WONG HOI FUNG v. AMERICAN INTERNATIONAL ASSURANCE CO. (BERMUDA) LTD. AND ANOTHER

HCA4576/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4576 OF 2001

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D E C I S I O N

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1) This is the plaintiff's application for leave to adduce expert evidence at the trial of the action. The application was first made orally at the Checklist hearing when the Listing Master referred it to me as the Listing Judge for arguments. When the application came before me, the plaintiff handed in a draft expert report of one Mr Tong Yau Keung, Edmond and indicated that it represents the bulk of expert evidence sought to be admitted at trial.

Background

2) The background of this action, briefly stated, is as follows. The plaintiff is the holder of a life insurance policy dated 8 December 1998 which was taken out in Singapore ("the Singapore Policy"). In 1999, the plaintiff took out a life insurance policy with the 1st defendant through the arrangement of the 2nd defendant, who was then an agent of the 1st defendant. This policy was dated 2 July 1999 ("the 1st Policy"). Subsequently, the plaintiff took out a second life insurance policy with the 1st defendant ("the 2nd Policy"). It is the plaintiff's case that the 1st Policy was superseded by the 2nd Policy whereas the defendants' case is that the 1st Policy was, at the plaintiff's request, replaced by the 2nd Policy.

3) The first two of the three instalments for the premium under the 2nd Policy had been paid by the plaintiff. On 12 July 2001, a sum of US$195,000 was paid by the 1st defendant to the plaintiff. The plaintiff regards this as a withdrawal by him. The defendants, however, say that this was a loan to the plaintiff from the 1st defendant.

The action

4) On 22 October 2001, the plaintiff issued the Writ herein. The Statement of Claim was amended on 22 February 2002. The plaintiff's claim is for a declaration that the 2nd Policy is null and void and, alternatively, for an order rescinding the 2nd Policy. The plaintiff further seeks the return of the premium paid under the 2nd Policy after giving credit for the sum of US$191,170. Two causes of action are relied upon, namely, misrepresentation and breach of contract or breach of duty of care and good faith.

5) The misrepresentation claim is founded on the allegations that the 2nd defendant had, together with her superior, Mr Samuel Yeung, made various representations as to the features and benefits under the 2nd Policy and the plaintiff was thereby induced into effecting the 2nd Policy. The representations relied upon by the plaintiff are particularized in paragraph 6 of the Amended Statement of Claim and are as follows :

"(a) The said policy was specifically tailor-made for the Plaintiff in accordance with the Plaintiff's needs and requirements for early redemption options upon completion of all premiums payments.

(b) The Plaintiff had the option to redeem the premiums in full after the Plaintiff made all the total premiums in the sum of US$750,000 upon the expiry of the three years period.

(c) The said policy was a kind of high yielding saving plan. The dividends and interest returns and yielding would be better than the usual deposit rate of interest of bank.

(d) The said policy would be better and more advantageous than the Singapore policy. In that since the Singapore policy has a substantial amount of coverage on the insured i.e. US$6,000,000, all the Plaintiff needed was a high return policy which would provide high yielding of incomes to the Plaintiff periodically.

(e) The Plaintiff would receive interest at a rate of not less than 6% per annum on the insured amount of the said policy plus dividends starting from the 2nd year of the said policy.

(f) The said policy included participation of dividend and the Plaintiff would receive dividends starting from the 2nd year from inception."

6) The plaintiff contends that these representations are false or untrue. The falsity is particularized under paragraph 8 of the Amended Statement of Claim, which reads :

"(a) The said policy was not tailor-made for the Plaintiff in accordance with his needs and requirements as there was no provision for full redemption after the expiry of the third year.

(b) The said policy was not by any means a high return/yielding policy as the guaranteed return was only 5% per annum and the Defendants only would pay a small fraction of the said 5% interest payment to the Plaintiff starting from the expiry of the 3rd year.

(c) The said policy had no provision for dividend participation.

(d) The actual return on interest was much lower than the prevailing bank interest rate for savings.

(e) The said policy being a low interest return, non-dividend participation, non-transferable policy was not, by any standard, a better or more advantageous policy than the Singapore policy."

