|
HCA 227/2024
[2026] HKCFI 3603
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 227 OF 2024
_______________________
BETWEEN
| |
F J BENJAMIN (SINGAPORE) PTE LIMITED |
Plaintiff |
| and |
| |
BABYZEN LIMITED |
Defendant |
___________________
| Before: |
Deputy High Court Judge Le Pichon in Chambers |
| Date of Hearing: |
14 May 2026 |
| Date of Decision: |
25 June 2026 |
___________________
DECISION
___________________
1.This is D’s appeal from Master KW Wong’s order dated 27 January 2026 dismissing D’s O.14A summons dated 7 August 2025 (“Summons”) on the ground that the matter of construction under the Summons is not appropriate and suitable under RHC O.14A without knowing the factual matrix.
Relevant factual background
2.The following facts are agreed:
(i) D is a Hong Kong Company and a supplier of strollers from Europe. It was originally controlled by French interests. In December 2021, D was absorbed into the Stokke Group, a Norwegian group and supplier of children’s products worldwide.
(ii) P is a company incorporated in Singapore and its holding company, FJ Benjamin Holdings Limited (“Holdings”) is a company listed on the Singaporean Stock Exchange. The group has been a leading distributor and retailer of fashion and lifestyle brands in Singapore, and through subsidiaries, Malaysia and Indonesia and Brunei (the “Markets”) in the past decades. At all material times Mr Eli Manasseh Benjamin (“Mr Benjamin”), the deponent of the affirmation in opposition dated 4 November 2025 (“Benjamin”) was and is the CEO of Holdings.
(iii) Prior to 2015, D’s product business activities were mainly in Europe.
(iv) On 25 November 2015, the parties entered into their first distribution agreement (the “2015 Agreement”). Under the 2015 Agreement, D appointed P as D's exclusive distributor for D's products under the brand BABYZEN, and granted P a non-transferable right to promote, market, use, display, distribute and sell the said products in the Markets. The term of the 2015 Agreement was from 1 December 2015 until 31 December 2018 (the “Initial Period”), a period of 37 months.
(v) §13.l of the 2015 Agreement provided that
“…this Agreement shall be renewed automatically by tacit agreement for further periods of three (3) years, unless one of the Party serves a written notice of non-renewal at least three (3) months before the end of the initial or renewed contractual period.”
(vi) In June 2019, with retrospective effect to 1 January 2019, the parties signed the second distribution agreement for the term from 1 January 2019 to 31 December 2020 (the “2019 Agreement”). §11.1 of the 2019 Agreement provided that,
"... this Agreement shall be renewed automatically by tacit agreement for further periods of (2) two years, unless one of the Parties serves a written notice of non-renewal at least (3) three months before the end of the initial or renewed contractual period.”
This is identical to the equivalent term in the 2015 Agreement save that the renewal period under the 2019 Agreement was 2 instead of 3 years.
(vii) On 10 May 2021, the parties signed the third distribution agreement for the term from 1 April 2021 to 31 March 2023 (the “2021 Agreement”).
(viii) §11.1 of the 2021 Agreement provided that:
“Distributor shall have a right to renew this Agreement for further periods of three (3) years each. In order to exercise this right, Distributor shall serve a written notice of renewal at least three (3) months prior to the end of the initial or renewed contractual period, subject to Parties agreeing to the commercial terms in respect thereof.”
(ix) On 20 July 2022, D told P that D was now in the Stokke Group and intended the 2021 Agreement to terminate after the 2021 Term.
(x) On 1 November 2022, P issued the Notice of Renewal under §11.1 of the 2021 Agreement for a further 3 years.
Applicable principles under O.14A
3.They are to be found in Rockwin Enterprises Limited v Shui Yee Limited [2003] 3 HKC 174 (at §§18-26):
(A) §18 sets out the three-step approach once the Court is seized of an O.14A application:
(1) Is the relevant question one of law or of the construction of the document?
(2) If so, is that question one that should be determined under the O. 14A procedure?
(3) If the answer to (2) is “yes”, what is the determination of that question and what order should the court make as a consequence of determining the question?
