Re She Ka Kui
Read the full judgment text of HCB 1013/2017 on BabelCite. This HCB judgment was delivered on 26 April 2018.
1. There is before this court a bankruptcy petition dated 20 February 2017 (“ Petition ”) presented by the Petitioner (“ Chubb ”) against Mr She Ka Kui (“ Debtor ”). The Petition is based on the non-compliance with a statutory demand dated 7 April 2016 (“ statutory demand ”) for the sum of over HK$2.7 million. In her skeleton submissions, Ms Liao said Chubb is prepared to reduce HK$120,000 from that amount by way of set-off and proceed with the Petition on the basis of an outstanding debt of ar
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HCB 1013/2017 [2018] HKCFI 601 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE BANKRUPTCY PROCEEDINGS NO 1013 OF 2017 _______________
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_________________ J U D G M E N T _________________ Introduction 1.There is before this court a bankruptcy petition dated 20 February 2017 (“Petition”) presented by the Petitioner (“Chubb”) against Mr She Ka Kui (“Debtor”). The Petition is based on the non-compliance with a statutory demand dated 7 April 2016 (“statutory demand”) for the sum of over HK$2.7 million. In her skeleton submissions, Ms Liao said Chubb is prepared to reduce HK$120,000 from that amount by way of set-off and proceed with the Petition on the basis of an outstanding debt of around HK$2.66 million (“Debt”). 2.The statutory demand was served by advertisement in the Sing Pao Daily News. It has not been complied with and there was no application to set it aside. Chubb’s case 3.The Debtor was an insurance agent of Chubb from 25 September 2014 to 15 October 2015. The contractual terms governing the relationship between the parties were contained in the following documents:
4.Pursuant to the Remuneration Agreement, the Growth Bonus Agreement and the Rental Agreement, Chubb has paid the Debtor a Sign-on Bonus (“Sign-on Bonus”), Advanced Manpower Growth Bonus (“Growth Bonus”), Monthly Special Allowance (“Special Allowance”), and a rental deposit (“Rental Deposit”) as follows:
5.As regards termination of the contractual relationship between Chubb and the Debtor:
6.As far as Sign-on Bonus, Growth Bonus and Special Allowance are concerned, they are subject to the “claw-back” mechanism set out in Clause 4.1 of the Remuneration Agreement — in the event the Agent’s Agreement is terminated for any reason within two years from the date of the Debtor’s appointment ie 25 September 2014, the Debtor is liable to repay 100% of them to Chubb upon termination. 7.The Agent’s Agreement was terminated by Chubb with effect from 15 October 2015 by a letter to the Debtor dated 15 September 2015. Since the termination was within two years from 25 September 2014, Chubb contends that the Debtor is obliged to repay all the Sign-on Bonus, Growth Bonus and Special Allowance totaling HK$2.64 million. Concerning the Rental Deposit of HK$120,000 which was also repayable upon termination of the Agent’s Agreement, since Chubb is prepared to forego this amount, it is unnecessary for this court to go into the reason for it. Lastly, the Debtor is said to owe HK$26,605.24 to Chubb by way of “negative commission”, which is undisputed by him. 8.Accordingly, the Debt consists of the following 4 items:
Deliberation 9.It is well-established that in order to successfully oppose a Petition, a debtor has to show a bona fide dispute to the debt on substantial grounds, by sufficiently precise evidence which is believable, and must establish that he actually has a defence of substance, not just a fair probability of one: Wong Lo Fung v AXA China Region Insurance Co Ltd unrep; HCB 1864/2013; 29 August 2014 at [25]-[26]. 10.It is equally well-established that bankruptcy proceedings are summary in nature and are not intended to be used for the purpose of debt collection. Where there are bona fide disputes turning to a substantial extent on disputed questions of fact which require viva voce evidence, such disputes could not properly be decided on a Petition, in which case the Petition should be dismissed: Re Yuen Mun Wah (debtor) [2015] 2 HKLRD 108. 11.The jurisdiction to make a bankruptcy order is only exercised in very clear cases: Re Leung Cherng Jiunn (debtor) [2016] 1 HKLRD 850. At [27(5)], Kwan JA set out the law in these terms:
