Zhu Yong Zhen v American International Assurance Co, Ltd and another

• Jurisdiction: Singapore
• Judge: Tan Lee Meng J
• Judgment Date: 17 August 2010
• Neutral Citation: [2010] SGHC 238
• Plaintiff Counsel: Plaintiff in person
• Docket Number: Suit No 515 of 2009 (Registrar’s Appeal No 189 of 2010)
• Date: 17 August 2010
• Hearing Date: 17 May 2010,26 May 2010
• Subject Matter: Contract,Civil Procedure
• Published date: 20 September 2010
• Citation: [2010] SGHC 238
• Defendant Counsel: Adrian Wong (Rajah & Tann LLP),The second defendant in person.
• Court: High Court (Singapore)
• Year: 2010

Tan Lee Meng J:

The plaintiff, Mdm Zhu Yong Zhen (“Mdm Zhu”) sued the first defendant, American International Assurance Company, Limited (“AIA”), for breach of contract and the second defendant, her former solicitor, Mr Chia Ti Lik (“Mr Chia”), for colluding with AIA against her. She appealed against a number of orders made by Assistant Registrar Jason Chan (“AR Chan”), which included the striking out of her claim against AIA and Mr Chia and the dismissal of her application to strike out AIA’s defence and counterclaim and Mr Chia’s defence.

At the outset, it may be noted that although AIA and Mr Chia are the only defendants in the action, Mdm Zhu alleged in her Statement of Claim that another of her former solicitors, Ms Carrie Gill (“Ms Gill”) from M/s Engelin Teh Partnership (“ETP”), had also colluded with AIA to give the latter “defending and fighting power” against her. She also alleged that Mr Amarjeet Singh SC, the independent Adjudicator who had tried to resolve her dispute with AIA, was not independent and had wasted her time. Finally, Mdm Zhu asserted that a Senior Assistant Registrar and an Assistant Registrar of the Supreme Court had taken deliberate steps to sabotage her claim against AIA.

I dismissed Mdm Zhu’s appeal against AR Chan’s decisions to strike out her claim against AIA and Mr Chia, and to dismiss her application to strike out AIA’s defence and counterclaim and Mr Chia’s defence. The reasons for my decision are set out below.

Background

AIA’s life policies include policies that enable the assured to participate in the company’s surpluses in the form of dividends. Two such policies are the “Financial Guardian” policies and the “Whole Life Participating With Dividends” policies. Some of these policies that had been sold between 1 May 1986 and 20 April 1994 included a feature known as the “critical year”, which refers to the year in which the life policy would have accumulated sufficient dividends to enable the policyholder to continue to enjoy life assurance coverage without having to pay any more premiums. AIA issued documents explaining the critical year feature but it maintained that while a critical year may be projected, there was no guarantee that it would not shift because much depended on the amount of dividends declared annually and on the interest rate earned by the accumulated dividends. In fact, the document illustrating the critical year feature made it clear that dividends and interest rate were not guaranteed.

In 1993, Mdm Zhu effected a “Financial Guardian” life policy (“the policy”) with a critical year feature with AIA. The assured sum under her policy No L518324553 was $200,000 and the policy enabled her to participate in the company’s surpluses in the form of dividends. Her annual premium was $3,883.00.

Before the policy was effected, Mdm Zhu had discussions with AIA’s representative, Mr Oscar Huang (“Oscar”), who gave her a document that illustrated the critical year feature for an assured sum of $100,000, and not $200,000, which was the assured sum in her case. Mdm Zhu referred to this document as an “Original Policy Quotation” or “OPQ” while AIA called it a “Policy Benefit Illustration”. As these titles did not appear on this document, it will hereinafter be referred to as “the CY document”.

It is crucial to note that while the calculations in the CY document showed that the critical year was the 16th year after the policy had been effected, the CY document expressly provided that the calculations were based on the current rate of dividends and an interest rate of 7%, both of which were not guaranteed. These disclaimers were as follows: (1) THE DIVIDENDS ARE BASED ON CURRENT SCALE. FUTURE DIVIDENDS ARE NOT GUARANTEED.

…

(3) THE INTEREST RATE USED … FOR ACCUMULATION IS 7%. THIS RATE IS NOT GUARANTEED AND IS USED FOR ILLUSTRATION PURPOSES ONLY.

[emphasis added]

After her discussions with Oscar, Mdm Zhu applied for the policy on 14 May 1993. The application form submitted by her to AIA contained the following important declaration by her:

No statement, information or agreement made or given by or to the person soliciting or taking this application by or to any other persons shall be binding on the Company, unless reduced to writing, and then, if presented to and approved by an officer specified in the policy.