(B) §20: Step 2 requires the Court to be satisfied that
(1) The question of law or construction is one that is suitable for determination without a trial. In other words, the Court has all the necessary facts and matters before it in order to determine the question of law or construction.
(2) That if so suitable and should be determined by the court that it will finally determine (subject to a possible appeal) the entire cause or matter or any issue or claim therein.
(3) Even if the above 2 conditions are fulfilled that the Court in its discretion is satisfied that the question is one that ought to be determined under O.14A.
(C) §27: […] In other words, the court must have all the necessary facts and matters before it to determine the question of law or construction. Where the court is not seized of all relevant facts, it would be an extremely rare case (if ever) in which the procedure under O.14 A would be adopted.
4.As regards step 2 of Rockwin, in Shell Hong Kong Limited v Yeung Wai Man Kiu Yip Company Limited (2003) 6 HKCFAR 222, the CFA made the following observations (at §24):
“It must also be noted that it is inappropriate to use this procedure if the issues of facts are interwoven with the legal issues to be determined. For obvious reasons, the question of law or construction of document cannot be dealt with on assumed or hypothetical facts. And if it is necessary for the court to hear evidence to resolve a factual dispute in order to come to a determination on the question of law or construction of document it would not normally be suitable to invoke O.14A.”
5.That approach was echoed in Netwell Properties Ltd v JCG Finance Co Ltd [2004] 2 HKLRD 138 where the Court of Appeal commented (at §6) as follows:
“… If there is a dispute as to the facts, it is difficult to see how judgment can be entered in favour of a claimant. Where a claimant seeks judgment under O.14A the facts would have to be based on either established facts or agreed facts. As set out in the Hong Kong Civil Procedure 2002, Vol.1 at pp. 178-179 para. 14A/2/4, there should be no hypothetical facts and where the issues of fact are interwoven with the legal issues raised, it will be undesirable for the court to split the legal and factual determination, for to do so would in effect be to give legal rulings in vacuo or on a hypothetical ruling, which the court will not do.”
6.D’s Amended Defence does not state their factual case relevant to construction.
7.The two affidavits, “Flaaen 1st and 2nd” (filed on 22 August 2025 and 20 November 2025 respectively in support of its O.14A Summons) were affirmed by the Legal Counsel employed by Stokke AS subsequent to the signing of the 2021 Agreement on 10 May 2021. Hence the deponent had no personal knowledge of the relevant facts and circumstances at the time of the signing of the 2021 Agreement.
8.Flaaen 1st and 2nd [1] made legal submissions on construction. D made an express and unequivocal reservation that the truthfulness of the facts stated in Benjamin are not admitted.
9.P’s factual case set out in P’s skeleton at §§6-11 is as follows:
(i) P first became aware of D’s products through knowing D’s distributor in the UK at the time. It was interested in expanding its business in the Asian Markets: Benjamin §9. In or around 2015, P was introduced to D’s management: Benjamin §10.
(ii) At that time, D’s products faced fierce potential competitions from local competitors in the Markets: Benjamin §11.
(iii) Given D’s unfamiliarity with the local Markets, there was a need for D to rely on P as its exclusive distributor: Benjamin §11.
(iv) D collaborated with P given that: -
(a) P would guarantee a minimum number of purchases, therefore the risks associated with sales and profitability were transferred to P, the distributor: Benjamin §12.
(b) P has well established networks and long-standing relationships with retailers, and selling through P would allow instant penetration into the Markets and access to P’s vast distribution network: Benjamin §13.
(c) Operating under this model would help D reduce its marketing costs and allow D to leverage P's knowledge of the Markets: Benjamin §14.
(d) Financially, since D had no logistical operations in the Markets, D could not carry out the business at lower costs than through P’s distribution. Benjamin §15.
