WINTERTHUR LIFE INSURANCE CO. v. TSUI CHING KUEN

HCA 10972/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10972 OF 1998

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J U D G M E N T

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1. The Defendant, Mr. Tsui Ching Kuen, was the agent of the Plaintiff, Winterthur Life (formerly known as Winterthur Life Insurance Company), for soliciting applications for insurance from 6 January to 25 September 1997 pursuant to an "Agent Agreement for Selling of Long-term Insurance" dated 9 January 1997 ("the Agency Agreement").

2. In addition to the Agency Agreement, the Plaintiff and the Defendant also entered into an "Agent Financing Agreement" and ""Leader Financing Agreement" of the same date ("the Financing Agreements" when referred to collectively).

3. Insofar as it is material, the Agent Financing Agreement provided:

"1. It is confirmed that the Company will pay the Monthly Advance to the Agent each month in arrears during the Financing Period.

2. All such advances shall be debited to the Agent Advances Account.

3. During the financing period, 75% of all direct commission and bonuses due to the Agent will be retained by the Company and shall be credited to the Agent Advances Account.

4. A monthly interest of 0.75% of the outstanding balance of the Agent Advances Account will be charged by the company to offset the cost of financing and to encourage repaid termination of finance.

.....

7. This Agreement may be cancelled by either party at any time. In such event, the total outstanding balance in the Agent Advances Account shall constitute a debt owed to the Company.

.....

9. If the Agency Agreement is terminated for any reason, this Agreement will be cancelled. Unless the Agency Agreement is terminated for fraud or other serious misbehaviour, clause 7 shall apply.

10. Finance in the first two months is guaranteed. Finance in the third month will be limited to 75% of the average of the last 2 months annualised first year commission. Finance each month thereafter will be limited to 75% of the average of the last 3 months annualised first year commission.

.....

APPENDIX

Consultancy Agreement Date	Jan. 6, 1997
Consultant Financing Agreement Date	Dec. 1, 1996
Monthly Finance	HKD2,000.00
Finance Period Start	Dec. 1, 1996
Finance Period End	Max. 12 months after period start

4. Similarly, the Leader Financing Agreement provided:

"1. It is confirmed that the Company will pay the Monthly Advance to the Leader each month in arrears during the Financing Period.

2. All such advances shall be debited to the Leader Advances Account.

3. During the financing period, 75% of all remuneration due to the Agent will be retained by the Company and shall be credited to the Agent Advances Account.

4. A monthly interest of 0.75% of the outstanding balance of the Agent Advances Account will be charged by the company to offset the cost of financing and to encourage repaid termination of finance.

.....

7. This Agreement may be cancelled by either party at any time. In such event, the total outstanding balance in the Leader Advances Account shall constitute a debt owed to the Company.

8. If the Agency Agreement is terminated for any reason, this Agreement will be cancelled and the outstanding balance of the Leader Advance Account will be immediately due and repayable.

9. Leader Finance in the first six months is subject to performance against business plan attached. Finance in the seventh month and thereafter will be limited to 75% of the average of the last 3 months annualised first year override and personal business

APPENDIX

Agency Agreement Date	Jan. 6, 1997
Leader Financing Agreement Date	Dec. 1, 1996
Business Plan
Monthly Finance (Leader)	HKD28,000.00
Finance Period Start	Dec. 1, 1996
Finance Period End	Max. 12 months after period start

5. The Agency Agreement was terminated by the Defendant in writing on 25 September 1997. By virtue of Clause 9 of the Agent Financing Agreement and Clause 8 of the Leader Financing Agreement, the Financing Agreements were "cancelled" and the advances made by the Plaintiff to the Defendant thereunder became due and repayable by the Defendant to the Plaintiff.

6. By the specially indorsed Writ of Summons issued herein on 4 July 1998, the Plaintiff claimed against the Defendant a sum of HK$190,971.32 said to be the aggregate outstanding advances made by it to the Defendant under the Financing Agreements after deducting the total commission retained by the Plaintiff under the Agency Agreement.

