Winnitex Investment Co Ltd v. Oxford Products (International) Ltd
Read the full judgment text of DCCJ 3690/2004 on BabelCite. This District Court judgment.
1. The Plaintiff (“ P ”), a Hong Kong company engaged in trading and manufacturing fabrics, claimed that by a contract contained in and/or evidenced by e-mails between the Defendant (“ D ”) and P (in particular D’s e-mail to P on/about 6 th June 2003 (“ 6/6/03 E-mail ”)), D agreed to purchase and P agreed to supply certain fabrics . P further claimed that D repudiated the contract on 5 th August 2003 and P accepted such repudiation by e-mail on the same day . D refused to pay P’s debit note for
Cited by 1 case · Cites 4 cases
|
DCCJ3690/2004 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 3690 OF 2004 ____________ BETWEEN
____________ Before: Her Honour District Judge Marlene Ng in Chambers Date of Hearing: 24th November, 2004 Plaintiff’s Further Written Submissions: 1st and 7th December, 2004 Defendant’s Further Written Submissions: 2nd December, 2004 Date of Handing Down Decision: 20th December, 2004 _______________ D E C I S I O N _______________ Introduction 1. The Plaintiff (“P”), a Hong Kong company engaged in trading and manufacturing fabrics, claimed that by a contract contained in and/or evidenced by e-mails between the Defendant (“D”) and P (in particular D’s e-mail to P on/about 6th June 2003 (“6/6/03 E-mail”)), D agreed to purchase and P agreed to supply certain fabrics. Pfurther claimed that D repudiated the contract on 5th August 2003 and P accepted such repudiation by e-mail on the same day. D refused to pay P’s debit note for its loss and damages dated 19th September 2003 (“Debit Note”), so P commenced the present action for loss of profits and damages. 2. After acknowledging service of the writ, D applied by summons for the following orders :
3. At the hearing, D abandoned reliance on Order 18 rule 19(1)(a) of the Rules of the District Court for Striking Out Application. D’s evidence 4. D filed two affirmations of Michael Cheng (“Cheng”), D’s finance and administration director, and an affirmation of Chan Pui Ling Ellen (“E Chan”), D’s fabric merchandiser, in support of its application. 5. D was the subsidiary and buying agent of Oxford Industries Inc (“OII”), a US company engaged in manufacturing, importing and wholesaling textiles and garments. D as OII’s buying agent had business dealings with P for 5 years. D disclosedOII’s sourcing policy dated 29th January 2003 and signed by P (“Sourcing Policy”) to show P’s awareness of the relationship between D and OII. 6. On/about 18th November 2002, D sent a letter to all its suppliers including P (“Letter”) explaining that as a result of a laser printed purchase order D was providing them with an attached copy of the “Oxford Master Purchase Order Terms and Conditions” (“Oxford Terms”). Letter stated as follows :
7. On/about 21st May 2003, P’s authorised signatory signed the acknowledgment set out in Letter as follows : “we agree that [Oxford Terms] will govern all purchase orders accepted by us from [D], [OII] or any of their subsidiaries or affiliates” (“Acknowledgment”). The words “valid for Jan 1 ~ Dec 31, 03” werewritten in manuscript at the bottom. 8. D denied the claim by Choy Yuen Pik (“Choy”), D’s then manager, that she did not receive a copy of Oxford Terms. D’s E Chan,who only dealt with P’s Chan Yu Shing Nixon (“Chan”) and Lilian Ching (“Ching”) in relation to the contract, did not recall dealing with Choy or P’s other staff in respect of Oxford Terms. Even if Choy were involved as claimed, given the binding effect of Acknowledgment, she should/ could have asked E Chan for a copy of Oxford Terms and not sign Acknowledgment unless and until she received it. 9. D disclosed 8 purchase orders between P and OII from 23rd January 2003 to 13th May 2004 (“Sample PO”)signed by P’s Chan/others and/or affixed with P’s company chop to illustrate that Oxford Terms were binding on P. 10. On/about 18th June 2003, OII sent purchase order no.F000103025 to P (“PO”) but P did not sign or affix its company chop thereon. PO provided as follows :
11. Oxford Terms provided inter alia as follows :
