KOREA TRADE INSURANCE CORPORATION v. FORTUNE DRAGON MOTORS (INTERNATIONAL) CO LTD

HCA 1281 / 2018

[2018] HKCFI 2701

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1281 OF 2018

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REASONS FOR DECISION

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Introduction

1.  By a summons filed on 19 June 2018 (“the Summons”), the Plaintiff (“P”) applied for summary judgment against the Defendant (“D”) under Order 14 of the Rules of the High Court (“RHC”) on the ground that (according to P) D had no defence to P’s claim in the Statement of Claim (“SoC”).

2.  I heard the Summons substantively on 5 December 2018, after which I (1) entered summary judgment in favour of P against D in terms of paragraph 1 of the Summons [A/8]; and (2) ordered D to pay P the costs of and occasioned by the Summons, to be taxed if not agreed, with Certificate for Counsel (“the Decision”).

3.  My reasons for the Decision are as set out below.

SoC

4.  For the purpose of explaining the parties’ arguments, I would set out P’s pleaded case.

5.  P’s pleaded case was that by a signed deed of settlement dated 10 April 2018 (“the Deed”), D agreed to pay P, by 16 installments, the total sum of USD 1,165,822.10.  P averred that D, in breach of the terms of the Deed, failed to pay P in full as agreed, and as of 15 June 2018 there was an unpaid balance of USD 1,075,822.10 (“the Outstanding Sum”).  On this simple basis, P claimed the Outstanding Sum plus contractual interests.

6.  D never filed its Defence, though it had on 10 July 2018 filed an affirmation [B/24] in opposition of the Summons in which D: -

(1)   Admitted its execution of the Deed [para 21];

(2)   Stated its intention to challenge the validity of the Deed [para 26]; and

(3)   Stated its “view” that P was “obliged” to prove its locus to sue D [para 29].

Submissions of D

7.  In opposition of the Summons, Ms Cindy Kong, Counsel for D, submitted, inter alia, that I should not enter summary judgment against D because P failed to plead the “background” leading up to D’s execution of the Deed and as such P failed to establish itself as a “rightful creditor” of D with locus to sue D.  Ms Kong further said it would be “inequitable” for judgment in favour of P to be entered against D when the “background” leading to D’s execution of the Deed had not been made clear by P.

Submissions of P

8.  In answering D’s submissions and in support of the Summons, Mr Leo Yu, Counsel for P, submitted, inter alia, that D had no real defence because: -

(1)   The undisputed contemporaneous documents [C/122] [C/124] showed that D had consulted its own lawyers and considered the Deed for 11 days before executing the same, so no case for challenging the validity of the Deed had ever been made out by D; and

(2)   On P’s pleaded case its locus to sue D arose out of the Deed itself – there was nothing in D’s submissions that P had to plead the background to the Deed.

My View

9.  In gist, I agreed with the submissions of P and disagreed with the submissions of D.

10.  I read the Deed.  Its Recital (F) explicitly stated that the Deed was the end product of a settlement reached by the parties after negotiation.  Its Recital (E) explicitly stated, inter alia, the following: -

“… For the purpose of this Deed and upon mutual consensus of all parties, the parties hereto acknowledge and confirm that the outstanding principal and interests those [D] now owes to [P] amount to a total sum of USD 1,165,822.10… which sums shall become the principal amount of this Deed”

11.  By reason of the above, P was perfectly entitled to rely on the Deed itself as the basis of its claim in the way it did, without pleading the negotiation or background which led to the Deed’s execution.  There was nothing in D’s complaint that P should somehow be required to plead more than just the Deed.  Once D had executed the Deed, and the execution was admitted by D, this Court should not go behind the Deed, in the absence of a particularized challenge to the validity of the Deed on one of the legally-recognized grounds of challenge.

