FACV 18/2015 (Civ)

IpsofactoJ.com: International Cases [2017A] Part 1 Case 5 [CFA]


COURT OF FINAL APPEAL, HKSAR

Coram

Dah Sing Insurance Services Ltd

- vs -

Gill Gurbux Singh

Justice R.A.V. Ribeiro PJ

Justice Robert Tang PJ

Justice Joseph Fok PJ

Justice Stock NPJ

Justice Spigelman NPJ

31 MARCH 2016


Judgment

Justice Ribeiro PJ

  1.  I agree with the Judgment of Mr Justice Tang PJ.

    Justice Tang PJ

  2.  Part X of the Insurance Companies Ordinance, Cap 41 (“the Ordinance”) was added by amendment in 1994 “to put into place a scheme for the supervision of self regulation by the insurance industry of insurance agents and brokers.”[1]  The Secretary for Financial Services in moving the second reading of the Bill, explained:

  3. The main objective of the Bill is to define the role of agents and brokers. .... It is also an objective of the Bill to strengthen protection for policy holders by requiring agents and brokers to meet specified standards before being appointed or authorized. Insurers are required to comply with the Code of Practice drawn up by the Hong Kong Federation of Insurers and approved by the Insurance Authority for the appointment and administration of agents.

  4.  Part X requires the Hong Kong Federation of Insurers (“HKFI”), with the approval of the Insurance Authority, to issue a Code of Practice for the Administration of Insurance Agents (“the Code”).[2]  An insurer is required to comply with the Code.[3] Failure to do so carries potential criminal consequences.[4]  An insurance agent[5] is also required by the Ordinance to comply with the Code of Practice.  Under s 67(5), the Insurance Authority may require “an insurance agent to supply information that verifies .... the insurance agent’s, compliance with the code of practice” and it is an offence under s 77(6) if an insurance agent fails “to supply information that is required under s 67(5) that verifies compliance with the code of practice”.

  5.  A Code of Practice was duly issued and the Insurance Agents Registration Board (“IARB”) was established by the HKFI to administer the Code of Practice.  We are concerned with the June 2004 version of the Code of Practice.  Under para 8 of the Code:

  6. The IARB may issue Guidance Notes from time to time as to how it intends to exercise its powers and fulfil its responsibilities under this Code. Such Guidance Notes shall not form part of this Code.

    We are concerned with the Guidance Note revised on 13 June 2005.

  7.  The Code also contained provisions for the regulation of a technical representative which is defined to mean:

  8. a person (not being an insurance subagent who is classified as an insurance agent for the purpose of this Code) who provides advice to a policy holder or potential policy holder on insurance matters for such insurance agent, or arranges contracts of insurance in and from Hong Kong or behalf of that insurance agent.

  9.  A technical representative is not an insurance agent but they share many common characteristics[6] and there is little difference in the regulation of insurance agents and technical representatives under the Code.[7]  Indeed, given their common qualification, a technical representative is also qualified to work as an insurance agent.  As indeed was the case with Mr Singh, the appellant who was the defendant at trial.  For the purpose of this appeal, it is sufficient to note first that a person could not be appointed as a technical representative by an insurance agent unless the IARB had confirmed his registration as such in its sub-register of technical representatives on application made by the insurance agent.[8]  That upon the cessation of appointment, the insurance agent should inform the IARB of that fact within 7 days of such cessation[9] and upon such notification the IARB shall remove the technical representative from the sub-register relating to that insurance agent. 

  10.  Secondly, a technical representative is required to undergo Continuing Professional Development (“CPD”).[10]  Under the Guidance Note,[11] it was the responsibility of the insurance agent to collect evidence of compliance with the CPD requirements from its technical representatives and supply them to the IARB.  Should such evidence not be provided in accordance with the Note, the technical representative would suffer a mandatory de-registration as well as being barred from registration for 3 months.  The detailed provisions on compliance with the requirements of the CPD program in relation to technical representatives and the responsibilities of insurance agents who have appointed them are stated in clause 6(b) of the Guidance Notes as follows:

  11. Responsibilities of insurance agents who have appointed TRs:

    (i)

    dispatch copies of Declaration Form[12] to all of their TRs;

