Dah Sing Insurance Services Ltd v. Gill Gurbux Singh
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DCCJ 1467/2008 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 1467 OF 2008 ________________________ BETWEEN
Coram : Deputy District Judge K. H. Hui in Court Dates of Hearing : 24, 25 and 26 April 2012 Date of handing down of Judgment : 18 May 2012 ________________________ JUDGMENT ________________________ Introduction 1.In this case, the Plaintiff claims against its ex-technical representative for the repayment of sign-on fee and monthly allowances. Background 2.The Plaintiff (“Dah Sing”) is an insurance company registered under the Insurance Companies Ordinance, Cap 41 (“the Ordinance”). 3.In early 2007, Dah Sing appointed the Defendant (“Mr. Singh”) as a technical representative (similar to insurance agent but not entitled to sell certain types of insurance products) and a Senior District Manager of Dah Sing. It was agreed that Mr. Singh is entitled to a sign-on fee, monthly allowance, other allowances and payments. 4.Dah Sing paid Mr. Singh $150,000 as the sign-on fee on 14 February 2007 and 2 monthly allowance at $50,000 each for January and February 2007 respectively. 5.Dah Sing claims for the refund of the sign-on fee and monthly allowance in the sum of $250,000 because the appointment of Mr. Singh was terminated on 23 August 2007 which is within the 12 month period after his appointment. 6.Mr. Singh accepts that he has to repay the sign-on fee. However, he denies liability regarding the monthly allowance because it is not subject to any repayment condition. He further counterclaims for the outstanding monthly allowance, office allowance and damages. The Plaintiff’s Case 7.Dah Sing calls one witness only. She is Ms. Kan Chuy Hant Lily (Ms. Kan”). 8.Ms. Kan is a Senior Manager of Dah Sing. She is an employee of Dah Sing but not an insurance agent. 9.The parties herein have signed 4 agreements (collectively referred to as “the Agreement”) for the purpose of appointing Mr. Singh as a technical representative (“Agent”) and a Senior District Manager of Dah Sing:-
10.Pursuant to Clause 3(a) of the LOU and Clause 6 of the Offer Letter, Mr. Singh is entitled to a sign-on fee in the sum of $150,000 (“the Fee”). However, the Fee is repayable in full if the Agreement is terminated within 12 months after the commencement of appointment (Clause 6 of the LOU). 11.Dah Sing is saying that while the said documents are signed on different dates, Mr. Singh is engaged as an Agent and a District Senior manager in one go. Mr. Singh has his registration with the Dah Sing approved on 19 January 2007 and thus it is the commencement date of his appointment. Dah Sing is obliged to obtain the confirmation of the Insurance Agents Registration Board (“IARB”) before confirming the appointment of any person as an insurance agent. 12.Mr. Singh has failed to procure any insurance policy for the purpose of meeting the business production validation requirement as set out in Clause 4 of the Offer Letter (which requires a minimum of $10 Million Annualized First Year Premium (“AFYP”) within 6 months after 19 January 2007) and pursuant to Part (V) of the Remuneration Agreement, the Dah Sing decided to suspend the payment of the monthly allowance in March 2007. 13.On 24 July 2007, there was a meeting between Mr. Singh and Mr. James Wong (“Mr. Wong”) who is the Chief Executive Officer of Dah Sing. In this meeting, it was agreed that Mr. Singh’s appointment be terminated with effect from 23 August 2007. Mr. Singh’s Case 14.Mr. Singh joined the insurance industry since mid 1970’s. He is a friend of Mr. Wong and they had worked together for some time before. 15.In late 2006, Mr. Singh called up Mr. Wong to discuss if there was any chance of working together again when he learned that Mr. Wong was about to join Dah Sing. 16.After some discussions, Mr. Wong agreed to engage Mr. Singh as a Senior District Manager of Dah Sing with a sum as the Fee and $50,000 monthly allowance for a period of 24 months. Further, being a Senior District Manager, Mr. Singh was also entitled to an office allowance at $4,500. Apart from these, Mr. Singh can earn commission which depends on the business achievement of his sales team. 17.It is the Defence’s case that Mr. Singh was appointed as an Agent as from 19 January 2007. His appointment as a Senior District Manger commenced from 23 January 2007. 