East Asia Aetna Services Co Ltd v. Chau Siu Ping Paymond and Others

Case No.HCA 7464/1984

Court

High Court CFI

Date11 Apr 1986

Judge—

Case Document

100%Judiciary

HCA007464/1984

IN THE HIGH COURT OF JUSTICE HONG KONG

1984 No. 7464

BETWEEN

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	EAST ASIA AETNA SERVICES COMPANY LIMITED	Plaintiff

	AND

	CHAU SIU PING, RAYMOND	1st Defendant
	WONG CHI KEUNG, PATRICK	2nd Defendant
	CHAN CHI KEUNG, JIMMY	3rd Defendant
	CHUNG SHIU FAI, RICHARD	4th Defendant
	NG WING KEUNG, PAUL	5th Defendant
	CHOW KWOK LIM, STANLEY	6th Defendant
	WONG KWOK CHI, PIUS	7th Defendant
	LEUNG WAI CHEONG, DEREK	8th Defendant

__________________

Coram: Mortimer, J.

Dates of Hearing: 10 - 14 and 17 - 20 March 1986

Date of Judgment: 11 April 1986

Date of Handing Down Reasons: 15 August 1986

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REASONS FOR JUDGMENT

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1. The Plaintiff is the principal agent in Hong Kong of two associated insurance companies: The East Asia Aetna Insurance Company (Bermuda) Limited and The Fast Asia Aetna Company (Hong Kong) Limited. The Plaintiff's chief business is selling life insurance. For a short period in 1984 the 1st Defendant was a Unit Manager and the remaining Defendants were agents of the Plaintiff under written agreements. Each agreement was in the Plaintiff's standard form of individual agents agreement,

2. Each Defendant was entitled under his contract to earn remuneration by way of commission for insurance sold. Also, in pursuance of Clause 8, monetary advances were made by the Plaintiff to each Defendant in order to give him a stable income during the period before he was able to earn commission. (In evidence these were called "financing advances". I will describe them in this judgment as "advances". ) The level of advances was at the Plaintiff's discretion and after 12 months they were to be repaid out of commissions earned in 36 equal installments. By Clause 13, if the agreement was terminated, a balance had to be struck and any advance still owed by an agent to the Plaintiff was to be repaid on demand.

3. The longest period that any of the Defendants stayed with the Plaintiff was just over two months. Each Defendant received advances. None earned any commission. After his contract had been terminated by each Defendant the Plaintiff demanded repay-ment of advances made to him but no Defendant has made any such repayment.

4. Although each Defendant's case has to be considered separately each denies the claim against him on the same grounds and each counterclaims for commissions lost as a result of him leaving of his previous Company.

5. There is no dispute that each Defendant signed his agreement with the Plaintiff. The Defendants submit that the Plaintiff cannot recover the sums claimed on the following grounds:

(1)	that the Plaintiff made collateral agreements not to enforce payment of the balance of any debt under Clause 13 if an agent left the Company before repayment had been made by deduction from commission earned.
(2)	that the Plaintiff is estopped from enforcing repayment on the basis that assurances were given that repayment would not be enforced at the outset of negotiations and that acting upon those assurances each Defendant left his previous employment and substained loss of accrued commission.
(3)	that the contract was induced by misrepresentations to the effect:-

(a)	that the policies marketed by the Plaintiff would be similar to or better than certain proposals produced; (See Page 90 of the bundle)
(b)	(Not alleged by the 8th Defendant) that it would-be possible for each Defendant to start writing insurance on behalf of the Plaintiff and earning commission on the 1st June 1984;
(c)	(The 8th Defendant only) that the policies to be sold by the Plaintiff would be issued by either an American or an Australian Company;
(d)	that each contract was signed under 'economic duress".

6. Further, the Defendants who lost accrued commission from their previous employment counterclaim for this loss on the basis of the alleged misrepresentations.