    (ii)

    arrange sufficient CPD training for their TRs, if necessary;

    (iii)

    issue evidence/record of attendance to prove a TR who has attained a course sponsored by the insurance agent with the number of CPD credits/hours and type of credits printed on evidence/record of attendance;

    (iv)

    monitor the compliance of their TRs with the CPD requirements;

    (v)

    collect Declarations Forms from their TRs by 14 August;

    (vi)

    file the Annual Return to the IARB and report on those who fail to achieve the CPD credits/hours by 15 September; and

    (vii)

    offer help to their TRs in maintaining proof of compliance with CPD requirements.

  12.  The consequence of non-compliance is stated in clause 7.  For brevity, I call this, the duty to report CPD credits to IARB.

  13.  The appellant (“Mr Singh”) was appointed a technical representative by the respondent, Dah Sing Insurance Services Limited (“Dah Sing”), an insurance agent, by a contract dated 23 January 2007 (“the contract”).[13]  The contract provided expressly that it should take effect from 1 January 2007.  However, at trial it was agreed that the appointment only took effect from 19 January 2007 which was the date when Dah Sing obtained confirmation of the IARB.[14]  Under the contract, his appointment could be terminated by a month’s notice.  On 23 August 2007, his employment was duly terminated by notice. In his counterclaim against Dah Sing, he complained first that because Dah Sing had failed to inform the IARB of the cessation of his appointment, he could not work as a technical representative. In respect of this claim, he was awarded damages equivalent to one month’s loss of earning.[15]  It was not disputed at trial and was the evidence of Dah Sing’s witness, that unless, the cessation of his appointment had been reported to IARB, he could not work for another insurance agent.  His other complaint was that, although he had complied with the CPD requirements and supplied the necessary information to Dah Sing, Dah Sing had failed to report his CPD credits to IARB, as a result he suffered 3 months’ compulsory de-registration.  He was awarded damages equivalent to 3 months’ income in respect of this claim.[16]

  14.  At trial Mr Singh relied on breach of contract, negligence and breach of statutory duty.  However, counsel for Dah Sing at trial, who did not appear in the subsequent appeals, limited the dispute to whether as a matter of fact there was any breach.[17]  It was not disputed in relation to the deregistration that if that was the result of Dah Sing’s fault, 3 months’ loss of income should be awarded.

  15.  On appeal, the District Judge’s judgment was reversed.  The Court of Appeal took the view that there was no actionable breach of statutory duty and that Dah Sing owed Mr Singh no duty of care at common law.  It also held that notwithstanding Dah Sing’s failure to report the cessation of his appointment as a technical representative, because Mr Singh could work as an insurance agent for more than one insurer, he had not suffered any loss.  For this reason it also allowed the appeal in relation to this claim.

  16.  The Appeal Committee gave leave to appeal, first on[18]:

  17. whether the relationship between insurers and insurance agents of the one part and insurance agents [and] technical representatives of the other part can give rise to a duty of care owed by the former to the latter to comply with the mandatory requirements in the code of practice and guidance note, for the breach of which, a claim for damages may arise.

  18.  Leave was also granted on the “or otherwise” basis so that we could consider whether in the circumstances of this case, the Court of Appeal should have, on its own motion, refused to accept or abide by the concession made by the plaintiff that before the cessation of his appointment was reported he could not work for another insurance agent.  Although Mr Singh also sought leave to argue that he had a cause of action for breach of statutory duties, leave was not granted.

  19.  In this appeal the focus of the argument of Ms Eu SC, for Mr Singh, was on tortious duty of care to which I now turn.

    Duty of Care

  20.  Ms Eu SC submitted that Dah Sing owed Mr Singh a duty of care to comply with the requirement of the Code to report the cessation of Mr Singh’s appointment within 7 days of the cessation as well as to report his CPD credits to the IARB.  She relied in particular on these words of Lord Bridge of Harwich in Caparo Industries Plc v Dickman [1990] 2 AC 605 at 617 that:

  21. .... in addition to the foreseeablity of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterised by the law as one of ‘proximity’ or ‘neighbourhood’ and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope upon the one party for the benefit of the other.

