Integrity Financial Advice Network Co Ltd v. Lau Kong Kei

HCA 2165/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2165 OF 2011

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JUDGMENT

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Introduction

1.In this action, Integrity Financial Advice Network Company Limited (“Integrity”) sues Mr Lau Kong Kei (“KK Lau”) for the return of a sum of HK$17,348,941.43 (“the Amount”) being 80% of the total amount of HK$21,686,176.79 (“the Total Sum”) previously advanced to KK Lau pursuant to two written contracts whereby it was agreed that KK Lau agreed to participate in its revolutionary business enterprises in the insurance industry in 2010. KK Lau however denies his contractual liability to repay any portion of the Total Sum advanced to him and counterclaims for his outstanding entitlement under the written contracts.

2.The written contracts are entitled Technical Representative’s Contract dated 17 May 2010 (“the TR Contract”) and Transition Allowance Scheme Financing Agreement dated 24 May 2010 (“the Financing Agreement”) (collectively “the Contracts”). The claim of Integrity is based entirely on the Contracts. Whilst it is not in dispute that KK Lau has received from Integrity the Total Sum under the Contracts, Integrity now seeks to recover the Amount pursuant to a clawback provision in the Financing Agreement upon termination of the TR Contract by Integrity on 10 November 2011.

3.The nub of the pleaded case of KK Lau is that prior to his signing of the Contracts, certain representations and promises were made on behalf of Integrity to induce him to give up his lucrative job with American International Assurance (Bermuda) Limited (“AIA”) and take part in the innovative insurance business to be carried on by Integrity. By reason of such representations and promises, KK Lau claims that the clawback provision is not enforceable against him. He further claims that Integrity wrongfully terminated the TR Contract. Therefore, he counterclaims for payments under the Financing Agreement in the total amount of HK$5,004,502.32 and damages for misrepresentation(s) to be assessed.

4.The major issues calling for determination are hence: (1) whether any misrepresentations were made on behalf of Integrity upon which KK Lau relied to enter into the TR Contract and the Financing Agreement and (2) whether Integrity is entitled to enforce the clawback provision against KK Lau, which hinges on whether Integrity was entitled to terminate the TR Contract and hence it can invoke the clawback provision in the Financing Agreement.

Background facts

5.Before I deal with the substantive issues, I shall first outline the background facts leading to the conclusion of the Contracts. They are mostly uncontroversial and evidenced by documents not in dispute.

6.Integrity is a company incorporated in Hong Kong and is part of the Integrity group, which is composed of five companies. The mother company is Integrity Partnership Limited (“IPL”) which is a member of the AXA Group. IPL was jointly owned by AXA China Region Limited (“AXACR”) as to 51% and Integrity Financial Group Limited (“IFGL”) as to 49%.

7.IPL is the mother company and it together with four other companies forms the Integrity group. Within the Integrity group, insurance agency services are provided by Integrity whereas brokerage services are provided by Integrity Independent Risk & Financial Solutions Company Limited (“IIRFS”).

8.KK Lau is a heavyweight in the insurance industry. Prior to joining the new model, from 1973 to 2010, he was the Senior District Director of AIA, which hardly needs introduction. Both his daughter Lavina Lau and his son-in-law, Mr Faith Chu, have a successful insurance career and the latter also joined Integrity.

9.According to the 2010 Operation Plan of Integrity, the new business was different from the traditional agency system and was aimed to provide a business platform for established insurance professionals. This new model also was aimed to enhance professionalism in the insurance industry and eliminate malpractice of traditional agents. 

10.Instead of becoming agents, these professionals would join the new model through their network companies to be set up by themselves. Such network companies would recruit their own advisers and be responsible for their own profit and loss. This new model would attract quality insurance professionals who want to develop their own business by way of their own network companies. They are hence able to build long term value with their own network companies. On the other hand, they would obtain marketing allowance and commissions through their network companies. Integrity would also provide office accommodation, training, recruitment support to the network companies.

11.The key personnel of the Integrity group included Denny Chan, Kevin Lee and Chris Chan. Denny Chan was the Chief Executive Officer of IPL and Kevin Lee was the Chief Executive Officer of Integrity. Chris Chan was the Head of the Network Management of Integrity. Prior to joining the Integrity group, all of them worked in the insurance sector. In particular,  Denny Chan served as the Honorary Secretary of the Insurance Claims Complaints Bureau between 1999 to 2009 as well as the Councillor of the Life Insurance Council, Hong Kong Federation of Insurers from 2001 to 2007.

12.The first key document involving KK Lau is a Letter of Intent dated 1 December 2009. It showed the preliminary intention of the parties to form a new model. The Letter of Intent bore the letterhead of AXA and no specific mention was made to Integrity. It was signed by Chris Chan as Head of Network Management and KK Lau in his personal capacity. The Letter of Intent served to confirm its intention to offer KK Lau the appointment of Senior President within the corporate network of a new distribution entity that would be a subsidiary of a joint venture formed by partnership between AXA and/or its associated companies on the one part and a company to be formed to hold the shares in the joint venture on the other hand.

13.The Letter of Intent expressly stated that it did not create a binding contract and neither party seeks to enforce any of its provisions. I do not intend to go into any detail and suffice it for me to highlight the following contents by way of background.

14.The commencement date of the appointment was fixed for 11 January 2011 or any other mutually agreed date. On or before the commencement date, AXA would provide to KK Lau full copies of the contractions in relation to the engagement of his distribution company and himself collectively defined as the relevant contracts.

15.As an incentive to join the new model, it was suggested that KK Lau should be paid transition allowance (“TA”) in the sum of HK$26,690,679.33, with a sign-on advance of HK$6,672,669.83 (“TB”) and a monthly transition advance of HK$834,083.73 (“MTA”) for the next 24 months. The advance of the transition allowance was expressly subject to conditions of a financing agreement to be entered into by KK Lau and validation and other requirements as stipulated in the schedule to the financing agreement.

16.However, if any of the relevant contracts were terminated for any reason within 60 months from the respective date of such relevant contracts, KK Lau would be liable to repay the transition allowance on a sliding scale. The longer the relevant contracts subsisted, the lesser the amount of the transition allowance had to be repaid. For example if any of them was terminated within the 13^th month to the 24^th month from their effective date(s), 80% of such transition allowance should be repaid.

17.As a further incentive, a share option scheme was suggested. The proposed scheme involved three other individuals including Robert Chau, Jacky Leung and Faith Chu. All these people are outstanding practitioners in the insurance sector. KK Lau and Robert Chau even assumed the position of treetops (“TTs”) at AIA, i.e. the uppermost in the hierarchy of their respective companies. It turned out eventually that only KK Lau and Faith Chu joined the platform.