The Background

7. Ernest WONG is now the Senior Agency Manager with the Plaintiff. Between 1971 and 28th February 1984 he worked for "Manulife" a leading insurance company in Hong Kong. He started there as an agent. By his departure he was a very successful Branch Manager. In that capacity he recruited all the Defendants to work for Manulife save for the 8th Defendant. (The fourth Defendant had been recruited but had not started work by the 28th February 1984)

8. Ernest WONG left Manulife after differences with senior management. His departure was voluntary in name only. The 1st to the 7th Defendants and many other agents owed him considerable personal loyalty and, I believe, had a high regard for his business skill. Although the first seven Defendants say that any contact they had with Ernest WONG after his departure was simply to give him support and, so far as the 1st Defendant is concerned to assist him obtain new employment, I am satisfied that their interest was less altruistic. They were prepared if the opportunity arose to hitch themselves to the star of Ernest WONG's success

9. Consequently, on the 28th February 1984 there was a meeting at Ernest WONG's home attended by some twenty-five former colleagues. Initially the meeting was to demonstrate loyalty to Ernest WONG but there were developments. Ernest WONG appreciated that his search for new employment would be assisted, and his value to any insurance company would be increased, if he had with him a body of expereinced and skilful agents. On the same basis some of those present at the meeting(including the 1st Defendant) recognized that the opportunity could arise to better their prospects. Ernest WONG gave evidence to the effect that a number of agents, including the 1st Defendant, expressed their interest in leaving Manulife and going with him if a good opportunity arose. I am satisfied that this was the basis upon which the two letters were written to the Plaintiff on the 1st March 1984 (Page 1) and the 9th April 1984 (Page 3) by Ernest WONG assisted by the lst Defendant. There is a dispute as to the basis upon which, and the persons who, kept in contact with Ernest WONG about this matter but I am satisfied on the evidence that the 1st Defendant was the leader of a group of agents who were prepared to join a new company with Ernest WONG if acceptable terms could be negotiated. I note the terms of the two letters above without rehearsing them. Ernest WONG's evidence is significantly supported by these letters and I accept it.

10. In the course of the negotiations with the Plaintiff Ernest WONG visited Australia on the 20th and 21st March 1984. When there he spoke daily on the telephone with Raymond CHAU here in Hong Kong.

11. When he returned to Hong Kong Ernest WONG brought with him several computerized presentations of proposals (Page 90 is an example). Raymond CHAU (1st Defendant) saw those documents and discussions with the Plaintiff's representatives continued. There were discussions about the type of product which the Plaintiff would sell in Hong Kong. To this end Raymond CHAU had a discussion with the Plaintiff's actuary. This was about the time when the letter of 9th April (Page 8) was written. Raymond CHAU drafted the last paragraph of that page which reads:

"In the area of product portfolio, whatever doubts we have had with regard to the competitiveness of your product have been, I'm pleased to say, completely cleared up. "

12. Also, detailed negotiations were undertaken about the terms of the agency contract. (See page 11 onwards)

13. At about the same time, the Plaintiff's General Manager in Australia (Mr. Woolridge) came to Hong Kong. He was here between the 4th and 19th of April. Ernest WONG had discussions with him and I am satisfied he reported on them to some other agents who were interested and I am satisfied having regard his involvement that Raymond CHAU was made aware of those discussions.

14. The result was that on 16th April 1984 Ernest WONG was appointed Senior Agency Manager in Hong Kong for the Plaintiff.

The Agency Contracts made between the Plaintiff and the first seven Defendants

15. Ernest WONG lost no time in contacting a number of agents who were working for Manulife. They included the first seven Defendants. Between 22nd April and 25th April each of them was seen individually by Ernest WONG at his home. The interviews followed the same pattern. Each was asked if he was still interested in working with Ernest WONG. He was told of the negotiations with the Plaintiff; he was told about the Plaintiff; he was told advances would be provided; he was told something of the product which would be sold and Ernest WONG indicated when he hoped Aetna would open for business.

16. There are issues about what was said in relation to repayment of advances, the type of product, and the date of opening for business. To these issues I will return.

17. On the 9th. May 1984 these Defendants and others attended a meeting with Ernest WONG. Application forms for employment with the Plaintiff were handed out and each signed a letter of resignation from Manulife. Ernest WONG was co-ordinating their departure. Up to this time confidentiality had been successfully observed but events overtook the planned timings. Manulife discovered what was happening. On the 21st of May therefore the letters of resignation were sent on behalf of the 2nd to 7th Defendants inclusive. The 1st Defendant was playing Bridge in Beijing at the time. He left shortly after his return.

18. The result was that most of the agents arrived at the Plaintiff's premises before the 1st of June. Thereafter delays were experienced and no business was written on behalf of the Plaintiff before about the 4th of July. In fact, none of the Defendants ever wrote any business on behalf of the Plaintiff.

19. On about the 15th of June each of these Defendants signed his Agency Agreemente. The Agreements were dated 1st June 1984. All the agreements were in the same terms and an example is at Page 21.

20. After the signing advances were made. Not surprisingly the Company would not prepared to make advances under the Agreement until the agreement itself had been entered into. It had been made clear on each application form that no advances would be made before signing. (See Page 45).