  22.  Foreseeability of loss is straightforward.  In the case of failure to report the cessation of appointment, it was accepted that Mr Singh could not work as a technical representative for another insurance agent until cessation of his appointment had been reported by Dah Sing.[19]  In the case of failure to report the CPD credits, the penalty was mandatory and it was not disputed that he could not work during the 3 months when he was de-registered. 

  23.  “Proximity” or “neighbourhood” are not the only relevant concepts in cases of omissions involving pure economic loss.  The House of Lords in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 preferred the concept of “assumption of responsibility”. Lord Goff of Chieveley[20] said the concept of assumption of responsibility appeared, at 181:       

  24. .... to have been adopted, in one form or another, by all of their Lordships in Hedley Byrne [1964] A.C. 465.

    and that:

    Furthermore, especially in a context concerned with a liability which may arise under a contract or in a situation ‘equivalent to contract,’ it must be expected that an objective test will be applied when asking the question whether, in a particular case, responsibility should be held to have been assumed by the defendant to the plaintiff: see Caparo Industries Plc v Dickman [1990] 2 A.C. 605, 637, per Lord Oliver of Aylmerton.

  25.  But, whether the applicable concept is “proximity”, “neighbourhood” or “assumption of responsibility”, Lord Hoffmann explained in Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181 at 198 and 199:

  26. the answer does not depend upon what the defendant intended but, as in the case of contractual liability, upon what would reasonably be inferred from his conduct against the background of all the circumstances of the case. The purpose of the inquiry is to establish whether there was, in relation to the loss in question, the necessary relationship (or ‘proximity’) between the parties and, as Lord Goff of Chieveley pointed out in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, 181, the existence of that relationship and the foreseeability of economic loss will make it unnecessary to undertake any further enquiry into whether it would be fair, just and reasonable to impose liability.

  27.  Earlier at 190, Lord Bingham of Cornhill regarded an assumption of responsibility  which is to be applied objectively:

  28. as a sufficient but not a necessary condition of liability, a first test which, if answered positively, may obviate the need for further enquiry.

  29.  In the present appeal, I prefer to approach the question of liability by considering whether, viewed objectively, Dah Sing could be said to have assumed the responsibility to report the cessation of his appointment or report his CPD credits.  The answer depends on what could be inferred from the circumstances of this case. I have already mentioned the contract and said that although it expressly stated that its effective date was 1 January 2007, it did not become effective until 19 January 2007 when Dah Sing obtained confirmation from IARB of the registration.  There were two other contractual documents between the parties, both dated 14 February 2007. Although they were dated later, there was no suggestion that they were not agreed contemporaneously with the contract.  First, an offer letter signed by the parties under which Mr Singh was appointed “senior district manager” with effect from 1 February 2007 and which required that Mr Singh be registered with the HKFI as an agent[21] representing the company. Under the offer letter Mr Singh was paid an one off sign-on fee of $150,000. By a separate letter of understanding signed by Mr Singh and Dah Sing, he undertook to perform all his duties and to remain as a bona fide insurance agent[22] of the company for a minimum of 5 years and to repay the sign-on fee if his contract was terminated in the first 3 years.[23]  Mr Singh’s counter claim was made in response to Dah Sing’s claim for a refund of the sign-on fee because his appointment was terminated in the first year.  It is clear that the foundation of all these contractual documents was the registration of Mr Singh as a technical representative of Dah Sing which required the application by Dah Sing and his continued registration which depended on Dah Sing reporting his CPD credits to the IARB.[24]

  30.  Mr Tong SC relied on the fact that the contract of appointment expressly placed upon Mr Singh the responsibility to comply with the Code[25] whereas it was silent so far as Dah Sing was concerned.  I would not read too much into this.  As I have said,[26] in my view, Dah Sing was obliged by the Ordinance to comply with the provisions of the Code, that being the case, the requirement for compliance by Dah Sing could be taken for granted and no express provision was required. 