12.  As Ribeiro PJ had said in the well-known case of Ming Shiu Chung v Ming Shiu Sum (2006) 9 HKCFAR 334 at para 84: -

“… Reliance is universally placed on signatures appended to documents by persons of full age and understanding as signifying the signatory’s assent or adherence to what that document states. Where such a person has signed a document which purports to have legal effect, the law has never regarded it as enough to show that he signed without knowing its contents for the document to be disavowed. It is an everyday occurrence that people sign documents without reading the small (or even the large) print and therefore sign without actually knowing the terms (or all the terms) of the document signed. But they are held to the documents which they have chosen to sign unless there is shown to be a recognized legal basis for concluding that their apparent consent has been in some way vitiated or that reliance on that document by some other person falls into some category of unconscionable conduct justifying relief in equity.”

13.  More recently, in Asgain Co Ltd v Cheng Ka Yan (No 2) [2018] 2 HKLRD 641, Lam VP applied the above with approval and further noted that in Prime Sight Ltd v Lavarello [2014] AC 436, the Privy Council went as far as to say the contents of a deed could form an estoppel by deed or by convention even if all parties to that deed knew such contents were actually false because in accordance with “the principle of party autonomy” which was said to underlay the common law of contract, the parties to a deed were entirely free to enter into a transaction by assuming a different state of facts or law as between themselves for the purposes of that transaction only.

14.  The above being the law, D’s suggestion that P was somehow obliged to plead or explain the background facts which led to the execution of the Deed or prove the truth of the various recitals in the Deed was in my judgment wholly misconceived.

15.  Further, whilst D had via its affirmation [B/24] set out various background facts and deposed to its “intention to challenge the validity of the Deed” [B/29, para 26], none of the recognized bases for challenging a deed (e.g. fraud, mistake, misrepresentation and undue influence, etc.) had ever been mentioned or particularized in the affirmation.  That appeared to me to be fatal to D’s opposition as well.

16.  The law was clear and trite.  As the learned editors of HKCP 2019 had correctly observed in paragraph 14/4/4 of their work: -

“The defendant’s affidavit must “condescend upon particulars,” and should, as far as possible, deal specifically with the plaintiff’s claim and affidavit, and state clearly and concisely what the defence is, and what facts are relied on to support it. This obligation is to ensure that where a plaintiff raises a plausible and prima facie sustainable case, a defendant can convince the court there exists a triable issue… If the defence relied on is fraud, the affidavit should state the particulars of the fraud… A mere vague general allegation of fraud is useless. Similarly, if a legal objection is raised, the facts and the point of law arising thereon must be clearly stated.  Indeed, in all cases, sufficient facts and particulars must be given to show that there is a triable issue…”

17.  The key was the phrase “condescend upon particulars” as set out above.  None of the recognized bases for challenging a deedhad ever been mentioned in D’s affirmation, whether in form or in substance or in any other way.  The various elements of such bases were not stated either.  Plainly, a mere and vague reference to D’s “intention to challenge” [B/29, para 26] was insufficient to raise a triable issue.

18.  Mr Leo Yu, Counsel for P, further submitted that D’s repeated attempts to talk about the law of insurance and the law of subrogation were wholly misconceived because the sole basis of P’s claim against D as set out in the SoC was a breach of the Deed, and it was this pleaded case of P which D had to deal with.  I agreed.  In the absence of any particularized challenge to the validity of the Deed, there was no basis on which this Court could go behind the Deed and speculate what could have happened if the parties did not settle by executing the Deed in the way they did.

19.  All in all, having read and considered everything cautiously, I came to the firm view that P had established a prima facie case and D had failed to show any remotely arguable defence or triable issue.  There was no other reason why there should be a trial either.

20.  It was by reason of the above that I made an order in terms of paragraph 1 of the Summons.

Costs

21.  There was no reason why costs should not follow the event.  P was the winner and D was the loser.  The costs of this action, and the costs of and occasioned by the Summons, should all be paid by D to P.

22.  On the question of Certificate for Counsel, in my judgment it was reasonable, necessary and proper for P to engage Counsel to argue the Summons substantively, especially since D had itself engaged Counsel.  I granted Certificate for Counsel accordingly.

Final Remarks

23.  I thank both Counsel for their most able assistance.