7) As to the other cause of action, the plaintiff's pleaded case is that the defendants are under a duty of care to ensure that they discharged their obligations with reasonable skill and care. It is pleaded that the defendants had breached the contract or their duty of care in three ways :

(a) failure to procure/provide a valid policy with dividends participation benefits;

(b) failure to procure/provide a valid policy with redemption option; and

(c) failure to procure/provide a policy that meets the needs of the plaintiff.

8) The defendants deny both claims. On the claim in misrepresentation, the defendants deny that the representations as pleaded had been made, that any representations made to the plaintiff were made falsely, fraudulently or recklessly, and that the plaintiff was induced by the representations into executing the 2nd Policy. As to the claim in breach of contract or duty, the defendants deny both the exercise of a duty of care and the alleged breaches.

9) The issues for determination at trial can therefore be summarized as :

(1) Whether the 2nd defendant had made the representations as pleaded.

(2) Whether the representations alleged are false or untrue.

(3) Whether the plaintiff was introduced into executing the 2nd Policy.

(4) Whether the defendants are under a duty of care to the plaintiff.

(5) If so, whether the defendants were in breach.

The proposed expert evidence

10) The draft expert report falls into three parts. The first part, consisting of the first four sections, deals with the basic concepts and types of life insurance and the features of a limited life payment, which is a form of premium payment, and also explains the terms "cash value", "cash payment" and "dividend". The second part, comprising section 5, gives a brief description of the 2nd Policy. The last part, which is contained in the remaining three sections, is a comparison of the 2nd Policy with the policies of two other insurance companies, followed by a conclusion that the plaintiff is paying greatly in excess or is receiving extraordinarily less than he deserves.

The relevant principles

11) Modern judicial authorities recognize that the court has inherent power to rule on the admissibility of expert evidence at a pre-trial stage : Woodford and Ackroyd v. Burgess [2000] CP report 79, Ko Chi Keung v. Lee Ping Yan Andrew [2001] 2 HKC 63 and Annabell Kin Yee Lee & Others v. Lee Wing Kim (May Lee) & Anor (unreported), HCA9522/1997. Where the proposed expert evidence is plainly inadmissible or irrelevant, the court ought to exercise its discretion to refuse the admission of such evidence. But where the court cannot form a clear view on the relevance of the proposed expert evidence or where it considers that the proposed evidence is clearly relevant, then it should grant leave for the evidence to be adduced at the trial : Ko Chi Keung v. Lee Ping Yan Andrew (supra), at p.67 and Annabell Kin Yee Lee & Others v. Lee Wing Kim (May Lee) & Anor (supra), at p.15.

12) In deciding whether certain proposed expert evidence should be received, the relevant test has been stated to be a two-stage one. Firstly, the evidence has to be admissible as "expert evidence" for the purpose of section 58 of the Evidence Ordinance, Cap.8. Secondly, the evidence must be relevant, in the sense that it is helpful to the court in arriving at its decision on one or more of the issues to be resolved : Barings plc (in Liquidation) & Anor v. Coopers and Lybrand & Ors, Lexis Transcript, 9 February 2001, Evans-Lombe J at paras.44-45.

Reasons for decision

13) The defendants oppose the plaintiff's application on the ground that the proposed expert evidence is irrelevant to the issues to be resolved. In meeting the objection, Mr Chung who appeared for the plaintiff, submitted that the purposes of the proposed expert evidence are twofold :

(1) to explain the terminologies and special terms in insurance policies commonly offered on the market;

(2) to explain the calculations of the returns and benefits under the 2nd Policy.

It is further submitted that the proposed expert evidence is relevant to whether the alleged representations are untrue or false, and will also show that the 2nd Policy is inferior to the policies available on the market.

14) Generally speaking, it is within the function of experts to explain words or terms of science or art appearing on documents which the court has to construed : Hong Kong Civil Procedure 2002, Vol.1, para.38/4/2. Therefore, insofar as expert evidence is sought to be introduced for the purpose of explaining the special terminologies and the calculations of returns and benefits in the insurance policies involved in these proceedings, it will be admissible as coming within the proper confines of expert evidence. Such evidence, I will accept, is relevant to the question of whether the pleaded representations are false or untrue. It may possibly be relevant as to the issue of breach of duty of care.