  31.  In Henderson, Lord Goff of Chievely spoke of the importance of the possession of special knowledge or special skill in the person said to have assumed responsibility.[27]  Here, we are not concerned with special knowledge or special skill, but Dah Sing was in an analogous position because of its role under the Code in reporting the cessation of appointment and reporting of CPD credits.  Moreover, it was obvious that Mr Singh relied on Dah Sing to perform its role.  The provisions set out in para 7 above outlined the many duties which Dah Sing as an insurance agent had to perform to enable its technical representatives to obtain the CPD credits including the supply of a copy of the necessary declaration which is essential for reporting the CPD credits.  Also, the reporting could only be done by Dah Sing.  It was obvious that Mr Singh would rely on Dah Sing.  In these circumstances, I believe it is clear that Dah Sing must be taken to have assumed the responsibility to comply with these requirements.

  32.  The Code provided that the appointment of a technical representative could not take effect before registration by the IARB on the application of Dah Sing.  I asked Mr Tong SC who appeared for Dah Sing whether it was his submission that, although under the Code Mr Singh could not begin work until his registration as a technical representative with the IARB upon application by Dah Sing had been confirmed, Dah Sing was not obliged to apply for registration.  Mr Tong said it was.  With respect, it seems to me clear that Dah Sing was under a duty to report the appointment of Mr Singh to IARB.  The duty may be both contractual as an implied term of the contract to give it business efficacy as well as a tortious duty arising out of the relationship between the parties under which Dah Sing must be taken to have assumed such responsibility.  As for the report of cessation of appointment and the CPD credits, given the clear foreseeability of loss to Mr Singh in the event of Dah Sing’s failure and Dah Sing’s assigned role under the Code, viewed objectively, Dah Sing must be taken to have assumed responsibility to do so.

  33.  Kwan JA in the Court of Appeal referred to and relied on what Ribeiro PJ said in Leung Tsang Hung v Incorporated Owners of Kwok Wing House (2007) 10 HKCFAR 480 at paras 49 to 53.  But, with respect, what his Lordship said at para 54 is more apposite.  His Lordship said[28] in cases where one has:

  34. .... actually done acts or entered into relationships or undertaken responsibilities which give rise to a common law duty of care. .... The duty rests upon a solid, orthodox common law foundation and the question is not whether it is created by the statute but whether the terms of the statute (for example, in requiring a particular thing to be done or conferring a discretion) are sufficient to exclude it. The law in this respect has been well established since Geddis v Proprietors of the Bann Reservoir (1878) App Cas 430.

  35.  Given the assumption of responsibility, the foreseeability of loss and Mr Singh’s reliance on Dah Sing to report the cessation of his appointment and his CPD credits in accordance with Dah Sing’s assigned role under the Code, I believe one could also conclude that it would be fair, just and reasonable to impose a duty of care on Dah Sing.

  36.  Mr Tong also relied on some of the provisions of the contract of appointment to show that Dah Sing had not assumed any contractual responsibility to report termination of appointment. Assumption of responsibility which would otherwise give rise to tortious liability may be excluded by contract if the latter is inconsistent with it.[29]

  37.  First, clause 13.4.6, which provided that:

  38. Upon termination of this Agreement and subject to the provisions of Clause 13.5:

    ‘the Company, shall, if termination is for a cause relating to a breach of the Code or relevant Ordinance, notify the IARB of the relevant particulars and notify the Technical Representative that it has done so.’
  39.  And clause 13.7 of the contract which provided that Dah Sing:

  40. .... shall not be liable to pay any compensation to the Technical Representative for any loss or damages howsoever arising from or in connection with the termination, for whatever reason, of this Agreement.

  41.  Clause 13.7 does not help, the losses complained of flowed not from “the termination, for whatever reason” but failure to report cessation of his appointment or report of CPD credits.  Nor would clause 13.4.6 help Mr Tong.  Clause 13.4.6 expressly required Dah Sing to notify IARB and the technical representative of the termination of the appointment for a cause related to a breach of the Code or relevant Ordinance.  We are not concerned with notification of any breach and I cannot read clause 13.4.6 as being inconsistent with a tortious liability to report cessation of appointment which is unrelated to any breach at all.

