T v. A AND ANOTHER

HCCT 57/2017

[2018] HKCFI 1756

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS NO 57 OF 2017

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JUDGMENT

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INTRODUCTION

1.  The issue which requires determination in this action is whether the on-going arbitration seated in Hong Kong between (i) T and A as co-claimants, and (ii) V as respondent, was commenced with T’s authority or consent.

BACKGROUND FACTS

2.  By a Bill of Lading No MRW/CHN-111201 dated 19 December 2011 (the “Bill of Lading”), V by its servants or agents acknowledged the shipment on board its vessel known as MV “Vinalines Queen” (the “Vessel”) at Morowali, Sulawesi, Indonesia, of a cargo of approximately 54,400 MT of Nickel Ore (the “Cargo”) for carriage to and delivery at Ningde Port, PRC, for reward.  T was named as the Notify Party in the Bill of Lading. It was also the holder of the Bill of Lading.

3.  Also on or about 19 December 2011, T as assured and C, now known as A, as insurer entered into a Cargo Policy No EM72501813 (the “Cargo Policy”) in respect of the Cargo, for the insured amount of US$4,015,000.

4.  The Cargo Policy expressly incorporates “Institute Cargo Clauses (A) 1/1/82” into the policy.  Clause 19 thereof provides that “[t]his insurance is subject to English law and practice”.

5.  On or about 25 December 2011, the Vessel carrying the Cargo sank off Luzon, the Philippines, resulting in the loss of, inter alia, the Cargo and the Vessel.

6.  As a result of the loss of the Cargo, on 26 June 2012, T commenced legal proceedings in the Shanghai Maritime Court against (i) C Shanghai Branch (“C Shanghai”), and (ii) C, under the Cargo Policy.  On 7 November 2012, T (as Party A), C Shanghai (as Party B) and C (as Party C) entered into a settlement agreement (“the Settlement Agreement”) after mediation.  The following provisions of the Settlement Agreement are relevant for the present purpose:-

“1. 乙方同意向甲方支付并且甲方同意接受340万美元 (以下简称为“和解款项”) ，包括所有利息和费用，作为上述案件全部和最终的解决方案。

Party B and Party C agree to pay Party A and Party A agrees to accept USD3,400,000.00 (hereinafter referred to as ‘the Settlement Fund’), including all interests and costs, as full and final settlement of the aforementioned case.

3. 甲方同意在收到和解款项之日起3日内，签署《收据及免除责任书》以及《权益转让书》(格式随附)并交付给乙方。

Party A agrees to issue the Receipt and Release Form and the Subrogation Form (in the form as attached) and deliver to Party B and Party C within three (3) days after its receipt of the Settlement Fund.

7. 本《和解协议》适用中华人民共和国法律，所产生的纠纷由上海海事法院管辖。

This Settlement Agreement shall be governed by the law of the People’s Republic of China, and any dispute herefrom shall be subject to the jurisdiction of the Shanghai Maritime Court.

8. 本《和解协议》中英对照。如中英文发生歧义，则以中文版本的内容为准。

This Settlement Agreement is bilingual in Chinese and English. If there is any inconsistency between the Chinese and English version, the Chinese version shall prevail.”

Pausing here, it has not been suggested by any parties that there should be any distinction drawn between C and C Shanghai for the present purpose.  C and C Shanghai shall hereinafter collectively be referred to as “C” or “A”, as appropriate.

7.  Pursuant to the Settlement Agreement, A paid the sum of US$3,400,000 to T on 19 November 2012, following which T executed the (i) “收据及免除责任书 (Receipt and Release Form)” (the “Receipt/Release Form”), and (ii) “权益转让书 (Subrogation Form)” (the “Subrogation Form”) in accordance with Clause 3 of the Settlement Agreement.

8.  The Receipt/Release Form, so far as material, states as follows:-

“就上述保险单下的保险理赔事宜，兹收到贵方根据2012年11月7日签署的《和解协议》所支付的和解款项340万美元。我们，[T]，确认就上述保单而提起的对贵方的理赔请求，已经得到全部和最终的解决。

Regarding our claim under the above Cargo Policy, in consideration of receipt of the Settlement Fund for USD3,400,000.00 paid by you in accordance with the Settlement Agreement dated 7 November 2012, we, T, hereby confirm that our claim against you under the above has been fully and finally settled.”

