RE WONG LO FUNG

HCB 1864/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 1864 OF 2013

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J U D G M E N T

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Introduction

1.  This is a bankruptcy Petition (“Petition”) brought by AXA China Region Insurance Company Limited (“Petitioner”) against Mr Wong Lo Fung (“Mr Wong”).

2.  The Petition is based on Mr Wong’s non-compliance with a Statutory Demand dated 8 February 2013 (“Statutory Demand”) and personally served on him on 19 February 2013.

3.  The Statutory Demand was founded on a debt due and owing under an EHP Manager’s Financing Agreement entered into between the Petitioner, Mr Wong and Mr Tang Kam Charn Frankie (“Mr Tang”) and  effective from 19 August 2009 (“Financing Agreement”) and an Agent’s Contract dated 1 April 2009 entered into between the Petitioner and Mr Wong (“Agent’s Contract”).

4.  The debt was originally in the sum of HK$171,678.43 broken down into two components as follows:

5.  Based on the Statutory Demand, the Petitioner presented the Petition herein on 15 March 2013 and served it personally on Mr Wong on 18 March 2013.

6.  On 30 July 2013, Mr Wong made a partial payment to the Petitioner of the second component ie HK$2,246.57, thereby reducing the debt to HK$169,431.86 (“Debt”). There is no dispute that the Statutory Demand has not been fully complied with and the Debt remains unsatisfied.

7.  The Petition is opposed by Mr Wong. 

Background

8.  On 1 April 2009, Mr Wong joined the Petitioner with the title “Agency Development Director” and entered into the Agent’s Contract. One of the job duties of Mr Wong was to recruit insurance agents for the Petitioner.

9.  According to Mr Wong, in or about May 2009, he was in contact with Mr Tang, a discharged bankrupt, who was experienced in the insurance industry. Through his introduction, the Petitioner agreed to engage Mr Tang as insurance manager under the supervision of Mr Wong.

10.  By an Agency Manager’s Contract dated 19 August 2009 made between the Petitioner and Mr Tang (“Manager’s Contract”), Mr Tang agreed to act as both agency manager and agent of the Petitioner subject to the terms and conditions contained therein. Attached to and forming part of the Manager’s Contract was the Financing Agreement.

11.  According to the copy of Financing Agreement before this court, the document was signed by Mr Wong and Mr Tang in the presence of a Mr Peter Lai Wai Ping (“Mr Lai”), then Head of Agency Strategy of the Petitioner. The dates handwritten on the signing page of the Financing Agreement suggest the date of signing by Mr Wong and Mr Tang was 13 July 2009, which is disputed by Mr Wong, whereas the date of signing by the Petitioner was 27 August 2009.

12.  Clause (2) of the Financing Agreement provided that the Petitioner would:

(1) advance to Mr Tang a “Career Bonus” (“CB”) in accordance with the Schedule therein; and

(2) advance to Mr Tang a “Monthly Transition Bonus” (“MTB”) during the Program Period i.e. maximum 24 months from its effective date of 19 August 2009 in accordance with the Schedule therein.

13.  Clause (5) of the Financing Agreement provided that if the Manager’s Contract was terminated for any reason within 25 to 36 months from its effective date of 19 August 2009, Mr Tang should repay 50% of the amount of CB and MTB advanced to him by the Petitioner.

14.  Clause (6) of the Financing Agreement is the one relied upon by the Petitioner against Mr Wong. It provided that:

“(6) If the Manager’s Contract is terminated for any reason within 48 months from its effective date, [Mr Wong] will be liable for the amount of advanced CB and MTB repayable to [the Petitioner] by [Mr Tang] (hereafter called “Leader Debt”) under this Financing Agreement…The Leader Debt is a debt due and owing by [Mr Wong] as a principal debtor to [the Petitioner].” (emphasis added)

15.  Pursuant to the Financing Agreement, the Petitioner has advanced to Mr Tang a total sum of HK$338,863.72 comprising (i) CB in the sum of HK$159,500.00 and (ii) MTB in the sum of HK$179,363.72.