18.The embryo of the new model appeared with the signing of a shareholders’ agreement of IPL dated 28 December 2009. AXACR and Allset International Limited (later known as IFGL) were parties to this agreement.

19.From February to March 2010, as evidenced by the internal emails of Integrity involving its legal department, the terms of the agreements to be signed with the TTs were discussed. In particular, the clawback provision in the agreement relating to KK Lau was amended to give him more protection.

20.On 16 March 2010, KK Lau signed an agreement entitled Interim Transition Allowance Scheme Financing Agreement (“Interim Financing Agreement”) with a schedule. KK Lau signed the same in his personal capacity and was refereed to as Network Owner. He thereby agreed his annual income in the previous year to be HK$13,345,339.66 and that this amount should be used as base amount for the calculation of the advances to be made to him. As a result, the parties agreed that KK Lau’s TB should be HK$6,672,669.83 and his maximum MTA should be HK$20,018,009.52 (HK$834,083.73 per month x 24 months).  All these figures were identical to those previously stated in the Letter of Intent. The total transition allowance (TA) that Integrity should pay KK Lau remained unchanged.

21.It should be noted that the maximum MTA in general is usually subject to validation requirements. In simple terms, an advisor is required to perform well and generate sufficient new business each month in order to be entitled to the MTA. His performance is measured by his new business credit (“NBC”). In the Schedule to the Interim Financing Agreement of KK Lau, it was expressly provided that he had zero validation requirement to meet. In other words, KK Lau did not have to meet any validation requirement to be entitled to MTA.

22.Another noteworthy matter about the Interim Financing Agreement is that the clawback provision was revised as per the previous discussion. The sliding scale remained unchanged but Integrity could only demand refund of TA only on a fault basis.

23.On 25 March 2010, KK Lau received from Integrity the agreed TB in the sum of HK$6,672,669.83.

24.In May 2010, as evidenced by internal correspondence, Integrity was in the cause of finalizing the agreements to be signed by KK Lau. On the other hand, Integrity applied to Insurance Agents Registration Board for the registration of KK Lau as a technical representative (TR) on 7 May 2010. In the application form, it is revealed that KK Lau had taken two out of five qualifying examinations only.

25.On 12 May 2010, Integrity entered into a Network Company’s Contract with both AXACR and i-Financial Pro Group Limited (“IFP”). One Madam Cristin Lin signed on behalf of IFP as its responsible officer. She, and not KK Lau, held all the requisite licences to be a responsible officer.

26.As can be seen in the internal emails of Integrity, network owner was just a title given to the agent who was also the network company. Integrity had legal advice from its legal department on this arrangement. KK Lau was the actual owner of IFP while Madam Lin was the responsible office only because KK Lau could not be registered as an agent of Integrity given the insufficient licences held by him. KK Lau could not sign an agent’s contract and would only sign a TR contract.

27.In the Network Company’s Contract, IFP was appointed as an agent of Integrity, which was an agent of AXACR, to promote and solicitor business offered by AXACR and other AXA companies through Integrity. IFP was expressly required to meet the key performance indicators specified by Integrity where applicable including production, recruitment and persistency.

28.Shortly afterwards, KK Lau entered into the Contracts. In so far as TA is concerned, there was no deviation from those provisions in the Initial Financing Agreement.

29.The following provisions in the TR Contract and the Financing Agreement are central to the claim of Integrity:

TR Contract

1.1  Subject to the terms and conditions of this Agreement, the Representative shall act as representative of Integrity in promoting, soliciting such business which Integrity is, from time to time, authorized to transact under such agency agreements with such relevant authorized insurers (the “Insurers”) (the agency agreements shall be referred to as the “Agency Agreements”).  Integrity reserves the right in absolute discretion to modify any or all of theRepresentative’s duties as it thinks appropriate having regard to the operational requirements of integrity.

1.5  The Representative shall act for Integrity on an exclusive and full time basis and shall not accept appointment as a technical representative, a responsible officer, an insurance agent or an insurance agency manager of any other person or company for any insurance or other business nor engage in any other business or occupation without the prior written consent of integrity.

2.1 During the term of this Agreement, the Representative shall and shall ensure that all the technical representatives and other persons under his supervision:

(a) meet the key performance indicators specified by Integrity where applicable including production, recruitment and persistency;

…

(e) train, supervise and develop technical representatives and other persons who are under his supervision as determined by Integrity;

…

(k) maintain performance and production equal to or greater than the minimum standards which Integrity will establish annually and make known to the Representative in writing;

…

4.1  During the term of this Agreement, the Representative shall:

…

(c) meet the key performance indicators specified by Integrity including production and persistency;

…

18.1 Integrity or the Representative may terminate this Agreement at any time and without giving any reason for so doing by giving 1 month’s notice to the others in writing.

18.2 Integrity may terminate this Agreement immediately with notice (but in the case of 18.2(f), 18.2(i), 18.2(j), 18.2(k) and 18.2(l) without notice) to the Representative if:

…

(h) the Representative does not meet training, production,persistency, recruitment or other requirements in respect of the Representative’s appointment in this Agreement which may be set by Integrity or may be required under laws, legislation, statutory rules, regulations, codes and guidelines of government authorities from time to time;

18.4 In the event of termination of this Agreement under Clause 18.2, payments of remuneration shall be stopped immediately (whether or not they are accrued).  All of the Representative's rights to such payments accruing prior to termination of this Agreement shall immediately cease upon termination of this Agreement, and the Representative waives all his rights to such payments.

Financing Agreement

(2) (i) Subject to the terms and conditions in this Financing Agreement and the schedule hereto (hereafter called “Schedule”), the Company shall:

(a) advance to the Technical Representative a “Transition Benefit” (hereafter called “TB”) in accordance with the Schedule; and

(b) advance to the Technical Representative a “Monthly Transition Allowance” (hereafter called “MTA”) monthly during the Program Period (as defined in the Schedule) in accordance with the Schedule.

(ii) Pursuant to the interim transition allowance scheme financing agreement dated 16 March 2010 (hereafter called the “Interim Financing Agreement”), the entire TB was advanced to the Technical Representative by the Company on or around 25 March 2010 and, for the purposes of this Financing Agreement, the term TB shall include any such advance of the TB already made under the Interim Financing Agreement.

(4) The Company may at any time and at its sole and absolute discretion discontinue advance of TB and/or MTA in Clause (2), by notice to the Technical Representative.

(5) If the Technical Representative’s Contract is terminated (i) by the Technical Representative pursuant to clause 18.1 of the Technical Representative’s Contract, or (ii) pursuant to clause 18.2 of the Technical Representative’s Contract within 60 months from its effective date, a portion of the amount of TB and MTA that has been advanced to the Technical Representative under this Financing Agreementwill be immediately repayable by the Technical Representative to the Company. The Technical Representative shall:

…

(b) repay 80% of the amount of TB and MTA advanced if the Technical Representative’s Contract is terminated within the 13^th month to the 24^th month from its effective date;

…

The Company would waive its right to seek recovery of all advances made under this Financing Agreement so long as the Technical Representative’s Contract remains in effect for a period of more than 60 months from its effective date.