12. Pursuant to clause 1(b) of Oxford Terms, PO (ie the subject contract) became legally binding between P and OII when PO was sent to P on/about 18th June 2003 and P retained it without any written objection. D discloseda letter of credit dated 23rd June 2003 (“LC”) issued on OII’s application in P’s favour for the contract together with its amendment dated 3rd July 2003. 13. Cheng claimed that as the contract was entered into between P and OII, E Chan’s liaison with P by e-mail was made on OII’s behalf. Such e-mail correspondence was only used to initiate the intended purchase and to negotiate the terms/conditions and was not legally binding until PO was issued. Although 6/6/03 E-mail was headed “ORDER CONFIRMATION”, P disingenuously failed to refer to PO which such e-mail confirmed. Further, by reason of clause 17 of Oxford Terms, there was no scope to argue the e-mails constituted or evidenced any agreement or variation thereof. 14. D alternatively contended that the proceedings were frivolous, vexatious and/or an abuse of process in that P (a) failed to plead all material facts and/or (b) issued the present proceedings for convenience by litigating in Hong Kong rather than pursuing OII in the United States.Oxford Terms also provided inter alia that :
SinceOxford Terms had an entire contract clause and there was no agreement to vary Oxford Terms, P could not depart from the provisions or fail to comply with what was commercially agreed between the parties for its own convenience. P’s evidence 15. P filed the affirmations of Choy (D’s former manager) and Chan (D’s manager) in opposition. P had business dealings with D since 1998 and employed Choy from around 1998 to 2004. 16. Choy received Letter (without Oxford Terms attached) from D on/about 21st May 2003 although it was dated 18th November 2002 and required P to sign/return not later than 31st December 2002. Choy sought clarification from E Chan who told her it was only a matter of formality for D to sign Letter, which was just to assist E Chanto report to her boss. When Choy signed Letter and wrote the date of 21st May 2003, she did not intend Oxford Terms to have any effect on contracts between P and D. Choy denied writingthe manuscript words “valid for Jan 1 ~ Dec 31, 03”. Chan confirmed that none of P’s other staff received Letter or wrote such manuscript words. 17. Throughout the negotiation and contract process, D never mentioned Oxford Terms or reminded P of their alleged binding effect on the subject contract. P never intended the alleged Oxford Terms to have an effect on the subject contract. 18. P intended to and did enter into the subject contract with D as evidenced by and/or contained in e-mails exchanged between P and D. D confirmed its order for the purchase of fabrics from P in 6/6/03 E-mail and never referred to PO in any of its e-mails exchanged with P in respect of the contract. The caption for D’s e-mails prior to 6th June 2003 was “…… F35PR720 – Winnitex fabric Do2557-AC” which was changed to “Dillards QEP730 ORDER CONFIRMATION” when D confirmed P’s order by 6/6/03 E-mail. All e-mails thereafter were under the latter caption. To all intents and purposes, the terms in 6/6/03 E-mail were binding on P and D. 19. D never told Chan or disclosed in writing during the negotiation process and/or in any of the e-mails exchanged between P and D that it was acting for OII. Although P sent numerous e-mails to D chasing for settlement of Debit Note, D never replied that it only acted as OII’s agent. In response to the demand letter from P’s solicitors of 17th May 2004, D’s solicitors in their reply letter dated 27th May 2004 only queried how D became legally or contractually liable to P. After P’s solicitors gave details of P’s claims in their lettersof 5th and16th June 2004, neither D nor its solicitors gave any further response. The present proceedings were commenced on 17th July 2004. 20. All negotiations for the subject contract took place in Hong Kong. Both P and D were Hong Kong companies having their respective place of business in Hong Kong. P considered that the Hong Kong court was a suitable and convenient forum for this action to be heard and tried. Issues 21. The following are the issues in respect of Striking Out Application :
22. D’s alternative Stay Application, which is based on Clause 12 as an exclusive jurisdiction clause and failing which on the ground of forum non-conveniens, is premised on D being a proper party and Oxford Terms being applicable to the contract. The issues arising under Stay Application are as follows :