18.The Fee is repayable in full to Dah Sing if the Agreement be terminated within 12 months after the appointment of Mr. Singh (23 January 2007) as the Senior District Manager. 19.After the appointment, Mr. Singh tried to recruit down-line managers and agents. It was his duty to build up a sales team to sell the insurance products of Dah Sing. Mr. Singh said that he was the head of his team and thus he was not supposed to sell business products. Mr. Singh offered remuneration package including sign-on fee and monthly allowance to attract suitable candidates to join Dah Sing. He did successfully procure the consent of over 20 candidates to join. However, Mr. Wong either refused to approve their engagement or cut down the offers. As a result, only Mr. Singh can only recruit one agent. 20.Sometime in March 2007, Mr. Singh had a meeting with Mr. Wong who told Mr. Singh that his monthly allowance would be suspended after having reviewed his business achievement. Subsequently, there was another meeting. Mr. Wong agreed to resume payment of the monthly allowance if Mr. Singh can recruit 10 agents. While Mr. Singh submitted more than 10 candidates for approval, they were all rejected by Mr. Wong. 21.There was a further meeting with Mr. Wong on 24 July 2007. On that occasion, Mr. Wong explained that there was funding problems to recruit those managers/agents as put forward by Mr. Singh. 22.Mr. Singh accepted that his appointment was terminated on 23 August 2007. 23.Mr. Singh complained that Dah Sing has failed to notify the IARB that he was no longer an Agent of Dah Sing. Without such notification by Dah Sing, the IARB will not allow Mr. Singh to register as a technical representative/insurance agent for another insurance company. In the premises, he was unable to work for another insurance company. 24.Further, in around July 2007, Mr. Singh submitted to Mr. Thomas Li (“Mr. Li”), who is the superior of Mr. Singh and also an employee of Dah Sing, a certificate awarded by the Hong Kong Federation of Trade Unions Occupational Retraining Centre (“the Certificate”) as proof of having pursued continuing professional development programme as required by the legislation for onward submission to the Hong Kong Federation of Insurers (“HKFI”) to fulfill the registration requirement of a technical representative/ insurance agent. 25.However, Dah Sing has failed to submit the information to HKFI. As a result, the Mr. Singh was de-registered for 3 months (from 14 November 2007 to 13 February 2008) and thus unable to work as a technical representative until re-registration. Discussion and Analysis (a) Monthly Allowance at $50,000 26.Dah Sing claims for the refund of $100,000 (2 payments made for January and February 2007). Mr. Singh counterclaims for the outstanding payment up to June 2007. 27.It should be noted that while Mr. Singh was, according to Dah Sing, appointed on 19 January 2007 (or 23 January 2007 as put forward by the Defence), he received his monthly allowance as from January 2007 (Bundle p127). 28.There are 2 issues here: (i) is the monthly allowance repayable? and (ii) is Dah Sing entitled to suspend payment? To answer these questions, we have to know the exact terms of the agreement for the payment of this monthly allowance. Monthly Allowance Repayable? 29.Dah Sing says that the monthly allowance is repayable if the Agreement is terminated within 12 months after appointment. However, nothing about this monthly allowance is mentioned in the Agreement and there is no other evidence to support this contention. 30.The only evidence on this subject comes from Mr. Singh. I see no reason why I should not accept his evidence. This is my ruling that the monthly allowance is not subject to any condition of repayment. Entitlement to Suspend Payment 31.Mr. Yip, Counsel for Dah Sing, submitted that Dah Sing is entitled to rely on Part (V) of the Remuneration Agreement as well as Clause 4.1.3 of the Agent’s Contract to suspend payment. 32.Mr. Leung, Counsel for Mr. Singh, notified the Court that the date of the Remuneration Agreement should be 23 January 2007 instead of 23 January 2006 as appeared at the last page of the agreement (Bundle p109-111). 33.The heading of Part (V) reads “Validation Requirements on Titles and Respective Benefits (By annually and review by quarterly)”. Note (f) provides that “For new Senior District Manager joining the Company during a quarter, the validation requirements will begin to apply at the start of the following quarter”. Note (d) provides that “Quarters are ended by March, June, September and December of each calendar year”. 34.Clause 4 of the Agent’s Contract reads:-