(8) In the event of the Technical Representative failing to repay when due all or any part of the debt repayable to the Company pursuant to the terms of this Financing Agreement, and/or the Network Company failing to pay all or any part of the Network Company Debt to the Company pursuant to the terms herein, the Technical Representative and/or the Network Company shall pay the Company annual simple interest on such amount(s) remaining unpaid at the rate of 3% over the Best Lending Rate from time to time quoted by The Hongkong and Shanghai Banking Corporation Limited.

(9) Each of the Technical Representative and the Network Company shall severally indemnify and hold harmless the Company from and against all losses and damages, liabilities, charges and expenses of whatsoever nature, including but not limited to all legal costs (which shall include costs on solicitor and own client basis) and cost of recovery agent (if any) incurred by the Company, as a result of any breach of this Financing Agreement by the Technical Representative or the Network Company concerned. Such agreement to indemnity shall survive the termination of this Financing Agreement.

(10) A statement as to the amount(s) owing by the Technical Representative or Network Company to the Company under this Financing Agreement signed by one of the Company’s officers shall, in the absence of manifest error in computation, be final and conclusive and binding on the Technical Representative or Network Company.

(11) This Financing Agreement shall be effective on the effective date of the Technical Representative’s Contract (“Effective Date”). When the Technical Representative’s Contract is terminated, this Financing Agreement shall forthwith be terminated without any notice, and the Technical Representative and/or the Network Company shall, without prejudice to the rights and remedies of the Company, immediately repay all the outstanding amounts due to the Company pursuant to this Financing Agreement.

30.KK Lau was referred to as “Representative” in the TR Contract and “Technical Representative” in the Financing Agreement. IFP was also a party to the Financing Agreement and was referred to as “Network Company”.

31.I now turn to the main issues and evaluate the evidence relating thereto. Before doing so, I have a preliminary observation to make about the defence.

32.I should first point out that the pleadings of the defence despite their re-amendments remain unsatisfactory. The plea of misrepresentation, being central to the defence, lacks clarity and precision. When the alleged misrepresentations were made orally, as in the present case, it is important to plead precisely who said what and to whom it was said. Here, the pleaded case is that the alleged misrepresentations could be made by the Trio at the same time or could be made by any combination of the Trio. The former scenario is obviously inherently improbable bordering on absurdity whilst the latter scenario actually undermines the certainty of the allegations.

33.Pleadings formality aside, the plea can barely survive proper legal analysis. On the one hand, KK Lau does not ask for rescission and instead, he has affirmed the Contracts and even makes a counterclaim in reliance of the same. On the other hand, KK Lau wants to avoid the clawback provision in the Financing Agreement.

34.Mr William Wong SC (together with Mr James Cheng and Mr Michael Lok), appearing for KK Lau, tried his utmost to resist the claim of Integrity albeit being handicapped by the present state of the pleadings, of which he is not the author. Sensibly, he abandoned some allegations in the pleadings in respect of share options and the claim arising therefrom on the first day of the trial. He further abandoned the plea of fraudulent misrepresentation at his closing submissions.

Misrepresentation and promises?

35.I shall first make factual findings in respect of this plea of misrepresentation, which features in both his Defence and his Counterclaim. The same allegations in support of this plea also form the main plank of his alternative plea of estoppel.

36.KK Lau alleges some misrepresentations and promises in his pleadings. I shall first deal with the major one which KK Lau seeks to avoid the clawback provision.

37.It is alleged that in or about early March 2010, Denny Chan and/or Chris Chan and/or Kevin Lee, whom KK Lau referred to as “the Trio”, presented to him that the TB would not be repayable under any circumstances provided that he would remain working for Integrity for 5 years and similarly the MTA would not be subject to repayment unless he resigned on his own initiative within 5 years.

38.KK Lau claims that in reliance of the foregoing representations and promises, with his worry about the risk of joining a new business with the abandonment of his successful career with AIA being allayed, he resigned from AIA and set up IFP to enter into the Interim Financing Agreement in March 2010.

39.KK Lau pleads that Integrity and/or the Trio intended to use the representations and promises to induce him to join the new business and they knew that the representations and promises were false, untrue and/or not intended to be carried out and/or they were made recklessly without caring whether they were true or false. Alternatively, they were made negligently.

40.On this basis, KK Lau further signed the Contracts in May 2010 and caused IFP to enter into the Network Company’s Contract.

41.There is a further allegation introduced by way of amendments that there was a representation that the TR Contract was a mere formality and that KK Lau did not need to care about the terms therein. It is not unknown on the pleadings as to when, where and indeed who made this representation to KK Lau. His witness statement, which is merely a slightly beefed up copy of the pleadings, provides no answer in this regard.

42.Having considered the documentary evidence and heard KK Lau and the Trio, I have no difficulties in coming to the conclusion that no such representations and promises were made by any one of the Trio for the following reasons:

(1) The clawback provision consistently featured in all of the Letter of Intent, the Interim Financing Agreement and the Financing Agreement. It was of critical importance to Integrity and that made perfect commercial sense for it to be incorporated to safeguard its interest;

(2) The internal correspondence of Integrity, the authenticity of which is not in issue, showed that there were indeed serious discussions about the terms of the clawback provision applicable to TTs including KK Lau. Eventually revisions were made so as to give TTs more protections against clawback. This indicates Integrity was very serious about the clawback provision and took into account the position of KK Lau. It was meant to be enforceable;

(3) I refuse to accept KK Lau’s evidence on this issue. His written allegation is that the alleged misrepresentations and promises were made to him in March 2010. Under cross-examination, when he was made alert to the clawback provision in the Letter of Intent, he awkwardly changed his evidence to say that they were actually some time in September or October 2009 so as to explain why he signed the Letter of Intent in December 2009. This last-minute change of the timing is not merely an indication of imprecision. It shows how flexible KK Lau about his allegations.

(4) The alleged misrepresentations and promises were in direct contradiction with the clawback provision. There is no reason why KK Lau would agree to append his signatures on the Letter of Intent, the Interim Financing Agreement and the Financing Agreement when his legal position would be seriously prejudiced by those express terms;

(5) There is completely no basis for KK Lau to believe and act on the alleged misrepresentations and promises made by any one of the Trio with whom he had never dealt. Curiously enough, KK Lau said he had not even suggested them to delete the clawback provision.   

