Trans-medica Pharma-handelsgesellscharft Mbh v. Ananda Pharmaceuticals & Chemicals Ltd

HCCL000138/1989

IN  THE SUPREME COURT OF HONG KONG

HIGH COURT

COMMERCIAL LIST

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BETWEEN

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Coram: Hon. Jones J. in Chambers

Date of hearing: 5 February 1990

Date of handing down judgment: 14 February 1990

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JUDGMENT

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1. This is an application by the defendant for a stay of proceedings under section 6 of the Arbitration Ordinance on the grounds that the parties have agreed to submit any dispute to arbitration in Hong Kong.

2. The plaintiff, by this action, claims damages against the defendant for breach of two contracts dated the 30th May 1989 and the 20th July 1989 whereby the plaintiff agreed to purchase from the defendant two parcels of 1,000 kg cimetidine USP21.  Cimetidine is a pharmaceutical product which. I am told, is used for anti-ulcer medication. The plaintiff alleges that the goods tendered under both contracts were not the goods that had been ordered. Further in respect of the second contract, the plaintiff contends that the parties concluded a settlement of the dispute on the 20th September 1989. By the settlement the defendant agreed to deliver a fresh consignment of the goods and to take back the goods originally tendered. However, the defendant failed to carry out the terms of settlement on the grounds that an analysis obtained from the defendant's supplier in China showed that a sample of the goods originally tendered to the plaintiff complied with the terms of the contract. Subsequently the plaintiff by a letter of the 3rd November 1989 informed the defendant that all proposals for settlement were withdrawn.

3. The stay is sought under clause 11 of the General Terms and Conditions of the defendant's Sales Confirmation which reads as follows :-

4. The plaintiff notified the defendant of its claim outside the 15 day time limit set out in the clause, but on this matter no point is taken.

5. The plaintiff opposes the grant of a stay on the grounds that the first contract was negotiated and concluded orally in the defendant's office in Hong Kong at a meeting on the 30th May 1989 between Mr J. Schacke of the plaintiff and Mr E. Wong of the defendant. The terms of the contract were recorded in writing by Mr Schacke on the same date in a fax addressed to Mr Wong and were later set out in a letter of confirmation from the plaintiff to the defendant dated the 5th June 1989 which the plaintiff contends was posted before the plaintiff received the defendant's sales confirmation. The plaintiff contends that at the meeting on the 30th May 1989, the manner in which disputes might be resolved was not discussed while the defendant did not supply a copy of its standard sales confirmation at the time or mention that its terms were to form part of the contract. In fact the plaintiff has denied that it was aware of the terms set out. The plaintiff also asserts that this was the first contract concluded directly between the parties although there had been previous contracts executed through West German brokers.

6. The plaintiff states that the second contract was concluded by telex on the 19th July 1989 the terms being confirmed in the plaintiff's letter to the defendant dated the 20th July 1989. A sales confirmation dated the 19th July 1989 endorsed with the same terms and conditions in respect of the first contract was sent by the defendant to the plaintiff. Neither of the two sales confirmations has been signed by the parties.

7. In respect of the second contract, the plaintiff asserts that as a compromise had been reached although not implemented by the defendant, there is no dispute to be referred to arbitration. However, under the heading "General Terms and Conditions" of the defendant's sales confirmation the followng words appear :-

"This Contract is made between Buyer and Seller subject to the following terms and conditions unless otherwise stipulated on the face hereof or agreed upon separately in writing."

There is no evidence from either party that any of the terms and conditions do not apply in the event that the sales confirmaton forms part of the contract.

8. Mr Graham, counsel for the plaintiff, submitted that the contracts between the parties had been concluded before the sales confirmation notes were received whilst it has not been established that the terms and conditions had been incorporated by reason of the earlier contracts. Mr Graham referred me to the definition of arbitration set out in Section 2 of the Arbitration Ordinance which reads :

"'Arbitration agreement' means an agreement in writing (including an agreement contained in an exchange of letters or telegrams) to submit to arbitration present or future differences capable of settlement by arbitration whether an arbitrator is named therein or not."