7. Final judgment for the said sum of HK$190,971.32 was initially entered in default of notice of intention to defend on 19 August 1998. Such final judgment was set aside and replaced by interlocutory judgment with "damages to be assessed" on 29 June 2000.

8. By its "Revised Particulars of Damages" filed on 19 July 2002, the Plaintiff revised the net amount of advances due to it from the Defendant to HK$180,982. In addition, the Plaintiff also claimed finance charges totalling HK$7,886.30 calculated up to 25 September 1997.

9. The Plaintiff arrived at the figure of HK$180,982 as follows:

Month/Year	Total Financing (HK$)	Commission Withheld
12/1996	30,000	-
1/1997	30,000	698.09
2/1997	28,000	3,023.91
3/1997	30,000	3,641.48
4/1997	30,000	3,001.36
5/1997	30,000	-
6/1997	4,988.72	1,671.38
7/1997	3,129.07	2,287.46
8/1997	13,976.94	2,686.03
9/1997		2,103.02
	200,094.73	19,112.73
LESS	19,112.73
	180,982

10. It is the Plaintiff's case that it paid the Defendant these advances together with other sums payable by the Plaintiff to him such as his non-repayable HK$10,000 monthly allowance, portion of commission not retained by the Plaintiff, bonus, etc. once a month:

Month/ Year	Total Commission earned (HK$)	Commission released (HK$)	Monthly allowance (HK$)	Financing (HK$)	Bonus (HK$)	Adjustment(HK$)	Amount paid (HK$)
12/1996	-	-	10,000	30,000	-	-	40,000
1/1997	930,78	232.69	10,000	30,000	-	-	40,232.69
2/1997	4,031.88	1,007.97	10,000	28,000	-	-	39,007.97
3/1997	4,170.83	528.85	10,000	30,000	684.97	-	41,213.82
4/1997	4,001.81	1,000.46	10,000	30,000	-	-	41,000.45
5/1997	(307.19)	(307.19)	10,000	30,000	-	-	39,692.81
6/1997	1,946.45	275.07	10,000	4,988.72	282.05	-	15,545.84
7/1997	3,049.94	762.48	10,000	3,129.07	-	-	13,891.55
8/1997	3,581.37	895.34	10,000	13,976.94	-	(407.50)	24,464.78
9/1997	2,103.02	-	-	-	-	-

The amounts appearing in the last column were the sums of those set out in the 3rd to 7th columns.

11. The total commission earned by the Defendant was substantiated by commission statements which were kept contemporaneously on a monthly basis and reprinted on 13 December 2001, presumably for production in this action.

12. Save and except for the sums of HK$40,000, HK$41,213.82 and HK$24,464.78 said to have been paid in December 1996, March 1997 and August 1997 respectively, the Plaintiff was able to produce contemporaneous records of payment of the amounts shown in the last column of the table in paragraph 10 hereinabove. They were bank statements for the payments in January and February 1997, "Payroll Transaction Registers" for May, June and July 1997 and computerised "payment statistics" for April and June 1997. A Payroll Transaction Register was generated every time when the Plaintiff instructed the Hongkong Bank to autopay a sum to an agent in a specified account. On such evidence, I am satisfied that the claimed January, February, April, May, June and July 1997 payments had indeed been made by the Plaintiff to the Defendant.

13. In relation to the sum of HK$41,213.82 said to have been paid in March 1997, the Plaintiff was able to produce a Payroll Transaction Record showing payment of a sum of HK$39,213.82 which was HK$2,000 short of the total payment alleged. As for the December 1996 and August 1997 payments, the Plaintiff claimed to have lost all primary records.

14. The question arising was whether there was any or any sufficient or reliable evidence upon which I could find that the Plaintiff had paid the Defendant HK$40,000 in December 1996, an extra HK$2,000 in March 1997 and HK$24,464.78 in August 1997.