Striking Out Application 23. Although Mr Shum, counsel for P, urged me to first consider the dispute on jurisdiction, I find that it more convenient if I start with Striking Out Application. After all, both parties contend that this court has jurisdiction to deal with such application. 24. The law Although both parties accept that affidavit evidence is admissible, they are unable to agree on how the court should deal with factual disputes arising from the evidence adduced. Ms Newall, counsel for D, submitted that the court must resolve factual differences arising from the affidavits and make factual findings. No authority was cited for this proposition. 25. I agree with Mr Shum that it is only in plain and obvious cases that the court should exercise its summary powers to strike out any pleading. Mr Shum fairly accepted that if the evidence adduced in opposition to a striking out application was “practically moonshine” so that the case for striking out remained plain and obvious, the court should not decline to do so. But “there should be no trial on affidavit. Disputed facts were to be taken in favour of the party sought to be struck out …… The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out …… Where the legal viability of a cause of action is sensitive to the facts, an order to strike out should not be made ……The mere fact that a case is weak and not likely to succeed is no ground for striking it out …… It is for the party seeking to strike out an indorsement on a writ or pleading to demonstrate that the case is a plain and obvious one in which the other party’s claim is bound to fail” (Hong Kong Civil Procedure 2004 Vol.1, para.18/19/4 at p.316). 26. Proper party to and constitution of the contract Ms Newall referred to Sample PO, LC and Sourcing Policy to submit that vis-à-vis D, P all along acted as OII’s buying agent and never as own principal. 27. However, Acknowledgment on its face refers to purchase orders by D, OII and their subsidiaries/affiliaties, suggesting that P and D recognised the possibility of purchase orders accepted by P from D as well as from OII. Ms Newall submitted that one should not read too much into a boilerplate acknowledgment applicable to all suppliers. But I note that D prepared this Acknowledgment which it relied to say Oxford Terms were binding on P. In the end, Ms Newall accepted Acknowledgment was inclusive of the possibility of purchase orders from OII and from other members of the Oxford group of companies (including D). 28. In fact P does not seek to deny it has entered into some contracts with OII. The issue is whether it did so to the exclusion of D. It has not been said that Sample PO are the only contracts P made with OII during the relevant period, let alone with other Oxford group companies. Further, in light of Acknowledgment’s inclusive nature, it is not plain and obvious that Sample PO demonstrated that P all along did not enter into any contract with D as own principal. 29. I do not see OII being LC’s applicant necessarily demonstrates its identity as the contracting party. LC was issued on 23rd June 1998, by which time on either party’s case the identity of the contracting party has already been crystallised. D claims that OII’s capacity as contracting party was crystallised by the issuance of PO dated 18th June 2003. P contends that D’s identity as contracting party was concluded by 6/6/03 E-mail on 6th June 2003. LC is merely a subsequent arrangement to effect payment under the contract. 30. Further, as stated above, P does not dispute that it did enter into some contracts with OII, so it is not surprising it signed Sourcing Policy. But it will take an ambitious leap to infer from Sourcing Policy that P never contracted with D as own principal. 31. Thus, on the evidence before me, I cannot say that it is plain and obvious that throughout P’sdealings with D, D acted exclusively as OII’s buying agent. More importantly, there is factual dispute in respect of the subject contractas to who is the proper party. Chan asserts P entered into the contract with D as own principal and Cheng claims P did so with D as OII’s buying agent. 32. Ms Newall tried to argue that P’s contention was unbelievable because by 18th June 2003 P knew E Chan had prepared PO on OII’s behalf and raised no query or dispute. However, such submission ignores Choy’s and Chan’s evidence that P never received or agreed to PO. PO was not signed or affixed with P’s company chop, and D did not adduce evidence to demonstrate P’s receipt of PO (eg subsequent correspondence referring to PO). 33. Ms Newall argued that P’s denial was not credible because the e-mails (which P claimed constituted the contract between P and D) were, as a matter of “commercial practice” and “common sense”, merely a prelude to the formal contract (ie PO). Post-PO e-mails between P and D (as OII’s buying agent) were only communications for the purpose of giving effect to the contract (ie PO). 34. However, in my view, it is not objectionable in principle for contracts to be concluded by exchange of e-mails (Chitty on Contracts 29th ed. Vol.1 paras.2-048 – 2-049). It also does not offend commercial practice or common sense for P to enter into a contract with D (whether by e-mail or other form). After all, Acknowledgment’s inclusive nature suggests the possibility of P accepting purchase orders from different members of the Oxford group. More importantly, there are a number of factual issues arising from the affidavits (as canvassed by Mr Shum in his submissions) which illustrate that the questions of whether PO or e-mails constitute the contract and whether D or OII is the contracting party are not crisp and clear :