35.Mr. Yip submitted that the overall effect of these provisions is that Dah Sing is entitled to review the payment of the monthly allowance. 36.This is not disputed by Mr. Leung. However, Mr. Leung submitted that Dah Sing is not entitled to review at the time and in the manner as they did. 37.Mr. Leung submitted that Dah Sing is only entitled to review at the end of a quarter under Note (d). In the light of Note (f), the validation requirements do not apply until April 2007 because Mr. Singh joined Dah Sing in January 2007 and thus “during a quarter”. It means that Mr. Singh is entitled not to do anything in building up his team or selling business products until end of March 2007 as the validation requirement does not apply to this interim period. It also means that there is no performance against which Dah Sing can review as Mr. Singh is not required to do anything during that period. Therefore, Dah sing can only review the performance by end of June 2007. 38.I do not accept Counsel’s submission. The parties agreed that the benefits of Mr. Singh are subject to review quarterly. Dah Sing is therefore entitled to review the payment of allowance by end of March 2007. What then is the basis or criteria for the review? The Agreement is silent on it. Since Mr. Singh is not saying that there is any implied term governing the scope of the review, it means that Dah Sing is free to adopt whatever basis or criteria. 39.It is therefore my ruling that Dah Sing is entitled to review the payment of the monthly allowance by end of March 2007. 40.Mr. Leung contends that Mr. Singh was told about the suspension on 10 March 2007 when he had a meeting with Mr. Wong and the instruction to suspend the payment was given on 13 March 2007 (see the internal e-mail of Dah Sing at Bundle p136). Mr. Leung argues that the review is a pre-mature one. 41.It may be the case. Yet, Mr. Singh allows the matter to move on. There is no question of anticipatory breach. There is a decision made on 10 March 2007 does not mean that there is no further decision thereafter. As a matter of reality, I am of the view that by not paying the monthly allowance for March 2007 (the payroll date may be late March or early April 2007), Dah Sing is effectively making a decision (or confirming the earlier decision of) not to make payment on the payroll date. The same reasoning applies to each and every payroll date thereafter. Mr. Leung further complains there is no written notice on the suspension of payment as required under the Remarks of the Remuneration Agreement (Bundle p111). I am of the view that the payroll statement is sufficient. Indeed, there is no requirement of advance notice under the Remarks. 42.It is my ruling that Dah Sing is entitled to review the payment of the monthly allowance. This is however subject to Note (d) under the Remuneration Agreement. It means that Dah Sing can only suspend payment from April 2007 onwards. 43.I therefore dismiss Dah Sing’s claim for the repayment of $100,000. I also allow the counterclaim for monthly allowance for $50,000 (for March 2007). (b) Office Allowance 44.Mr. Leung submits that it is a title fee in nature which means that Mr. Singh is entitled to this allowance so long as he is a Senior District Manager, i.e. until 23 August 2007 when he left Dah Sing. 45.Mr. Yip submitted that there is nothing in the Agreement which provides that this allowance is title fee in nature. Therefore, it is subject to review under Part (V) of the Remuneration Agreement. 46.I accept the submission of Mr. Leung. First, there is the evidence of Mr. Singh that this allowance is a title fee. Being a Senior District Manager, he is entitled to $4,500. If he is demoted to a District Manager, the allowance will be $4,000 only. Secondly, the internal e-mail of Dah Sing (Bundle p136) confirms the allowance is title fee in nature. Thirdly, if that is not a title fee in nature, it will be the same as the monthly allowance. Why should there be a separate allowance with different title? 47.It is my ruling that the Office Allowance is a title fee. Since Mr. Singh remains as a Senior District Manager until 23 August 2007, he is entitled to the allowance until then. 48.In other words, Mr. Singh is entitled to $25,950 ($4,500 x 5 months and 23 days) for the balance of Office Allowance. (c) Negligence/ Breach of Statutory Duty 49.There are 2 complaints here: -
