– Large increase of 40.6% in civil cyber cases between 2020 and 2021
– Applying correct reasonable man test based on current development of society
– Once a person clicks on a button agreeing to terms, such terms are binding
– In a tiff over live streaming and streamers being poached by competitors
– Leading artists, Red Hong Yi & Namewee cash in on hot 2021 NFT market
– Eye on digital banks, Grab and constitutionality of s. 233 of the CMA 1998

When the Government of Malaysia announced its 2nd lockdown in January 2021, our Courts quickly opened virtual doors for remote hearings and trials.

Today, virtual hearings and trials have now become a norm in Malaysia with many Courts, particularly, the civil Courts, operating as virtual Courts.

The Chief Justice, in her speech on the occasion of the Opening of the Legal Year 2022 entitled “Access to Justice and the New Normal” said that judges have adjusted well to remote hearings at least in the context of civil cases, criminal applications and criminal appeals.

The screen-sharing technology had assists them with reference to documents and the level and nature of advocacy has improved irrespective of whether counsel before the judge is senior or junior.

Some criminal courts have also moved to conduct matters virtually. Prior to this, criminal proceedings were still done physically. S. 173(a) of the Criminal Procedure Code provides that when an accused appears or is brought before the Court a charge containing the particulars of the offence of which he is accused shall be framed and read and explained to him, and he shall be asked whether he is guilty of the offence charged or claims to be tried unless a dispensation is allowed. This would mean that the accused would have to be present in Court when the charge is read to him.

It was not until the Sessions Court case of Pendakwa Raya v Syamsul Zaman Bin Sukri (Pasir Mas Sessions Court Criminal Case No. DJ-62JSK-36-08/2021) that a charge was read to the accused via remote communication technology i.e. Zoom as the accused tested positive for Covid-19 and could not attend Court physically. The learned Sessions Court Judge, Tuan Badrul Munir Mohd Hamdy relied on the provisions of s. 101 and s. 101B of the Subordinates Courts Act 1948 to exercise his discretion to have the matter conducted via remote communication technology.

The Malaysian Bar Council has also moved on with times. They have finally lifted the ban on the use of virtual offices by lawyers and recognised that “a virtual office offers benefits like convenience, flexibility, and cost effectiveness”. To regulate the use of virtual offices, Chapter 7A entitled “Virtual Offices” was introduced in August 2021 into the Rules and Rulings of the Bar Council. Essentially the new rulings require members to ensure the confidentiality of client’s information.

Defamation

The Chief Justice in her speech also highlighted the increase of cyber defamation cases between 2020 and 2021. There was a large increase of 40.6% of civil cyber cases between 2020 and 2021. The steady rise of such cases reflects the greater use of social media and perhaps the greater tendency to misuse it.

The rise in such cases also saw Courts taking into factors such as current trends, development and behaviour of society in determining whether a statement is defamatory. Here are some interesting cases decided in 2021.

Defamation via photograph and subject matter of article

In Restoran Nasi Kandar Irfanah Sdn Bhd v The New Straits Time Press (Malaysia) Berhad & Anor Appeal [2021] 1 LNS 2465, the plaintiff claimed that, among others, a Facebook posting containing a photograph of one of the plaintiffs seated at the other plaintiff’s restaurant to be defamatory even though the publication was referring to two (2) other nasi kandar restaurants. The Facebook post links to an online article entitled “2 famous Penang Nasi Kandar restaurants infested with rats, cockroaches, ordered shut”. The online article was not in reference to the plaintiff’s restaurant.

The Court of Appeal held that any person who clicked on the post itself would be directed to the said online article and would easily come to know of the identities of the said 2 famous nasi kandar restaurants in Penang which plainly did not include the second respondent. The Court of Appeal held that the High Court had failed to adopt and/or apply the correct reasonable man test based on the current development of society on the reading of news reported on social media such as Facebook when the learned High Court Judge concluded that the reader would not know of the restaurants actually implicated simply because there was no link below the offensive photograph stating “click here to read more.” Society today being widely exposed to social media, it is most unlikely that the ordinary reader would not be able to access the full article by clicking on the relevant link which can be regarded as a simple process in this time and age.

Recognition of the use an asterisk (*) to correct a typo by the Court

In Tan Sri David Chiu Tat-Cheong v Seema Elizabeth Soy [2021] 1 LNS 1162, the plaintiff initiated an action for defamation against the defendant for allegedly publishing certain defamatory statements on a WhatsApp Group over the plaintiff’s family, company and allegedly previous convictions. The plaintiff is the founder and managing director of Malaysia Land Properties Sdn Bhd (also known as “Mayland”). Mayland is the developer of Waldorf & Windsor Towers Service Apartments (“W&W”). The defendant on the other hand, was the owner of an apartment unit at W&W and was involved in the management committee and sub-committee of W&W in various capacities.

In one of the impugned text, the plaintiff stated, “The same don (David Chiu) is the Founder and Chairman of Mayland!!!” but she later corrected the word “don” with the word “son” with an asterisk (*). The plaintiff claims that these words meant that he is a Don and is associated with the criminals or underworld.

The High Court accepted that the use of asterisk (*) to correct a word is a common way of correcting a misspelling on WhatsApp. Particularly, in this case, the letters “s” and “d” are next to each other on the mobile phone keypad used in the WhatsApp application. Moreover, the correction was done in the space of a minute.

Extension of defence of Qualified Privilege for publications on WhatsApp groups

The High Court in Tan Sri David Chiu Tat-Cheong v Seema Elizabeth Soy [2021] 1 LNS 1162 also extended the defence of qualified privilege, which is a defence for defamation, to a person who published alleged defamatory statement to members of a WhatsApp group. Qualified privilege is afforded to those who make defamatory statements in the discharge of some public or private duty, whether legal or moral, or in the conduct of their own affairs, in matters where their interest is concerned. But only if the publication derived from right and honest motives.

