Hellenic Reliance Insurance S.A. v. Grand Union Insurance Co. Ltd.

HCCL000082/1986

1986, No. CL82

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: Hon. Jones J. in Chambers

Date of hearing: 16 October 1989

Date of handing down judgment: 25 October 1989

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J U D G M E N T

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1. This is an application by the plaintiff for summary judgment under Order 14 of the Rules of the supreme Court and on admissions under Order 27.

2. Both the plaintiff and the defendant are insurance companies, the plaintiff being incorporated in Greece and the defendant in Hong Kong. The plaintiff claims an indemnity against the defendant under 18 contracts of reinsurance relating to marine insurance entered into by the defendant by or through its agent, Grand Union Insurance (Consultants) Hong Kong Limited. The reinsurance contracts were effected on behalf of the plaintiff either directly or indirectly two firms of insurance brokers, Robert Bradford Hobbs Saville Limited ("RBHS") between 1980 and 1982 and Evans-Lombe Ashton & Co. Limited ("EL") between 1982 and 1984.

3. In respect of the reinsurance contracts entered into on behalf of the plaintiff by RBHS, it was expressly provided that the reinsurance should "follow all rulings, settlements, decisions and premium payments of ceding company (ies) and all original Underwriters in every respect" whilst those issued by EL on behalf of the plaintiff provided that "All terms clauses conditions returns and additional premiums as orig and to follow orig settlement(s) in every respect".

4. The plaintiff paid the premia in respect of the reinsurance to RBHS and EL, and having settled liabilities under the original contracts of insurance, the plaintiff now claims to be indemnified by the defendant for the sums of US$226,030.70 and 7,607.60.

5. By the points of defence, the defendant admits liability to indemnify the plaintiff under six of the RBHS contracts. In fact for some of these contracts the defendant in October 1988 tendered to the plaintiff two cheques for US$5,526.70 and 1,182.38, but these sums were only accepted on account as part payment as no interest was included. The admissions are contained in paragraph 7 of the points of defence and relate to sums of US$30,232.46 and 200.96. No application has been made to amend the points of defence. However, the position has changed since the service of a list of documents in respect of some of the claims, which the defendant contends have been settled as a result of funding by RBHS. The construction placed upon this evidence is denied by Mr Williams, an insurance broker of RBHS, who states that the entries were made in the books as a result of a course of dealing between RBHS and the plaintiff whereby a credit entry would be placed in the running account between them for a claim of a sum owed by the defendant to the plaintiff for which RBHS anticipated payment by the defendant, but that it did not amount to a discharge of the defendant's obligation to pay the plaintiff either through RBHS or direct. The argument submitted on behalf of the defendant that there was an arguable defence by virtue of the implication that the sums in question had been paid by the plaintiff's own broker can only be described as absurd. There was clearly no merit in this argument.

6. Mr Chan, counsel for the defendant also submitted that the plaintiff's right to sue as an undisclosed principal had not been established, but again there was no merit in this argument for there is no duty to disclose the name of an undisclosed principal, see Glasgow Assurance Corporation (Limited) v. William Symondson and Co. [1911] XXVII TLR245 where it was held that if the knowledge of the identity of an undisclosed principal was required by the underwriter he must ask the question. In any event, the evidence placed before me reveals that the defendant must have been aware of the identity of the plaintiff.

7. Reference was also made on behalf of the defendant to litigation in England between the defendant and EL in which the defendant is claiming payment of unpaid premia from EL. EL in that action had opposed summary judgment on the grounds, inter alia, that they were entitled to set off claims under the reinsurance contracts from the premia to the defendant. The defendant therefore asserts that the plaintiff and EL allege that the defendant is indebted to them for the same sums of money. Apart from the irrelevance of this submission EL has received no authority from the plaintiff to resist those proceedings by way of set off or counterclaim.

8. In the absence of fraud which has not been pleaded, there is no defence to the plaintiff's claim. Nevertheless Mr Chan contended that the plaintiff had to prove that in making payment of the claims under the original policies of insurance, it had acted in a proper and businesslike manner. However, I was referred by Mr Mills-Owens, Counsel for the plaintiff, to the judgment of Goff L.J. (as he then was) in The Insurance Co. of Africa v. Scor (U.K.) Reinsurance Co. Ltd. [1985] 1 Ll L.R. 312 where at p.330 he had this to say :-

" In my judgment, the effect of a clause binding reinsurers to follow settlements of the insurers, is that the reinsurers agree to indemnify insurers in the event that they settle a claim by their assured, i.e., when they dispose, or bind themselves to dispose, of a claim, whether by reason of admission or compromise, provided that the claim so recognized by them falls within the risks covered by the policy of reinsurance as a matter of law, and provided also that in settling the claim the insurers have acted honestly and have taken all proper and businesslike steps making the settlement."

These words were cited with approval by the Court of Appeal in Hong Kong in Insurance Company of the State of Pennsylvania v. Grand Union Insurance Company and Lowndes Lambert Construction Limited Civil Appeal 8 of 1989. However, these two cases, place the onus of proof to establish this defence upon the defendant as reinsurer. No evidence has been placed before me by the defendant to show that the he plaintiff had not acted honestly or taken proper and businesslike steps in settling claims under the original policies of insurance with the result the defendant is liable to follow the settlement effected by the plaintiff.

9. Accordingly, there will be judgment for the plaintiff for the sums of US$226,030.70 and 7,607.60. Upon the authority of Komala Deccof & Co. S.A. and Others v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina) (1984) HKLR 219 interest is awarded on these sums at 1% over prime from the date of payment of each claim by the plaintiff. There will also be an order nisi for costs with a certificate for two counsel.

Representation:

Mr R. Mills-Owens, Q.C. and Mr J. Fok, (Holman, Fenwick & Willan), for Plaintiff.

Mr E. Chan, Q.C. and Mr J. Scott, (Clifford Chance), for Defendant