He emphasised that as the sales confirmation notes of the defendant had not been signed, they were in any event not effective.

9. The issue as to whether there was a written agreement to arbitrate was considered in Excomm Ltd. v. Ahmed Abdul-Qawi Bamaodah (The "St. Raphael") [1985] l Ll.L.R. 403 where Lloyd L.J. had this to say at 408 and 409 :-

"        For an agreement to be a written agreement to arbitrate it is unnecessary for the whole of the contract, including the arbitration agreement to be contained in the same document. It is sufficient that the arbitration agreement is itself in writing; indeed it is sufficient if there is a document which recognizes the existence of an arbitration agreement between the parties.

This appears from the decision of the Court of Appeal in Frank Fehr & Co. v. Kassam Jivraj & Co., (1949)82 L1.L.Rep. 673. Theat was a case on the old LCFTA printed form of contract containing an arbitration clause. The printed form had a slip or memorandum at the foot, which should have been torn off and signed. It never was signed. The question was whether there was a written agreemnt to submit within s.27 of the 1889 Act. Lord Greene, giving the leading judgment in the Court of Appeal, said at p.676 :

'On that footting, what we have to look for, therefore, is a signature authenticating, recognizing, or incorporating - whatever word one chooses to use - a written document containing an agreement to submit. Quite clearly if, on receipt of this printed form, the sellers had cabled to London saying: 'We accept the terms set out in your written document', that cable, plus the printed form, would have constituted a written agreement to submit, and that would be so irrespective of the fact, if fact it was, that there was a pre-existing agreement merely by the passing of the earlier cables. In other words, the section, to my mind, is quite clearly satisfied if there is produced a document or documents signed by the parties which records a pre-existing agreement or authenticates or recognizes the existence of an agreement to submit. .......'

I would adopt Lord Greene's definition of what is meant by a written agreemnt to arbitrate, except that I would respectfully question whether it is necessary for the agreement to be signed. ....

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Despite the great weight to be attached to any dictum of Lord Greene the authorities generally are against any necessity for an arbitration agreement to be signed; see Mustill and Boyd on Commercial Arbitration, p.57, footnote 12. There is certainly no express requirement to that effect in the definition of arbitration agreement in the 1950 Act. I would hold that an arbitration agreement need not be signed and that the definition in s.32 of the Act is satisfied provided there is a document or documents in writing which, to use the language of Lord Greene

'... recognize, incorporate or confirm the existence of an agreement to submit.'"

10. It is quite clear from the facts in this case that oral agreements were made during discussions which were subsequently confirmed in writing and that the sales confirmations of the defendant evidenced the final contracts that had been concluded. Those contracts were proved to have been received by the plaintiff and the terms set out had not been varied by any written agreement. Further the earlier agreements although made through brokers had been evidenced by the same sales confirmations which have not been disputed by the plaintiff. The course of dealing between the parties clearly incorporated the terms of the sales confirmations into the contracts although the documents were not signed. Upon the evidence the plaintiff had knowledge and had accepted those terms.

11. The submission in relation to the second contract that the compromise is not amenable to arbitration is untenable for clause 11 expressly provides as follows :-

"The parties shall endeavor to settle amicably any claims or dispute which may arise under this contract; failing which the dispute shall be referred to and finally settled by an Arbitration under the Laws of Hongkong."

As no settlement was achieved following the negotiations a reference to arbitration under clause 11 will necessarily follow.

12. Accordingly, there will be an order for all further proceedings in the action to be stayed, with costs to the defendant.

Representation:

Mr P. Graham (Hampton Winter & Glynn) for the Plaintiff.

Mr N. Sarony (Woo, Kwan, Lee & Lo) for the Defendant.