35. I also note that a substantial part of the e-mail correspondence between the parties after 6th June 2003 dealt with lab-dips. PO made no reference to lab-dips or the need for D to approve them. On the other hand, 6/6/03 E-mail particularly remarked on the need for “5 yds/colour and dye lot to [D] for approval and testing”. 36. Quite clearly, the aforesaid matters raise factual issues that cannot be resolved on affidavit. In light of the factual issues, I cannot say P’s contentions under this head are plainly and obviously bad. In such circumstances, Striking Out Application fails. 37. Applicability of Oxford Terms Given my conclusion that it is not possible to finally determine at this stage whether OII or D is the proper party to the contract or whether PO or the e-mails exchanged between P and D constituted the contract, there is no need to consider the applicability of Oxford Terms. However, I will deal with it for completeness. 38. On the premise that the contract was between P and OII, D argued that Oxford Terms were binding on the parties because P’s Choy signed Acknowledgment evidencing the parties’ clear common intention that Oxford Terms would govern all purchase orders between P and OII. 39. Choy claimed she did not (and Chan also said P did not) receive a copy of Oxford Terms and she was misled by D’s E Chan who told her that signing Acknowledgment was a mere formality to assist E Chan in reporting to her boss. Therefore Choy never intended Oxford Terms to apply to contracts between P and D. E Chan denied any dealings with Choy on Oxford Terms and further denied making such misleading statement to Choy. These are again disputes of fact between the parties. 40. Ms Newall argued that Choy’s contentions defied belief and should be rejected. She submitted that it was implausible for Choyto sign as P’s authorised signatory without having sight of Oxford Terms and without making any attempt to ask for a copy. Choy’s assertion was particularly unlikely as she was a manager in a senior position. Ms Newall submitted that once such argument was rejected, it did not matter that Choy had not seen Oxford Terms because by signing Acknowledgment as D’s authorised signatory, she bound D to Oxford Terms. The dispute between the parties as to who wrote the manuscript words “valid for Jan 1 ~ Dec 31, 03” in Letter would not invalidate Choy’s signature or its effect. 41. I am not satisfied that the misrepresentation defence as raised on the affidavit evidence before me is plainly and obviously bad. It requires an assessment of the evidence and of the credibility of witnesses, which cannot be done on affidavit. I note that although Cheng in his 1st affirmation said Letter was sent to all suppliers including P on/about 18th November 2002, Choy said she received and signed Letter on/about 21st May 2003. Yet Letter on its face calls for signature and return on/before end of 2002. If Cheng were right in that D sent Letter to P in November 2002, there is no explanation as to (a) why D did not sign/return Acknowledgment on/before 31st December 2002 but only did so almost 5 months later, (b) what action was taken prior to 21st May 2003 to follow up with D (if at all) and (c) why the purchase orders between P and OII prior to 21st May 2003 (eg purchase orders nos. F000103006, F96S503007, F96S50344, F96S503072) all provide D accepted Oxford Terms when in fact P has not yet done so. 42. Ms Newall argued that the deadline of 31st December 2002 was a mere request to focus the parties’ attention and not legally binding. Even if the deadline is not binding, it nevertheless raises a question on the credibility of P’s and D’s versions of events under this head which can only be resolved by trial. On a striking out application a court should not consider whether a party’s case is weak but whether it is plain and obviously bad. 43. Summary I have no hesitation in concluding that this is not a plain and obvious case for striking out the Statement of Claim. The application is sensitive to facts which should be resolved by way of trial. Striking Out Application is dismissed. 