ING LIFE INSURANCE CO. (BERMUDA) LTD. v. CHUNG WAI KEUNG

HCA 3691/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3691 OF 2001

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J U D G M E N T

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1. On 11 March 2002 Master Ho gave judgment to the plaintiff for that part of its claim against the defendant in respect of which it had applied for summary judgment under Order 14 RHC. This is an appeal by the defendant against that order.

Background

2. The plaintiff is a well-known insurance company licensed to operate in Hong Kong. The defendant applied to become an agent and was duly appointed on terms as from 1 November 1997. The defendant's designated rank was that of Agency Director which in simple terms put him in charge of a team of other agents appointed by the plaintiff, collectively known thereafter as his downline agents. His pay was determined as a commission of income generated by both himself and his downline agents at a prescribed rate. The terms provided for an income for the first 12 months of $45,000 per month against which was to be set off actual income earned. That income could be retained even if not matched by actual income, provided the agency remained on foot for at least 2 years. But the plaintiff had the right to suspend the monthly income of $45,000 if the commission earned for the period in question fell below the designated rate. The terms also provided for a discretionary right by the plaintiff to make advances from time to time against expected remuneration, which the plaintiff was then entitled to withhold to meet repayment. Upon termination of the agency the parties were obliged to settle their accounts forthwith. As to how that was to be carried out clause 12 (ii) was in point:-

"12. It is hereby expressly agreed and acknowledged:-

. . . . . .

(ii) that every calculation of the balance of the commission account of the Agent (defendant) shall be determined by the Company (plaintiff) and shall be final and conclusive and binding on the Agent."

3. The defendant was entitled to receive and did receive a monthly statement of accounts showing income paid and received calculated at the prescribed rate offset as may be against advances and, when applicable, the monthly minimum income.

4. So much as I have so far recorded is not in dispute. That which immediately follows, is. It is the plaintiff's case that as a term of his appointment as an Agency Director and in charge of downline agents the defendant was committed to guarantee reimbursement to the plaintiff advances made to the downline agents in his team where the agents had failed to earn sufficient commission to do so.

5. The defendant's agency came to an end with effect from 1 August 2000. The plaintiff calculated that as at that date there was a total debit balance of $1,966,022.87. The defendant paid $48,000 in part reduction. Allowing for this and making another mathematical adjustment, the plaintiff calculated that as at 16 November 2001 the defendant was indebted in the sum of $1,818,006.20 made up as follows:-

Indebtedness of the defendant	$ 464,637.43
Indebtedness of the downline agents, guaranteed by the defendant	1,353,368.77
Total	$ 1,818,006.20

6. Demand having been made of the defendant without success, the plaintiff issued its writ on 17 August 2001.

The Proceedings

7. In its statement of claim the plaintiff recited the terms of the agency agreement by which the parties were bound and the guarantee under which the defendant was alleged to be liable for the indebtedness of his downline agents. The prayer recited a claim for the total sum of $1.818 million together with interest at the rate thought fit.

8. In his defence the defendant admitted the agency agreement but otherwise made no admissions. In particular he denied liability as guarantor of any indebtedness due by the downline agents and that he owed the $1.818 million or any part thereof.

The Order 14 RHC Application

9. By summons of 13 December 2001 the plaintiff applied for summary judgment for the sum of $464,637.43 and interest thereon at the rate of 10.86% per annum from 17 August 2001, the date of the writ. Of course this was for that part only of the plaintiff's claim which it calculated was the defendant's personal liability, it being content to pursue the remainder at trial.

10. The order sought was granted in terms by Master Ho on 11 March 2002. It is against that order that the defendant appeals.

The Appeal

11. In respect of that part of the plaintiff's claim with which I am concerned, the plaintiff calculated the amount outstanding by offsetting against advances made to the plaintiff totalling $675,000 the sum of assessed commissions of $162,362.57 and the $48,000 repayment, to arrive at the figure of $464,637.43. The gravamen of the defendant's complaint is that the plaintiff's calculations which achieve the credit of $162,362.57 are incorrect but that he is unable to establish to what extent without full discovery. Whilst conceding that during the currency of the agency he received monthly accounting he did not retain all copies because of his responsibility to his downline agents to provide the accounting relevant to each of them. But he did retain or was able to retrieve those statements of accounts and monthly reports for the last six months of his agency. These recorded all pertinent accounting information for the period in question and included the plaintiff's calculation of the commission due to him. He has since made his own calculations and found that the set-off was too light by the sum of $60,664.15, indicating not only that the judgment obtained was too high by that figure but that there could be further discrepancies during the earlier period of the agency, discrepancies which need to be explored before the plaintiff should have judgment. The defendant supported this defence by producing the statements of accounts and monthly reports prepared by the plaintiff for the six months in question and his own calculations based on the agreed prescribed rate to show the mistakes and resultant deficit.