The impugned text was communicated in a closed and private WhatsApp chat group setting constituted by participants who were interested in the welfare of W&W. It was transmitted in line with the purpose for existence of the WhatsApp Group. The defendant sent the text in pursuance of her duties and in her capacity as a member of the management committee of W&W. In order to raise awareness of the various legal disputes in which Mayland and its related entities were the counter-parties with opposing interests.

Liability of Online Marketplace Operators

Those in the intellectual property protection industry will have to wait again for the Court to decide on whether a trade mark owner can stop an online marketplace operators from allowing its merchants to list products bearing their trade mark under the new Trademarks Act 2019.

An online marketplace operator was found to be liable for trade mark infringement under the old Trade Marks Act 1976 (now repealed and replaced with the Trademarks Act 2019) (Nexgen Biopharma Research & Innovation SARL v Celcom Planet Sdn Bhd (Kuala Lumpur High Court Suit No. WA-22IP-3-01/2018). Unfortunately, there is no grounds of judgment available for this case.

Online marketplace operators generally take down counterfeit products from their platforms upon receiving notice from the trade mark owner. However, when it comes to unauthorised genuine products (e.g. parallel imports or direct marketing products which online sales are prohibited by the principal), the general position by online marketplace operators is that they will not delist such products.

In the case of Deka Marketing Sdn Bhd v Shopee Mobile Malaysia Sdn Bhd [2021] 10 CLJ 395, the plaintiff, being the trade mark owner of the mark DEKA, sought to restrain Shopee from allowing and permitting resellers of DEKA products from utilising Shopee to conduct business involving the DEKA products, including the advertising, distribution, publication and offer for sale of the said products, without the plaintiff’s licence, permission or authorisation.

According to the plaintiff, only exclusive distributors and authorised dealers appointed by the plaintiff are allowed to sell its products. The plaintiff applied for an order for summary judgment so that the matter can be disposed summarily without going to trial.

Shopee on the other hand argued that, among others, there is no law that prohibits the reselling of products that have been purchased without having to get prior consent or authorisation from the brand owner, as the title of the goods has passed to third parties, the plaintiff’s action lies against the resellers and not Shopee and this issue cannot be resolved through a summary judgment application, and Shopee merely provides the platform enabling the third party sellers to put their goods for sale and for buyers to purchase them.

The buyers will liaise with the sellers directly, not with the Defendant. Thus, the defendant does not advertise, publish, sell, make offers of the DEKA products listed in the Shopee platform for sale by those resellers. The defendant also applied to have the matter disposed summarily under Order 14A and 33 of the Rules of Court 2012 by answering the following questions of law-

(a) Whether the plaintiff has the right in law to restrict the resale of authentic products bearing the “DEKA” mark (“Deka Products”) on the defendant’s online marketplace (www.shopee.com.my) (“Platform”)?

(b) Whether the advertising, distributing, marketing and/or offering for sale of Deka Products on the Platform gives rise to a cause of action for trademark infringement against the persons advertising, distributing, marketing and/or offering for sale Deka Products on the Platform (“Resellers”)

(c) If the answer to (b) above is in the affirmative, whether the Resellers are liable to the Plaintiff for trademark infringement?

(d) If the answer to (c) above is in the affirmative, can claims for trademark infringement be made against the defendant by reason of the alleged advertising, distribution, marketing and/or offering for sale of Deka Products by the Resellers on the Platform?

(e) If the answer to (d) above is in the affirmative, can findings of infringement be made against the defendant without the Resellers being made parties to the proceedings?

The High Court dismissed both applications on the ground that, among others, the matters should be adjudicated through a trial and not summarily.

In respect of the application for summary judgment, the High Court concluded that the following issues are triable-

(i) that being an online marketplace platform, the defendant does not carry out distribution or retail marketing of electrical or household products;

(ii) despite being the registered owner of the “DEKA” trademark, the plaintiff does not have any right to prevent any seller who trades the plaintiff’s products by accurately describing the product by its brand name;

(iii) no one is prohibited from reselling the plaintiff’s products once those products are sold and the title of the goods passed to the said seller/reseller;

(iv) the plaintiff’s claims against the defendant instead gave rise to concerns under the Competition Act 2010;

(v) the third party sellers using the impugned Shopee platform are independent with no contractual or business associations with the defendant;

(vi) the defendant does not advertise, publish, sell or make offers for the sale of products listed on its Shopee marketplace; and

(vii) the plaintiff’s products placed for sale by the said sellers on the defendant’s platform does not in any manner infringed the plaintiff’s DEKA trademark. Even if it does, the quarrels should be between the plaintiff, the resellers and the plaintiff’s so-called authorised dealers/exclusive distributors, fell squarely within the meaning of triable issues.

As for defendant’s application under Order 14A and 33 of the Rules of Court 2012, the High Court concluded that the questions raised by the defendants in its application involved mixed questions of facts and law that could be justly determined after this court having the benefit of hearing evidence of witnesses at a full trial.

Enforceability of electronic contracts

It is settled that electronic contracts are enforceable in Malaysia. Once a person clicks on a button agreeing to the terms, such terms are binding on him regardless of whether or not he read it or not.

In Vijay Kumar Natarajan & Anor v Malaysia Airlines Berhad [2021] 1 LNS 881, the plaintiffs wanted a refund of their airflight with the defendant to Manila which was rescheduled due to the Movement Control Order as the 1st plaintiff’s meeting in Manila had been cancelled.

The High Court struck out the case as the Court was of the view that the plaintiffs are bound by the terms and conditions of the airlines presented online via the airlines’ website. One of the terms and conditions states that the flight tickets are non-refundable tickets. The plaintiffs had agreed to the terms and conditions when they clicked the button ‘I understand and accept the Terms and Conditions of Carriage and Fare Conditions’ at the time of purchase of the air ticket.