44. At the hearing I queried whether I shouldconsider directions for dealing with the aforesaid issues as preliminary issues under Order 33 rule 3 of the Rules of the District Court. Mr Shum opposed the suggestion. Ms Newall also did not ask for any alternative prayer of relief for disposal of the aforesaid issues under Order 33 rule 3. 45. Given that neither party wishes to adopt such course, I decline to do so. In this I draw support from the judgment of Godfrey J in Lam Kee On v Lam Hing [1992] 2 HKC 317 where the learned judge expressed doubt about the court’s power in the absence of agreement between the parties to go on and decide the point as if it had come before the court as a preliminary issue set down for hearing under Order 33 rule 3 after dismissing a striking out application. Stay Application 46. Waiver of right to contest jurisdiction Mr Shum submitted that by taking out Striking Out Application, D had waived its right to contest jurisdiction. Lord Frazer in Williams & Glynn’s Bank plc v Astro Dinamico Compania Naviera SA [1984] 1 WLR 438, 444quoted with approval the test by Cave J in Rein v Stein (1892) 66 LT 469 : “It seems to me that, in order to establish a waiver, you must show that the party alleged to have waived his objection has taken some step which is only necessary or only useful if the objection has been actually waived, or if the objection has never been entertained at all.” 47. At the hearing, Ms Newall submitted that Williams & Glynn’s Bank plc’s case (supra) was only persuasive authority distinguishable on its facts. But Cheung J (as he then was) in para.27 of the judgment in Lee Fai trading as Lee Fai Timber v Chan KuiCACV84/1997 (unreported, 7th October 1997)approved Cave J’s test in Rein’s case (supra). I am persuaded that Cave J’s test is relevant to the present consideration. 48. Mr Shum argued that by Striking Out Application, D in fact asked the court to decide the action on the merits by determining certain facts (namely, whether OII was a party to the contract and whether PO/Oxford Terms were binding on the parties)in its favour. In the circumstances, Striking Out Application was only necessary or only useful if the objection on jurisdiction has been actually waived or has never been entertained at all. 49. Mr Shum went on to say that what D should have done was to take out Stay Application without prejudice to any argument it might have that it was not a proper party to the contract. If the court stayed the present proceedings, it would have been the end of the matter. If the court were against D on Stay Application, it would not have precluded D from subsequently contesting that it was not a proper party to the contract and issuing Striking Out Application on that basis. What D could not do was to take both inconsistent steps together, which it did as evident from Cheng’s1st affirmation where he said it was only if the court did not accept D was not a party to the contract that he would invite the court to consider whether the action should be stayed. 50. Ms Newall submitted that the present application was unusual as D had to first establish the proper party to the contract and the applicability of Oxford Terms. It was only if the court found that OII was not theproper party to the contract that Stay Application became relevant. So D had no choice but to put Striking Out Application as its primary application and Stay Application as an alternative. Striking Out Application was therefore “necessary” for Stay Application. Ms Newall also argued that had D proceeded to contest against jurisdiction only, P would have challenged D’s capacity to invoke Clause 12 when its capacity vis-à-vis the contract was questionable. However, Mr Shum submitted and I agree that it is P’s case all along that D is the proper party to the contract. That being the case, D can hardly take the objection envisaged. 51.In this respect, it is useful to refer to the case of 廣東里水鮮果批發市場有限公司v Yip Lai Fong (葉麗芳)HCA2559/2003, Deputy High Court Judge Muttrie (unreported, 9th December 2003) where the learned judge was faced with a similar situation. In that case, the defendant took out a summons praying for an order that the plaintiff’s name be struck out on the ground that the proceedings were instituted without proper authority and consequent thereon the proceedings should be dismissed. The defendant claimed alternatively for determination of this issue as a preliminary issue, still alternatively for stay of the proceedings pending the outcome of a High Court action and a declaration under Order 12 rule 8 that the court had no jurisdiction over the defendant in respect of the subject matter of the claim. The learned judge referred to the judgment of Godfrey JA in Lee Fai trading as Fai Kee Timber’s case (supra) and held as follows :