(6) This is particularly so given the fact that KK Lau was a veteran insurance practitioner and had ample social experience. He agreed that he knew the importance of contractual terms in a commercial document such as an insurance policy. I cannot believe that he was so naive that he would rely on the alleged misrepresentations and promises despite the persistent appearance of the clawback provision;

(7) Clause 1.4 of the TR Contract provided that KK Lau acknowledged that he freely and voluntarily entered into the same and had been given an opportunity to obtain legal advice prior its execution. This clause together with Clauses 21.1 (no modification without written evidence bearing signatures of the parties) and 21.2 (the entire agreement clause) seriously underscore the improbability of the existence of such alleged misrepresentation and promises;

(8) Under cross-examination, KK Lau denied having sought any legal advice on the terms of the Contracts. However, he accepted that in January 2010 he and Faith Chu had a lunch meeting with a solicitor named Mr Adolf Cheung. There, Faith Chu obtained legal advice on the contracts he was going to sign with Integrity. KK Lau claimed that he did not seek any legal advice himself and the discussion was strictly confined to Faith Chu and Mr Adolf Cheung. He did not even pay attention to their conversation as he knew that Faith Chu’s contract differed from his.

(9)I cannot accept his assertion. They were at the same table and both Faith Chu and KK Lau would soon leave their long-term employment and contract with Integrity. I could not accept KK Lau could be so indifferent to his own contractual matters and did not take the opportunity to consult Mr Adolf Cheung.  

(10) Indeed, in his witness statement filed in another High Court action (HCA 623/2012), KK Lau told another story. There, it was narrated that both he and Faith Chu were given legal advice at the lunch meeting and upon such advice, Faith Chu and he requested the Trio to delete certain unfair terms relating to the clawback mechanism. To be exact, they requested that there would be no clawback if the Agreement was terminated by either party with one-month’s notice on a no fault basis.  

(11) The said witness statement was only produced to KK Lau under cross-examination. KK Lau was caught off the guard. He could barely give a convincing explanation for the discrepancy between his oral testimony and the said witness statement.

(12) There are eleven provisions in Clause 18.2 of the TR Contract other than the controversial one, viz, Clause 18.2(h). The reasonableness of such provisions is not in dispute. For example, it was provided that Integrity could terminate the TR Contract immediately if KK Lau commits any dishonest or fraudulent act resulting in a criminal conviction. I fail to see how KK Lau argues that the clawback provision should nevertheless not be triggered if those conditions in such provisions are fulfilled.   

(13) Last but not the least, I have heard the Trio. They appeared to me to be forthcoming. They struck me as professionals of integrity. I do not believe that they ever made a concerted effort to create such alleged misrepresentations and promises. They could hardly work on any mature and reasonable man who has been in the insurance business for decades. I prefer their evidence in this regard and believe that that they did not make such misrepresentations and promises negligently or otherwise.

43.I should make it clear that I reach this conclusion despite the evidence of Faith Chu and Robert Chau. Their evidence is of little relevance in fact and cannot in any way undermine the force of the evidence of the Trio. I should make it clear I do not accept the two-year guarantee assertion by Robert Chau.

44.There are some other alleged misrepresentations in the pleadings. Mr William Wong in his closing submissions expressly confines his case to two misrepresentations and abandons others pleaded under paragraph 5 of the Re-Amended Defence and Counterclaim. The first one is that there was representation by the Trio to the effect that the network companies in the new model can sell insurance products other than those of AXA. The second one is that Integrity would operate independently of AXA despite it being held 51% by AXA.

45.First, as rightly pointed out by Mr YL Wong SC, appearing for Integrity with Mr Suen, such a plea of misrepresentation is deficient in that it lacks particulars and the precise nature and extent of their untruth are not pleaded.

46.In his oral testimony, KK Lau elaborated on the first misrepresentation. He further agreed that the Trio did not expressly tell him that once he joined the platform, such products could be available to his network companies. He also accepted that no direct sale of non-AXA products were meant by the parties. He knew too well that any dealing with non-AXA products had to be done through a referral system and/or an agency agreement.

47.When being confronted with the fact that MSIG general insurance products (by an agency agreement) and Transamercia products (by referral through IIRFSCL) were indeed available to the network companies of Integrity, he emphasized that he expected that his network company after joining the platform of Integrity could sell the life insurance products of the other three big insurance companies only (Zurich, Prudential and Manulife) and not others.

48.His pleading however does not allow him to advance this case. Moreover, his evidence in chief including his oral evidence did not support such a change of his pleaded case.

49.Nor is there any evidence in his witness statement that KK Lau had ever complained to Integrity about the falsity of the alleged misrepresentation.  

50.On the evidence, I am not convinced of any falsity of the alleged misrepresentation. I reject his alleged misrepresentation about sale of non-AXA products without hesitation.  

51.The second alleged misrepresentation about independent operation of Integrity is even more difficult to understand. In Mr William Wong’s opening submission, the independence alluded to was about the operation of the network company of KK Lau from AXA and not that of Integrity.

52.Further, again no particulars of falsity of this alleged misrepresentation is given in the pleading. KK Lau agreed that he did not explain the falsity at all until he was cross-examined. He alleged “the relevant contracts and rules were based on AXA’s standard form documents”.

53.I do not accept that he could make an allegation of falsity in such a manner. Nor can I accept his belated allegation can prove falsity at all. 

54.The alleged misrepresentations and/or promises constitute the only positive case of the defence. I have come to the conclusion that the defence cannot prove such misrepresentations and/or promises and all his pleas based on them including estoppel should likewise be rejected.

55.This of course does not mean that Integrity must succeed in his claim. It still has to prove his contractual entitlement under the Contracts to claw back, which largely hinges on whether Integrity was entitled to terminate the TR Contract without notice under Clause 18.2(h) thereof.

56.The parties have filed a Joint List of Issues. In light of my factual findings concerning the alleged misrepresentations and promises, only a few issues relating to the lawfulness of the termination of the TR Contract by Integrity call for determination. They are set out as follows:

(1) Whether KK Lau failed to meet his performance requirements, particularly those stipulated in clauses 2.1(a), (e) and (k) and 4.1(c) of the TR Contract.

(2) Whether those foregoing obligations fall within the scope of the requirements under Clause 18.2 (h) of the TR Contract.

(3) Whether KK Lau was required to meet any training, production, recruitment or any similar requirements by his agreements with Integrity and whether any was ever set for him.

57.As a preliminary observation, these issues are largely factual in nature albeit involving a proper construction of the relevant provisions. Most facts alleged by Integrity are not really in dispute. They are borne out by documentary evidence. The underperformance of IFP and hence Integrity is indisputable, regardless of which party was to be blameworthy. There are not really many material factual disputes. The debate is more about the interpretation of certain indisputable facts.