9.  The Subrogation Form, so far as material, states as follows:-

“鉴于上述保险人已作上述金额之赔付，我们，[T]，特此豁免保险人及其代理人和 / 或代表有关此事件的任何责任，并且我们同意将有关保险标的的一切权益和救济，包括但不限于向任何第三人、承运人、船舶、个人或公司的追偿权益，转让给上述保险人，我们也保证和同意，如有需要，允许以我们的名字对任何第三方采取货物求偿的任何程序，且在此程序中提供保险人可能要求我们的任何形式的协助。

IN CONSIDERATION of payment of the above mentioned Settlement Amount from the above underwriters for the claim described as above, we, T, hereby RELEASE the underwriters, their agents and/or representatives from any liability in regard to such claim or loss, and we agree that the underwriters are SUBROGATED, assigned, and transferred with all our rights, interests and remedies in respect of the subject matter insured, including but not limited to the right of recovery against any third parties, carriers, vessels, persons or corporations that may be liable for the damage or loss, and we also undertake and agree to allow any proceedings to be taken in [our] name for recovery against any third parties, if required, and to assist in such proceedings in any form that may be required from us.”

10.  On 24 December 2012, Smyth & Co in association with RPC (as it was then known) (“RPC”) purportedly on behalf of A and T appointed Mr James Wort as their arbitrator in an intended arbitration (“the Arbitration”) against V claiming for the loss of the Cargo.  On or about 25 December 2012, RPC gave notice of the Arbitration to V.

11.  Subsequently, V appointed Mr Andrew Sheppard as its arbitrator, and Mr Wort and Mr Sheppard appointed Capt Lee Fook Choon as the third arbitrator.  The arbitral tribunal (“the Arbitral Tribunal”) was thereby constituted.

12.  According to T, it was unaware of the commencement of the Arbitration in its name until around 8 May 2017 when it received a “without prejudice” letter from Clyde & Co (V’s lawyers) in which reference to the on-going Arbitration purportedly commenced on behalf of both T and A against V was mentioned.  The events which happened in the Arbitration during the period of time between December 2012 and May 2017 are not relevant for the present purpose and will not be set out here.

13.  On 18 August 2017, Reed Smith Richards Butler (“RSRB”) informed the Arbitral Tribunal of T’s position that A had no authority to commence the Arbitration using T’s name and that T was not a proper claimant in, or party to, the Arbitration.

14.  On 14 September 2017, the Arbitral Tribunal gave a Decision holding, inter alia, that “A has every right in law to proceed with this Arbitration.  In English law (and Hong Kong law), it is common for the subrogated insurers to name the assured in the action or reference.  It is also the unanimous decision of the Tribunal that whether it is a case of assignment or subrogation, the assured T has an obligation to co-operate and assist the insurers in this recovery action”.  By an (Interim) Award on Costs dated 14 September 2017, the Arbitral Tribunal ordered T to bear the costs of the tribunal, A and V in respect of its failed application to challenge the authority of A to use the name of T as a claimant in the Arbitration.

15.  Upon RSRB’s request for clarification of its Decision and Interim Award, the Arbitral Tribunal, in a further email to the parties dated 1 October 2017, stated, or clarified, that it “obviously has jurisdiction over T in this Hong Kong Arbitration”.

16.  On 12 October 2017, RPC purportedly on behalf of T and A served written Claim Submissions on V in the Arbitration alleging (inter alia) that the Vessel was not seaworthy.  The claim was quantified at US$3,972,404.50.

17.  On 7 December 2017, V served its Defence and Counterclaim Submissions in the Arbitration, raising a counterclaim for US$24,727,528.73 against T for the loss of the Vessel on the ground that the Cargo was of “inflammable, explosive or dangerous” nature (in that it liquefied on the voyage) causing the Vessel to lose stability and capsize.  I am given to understand that the question of whether the Arbitration was commenced with T’s authority has, or may have, an implication on the validity of the counterclaim against T.  This is not, however, an issue which I have to determine in this action.

18.  In the meantime, on 12 October 2017, T commenced the present action against A (as 1^st Respondent) and V (as 2^nd Respondent) seeking, inter alia, a declaration that –

“the Arbitral Tribunal … has no jurisdiction over the Applicant on the ground that the arbitration was purportedly commenced in the name and/or on behalf of the Applicant without the Applicant’s consent and/or authority”.

DISCUSSION

19.  Article 16(3) of the Model Law, which is given effect in Hong Kong by Section 34 of the Arbitration Ordinance, Cap 609, states as follows:-

“The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article [ie a plea that the arbitral tribunal does not have jurisdiction] either as a preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within thirty days after having received notice of that ruling, the court specified in article 6 [ie the Court of First Instance of the High Court] to decide the matter, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.”