Enforceability of hyperlinked contracts

The Court of Appeal dealt with the issue of whether a contract, located on a website, is enforceable. In Able Food Sdn Bhd v Open Country Dairy Ltd [2021] 7 CLJ 716, the Court of Appeal held that the terms of trade located on a website is applicable as the sales contract expressly referred to a hyperlink containing the terms of trade. The Court of Appeal held that the burden was on the person served with the contract to look up the terms of trade via the hyperlink. The failure on their part to do so is akin to a contracting party not bothering to avail themselves of the terms, and to read and understand the same, with the benefit of legal advice or otherwise. Leave to appeal to the Federal Court was later refused.

Similarly, in MISC Berhad v Cockett Marine Oil (Asia) Pte Ltd [2021] MLJU 563, the High Court held that the plaintiff’s terms and conditions, which was attached to their tender, were applicable in the transaction instead of the defendant’s terms which was merely linked on the foot of the defendant’s emails to the plaintiff. There was no indication that the defendant’s offer made pursuant to the plaintiff’s invitation was a counter-offer on the plaintiff’s terms. There was no step taken by the defendant to draw the attention of the plaintiff to the application of the hyperlink which only appeared in the foot of the defendant’s emails.

You may read more about this topic in my previous Bread & Kaya article entitled “Practical tips to ensure your electronic contracts are enforceable“.

Live streaming

A live streaming business generally consists of two (2) parties, namely the live streaming platform and the live streamer. There may be times where there are additional parties involved, for example, the person who manages the live streamer who may be the person dictating or negotiating the terms of the contract between the platform and the live streamer. Live streamers may be subject to certain rules and regulations imposed by the platform. This may include a code of conduct that governs the live streamers’ behaviour while live streaming.

Live streamers may be, among other, public figures and influencers. They may stream content such as games and live performance such as dancing and singing. Live streamers may be remunerated by the platform and/or audience of the live stream through purchase of digital goods or contributions.

Our Court had adjudicated a matter concerning live streaming in Malaysia, which featured the hallmarks of a live streaming business. 

In Famest Solution v Xiao Xiang Business Sdn Bhd [2021] 1 LNS 2289, the defendant engaged the plaintiff as one of its official guilds to manage, recruit and provide live streamers to perform live streaming services on the defendant’s live streaming platform known as “Elelive”.

The relationship between the guilds (such as the plaintiff), defendant and live streamers are governed by two (2) contracts, namely, a contract between the live streamers and the defendant for the exclusive live streaming performance on Elelive, and a contract that provides for the assignment of service fee payable to the said live streamers whereby the guilds (such as the plaintiff) will then manage the service fees and remit the same to the said live streamers after deduction of the guilds’ commission, without any participation by the defendant.

The defendant issued rules and regulations to the guilds which is subject to amendment or update by the defendant from time to time. One of the material terms of the rules and regulations is that monthly service fee will be paid by defendant to the guild upon verification by both parties within the first 5 working days of each month. Subsequently and without any involvement or participation by defendant, the guild on its own will pay a salary to the live streamers based on the remuneration that has been mutually agreed between them.

The dispute started when the defendant failed to pay certain outstanding service fee to the plaintiff. The defendant imposed sanctions against the plaintiff by deducting 30% of the service fee payable to the plaintiff, allowing other live streamers to transfer to other guilds without the need of the plaintiff’s approval and no transfer fee, and salaries which are payable by the plaintiff’s liver streamers will be paid directly by the defendant until the deducted 30% service fee is fully utilised. The defendant claimed that the reason for doing so was because an alleged agent of the plaintiff had breached the said rules and regulations by allegedly enticing, luring and poaching one of the live streamers from Elelive to another rival platform, BIGO Live.

As a result, the plaintiff sued the defendant for the outstanding fee, a declaration that the sanctions made for the violation of the said rules and regulations are unlawful, and losses amounting to RM4,333,200 for the damages caused due to the departure of live streamers from the plaintiff due to the sanctions, estimated cost of recruiting or replacing the departed live streamers, and additional losses as there were live streamers that had stopped online broadcasting due to the sanctions.

The defendant filed a counterclaim against the plaintiff for loss or profit due to the alleged breach of the rules and regulations i.e. the poaching of the live streamer by its agent, poaching of 11 existing live streamers from Elelive to a BIGO Live.

The defendant also filed an action for defamation due to the plaintiff’s publication of certain defamatory remarks via a petition on Change.org and a Facebook post.

After trial, the High Court partially allowed the plaintiff’s claim and dismissed the defendant’s counterclaim.

The Court held that the defendant is liable to pay for the outstanding sum as the plaintiff had performed the services that it is required to do. The Court also found that sanctions imposed were improper based on the reasons below.

The Court found that the plaintiff did not poach the live streamer and enticed her not to execute the exclusive agreement with the defendant. Based on the evidence that the defendant relied on to impose the sanctions, in particular a WeChat conversation between the alleged agent and the live streamer, the alleged agent did not poach the live streamer to leave the guild. It was the live streamer who approached the alleged agent to obtain information.

The rules and regulations consist of a complaint process and procedure. The defendant confirms that any actions imposed must comply with the complaint process and procedure. The defendant’s witness admitted that his complaint was not in accordance with the rules and regulations. The complaint is therefore rendered “unfounded”, as stipulated by the rules and regulations itself.

The Court held that the alleged agent is not an agent of the plaintiff. There was no evidence proving so and in fact, there was evidence showing otherwise. Therefore, the sanctions cannot be applied against the plaintiff. He is merely an independent contractor who recommends live streamers to the plaintiff on an ad hoc basis. As such, the plaintiff is not responsible for any act or omission committed by the alleged agent.

The Court also found that the punishment meted out via the sanctions were not within the parameters of the rules and regulations. In fact, two of the sanctions were not even stated in the rules and regulations. The Court held that the defendant is not entitled to impose punishment that is more severe than what was agreed between the parties in the rules and regulations. The defendant is not entitled to impose punishment at its uninhibited whim and fancy.