12. Further, the defendant says that the two arms of the plaintiff's claim are interwoven such that it would be premature and wrong to deal with one of them summarily.

13. The plaintiff for its part denies that there are mistakes in the calculations giving rise to the total indebtedness. Iu Wan Ling (Miss Iu) is a senior officer in the Credit Control Department of the plaintiff, having conduct of the claim on its behalf. She said by affidavit that the figures derive from the statements of accounts and reports provided monthly to the defendant during his agency which were received by him without query or complaint. And none would have been justified. The calculations were based on the scale of remuneration from time to time agreed by the parties. Having examined the defendant's calculations in which he seeks to justify that there are mistakes she says he has fallen into error by using a methodology that preceded that for the period in question. The figures are accurate. The defendant is bound by them under clause 12(ii) of the agency agreement.

14. Miss Iu said further that commission is calculated up to and as at the date of termination of a former agent's agency contract. So it was and remains in the defendant's case. The claim was fixed and certain at that time and not capable of variation no matter the outcome of the claim against the defendant under his underwriting guarantee.

15. Thus it was not improper or inappropriate to separate the two claims and seek summary judgment as applied for.

The Law

16. The Order 14 RHC procedure may be invoked by a plaintiff who seeks judgment without trial where he is of the belief that his opponent has no defence to his claim. I quote from the White Book, 2002, at paragraph 14/4/1:-

"......The underlying policy of the summary procedure is to prevent a defendant from delaying the plaintiff from obtaining judgment in a case in which the defendant clearly has no defence to the plaintiff's claim: Man Earn Ltd v. Wing Ting Fong [1996] 1 HKC 225. "Order 14 proceedings for summary judgment when there is no defence to a claim are an important feature of the legal process. It enables plaintiffs in cases where there is no defence to obtain expeditious summary judgment to avoid unnecessary delay. When applied for, it is for the defendant to show that there is a triable issue or an arguable defence if he is to be allowed his day in court. To deny him his day in court, if he shows a triable issue or an arguable defence, is indeed a fearful injustice. On the other hand, if he has no defence and he obtains leave to defend, equally, there is injustice to the plaintiff." per Mortimer J A in Manciple Ltd v. Chan On Man [1995] 3 HKC 459 at 466. The machinery of O. 14 works on the basis that if the plaintiff's application is properly constituted, he is prima facie entitled to judgment unless the defendant shows cause to the contrary or the application is dismissed."

And paragraph 14/4/9:-

"Leave to defend - unconditional leave - "It is appropriate to be reminded of the principles applicable to an O. 14 application. They are well-known and in fact not disputed by the parties. The plaintiff (a defendant to the second defendant's counterclaim) must show that there are triable issues. He has to satisfy the court that he has a 'real or bona fide defence' (see Ackner LJ in Banque de Paris et des pays-bas (Suisse) SA v Costa de Naray [1984] 1 Lloyd's Rep. 21 at 23). If he makes an allegation, it must be credible or believable in the light of the evidence placed before the court. As Bokhary JA said in Re Safe Rich Industries Ltd ([1994] HKLY 115):

'The test at the summary stage is indeed as simple as whether the defendant's assertions are believable. But it must be recognized - because failure to recognize it would create a debt-dodger's charter - that whether the defendant's assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as either undisputed or beyond reasonable dispute.'"

17. The test is clear. Has the defendant been able to establish there are triable issues, serious disputes of fact which can and should only be resolved at trial?

Application of the Law

18. It is apparent to me and I so find that there are no interwoven issues which require the two branches of the plaintiff's claim to be dealt with together, at trial. I am further satisfied that the calculation giving rise to the plaintiff's claim under the first branch is not capable of further adjustment because it became fixed and certain as at the date of termination of the defendant's agency. There remains the defendant's allegation that the calculations are inaccurate and incapable of reassessment without production of all records. In that regard I pay heed to the following:-

(a) all reports, statements of accounts and other documents from which the plaintiff has assessed the amount due were made available to the defendant on a monthly basis;

(b) the defendant did not ask for additional copies;

(c) the defendant did not query the calculations until well after receipt, when these proceedings were on foot;

(d) the assessment giving rise to the claim is no more than a collation of those calculations;

(e) the explanations the defendant has given as to why he finds fault with specific calculations are based, as I am satisfied, on the wrong formula and thus are themselves wrong;

(f) clause 12(ii) of the agency agreement gives the plaintiff final determination of what is due.

19. The burden being upon the defendant to satisfy me that there is a triable issue or arguable defence, I find that he has not achieved the necessary threshold. The plaintiff is entitled to the judgment Master Ho ordered including interest, there being no challenge to the plaintiff's right to interest or the rate.

The Outcome

20. The appeal is dismissed. Costs are to the plaintiff, taxed if not agreed. (The order for costs is nisi at first instance.)