TRANS-MEDICA PHARMA-HANDELSGESLLSCHAFT MBH v. ANANDA PHARMACEUTICALS & CHEMICALS LTD

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JUDGMENT

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Kempster, JA (giving the judgment of the court) :

1. This is an unopposed appeal by plaintiffs incorporated and carrying on a pharmaceutical business in West Germany against an order made by Jones J pursuant to the provisions of the Arbitration Ordinance (Cap 341) on 14 February 1990 at the instance of defendants incorporated and carrying on a like business in Hong Kong, staying an action for damages for breach of two contracts for the sale and purchase, among other things, of a product called "Cimetidine" and of a further agreement compromising the dispute in relation to the second of those contracts.

2. The affidavit evidence before the learned judge demonstrated that on 30 May and 19 July 1989, respectively, contracts, the first orally at a meeting in Hong Kong and the second by telex, had been concluded between the parties; each for the sale by the defendants to the plaintiffs of 1,000 kilogrammes of Cimetidine. Goods were shipped by reference to each. Disputes arose as to their quality. The critical questions failing for determination were whether or not provisions for arbitration had been included in or imported into one or more of the agreements. It was for the defendants to show that they had. Zambia Steel v James Clark and Eaton Ltd (1986) 2 Lloyds Rep 225 at p 227 as stated by O'Connor LJ.

3. As regards the earlier agreement both parties timeously dispatched written confirmation. That of the plaintiffs, on a Furama Hotel facsimile, made no mention of arbitration. Their more formal document dated 5 June purported to subject the contract to German law and to the terms of the International Chamber of Commerce and the parties to the jurisdiction of the courts in Hamburg. The defendants' unsigned document purported to incorporate their standard terms and conditions including arbitration according to the laws of Hong Kong. This document was not received by the plaintiffs until after they had dispatched their communication of 5 June. On the other hand the plaintiffs must have been aware of the existence of those standard terms and conditions by reason of at least one of the purchases which they had made from the defendants, which the defendants had purported to confirm, on 30 March and 27 April 1989; this despite the denial of knowledge and the qualified denial of earlier direct negotiations deposed to by Mr Mallard, a solicitor, on the plaintiffs' behalf. However, the two documents in question do not, in our view, suffice to incorporate the defendants' standard terms in any of the agreements with which we are presently concerned. The defendants would not have had good cause to assume that the plaintiffs were agreeing to their standard terms and conditions in the sense indicated by Salmon LJ in Hollier v Rambler Motors Ltd [1972] 2 QB 71 at p 76.

4. In the face of largely hearsay material deposed to without cross-examination and of conflicting documents we cannot think that Jones J was entitled to find, as he did, that the agreement of 30 May 1989 incorporated an arbitration clause.

5. Mutatis mutandis we are of the same opinion about the judge's finding that the agreement of 19 July was subject to such a clause. The defendants' telex asked the plaintiffs to "fax" a purchase order while their unsigned "sales confirmation", also of even date, purported to incorporate their standard terms and conditions. Neither the plaintiffs' facsimile letter nor their confirmation, both dated 20 July, mentions arbitration though the latter document has the same purported effect as that relating to the first contract and dated 5 June. It bears the reference "13.304" to which the defendants referred in their invoice dated 27 July. The defendants' allegation that "... it is also customary trade practice to settle such contractual disputes of a technical nature by reference to arbitration" was denied on oath by Mr Mallard and played no part in the decision of the learned judge.

6. For obvious reasons the plaintiffs have not alleged in their Points of Claim that any of the relevant contracts was subject to German law or to the terms of the International Chamber of Commerce or that the parties had submitted to the jurisdiction of the Hamburg Courts. By inference they reject the contractual efficacy of standard terms emanating ex post facto from either side. Neither party has furnished evidence suggesting that the alleged settlement of the dispute arising from the contract of 19 July was subject to an arbitration provision and it is in any event not a claim or dispute which arises "under this contract"; to quote clause 11 of the defendants' standard terms and conditions.

7. If we are right in our opinion that the evidence before Jones J was insufficient to warrant findings that the defendants' standard terms and conditions were incorporated into any of the material contracts it follows that there was no "arbitration agreement" upon which to found an application for stay within the meaning of sections 2, 6, or 6A of the Arbitration Ordinance.

8. We should, perhaps, add that at the time when the proceedings were commenced the plaintiffs were incorporated in Germany so that any agreement to refer would not have been a "domestic arbitration agreement" as defined in sections 6A(2) and (3) (b). Subject to the considerations already canvassed the defendants would therefore have been entitled to invoke section 6A(1). The reference in the defendants' summons to Order 18 rule 19 of the Rules of the Supreme Court and to the inherent jurisdiction does not advance the matter.

9. We would allow this appeal and set aside the Order of 14 February 1990.