21. Each of these Defendants contends that he signed the Agreement only in consequence of assurances and undertakings given by Ernest WONG on behalf of the Plaintiff (the collateral agreement) that if he left the Plaintiff before the total of the advances made to him had been repaid out of commission earned the Plaintiff would not seek to recover the balance.

The 8th Defendant

22. The 8th Defendant also worked for Manulife. He was recruited by the witness James WONG to become an agent for the Plaintiff. Several meetings were held at which James WONG told the 8th Defendant about the Plaintiff, the opportunities, the prospects and a little about the product to be sold. The level of advances was discussed and agreed.

23. The 8th Defendant resigned from Manulife on 28th June 1984 giving 15 days notice. He joined the Plaintiff and signed his Agency Contract in the middle of July.

24. This Defendant contends that James WONG gave him an assurance before he left Manulife that the Plaintiff would not seek repayment of advances on termination if they had not already been recovered from commissions earned. Also, he contends that James WONG misrepresented to him that the policies to be sold by the Plaintiff would be the equivalent of or better than the example on Page 90 and that the policies would be issued by either the American or the Australian Company. He says that in consequence of these assurances and misrepresentations he left Manulife, potentially losing accrued commission and signed his contract with the Plaintiff.

The Resignations and the Demands for Repayment of Advances

25. The 7th Defendant collected his second advance on 15th July 1984 and resigned from the Plaintiff the next day. The 1st to the 6th Defendants resigned on 30th July and the 8th Defendant resigned on 4th August. Each Defendant either returned to Manulife or took up employment with yet another insurance company called Sentry. On 13th Aaugust 1984 the Plaintiff demanded repayment of advances from the 1st to the 7th Defendants (Page 31 is an example) and a similar demand was made against the 8th Defendant on 4th September 1984 (Page 85). No reply was made by the Defendants until 12th September and 24th September by the 1st to the 6th Defendants, and until 2nd October by the 7th Defendant. These Defendants denied liability broadly on the grounds advanced in court.