58.On the other hand, generally speaking, all the witnesses of Integrity appeared to be straightforward and decent professionals. They were impressive witnesses. I have no concern about the veracity of their testimony, especially those supported by contemporaneous documents.

59.The same cannot be said about KK Lau. To start with, his allegations of misrepresentation are incredible. He was often evasive in his answers and he inclined to harping on his own case in disregard of the questions posed to him. I do not find him to be a truthful witness at all and wherever his evidence is in conflict of those of the witnesses of Integrity, I feel more comfortable to prefer the latter.

60.Before my resolution of the foregoing agreed issues, I have to explain why I refused to allow Mr William Wong to raise a contention on the first day of the trial. In his written opening submission, he contended that KK Lau did not assume any personal obligations under the TR Contract and such obligations were to be performed by his network company only. He submitted that Integrity therefore had no cause of action against KK Lau in the result.

61.Mr YL Wong mounted an objection to this course in making his opening submission. He submitted that it was a new case and it would cause prejudice to Integrity if it had to deal with the new case made only a few days before the trial.

62.Mr William Wong explained to me in detail the basis of his controversial contention. Briefly put, his argument ran as follows. KK Lau was such a TT that he was never intended to be a technical representative doing personal selling himself. He signed the TR Contract instead of a network owner agreement as intended by the Letter of Intention just because he was not professionally qualified to be an agent of Integrity. Thus, KK Lau could not be a network owner in the new platform. The purpose of his entry into the TR Contract was only to enable him to obtain the TA. In passing, I noted that I found little merit in this submission at all.

63.On the other hand, Mr William Wong agreed that KK Lau had to perform the obligations of his network company under the Network Company Contract qua its shareholder.

64.I agreed with Mr YL Wong that Mr William Wong tried to run an unpleaded case. In his pleading, the only basis that KK Lau contends that he could avoid the clawback provision (and not all the terms) in the TR Contract is his plea of misrepresentation and estoppel. It is alleged that the TR Contract was misrepresented to him to be a mere formality only and he did not need to be concerned about its terms.

65.True as it is that there is an averment that neither party intended to treat KK Lau as a technical representative but as the director or senior president of his network company to further and expand the business of both his network company and Integrity. I also noted that there was an assertion that KK Lau was not required to meet any training, production, persistency and recruitment or any similar requirement by his agreements with Integrity.

66.However, KK Lau did not allege that he personally had no personal obligations to perform under the TR Contract despite all the extensive supervisory and actual performance obligations contained therein merely because he was not intended to be a technical representative himself. There were many other obligations which could and should be fulfilled by KK Lau irrespective of whether he was a technical representative or a network owner under the TR Contract. Such obligations were to be performed by him with a view to the furtherance and expansion of the business of both his network company and Integrity. On pleading level, I ruled that KK Lau should not be allowed to adopt this new position.   

Interrelationship between Clauses 2.1(a), (e) and (k) and 4.1(c) and 18.2(h) of the TR Contract

67.Now I turn to the agreed issues. First I have to consider whether those obligations under 2.1(a), (e) and (k) and 4.1(c) fall within the scope of the requirements of Clause 18.2(h). My view is that the answer is clearly in the positive.

68.As an overall view of the TR Contract, Clause 2 set out the supervision obligations of KK Lau. KK Lau were obliged to perform by himself and the technical representatives and other persons under his supervision a number of duties.

69.Clause 2.1(a) referred to key performance indicators (“KPIs”) specified by Integrity to be met by KK Lau and the personnel of IFP. Production, recruitment and persistency were expressly included to be KPIs.

70.Clause 2.1(e) merely imposed on KK Lau a general duty to train the personnel under his supervision.

71.Clause 2.1(k) required KK Lau to reach at least certain minimum standards established by Integrity annually. Such minimum standards related to performance and production must be made known to KK Lau in writing.

72.Clause 4.1(c) imposed upon KK Lau a personal duty to meet KPIs including production and persistency.

73.Clause 18.2(h) entitled Integrity to terminate the TR Contract if KK Lau underperformed and failed to meet the training, production, persistency, recruitment or other requirements which might be set by Integrity from time to time. The scope of such requirements was wide indeed.  

74.Admittedly, Clause 18.2(h) made no mention about any KPIs and/or minimum standards. Nor did it refer to any of Clauses 2.1(a), (e) and (k) and 4.1(c). However, reading the TR Contract as a whole and adopting a purposive construction, all the KPIs and minimum standards referred to in those provisions clearly fall within the wide ambit of those requirements in Clause 18.2(h). I fail to see how it can be argued otherwise.

Any KPIs/minimum standards/performance requirements actually set for KK Lau pursuant to the TR Contract

75.The primary documents on which Integrity relies include the September Business Plan Minimum Case (“the September Business Plan”), its revised version (“the Revised Business Plan”) and the Performance Tables (“the Performance Tables”).

76.The case of Integrity is based on the persistent failure of KK Lau and IFP to meet the minimum targets in the September Business Plan and the Revised Business Plan. Integrity relies on the Performance Tables to demonstrate the shortfall.

77.The defence raised no issue about the authenticity of these primary documents. No challenge to the accuracy of their contents was mounted, either. The central contention is that they were merely business plans with no binding effect and the figures contained therein were merely business projections without any mention of KPIs, minimum standards or performance requirements.

78.This is purely a factual issue as to whether any KPIs, minimum standards and performance requirements for KK Lau to meet under the TR Contract had been set.

79.The starting point is that there were express contractual rights on the part of Integrity in the TR Contract to set KPIs, minimum standards and performance requirements for KK Lau to meet. These rights make perfect commercial sense for Integrity. It set up the platform and the performance of KK Lau and his network company was of critical importance to its success.  

80.The network companies were totally new to Integrity and its founders. It was the person recruited to join the platform via his network company that mattered. This was the reason why Integrity handpicked TTs and established insurance practitioners. The TA, which was a huge amount by any standard, was paid to KK Lau personally and not IFP. It follows that Integrity did have expectation of KK Lau (and the personnel of IFP under his supervision) to perform and indeed contractually obliged him and IFP to perform.

81.Among such KPIs, minimum standards and performance requirements, KK Lau agreed that production and manpower played an important part in the make or break of the business of IFP and hence Integrity.

82.I should add that prior to the signing of the TR Contract, as indicated by the internal emails of Integrity, in particular, the one dated 5 May 2010 sent by Chris Chan to Kevin Lee and Denny Chan, a meeting was held with KK Lau and his management team and a 5 years business projection table was produced as a result. In the table, both the targeted recruitment and production figures of IFP were given. For the year of 2010, KK Lau’s estimate of productivity stood at HK$31,250,000 and his estimate of manpower (headcount of new recruits) at 138.