(v) At the time of entering the 2015 Agreement, P and D intended to have a long-term collaboration and business relation. The aggressive sales target set out in the 2015 Agreement reflected the parties’ optimistic prediction that D’s product would be popular in the Markets: Benjamin §20. However, as this was only the parties’ first collaboration, the parties still reserved their rights to review and decide whether to continue the collaboration at the end of the 2015 Agreement after review of business performance (which is reflected by Clause 13.1 of the 2015 Agreement, allowing determination of the collaboration by written notice): Benjamin §21.
(vi) During the term of the 2015 Agreement, P and D developed a highly effective and excellent working relationship. The parties also intended to place D’s product as leaders in the stroller segment of the Markets as their common long-term business objective: Benjamin §22.
(vii) At that time, the parties had developed an excellent relationship. Whenever D received any offers for deals from P’s competitors, D would at least notify P of the same and allow P to make an offer to continue the business relationship: Benjamin §27.
(viii) It was against that background that the 2019 Agreement was signed.
(ix) The parties’ collaboration during the 2019 Agreement was a success and the overall sales targets set by the parties were achieved despite the Covid-19 pandemic. The parties developed an excellent relation of mutual trust and confidence, fully and exclusively committed to each other in the long term: Benjamin §§30-32.
(x) During the term of the 2015 and 2019 Agreements, P made substantial financial resources into promoting and distributing D’s products, such as (1) hiring managers, (2) setting up special sales team in the Markets solely for promoting D's products, (3) in holding inventories, (4) in social media and (5) in-store marketing efforts etc.: Benjamin §32(2).
(xi) During the term of the 2019 Agreement, D gained certain knowledge and connections in the Markets. There was a commercial need for P for reassurance from D that P would not be excluded from the long-term collaboration: Benjamin §§34-35.
(xii) Against that background the parties entered into the 2021 Agreement.
10.P’s factual case is challenged on admissibility grounds. D’s skeleton for the hearing below had an annex that listed the paragraphs in Benjamin[2] to the truthfulness of which D objected.
11.That annex is not in D’s skeleton for this hearing. D’s stance is that there is no dispute between the parties of the relevant facts. The Court may take as true all P’s factual allegations in ASOC §§1-10[3]. However, that admission was immediately qualified by §4 of D’s skeleton, rendering it difficult to navigate which parts are actually admitted.
The assertions set out in P’s factual case
12.D considered the assertions in Benjamin set out in §9 above “inadmissible” on the grounds that (i) declaration of subjective intent of the contracting parties is irrelevant; and (ii) they are excluded by the entire agreement clause (“EAC”) under the 2021 Agreement.
13.The principles of construction are well-settled. The parties cite common cases. It suffices to mention the following:
(i) The CFA held in Eminent Investments (Asia Pacific) Limited v DIO Corporation (2020) 23 HKCFAR 487 at §§ 40-44 that the Court adopts both a textual and contextual approach. Context plays a large role. The Court takes primary account of the natural and ordinary meaning of the parties’ chosen words in question as well as the facts and circumstances known or assumed by the parties at the time that the contract was executed, the purpose of the contract, the purpose (mischief) of the provision, other relevant provisions, the quality and formality of the drafting of the document and commercial common sense.
(ii) The background knowledge which would reasonably have been available to both parties in the situation in which they were at the time of the contract includes anything which would have affected the way in which the language of the document would have been understood by a reasonable man: Maeda KKKK v Bauer Hong Kong Limited [2020] HKCA 158, at §§29(1)-(2).
(iii) In Marble Holdings Limited v Yatin Development Limited (2008) 11 HKCFAR 222, Mortimer NPJ (at §19), citing Lord Bingham’s summary in Bank of Credit and Commerce International SA v Ali & Others [2002] 1 AC 251 at §8[4], distinguished an objective determination of the parties’ intention from an inquiry into the parties’ subjective states of mind.
14.P submitted that it is not asking the Court to ascertain the subjective state of mind of the parties but to make an objective assessment of their intention.