20.  In deciding whether an arbitral tribunal has jurisdiction in respect of any particular reference under this article, the court determines the matter afresh and is not in any way bound by the tribunal’s decision (see S Co v B Co [2014] 6 HKC 421, at paragraph 35 per Mimmie Chan J).

21.  An absence of authority to commence arbitral proceedings in the name of a party is a matter which goes to the jurisdiction of the tribunal, in so far as that party is concerned (see SEB Trygg Holding Aktiebolag v Manches [2005] 2 Lloyd’s Rep 129, at paragraphs 37 and 40 per Gloster J).

22.  In order to determine whether the Arbitration was commenced with T’s authority, the following issues arise for determination:-

(1) Whether A, as subrogated insurer, had authority to commence the Arbitration using T’s name (“Issue 1”)?

(2) Whether A had such authority under the Subrogation Form?  To answer this question, the following sub-issues require consideration:-

(a) What is the proper law of the Subrogation Form (“Issue 2”)?

(b) Whether the Subrogation Form effects an assignment of T’s rights and remedies against V to A (“Issue 3”)?

(c) What is the meaning and effect of the words “if required” in the Subrogation Form (“Issue 4”)?

(d) Whether A had authority to commence the Arbitration using T’s name because that was “required” for pursing the recovery claim against V (“Issue 5”)?

Issue (1): A had no authority, as subrogated insurer, to commence the Arbitration using T’s name

23.  The starting point is the proper law of the Cargo Policy.  By virtue of Clause 19 of Institute Cargo Clauses (A) 1/1/82 which has been incorporated into the policy by express reference, the proper law of the Cargo Policy is English law.  In the absence of evidence to the contrary, English law is presumed be the same as Hong Kong law for the present purpose.

24.  The subrogation of an insurer to the rights of the assured is governed by the proper law of the contract of insurance: see Dicey and Morris on The Conflict of Laws, 11^th Edn (1987), Vol 2, p1396.  Accordingly, the rights of A as subrogated insurer under the Cargo Policy are also governed by English/Hong Kong law.

25.  Under English/Hong Kong law, the principle of subrogation is derived from the nature of an insurance contract as a contract of indemnity, and the insurer’s right of subrogation arises upon payment under the policy.  In Edwards (John) & Co v Motor Union Insurance [1922] 2 KB 249 at 254-255, McCardie J stated the position as follows –

“It will be observed that the whole basis of the subrogative doctrine is founded on a binding and operative contract of indemnity, and that it is from such a contract only that the equitable results and rights as indicated above derive their origin… the principle of subrogation is ever a latent and inherent ingredient of the contract of indemnity, but that it does not become operative or enforceable until actual payment be made by the insurer. It derives its life from the original contract. It gains its operative force from payment under that contract. Not till payment is made does the equity, hitherto held in suspense, grasp and operate upon the assured’s choses in action. In my view the essence of the matter is that subrogation springs not from payment only but from actual payment conjointly with the fact that it is made pursuant to the basic and original contract of indemnity.”

26.  Notwithstanding the insurer’s right of subrogation, it is clear that the right of action for recovery of the loss remains vested in the assured.  Thus, if the insured wishes to bring a claim for compensation or damages against a third party, it must do so in the name of the assured.  This having been said, if the assured refuses to lend its name to the insurer to make the claim, the insurer can compel, in equity, the assured to allow his name to be used for legal proceedings against the third party. See

(1) Edwards (John) & Co v Motor Union Insurance, ante, at 253-254, per McCardie J –

“If once the claim be paid then as a matter of equity the rights to recover against third persons pass from the assured to the insurer although the legal right to compensation remains in the assured and although actions at law must be brought in the name of the assured and not of the insurer: see London Assurance Co. v. Sainsbury; King v. Victoria Insurance Co. As pointed out in MacGillivray, p. 740, it follows from this equity that if the assured upon tender of a proper indemnity as to costs refuses the use of his name the insurer can by proceedings in equity compel him to give the use of his name. This has long been settled law.”

