Tsoi Yiu Chung v. Ing Life Insurance Co (Bermuda) Ltd Formerly Known As Aetna Life Insurance Co (Bermuda) Ltd

HCA 2447/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2447 OF 2007

____________

BETWEEN

____________

Before: Deputy High Court Judge Carlson in Chambers

Date of Hearing: 20 January 2011

Date of Delivery of Ruling: 21 January 2011

____________________

R U L I N G

____________________

Introduction

1.This is a very late application to re-amend the statement of claim.  There is also an application to file further witness statements and a supplemental list of documents.  The summons for the re-amendment is by far the most contentious.

The Nature of the Claim

2.Before I go into the application to re-amend, I will briefly relate what the action is all about.  The Plaintiff who had become a successful businessman, wished to take out a series of insurance polices for his retirement and to insure himself and his family.  He became acquainted with a Miss Joyce Wong through a mutual friend.  She was, until shortly before she committed suicide in December 2006, an agent of the Defendant selling insurance on its behalf.  What she did was to defraud a number of the Defendant’s insured customers by receiving their premiums and then not applying them to their policies but to those of other customers whose premiums she had no doubt also misused and misapplied.  In effect she was having to rob Peter to pay Paul, if I can so express it, in order to keep herself afloat.  In 2006, the Defendant discovered what she had been doing and dismissed her.  Soon after that she left a suicide note apologising for what she had done and then took her life.

3.Between 1997 and 2004, the Plaintiff had taken out 25 policies of insurance through Miss Wong.  By the time that it had been discovered what Miss Wong had been up to, the Plaintiff had paid the Defendant over $7.6 million in premiums.  Because the Defendant had been unaware of what Miss Wong had done it caused the Plaintiff’s insurance policies with it to lapse.  This was because, although the Plaintiff had been dutifully paying his premiums on his American Express credit card by direct debit to the defendant’s account, Miss Wong was allocating the vast majority of these payments to other customers’ policies and not to the Plaintiff’s policies.  Once it appeared to the Defendant that the Plaintiff was not keeping up his premiums, as it was entitled to in such circumstances, the Defendant treated the Plaintiff’s policies as having lapsed.

4.Following Miss Wong’s suicide, widely reported at the time in the newspapers, the Plaintiff approached the Defendant about his policies.  He was informed that they had lapsed because he had stopped paying premiums.  The reality was that he had been paying premiums as he had contracted to but Miss Wong was misappropriating them.  She even sent him a notice purporting to come from the Defendant to tell him that his policies were in order and that his premiums were up-to-date.

5.The Defendant has refused to give the Plaintiff any redress for their fraudulent agent’s management of his policies.  He has sued them and if I allow the re-amendment then the claim will be increased to just over $7.6 million being for the return to him of his wasted premiums.

The Conduct of the Action

6.There is no doubt whatsoever that the delay in making the application is very serious.  The trial is 6 weeks away and the nature of the amendments so substantial that if I allow the re-amendments the trial dates (7 days) will need to be vacated and, given the state of the lists, it is very likely that the action will not be tried until sometime, hopefully, early next year.  On delay alone Mr Hung, who opposes the amendments, is on extremely strong ground.  Mr Cheung who makes the application needs to show very compelling reasons for me to accede to his application.  In making the application he cannot have it both ways, that he is to say to get his re-amendments and oblige the Defendant to be ready to meet the case in 6 weeks time.  And so the burden on him is a very heavy one.