83.It is true that there was no specific requirement spelled out in the TR Contract. I find nothing untoward about this and I am unable to share Mr William Wong’s concern. In the first place, the express terms of the TR Contract clearly allowed Integrity to specify such requirements during its currency.

84.KK Lau was the only TT successfully recruited by Integrity. His track record was impressive and he had a high standing in the profession. That was the reason why Integrity agreed to pay a substantial amount to ensure his participation. Integrity obviously pinned high hopes on him and placed trust in him at the outset.

85.Against this background, it was perfectly understandable that it found it more conducive to a good working relationship to leave the nitty-gritty of such KPIs, minimum requirements and performance requirements to be decided at a later stage.

86.Indeed, Mr YL Wong draws my attention to a provision of the “Model Agency Agreement For Selling of Long-Term Insurance” issued by Life Insurance Council of The Hong Kong Federation of Insurers (2011 version) to the effect that an agreement with an insurance agent can be terminated without notice if “the agent does not meet training, production, persistency or other requirements in respect of his operation which may be set by the Company from time to time”.

87.Given the express provisions and their plain commercial necessity, I am of the view that it is more probable than not that Integrity would set KPIs, minimum standards and performance requirements to ensure delivery of KK Lau in due course.

88.I should proceed to examine the circumstances under which the September Business Plan, the Revised Business Plan and the Performance Tables were presented and acted upon by the parties. They are mostly evidenced by contemporaneous documents and can be outlined as follows.

89.On 3 September 2010, Benny Yip sent to Cristin Lin an email copied to KK Lau (“the September Email”). Benny Yip was the Senior Manager of Planning & Performance Management of Integrity and was in charge of monitoring the performance of its network companies. By the email, Benny Yip asked Cristin Lin her comments on his draft business plans attached thereto. The draft was based on their discussion on the day before. The draft business plans were in the form of spreadsheets. Each of them consisted of a minimum case and a realistic case with projected figures relating to productivity and manpower. The targets in the realistic case were expressly stated to be 125% of those in the minimum case. Benny Yip made it clear that the draft would be presented to the Board.

90.I note that KK Lau under cross-examination claimed for the first time that he never read the September Email. I cannot believe him. It was such an important document that it could not escape his attention, especially when Cristin Lin also received the same.

91.An undated email of Benny Yip showed that Cristin Lin confirmed acceptance of his draft and the plans would soon be presented to the Board.

92.In his evidence, Benny Yip explained that in September 2010, Kevin Lee instructed him to create a tool by way of business plans. It was intended that such plans could help the parties to monitor the business performance and to plan for future growth.

93.He further explained that the figures in the September Business Plan were arrived at after repeated discussions with KK Lau and Cristin Lin from May to September 2010. The projected sales figures were provided by KK Lau whilst the projected expenditures were provided by Cristin Lin. Both of them committed to the figures.

94.I have also no reason to cast doubt on the evidence of Benny Yip, who is an independent witness working in Singapore, having severed his ties with Integrity and AXA entirely. He appeared to be very forthcoming to me and tesified with confidence and clarity. I find him to be a truthful witness.

95.On the other hand, I am unable to accept the evidence of Cristin and KK Lau that they only received the figures from Benny Yip. Cristin tried to pretend to be innocent and was unable to produce those figures to Benny Yip. She insisted that Benny Yip provided them to her. In fact, she is an experienced insurance agent having previously worked for AIA under the supervision of KK Lau.

96.She added that KK Lau was unable and unwilling to provide any figures for forecast purpose since he said the business had just started and “the chair was not yet hot” (櫈都未坐熱).

97.I do not find her to be a credible witness. She first told this court she had a master degree in the Chinese Language. Upon discovery of her master degree being a MBA, she changed to say that she had only meant that her master degree course was taught in the Chinese Language. Moreover, she did not mention about the September Email at all in her evidence in chief and she could hardly contradict its content.

98.Moving onto February 2011, Integrity showed a heightened concern about the performance of IFPGL. By an email dated 21 February 2011 (“the February Email”), Benny Yip sent to KK Lau the Revised Business Plan, which they had discussed in that afternoon. Benny Yip impressed KK Lau that the manpower and production figures would be submitted to Integrity for consolidation.

99.The Revised Business Plan was a revision of the September Business Plan. The NBI were increased whilst the manpower figures were lowered. Mr William Wong highlights that Benny Yip and Denny Chan failed to mention the Revised Business Plan in their witness statements.

100.Their omission does not cause me any concern. There is no issue about the genuineness of the February Email and the Revised Business Plan. They were in actual existence.

101.Benny Yip explained that the revision was done with the direct input of KK Lau. KK Lau denied and asserted that Benny Yip made up all the new figures himself. I note that this assertion was not even put to Benny Yip.

102.I reject KK Lau’s assertion, which is inherently improbable. He finally agreed that certain revisions in respect of manpower were possible only with his input. It only shows how desperate he is to negative any commitment to the Revised Business Plan.

103.Benny Yip further prepared the Performance Tables with reference to the Business Plan from September 2010 to January 2011 and thereafter the Revised Business Plan. The Performance Tables were entitled “NC Monthly Business Report (actual v plan)”. The Performance Tables showed both the actual figures achieved in terms of productivity and manpower and those stated in the Business Plan. Benny Yip updated them on a monthly basis so that Integrity could closely monitor the actual performance of IFP and see whether it could meet the targets set in the September Business Plan and the Revised Business Plan.

104.In total, there were 6 further Performance Tables updated from March to October 2011. From these Performance Tables, it can be seen that IFP underachieved and did far worse than the minimum case in the September Business Plan and the Revised Business Plan.

105.The undisputed evidence of Denny Chan is that he held a private meeting with KK Lau to review the performance of IFP every month since May 2010. Denny Chan further said since February 2011, he referred to the Performance Tables at such meetings with KK Lau to impress upon him his underperformance and demanded improvement. This KK Lau denies. He further claims having received only one of the Performance Tables from Integrity.  

106.As observed above, Denny Chan was a more reliable witness. His evidence is supported by his meeting notes which he prepared in July, August and November 2011. These meeting notes also referred to other matters such as business reports and complaints of KK Lau, which he agreed to have been canvassed.

107.There is no issue about the authenticity of such meeting notes. I believe Denny Chan did make a genuine contemporaneous record of the monthly meetings with KK Lau by way of these meeting notices. I am aware that the one dated 9 November 2011 is an exception and is self-serving in nature. I believe Denny Chan did create this for the record in anticipation of KK Lau’s dismissal on the following day. I am convinced of its truth by the oral evidence of Denny Chan in any event.

108.In fact, it is more likely than not that Denny Chan referred to the Performance Tables at the monthly meetings for the purpose of discussion about the performance of IFP. The Performance Tables did contain the relevant information. There is no reason why Denny Chan should withhold these documents from KK Lau and did not refer to them at all. Whether KK Lau actually paid attention to the contents in the Performance Tables is irrelevant.   