In respect of the losses amounting to RM4,333,200, the plaintiff’s claim was dismissed as it was unsubstantiated. The plaintiff failed to show that it had suffered such loss and such loss was linked to or caused by the defendant or the sanctions or tender any credible evidence to prove such losses.

As for the defendant’s counterclaim for defamation, the defendant failed to plead in its statement of claim of the exact words in the Facebook post and online petition which are alleged to be defamatory. Therefore, the defendant’s counterclaim is defective. Furthermore, the plaintiff removed the postings after receiving a letter of demand from the defendant. In addition, no other demand nor compensation was requested by the defendant at that point of time. Thus, the defendant’s demand has already been met and the defendant’s claim on the compensation also appears to be an afterthought to the plaintiff’s claim.

In respect of the counterclaim for loss or profit due to the alleged breach of the rules and regulations i.e. poaching of the live streamer, the Court held that the defendant had failed to prove that the plaintiff had breached the rules and regulations . Therefore, they are not liable for such a claim.

The Court also held that since there is no evidence that the plaintiff had poached the 11 live streamers, they are not liable for damages as well. The Court said that the 11 live streamers might have left the defendant on their own accord or for reasons of their own which have nothing to do with the plaintiff.

Live streaming devices

The Parliament in 2021 introduced s. 43AA of the Copyright Act 1987 to criminalise the use of streaming technology to facilitate the infringement of copyright in any work. It came to force in 2022. A streaming technology is defined as “includes a computer program, device or component which is used in part or in whole that results in an infringement of the copyright in a work”.

This provision was introduced to tackle media boxes that can stream illegal content. With such media boxes, one may access thousands of channels through an application without paying for the content. Previously, the Government sought to tackle such problem though s.41 of the Copyright Act 1987 and s. 232(2) of the Communications and Multimedia Act 1998.

Now with s. 43AA of the Copyright Act 1987, any person who, among others, manufactures a streaming technology for sale or hire, imports a streaming technology, or selling, offering advertising for sale or hire, possessing or distributing a streaming technology to the extent as to affect prejudicially the owner of the copyright is liable to a fine not less than US$2,248 (RM10,000) and not more than US$44,960 (RM200,000) or to imprisonment for a term not exceeding twenty (20) years or to both. However, it must be clarified that media boxes without an application to access copyright infringing content do not fall within s. 43AA. One may still sell an empty media box so long it obtained the necessary approval from the authorities. Certain electronic devices (such as an older generation TV) require such media boxes to watch other content such as YouTube or Netflix.

Non Fungible Token

2021 saw the rise of Non Fungible Token (NFT) in Malaysia. Malaysian artists Red Hong Yi reported sold her NFT art, known as Doge to the Moon for 36.3 ETH which was valued at RM325,000. The successful bidder of the NFT owns both the physical (i.e. a copper plate) and digital artworks. Malaysian singer, Namewee also sold 100 NFTs of his song which reportedly valued at RM3.5 million. Particulars of the sale of these NFTs are not publicly known.

There is no legal definition to the term NFT in Malaysia. But it can be described as a digital token, and a digital asset. It is stored on a digital ledger, called a blockchain. It can be traded on an online marketplace such as OpenSea and Binance. In Malaysia, we have our own online marketplace such as pentas.io.

It is usually represented by an item, such as a digital art, a song or a video. However, the unique thing about NFT is that a person purchasing the NFT does not necessary own the intellectual property in the NFT. For example, you may have purchased an NFT of a digital art which the creator had issued 100 tokens. You are the owner of that particular token. The owner of the intellectual property residing in that digital work may still be the creator or the intellectual property owner.

This may sound novel but when we compare this with a real-life scenario, this is nothing new. We can see this in stamps trading or trading card such as football cards or Pokémon cards. One may trade such stamps or cards without limitation but the intellectual property rights in those artistic work will still belong to the copyright owner. The value of an item would depend on how rare it is, and the same item may differ in value depending on various circumstances such as its condition, the year of production, the number of circulating copies etc.

The United States Courts are now dealing with NFT disputes. In Roc-A-Fella Records, Inc. v. Dash, 1:21-cv-05411-JPC (S.D.N.Y. Jul. 29, 2021), the plaintiff owns all rights to the album Reasonable Doubt, including its copyright. It alleged that the defendant —a minority shareholder in the company — unlawfully stole and attempted to auction the copyright to Reasonable Doubt as an NFT.

In Miramax, LLC v Quentin Tarantino et al (US District Court, Central District of California: 2:21-cv-08979), production company Miramax sued director Quentin Tarantino after he announced that he would be auctioning off “exclusive scenes” from the 1994 motion picture Pulp Fiction in the form of NFTs. According to his website www.tarantinonfts.com, “the collection holds secrets from Pulp Fiction,” and “each NFT contains one or more previously unknown secrets of a specific iconic scene from Pulp Fiction”. The “privileged” purchasers “will get a hold of those secrets”.

So far, there is no reported case about NFTs in our Courts. However, there are numerous complaints by copyright owners about their work being used on NFTs and sold on NFT marketplaces. Steps were also taken by companies to ensure that their trade mark protection extends to NFTs. For example, Riot Games, Inc, the brand of owner of the popular game League of Legends, have filed an application to register their trade mark which included “digital materials, namely, nonfungible tokens (NFTs)” with the Intellectual Property Corporation of Malaysia.

Love scams

Public Prosecutor v Wang Jianquan [2021] MLJU 1708; [2021] 5 LNS 109 is an interesting case about a “love scam” operation in Malaysia. The accused was one of the two (2) Chinese nationals arrested and investigated for love scam activities deceiving Chinese nationals. There were nine (9) Malaysians involved too. One of the items seized was an exercise book containing “script of conversation” used against the victims.

The investigation revealed that the phone belonged to one of the arrestees (B8), contained her semi-nude photos, which were sent to the potential victims by the rest of the arrestees (including the accused person). The arrestees would first communicate with the victims. The said arrestee (B8) would make a video call to the victims and lured them into exposing themselves (literally – by exposing their private part). The video calls were recorded and used to extort monies from the victims. Refusal to accede to their request was at the peril of the obscene videos and photos being revealed to the victim’s family members.