50.Mr. Yip does not argue that Dah Sing owes no duty of care or there is no statutory duty. The only dispute raised by Dah Sing is that, as a matter of fact, there was no breach of the duties. The Statutory Requirements 51.Under section 67(1) of the Ordinance, the HKFI is required, with the approval of the Insurance Authority (“IA”), to issue a Code of Practice for the Administration of Insurance Agents (“the Code”). 52.The latest edition of the Code is issued in March 2010. However, the governing version for the present case is the 6th edition issued in June 2004. 53.An insurer is required under section 67(4) of the Ordinance to comply with the Code, which specifies, inter alia, the rules and procedures governing the registration and de-registration of insurance agents. 54.An insurer who fails to comply with the Code commits an offence and is liable to a fine of $100,000 (section 77(10)). 55.The Code is divided into 6 Parts (Part A to Part F). The term “Technical Representative” is defined in Part A. It should however be noted that this is not the same as the technical representative of Dah Sing who is an insurance agent for the purpose of the Code. 56.Clause 8 of the Code reads:-
Failure to Report Termination 57.Part C of the Code provides for registration and cancellation of the registration of insurance agents. 58.In order to appointment someone as an insurance agent, an insurance company has to apply to the IARB for registration of the insurance agent. Upon registration, the IARB will issue a registration number to the insurance agent. Such registration is valid for a period up to 3 years. 59.Under Clause 17 of the Code, Dah Sing shall within 7 days of the termination of the appointment of Mr. Singh notify the IARB of the same. That is obviously a statutory duty to report. Upon such report, the registration will be cancelled. 60.Ms. Kan said that Dah Sing, as a matter of normal procedure, will notify the IARB within 7 days of the termination. Notice will be given to IARB by fax and by post. However, no record of such fax or letter can be found in the personal file of Mr. Singh. 61.After Mr. Singh has received the demand letter from Dah Sing dated 5 September 2007 (“Demand Letter”), he checked with IARB and found that he was still registered with Dah Sing. He made no complaint to the IARB. It was not until 14 November 2007, when his registration was revoked by the IARB, he ceased to be registered with Dah Sing. 62.Mr. Singh also told the Court that the IARB will issue an agent Movement Record to insurance companies from time to time setting out who are registered successfully and whose registration has been cancelled (“Movement Record”). 63.Mr. Yip submitted that the cancellation of registration involves the reporting on the part of Dah Sing and the cancellation of registration on the part of the IARB. As there is no evidence from the IARB that they have not received any report from Dah Sing, Mr. Singh has failed to proof the alleged failure. 64.There is no dispute that the registration was not cancelled until 14 November 2007. What could have happened that lead to this? It may be the case that Dah Sing failed to report the termination. In the absence of such report, there could be no cancellation. The second possibility is that Dah Sing has reported but the IARB has failed to cancel the registration. 65.If Dah Sing has reported the termination to the IARB, they should have the copy fax and/or letter in their files. How come the copy fax and/or letter disappear? That is the best evidence to show that they have complied with the statutory duty to report to the IARB and thus should be kept properly. Dah Sing should no doubt aware of this duty as failing to comply with it is an offence. 66.If it is solely the fault of IARB for failing to cancel the registration, Dah Sing could easily spot it out if they have reviewed or checked the relevant Movement Record against their own records properly. The Movement Record serves as a record of work done by the IARB and for the insurance companies to check if that tallies with their own records. Mistakes or omissions could be identified and rectified promptly. 