12.Mr Lin, for the Debtor, submits that his client has a bona fide defence to the Debt. His defence is based on certain promises made by Ms Phyllis Wong (“Ms Wong”), Agency Development Officer of Chubb, to him resulting in an oral agreement he reached with Ms Wong on behalf of Chubb in May 2013. His defence is also based on the reassurance made to him by Mr Alan Lam (“Mr Lam”), CEO of Chubb, in December 2013. 13.Mr Lin further submits, on the basis of the oral agreement and those promises and reassurance, the Debtor has a genuine and serious cross-claim against Chubb which exceeds the amount of the Debt. 14.According to the Debtor’s affirmation in opposition, the promises, the oral agreement and the reassurance were made in these circumstances. 15.From 1 August 2011 to 12 September 2014, the Debtor worked for AIA International Ltd (“AIA”) as a District Manager. The Debtor had a successful career in AIA — he had more than 40 downline agents under him and his income in the financial year of 2011/2012, for instance, was over HK$2 million. 16.In or about May 2013, the Debtor was approached by Ms Wong who told him Chubb wanted to recruit him and his team of downline agents. As there were restrictions in his contract with AIA ie he was contractually bound to work for AIA for 6 years, failing which he had to pay substantial compensation, the Debtor hesitated. In order to induce him and his team to join Chubb, Ms Wong made the following promises to the Debtor:
17.The Debtor found the Promises very attractive and in reliance thereof reached an oral agreement with Chubb through Ms Wong (“Oral Agreement”) on these terms:
18.In accordance with the Oral Agreement, many of the Debtor’s downline agents including a Mr Cheung Man Chit and a Mr Li Kim Hung joined Chubb in May 2013. In late December 2013, the Debtor arranged a Mr Lee Fat Keung to join Chubb as Agency Director. In June 2013, the Debtor also proceeded to rent an office to carry on business for Chubb as disguise for his downline agents. 19.In about December 2013, Ms Wong introduced the Debtor to Mr Lam. Mr Lam reassured him that the Promises were valid and subsisting and all the benefits promised by Ms Wong would remain unchanged and would be payable to him when he joined Chubb officially (“Reassurance”). 20.When the Debtor resigned from AIA, AIA commenced civil proceedings against him for breach of contract. The proceedings were eventually settled on terms that he had to compensate AIA a total of HK$1,631,876.40 by instalments from October 2014 to October 2016. 21.On the Debtor’s case, by reason of the Oral Agreement, the Promises and the Reassurance, the Sign-on Bonus and the Growth Bonus paid to him were non-refundable. Further, the Debtor claims to be entitled to:
22.It seems to this court the Debtor’s case on the Oral Agreement is believable and that he has shown a bona fide dispute to the Debt on substantial grounds. 23.There is no dispute that some of the Debtor’s downline agents moved from AIA to Chubb since May 2013. Further, as borne out by his payroll statement for October 2014, the Debtor was credited with Override Commission generated from the commission earned by his downline agent, Mr Lee Fat Keung, from March 2014 onwards. This gives support to the existence of the Oral Agreement since there was no reason why he was entitled to anything at all prior to 25 September 2014, if his agency relationship with Chubb only began on that day, as contended by Chubb. 24.Since the Debtor knew he had to pay substantial monetary compensation for the early termination of his contract with AIA, it makes commercial sense for the Debtor to make the demands in terms of the Oral Agreement including inter alia the Sign-on Bonus and the Growth Bonus be non-refundable. It also makes commercial sense for Chubb, who was sufficiently impressed with the Debtor to headhunt him, to accept his demands as an inducement to him to break his contract with AIA. 25.At this juncture, it is important to note that Chubb has not adduced evidence from Ms Wong or Mr Lam to contradict the Debtor’s case. Instead, for reasons unknown to this court, Chubb has procured a Ms Chan Wing Sze Wendy, manager of Chubb’s agency and administration department, to file two affirmations on its behalf, the second of which was supposed to be in reply to the Debtor’s affirmation. As confirmed by Counsel, there is nothing in the evidence which suggested Ms Chan had any dealing with the Debtor while he was formally working for Chubb. All Ms Chan said at paragraph 32 of her 2nd Affirmation was this:
26.Further, Ms Chan did not even purport to expressly deny the Debtor’s case on the Oral Agreement, the Promises or the Reassurance. She just tried to argue that neither the earlier Offer Letter nor any of the Agreements subsequently signed by the Debtor had made any reference to the Oral Agreement referred to by him in paragraph 13 of his affirmation, thereby implicitly suggesting the allegation about the Oral Agreement was fabricated. This is a complete non sequitur. 