109.Therefore, I have no difficulties in accepting Denny Chan’s evidence that he did review the performance of IFP with KK Lau by reference to the Performance Tables during such monthly meetings.  I also accept that at the meeting on 1 November 2011, Denny Chan informed KK Lau of the termination of the Contracts with effect from 10 November 2011.

110.In light of the foregoing matters, I accept that Integrity did set the KPIs, minimum standards and requirements in writing under the TR Contracts by way of the minimum targets in the September Business Plan and the Revised Business Plan for the following reasons:

(1) I got a distinct impression that KK Lau’s evidence on this issue cannot be relied on. He was not forthcoming when asked pertinent questions and was all ready to say anything to reinforce his core contention that he had never committed to any figures set out in the September Business Plan and the Revised Business Plan. He claimed to be ignorant of the contents of the material documents sent to him.

(2) Regardless of his own attitude towards such figures, the attitude of Integrity is clearly shown in the September Email and the February Email. They were to be submitted to the Board. In his meeting record, Denny Chan referred to such minimum figures as committed targets. They were not mere projections for business planning, though they could also help in that regard. Integrity expected KK Lau to meet such minimum targets and they were KPIs within the meaning of Clauses 2.1(a) and 4.1(c).

(3) The Performance Tables were created by reference to the minimum targets in the September Business Plan and the Revised Business Plan. I see no utility in the Performance Tables at all if the minimum targets were sheer projections created by Benny Yip on his own.

(4) In a similar vein, if the minimum targets were mere projections without any measure of commitment on the part of IFP, I see no reason why Benny Yip had to be tasked with the revision of the September Business Plan and came up with the Revised Business Plan with serious discussions with KK Lau.

(5) I am aware that loose language was used by Integrity in those primary documents, as highlighted to this court by Mr William Wong. The title of “business plan” seems to suggest non-definitive nature of the targets set out therein so that no dire consequence would flow from any failure to meet such targets. Further, there is no express reference to KPIs, minimum standards and requirements. In my view, what really matters is whether, in substance, such KPIs, minimum standards and requirements were actually given in accordance with the TR Contract in the September Business Plan and the Revised Business Plan. It is perfectly understandable that Integrity simply adopted the usual language in its ordinary cause of insurance business without strict adherence to the terms used in the TR Contract. I do not think it is necessary at all.

(6) Nor is it necessary for Integrity to reiterate its contractual right in its communication with KK Lau about the Business Plans. KK Lau should have been taken to be cognizant of the terms of the TR Contract and have obtained legal advice thereon. It might not do good to the working relationship if Integrity always mentioned its legal rights against KK Lau.

(7) I should add that the fact that Integrity did not terminate the TR Contract under Clause 18(1)(h) immediately upon KK Lau’s failure to meet the minimum targets does not mean that KK Lau was not contractually bound to meet such targets. No plea of estoppel or acquiescence is made on this basis. Indeed, it involved a commercial decision as to when to cut the loss and severed the tie altogether.

111.Mr William Wong further relies on the fact that KK Lau had zero validation requirements to rebut the existence of any performance requirements set under the TR Contract. I cannot accept his submission.

112.As explained by Kevin Lee, zero validation requirement, as requested by KK Lau and accepted by Integrity, merely related to his entitlement to MTA without pre-conditions within the first 24 months. As discussed above, validation requirements are a normal practice in the insurance industry. At the inception, when Integrity had confidence in KK Lau and in light of KK Lau’s express promise that he could deliver, it is understandable that Integrity agreed to waive the validation requirement of KK Lau, especially when the parties were optimistic about the new model and eager to work together on it. It could be viewed as a vote of confidence and a gesture of goodwill.

113.However, it could not possibly mean that Integrity was willing to give KK Lau the entire clawback provision could do nothing when it turned out that the confidence was not justified. In my view, it would go too far to suggest that Integrity thereby waived any performance requirements during the currency of the TR Contract altogether. The express provisions relating to performance requirements remained intact even after the validation requirement had been set to be zero contrary to the original intention evinced by the Letter of Intent. There is no reason why such performance requirements should not be given effect.

114.Mr William Wong further argues that KK Lau had no reason to agree to the minimum targets for the months of May to August 2010 in the September Business Plan when he knew that the actual figures failed to meet such targets if any such failure would entitle Integrity to terminate the TR Contract and ask to claw back.

115.I do not find this argument convincing. If Integrity had been minded to terminate the TR Contract in September 2010 on account of KK Lau’s previous failure to meet the minimum targets, it would not have asked KK Lau to provide his projections for the following few years at all. The new platform was still in its infancy and it is only reasonable for Integrity to refrain from exercising its contractual right and give KK Lau time to catch up. This must be clear to KK Lau.

Alleged failure to meet KPIs, minimum requirements and performance requirements set pursuant to the TR Contract

116.On this issue, I do not find it necessary to undertake a detailed analysis of the figures in the Performance Tables. The underperformance of IFP is not really in dispute and KK Lau merely laid the blame on the doorstep of Integrity.

117.The underperformance is sufficiently shown by the ratio of the actual figures verse the planned figures ratios from February to October 2011 in terms of both production and manpower, which are as follows (figures not in dispute):

	2/11	3/11	4/11	5/11	6/11	7/11	8/11	9/11	10/11
Production	69%	36%	11%	49%	39%	32%	28%	14%	23%
Manpower	103%	77%	75%	75%	62%	61%	59%	54%	53%

118.In conclusion, in light of the foregoing analysis, I make the following findings:

(1) Integrity was entitled to set the KPIs, minimum standards and/or performance requirements under the TR Contracts;

(2) Integrity did set such KPIs, minimum standards and requirements in writing under the TR Contracts by way of the minimum targets in the September Business Plan and the Revised Business Plan;

(3) KK Lau and IFP failed to meet such minimum targets and hence failed to meet the requirements within the meaning of section 18.2(h);

(4) Integrity was entitled to terminate the TR Contract with immediate effect by its letter dated 10 November 2011; and

(5) Integrity is entitled to ask KK Lau to claw back pursuant to Clause 5(b) of the Financing Agreement.

119.With these findings, I am satisfied that Integrity has sufficient proved its claim. None of the many arguments made by Mr William Wong and matters raised by KK Lau is able to convince me otherwise. A great majority of such arguments and matters in his 190-page closing submissions are irrelevant given the pleadings of KK Lau and are with respect quite beside the point.

120.Nevertheless, I shall deal with some of the challenges of Mr William Wong to the integrity of the Statement of Claim. He argues that there is no mention about the September Business Plan and the Revised Business Plan in the pleadings of Integrity and so they are deficient.

