Korea Trade Insurance Corporation v. Fortune Dragon Motors (International) Co Ltd

HCA 1281/2018

[2019] HKCFI 1824

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1281 OF 2018

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D E C I S I O N

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1.The Plaintiff’s claim against the Defendant is for the outstanding amount of US$1,075,822.10 (“Outstanding Amount”) due under a Settlement Deed dated 10 April 2018 (“Deed”) signed by the Plaintiff, the Defendant and Daewoo International Corporation (“Company”). Under the Deed, the Defendant confirmed that it owed US$1,165,822.10 (“Debt”) to the Plaintiff, and agreed to settle the Debt by 16 installments in accordance with a schedule for payment (“Schedule”). After 2 installments, the Defendant defaulted in further payment, and the Plaintiff instituted proceedings on 1 June 2018 for recovery of the Outstanding Amount. On 5 December 2018, the Master entered summary judgment against the Defendant, against which the Defendant now appeals.

2.The Defendant claims that there are triable issues as to the Plaintiff’s locus to sue on its rights under the Deed, as the Plaintiff is suing as having been subrogated to the claim of the Company against the Defendant, as the insurer of the Company.  The Defendant claims that it is entitled to seek discovery of documents evidencing the sale and purchase agreement between the Defendant and the Company which created the Debt, the insurance policy between the Plaintiff and the Company and, in particular, the Plaintiff’s payment to the Company of the Debt.  The Defendant argued that payment to the insured is a condition precedent of subrogation and the Plaintiff’s ability to exercise its rights of subrogation as an insurer, in respect of the benefits and remedies of the insured Company against the Defendant, for the Debt due from the Defendant to the Company.  The Defendant says that “in the event that” there was no payment, there would be misrepresentation which would then render the Deed unenforceable.

3.The Defendant further claims that, although the Deed signed by the Defendant contains a recital that the Plaintiff had honored the insurance payment to the Company pursuant to the relevant terms of the insurance, and was subrogated to the position of the Company as creditor of the Defendant by a letter of assignment dated 24 November 2016, the Defendant is not bound or estopped from disputing the Debt or denying that the Outstanding Amount is payable by the Defendant.  Counsel for the Defendant relies on the fact that parties to an insurance contract cannot by themselves agree that the insurer can exercise rights of subrogation prior to payment (Rathbone Brothers Plc v Novae Corporate Underwriting [2014] EW CA Civ 1464).

4.It has to be borne in mind that the claim made by the Plaintiff in these proceedings is for the outstanding balance of the Debt, which is acknowledged and admitted by the Defendant under the Deed to be due and payable to the Plaintiff.  The Deed is signed by both the Plaintiff and the Defendant, and the Debt is acknowledged in the Deed to be due and payable by the Defendant as obligor to the Plaintiff as the direct obligee. 

5.The Defendant is not seeking to rely now on any vitiating factor recognized in law, such as mistake, or misrepresentation, or undue influence, to challenge or set aside the Deed to which the Defendant had put its signature.  The potential claim of misrepresentation is based on its mere suspicions.  The allegation made by the Defendant that the Deed had not been explained to the Defendant is not a ground to defend or to avoid the liability assumed under the Deed (Ming Shiu Chung v Ming Shiu Sum (2006) 9 HKCFAR 334).  Nor is a desire to investigate alleged obscurities and the hope that something will turn up on the investigation sufficient reason for refusing to enter judgment for the Plaintiff, as leave to defend cannot be obtained by putting forward a case that is all surmise and Micawberism (Lady Anne Tennant v Associated Newspapers Group Ltd [1979] FSR 298).

6.Counsel for the Defendant emphasized the need, in the context of estoppel by deed, to construe the statements made in the Deed, before deciding which party is to be bound by the statement.  On a plain reading of the Deed, the statement made in clause 3.1 is clearly one which is made by the Defendant to confirm that as at the date of the Deed, it owed the Debt to the Plaintiff, and that the Defendant will make payment to the Plaintiff to settle the Debt by 16 installments in accordance with the Schedule.  The Defendant is clearly the party bound by Clause 3.1 of the Deed, and is estopped thereby from denying that the Debt is due from it to the Plaintiff.

7.Clause 2.1 likewise contains a clear statement of acknowledgment and confirmation by the Defendant, that all the matters set out in the recitals to the Deed are true and correct.  These include the facts and matters in recital (D) as to the Plaintiff having honored the insurance payment to the Company pursuant to the terms of the insurance, and that the Plaintiff is subrogated as the creditor of the Defendant.  The Defendant argued that it had no knowledge as to the alleged fact of payment by the Plaintiff to the Company, and whether the Plaintiff was in fact subrogated to the rights of the Company as creditor of the Defendant.  As such, it was argued that the Defendant is not bound by Recital (D) and should not be bound by Clause 2.1 of the Deed.  Counsel argued that the fact of payment by the Plaintiff to the Company was the entire basis of the Debt, and the acknowledgment by the Defendant contained in Clause 3.1.

8.On the part of the Plaintiff, Counsel maintained that the Defendant had acknowledged the Debt due to the Plaintiff under the Deed, and that issues as to the Plaintiff’s right of subrogation and absence of payment are irrelevant and pure speculation, but that the Plaintiff’s payment to the Company and right of subrogation are in any event acknowledged by the Defendant, which is estopped from disputing such facts - even in a case when the statements were known to be untrue by all parties to the document (Asgain Co Ltd v Cheng Ka Yan (No 2) [2018] 2 HKLRD 641).

9.Even if the Plaintiff’s right of subrogation should be relevant for the purposes of its claim in these proceedings, I agree with the Plaintiff that the Defendant is estopped from denying or disputing the Plaintiff’s payment to the Company.  I cannot see that an insurer’s right of subrogation, and payment being a condition precedent to such right of subrogation, is somehow an exception to the operation of estoppel by deed, or by convention.  There is no direct authority on this cited by the Defendant.  Just as a party stating in a deed that the amount of a bill of exchange or cheque is due and payable is estopped from disputing whether the bill or cheque had been duly presented for payment, or whether consideration had been given for the issue of the bill or cheque, the effect of the estoppel in this case is that the Defendant is not able to go behind the statements in Recital (D) and Clause 2.1 of the Deed, to argue whether the condition precedent to subrogation had been fulfilled by payment.

10.For all the above reasons, I agree with the Master’s reasons for entering summary judgment against the Defendant, that there is no need for the Plaintiff to plead its locus as being subrogated to the rights of the Company as creditor.  I find no triable issues to the Plaintiff’s claim for the Debt as pleaded, and dismiss the appeal.  Judgment is entered against the Defendant in terms of the Order 14 summons, with costs of the action which include the costs of the appeal.

Mr Danny Fung and Mr Leo Yu, instructed by Kim & Company, Solicitors, for the plaintiff

Ms Cindy Kong, instructed by CFN Lawyers, for the defendant