7.To demonstrate the seriousness of the situation, it is instructive and helpful to consider the following chronology.  The action started on 20 November 2007.  The Defendant (I have to say somewhat tardily) filed its defence on 13 February 2008.  Pleadings closed on 27 February 2008.  The action then went to sleep somewhat until October 2009 when both parties filed and served their list of documents.  The statement of claim was first amended on 26 February 2010.  There was a Case Management Conference (“CMC”) on 6 January 2010 when the Plaintiff’s solicitors indicated that their pleadings were in order and no further amendment was required, although leave was obtained for the amendment of 26 February 2010 by order of Master Ho on 22 February.  Be that as it may, the Plaintiff also indicated at that CMC that discovery was complete, that no further witness statements would be filed and it was appropriate to set the case down for trial.  Witness statements were exchanged on 16 March 2010, the amended defence having been filed on 8 March 2010.  There was a further CMC on 17 March 2010 when the Plaintiff’s solicitors repeated what they had put down in their previous Listing Questionnaire that the case was ready to be set down.  On 27 April 2010, the Plaintiff’s solicitors applied to have the action set down and the trial dates were fixed for 1 March 2011 for 7 days, now revised to 2 March until 10 March, before Fok J.  There was a PTR on 4 January 2011 before Fok J when Mr Cheung indicated that he wished to re-amend the statement of claim and to make further discovery.  Unsurprisingly, the judge was unwilling to entertain such an application without a summons and pointed out to Mr Cheung that a milestone date such as the trial dates were not amenable to being vacated save for very good reason and in exceptional circumstances.  The reason put forward by Mr Cheung was that he had just been instructed in place of counsel who had amended the statement of claim in February 2010 and took the view that re-amendments were required.  Fok J pointed out to Mr Cheung that a change of counsel would not usually amount to an exceptional reason for moving the trial dates.

8.It is against this most unpromising background that Mr Cheung now makes what has become a very urgent application.

9.To allow this application, requiring the vacating of these trial dates, would require a considerable feat of advocacy from Mr Cheung.  He has very little room for manoeuvre and procedurally the Defendant has been blameless and is ready for trial.

The Reasons for the Application

10.The affidavit in support of the application is not sufficiently full in its explanation for the need to come so late and to cause the trial to be adjourned for at least 12 months given the state of the lists.  What has emerged from Mr Cheung at the Bar is that very junior counsel of about two years call had originally been instructed to draft the statement of claim and he was then replaced by other counsel, who was also of two years call, to amend the statement of claim which she did in February 2010.

11.Mr Cheung was approached on 31 December 2010 to see whether he would be prepared to step-in in place of counsel who had been in the case since she drafted the amended statement of claim.  No reason has been given why she was replaced and how that had come about and when that decision was taken. All of this should have been in the affidavit in support.  The later the application, the fuller and more compelling the reasons should be in support of it.  I am also told that another solicitor from the firm that has represented the Plaintiff from the start of the action has now come in to deal with this case.

12.Having read the papers 4 days before the PTR on 4 January 2011, Mr Cheung decided that the pleading needed substantial re-amendment.  He is much more experienced than both counsel who had previously been instructed.

13.The re-amendments are voluminous which, if allowed, would require me to adjourn the action to enable the Defendant to prepare on them and to re-amend its defence.  Suffice it to say at present that although the same factual matrix is retained, the case now relies on the Code of Conduct governing insurance companies and allegations that the Defendant, by its alleged abject failure to supervise Miss Wong’s activities, was guilty of serious breaches of the Code of Conduct.  Additionally, implied terms are sought to be incorporated as to the duty of care that the law will, according to Mr Cheung, impose on the Defendant in the conduct of its business and in the care and attention that it must display towards its customers and in the way that it supervises its agents who, by virtue of section 68(1) Insurance Companies Ordinance, are taken to act on the Defendant’s behalf so that, according to Mr Cheung, Miss Wong’s acts as the agent in this case are to be treated as those of the Insurer Defendant.

14.The other aspect of the re-amendment is to substantially increase the size of the claim to $7.6 million (for the return of the premiums) from just over $1.3 million.

15.Assuming for the moment that these are perfectly good pleas that are being proposed by Mr Cheung, the fact remains that there is absolutely no reason why they could not and should not have been made as long ago as March 2010 by the time of the 2nd CMC.

Objections

16.Mr Hung, who has argued a strong case with moderation, and therefore even more persuasively, submits that no good reason has been shown to allow the re-amendment which will require the adjournment of the trial.  In this more demanding post-CJR era milestone dates will only rarely be interfered with.  He is of course absolutely right.  This is a late and inexcusable application — and again Mr Hung must be right about that.  Why, he asks rhetorically, should the Defendant be held up in this way.  There will be both a forensic prejudice for his client as well as a commercial one.  Although this is not a very large claim for such a substantial financial institution as the Defendant, it is entitled to know where it stands sooner than later in an action that was started over 3 years ago and which relates to matters going back to at least 1999.  There is also a perfectly proper submission as to forensic prejudice.  Mr Hung refers to fading memories, although it is fair to say that this is substantially a document’s case where what Miss Wong did will emerge from the documents, as will the Plaintiff’s conduct in paying his premiums on time through American Express.