52. Ms Newall sought to distinguish the case of 廣東里水鮮果批發市場有限公司(supra) on the basis that the defendant therein brought the jurisdictional challenge under Order 12 rule 8 of the Rules of the High Court and not under the inherent jurisdiction as in the present case. Mr Shum pointed out that Order 12 rule 8 only set out the procedural requirements for making the application for stay which should not be confused with the source of the court’s power to hear the application, ie under its inherent jurisdiction. Indeed, I note that Order 12 rule 8(1) applies to any defendant who wishes to dispute the jurisdiction of the court on the irregularity as mentioned in rule 7 “or on any other ground”. Order 12 rule 8(1)(g) also envisages the court may make “a declaration that in the circumstances of the case the court has no jurisdiction over the defendant in respect of the subject matter of the claim or the relief or the remedy sought in the action”. In my view, the essence of the alternative relief sought in the case of 廣東里水鮮果批發市場有限公司 (supra) is a challenge to jurisdiction and I do not find the nature of such relief distinguishable from the alternative relief claimed by P in the present application. 53. Ms Newall then argued that since both primary and alternative applications were made in the same summons in the present case, it was obvious that D had no intention to waive the right to contest jurisdiction. She cited Hwoo Huang Linda v Fu Being San and others HCA4888/2001, Deputy High Court Judge Reyes SC (as he then was) (unreported, 10th April 2002) where the learned judge summarised the principles as follows in para.26 of his judgment :
54. Ms Newall submitted that although the guidelines in Hwoo Huang Linda’s case (supra) were not an exhaustive statement of the law, the court should not be overly subtle or astute to find submission to jurisdiction. She adopted counsel’s submissions in Susanto-Wing Sun Co Ltd v Yung Chi Hardware Machinery Co Ltd [1989] 2 HKC 504, 508 that the court was to do justice in a sensible way. 55. Mr Shum argued that para.26(5) of the judgment in Hwoo Huang Linda’s case (supra) was obiter dictum and the judgment should be read in light of Cave J’s test in Rein’s case (supra). He submitted that there was no magic in the words “without prejudice” and the substance of D’s action must be looked at. 56. I do not see the “real question” identified by the learned judge in Hwoo Huang Linda’s case (supra) as being different in substance from Cave J’s test in Rein’s case (supra) which was endorsed by the Hong Kong Court of Appeal. As I read the legal propositions in para.26 of the judgment in Hwoo Huang Linda’s case (supra), I do not think the learned judge is departing from the principle that the true nature of the party’s conduct should be considered, and if that amounts to a waiver of the right to contest jurisdiction, the “without prejudice” label will not save the day. In this I draw support from the 1st instance judgment in Chan Kiu v Lee Fai trading as Fai Kee Timber HCPI126/1995, Jerome Chan J (unreported, 2nd May 1997) and the appeal to the Court of Appeal therefrom in Lee Fai trading as Fai Kee Timber’s case (supra), which have not been referred to in Hwoo Huang Linda’s case (supra). 57. In Chan Kiu’s case (supra at paras.16-19), the late Jerome Chan J held that the jurisdiction issue was whether judged objectively the defendant had conducted himself in such a way that he submitted to the jurisdiction of the court notwithstanding his express declaration of non-acceptance of the court’s jurisdiction. He held as follows :