The accused pleaded guilty to an offence under s. 420 of the Penal Code (cheating and dishonestly inducing delivery of property) and was sentenced to a one month imprisonment and RM8,000 fine, in default of payment two months imprisonment.

The learned Magistrate was of the view that the offence concerns conspiracy to cheat. The manner the offence was committed was horrendous. The victims were lured and deceived into exposing their private parts, which was captured and used as a bargaining chip to extort money, leaving the victim with the only other option of perpetual embarrassment facing their own family members. It is inhuman, gross and short of dignity. Scaling the plea of guilty as well as being a first offender against the manner of the offence was committed does not tip the scale in favour of the accused person.

The learned Magistrate also took judicial notice of the prevalence of online scam-related activity in Malaysia. Statistics issued by CyberSecurity Malaysia show that online fraud has continued to be the highest reported incidents totalling 7,774 reports in 2019, 5123 reports in 2018, and 3,821 reports in 2017, compared to other incidents, i.e. cyber harassment, intrusion attempt, denial of service, vulnerabilities report, content-related, spam, malicious code and intrusion. In 2020, out of 8,366 online incident cases reported, 6,048 were online fraud cases.

Service of Court Documents on Facebook

Last year, I reported that the High Court allowed the service of court documents on Facebook Malaysia Sdn Bhd as the Court found that Facebook Malaysia is the agent of Facebook, Inc under Order 10 Rule 2 of the Rules of Court 2012 (Abu Jamal Bin Sulaiman & Anor v Facebook, Inc (Kuala Lumpur High Court Original Summons No. WA-24NCVC-57)).

The Court of Appeal however has overturned the decision in Civil Appeal No. W-02(IM)(NCvC)-1222-09/2020 on the grounds that, among others, there is insufficient evidence to prove that Facebook Malaysia Sdn Bhd is an agent of Facebook, Inc.

On another note, Facebook, Inc changed its name to Meta Platforms, Inc. Any legal action filed against Facebook, Inc in Malaysia should now be against Meta Platforms, Inc and served on to them with an order to serve out of jurisdiction to their office in California, United States.

Whether Grab drivers are “employees”

Last year, I reported that one Loh Guet Ching filed an action for judicial review (Loh Guet Ching v. Menteri Sumber Manusia & Ors (Kuala Lumpur High Court Judicial Review Application No. WA-25-296-10/2020) after the Minister of Human Resource refused to refer the matter to the Industrial Court without giving any reasons under s. 20(3) of the Industrial Relations Act 1967 (this provision has now been amended to require the Director General for Industrial Relations to refer to the Industrial Court for an award when there is no likelihood of the representation being settled). She had earlier brought a case against Grab at the Labour Department after she was terminated as an e-hailing driver. The High Court dismissed the application for judicial review. The learned Judge held that, among others, the Minister has no obligation to give any reason for his decision and not to refer the representation to the Industrial Court. The learned Judge also found that Ms Loh is not an employee of Grab as-

(1) there was no employee and employer relationship as Ms Loh had only registered herself as a driver using Grab’s platform and she had to prepare a vehicle herself to bring passengers using the platform provided by Grab.
(2) she does not receive a salary but Grab receives a 20% commission from the profit she made using Grab’s platform,
(3) Grab does not make any statutory contributions for employees (i.e. KWSP, PERKERSO and Employment Insurance Scheme (EIS),
(4) Grab does not provide a salary statement for the purpose of taxation for Ms Loh, and
(5) Grab does not control Ms Loh. Instead, Ms Loh is free to use the application provided by Grab following her schedule and suitability. Further, Grab does not stop her from using other applications such as MyCar, JomRides, Mula and the like.

In respect of the new trend in other foreign Courts such as in the United Kingdom and Europe which had acknowledged and defended the status of e-hailing drivers as employees of e-hailing companies, his Lordship held that such cases are only persuasive and are not binding to our Courts in Malaysia. There are no provisions in law that acknowledge that a e-hailing driver is a workman. Therefore, it is no surprise that the Minister made a decision based on the current laws in Malaysia.

The matter is now pending at the Court of Appeal.

Closing

In 2022, we can expect more interesting developments in the cyberlaw and IT sphere.

– New NFT legal disputes are starting to pop in Courts beginning of 2022. It was reported OpenSea was sued by a user of its platform after the latter’s “Bored Ape Yacht Club NFT – Bored Ape #3475” was stolen when OpenSea was hacked (McKimmy v. OpenSea, No. 4:22-cv-00545). The same “Bored Ape Yatch Clut NFT” was a subject matter of another dispute in the Singapore High Court where the Singapore High Court had blocked potential sale and transfer of the said NFT after an online user by the name of “chefpierre” had taken it wrongfully from him.

Meantime, local artist Fahmi Reza launched a NFT of his Monyet Istana artwork on his website monyetistana.com to raise funds for the Freedom of Expression Legal Defence Fund. The legal fund will help support fellow Malaysians who are investigated and prosecuted for exercising their right to freedom of expression. He successfully raised RM48,000 from the sale of this NFT in 48 hours. However, it was later reported that monyetistana.com was blocked from access by our local internet service providers.

Three other noteworthy developments I am going to follow this year are:

– Bank Negara has awarded digital banking licences to five consortiums. Three consortiums, namely Boost Holdings Sdn Bhd and RHB Bank Bhd, GXS Bank and Kuok Brothers, and SEA and YTL Digital Capital will be licensed under the Financial Services Act 2013.

Meanwhile, a consortium comprising AEON Financial Service Co Ltd, AEON Credit Service (M) Bhd and MoneyLion Inc, and a consortium led by KAF Investment Bank will be licensed under the Islamic Financial Services Act 2013. These new banks can help individuals and businesses gain better access to more personalised solutions backed by data analytics. It will be interesting to see what cyber and electronic legal issues that may arise from this new industry.