16.  On 7 October 2011, Mr Tang gave one-month notice to terminate all agreements and contracts with the Petitioner with effect from 7 November 2011 i.e. within 25 to 36 months from the Manager Contract’s effective date. By virtue of this termination, Mr Tang was liable to repay the Petitioner the sum of HK$169,431.86, being 50% of the total sum of HK$338,863.72. On the evidence before this court, it does not appear that Mr Wong disputes the existence or the amount of this debt owed by Mr Tang to the Petitioner.

17.  Mr Tang having failed to pay this sum to the Petitioner, the Petitioner instituted bankruptcy proceedings against him on 16 August 2012 in HCB5386 of 2012. On 17 October 2012, a bankruptcy order was granted against him.

18.  By virtue of Clause (6) of the Financing Agreement, the Petitioner held Mr Wong liable as a “principal debtor” for the said sum of HK$169,431.86. 

19.  On 11 January 2012, Mr Wong gave notice to the Petitioner to terminate all contracts and agreements with it for personal reasons.

Discussion

20.  Based on Mr Wong’s statement exhibited to his affirmation in opposition dated 5 September 2013, it would appear that the sole basis on which he opposes the Petition is that the Debt is disputed.

21.  According to the statement, on 19 August 2009, Mr Wong attended a meeting with Mr Lai at the Petitioner’s office in Times Square, Causeway Bay, Hong Kong. Mr Tang, a Ms Yuki Lo Wai Yi (“Ms Lo”) and a Mr Alex Chu Chun Man (“Mr Chu”) were also present. Both Ms Lo and Mr Chu were the Petitioner’s insurance agents. They were downline agents of Mr Tang and under the supervision of Mr Wong.

22.  Mr Wong said when Mr Lai asked him to sign the Financing Agreement, he asked Mr Lai whether he would be liable for Mr Tang’s debt if Mr Tang failed to repay what was due to the Petitioner and became bankrupt. Mr Lai clearly said no (“Representation”). Mr Wong said he was comforted by the Representation and signed the Financing Agreement in reliance of it.

23.  In support of his case, Mr Wong exhibited two signed but unsworn statements, one from Ms Lo and the other from Mr Chu. Both statements corroborated Mr Wong’s allegation that Mr Lai made the Representation to him on 19 August 2009 when he signed the Financing Agreement. However, both statements are ambiguous as to whether Ms Lo and Mr Chu were actually present at the meeting with Mr Lai on 19 August 2009. Further, there is no explanation as to why Ms Lo or Mr Chu did not see fit to provide a sworn statement in support of Mr Wong’s case.

24.  Mr Lai, on the other hand, denied having made the Representation to Mr Wong at a meeting on 19 August 2009, or any other meetings he had with Mr Wong. He also said, given the unique and confidential nature of Mr Tang’s compensation package, it was the Petitioner’s practice to conduct agreement signing sessions only with the parties concerned viz Mr Wong and Mr Tang. Hence, he believed Ms Lo and Mr Chu were not at the meeting when the Financing Agreement was signed. Lastly, he said the Financing Agreement was signed by Mr Wong and Mr Tang on 13 July, instead of 19 August 2009.

25.  In order to successfully oppose the Petition, a debtor has to show a “bona fide dispute on substantial grounds, by sufficient precise evidence which is believable, and must establish that he actually has a defence of substance, not just a fair probability of one”: Hong Kong Bankruptcy Law Handbook 4^th Ed. at p 47 para. 6A.10; ICS Computer Distribution Ltd. [1996] 1 HKLR 181.

26.  In the present case, there is conflicting affidavit evidence from the parties regarding the circumstances under which Mr Wong signed the Financing Agreement. Normally, such factual disputes are unsuitable for resolution summarily in the Bankruptcy Court. Rather they ought to be resolved in ordinary civil litigation where viva voce evidence is given and tested by cross-examination: Re Lympne Investments Ltd. [1972] 1 WLR 523; Re Bylamson & Associates (enterprises) Ltd. [1983] 1 HKC 510.

27.  However, it seems to me that Mr Wong’s affidavit evidence, even if accepted by this court, does not disclose a defence of substance. The reasons are three-fold.

28.  First, there is no evidence that Mr Lai had actual or apparent authority from the Petitioner to make the Representation.