58.The Court of Appeal upheld this aspect of his decision. Godfrey JA held that a defendant who invoked or utilised the jurisdiction of the court with a view to his advantage waived by doing so his right to object to any earlier procedural irregularity (unless fundamental). As the defendant in that case invoked the jurisdiction of the court to set aside the plaintiff’s regular judgment and utilised the jurisdiction of the court to contest the assessment of damages, although under protest, Godfrey JA and Cheung J (as he then was) held that such steps were inconsistent with the challenge of the court’s jurisdiction and the defendant had clearly waived such right of challenge. 59.D has difficulties in overcoming the principles in Chan Kui’s case (supra) and in the case of 廣東里水鮮果批發市場有限公司 (supra). Ms Newall sought to distinguish Chan Kui’s case (supra) by saying thatthe steps taken by the defendant in Chan Kui’s case were obviously inconsistent with an application to challenge jurisdiction, but here Striking Out Application was merely defensive action. I cannot see how Striking Out Application can be such when it amounted to a challenge on the merits of the case. It is obviously a step taken in reaction to the writ of summons, but so is the filing of a Defence which is commonly regarded as a waiver of the right to contest jurisdiction. The key issue is whether the step taken goes to the merits and substance of the proceedings. Further, I note in that in the case of 廣東里水鮮果批發市場有限公司 (supra), the learned judge obviously concluded that putting striking out and stay applications in the same summons was insufficient to preserve the right to challenge jurisdiction. 60.I conclude that D has submitted to the jurisdiction of the Hong Kong court and has waived its right to contest jurisdiction. 61. Clause 12 Even if I am wrong and D has not submitted to the jurisdiction of the Hong Kong court, D still faces other difficulties in respect of Stay Application. 62. As referred to in paragraph 22 above, Stay Application is premised on findings by this court that D is a proper party and Oxford Terms are applicable to the contract. As I have concluded that the factual issues ought to be resolved at trial, I am unable at this stage to make such findings. I wish to make clear that in dismissing Striking Out Application I have not formed any definitive view on the final merits of the factual issues. Therefore, D also fails in respect of Stay Application. 63. However, for completeness, I will briefly discuss whether Clause 12 amounts to an exclusive jurisdiction clause on the assumption that D is a proper party and Oxford Terms are applicable to the contract. 64. The onus is on D to establish that Clause 12 is an exclusive jurisdiction clause. This turns on construction of the provision based on the proper law of contract. As there is no evidence before me of the laws of the State of New York, USA, I shall apply local law. T & K Electronics Ltd v Tai Ping Insurance Co Ltd [1998] 1 HKLRD 172, 173 held that “in construing the clauses three possibilities existed: either the parties intended to provide for the exclusive jurisdiction of the English court, or the words were permissive, in the sense that the parties agreed that any action brought in England were properly brought and could not be objected to, or that the words were intended to be declaratory in that the English courts would in any event have jurisdiction on the particular facts of a case”. The absence of the word “exclusive” is not fatal (Yu Lap Man v Good First investment Ltd [1999] 1 HKC 622). 65. The test is whether Clause 12 on its proper construction obliges the parties to resort to the jurisdiction of the City of New York and to exclude all other jurisdictions. “Or to put the issue in another way: is the obligation contained in the clause the intransitive one to submit to a jurisdiction if it is chosen by the other contracting party, or is it the transitive one to submit all disputes to the chosen jurisdiction?” (Sinochem International Oil (London) Co Ltd v Mobil Sales and Supply Corporation and Sinochem International Oil Co Ltd (Third Party) [2000] 1 Lloyd’s Rep 670, 676). 66. Ms Newall submitted that the use of the word “shall” in Clause 12 was assertive and once D as buyer made the election to have the litigation in the City of New York, it was binding on the parties. She said this demonstrated that Clause 12 was an exclusive jurisdiction clause. Therefore the discretion should be exercised in favour of granting Stay Application unless strong cause for not doing so was shown (T & K Electronics Ltd’s case (supra)). 67. Mr Shum submitted that Clause 12 could not be read as putting a higher duty upon P than to refrain from objecting to the jurisdiction of the City of New York if D elected that jurisdiction. Construing the clause as a whole, the phrase “at Buyer’s election” clearly showed that the clause was only permissive and not exclusive. There was a clear lack of mutuality in that only the buyer (ie D) and not the seller (ie P) who had the choice to litigate in the City of New York. The exclusivity of a jurisdiction clause could not be dependant on one party’s choice. 