Zhu Yong Zhen v AIA Singapore Pte Ltd and another

• Jurisdiction: Singapore
• Judge: Chan Seng Onn J
• Judgment Date: 15 February 2013
• Neutral Citation: [2013] SGHC 37
• Date: 15 February 2013
• Docket Number: Suit No 515 of 2009/Z
• Published date: 18 February 2013
• Plaintiff Counsel: The plaintiff in person
• Hearing Date: 02 July 2012,03 July 2012,04 July 2012,25 June 2012,28 June 2012,19 October 2012,05 July 2012,29 June 2012,27 June 2012
• Defendant Counsel: Adrian Wong Soon Peng and Chow Chao Wu Jansen (Rajah & Tann LLP)
• Court: High Court (Singapore)
• Subject Matter: Contract,Tort,Publication,Defamation

Chan Seng Onn J:

The 1st Defendant (“AIA”) is an insurance company and the Plaintiff (“Mdm Zhu”) a policyholder with AIA. Mdm Zhu brought this suit against AIA for breach of contract. AIA counterclaimed for defamation relating to statements made on an internet blog set up by Mdm Zhu. Mdm Zhu’s claim against the 2nd Defendant was previously struck out and is no longer relevant to this dispute.

Three discrete issues arise for my decision. First, the correct interpretation of Mdm Zhu’s insurance policy, viz, whether it was a term of the policy that annual premiums would only have to be paid for a specified number of years, up to a cut-off date known as the “Critical Year”. Second, whether AIA had in breach of contract caused Mdm Zhu’s insurance coverage to lapse. Third, whether AIA’s claim for defamation is established and, if so, whether Mdm Zhu’s defence of justification is borne out. Unfortunately, perhaps owing to Mdm Zhu’s lack of representation, there was a proliferation of irrelevant issues in submissions and at trial, resulting in rather prolix proceedings.

The background to the dispute

On or about 29 April 1993, Mdm Zhu met an AIA insurance agent named Oscar Huang. Mr Huang utilised a document to aid in advising Mdm Zhu about a product known as the Singapore Financial Guardian (“SFG”) policy.¹ AIA refers to this document as the Policy Benefit Illustration (“PBI”), while Mdm Zhu names it the Original Policy Quotation (“OPQ”). AIA’s terminology will be adopted and the document referred to as the “PBI” in this judgment.

The PBI comprised a table setting out projected annual policy values for a woman of Mdm Zhu’s age at the material time then with an insured sum of $100,000.00. Of general interest to many potential clients are the columns headed “Death Benefit” and “Total CSV Available”. Of greater relevance to this dispute are the columns headed “Premium Paid by Assured”, “Premium Paid from CD Accumulation”, “Current Year Dividend” and “Balance CD”. The acronyms “CSV” and “CD” are not defined, but refer to “cash surrender value” and “current year dividends” respectively. The cash surrender value is the amount of money that a policyholder would receive on terminating the policy in a given year. The current year dividends are the monies paid to the policyholder annually out of the profits of the fund of paid-up premiums.

At the heart of this dispute are the words “Critical Year: 16”. The PBI does not explain what “Critical Year” means. However, the table described above indicates that the annual premium of $2,091.50 would be paid by the policyholder for the first 16 years. Thereafter, this sum would instead be paid out of the accumulated dividends. This is evidenced by the values under the column “Balance CD”. For the first 16 years, the figure reflected under that column is the accumulated dividends as of the previous year, with the addition of 7% p.a. interest and the current year dividend. For the 17th and subsequent years, the annual premium is deducted from the “Balance CD” value for the year. It can be surmised that the Critical Year refers to the last year that a policyholder would have to pay the premium out of her own pocket. It is Mdm Zhu’s contention that the Critical Year is a fixed feature of her policy and that she would not under any circumstances have to pay the 17th and subsequent annual premiums.

Also relevant are the following notes at the bottom of the PBI: (1) THE DIVIDENDS ARE BASED ON CURRENT SCALE. FUTURE DIVIDENDS ARE NOT GUARANTEED. (2) ..... (3) THE INTEREST RATE USED IN COLUMN (4) [BALANCE CD] FOR ACCUMULATED [SIC] IS 7%. THIS RATE IS NOT GUARANTEED AND IS USED FOR ILLUSTRATION PURPOSES ONLY.

On 3 May 1993, Mdm Zhu completed and signed a policy application form for an SFG policy with a sum insured of $200,000.00 and handed Mr Huang the annual policy premium of $3,883.00.² The date of the application form was later changed from 3 May 1993 to 14 May 1993 as Mr Huang only became an AIA insurance agent officially on the latter date. The policy was also backdated to 23 March 1993 to give Mdm Zhu the benefit of a lower premium as her birthday was the day after (viz, 24 March).

