AGEAS INSURANCE CO (ASIA) LTD v. LAM HAU WAH INNEO

HCA 1840/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1840 OF 2009

_______________________

_______________________

_________________________________________

RULING
(VARIATION OF COSTS NISI)

__________________________________________

Introduction

1.  The main action was over sums of money said to be advances/loans by the plaintiff insurance company (“Company”) and repayment of which were being claimed against the defendant (“D”), its former regional director and agency manager.  On 28 February 2014, this court handed down a judgment in favour of the Company (“Judgment”) for the sums claimed and made an order nisi that D should pay the Company’s costs of this action with certificate for two Counsel (“Order Nisi”).

2.  D applied to vary the Order Nisi such that D should bear only 70% (or such proportion that the court thinks just) of the Company’s costs.

3.  The Order Nisi included not only costs of the trial, but also costs of D’s successful appeal against summary judgment being entered against him, which costs having been ordered by Kwan JA to be in the cause of the action.

Legal Principles

4.  There was no dispute on the applicable legal principles.  As summarised by DHCJ M Ng in Kinetcs Medial and Health Group Company Ltd v Dr Tse Ivan Cheong Yau (Unreported, HCA 1115/2010, 7 April 2014):

“In summary, the starting point is that costs should follow event, and a party seeking departure from that bears the burden of showing a departure is justified. The court has a discretion to deprive a successful party of costs incurred on failed issues if the issues in question are discrete and isolated and the arguments on those issues had caused a significant increase in the length or costs of the proceedings. The court can only order a successful party to pay the costs of the unsuccessful party if the former raised issues or made allegations improperly or unnecessarily.How the discretion is to be exercised in each case depends very much on the particular circumstances of the case[1].”

Summary of the action

5.  To put this action in its context, it had always been the Company’s case that its claims against D were straightforward in debt relying upon the loan agreements and manager’s financing agreements.  It was D who asserted that there was a 1994 Agreement, and a variation thereof and asserting that those written agreements relied on by the Company did not reflect the reality by reason of the 1994 Agreement.  In the end, the Company had succeeded on all the main specific issues identified by the Company. As for the 1994 Agreement, although I accepted that there were verbal promises from Yang on behalf of the Company that D and the other FALs would not be financially worse off in joining the Company, it was my finding that these verbal promises did not result in any concrete agreement containing those terms in particular in relation to any guaranteed Top Up Payments (or Ex Family Head Benefits) or the Buy Out Entitlement.  D therefore did not succeed with his case on the 1994 Agreement.

D’s reasons for variation of the Order Nisi

6.  D’s reasons for seeking a variation of the Order Nisi, as submitted by D, were :

(i) P had raised issues and made allegations improperly or unnecessarily;

(ii) P did not conduct itself reasonably by applying for summary judgment.

Discussion

Improper or unnecessary issues/allegations

7.  For (i) above, D had set out specifically 6 “key background facts” which D submitted that P had disputed on the face of its pleadings but by the time of the trial, they were no longer disputed, or no longer disputed seriously.  Those 6 “key background facts” formed the background of the 1994 Agreement.

8.  In relation to the 1^st background fact relating to the “identity, status and eminence of the 7 FALs”, from my reading of paragraph 5 of the Reply referred to in D’s submissions, the Company merely denied that there were only 7 FALs who left AXA at that time to join the Company, and what the Company stated was that there were other agency leaders as well.  The term “Founding Agency Leader” in itself would not, in my view, imply any particular status or eminence.  Having said this, I accept by referring to other agents who joined at the same time, the Company was not admitting that the 7 FALs were in any a particular category, or a “meaningful group”.  It was submitted on behalf of the Company that it lay outside the direct knowledge of anyone presently at the Company as to that whether the 7 FALs formed a “meaningful group”.  I accept the status and eminence of the 7 FALs was always going to be a matter which had to be dealt with by D in his evidence.  The dispute, or rather non-admission, by P did not involve a significant length or increase in costs of the proceedings.

9.  As for the 2^nd background fact of “Ex Family Head Benefits”, it was my finding in the Judgment that D was entitled to such benefits, and that what was subject to review was only the actual amounts or formulae for calculations.  Such entitlement could be seen from the evidence of the Company’s own witness Ng.  This was a finding against the Company.

10.  In relation to 3^rd background fact of the “industry practice of agency leaders building and recruiting own pool of agents at its own expense”, in paragraph 7.3 of the Reply, the Company did say that it provided training to all agents and bore all relevant expenses, but for any expenses relating to additional training or coaching or knowledge transfer by the agency leader, such would be borne by the agency leader and the agency leader would not receive reimbursement from the Company.  Paragraph 7.3, however, started off with a general denial of what was asserted by D including there being any industry practice at all.  As it turned out, that there was an industry practice of agency leaders building and recruiting own pool of agents at its expense was not disputed by the Company at trial and this was in fact supported by the evidence of the Company’s former CEO.

11.  The remaining 3 “key background facts” were in relation to the Buy Out Entitlement.  Para 7.4 of the Reply started off with a general denial of there being an industry practice of any buy out, but later as reflected by D’s subpoenaed witness Fung, who was the Company’s former Chief Agency Officer, there would be an industry practice of a buy out in cases when an agency manager retired or his contract terminated on amicable terms, but there would be none when the contract was terminated for cause.  As for “whether Lau and Mak were subject to a (conditional) buy out”, the Company did not accept that the arrangement was what was characterised by D, or Lau, or Mak.  What was found in the Judgment that Lau and Mak did have a buy out, albeit a conditional one.  I also accept that the Company had originally denied that the 2^nd 2008 Loan Agreement was a buy out, but its witness Fraser in the end accepted that there was an element of buy out, subject to conditions.

12.  Having considered the above, I accept that the Company’s denials and assertions in particular in relation to the Ex Family Head Benefits and the Buy Out Entitlement had resulted in there being some unnecessary issues raised and time had to be incurred to deal with such denials/assertions, even though ultimately the finding on the 1994 Agreement was against D.  However, the time taken up by these issues whether during the course of the entire proceedings or during the trial, would not be as high as 30 % as suggested by D.  On an overall broad brush approach, I am of the view that it was at most 5 %.

The application for summary judgment

13.  I am unable to accept D’s submissions that the Company knew or ought to have known from the start that it did not have a clear case for summary judgment or that it was unreasonable for the Company to apply for summary judgment in the first place.  The Court of Appeal allowed D’s appeal only on the basis of the new evidence admitted on appeal.

Conclusion

14.  In light of the above, I am only prepared to vary the costs order nisi to the extent that D is to pay 95% of the Company’s costs to include costs of the written submissions, with certificate for two Counsel for the trial.