– Health news portal CodeBlue broke the news about the ownership of Malaysia’s contact tracing application, MySejahtera, which stores the personal data of millions of Malaysians and its residence.

Whilst the Government had claimed ownership of the MySejahtera application, CodeBlue revealed that one Entomo Malaysia Sdn Bhd was the owner of the intellectual property rights (except for the trade mark and date collected through MySejahtera which is owned by the Government of Malaysia) in and to MySejahtera application, and thereafter transferred it to one MySj Sdn Bhd.

This was based on the Court documents revealed in the shareholder disputes between the company behind MySejahtera (P2 Asset Management Sdn Bhd v MySj Sdn Bhd (Kuala Lumpur High Court Suit No. WA-22NCC-516-11/2021), Hasrat Budi Sdn Bhd v Entomo Malaysia Sdn Bhd (Kuala Lumpur High Court Suit No. WA-24NCC-118-02/2022)).

The Government of Malaysia later clarified that it only owned the trade mark and certain modules and their source codes. There are other rights residing in the MySejahtera application which is owned by other parties. Nevertheless, it seems that the Government of Malaysia is slowly transitioning MySejahtera to a non-Covid-19 pandemic related application.

– And, to close, activist Heidy Quah Gaik Li’s challenge to the constitutionality of s. 233 of the Communications and Multimedia Act 1998 hit a wall after the High Court refused to refer the matter to the Federal Court based on the following question –

Whether the provision of s. 233 of Communications and Multimedia Act 1998 is a permissible restriction under Art. 10(2)(a) Federal Constitution read together with Article 8 Federal Constitution (infringement of freedom of speech & expression).

The matter is now pending at the Court of Appeal (Heidy Quah Gaik Li v Kerajaan Malaysia (Civil Appeal No. B-01(IM)-130-03/2022)). She was earlier charged for sharing alleged content over a Facebook post that alleged mistreatment of refugees at an Immigration detention centre. The Sessions Court then granted a discharge amounting not to acquittal after the Court found that her charge was defective.

First published on Digital News Asia on 16, 18 and 23 July 2022. Article updated with a summary of the case of Loh Guet Ching v. Menteri Sumber Manusia & Ors.

The post Bread & Kaya: 2021 Cyberlaw cases in the recovery period appeared first on Foong Cheng Leong.

– Court decisions on thorny issues of hyperlinked agreements’ enforceability
– Heavy price to pay for not reading online terms of any commercial agreement
– 8 practical tips to ensure that your electronic contracts are enforceable
– Tracking mechanism to track if counterparty accessed terms and condition

These days, many businesses no longer print or provide their entire contract to their customers or suppliers. It is relatively commonplace for businesses to point their contracting partners to the terms contained on a website, i.e. through a hyperlink.

We can see these in application forms, emails, and even in physical or electronic contracts. With the advent of the Covid-19 pandemic, it would be beneficial for businesses to adopt electronic contracts, particularly using hyperlinked contracts or terms, rather than physical contracts.

It creates convenience, not only are they great for easy drafting but it makes editing documents a breeze, it is an attempt to achieve a much more friendly and acceptable clientele experience within business.

However, there are certain issues to be looked at when adopting the use of hyperlinked contracts or terms. One of such situations would be where the contracting parties each have their own terms of engagement with reference to their own hyperlinked contracts or terms. Without a signed contract, this poses a dilemma which contract or terms would apply.

This article addresses the measures businesses may use to incorporate a hyperlink successfully and the current state of law in disputes involving contracts or terms incorporated by reference by way of a hyperlink. Therefore, we will look into the cases below to see how the courts deal with such a dilemma.

English Law Position

In tackling the enforceability of whether the electronics terms and conditions form part of the agreement, the English courts critically analyzed whether a party had taken reasonable steps to ensure that its terms and conditions had been brought to the attention of the other side. The two following courts had based their focus on the conspicuousness of the terms.

In Impala Warehousing v Wanxiang Resources [2015] EWHC 25, Impala issued a warehousing certificate in respect of Wanxiang’s goods pledged to a bank as security. The warehouse certificate was then endorsed to Wanxiang after the sum advance by the bank had been paid off. A dispute arose thereof and parties disagreed where the matter ought to be adjudicated. The back of the warehousing certificate contains a term stating that its latest version of its terms and conditions is posted on its official website. The website contains an agreement stating that, among others, the governing law of the matter is English law and the English court shall have exclusive jurisdiction to adjudicate the matter.

In deciding whether the English court has exclusive jurisdiction, the English High Court held that as a matter of English law where terms are incorporated it must be shown that the party seeking to rely on the conditions has done what is reasonably sufficient to give the other party notice of the conditions. The learned Judge found that the first page of the warehouse certificate contains a clause stating that all disputes shall be subject to Impala’s terms and conditions. At the base of the page the reader is invited to refer to the reverse of the page for additional conditions. On the reverse, the reader is referred to Impala’s website for its terms and conditions.

Thus, the holder of the warehouse certificate knows that the certificate is subject to Impala’s terms and conditions. The High Court held that these steps taken by Impala were reasonably sufficient to give the holder notice of condition. In this day and age when standard terms are frequently to be found on websites, the High Court considered that reference to the website is a sufficient incorporation of the warehousing terms to be found on the website.

Cockett Marine Oil DMCC v Ing Bank NV & Anor [2019] EWHC 1533, on the other hand, involves a challenge of two arbitration awards on the ground that the arbitral tribunal had no jurisdiction. The tribunal held that it had jurisdiction because the terms of the contract between the parties included a London arbitration clause. The claimants had agreed to purchase bunkers from the defendants in two separate transactions. The defendants, being the sellers, had earlier sent a mass email to their customers enclosing their terms and conditions which contained the London arbitration clause which provides for the jurisdiction of the arbitral tribunal in London in the event of a dispute. The parties had a dispute and the defendants brought the matter to arbitration.

