We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
30 September 2014
In Dah Sing Insurance Services Ltd v Singh, the Hong Kong District Court ruled in favour of the insurance agent in respect of a negligence claim arising from a breach of statutory duty by the insurer.(1) More than a year later, the Hong Kong Court of Appeal has handed down a judgment overturning the lower court's decision.(2) The court held that the insurance agent had no cause of action for negligence against the insurer.
The defendant, Gill Gurbox Singh, was an insurance agent of the plaintiff, Dah Sing Insurance Services Ltd. In August 2007 Singh's appointment with Dah Sing was terminated. In April 2008 Dah Sing issued a writ in the district court seeking repayment of the sign-on fee and monthly allowances previously paid to Singh.
Singh counterclaimed against Dah Sing for the outstanding monthly allowance and office allowance, as well as damages for loss of income as a result of Dah Sing's failure to report:
The trial judge ordered Singh to repay the sign-on fee to Dah Sing, but dismissed Dah Sing's claim for repayment of the monthly allowances. Singh was held to be entitled to the outstanding monthly allowance and office allowance, as well as damages for loss of income, as a result of Dah Sing's breach of statutory duty.
Dah Sing appealed on the grounds that Singh had failed to plead specifically in his amended defence and counterclaim:
Pleading the specifics
The appeal court held that while there was room for improvement in Singh's pleading, it was sufficient for it to contain all the material facts he relied on to bring a negligence claim against Dah Sing in the defence and counterclaim, notwithstanding that Singh had not used phrases such as 'duty of care' and did not specifically plead that he was claiming damages for negligence.
In this case, Singh had pleaded the relationship between the parties, which was alleged to give rise to a duty of care owed by Dah Sing to avoid causing loss and damage to Singh. There were sufficient averments to establish Dah Sing's responsibility to report his termination of appointment and his CPD credits. In addition, the court noted that Dah Sing's counsel did not question the bases relied on by Singh in his counterclaim for damages, nor did he argue that there was no statutory duty on the part of Dah Sing throughout the course of the trial.
The court found that since the hearing was conducted on some unpleaded bases and the pleadings were disregarded by the parties, objections to pleadings would not have much force. It was open to Singh to raise a claim in negligence and for the court to consider Dah Sing's failure to check the movement record in determining whether there was a breach of duty of care.
However, the court emphasised that whether a duty of care at common law was owed by Dah Sing was a different issue.
Civil right of action against breach of statutory obligation
Apart from what was pleaded in Dah Sing's grounds of appeal, the court considered whether it was viable for Singh to bring a civil cause of action in respect of Dah Sing's breach of statutory duty.
The court noted that a private right of action could be brought only if the legislative intent of imposing a statutory duty was to protect a limited class of public against the breach of duty. As the Insurance Companies Ordinance was silent on this issue, to ascertain the legislative intent of the ordinance the court looked at the "statements made by government officials in relation to the bills in the Legislative Council debates and other materials placed before the legislature at that time"(5). As a matter of statutory construction, the court was persuaded that the legislative intent of the ordinance was to protect public consumers, not insurance agents.
It was therefore not viable for Singh to bring a claim in respect of Dah Sing's breach of statutory duty. The court decided that it would not be fair, just or reasonable to impose the statutory duty on Dah Sing at common law for the benefit of Singh. A common law duty of care giving rise to a claim in damages should not be superimposed on this statutory regime.
The court allowed Dah Sing's appeal and set aside the damages awarded to Singh.
This decision does not change the fact that insurers must comply with reporting obligations imposed on them. Failure to do so constitutes breach of the Insurance Agents Registration Board Code and the Guidance Note on Compliance with the Requirements of the CPD Programme, and insurers will be subject to financial penalties for any breaches. However, insurers should not be held liable in respect of negligence claims brought by insurance agents.
In this decision the appeal court gave its interpretation of the legislative intent of the Insurance Companies Ordinance by finding that the statutory duty imposed by the ordinance intended to protect the consumer public, and that such protection did not extend to insurance agents.
The appeal court departed from the district court judgment by deciding that a breach of statutory duty cannot give rise to a civil cause of action. The fact that it is the insurer's obligation to report does not make the insurer responsible for any loss and damages suffered by the insurance agent resulting from any failure of any such obligation.
Insurance agents should perform regular checks as to whether insurers have complied with the code and the guidance note as they should not have any financial recourse as a consequence of the insurers' breach of reporting duties.
On the pleading issue, it should be sufficient for the pleader to plead all material facts upon which he/she relies in the pleading. Nonetheless it is always best practice to plead all potential claims that can arise from the case to avoid unnecessary ambiguity and uncertainty.
For further information on this topic please contact Kevin Bowers at Howse Williams Bowers by telephone (+852 2803 3648), fax (+852 2803 3608), or email (firstname.lastname@example.org). The Howse Williams Bowers website can be accessed at www.hwbhk.com.
(1)  HKCU 1046. For further details please see "Insurers beware: a costly failure to report".
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.