[emphasis added]

Furthermore, the application form contained the following clause as to when the policy would take effect:

Any insurance herein applied for shall not take effect unless and until the relevant policy is/are issued and delivered to me on this application and the first premium thereon actually paid in full during my lifetime and good health provided, however that if any payment of premium is made in cash at the time of signing this application and a conditional binding deposit no ….. dated …. issued therefore, the terms of the receipt shall apply hereto and are agreed to.

It was not disputed that when Mdm Zhu signed the application, she did not pay the premium in cash.

The policy that was issued to Mdm Zhu contained an “entire agreement clause”, which provided that “the policy and the application for it, a copy of which is attached to and made a part of the policy, constitute the entire contract”. The CY document was not attached to or made a part of the policy.

Notwithstanding the express terms of the CY document, which clearly stated that the interest of 7% was not guaranteed, her declarations in the application form and the entire agreement clause in the policy, Ms Zhu claimed that she understood the CY document to be a contractual promise by AIA that the policy would reach the critical year in 2008. However, AIA contended that the CY document shown to Mdm Zhu by Oscar before she applied for the policy had merely illustrated the position for a $100,000 policy on the basis that dividends were based on the then current scale and interest rate on accumulated dividends did not dip below 7%. It also pointed out that Mdm Zhu had not asked for a document that illustrated the critical year for a $200,000 policy such as the one that she effected.

There were other policyholders who were affected by problems relating to the critical year feature in their policies. AIA announced a number of packages for affected policyholders and in 2003, it appointed an independent Adjudicator to resolve individual cases of policyholders who accepted the adjudication process. AIA agreed to abide by the decision of the Adjudicator. The Adjudicator at the material time was Mr Amarjeet Singh SC, a former judicial commissioner of the Supreme Court.

In early 2008, AIA wrote to Mdm Zhu to inform her about a range of alternatives in relation to the future of her policy. AIA also stated that if she did not respond to the letter, it would be assumed that she would continue to pay her premium, in which case, the cover afforded by the policy would be unaffected.

On 9 April 2008, Mdm Zhu wrote to AIA to explain that she did not have to pay any premiums after 2008. She enclosed a copy of the CY document to support her case. AIA replied that her policy was for $200,000 and the projected critical year in her case was 15 years and not 16 years, as shown in the CY document, which related to a policy for $100,000 and not $200,000. Thereafter, Mdm Zhu and AIA had a lengthy exchange of letters. In March 2009, Mdm Zhu instructed AIA to pay the premium for 2009 from her dividends. AIA forwarded her a form to authorise the use of her dividends to pay for the premium and asked her to sign it. Mdm Zhu defaced parts of the authorisation form that were not to her liking. AIA informed her that as she had defaced the authorisation form, her request to use her accumulated dividends to pay for her premium for 2009 could not be processed.

Mdm Zhu asks AIA to invest $1.5m in her business

On 20 August 2008, Mdm Zhu wrote to AIA to propose what she thought was a “win-win” manner of resolving their dispute over the critical year. At that time, she required $1.5m to set up a business to manufacture and sell health supplements in the form of “Silver Bullets”. She asked AIA to invest $1.5m in her business to end their dispute. In her e-mail on 20 August 2008, she stated as follows:

[I] do not like to see AIA get into big troubles although I am angry at what AIA did in the process to revolve the dispute with me. Hence, I propose a win-win solution….Here it is.

I have a business plan. I am going to look for strategic investors to invest on my intended business….

….

I like to have your decision. Could you please let me know within one week? After that, my proposal will lapse and I will look for other investors. In the meanwhile, I may take the dispute to the courts and get best lawyers to sue AIA. It shall be a meaningful lawsuit. … Therefore, the key to resolve the dispute is in your hands.

[emphasis added]

Mdm Zhu forwarded to AIA an “Executive Summary on Manufacturing, Marketing and Distributing MySilver – A High Quality Nano Product and A Special Health Supplement”. She also sent AIA a rather detailed confidential non-disclosure agreement in relation to the proposed business collaboration between her and AIA for the latter’s signature.

After AIA declined to invest $1.5m in her company, Mdm Zhu asked AIA on 10 October 2008 to compensate her for surrendering her policy. In an e-mail dated 13 October 2008, she clarified that the compensation she wanted from AIA for surrendering her policy was the “investment amount” (ie $1.5 m) stated in her business plan that had been forwarded to AIA on 20 August 2008. In short, she now sought $1.5m from AIA without requiring the latter to invest anything in her business. AIA did not accept her latest offer to settle its dispute with her.

Mdm Zhu’s blog

Mdm Zhu decided to set up a blog to inform the public about her “findings” on her dispute with AIA. In the blog,...