68. In my view, in interpreting the words “shall at Buyer’s election be litigated in a court in the City of New York and Seller submits to the jurisdiction of such court” in Clause 12, although the word “shall” has been used, looking at the clause as a whole, the provision is no more than an intransitive one to submit to a jurisdiction if it is chosen by the other contracting party. I draw assistance from the judgment of Travers J in Contractors Ltd v MTE Control Gear Ltd [1964] SASR 47 on the meaning of “submission to the jurisdiction” which was cited with approval by Mayo JA in Yu Lap Man’s case (supra at pp.627-628). Such phrase is apt to describe a situation which arises after litigation has commenced in the City of New York, but no such litigation has commenced there. It does not extend to require either of the parties to refrain from commencing proceedings in Hong Kong if they so desire. This only put a duty on P not to object to the jurisdiction of the City of New York if any proceedings are taken there. In the circumstances, I conclude that Clause 12 is not an exclusive jurisdiction clause. 69. Forum non-conveniens I also consider this issue for completeness in case I am wrong and D has not submitted to the jurisdiction of the Hong Kong court. The inability to establish at this stage that D is a proper party to the contract also renders Stay Application under this head untenable. 70. Even if that hurdle were crossed (which I do not accept) and given that I have concluded that Clause 12 is a non-exclusive jurisdiction clause, both Mr Shum and Ms Newall agree that the relevant considerations are the principles enunciated in Spiliada Martine Corp v Cansulex Ltd [1987] AC 460. The principles are well summarised in Hong Kong Civil Procedure 2004 Vol.1, para.11/1/10 at pp.100-101, which I shall not repeat here. It is sufficient to refer to the summary of the three-stage approach adopted by the Court of Appeal in The Adhiguna Meranti [1987] HKLR 904, 907 and Rambas Marketing Co, LLC v Chow Kam Fai CACV1055/2001 (unreported, 12th March 2002) and abbreviated in The Lanka Muditha [1991] 1 HKLR 741,744 as follows :
71. Mr Shum submitted that D had failed to discharge its burden of showing that the City of New York was clearly or distinctly more appropriate than the local forum, so its argument on discretionary stay must fail. On D’s alternative premise under Stay Application, both contracting parties (P and D) are Hong Kong companies with places of business in Hong Kong. The contract was negotiated and made in Hong Kong and the factual witnesses on the presently known factual disputes are Hong Kong individuals. 72. Although Ms Newall argued there were strong connecting factors with New York, she accepted that issues of fact were tied to Hong Kong. The relation to the City of New York as apparent from the affidavits covered only the governing law and the jurisdiction clause. Both matters are predicated on the applicability of Oxford Terms, a matter which cannot be determined at this stage. 73. As regards the governing law, Ms Newall does not dispute the following principles in para.11/1/10 at p.101 of Hong Kong Civil Practice 2004, Vol.1 :
There is no evidence before me that there is any controversy, substantial or otherwise, over the laws of State of New York, USA that will be persuasive to a stay of the present proceedings. As regards the jurisdiction clause, since it is non-exclusive, it is but one factor within the factual matrix upon which the court is asked to exercise its discretion for a stay of proceedings. 74. Ms Newall argued that P would not be prejudiced by having the matter heard in New York. But on an application for discretionary stay, it is for the applicant to show that the foreign forum is clearly and distinctly more appropriate than Hong Kong and this D has not done.In the circumstances I also dismiss Stay Application. Costs 75. There is no reason why costs should not follow event. I therefore make a costs order nisi that D shall pay P’s costs of the application (including all costs reserved in relation to the application) to be taxed if not agreed with certificate for counsel. Publication of this decision 76. Pursuant to Practice Direction 25.1, I request the parties to make written representations on the release of this decision for publication within the next 7 days. If there is no objection or response within such time period, I propose to grant permission for this decision to be published.
Mr Edward Shum instructed by Messrs W K To & Co for the Plaintiff. Ms Glenys Newall instructed by Messrs Lee & Chow for the Defendant. |
Cases cited in this judgment
Other judgments that cite this case