29.  In Mr Wong’s statement, all he could say is that he believed Mr Lai had the requisite authority by reason of his position within the Petitioner. However, the position of Mr Lai as the Petitioner’s “Head of Agency Strategy” gives little clue as to his actual authority. In this regard, it is noteworthy that Mr Lai was just a witness to Mr Wong’s and Mr Tang’s signatures on the Financing Agreement and did not appear to have authority to enter into the Financing Agreement on behalf of the Petitioner – the agreement was in fact signed by a Mr Alger Fung, the Petitioner’s Head of Agency Distribution. As far as apparent authority is concerned, it is trite law that an agent cannot cloak himself with apparent authority – only the principal can: Thanakharn Kasikorn Thai Chamkat v Akai Holdings Ltd. (No. 2) (2010) 13 HKCFAR 479. In the present case, there is nothing in Mr Wong’s statement which suggests the Petitioner has said or done anything to cloak Mr Lai with authority to make the Representation.

30.  If Mr Lai is not shown to have authority to make the Representation, the Representation, even if made as alleged, would not bind the Petitioner.

31.  Second, it does not seem to this court that the Representation is a misstatement of the legal effect of the Financing Agreement at all. On its plain wording, what triggers off Mr Wong’s liability “as a principal debtor” under Clause (6) is not Mr Tang’s failure to repay what is due to the Petitioner or his bankruptcy, but simply the termination of the Manager’s Contract for any reason within 48 months from 19 August 2009.  Hence, when Mr Wong asked Mr Lai whether he would be liable for Mr Tang’s debt if Mr Tang failed to repay what was due to the Petitioner and became bankrupt, it was literally correct for Mr Lai to say no. In other words, even if Mr Lai had made the Representation as alleged, it was not a misrepresentation. While Mr Lai could have answered the question in a more helpful way by pointing out to Mr Wong the true legal effect of Clause (6), he was under no duty to do so – Mr Wong is a person of full age and understanding and in his own words can manage English. He can read Clause (6) himself or seek legal advice if he is in doubt.

32.  Lastly, ordinarily, a person is bound by his signature to a document whether or not he reads it or understands it unless there is shown to be a recognized legal basis for concluding that his apparent consent has been in some way vitiated: Ming Shiu Chung & Ors v Ming Shiu Sum & Ors (2006) 9 HKCFAR 334.

33.  In the present case, what Mr Wong said, taken at its highest, is he had been misled by Mr Lai as to the legal effect of the Financing Agreement. Unless Mr Wong can bring himself within the doctrine of non est factum, the fact that he misunderstood the legal effect of the Financing Agreement by reason of Mr Lai’s misrepresentation will not affect the Petitioner’s right to enforce the agreement.

34.  There are, however, two obstacles to the application of the doctrine to Mr Wong’s case.

35.  First, the plea of non est factum is not available to a person whose mistake is as to the legal effect of the document he signed – there must be a radical or fundamental difference between what he signed and what he thought he was signing: Saunders v Anglia Building Society [1971] AC 1004, 1016–7 (per Lord Reid); 1022 (per Viscount Dilhorne). Second, carelessness on the part of the person signing the document would exclude the plea of non est factum: Saunders v Anglia Building Society supra 1019 (per Lord Hodson); 1036-7 (Lord Pearson).

36.  In my view, Mr Wong has failed to overcome both the first and the second hurdles.

37.  As for the first hurdle, as I said earlier, Mr Wong’s mistake, taken at its highest, was merely as to the legal effect of a term of the Financing Agreement ‑ there is no suggestion that he thought he was signing a document of a totally different character or nature from what he actually signed. As for the second hurdle, in the view of this court, Mr Wong has failed to show, the burden being on him, that he has taken due care before he signed the Financing Agreement. At the hearing, this court specifically asked Mr Wong whether he could read English and he said he could manage. If so, he should have read the Financing Agreement himself instead of relying on Mr Lai to tell him its legal effect. 

38.  To conclude, for the above reasons, this court is satisfied that Mr Wong has failed to raise a bona fide and substantial dispute to the Debt. In these circumstances, this court is satisfied that the Petition is well‑founded and a bankruptcy order should be made.

Disposition

39.  There will be a bankruptcy order against Mr Wong and an order nisi that costs of the Petition be to the Petitioner, to be taxed if not agreed.