AT & JM GROUP LTD v. LI & FUNG (TRADING) LTD

HCA 780/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 780 OF 2010

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D E C I S I O N

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1.  Leave to appeal and a stay of execution pending appeal are refused. In my view, Li & Fung’s prospects of success on appeal are poor. Let me briefly elaborate on why I think so.

2.  If A wishes to incorporate an arbitration clause into a standard contract, A must do so unambiguously.  Otherwise, one ends up in a Catch-22 situation.  In the event of a dispute over the contract, B would be at A’s mercy as to choice of forum.  If B initiates arbitration, A can delay B’s claim by alleging that no arbitration clause has been incorporated.  On the other hand, if B resorts to Court, A can delay matters by claiming that the dispute is subject to arbitration.  At all times, a party to a contract must be reasonably able to determine the existence or non-existence of an obligation to arbitrate.

3.  I previously ruled that Li & Fung failed unambiguously to incorporate an alleged arbitration clause into its standard form contract.  Li & Fung now seeks leave to appeal against my ruling on a number of grounds. 

4.  The relevant contract is contained in various Placement Memoranda (PMs) issued by Li & Fung.  The front of each PM states that “the terms and conditions on the face hereof and overleaf shall constitute the entire contract” between the parties. 

5.  The PMs also stipulate that:-

“No agreement or document having as its purpose or effect the variation, addition to or deletion of any of the terms and conditions printed on the face hereof or overleaf will be binding unless annexed hereto and signed on behalf of [Li & Fung] by an authorised signatory”.

6.  The PMs contained no terms overleaf.  Nor does any document actually signed by Li & Fung or any Li & Fung agent appear to have been annexed to any of the PMs.  On the other hand, the face of the PMs contained no express arbitration agreement. Thus, the PMs do not appear to contain an arbitration agreement.

7.  But Li & Fung say (Grounds of Appeal para.1) that I was wrong in coming to such conclusion. Li & Fung contend that an arbitration agreement was incorporated into the PMs.

8.  In particular, Li & Fung rely on the following words on the last page of each PM involved in this action:-

“A) IF SHIPMENT CANNOT BE EFFECTED PRIOR TO LAST SHIPMENT DATE. CONTACT US FOR DISPOSITION OF THIS ORDER

B) PLEASE REFER TO PURCHASE ORDER TERMS & CONDITIONS AS UPDATED IN VENDOR OPERATIONS MANUAL AVAILABLE AT WEBSITE

https://importdirect.lifung.com/kbvomw/login.asp”

9.  On the basis of these words, Li & Fung say (Grounds of Appeal para. 2(1)) the entirety of the terms and conditions in their Vendor Operations Manual (VOM) (including an arbitration clause) were incorporated into the PMs.

10.  But the reference to the VOM in the PM is unclear on whether the terms and conditions of the VOM were intended to form part of the PM. One is simply advised to “refer” to the terms and conditions without being told for what purpose reference is supposed to be made.  The reference to the VOM leads nowhere.  The function of the reference is ambiguous. The reference may possibly have been made because the terms and conditions of the VOM were intended to supplement those stated in a PM (but (if so) why not say so explicitly?).  Or, one may have been referred to the VOM for information purposes only.  

11.  The printed terms on the face of the PMs are unequivocal in stating that only the terms and conditions on the face and overleaf of a PM are to constitute the contract.  Given that fact, I cannot accept that a “dangling” reference to the VOM, without more, is enough to incorporate the terms of the VOM (including the arbitration agreement) into a PM.

12.  Li & Fung then say (Grounds of Appeal para. 2(2)) that, if there was doubt, the position was made crystal clear by e-mails to which the relevant PMs were attached.  Those e-mails stated:-

“For terms & conditions of Placement Memorandum, please refer to Vendor Operations Manual, Section 3.4, available in our website www.lifung-vom.com/pk/”.