15. On these payments, the totality of the Plaintiff's evidence can be so summarised :

(1) an one-page tabulated summary of the payments under the said various heads for the period from December 1996 to September 1997 ("the Plaintiff's Summary");

(2) the testimony of Ms. Cheng Yim Miu, the Plaintiff's Accounting Manager, of her belief that :

(A) payments to the Defendant should have been consistent throughout his employment;

(B) the difference of HK$2,000 for March 1997 was because the Defendant requested such an additional payment and was paid by cheque;

(C) that out of the sum of HK$13,976.94 for August 1997, HK$10,000 was paid to the Defendant as per his special request.

16. However, Ms. Cheng did not join the Plaintiff until mid 1998 and was not promoted to the position of Accounting Manager until 2001. Her said specific evidence regarding the payments in March and August 1997 could only have been hearsay and she had not stated the bases for her said belief.

17. I was asked to give weight to the Plaintiff's Summary. According to Mr. Chan Man Lung Charles, the Plaintiff's Assistant Vice President, who gave evidence at the hearing on 5 July 2002, this document had been served on the Defendant upon the termination of his agency. However, Mr. Chan being the Assistant Vice President did not claim to be the person who actually effected such alleged service. Indeed, Ms. Cheng who testified at the adjourned hearing on 19 August 2002 clarified that it was a Ms. Grace Fung, an account staff of the Plaintiff, who compiled the Plaintiff's Summary. Ms. Fung did not join the Plaintiff until December 1998 which was well after the departure of the Defendant. The Plaintiff's Summary was more likely to have been generated for the purpose of this action.

18. According to Ms. Cheng, Ms. Fung was still in the employ of the Plaintiff at the time of the "assessment" hearings. She was not invited to give evidence on how she prepared the Plaintiff's Summary. The actual computer records from which the Plaintiff's Summary was said to have been made was not produced. Such records, being less than 7 years old, should still exist. In the circumstances, I do not feel able to find on the balance of probabilities that the Plaintiff had advanced to the Defendant an extra HK$2,000 in March 1997 and HK$13,976.94 in August 1997. With regard to the latter month, I particularly note that financing was no longer guaranteed but was linked to the volume of business brought in by the Defendant.

19. The December 1996 payment was, however, different in that advances under the Financing Agreements was guaranteed for December 1996, the financing periods having commenced on 1 December 1996. In the absence of evidence to the contrary, I think I can proceed on the basis that the Plaintiff had performed its obligations under the Financing Agreements. I therefore find that the Plaintiff did advance to the Defendant a total sum of HK$30,000 in December 1996.

20. In summary, after setting off the amounts of commission withheld by the Plaintiff, the Defendant owed the Plaintiff the net sum of HK$165,005.06, a breakdown of which is as follows:

Month/Year	Total Financing (HK$)	Commission Withheld
12/1996	30,000	-
1/1997	30,000	698.09
2/1997	28,000	3,023.91
3/1997	28,000	3,641.48
4/1997	30,000	3,001.36
5/1997	30,000	-
6/1997	4,988.72	1,671.38
7/1997	3,129.07	2,287.46
8/1997	-	2,686.03
9/1997		2,103.02
	184,117.79	19,112.73
LESS	19,112.73
	165,005.06

21. I hereby certify that the principal sum due from the Defendant to the Plaintiff to be HK$165,005.06.

22. The claimed finance charges of HK$7,886.30 up to 25 September 1997 presumably took into account the principal amounts which I have rejected. I hereby direct the Plaintiff to re-calculate for my approval the finance charges at the contractual rate of 0.75% per month for the period before 25 September 1997, disregarding the principal sums that I have disallowed.

23. As for the period after 25 September 1997, I order the Defendant to pay interest on HK$165,005.06 and the re-calculated finance charges up to 25 September 1997 at 9% per annum (which is 0.75% per month) from 25 September 1997 up to the date of this Judgment and thereafter at judgment rate until payment.

24. I also make an order nisi that the Defendant pays the Plaintiff its costs of this action (save and except the costs of the hearing on 19 August 2002), such costs to be taxed if not agreed. Mr. Dennis Sit, for the Plaintiff, quite rightly did not ask for the costs of the adjourned hearing before me given that the adjournment was sought by the Plaintiff to improve its evidence.