Findings of fact on the main issues

I.	Alleged assurances and undertakings that repayment of outstanding advances would not be demanded on determination These fall into two categories. Those alleged to have been made by Ernest WONG during interviews with 1st to the 7th Defendants in April 1984 and second, those alleged at the time of the signing of the contracts. I consider these allegations against the background that Ernest WONG knew that "Manulife" did not as a matter of practice demand repayment in these circumstances. I bear in mind also that as a result of Ernest WONG's negotiations the Plaintiff's contract was more beneficial than Manulife's to the agents on determination in respect of accrued commissions. In cross-examination Ernest WONG made his attitude clear when he said that although it had not been the practice of Manulife to ask for repayment they were entitled to do so. I am satisfied that these Defendants did not join the Plaintiff simply to obtain the advances and leave without the obligation of repaying and I do not accept that questions relating to repayment of any balance on resignation was a matter of particular importance to them at the time of the interviews with Ernest WONG. They all well knew what "advances" were. Their main concern was the level of advances and the manner of repayment through commissions earned. I found Ernest WONG to be an impressive, intelligent and careful witness. He had no authority to give any such undertakings on behalf of the Plaintiff and although he was keen to recruit it is highly unlikely that he could have thought that such an undertaking would tip the balance. I am sure he gave no such undertakings at the interviews and meetings and I reject the Defendants' evidence. The 7th Defendant contended that Ernest WONG inform him that he had raised the matter in Australia and achieved a special deal to the effect that the repayment would not be demanded. In the light of all the other evidence given and the correspondence I am satisfied that this evidence of the 7th Defendant was invented for the purposes of this case. Also, each of the 1st to the 7th Defendants alleges that a similar undertaking was given shortly before he signed the contract either to him personally by Ernest WONG or to a group of the Defendants and others. Similarly, I reject these allegations. I prefer Ernest WONG's evidence on this point. It is supported by the evidence of Jack Theodosi whom I judge to be a reliable witness on this matter. Jack Theodosi said that early in June he had a discussion with the 1st Defendant and a number of others about the 'advances" provisions in the contract. I am satisfied that he explained (among other things) that if on termination of the contract there was an outstanding balance of advances they had to be repaid immediately. In spite of the 1st Defendant's reluctance on the point I also accept that he was the natural spokesman for the others. His qualifications, his industry, and his intelligence together with the high regard in which he was held by the other agents satisfied me or. this point. When Theodosi explained about the necessity for immediate repayment on termination no one questioned this. Had Ernest WONG given undertakings earlier these would have been brought to Theodosi's notice there and then. I also accept that on the day the 1st Defendant resigned he had a discussion with Theodosi in which he gave his reasons for leaving, at the end I am satisfied that he said "and by the way we fully intent to repay the financing". These words would never have been used if there had been any question of undertakings, agreements or even indications that repayment would not be demanded. I also bear in mind the clear terms of the contract, the clear of the explanatory notes of the contract, the absence of any reference to the provision for repayment in the contract in correspondence when the terms of the contract were being discussed (See letter 9th April) and the absence of any reference to this matter in any letter of resignation. The question of repayment must have been in each Defendant's mind at that time. I am also satisfied that no such assurances were given by James WONG to the 8th Defendant during discussions leading to his employment with the plaintiff. I accept James WONG's evidence on the matter. Also, I accept James WONG's evidence that after. the 8th Defendant resigned he had a discussion with him about repayment. The 8th Defendant was asking to repay by instalments. This is quite inconsistent to the 8th Defendant's contention which I reject.
II.	Custom of the trade The Defendants' contention that it was a "custom of the trade in Hong Kong" not to demand repayment of the balance of advances on an agent's resignation was based upon the evidence and the undisputed fact that "Manulife" did not in practice make any such demand. Also, no witness knew of any other insurance company which did so. Remarkably, in these circumstances, each insurance company retains clear provisions in its contract for such repayment if the advances have not been repaid out of commissions earned. Although it appears that Manulife's contract is similar in this regard in other respect the Plaintiff's contract was more advantageous to the agent. All this evidence goes no further than to establish that insurance companies in Hong Kong who make advances to their agents under their contracts have in the contracts a provision entitling them to recover the advances in all circumstances. In practice they usually do not seek repayment on termination but they retain the right to do so.
III.	The alleged misrepresentation that the insurance to be sold on behalf of the Plaintiff would be "similar if not better than" the proposal demonstrated to the 1st to 7th Defendants by Ernest WONG and to the 8th Defendant by James WONG This allegation concerns the sample proposals brought from Australia by Ernest WONG. An example is on Page 90. These proposals were in English style rather than American style. The agents had previously sold the latter. Ernest WONG showed each of the 1st to 7th Defendants the proposal at Page 90 and possibly similar ones. He says this was to demonstrate the computer layout and the U. K. style whereas the Defendants say he was representing to them that this was the type of proposal which would be sold in Hong Kong or possibly even better ones. The Defendants were all agents of experience. They knew that this proposal and similar ones were only examples (set out in a new way) of insurance that was being sold in Australia. Further, they must have known that the results shown were only forecasts and were not guaranteed and that the forecasts were made upon certain assumptions. As is set out on the proposal each future benefit is stated to be for illustration only and not to be guaranteed. The values are stated to be based on the latest bonus rate and current cash value. Further, before the signing of the contracts the product to be sold by the Plaintiff in Hong Kong had been a subject of discussions. The 1st Defendant not only drafted the letter of 9th April 1984 for Ernest WONG and therefore was aware of the contents of the last paragraph on Page 8 but later, he had a meeting with the Plaintiff's actuary to discuss the products. In evidence he conceded that the Plaintiff's products were competitive in Hong Kong. No complaints were made by any of the Defendants when they resigned that they had been deceived into thinking that they would be selling a better product and I accept Ernest WONG's evidence that when a complaint was made by an agent about the competitiveness of one of the policies 'it was fixed by someone from Australia immediately'. I am satisfied that these Defendants understood the nature of these proposals. They understood that they were examples of a computerized presentation without any guaranteed results and that the particular examples were applicable to Australia and not Hong Kong. I accept Ernest WONG's evidence that he made no representations to the effect that insurance to be sold would offer terms 'similar if not better than' the samples he brought back from Australia.
IV.	The alleged misrepresentation that the agents would be able to write business after 1st June 1984 (1st to 7th Defendants only) I am satisfied that when he was asked in April and May Ernest WONG told the Defendants that the Plaintiff hoped to commence business at about the beginning of June. I am equally sure that the Defendants fully understood that although this was the intention Ernest WONG was not giving any kind of undertaking to this effect. In fact, it was not the intention of any of the Defendants to leave "Manulife" until June because they wanted to collect some of their outstanding commissions. Events overtook them when "Manulife" discovered their intentions to leave and (apart from the 1st Defendant) letters of resignation were sent. In consequence they arrived at the Plaintiff's office earlier than intended. Further, it is clear that the 1st of June was not taken by the Defendants to be a firm date upon which they were placing reliance. This follows from the fact that they did not raise the matter on the 15th of June when the contract was signed. Nor was this a matter which any of them raised when they resigned. I am satisfied that no firm representation was made as to when the Plaintiff would commence business. I am equally satisfied that none of the Defendants left Manulife and joined the Plaintiff in consequence of anything said about the date of commencement.
V.	The alleged misrepresentation to the 8th Defendant that the Plaintiff's policies would be issued by the Plaintiff's parent company in iustralia or the U. S. A. In the course of discussion with James WONG before the 8th Defendant decided to join the Plaintiff I think it likely on the evidence that the 8th Defendant was told that policies issued would be valid worldwide and that they could be issued in either Hong Kong dollars or US dollars. I do not accept that James WONG told him that the policies would be issued by the American or the Australian company. I think it likely that after the 8th Defendant joined the Plaintiff a prospective client of his asked a question and that he then discovered that the policies were issued by the Hong Kong company. He raised the matter with James WONG who repeated to him that the policies were valid worldwide and that it was necessary to explain to his customers that the effect was that the US company would cover the policies. I am satisfied that no misrepresentation was made to the 8th Defendant by James WONG of this matter and that the difficulty the 8th Defendant faced was due to his lack of explanation to his client and possibly a lack of confidence his client had in him because of his youth. It had no bearing whatsoever upon his decision to join the Plaintiff. The fact that he found difficulty in selling the Plaintiff's insurance to his client may have had a bearing upon his decision to leave.
VI.	The allegations of economic duress The Plaintiff undoubtedly insisted upon each of the Defendants signing the agency contract before making any advance. The fact that no advance would be made until the contract was signed was set out on the top of each application form and as the advances were made in pursuance of the contract it was simple commercial common sense that each Defendant would have to sign before any advance was made. I accept that each Defendant needed advances for his living expenses and some may have been in Greater need than others. The Plaintiff would not assume that the Defendants had any other source of income at the time. There are no other circumstances either relevant or special to this defence raised.