15) I pause here to address Mr Donney's submission that the present case is not one in which the plaintiff asserts that he was promised one thing and the defendant asserts that he had in fact received what he was promised. It is Mr Donney's submission that there is no dispute as to whether the 2nd Policy gives the plaintiff what he was allegedly promised, although it is disputed that the alleged promises had been made. If indeed this is the case, I will readily agree that it will be unnecessary to adduce evidence, let alone expert evidence, on the effects and benefits under the 2nd Policy. However, upon reading the pleadings, particularly, the Amended Defence, I do not feel able to say for certain that there is no dispute that the 2nd Policy is different from what the plaintiff was allegedly promised. While the Amended Defence pleads too that the 2nd Policy is a non-participating policy, the defendants had denied and put the plaintiff to strict proof of each and every of the other particulars of falsity pleaded under paragraph 8 of the Amended Statement of Claim. The effects and benefits of the 2nd Policy is therefore a live issue on the pleadings and needs to be proved by the plaintiff.

16) Having said that, it will, however, be irrelevant and inadmissible where the expert evidence seeks to canvass terms and terminologies that do not feature in the three insurance policies involved in these proceedings. Equally, expert evidence that endeavours to compare the 2nd Policy with other insurance products offered by other insurers is both irrelevant and inadmissible. As Mr Donney rightly points out, it is not the plaintiff's pleaded case that the 2nd Policy is inferior than those insurance products generally available on the market. This is also not part of the allegations of falsity. As the pleadings stand, it is not permissible for expert evidence be introduced to demonstrate that the 2nd Policy is inferior to the products offered by other insurers. However, a comparison between the 2nd Policy and the Singapore Policy is relevant and permissible.

17) That being the case, sections 6 and 7 of the draft expert report are clearly not admissible as being irrelevant. Furthermore the conclusion stated is inappropriate for an expert. It is a matter for the court to conclude. As to sections 1 to 4, some of the matters explained there, such as limited payment life, are directly relevant as aiding the understanding of the effects of the policies in question. As to the other parts in these sections, they cannot be regarded as plainly irrelevant for they may provide the backdrop to a construction of the Singapore Policy and/or the 2nd Policy.

18) In short, I will grant leave to expert evidence be adduced at the trial limited to one expert for each side. The expert evidence should be limited to dealing with :

(1) the special terms and usage in life insurance policies as are relevant to the three policies pleaded herein; and

(2) a comparison of the features and benefits between the 2nd Policy and the Singapore Policy.

19) Obviously the plaintiff's draft expert report needs to be revised. The defendants' solicitors had, after the hearing before me, made a further submission by correspondence, putting in issue the expertise and qualification of Mr Tong as an expert in life insurance matters. In my view, this is a matter that should be reserved to the trial judge. I will not therefore address the points raised by the defendants' solicitors in this Decision. I will grant the plaintiff 14 days to file and serve the expert report intended to be used at the trial. The defendants will have 42 days thereafter to file and serve their expert report, if any.

Directions for setting down

20) The parties are in agreement that I should grant leave for the action to be set down in the fixture list before a bilingual judge. There is some disagreement as to the estimated duration of the trial. Considering that there are three factual witnesses and two expert witnesses, an estimate of four days is appropriate.

Conclusion

21) The orders I make are as follows :

(1) Leave for expert evidence on :

(a) the terms and usage in life insurance policies that are relevant to the insurance policies pleaded herein; and

(b) a comparison of the features and benefits under the 2nd Policy and the Singapore Policy

be adduced at the trial, limited to one expert for the plaintiff and one expert for the defendants.

(2) The plaintiff to file and serve his expert report within 14 days from the date of handing down of this Decision.

(3) The defendants to file and serve their expert report within 42 days thereafter.

(4) Leave for the action to be set down within 60 days in the fixture list for a 4-days trial before a bilingual judge.

(5) There be an order nisi that costs of the hearings before the Listing Master and before the Listing Judge on 2 October 2002 be in the cause.