121.I do not agree to this submission. The relevant provisions of the TR Contracts were pleaded. The material factual allegation that KK Lau failed to meet the performance requirements was pleaded too. It is trite that Integrity need not plead evidence in support of its pleaded allegations.

122.Mr William Wong further points out that in the Statement of Claim, it is pleaded that KK Lau failed to meet the requirements as stipulated in Clauses 2.1(a), (e) and (k) and 4.1(c) of the TR Contract. He submits that as a matter of fact, contrary to the pleaded case, there was no particular requirements stipulated in the TR Contract.

123.I find no merit in this argument. On a fair reading of the averment, it does not mean that the actual requirements in specific terms were expressly set out in those provisions. I find that the pleading does its job when it refers to the relevant provisions, which obliged KK Lau to meet requirements to be set by Integrity. 

124.In addition, from the Joint List of Issues, the parties’ witness statements and the way Integrity advanced its case and KK Lau advanced his, it cannot be discerned any confusion whatsoever about this plea. Though I agree that the pleading could be more precise, I cannot conclude that it is so deficient and inadequate as to deny Integrity its clear contractual entitlement to claw back.

125.Next, Mr William Wong points out that in the Re-re Amended Reply, it is alleged that KK Lau failed to meet the agreed targets. He submits that this is a new allegation of an agreement of targets falling outside the scope of the Statement of Claim. I disagree with him.

126.The new allegation does not form any part of the cause of action underlying Integrity’s claim and whether such targets had been agreed by KK Lau is not a material issue. The TR Contract did not require KK Lau’s consent to the KPIs, minimum standards and/or requirements to be set by Integrity. KK Lau in his evidence too agreed in fact Integrity could set such requirements without his consent. The new allegation is at most a piece of additional information about such requirements and I also do not think that it is an inconsistent plea at all.  

127.I do not intend to deal with other forensic analysis of the pleading and also the pre-action letters. I do not think such challenges are relevant to the clear issues which the parties identified in the Joint List of Issues and canvassed in the course of the trial. In the final analysis, the key issue is whether, on the evidence, Integrity could rely on Clause 18.2(h) to terminate the TR Contract by serving the notice on 10 November 2011. What the lawyers of Integrity said or did not say after that date can hardly affect the resolution of this issue.

Other contentions of KK Lau

128.KK Lau raised a number of wide-ranging allegations through his counsel in his cross-examination of the witnesses of Integrity. The haunting theme of the allegations is that KK Lau should not be made a scapegoat of the failure of Integrity and that the underperformance of IFP was also attribute to Integrity.

129.As pointed out by this court in the course of the trial, this is not an inquiry of the collapse of the new business model. It is not the pleaded case of KK Lau that there were somehow certain implied terms imposed on Integrity so as to enable KK Lau to fulfill his KPIs, minimum requirements or other performance requirements.  

130.KK Lau, rightly or wrongly, feels that Integrity treated him unfairly and did not give him any chance to catch up and develop IPF properly. This is particularly so when he considers that he already accepted a lesser TA to join the new business. He sees no reason why he would accept to be subject to any KPIs and/or performance requirements. He cannot accept that Integrity could claw back his TA.

131.I do not find it appropriate to even attempt to determine the fairness of the TR Contract. To begin with, there is no issue of fairness raised on the pleadings.

132.Moreover, the Contracts were after all commercial contracts. KK Lau was given ample opportunities to obtain legal advice on them and he entered into the same with eyes wide open to the express terms including the provisions now relied on by Integrity. If he purportedly chose to adopt a cavalier approach to commercial contracts and documents sent to him by Integrity with apparent importance, he should take the consequences. Absent vitiating factors, contracts are to be binding on the parties and upheld by the court. Unfounded allegations of misrepresentations and estoppel cannot assist him wriggle out of the Contracts. This court is particularly displeased with his baseless allegation of fraud, which was abandoned only at the very late stage of the proceedings.

133.The evidence shows that KK Lau was very eager to join the new model, which gave him a chance to be an entrepreneur having his own network company. It was a novel attraction and the carrot under the Contracts should not simply be confined to the TA. I am not persuaded that his TA was well below the market price in the circumstances.

134.On the other hand, the stick under the Contracts seems to him a common provision in the insurance industry. Clawback provisions are of commercial necessity to investors. Investors should also be entitled to terminate an agent’s contract on the ground of underperformance to cut loss. The evidence of Integrity is that it invested hundreds of millions on the model already. The total amount it paid to KK Lau and the IFP agents as allowances and commissions as at the end of 2011 amounted to HK$82 million. Incontrovertible documentary evidence of Integrity by way of management meeting minutes show that underperformance of KK Lau had long been a pressing concern of Integrity. Whether and when the termination should take place were pure commercial decisions of Integrity. 

135.All in all, whether the carrot justifies the stick under the Contracts involves commercial decisions of the parties privy to the Contracts and this court do not find it necessary and proper to form any view on their fairness.

136.Lastly, Mr William Wong sought to advance a case of conspiracy in the course of cross-examination of the witnesses of Integrity, relying on post-termination matters. I disallowed this course on the simple ground that it is never his pleaded case.  

Conclusion and Order

137.Brushing aside all the irrelevant allegations and arguments, this is a simple and straightforward contractual dispute. The case of Integrity is well supported by contemporaneous documents and the evidence of credible and truthful witnesses.

138.In stark contrast, as colourfully characterised by Mr YL Wong, the defence is a moving feast. It was prone to unauthorized expansion and contradicted by documents. It is not difficult to make my findings in paragraph 118 hereof. I see no reason why Integrity should be deprived of its contractual rights to terminate KK Lau’s engagement and claw back.

139.To conclude, with the foregoing findings made, I am positive that Integrity’s claim is borne out by evidence, even though I have not dealt with all the arguments and allegations of KK Lau in this Judgment. Suffice it to say, I have considered them and have come to the conclusion that they are irrelevant and/or have no impact on my findings.

140.Accordingly, I enter judgment against KK Lau and he should pay the Amount to Integrity forthwith. I further dismiss the counterclaim of KK Lau.

141.I also allow interest to run on the Amount at 1% over prime from 10 November 2011 until the date of this Judgment, thereafter at the judgment rate until full payment.

142.Costs should follow the event. I make an order nisi that KK Lau should pay Integrity its costs of this action including any reserved costs. I also allow certificate for two counsel.

143.It remains for me to thank both Mr YL Wong and Mr William Wong and their respective junior counsel for their very able assistance.

Mr Wong Yan Lung SC and Mr Jenkin Suen, instructed by Kennedys, for the plaintiff

Mr William Wong SC, Mr James Cheng (absent on 30 October 2014) and Mr Michael Lok instructed by Johnnie Yam, Jacky Lee & Co, for the defendant