In one of the two transactions, it was done through an exchange of email. The defendant sent a copy of its sales order confirmation which contained the particulars of the sale and purchase. The email also stated that “…The fixed terms and conditions are well known to you and remain in your possession. If this is not the case, the terms can be found under the web address [to the defendant’s terms and conditions]”.

The English High Court held that the defendants’ terms and conditions apply to the contract for the supply of bunkers and therefore the arbitral tribunal has jurisdiction. The High Court found that the claimants were aware of the defendants’ terms and conditions since the defendants had taken steps to inform their customers, including the claimants, regarding the defendants’ terms and conditions by way of the said mass email. In respect of the transaction involving the email exchange and sales confirmation order, the High Court further held that the claimant could access the defendants’ terms and conditions by clicking on the hyperlink in the sales order confirmation.

Malaysian Court’s position

Our Court’s approach in assessing whether the hyperlinked contract or terms is similar to the English court’s position. Essentially, there must be a clear and concise notice informing the reader that their hyperlinked contract or terms apply. Therefore, parties who wish their hyperlinked contract or terms to be incorporated must ensure that they provide an avenue for the user to read the terms of the agreement. Simply inserting a hyperlink to the terms and conditions may not be effective in making them form part of the overall contract. The following recent court decisions highlighted the thorny issues of hyperlinked agreements’ enforceability in businesses in whether or not it could be incorporated by reference.

In Able Food Sdn Bhd v Open Country Dairy Ltd [2021] 7 CLJ 716, the plaintiff, a Malaysian company, sued the defendant, a New Zealand company, for alleged breach of contract(s) in, among others, supplying instant whole milk powder of unmerchantable quality. The plaintiff demanded, among others, special damages and general damages for loss of profit and loss of market.

The defendant challenged the jurisdiction of the High Court in Malaysia to hear the dispute on the ground that the parties had submitted to the exclusive jurisdiction of the courts in New Zealand. In this regard, the parties had entered into seven (7) sales contracts. Each of the sales contracts (except for one) contains an endorsement with a hyperlink to its terms of trade (“Terms of Trade”) and it reads as follows: “http://opencountry.co.nz/termsoftrade

The Terms of Trade form part of this contract for sale and the parties agree to comply with the Terms of Trade in performing their obligation under this contract. Please be advised that OCD has modified its Terms of Trade please consult the attached terms.”`

The defendant argued that their “Terms of Trade” were incorporated by reference in each of the sales contracts wherein the parties had agreed that New Zealand law would apply and the parties are subject to the exclusive jurisdiction of the courts in New Zealand (hereinafter referred as the “choice of law and jurisdiction clauses”).

The High Court ([2021] 4 CLJ 614) held that the choice of law and jurisdiction clauses were not incorporated in the contracts because the Terms of Trade were not attached to the sales contracts, among others.

However, on appeal the Court of Appeal overturned the High Court’s decision and held that the choice of law and jurisdiction clause was, in fact, incorporated into the sales contracts.

In regard to whether the Terms of Trade were incorporated by reference, the Court reiterated the following basic principles of the law of contract:-

1. To incorporate a binding term, reasonable notice must be given either before or at the time the contract was made (Olley v Marlborough Court Hotel [1949] 1 KB 532 CA).
2. The terms incorporated should be located in a document where terms are expected to be printed (Chapelton v Barry Urban District Council [1940] 1 KB 532 CA).
3. Whether or not the parties had read the terms, contractual documents signed by the parties would automatically be considered as binding (L’Estrange v F Graucob Ltd [1934] 2 KB 394).
4. Reasonable steps must be taken by the party who inserted the term to bring it to the attention of the other party (Parker v South Eastern Railway Company [1877] 2 CPD 416).

The Court of Appeal found that the parties had a course of dealings. In all the sales contracts (issued by the defendant and duly accepted/signed by the plaintiff without any comment, modification, or qualification), it was clearly stated that the Terms of Trade formed part of the contract and that parties agreed to comply with the Terms of Trade in performing their obligations under the contracts. The endorsement in each of the sales contracts referred to a hyperlink, to wit, http://opencountry.co.nz/termsoftrade. The Terms of Trade could be found in the hyperlink. The plaintiff, for whatever reason, did not click on or look up the hyperlink. But that does not mean that the Terms of Trade, which are contained in the hyperlink, do not apply.

The Court of Appeal held that the burden was on the plaintiff to look up the Terms of Trade via the hyperlink. The failure on the plaintiff’s part to do so is akin to a contracting party not bothering to avail themselves of the terms, and to read and understand the same, with the benefit of legal advice or otherwise.

The plaintiff argued that the defendant was under a duty or obligation to furnish them with a copy of the Terms of Trade. The Court of Appeal was of the view that there was no such duty or obligation as the Terms of Trade were, as the defendant put it, just a “click away”.

The Court of Appeal found that notice of the Terms of Trade was given at the time when the contract was formed, and it was referred to in a document (Sales Contract) that one would reasonably expect to contain contractual terms. The express notice was given to the plaintiff that the Sales Contracts were subject to the Terms of Trade, which was accessible via a hyperlink provided. There was no ambiguity whatsoever as to where the Terms of Trade were located. Thus, the Court of Appeal was satisfied that the defendant had fulfilled the requirement of having taken reasonable steps to bring the Terms of Trade to the plaintiff’s attention and incorporating it in the Sales Contracts.

Additionally, during product purchase by the plaintiff, it is apparent that there is an exclusive jurisdiction clause. Therefore, the Malaysian Court is obliged to give effect to the exclusive jurisdiction clause unless the plaintiff, as the party sought to avoid the application of the clause, is able to establish that there are exceptional circumstances to justify the contrary. Since there was no convincing evidence to show that the plaintiff has an exceptional circumstance to exclude the express choice of jurisdiction, the most appropriate jurisdiction to hear the dispute would be in New Zealand.