(2) Yorkshire Insurance Co Ltd v Nisbett Shipping Co Ltd [1962] 2 QB 330 at 341, per Diplock J –

“It is also an implied term of the contract that if it is within the power of the assured to reduce the amount of the loss for which he had received payment from the insurer, by exercising remedies against third parties, he must do so upon being indemnified by the insurer against the costs involved. Since such remedies are personal to the assured they must be exercised in his own name. As the common law provides no method by which a person can be compelled to bring legal proceedings against another, recourse was needed by the insurer before the Judicature Acts to Chancery to compel the assured to allow his name to be used for legal proceedings against third parties in order to reduce the loss. But the duty of the assured to take proceedings to reduce his loss and the correlative right of the insurer to require him to do so was a contractual duty. The remedy for its breach, by compelling the assured to allow an action to be brought in his name, was an equitable remedy in aid of rights at common law, and was alternative to the common law remedy of recovering damages for, breach of the duty… But in the action brought in the name of the assured, pursuant to the equitable remedy, it is the assured who recovers judgment against the third party, and the judgment can be satisfied only by payment to him. When he receives it, the insurer can recover from him at common law, as money had and received, such sum as he has overpaid to the assured under the contract of insurance.”

(3)     Esso Petroleum Ltd v Hall Russell & Co [1989] AC 643 at 663, per Lord Goff –

“In normal cases, as for example under contracts of insurance, the insurer will on payment request the assured to sign a letter of subrogation, authorising the insurer to proceed in the name of the assured against any wrongdoer who has caused the relevant damage to the assured. If the assured refuses to give such authority, in theory the insurer can bring proceedings to compel him to do so. But nowadays the insurer can short-circuit this cumbrous process by bringing an action against both the assured and the third party, in which (1) he claims an order that the assured shall authorise him to proceed against the third party in the name of the assured, and (2) he seeks to proceed (so authorised) against the third party. But it must not be thought that, because this convenient method of proceeding now exists, the insurer can without more proceed in his own name against the third party. He has no right to do so, so long as the right of action he is seeking to enforce is the right of action of the assured. Only if that right of action is assigned to him by the assured can he proceed directly against the third party in his own name”.

27.  In the present case, upon the payment of US$3,400,000 to T on 19 November 2012, A became entitled to the right of subrogation in respect of T’s claim against V under the Bill of Lading.  Under English/Hong Kong law, A as subrogated insurer had no right or authority to commence the Arbitration using the name of T.

28.  In passing, I should mention that any right of subrogation that A had or might have upon payment of the settlement sum would have been overtaken by the assignment of T’s rights to it under the Subrogation Form (see Issue 3 below).  Once the relevant rights have been assigned to A, they would become vested in A which could exercise them in its capacity as assignee.  There would be no further rights vested in T to which A could subrogate.

Issue (2): the proper law of the Subrogated Form is PRC law

29.  Notwithstanding the opinions given by Mr Li Hai (T’s PRC law expert) and Mr Yang Wengui (V’s PRC law expert) on this issue, it is clear that the Hong Kong court applies its own conflict rules to determine the proper law of the Subrogation Form.  Under Hong Kong law, the proper law of a contract is generally determined by any express or inferred choice of law, failing which the residual rule of the closest and most real connection applies (see Johnston, The Conflict of Laws in Hong Kong, 3^rd Edn, paragraph 5.004).

30.  In my view, it is clear that the proper law of the Subrogation Form is PRC law.  I consider it to be the inferred choice of law of the parties in view of the fact that the Subrogation Form was issued and delivered to A pursuant to the Settlement Agreement which (i) prescribed the precise form and contents of the Subrogation Form, and (ii) contained an express choice of law clause providing for PRC law as the governing law of the Settlement Agreement.

31.  If I am wrong on the issue of inferred choice of law, I consider that the residual rule of the closest and most real connection would point to the same result.  In addition to the matters mentioned in paragraph 30 above, other factors which support the view that the proper law of the Subrogation Form should be PRC law include:-

(1) it was part and parcel of the Settlement Agreement following a mediation in China between PRC lawyers in proceedings before the Shanghai Maritime Court;

(2) the Settlement Agreement provides that any dispute therefrom shall be subject to the jurisdiction of the Maritime Court;

(3) the Settlement Agreement also expressly provides that should there be any inconsistency between the Chinese and English versions, the Chinese version shall prevail; and

(4) the parties to the Settlement Agreement were based in China.

32.  I accept that the Subrogation Form has some connection with English law given that it was issued against the backdrop of a claim under an insurance policy governed by English law.  However, this factor is not, in my view, sufficient to override the other considerations mentioned above which point clearly to PRC law as being the proper law of the Subrogation Form.