13.  To my mind, the e-mails only make the answer to the question of what was supposed to be incorporated even murkier. 

14.  First, note that the web address referred to by the e-mails is different from the web address stated on the face of a PM.  Let me assume in Li & Fung’s favour that both web addresses refer to the same VOM terms and conditions.  Li & Fung’s evidence, however, does not explain the discrepancy in web addresses.

15.  Second, it is unclear whether these emails can be regarded as documents “annexed” to the PMs (as required by the PMs if something is to be treated as varying or adding to the contract evidenced by a PM).  The PMs are attached to the e-mails, not the other way around.  In any event, it is unclear whether the mere typed name JOANNE CHEUNG at the bottom of an email meets the requirement that an annexed document must be (actually?) “signed ... by an authorised signatory”. 

16.  Third, in contrast to the website reference in the PM, the emails (if they are intended to have contractual effect) only appear to incorporate section 3.4 of the VOM as opposed to all the terms and conditions of the VOM.  Consequently, if one reads the e-mails in conjunction with the cryptic reference in the PMs to the terms and conditions of the VOM, it is far from clear just what is supposed to be incorporated.

17.  Fourth, VOM section 3.4 (apparently comprising consecutive paragraphs consecutively numbered 1 to 15) does not itself contain an arbitration agreement.  On the evidence adduced by Li & Fung, section 3.4 appears to be (immediately?) followed by a part headed “TERMS AND CONDITIONS”.  That latter part runs from clauses 1 to 18.  That part has a clause 3 which comprises clauses 3.1 to 3.3, but has no clause 3.4.  It is only in clause 18.2 of this part that an arbitration agreement is to be found. 

18.  Li & Fung says that section 3.4 includes the part headed “TERMS AND CONDITIONS” which I have just described. That may have been so to Li & Fung’s mind. But why would an ordinary reader have so assumed, given that the “TERMS AND CONDITIONS” part has its own numbering and appears to be a different section altogether?

19.  Assume that the e-mails may be regarded as “annexed” to the PM.  Section 3.4 seems to end where the part headed “TERMS AND CONDITIONS” begins and a new numbering of clauses takes over.  It is possible (as Li & Fung assert) that the part headed “TERMS AND CONDITIONS” is to be regarded in some slack way as a continuation of section 3.4.  But if it is so, it was incumbent on Li & Fung to make that evident from the outset.  It cannot rely on its slackness in numbering to create a trap for the unwary as to whether terms (including an arbitration clause) have or have not been incorporated.

20.  Li & Fung’s Grounds of Appeal para. 3 asserts that, if there is contradiction between the printed terms of a PM and the typed words therein, the latter are to prevail over the former.  But this ground begs the question.  It is inapposite.  The point is that it is far from apparent just what terms and conditions (if any) were incorporated into the PMs.  It is thus impossible to say whether or not there is a contradiction between anything. 

21.  Finally, Li & Fung complain (Grounds of Appeal para. 4) that the Court should not have dealt with their application substantively in a call-over hearing.  I disagree.  There is no substance to this ground.

22.  At a call-over hearing, the Court is entitled to scrutinise an applicant’s supporting affidavit and exhibits to see whether they disclose a viable case.  Where it appears to the Court that no viable case is made out, the Court can dispose of the application even in an initial hearing. Such approach is consistent with the underlying objectives of CJR.  An applicant must get its act together from the outset.  It cannot expect a second bite at the cherry to improve its evidence.  I observe that AT & JM were content for the matter to be dealt with substantively at the call-over hearing without the need for AT & JM to file affidavit evidence in reply.

23.  For the above reasons, I do not think that the VOM’s terms and conditions can reasonably be treated as having been incorporated (in whole or in part) into the PMs.  I therefore doubt that Li & Fung would succeed on appeal.  The grant of leave and a corresponding stay will only delay the speedy resolution of what is otherwise a straightforward action.  This would be contrary to the underlying objectives of CJR.