The policy application form comprised a questionnaire on the applicant’s personal and health details as well as the identity of the policy applied for. Of note are the following declarations included in the form: A No statement, information or agreement made or given by or to the person soliciting or taking this application or 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. C 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 ... D All my declarations herein made, and my statements or answers in this application and in any required medical examination, questionnaire or amendments together with the relevant policy shall constitute the entire contract between the parties thereto in so far as it may be relevant to the policy or policies I have requested.

AIA approved the application on 17 May 1993 and a policy booklet setting out the terms of the insurance contract was delivered to her by Mr Huang on 19 May 1993.³ The preceding facts set the stage for the contractual dispute between the parties. Subsequent events are relevant to the defamation claim made by AIA.

In 2003, AIA established what it calls the Critical Year Support Program (“CYSP”). Like Mdm Zhu, other policyholders were of the impression that they would not have to pay premiums beyond the Critical Year stipulated in the policy benefit illustrations shown to them. This problem was exacerbated by the fact that it was not an industry practice or regulatory requirement for policy benefit illustrations to be provided to potential policyholders. As a result, non-standard explanatory documents and advice might have been given to policyholders. The CYSP was started to address this issue. AIA communicated with the general public through announcements on its website, where the concerns of policyholders were noted and AIA’s position on the Critical Year – that the Critical Year was not a guaranteed feature of its policies – was set out. AIA also informed the public of the steps it intended to take to resolve the issue through its website.

In addition, AIA contacted policyholders individually by letter, beginning with those whose Critical Year had already passed. On 12 May 2004, Mdm Zhu received a letter from AIA regarding the CYSP.⁴ Mdm Zhu was told that her projected Critical Year was the 15th year according to AIA’s records. She would be sent a support program package around March 2008, about the time Mdm Zhu’s 16th annual premium became payable. This would have been the first annual premium to be paid from accumulated dividends, had the Critical Year taken effect on the 15th year. Whether the Critical Year was the 15th or 16th year is a point of contention between the parties.

As promised, Mdm Zhu received a second letter from AIA regarding the CYSP on 11 January 2008.⁵ In it, AIA presented Mdm Zhu with alternative courses of action which she could elect to pursue. In particular, Mdm Zhu was asked to provide AIA with the policy documents in her possession to enable AIA to make her a “support offer”, ostensibly a favourable variation of her original contract. It appears that the precise offer made to each policyholder would depend on what documents were provided to AIA and their contents. As will be seen, AIA’s request for Mdm Zhu’s policy documents aroused her suspicions. The other options presented in the letter included continuing to pay policy premiums as before, paying the premiums out of accumulated dividends until these were depleted and resuming payment thereafter, or referring the matter to dispute resolution before an adjudicator appointed by AIA or to the Financial Industry Disputes Resolution Centre.

Mdm Zhu replied on 9 April 2008 but declined to select any of the options presented to her.⁶ Instead, she asserted that the PBI was in unqualified terms and that everything stated therein was fixed and not variable. Puzzlingly, she also asserted that the PBI was unclear and difficult to understand. In any event, Mdm Zhu submitted copies of a number of documents to AIA, including the PBI, but expressed the view that AIA ought to have these documents already in its records. She asked AIA to send her the details of the support offer to be extended to her as soon as possible.

AIA replied in a letter dated 15 May 2008, stating its position that the Critical Year was merely a projection dependent on the cash dividends declared each year and the interest rate applicable to the accumulated dividends.⁷ AIA further stated that Mdm Zhu’s policy was for $200,000.00 and not $100,000.00 and that the projected Critical Year was 15. Accordingly, AIA declined to take Mdm Zhu’s PBI into account when formulating the support offer to be extended to her. This support offer was eventually despatched to Mdm Zhu on 16 June 2008 after repeated inquiries by her.⁸

There followed an exchange of correspondence between the parties, with increasing dissatisfaction on Mdm Zhu’s part regarding AIA’s management of the matter, and no progress towards a resolution of the dispute. On 20 August 2008, Mdm Zhu wrote a letter to AIA’s then Executive Vice President and General Manager, Mark O’Dell, setting out “research findings” that she had made and proposing what she called a “win-win solution”.⁹ The research findings were essentially a litany of Mdm Zhu’s suspicions and complaints. Among other things, Mdm Zhu asserted that: the words “Critical Year: 16” on her PBI were unqualified; the qualifications on the PBI (referred...