Issue (3): the Subrogation Form effects an assignment of T’s rights and remedies against V to A

33.  Given PRC law as the proper law of the Subrogation Form, the interpretative rules of PRC law are applicable for the purpose of construction of the Subrogation Form.

34.  Article 125 of the Contract Law of the People’s Republic of China states as follows –

“If any disputes arise between the parties over the understanding of any clause of the contract, the true meaning thereof shall be determined according to the words and sentences used in the contract, the relevant provisions in the contract, the purpose of the contract, the transaction practices and the principle of good faith …”

35.  It can be seen that the interpretative rules under PRC law are not significantly different from those under Hong Kong law, save the “principle of good faith” which I shall consider under Issue (4) below.

36.  The Subrogation Form is a bilingual document in Chinese and English.  There are some discrepancies or inconsistencies between the two versions.  Clause 8 of the Settlement Agreement provides that any inconsistency between the Chinese and English versions should be resolved in favour of the Chinese version.  I consider this principle to be equally applicable to the Subrogation Form in view of the fact, as mentioned in paragraph 30 above, that it was issued and delivered to A pursuant to the Settlement Agreement which prescribed its precise form and contents.

37.  The document is entitled “权益转让书” in Chinese and “Subrogation Form” in English.  The ordinary meaning of the Chinese words “权益转让” is an assignment of rights.

38.  In the body of the Subrogation Form, it is provided that “我们同意将有关保险标的的一切权益和救济 … 转让给上述保险人” in Chinese, and “we agree that the underwriters are SUBROGATED,assigned, and transferred with all our rights, interests and remedies in respect of the subject matter insured” in English.  Again, the Chinese text suggests an assignment, instead of subrogation, of rights.

39.  In this regard, it may be noted that under PRC law, there is a term in Chinese for the expression or concept of “subrogation” in English, namely “代位” or “代位行使” (see Article 60 of the Insurance Law of the People’s Republic of China, and Articles 93, 94 and 95 of the Special Maritime Procedure Law of the People’s Republic of China).  Although the term “转移” in Chinese is used for “subrogation” in English in Article 252 of the Maritime Code of the People’s Republic of China, I accept the explanation given by Mr Li that under PRC law, “转移” means “transfer” and covers both the concepts of “转让” (assignment) and “代位” (subrogation): see paragraph 32 of Mr Li’s 1^st Affirmation dated 21 March 2018.

40.  The parties have, in the course of the hearing, produced various “Receipt and Subrogation Forms” used by other insurance companies in China and they were commented upon by the parties’ respective PRC law experts.  I do not propose to examine those forms in detail in this judgment because I do not consider that they add much to the debate.  I also consider that one should focus on the actual form and contents of the document agreed to and signed by the parties for the purpose of determining their true intention and agreement.

41.  On behalf of A, Mr Chain argues, in reliance on the opinion of Mr Chen Weidong, that the Subrogation Form is a “Dual-Purpose” document which (i) recognizes and evidences subrogation, and (ii) assigns the balance of the right to sue beyond the amount of US$3,400,000 paid by A.  I do not accept that the Subrogation Form effects an assignment of only the balance of the right to sue beyond the amount of US$3,400,000 paid by A, because that would be inconsistent with the express wording of the Subrogation Form, which states that all T’s rights and remedies in respect of the Cargo against third parties are transferred to A.  In this regard, I recognize that under PRC law, the insurer’s right of subrogation is regarded, or operates, as a statutory assignment whereby the insurer can exercise the right to sue in its own name.  However, A’s right of subrogation in the present case is governed by English law and not PRC law.  A did not obtain any assignment of T’s rights or remedies by way of subrogation under the applicable law of subrogation.  There was thus no good reason for A to obtain an assignment of only a portion of T’s rights.  I do not consider that it is right to construe or interpret the Subrogation Form on the false premise that A had obtained an assignment of T’s right of action by subrogation to the extent of the settlement amount of US$3,400,000 paid by A to T.  In any event, I am of the view that the express wording of the Subrogation Form is sufficiently clear to negate the contention that the parties intend to effect an assignment of only the balance of the right to sue beyond the amount of US$3,400,000 paid by A.

42.  V’s PRC law expert, Mr Yang Wengui, is of the view that the Subrogation Form merely provides for A to be subrogated to the rights of T without any assignment of rights.  For essentially the same reasons mentioned above, I do not accept this view.  There is a further point raised by Mr Yang that I should briefly deal with here.  Mr Yang argues that if the Subrogation Form was intended to effect an assignment of T’s right of action against third parties to A, it would have been completely unnecessary and redundant for T to agree to allow proceedings to be brought in its name (if required), as provided for in the Subrogation Form.  It seems clear, however, that the relevant provision was included in the Subrogation Form because it was envisaged that recovery action would, or might, be taken in some foreign jurisdictions where the applicable law required the proceedings to be commenced in the name of T.  I shall come back to this matter when I consider the meaning of the words “if required” in the Subrogation Form later in this judgment.