15.The key matters raised in Benjamin that require the objective assessment of the parties’ intention are the following:
(i) whether the parties intended to have a long-term collaboration and business relation when entering the 2015 Agreement;
(ii) whether during the term of the 2015 Agreement, the parties shared a long-term business objective: to place D’s products as leaders in the stroller market;
(iii) whether during the term of the 2019 Agreement, reasonable men in the shoes of the parties would have made an exclusive commitment in the long-term having regard to the sales target under the 2019 Agreement having been met and the increasing trust and confidence between the parties;
(iv) whether, considering all the factual circumstances under the 2015 and 2019 Agreements, including the commercial rationale of collaboration, the parties reached a common consensus that P would not be excluded from long-term collaboration with D;
(v) during the course of the 2019 Agreement, having regard to P’s substantial investment in promoting D’s products and D’s increasing knowledge and improved connections in the local Markets, P had a commercial need for D’s assurance of a long-term partnership before entering a new agreement and making new investments.
16.P submitted that the Court has to undertake an objective assessment of the parties’ intention when construing the purpose of the contract, the mischief (purpose) of a particular provision and the commercial rationale of the contract, citing Marble Holdings.
17.As regards the EAC objection, an EAC is concerned with identifying contract terms. It is common ground that EAC does not exclude evidence of factual matrix[5]. P submitted that D’s reliance on EAC does not take matters further.
Suitability for O. 14A determination?
18.The issue for determination is the proper construction of §11.1 of the 2021 Agreement. As an O.14A application is for determination without a trial, it can only be determined if the Court has all the necessary facts and matters before it.
19.As earlier noted, nothing is known of D’s factual case relevant to construction. D adopted a non-admission approach and in its supporting affidavits and reply, D expressly does not admit to the truthfulness of the factual assertions in Benjamin.
20.The question comes to this: for the Court to arrive at the proper construction of §11.1, are the matters set out in §§9 and 15 above relevant?
21.In my view, the genesis of the parties’ collaboration, their business performance and relationship during the 5-year collaboration leading up to the 2021 Agreement and the commercial rationale of the 2021 Agreement constitute the context that could inform and shed light on the proper construction of §11.1. That would require all disputed facts to be established at trial, rendering O.14A unsuitable at this stage: see the authorities referred to in §13 above.
22.In the course of Mr Lam’s submissions, Mr Alder, counsel for D, intervened, stating that in order to save time D can accept §§ 1-19[6] of Benjamin except “the common consensus” that P asks the Court to take into account.
23.Mr Lam made the point that in an O.14A application, whether there are disputes of facts should be gleaned from the affidavits which contain the evidential basis. It is not appropriate for D to change its stance by way of submission[7] to suggest that those facts are agreed because D’s affidavits suggest otherwise.
24.Equally, P submitted that, absent affidavit evidence, it is not appropriate for D to submit that the reduction of renewal term from 3 years in the 2015 Agreement to 2 years in the 2019 Agreement shows that at the time the parties did not want to commit to a long-term future and instead insisted on short contracts. There is no such evidence from D in the present case.
25.I agree that the court can only proceed on affidavit evidence in deciding the Summons. For the reasons stated above, I do not consider the Summons suitable for summary determination.
26.For completeness, I now turn to consider the parties’ respective positions on the proper construction of §11.1.
The construction issue
27.P’s position[8] is as follows:
(1) Upon the proper construction of Section 11.1 of the Agreement, the Defendant grants and is obliged to provide the Plaintiff with a pre-emptive right to renew the Agreement which is triggered by the Plaintiffs service of a Witten (sic) notice of renewal at least 3 months prior to the end of the term of the Agreement, and lasts until the end of the term of the Agreement, during which the parties are to agree on the precise commercial terms of the renewed agreement, by the Defendant making an offer to the Plaintiff and/or allowing the Plaintiff to make offer to the Defendant: ASoC §4A– The Issue of Construction.
(2) Implied Term #1: the content of the proposed Implied Term #1 is identical to that stated in sub-para. (1) above, save that the legal basis is for the term to be implied. ASoC §5(1).
(3) If the Courts rule in favour of either P’s construction or Implied Term #1, Implied Term #2 is triggered, i.e. the duty to use reasonable endeavours and act in good faith.