  42.  Mr Tong also sought to argue that Mr Singh had suffered no loss as a result of the deregistration because it was said that Mr Singh was not aware of the deregistration until after it was over.  This is a point which had not been taken in any of the courts below nor had leave been given by us to raise the point.  We would not entertain it.

    Or otherwise

  43.  We also gave leave on the or otherwise basis.[30]  It is here that I turn to an important difference between an insurance agent and a technical representative which I can deal with briefly.  Under clause 19 of the Code, an insurance agent could work for 4 principals provided he has the consent of the principal for whom he acts as an insurance agent.[31]  However, in the case of a technical representative, clause 33 provided that he could not act as a technical representative for more than one insurance agent.  At trial there was no dispute that unless the cessation of appointment was reported by Dah Sing, Mr Singh could not work for another insurance agent and it was Mr Singh’s claim that he suffered loss of income as a result.  It was never Dah Sing’s case that even if they were in breach Mr Singh could have worked.  It was Mr Singh’s clear evidence that he couldn’t work.  His evidence was not contradicted.  Indeed, Ms Kan Chuy Hant who gave evidence for Dah Sing, said during cross-examination:

  44. Q.

    Right, so the code de-registration[32] is for enabling the agent[33] concerned to work in another company, right? If the code is not de-registered, he will not be able to work in another company, do you agree?

    A.

    Agree.

  45.  In the teeth of such evidence, the Court of Appeal of its own initiative,[34] referred to Mr Singh’s “Insurance Agents Registration History” and found against Mr Singh on this part of his claim.  Kwan JA said:

  46. 78.

    This was not a point taken by the plaintiff at the trial. Mr Li [leading counsel for Mr Singh] has referred us to the evidence of the plaintiff’s witness who agreed in cross-examination with the suggestion that if an agent was registered with one insurer, he could not be appointed as agent by another insurer. But this concession of the witness was plainly incorrect. Under clause 19 of the Code, an agent could work for not more than four principals simultaneously, of whom no more than two shall be long term insurers. This was borne out by the Insurance Agents Registration History of the defendant, there were two periods (from July 1995 to December 1996, and from December 1996 to May 1998) when he was registered as an agent of two insurers at the same time. There were other instances when his appointment as agent was subsisting with more than one insurer.

    79.

    On this evidence which cannot be refuted, the defendant had failed to establish that any loss of income was caused by the failure of the plaintiff to report his termination of employment. So for this reason as well, the award of damages of one month’s loss of income should also be set aside.

  47.  I have quoted at length from the judgment because, with respect, I find these paragraphs difficult.  Mr Singh was a technical representative and under clause 33 he could not act as a technical representative for more than one insurance agent.  The Code is silent on whether whilst still registered as a technical representative, he could work as an insurance agent.  I am unable to tell whether it was Kwan JA’s view that Mr Singh could at the same time be both a technical representative and an insurance agent.  But the fact that in the past he had been insurance agent for 2 insurers was not to the point.  At para 7 of her judgment, she said Mr Singh was registered as a “technical representative of insurance agency” of Dah Sing but at para 5 she said “He was appointed as the plaintiff’s insurance agent ....” which is wrong.  I believe her Ladyship might have been misled by the fact that in his defence and counterclaim, Mr Singh said he entered into an “agent contract”.  Furthermore, Ms Eu told us it was only after the receipt of Court of Appeal’s judgment that Mr Singh’s lawyers realized that the court regarded the fact that he had once worked for more than one insurer significant.

  48.  With respect, I do not believe the Court of Appeal was at liberty to take a new point on appeal against the clear evidence at trial.  The parties could be expected to know, as a matter of common understanding within the profession and practical reality, whether Mr Singh could work before the cessation of his appointment by Dah Sing had been reported. His clear and uncontradicted evidence was that he could not.  Moreover Mr Singh in his second affirmation has set out the prima facie relevant evidence which he could have adduced had the point been raised at first instance.  In these circumstances, I would also allow Mr Singh’s appeal on this point.