43.  In all, I prefer the opinion of Mr Li to those of Mr Chen or Mr Yang that the Subrogation Form effects an assignment of the entirety of T’s rights and remedies to recover compensation or damages for the loss of the Cargo from third parties (including, in particular, V) to A.

44.  Article 80 of the Contract Law of the People’s Republic of China states as follows:-

“Where the obligee assigns its rights, it shall notify the obligor. Such assignment will have no effect on the obligor without notice thereof. A notice by the obligee to assign its rights shall not be revoked, unless such revocation is consented to by the assignee.”

45.  It is not in dispute that no notice of assignment of T’s rights and remedies under the Subrogation Form was given to V prior to the commencement of the Arbitration.  It would appear, therefore, that under PRC law, the assignment is not binding on V.  Nevertheless, none of the parties has suggested that the absence of notice means that the assignment is void:-

(1) Mr Clifford Smith, SC (on behalf of T) is prepared to proceed on the assumption that the conditions under which the assigned right can be invoked by A against V is governed by English law (see paragraph 83(2) of Mr Smith’s Opening Submissions dated 20 April 2018).

(2) Mr Chain (on behalf of A) also seems to be prepared to proceed on the assumption that A could be regarded as an equitable assignee (see Section C1 of Mr Chain’s Skeleton Submissions dated 23 April 2018).

(3) Mr Charles Sussex, SC (on behalf of V) submits that if A had in fact taken an assignment of T’s cause of action against V under the Subrogation Form, such assignment could, or could only, take effect as an equitable assignment under English law (being the proper law of the contract of carriage contained in or evidenced by the Bill of Lading), or Hong Kong law (being the procedural law of the arbitral forum) (see paragraphs 25 and 43 of Mr Sussex’s Skeleton Submissions dated 23 April 2018).

I shall come back to the question of the legal effect of the Subrogation Form under English/Hong Kong law when I consider Issue (5) later in this judgment.

Issue (4): the meaning and effect of the words “if required” in the Subrogation Form

46.  The Subrogation Form states (inter alia) that -

“我们也保证和同意，如有需要，允许以我们的名字对任何第三方采取货物求偿的任何程序，且在此程序中提供保险人可能要求我们的任何形式的协助。” (We also undertake and agree to allow any proceedings to be taken in our name for recovery against any third parties, if required, and to assist in such proceedings in any form that may be required from us) [emphasis added] (“the Assistance Clause”).

47.  On their own, there are a number of possible meanings which may be given to the words “如有需要 (if required)” in the Assistance Clause in the Subrogation Form.  As mentioned by Mr Sussex in his Skeleton Submissions, they may mean “required by law”, or “needed” or “necessary” as a matter of prudence in the conduct of litigation, or “need” or “wish to have” (as in “If you’re going out, you’re likely to require an umbrella”), or “rendered necessary” (as in “It would have required much research for the solicitors even to form a tentative view of whether T’s name was required as a matter of strict law to be added as co-claimant in the arbitration”).

48.  In order to reach a proper conclusion on this issue, it is necessary to see how the Assistance Clause came to be agreed and included in the Subrogation Form.

49.  In an email dated 31 October 2012 from Wintell & Co (lawyers for T, “Wintell”) to Wang Jing & Co (lawyers for A, “Wong Jing”), Wintell proposed to Wang Jing to delete the provision in the Subrogation Form which permitted or allowed proceedings to be brought in the name of T for recovery against third parties, on the ground that T would assign its rights and remedies in relation to the subject of the insurance to A after payment of the settlement sum and A could then use its own name to pursue claims against third parties.  Since the parties have not been able to agree on the English translation of this email (and other emails mentioned below), I shall set out the original Chinese words here (the views that I have reached are based on my reading and understanding of the Chinese text):-

“删除了权益转让书中有关‘允许以我们的名义对任何第三方采取货物求偿的任何程序’的表述。在保险人支付和解款项后，我客户将签署权益转让书，将有关保险标的一切权利和救济均转让给保险人，因此，保险人可以其自己的名义向任何第三方进行追偿，而不应该再以我客户名义进行。”