General

26. In coming to my decision on the facts I have borne in mind the cogent submissions made to me by Mr. NG on behalf of the Defendants. Also, I have borne in mind that the Defendants made no complaint of the matters upon which they now rely when they left the Plaintiff. The 1st Defendant left partly as a result of a dispute with Ernest WONG. In a long conversation with Jack Theodosi, he made none of the complaints upon which he now relies and I am satisfied that he was a spokesman and a leader in respect the other Defendants. When they left all the Defendants went immediately to employment either back with "Manulife" or with Sentry Insurance.

Conclusion

27. On the basis of my findings of fact my decisions upon the defences raised are as follows:-

1. There was no collateral contract between the Plaintiff and any Defendant to the effect that Clause 13 of the Agency Agreement which entitled the Plaintiff to demand repayment of any balance of advances would not be enforced.

2. There were no assurances (that repayment of advances would not be demanded) given by the Plaintiff and acted upon by the Defendants to their detriment which estop the Plaintiff from recovering the advances. It is therefore not necessary for me to decide whether estoppel provides the Defendants with a defence to their recovery of advances in these circumstances.

3. There was no "practi e or custom of the trade" by which the Agency Agreements are to be interpreted, or by which terms are to be annexed, to the effect that the balance of advances would not be claimed on the determination of the contracts. Much more cogent evidence would be required and in the face of the clear and unambiguous terms of the contract it is probable that such a custom of the trade would be impossible establish in law, but on the evidence this is not a matter which is necessary for me to decide.

4. On the evidence no misrepresentations or warranties were made by the Plaintiff to the Defendants as to:

(a)	the competitiveness of policies which were to be sold by the Plaintiff. (All Defendants)
(b)	the time when business could first be written. (1st to 7th Defendants) or
(c)	whether the policies were to be issued by the American or the Australian companies (8th Defendant)

5. On the evidence no misrepresentations were made upon which the counterclaim is based. Questions as to the appropriate measure of damages where such misrepresentations are proved and whether the Defendants who lost the accrued commission from "Manulife" could recover these do not therefore require my decision.

28. There was no dispute that the advances were made to each Defendants and the amount of those advances were agreed between the parties. The above defences having failed I gave judgment for the Plaintiff against each Defendant for the appropriate sum and I dismissed the counterclaims with consequential orders for interest and costs.

(J.B. Mortimer)
Judge of the High Court

Representation:

Simon We stbrook (J.S.M.) for Plaintiff

K.B.Ng (Woo & Woo) for all Defendants