Royal Skandia, the Isle of Man-based investment manager and insurance firm, and a
local insurance broker from Hong Kong, have won a High Court case over a
powerful Hong Kong-based executive, coming as a landmark ruling for insurance brokers. 

The case, which hinged on commission disclosure, was brought by Jeremy Paul
Egerton Hobbins. According to the court documents,
Hobbins is an “extremely successful businessman” and a senior executive with Li
& Fung Group, a large Hong Kong firm. He has held directorships on 50 Hong Kong companies. 

Hobbins lost money in the Royal Skandia Investment-Linked
Assurance Scheme products that he purchased through the broker, Clearwater International, starting from March 2006.

The
essential allegation was that in recommending
Royal Skandia products, Clearwater
was not acting in Hobbins’ best interests, but selling products which would earn it more commission and fees paid by Skandia and other insurers.

The
nub of the case was that Hobbins wanted an order that Clearwater return to him the
commissions and fees which it earned from insurers for transacting business on his
behalf. This was on the grounds that Clearwater had failed to inform him
“precisely how much commission it would be earning on each ILAS product [he]
purchased”, which he said violated Hong Kong’s Prevention of Bribery Ordinance.

The
main issue, said Hon Justice A Reyes, is whether as a matter of law, an
insurance broker is obliged to disclose how much commission one earns on any
particular transaction brokered for a client.

Reyes
ruled against him, noting that  “common
law has long accepted the practice of an insurance broker receiving commission
from an insurer, provided (as here) those commissions do not exceed the usual
market rate”.

"That principle must be the starting point of any
analysis in the circumstances of this case," he added.

If a client, such as Hobbins, having been "alerted by
such disclosure as was made here" wished "further and better
particulars of the commission to be received", he could "readily ask
the insurance broker (such as Clearwater)... and then decide accordingly
whether to proceed with a transaction".

Royal Skandia said in a statement that it also welcomed
the court's ruling, which it noted confirmed that it “did not act
inappropriately in the case of Mr Hobbins”. 

“The judgement is clear that all claims have been
dismissed, and that certain claims should never have been made against Royal
Skandia in the first place,” Royal Skandia said. 

“Royal Skandia’s charges and product terms are clearly outlined
and agreed to by customers, including Mr Hobbins, at the point of
sale."