67.I do not accept Mr. Yip’s submission because he is in fact asking the Court to accept that IARB fails to note the reporting fax and also fails to note the reporting letter (or the IARB has failed to received both the reporting fax and reporting letter) and co-incidentally the reporting documents with Dah Sing have gone missing for reason unknown. 68.On the balance of probabilities, it is my ruling that Dah Sing has not reported the termination to the IARB in breach of Clause 17 of the Code. 69.It is my ruling that Dah Sing has failed their duty of care under negligence to check the Movement Record or check it properly. If the Movement Record had been checked or checked properly, Dah Sing would have found out the omission. Failure to Report CPD credits 70.Part E of the Code deals with fitness and properness of an insurance agent. In considering whether a person is fit and proper to act as an insurance agent, the IARB shall take into account, inter alia, whether the person possess the qualifications specified in Clauses 52 to 65 of the Code. 71.Clause 65 provides that:-
72.Guidance Note on “Compliance with the Requirements of the Continuing Professional Development (CPD) Programme” (“the Note”) was issued on 30 November 2004 (revised on 13 June 2005). 73.Under the Note, insurers are responsible to dispatch and collect declaration forms to report the CPD credits. 74.On this issue, Mr. Singh said that he has submitted the Certificate to Mr. Li. However, Dah Sing has failed to submit the Certificate to the IARB. As a result, Mr. Singh was suspended from registration as an insurance agent for 3 months from 14th November 2007 till 13 February 2008. Mr. Singh came to know this when he conducted a routine check with the IRAB about his registration status over the phone in February 2008. Upon personal inquiry with IRAB, he was given a letter dated 8 November 2007 from IRAB (“the Letter”) notifying Mr. Singh of the suspension. Mr. Singh said that he had not received this letter. 75.Mr. Singh admitted that he did not lodge any complaint to the IARB or HKFI or IA because he did not want to embarrass Mr. Wong, who was his friend and also the Honorary Vice Chairman of the HKFI. 76.Ms. Kan said that it is the normal practice of Dah Sing to notify the agents before 31 July 2007 to submit their declaration forms and report their CPD credits. It should be noted that Dah Sing’s case is that Mr. Singh has failed to submit any CPD record. 77.I have carefully considered the evidence of the witnesses and the submissions of Counsel. CPD credits are very important for the registration of an insurance agent. There is simply no reason why Mr. Singh would risk his career in not submitting the Certificate to Dah Sing. Further, there is no evidence from Dah Sing to contradict the evidence of Mr. Singh in this regard. It is therefore my ruling that Mr. Singh has submitted the Certificate to Mr. Li. 78.Mr. Singh agreed that he had not completed the declaration form as required by the Note (paragraph 6 (a)(iii)). However, he said that Mr. Li had not given him any declaration form and, at that time, he did not know that he had to fill in such a form. I accept his evidence. If he was provided with the declaration form, there is no reason why he would fail to complete the same. It is my ruling that Mr. Li has not provided the declaration form to Mr. Singh. That is a breach of the Note (paragraph 6(c)(i)). 79.There is a duty on the part of Dah Sing to dispatch and to collect the declaration forms and to report the CPD credits (paragraph 6(c)(i) and (iv) of the Note). Therefore, even if Mr. Li has provided the declaration form to Mr. Singh and it was Mr. Singh who failed to complete the same, he should have notified Mr. Singh to rectify the omission when Mr. Singh gave him the Certificate only. 80.Even assuming further that Mr. Li did not know or forgot about the declaration form, he should have at least forwarded the Certificate to the relevant department, which seems to be the Training Department, for further handling. When this was done, the responsible personnel should have at once noted the absence of the declaration form and informed Mr. Singh about it. 81.In the light of the Letter, there can be no dispute that the CPD credits was not reported to IARB. It is my ruling that Dah Sing has failed their statutory duty and in breach of the duty of care under negligence. Damages Mitigation of Loss 82.Mr. Yip complained that Mr. Singh has failed to mitigate his loss. The onus is of course on Dah Sing. 83.It is trite law that a “claimant must take all reasonable steps to mitigate the loss to him consequent upon the defendant’s wrong and cannot recover damages for any such loss which he could thus have avoided but has failed, through unreasonable action or inaction, to avoid.” (McGregor on Damages, 18th edition, Sweet & Maxwell, paragraph 7-004). In other words, Mr. Singh cannot recover avoidable loss. 84.Mr. Yip submitted that Mr. Singh has failed to complain to the HKFI about the failure to cancel the registration. 