Bread & Kaya 30: 2021 Cyberlaw cases in the recovery period Pt2

• 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

In Part two, I highlight interesting cases around the the increasingly common issue of disputes around electronic contracts (better know what you are getting into once you click to those "Agree to Terms/Conditions" buttons!) and the use of influencers for live streaming. 

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.

Final part tomorrow: Of NFTs, copyright owners complaining of their works being used and sold on marketplaces, of Quentin Tarantino jumping the gun (possibly), what are Grab drivers, where is Facebook, or is it Meta and the the old classics - Love Scams.