    Justice Fok PJ

  49.  I agree with the Judgment of Mr Justice Tang PJ.

    Justice Stock NPJ

  50.  I agree with the Judgment of Mr Justice Tang PJ.

    Justice Spigelman NPJ

  51.  I agree with the Judgment of Mr Justice Tang PJ.

    Justice Ribeiro PJ

  52.  The appeal is unanimously allowed.  We make an order nisi for costs to be paid by the respondent to the appellant here and below, with liberty to the parties, if so advised, to lodge written submissions on costs within 14 days of the date of the handing down of this judgment.  In default of such submissions, the order nisi is to stand as an order absolute without further direction.


[1] Explanatory Memorandum to the Insurance Companies (Amendment)(No 3) Bill 1993.

[2] s 67(1).

[3] Para 67(4).

[4] s 67(5), s 77(6)(a).

[5] Defined in the Ordinance to mean “a person who holds himself out to advise on or arrange contracts of insurance in or from Hong Kong as an agent or sub-agent of one or more insurers”.

[6] But there are also important differences, for example, an insurer cannot exclude or limit its liability for the actions of its appointed insurance agents, s 68(2).  This is not the case with technical representatives and this and other measures meant to protect policy holders or potential policy holders can be circumvented by an insurer appointing an “inhouse” insurance agent.

[7] The Court of Appeal in its judgment mainly referred to provisions in the Code which concern insurance agents. This, as will be seen, has given rise to some confusion, because there is one important difference in the Code concerning them, namely, under clause 33 a person cannot act as a technical representative for more than one insurance agent but an insurance agent could work for as many as 4 insurers.  See para 31 below.

[8] Clauses 26 and 27.

[9] Clause 31.

[10] Clauses 65 and 67.

[11] The Guidance Note on compliance with CPD Programme issued on 30 November 2004 and revised on 13 June 2005.

[12] Under clause 6(a)(iii), a technical representative has to complete this as part of the reporting process.

[13] In his defence and counterclaim, he called this “an agent contract”.  Be that as it may, the learned trial judge was aware that he was a technical representative.  See para 1 of his judgment. However, in the Court of Appeal, although at para 7 of Kwan JA’s judgment, it said Mr Singh was “registered as ‘a technical representative of insurance agency’ of [Dah Sing]”.  At para 5, it said that “He was appointed as [Dah Sing’s] insurance agent ....”.  This confusion may be important when we come to deal with the appeal on the “or otherwise” ground.

[14] Clause 26 provided that an insurance agent shall obtain IARB’s confirmation before confirming the appointment of a technical representative.

[15] Para 91, DC judgment.

[16] Para 92, DC judgment.

[17] Para 50, DC judgment.

[18] Determination, 4 August 2015.

[19] I will deal with the Court of Appeal’s contrary view below at para 32.

[20] With the concurrence of all their Lordships.

[21] In context as a technical representative and not an insurance agent or sub-agent. But in both Mr Singh and the evidence of Ms Kan Chuy Hant, the only witness of Dah Sing, he was referred to as “agent”, a term used, no doubt, colloquially.

[22] See para 4 but Mr Singh was not an insurance agent.  Dah Sing as an insurance agent could not appoint an insurance agent, only an insurer could appoint an insurance agent.

[23] 100% in the event of termination during the first year, 66.66% the second year and 33.34% the third year.

[24] See para 7 above.

[25] Clause 6.  See para 7 above.

[26] See para 3 above.

[27] Henderson at 180.

[28] Quoting from Gorringe v Calderdale Metropolitan Borough Council [2004] 1 WLR 1057 at 1068.

[29] Henderson at 193C.

[30] See footnote 7 above.

[31] Clause 21.

[32] This was the expression used to refer to the report of cessation of appointment.

[33] I believe this was also used colloquially and not a reference to “insurance agent” as defined in the Ordinance or the Code.

[34] See para 11 of the court’s decision refusing leave to appeal.  The point was not mentioned in the skeleton submissions before the Court of Appeal.


Representations

Ronny Tong SC, Norman Nip and Prisca Cheung (instructed by Keith Lam, Lau & Chan) for the plaintiff/respondent.

Audrey Eu SC and Kelvin Leung (instructed by T C Lau & Co, assigned by the Director of Legal Aid) for the defendant/appellant.


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