The Court of Appeal further stated that although it would seem unfair in the plaintiff’s perspective to file the action in New Zealand, however, it is what they had agreed upon when they had signed the contract, and so if any inconvenience were to be faced by the plaintiff, it would merely amount to the consequences of their agreement.

In MISC Berhad v Cockett Marine Oil (Asia) Pte Ltd [2021] MLJU 563, the plaintiff had invited tenders for the supply of bunkers via email and in the email, the plaintiff had attached their proposal form and terms and conditions (“the Plaintiff’s Terms”).

In the body of the said email under the heading “Important Note”, the plaintiff set out terms and conditions of the purchase attached to the email. The Plaintiff’s Terms stated that the provisions of the agreement shall be subject to, construed, and interpreted in accordance with the laws of Malaysia, and the parties hereto submit to the exclusive jurisdiction of Malaysian courts.

In addition, the Plaintiff’s Terms stated that the Plaintiff’s Terms constitute the entire agreement between the parties and no modification would be effective unless in writing and signed by both parties.

After a series of emails were exchanged between the parties, the tender was awarded to the defendant. The plaintiff contended that the contract was concluded on the Plaintiff’s Terms when the parties agreed on the price. The defendant, on the other hand, contended that the contract was made on its terms as the defendant’s emails carries a hyperlink to the defendant’s website containing the Fuel Supply Terms & Conditions (“the Defendant’s Terms”) at its footer.

The parties made the necessary arrangements to perform the contract to supply bunkers to the plaintiff by the defendant (“Supply Contract”). The supply went into trouble when the bunkers were detained by the Malaysian Maritime Enforcement Agency for potential offences. The plaintiff then terminated the Supply Contract on the grounds that the defendant was in breach of its obligation to deliver the bunkers free of claims and encumbrances.

After the bunkers were released by the Malaysian Maritime Enforcement Agency, the parties’ solicitors had commenced negotiation with reference to the Plaintiff’s Terms. The negotiation failed and the plaintiff initiated proceedings against the defendant in the High Court of Malaysia for damages arising from the defendant’s alleged breach of contract. The defendant, however, commenced arbitration proceedings in London and consequently sought a stay order pursuant to section 10 of the Arbitration Act 2005 and challenged the jurisdiction of Malaysia’s High Court. In response, the plaintiff applied for an anti-arbitration injunction on the grounds that the English courts have no jurisdiction over the proceedings based on the terms agreed between both parties in the Supply Contract.

On the issue of whose terms apply, the High Court held that the parties are contracted on the Plaintiff’s Terms and therefore, the Malaysian court has jurisdiction to adjudicate the matter. Judicial Commissioner Atan Mustaffa held that the plaintiff had attached their terms during their invitation to tender whereby it clearly states the recipients were invited to tender using the form provided and on the basis that it was the Plaintiff’s Terms that were to apply as found under the heading of “IMPORTANT NOTE”. Although the defendant’s hyperlink to the Defendant’s Terms was stated in the footer of its emails to the plaintiff during negotiation, there was no indication that the defendant’s offer made pursuant to the plaintiff’s invitation was a counter-offer on the Plaintiff’s terms.

In addition, the learned Judicial Commissioner held that the invitation to tender issued by the plaintiff via email was an offer and capable of immediate acceptance and should not be regarded as a mere invitation to treat apart from the specific price made on the forms. The forms included specified time and place of supply, fuel specifications, and terms and conditions therewith, which were already present in the invitation to tender and was not left open for any further discussion.

The learned Judicial Commissioner held that the hyperlink to the Defendant’s Terms was not sufficient to be incorporated into the Supply Contract. There was no step taken by the defendant to draw the attention of the plaintiff to the application of the hyperlink which only appeared in the foot of the defendant’s emails.

The defendant did not make it plain that the Defendant’s Terms were to govern the Supply Contract by giving reasonable notice of the conditions in a visually prominent way. A reference to an inconspicuous hyperlink at the bottom of someone’s signature at the footer of the email does not constitute sufficient notice of intention to contract on different terms.

Tips when incorporating hyperlinked terms

Here are some tips that businesses may use when incorporating these hyperlinked terms during the course of negotiations-

1. Clarity is the key. You should expressly inform your counterparty that your terms apply and are available on a website. For example, the link is accompanied with a notice stating, “Please click here for our terms and conditions of trade”. Do consider placing your hyperlink at the body of the email. Avoid placing the hyperlink anywhere inconspicuous, such as the footer of the email using very small font size. Also, do ensure that the hyperlink is valid and not broken.
2. Insert a date on all your contracts. This is so that you know which version of the terms and conditions you were dealing with in the future.
3. Keep your terms and conditions up to date.
4. Keep a record of your previous contracts. As disputes may arise any time in the future, you may not know which contract is applicable if you have various versions of the contract. Such previous contracts may be recorded by way of a print screen.
5. Employ a tracking mechanism in the system. This could keep track of whether the counterparty had accessed the terms and conditions.
6. Verify whether the terms reflect what have been agreed by the parties. In other words, ensure the terms are parallel to what have been discussed or negotiated with the counterparty.
7. Check the terms thoroughly. Be extremely attentive to the accuracy and the detail of the terms. Staff should be trained to identify any ambiguous terms that may knock back any rights that you may wish to protect, especially when it involves any onerous provision. The court may hold against you for not examining the provisions stated in the terms and conditions.
8. Consider Response Procedure. This is even if you do not have any enquiries regarding the hyperlinked terms provided by the other party. Such response procedure can be in the following manner-
a. Open discussion regarding the contract or terms;
b. Investigate any problems which may affect your rights;
c. Review the terms and decide whether the contracted terms should apply.

First published on Digital News Asia on 20 and 21 September 2021. Also published on The Law Review 2021 by Sweet and Maxwell.

The post Bread & Kaya: Practical tips to ensure your electronic contracts are enforceable appeared first on Foong Cheng Leong.