17.Additionally, Mr Hung complains that the new pleading is lacking in particulars.  It does not say which sections of the Code of Conduct are relied on, this being a bulky document.  There are also no proper particulars of the quantification of the new increased claim.  Late amendments should come with full particulars he says.  I also agree with that submission.  He submits that there may now be a limitation point to be taken advantage of, if I allow the amendments, which he will need to consider.

The Result

18.This is not an easy matter to decide notwithstanding the Plaintiff’s delay in making the application. 

19.What has prevented me from giving the application short shrift is that, on the face of it, the Plaintiff appears to have a very compelling case.  He has been the victim of a highly cynical and well planned fraud perpetrated against him by Miss Wong, the Defendant’s undoubted agent, for whom, unless good reason is shown, the Defendant must be held vicariously liable.

20.Secondly, if Mr Cheung is correct the originally drafted statement of claim and its amended version, prepared by relatively inexperienced counsel, do not sufficiently put the case against the Defendant and certainly do not properly reflect the Plaintiff’s losses.  The proposed re-amendment does in my judgment strengthen the case but, there is no reason why it should not have appeared in similar form in the original or, at the latest, amended version of the statement of claim.

21.Ultimately, I view this as a balancing exercise on my part.  To make an amendment such as this resulting in the vacating of trial dates just 6 weeks away when these dates were known months ago will rarely be allowed.

22.But as I see it, I either force the Plaintiff, who has undoubtedly been defrauded out of over $7.6 million of premiums, to go on with the case that has not been adequately pleaded or, I allow the amendments and adjourn to the trial with severe costs consequences for the Plaintiff.

23.If I force the Plaintiff to go on and he fares badly at the trial by virtue of a defective statement of claim then he will be left in a situation of having been defrauded by the insurance agent and, to add insult to that injury, he will have been badly served by his lawyers who he instructed to obtain redress for him.  This would be an intolerable outcome.

24.Of course, I could oblige the Plaintiff to go on with what he has got and if he does badly at the trial in March, it would be open to him to look to his solicitors and then counsel for redress.  This potentially would force him to start another expensive and perhaps risky action to get what he says are his just deserts.  I therefore also need to consider this as an option rather than cause the adjournment of the trial.

25.Having considered all of these possible options, in a case where the Plaintiff himself has personally been blameless for what has happened, it seems to me that the just outcome to this application is for the Plaintiff to be allowed to re-amend the statement of claim with the result that the trial dates will have to go, and I will in a moment give directions as to the progress of the case and its re-listing for trial.

26.Mr Hung has in the course of his response complained that the re-amendments have not been sufficiently particularised and it seems to me that this is almost certainly the case.  Nevertheless, the way that the re-amendments have been pleaded contains sufficient particulars to be allowed to stand as the re-amended statement of claim.  In view of the fact that I have now adjourned the trial, there will be sufficient time to ask for particulars and for further discovery.

27.Counsel are agreed, I think, that the Plaintiff will have to suffer an order that the costs of and occasioned by the re-amendment and the adjournment of the trial will be to the Defendant to be taxed and paid forthwith and this will include the costs of this summons and of its hearing.  I very much hope that the Plaintiff’s solicitors will carefully consider who is to be held responsible for these costs, although the order is directed to the Plaintiff as it must be.

Summons for Supplemental Witness Statements and List of Documents

28.Mr Cheung has accepted that the witness statements of Angel Chan and Okada Mieko should not be admitted.  Subject to that, I will allow the rest of the summons so that the witness statement of Hailey Ma and the supplemental witness of the Plaintiff can be admitted, as can the documents exhibited to the affidavit of Chan So Yuen which go in as further discovery by the Plaintiff.

29.I will now hear counsel on the costs of this summons as I will of what directions I should now give for the further conduct of the action.

Jeremy Cheung and Cecilia Shum, instructed by MessrsMartin Law & Co., for the Plaintiff

Samson Hung, instructed by MessrsKeith Lam, Lau & Chan Co., for the Defendant

Please refer to HCMP247/2011 for the relevant appeal(s) to the Court of Appeal.