RE SZETO CHI SING

HCB 1209/2018

[2019] HKCFI 434

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 1209 OF 2018

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J U D G M E N T

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Introduction

1.  The petitioner (“Sun Life”) presented a bankruptcy petition dated 2 March 2018 against the debtor (“Mr Szeto”), based on non-compliance with a statutory demand dated 21 December 2017.  The statutory demand was in respect of a sum of $1,022,708.38 which Sun Life sought to claw back from Mr Szeto.

2.  Mr Szeto opposes the petition on the ground that it was unfair for Sun Life to terminate his agency when he had met the relevant target in terms of recruitment and renewal of insurance policies.  He had not joined another insurance company since leaving Sun Life.  Further, he claims that Sun Life still owed him $160,000 and that should reduce the amount of the debt to about $840,000.

3.  Mr Szeto is absent despite the fact that this court has told him at the last hearing on 26 November 2018 about today’s hearing date.  Accordingly, the court proceeded in his absence.

Background

4.  The facts are taken from the helpful summary of Mr Chang, counsel for Sun Life.

5.  Mr Szeto was an insurance agent of Sun Life from 1 March 2014 until 27 July 2017.  The parties’ relationship was governed by the Agent’s Agreement, Manager’s Agreement and Agency Builder Program (“ABPA”).

6.  Clause 2.1 of the ABPA provided that Sun Life may in its sole and absolute discretion advance to Mr Szeto such bonus or allowance as asset out in Schedule 1 to the agreement.  That comprised the Signing Bonus (“SB”), Monthly Income Allowance (“MIA”) and Performance Bonus (“PB”).

7.  Indisputably Mr Szeto has received a total sum of $1,999,250 as SB, MIA and PB.

8.  Clause 3.1 of the ABPA provided that the bonuses would not be vested in Mr Szeto unless and until, amongst others, he has not ceased to be an agent of Sun Life during such periods as are specified in Clause 3.2.

9.  Clause 3.2 of the ABPA (“the Clawback Clause”) provided that if Mr Szeto ceased to be an agent of Sun Life and/or the Agent’s Agreement was terminated within the 37^th to 48^th month from the effective date, Mr Szeto must immediately repay to Sun Life 50% of all the bonuses advanced to him, with default interest at 4% per annum above the prevailing interest rate set by Sun Life.

10.  Clause IX(c) of the Agent’s Agreement provided that the Agent’s Agreement may be terminated without cause by either party upon giving 30 days’ written notice.  Clause IX(h) provided that the termination of the Agent’s Agreement would automatically terminate any other agreements between Sun Life and Mr Szeto.

11.  Mr Szeto’s agency was terminated by Sun Life by a letter dated 27 June 2017, which took effect from 27 July 2017.  Accordingly, the termination took place with the 37^th to 48^th month.  The Clawback Clause was triggered and Mr Szeto had to repay $999,625.

12.  Sun Life issued the statutory demand, having taken into account commission payable to Mr Szeto and adding default interest.

Grounds in opposition

13.  Mr Szeto has to show a bona fide dispute to the debt on substantial grounds by sufficiently precise evidence which is believable, and must establish that he has a defence of substance and not just a fair probably of one: So Sheung Hin Ben v Chubb Life Insurance Co Ltd [2018] HKCA 209, §4, Kwan JA.

14.  The Agent’s Agreement might be terminated without cause by notice from Sun Life.  However, Mr Chang fairly accepted for the purpose of argument that there was an implied term that that power to terminate should not be exercised with the dominant intention of triggering the Clawback Clause: So Sheung Hin Ben, §§31, 40.  Mr Szeto is tantamount to alleging bad faith on the part of Sun Life in terminating the agency.

15.  Apart from a bare assertion that his performance was within target, Mr Szeto has not adduced evidence to show that Sun Life had the dominant intention of triggering the Clawback Clause or otherwise had bad faith.

16.  On the other hand, Sun Life has adduced 2 pieces of evidence to refute any possible implication of bad faith:

17.  Firstly, Sun Life has explained by affirmation that the reason for termination was that, throughout 2017 and in particular in June 2017, a large number of agents under Mr Szeto’s team had terminated their agency or threatened to do so around the same time.  Some of those agents even joined a rival insurance company.  The serious defection within Mr Szeto’s team showed that he could not keep his team intact and Sun Life had lost confidence in him. 

18.  That was a commercial decision and no bad faith could be shown on its face.  Sun Life’s explanation was never refuted by Mr Szeto. 

19.  Secondly, in August 2016, despite the fact that Mr Szeto could not achieve the specified target for his MIA and PB, Sun Life extended the time for him to meet the target.  In the end, Mr Szeto obtained the bonuses.  It showed that Sun Life treasured Mr Szeto’s expertise and had no bad faith.  Again, Mr Szeto has not refuted these.

20.  Finally, Mr Szeto claims that Sun Life still owed him $160,000.  It is not clear how he computed this amount.  However, even assuming he was correct, the amount was not sufficient to wipe out the debt properly set out in the statutory demand.

21.  Considering the evidence before me, I am not satisfied that Mr Szeto has discharged the burden of showing a bona fide dispute of the debt on substantial grounds.

22.  Sun Life’s solicitor has certified today that the debt on which the petition is founded is still due and owing and has not been paid, secured or compounded.  The petition is proved.  I make an order of bankruptcy against Mr Szeto.

23.  Costs of the petitioner and the Official Receiver shall be borne out of the estate.

24.  I thank Mr Chang for his assistance.