“After the service of the written notice of renewal by [p] as set out in Section 11.1, [P] shall use reasonable endeavours and act in good faith to negotiate with [D] on the precise commercial terms of the renewed agreement and in making an offer to the Distributor and/or allowing the Distributor to make an offer before the end of the Term.”
ASoC §5(2).
28.Mr Lam clarified that P’s right is not an absolute right but a pre-emptive right. It does not mean that D must agree to renew but if it is minded to accept offers outside, it should give P a chance to match that offer: see AstraZeneca UK Ltd v Albemarle International Corp & Anor [2011] EWHC 1574 (Comm) at §§24 and 35.
29.P relies heavily on context and the commercial rationale to explain why P needed assurance for its substantial investment and to interpret §11.1. But the context is not agreed, hence the determination ought not to be made.
30.P submitted that if the Court at the trial determines or construes §11.1 as creating a pre-emptive right, then the duty to negotiate in good faith is readily implied, citing Goldbay Fortis Limited v Rich Resource Development Limited [2021] HKCFI 1684 at §§162-165 and 169-170, and AstraZeneca at §§54-56 which show that good faith is an inherent incidence of pre-emption.
31.A major criticism of P’s position on the construction issue is that the right of renewal is of uncertain duration in that it is entirely open-ended and could carry on in perpetuity. D’s response is that such a right only “lasts for the duration of the agreement in which the right was contained”: AstraZeneca at §29.
32.D’s position as to the proper construction of §11.1 is as follows:
(i) §11.1 should be strictly and literally construed as granting P an absolute right to renew the contract. However, such right is qualified by the phrase “subject to Parties agreeing to the commercial terms in respect thereof”. Such a clause would constitute an “agreement to agree” which is unenforceable.
(ii) On D’s construction, §11.1 constitutes an agreement to negotiate and/or an agreement to agree and therefore unenforceable as a matter of law.
(iii) § 11.1 is unenforceable for uncertainty of duration/perpetuity.
33.Mr Alder placed considerable reliance on BJ Aviation Ltd v Pool Aviation Ltd [2002] EWCA Civ 163 which raised a question of construction as to the effect in a clause (clause 4) (giving an option to renew for a further term the agreement under which the respondent was appointed to operate the airport) of the words “subject to the re-negotiation of the rent payable”.
34.In that case, the Court found that the four-part structure of clause 4 treats re-negotiation of the rent as a condition precedent to the obligation to grant a fresh agreement[9]. On that basis, clause 4 was “an agreement to agree” and was unenforceable for that reason. Mr Alder submitted that the present case has a condition precedent of subsequent agreement and is much weaker than that in BJ Aviation which only left rent to be determined.
35.In BJ Aviation, in reaching the conclusion that negotiation of the rent was a condition precedent, the Court considered that an important factor was the fact that there was no minimum period for which the operator was required to give a notice requesting renewal. The operator could have chosen to serve this on the last day of the 6 months which would mean that there would be no opportunity to satisfy the condition precedent by reference to objective criteria if the parties had not been able to agree the new rent[10].
36.Factually, the present case is clearly not on all fours with BJ Aviation. In the present case, notice has to be given at least 3 months before the end of the term. That difference somewhat undercuts the relevance of BJ Aviation in the construction of §11.1.
37.It is salutary to bear in mind the following proposition that Chadwick LJ identified in BJ Aviation (at §20) from the principles[11] set out by Rix LJ in Mamidoll-Jetoil Greek Petroleum Co SA v Okta Crude Oil Refinery AD [2001] EWCA Civ 406 at §69:
“First, each case must be decided on its own facts and on the construction of the words used in the particular agreement. Decisions on other words, in other agreements, construed against the background of other facts, are not determinative and may not be of any real assistance.”
38.Apart from placing reliance on BJ Aviation, D’s stance on construction is that §11.1 should be strictly and literally construed as granting P an absolute right to renew the contract which is qualified by the phrase “subject to Parties agreeing to the commercial terms in respect thereof”. In other words, the clause is an agreement to agree which is legally unenforceable.