50.  In their reply email dated 2 November 2012, Wong Jing stated that they were not prepared to accept the proposed amendment because in some jurisdictions, recovery claims against the vessel interests could only be made in the name of the cargo receiver under the bill of lading, and the law did not permit C to use its own name to pursue such recovery claims because it was not a party to the bill of lading:-

“关于权益转让书中有关‘允许以我们的名义对任何第三方采取货物求偿的任何程序’，这也是保险权益转让书的通常格式，一旦保险公司进行保险赔付，被保险人有义务在后续追偿程序中提供一切必要的协助。更重要的是，贵所应知，如果在英美法系地区追偿，只能以提单下收货人的名义向船东追偿，法律不允许用[C]名义追偿，因为在提单下，[C]不是当事人。随附是[C]其他案件中被保险人嘉吉粮油公司签署的权益转让书供参考，嘉吉cargill 是全球500强都签，可见该格式没有问题。因此，此点修改我方不能接受，望贵方理解。”

51.  Wintell replied on 6 November 2012 stating that they could accept the proposed provision in the Subrogation Form provided that Wong Jing (on behalf of C) warranted that C would use the name of T to pursue recovery claims only if (or in the situation where) the applicable law required the recovery proceedings against third parties to be brought in the name of the cargo receiver named in the bill of lading; otherwise the proceedings would be brought in the insurer’s own name:-

“关于权益转让书中有关‘允许以我们的名义对任何第三方采取货物求偿的任何程序’，如果贵方能够邮件回复：保证只有在法律规定只能以提单下收货人的名义对第三方采取货物求偿的任何程序的情况下，才会以[T]的名义进行追偿，否则，将以保险人自己的名义进行追偿，我方可接受权益转让书的措辞。”

52.  In their reply email dated 7 November 2012, Wing Jing gave the warranty sought by T:-

“我们同意贵方邮件的意见。我们代表[C]保证只有在法律规定只能以提单下收货人的名义对第三方采取货物求偿的任何程序的情况下，才会以[T]的名义进行追偿，否则，将以保险人自己的名义进行追偿。”

53.  Under English law, evidence of pre-contractual negotiation is generally inadmissible as an aid to the construction of a contract.  However, the Subrogation Form is governed by PRC law.  It is common ground amongst the PRC law experts that evidence of pre-contractual negotiation is admissible for the purpose of assisting in the interpretation of a written contract under the principle of “good faith” referred to in Article 125 of the Contract Law of the People’s Republic of China.  In any event, it is clear that A had expressly agreed that it would only use T’s name to pursue recovery proceedings against third parties if it is a requirement of the applicable law that the proceedings must be brought in the name of T.  Such agreement is, I consider, binding on A on the basis of a collateral warranty, or estoppel, or upon the true construction of the Subrogation Form.  It does not matter, in my view, which legal route is used to arrive at this result.

Issue (5): A had authority to commence the Arbitration using T’s name because that was “required” for pursing the recovery claim against V

54.  Although no notice of the assignment was given to V prior to the commencement of the Arbitration, for the reason mentioned in paragraph 45 above, I shall proceed on the basis that the Subrogation Form takes effect as an equitable assignment of T’s right of action against V to A. The question is whether A, as equitable assignee, is required by English law/Hong Kong law, being the applicable law for the present purpose, to join T as a party in order to pursue the recovery claim against V in the present Arbitration.

55.  I have been referred to a number of authorities bearing on the question of whether an equitable assignee may sue the obligor without joining the assignor (or obligee) in the action.  I do not propose to review those authorities in detail here, but will set out what I believe to be the principles which can be derived from them.

(1) The relevant cause of action is vested in the equitable assignee which is, strictly speaking, capable of being asserted by him alone without joining the assignor as a party to the action.

(2) There is, however, a long standing practice of the court that before giving final judgment in an action at the suit of an equitable assignee, the court would normally require him to bring the assignor before the court, either as plaintiff or as defendant, in order that the assignor would be bound by the result.

(3) The practice of requiring the assignor to be made a party to the action is a procedural, and not substantive, requirement.

(4) In exceptional circumstances, the court has power to dispense with the presence of the assignor.