27.Regarding the Debtor’s cross-claim, he has set out his calculation at paragraph 41 of his affirmation. Take as an example the Override Commission which had been generated from the actual commission earned by all his down-line agents moved from AIA to Chubb since June 2013 and which the Debtor is entitled to claim. Chubb should be in possession of all the information necessary to verify and, if it sees fit, contradict the calculation of the Override Commission claimed by the Debtor (HK$98,504.34 from May to December 2013, HK$1.035 million for 2014 and HK$594,543.91 from January to August 2015), even if it disputes the Debtor’s case on the Promises, Oral Agreement and Reassurance. Yet, for reasons unknown to this court, Chubb has chosen not to adduce any evidence to do so but simply complains that the Debtor has provided no particulars or evidence in support. 28.If the Debtor’s case on the Promises, Oral Agreement and Reassurance is eventually accepted by the court so that the Sign-on Bonus and Growth Bonus are not refundable, Chubb’s claim would be substantially reduced to HK$667,558.71 (HK$640,953.47 + HK$26,605.24). 29.Further, if the Debtor’s case that, pursuant to the Oral Agreement, he is entitled to inter alia Override Commission calculated from June 2013, instead of September 2014, onwards is also eventually accepted by the court, that claim alone, according to the Debtor’s calculation, could be over HK$1 million (even taking into account what Chubb actually paid the Debtor), which would extinguish Chubb’s remaining claim of HK$667,558.71. 30.Ms Liao argues that the entire agreement clauses in the Agent’s Agreement ie clauses 21.3 and 21.4 render the Debtor’s reliance on the Promises, Oral Agreement and Reassurance a non-starter. For ease of reference, they are set out hereinbelow:
31.Mr Lin’s short answers to that argument are two-fold. 32.First, the Sign-On Bonus, Growth Bonus, Special Allowance and Rental Deposit were not governed by or paid to the Debtor under the Agent’s Agreement. They were governed by and paid to the Debtor pursuant to the Remuneration Agreement, the Growth Bonus Agreement and the Rental Agreement which did not contain or incorporate any entire agreement clauses similar to clauses 21.3 and 21.4 by reference. Nor did those agreements form part of or referred to in the Agent’s Agreement so as to be affected by clauses 21.3 and 21.4. 33.Second, Mr Lin submits that the Debtor’s case on the Promises, Oral Agreement and Reassurance raises a promissory estoppel which, as a matter of law, is arguably not affected by an entire agreement clause: Edwin John Phillips v SA SA International Holdings Limited, unrep, HCA5190/2001, DHCJ A Cheung (as he then was), 8 November 2002. 34.There is force in Mr Lin’s submission. 35.Concerning the Debtor’s cross-claim, Ms Liao submits that in order to reject a petition by reason of the existence of an unlitigated cross-claim, one of the requirements is that the debtor must have been unable to litigate it: Re SY Engineering Co Ltd, unrep, CACV1896/2001, 27 February 2002, at [16], following Re Bayoil SA [1999] 1 BCLC 62 ("Inability to litigate Rule"). Ms Liao further submits, in the present case, there is no evidence or explanation to show the Debtor has been unable to litigate his alleged cross-claim. 36.What Ms Liao has failed to draw to this court’s attention is the fact that there are authorities to the effect that the rule as expressed in Re Bayoil SA and Re SY Engineering Co Ltd was non-binding obita dicta. Further, the recent trend, in both England and Hong Kong, is not to treat the rule as an absolute requirement as such. Rather, failure or delay in litigating a cross-claim may be something which throws doubt on the genuineness of the cross-claim: Re Keen Lloyd Resources Ltd [2004] HKC 33; Popely v Popely [2004] EWCA Civ 463; Re Landune International Ltd [2005] 4 HKLRD 46; Re Sinom (Hong Kong) Ltd [2009] 5 HKLRD 487; Re SNE Engineering Company Ltd unrep, HCCW308 of 2012, 23 May 2013, Recorder A Ho SC; LDX International Group LLP v Misra Ventures Ltd [2018] EWHC 275 (Ch). 37.As this court states earlier, the Debtor’s case on the Oral Agreement is believable and that he has shown a bona fide dispute to the Debt on substantial grounds. By parity of reason, it seems to this court that the Debtor’s cross-claim, based as it is on the Oral Agreement, is serious and one of substance, even though its quantum may be debatable. Ms Liao’s reliance on Re SY Engineering Co Ltd does not really take Chubb’s case any further. 38.To conclude, in my judgment, the matters raised by the Debtor cannot be satisfactorily resolved on the affidavit evidence placed before this court or dealt with in a summary manner. This court is not satisfied that a bankruptcy order should be made. Disposition and Costs Order Nisi 39.The Petition against the Debtor is hereby dismissed. 40.There shall be an order nisi that costs of the Petition, including all costs reserved, if any, be to the Debtor, to be taxed if not agreed, with certificate for counsel.
Ms Tara Liao, instructed by Kennedys, for the Petitioner Mr Kenny Lin, instructed by Simon C. W. Yung & Co., for the Debtor Attendance of the Official Receiver was excused |
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