85.The explanation offered by Mr. Singh was that he had made similar complaint against Zurich (Mr. Singh worked for Zurich before his spell with Dah Sing) to the HKFI. However, the HKFI refused to process his complaint on the ground that it was a contract dispute between the parties concerned. Mr. Singh therefore thought that it was meaningless to lodge any further complaint against Dah Sing because he thought that the HKFI would give similar answer to his complaint. 86.I do not accept Mr. Singh’s explanation. When Mr. Singh was being cross-examined, he clearly told Mr. Yip that the contract terms with Zurich and Dah Sing were different. It shows that he knows that there are differences between the contract terms with Zurich and Dah Sing. Even assuming that he is telling the truth about the response of the HKFI in relation to his complaint against Zurich, he should know that the complaint against Dah Sing may receive a different treatment as the contract terms are different. 87.The Demand Letter clearly said that the appointment of Mr. Singh was terminated as from 23 August 2007. If Mr. Singh complains to HKFI, I cannot see any valid reason for not processing with the complaint and to cancel the registration. 88.It is my ruling that Mr. Singh has failed to take all reasonable steps to mitigate his loss in that he has failed to contact or complain to the HKFI on this matter. Mr. Singh told the Court that he checked HKFI once after he received the Demand Letter. That should be within a few days after 5 September 2007. Even allowing some time for HKFI to make enquiry and/or for Dah Sing to rectify the position, the registration could have been cancelled by end of September 2007. Quantum of Damages 89.Mr. Leung submitted that the average income of Mr. Singh between 1 April 2005 and 23 August 2007 should be taken as his monthly income. I accept Counsel’s submission that in all the circumstances, it is fair to adopt this approach. Mr. Singh has worked for Zurich for around 16 months before he joined Dah Sing. The income for that period can reflect the earning capacity of Mr. Singh. The earnings of Mr. Singh when he was with Dah Sing can also show, at least, his basic remuneration entitlement. 90.The total income for this period is $2,117,678.70. The average is $73,616 ($2,117,678.70/ 28 months and 23 days)
91.In the light of my ruling above, Mr. Singh is only entitled to damages for 1 month by reason of the failure on the part of Dah Sing to inform the HKFI about the cancellation of the registration. I award damages in the sum of $73,616. 92.For the failure to report the CPD credits, Mr. Singh was suspended for registration for 3 months. I award damages in the sum of $220,848. Conclusion 93.Mr. Singh has to pay back the Fee in the sum of $150,000. All other claims of Dah Sing be dismissed. 94.Dah Sing has to pay the following to Mr. Singh:
95.After setting off the Fee, Dah Sing has to pay $220,414 ($50,000 + $25,950 + $ 73,616 + $220,848 - $150,000). 96.As to interest, I have considered that the default judgment was set aside on 28 February 2011. It is my order that Dah Sing has to pay interest at 8% from 14 March 2011 (the date of the Counterclaim) to date of judgment and thereafter at judgment rate until full payment. 97.I also make an order nisi that the Plaintiff to pay the Defendant’s costs of this action together with all costs reserved to be taxed if not agreed with certificate for Counsel. The Defendant’s own costs to be taxed in accordance with the Legal Aid Regulations. This order shall become absolute unless there is application to the otherwise within 14 days after handing down of this Judgment.
Mr. Timmy C. H. Yip, instructed by Messrs. Keith Lam Lau & Chan, for Plaintiff Mr. Alvin Leung, instructed by Messrs. T. C. Lau & Co., for Defendant Please refer to CACV255/2012 for the relevant appeal(s) to the Court of Appeal. | ||||||||||||||||||||||||||||||||||||||||||||
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