39.P submitted that such a literal reading is patently absurd. To construe the “right to renew” as an absolute right ignores the fact that it was immediately qualified by the proviso “subject to Parties agreeing …” in the same clause. On that construction, the proviso would render §11.1 completely meaningless which could not have been the parties’ common intention.
40.The principle that words should be construed in their natural and ordinary meaning is liable to be departed from where that meaning would involve an absurdity or would create some inconsistency with the rest of the instrument: Chitty on Contracts, 35th Edn at §16-096; Marble Holding at §20[12]. It is highly unlikely that experienced commercial parties who have had a 7-year business relationship would agree to a renewal clause that is entirely devoid of meaning.
41.In his reply submissions, Mr Alder sought clarification from Mr Lam on the right of pre-emption the renewal clause is said to confer on P as to whether or not it necessarily involves a third party. Upon hearing Mr Lam’s clarification, apart from making criticisms of P’s pleading, Mr Alder invited the Court to proceed and take the matters set out in §§6-13[13] of P’s skeleton “as read”.
42.D submitted that what P complains about has nothing to do with third parties and that BJ Aviation provides the answer to the present case. I confess to having some difficulty with D’s submissions, not least because the Court has to proceed on the basis of the parties’ evidence and cannot take matters “as read” when that D’s evidence is otherwise.
43.The upshot is that I am far from convinced that D’s approach to construction that §11.1 should be read and construed literally is unassailable to warrant an adjudication under O.14A.
Disposition
44.For the reasons set out above, this appeal falls to be dismissed.
45.I make an order nisi of costs of this appeal in favour of P, with certificate for counsel, such costs to be summarily assessed and payable forthwith.
46.I further direct that (i) P do lodge its statement of costs within 7 days of this Decision; (ii) D do lodge its lists of objections (if any, limited to two pages) within 14 days thereafter; and (iii) P do lodge its reply (if any, limited to one page) within 7 days thereafter for assessment in Chambers.
| |
(Doreen Le Pichon) |
| |
Deputy High Court Judge |
Mr Bernard Lam, instructed by Messrs. Howse Williams, for the Plaintiff
Mr Edward Alder, instructed by Messrs. King & Wood, for the Defendant
[1] Respectively dated 18 August 2025 and 14 November 2025.
[2] §§ 11, 12, 20, 22, 23, 25, 27, 30, 32 (2), 32 (3), 35- 37 and 43-45.
[3] D’s skeleton at §3.
[4] “To ascertain the intention of the parties the court reads the terms of the contract as a whole, giving the words used their natural and ordinary meaning in the context of the agreement, the parties’ relationship and all the relevant facts surrounding the transaction so far as known to the parties. To ascertain the parties’ intentions the court does not of course inquire into the parties’ subjective states of mind but makes an objective judgment based on the materials already identified.”
[5] D’s skeleton at §48.
[6] These paragraphs leave the matters set out in §9 (v)-(xii) above remaining subject to D's express reservation that the truthfulness of the facts stated therein are not admitted.
[7] D also sought to shift its stance at the hearing before the Master who warned D from shifting its stance on whether or not there are disputes of facts: see transcript at 41C-D.
[8] P's skeleton at §32.
[9] BJ Aviation at §26.
[10] BJ Aviation at §29.
[11] They are derived from authoritative decisions (concerning the problems which arise in law in a case where parties have entered into an arrangement which, although it has the appearance of a bargain, leave something to be agreed) comprehensively reviewed by Rix LJ and "are not capable of dispute" per Chadwick LJ in BJ Aviation at §18.
[12] Where the CFA cited the following passage from its earlier judgment in Jumbo King Ltd v Faithful Properties Limited & Others (1999) 2 HKCFAR 279 at 296:
"The construction of a document is not a game with words. It is an attempt to discover what a reasonable person would have understood the parties to mean. And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve. Quite often this exercise will lead to the conclusion that although there is no reasonable doubt about what the parties meant, they have not expressed themselves very well. Their language may sometimes be careless and they may have said things which, if taken literally, mean something different from what they obviously intended."
[13] §§6-11 are set out in §9 above.
|