See The Aiolos [1983] 2 Lloyd’s Rep 15, at 32-34 per Oliver LJ; Sim Swee Joo Shipping Sdn Bhd v Shirlstar Container Transport Ltd [1994] CLC 188 at 190 per Mance J (as he then was); Allson Classic Hotel (HK) Ltd v Harvest Star International Ltd [1996] 2 HKLR 330, at 336 per Mortimer JA; Robert v Gill & Co [2011] 1 AC 240, at paragraphs 63 to 68 per Lord Collins of Mapesbury JSC; and Kapoor v National Westminster Bank plc [2012] 1 All ER 1201, at paragraphs 30-40 per Etherton LJ.

56.  I should mention that there is some support for the view that the requirement to join the assignor in an action by the equitable assignee against the obligor should be regarded as a substantive, and not merely procedural, requirement: see Meagher, Gummow and Lehane on Equity: Doctrines and Remedies, 4^th Edn (2002), p286 at 6-520, referred to by Etherton LJ in Kapoor, ante, at paragraph 38. However, the balance of the authorities suggests that it should be treated as a procedural requirement.  In Secretary for Justice and Global Merchant Funding Ltd (2016) 19 HKCFAR 192, at paragraph 40, Ribeiro PJ (giving the reasons for the judgment of the Court of Final Appeal) quoted the following passage in the judgment of Windeyer J in Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 29:-

“A creditor cannot recover a debt piecemeal in a court of law. Therefore, when part of a debt was assigned, proceedings to enforce the assignment had to be brought in a court of equity. And the assignee, not the assignor, would be the plaintiff in the suit. The assignor (the creditor) as legal owner, the debtor and any assignees of other parts of the debt were all necessary parties, so that all the obligations of the debtor and the rights of all persons interested in the fund might be established by the decree. This was the rule of the Chancery Court. It is still the law ...” [emphasis added]

57.  Since the issue of whether the requirement to join the assignor in an action brought by the equitable assignee was a procedural or substantive requirement was not before the Court of Final Appeal in Secretary for Justice and Global Merchant Funding Ltd, it would probably be reading too much into that judgment to assume that the Court of Final Appeal had decided that the requirement was a substantive one. Nevertheless, that judgment confirms the general understanding that the assignor is a necessary party to the action (save in exceptional circumstances).

58.  Applying the principles mentioned in paragraph 55 above to the present case, I consider the joinder of T as a party to the arbitral proceedings against V can fairly be said to be “required” under English/Hong Kong law.  The fact that the requirement is regarded as a procedural, as opposed to a substantive, one does not make it any less a requirement of the applicable law for T to be made a party to in the Arbitration.  While is it true that the court (or arbitral tribunal) may, in an exceptional case, dispense with the requirement, that is not something which A can insist upon as a matter of legal right.

59.  There are two other matters raised in the course of the hearing which I should briefly deal with here.

(1) Mr Smith submits that unless the assignor (T) consents to sue as a plaintiff, it can be joined as a co-defendant (see paragraph 52 of Mr Smith’s Opening Submissions).  It seems to me that if the joinder of T as a party to the Arbitration is required under the applicable law, the condition for using T’s name in the Arbitration under the Subrogation Form is satisfied.  It could not sensibly have been the intention of the parties to the Subrogation Form that A ought to join T as a defendant in a recovery action in circumstances where T’s presence as a party is required, bearing in mind T’s agreement and duty to assist A in pursuing recovery actions against third parties.  Furthermore, as pointed out by Mr Sussex and Mr Chain, A and T are not parties to any arbitration agreement which could allow A to sue T in an arbitration.

(2) Mr Smith further submits that A could have completed the assignment by giving notice thereof to V and sue in its own name without joining T as a co-claimant (see paragraph 93 of Mr Smith’s Opening Submissions).  In my view, quite apart from the fact that under Article 80 of the Contract Law of the People’s Republic of China which governs the Subrogation Form, it is the duty of T to give notice of the assignment to V, the proper question to ask is whether the joinder of T as a party to the Arbitration is, in the circumstances pertaining at the time of commencement of the Arbitration, “required” under the applicable law, and not whether the joinder can be avoided by some means.

60.  In all, I conclude that the Arbitration was commenced in the name of T with its authority, and Arbitral Tribunal has jurisdiction over T.  This conclusion seems to me to accord with the purpose of the Assistance Clause, which is to facilitate, instead of frustrate, recovery actions taken by A against third parties who might have been responsible for the loss of the Cargo.

DISPOSITION

61.  For the forgoing reasons, I dismiss the Originating Summons dated 12 October 2017.  I also make an order that T shall pay A and V’s respective costs of this action, to be taxed if not agreed.

62.  Lastly, it remains for me to thank counsel for the assistance that they have rendered to the court.