Esports Business Development Ltd v. Wong Chun Yee Christopher
Read the full judgment text of HCA 1953/2018 on BabelCite. This High Court CFI judgment was delivered on 19 May 2023.
1. In this action, Esports Business Development Limited ( “the Company” ) claimed against Wong Chun Yee Christopher ( “CW” ) for, inter alia , the deliver up of various properties including certain gaming analytics database and odds calculations and for the administration rights of some Facebook Fanpages ( “the Properties Claims” ). CW counterclaimed against the Company on the same subject matters, claiming that he had the right thereto instead ( “the Properties Counterclaims” ). CW also sued Vi
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HCA 1953/2018 [2023] HKCFI 1349 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 1953 OF 2018 --------------------------
-------------------------- (By Original Action)
-------------------------- (By Counterclaim)
_________________ JUDGMENT _________________ BACKGROUND 1.In this action, Esports Business Development Limited (“the Company”) claimed against Wong Chun Yee Christopher (“CW”) for, inter alia, the deliver up of various properties including certain gaming analytics database and odds calculations and for the administration rights of some Facebook Fanpages (“the Properties Claims”). CW counterclaimed against the Company on the same subject matters, claiming that he had the right thereto instead (“the Properties Counterclaims”). CW also sued Victor Chan How Chung (“VC”) and Daniel Chan Ka Yiu (“DC”), by way of counterclaim, for breaching a joint venture agreement (“the Alleged JV Agreement”) between them, in particular, by failing to inject funds into the Company as agreed. 2.The Properties Claims and the Properties Counterclaims have been disposed of prior to the commencement of the trial[1]. What remain are CW’s claims against VC and DC on the Alleged JV Agreement (“the Remaining Counterclaims”). The main issues involved are whether there was a binding JV Agreement between the parties as such, and if so, whether VC and DC have breached such an agreement. 3.Pursuant to the order made by Master M Lam by consent on 12 October 2018, this is a trial on liability only. Damages shall be assessed on a separate occasion if VC and/or DC is/are found to be liable to CW herein. CW’S CASE 4.CW and DC were close friends. CW was a Mathematics graduate from Imperial College London. He wished to set up an E-sports betting business. 5.In April 2013, CW incorporated a company in the United Kingdom (“the UK Company”) to kick-start his business. He worked very hard to develop gaming analytics database and odds calculations algorithms. He also briefly worked at Hong Kong E-sports Limited to gain more experience. 6.In September 2013, DC as a good friend of CW introduced his father (VC) to CW, so that CW could receive general feedback from VC on his business plan. At the time, VC was the Chairman of Rexlot Holdings Limited (“Rexlot”), a listed company which operated a lottery business in the PRC. 7.In 2014, CW began to actively look for investors for his business venture of e-sports betting and received very positive feedback. 8.At around the same time (in March/April 2014), DC told CW that he wished to partner with him. Out of friendship, CW agreed to share his equity with DC. 9.In around April 2014, CW was introduced to a group of Singaporean investors (“the potential Singaporean investors”), who were interested in CW’s business plan. On 21 April 2014, the potential Singaporean investors had in-principle agreed to invest in CW’s business plan.[2] 10.DC arranged a meeting with VC and CW on 21 April 2014[3] (“the First Meeting”). In the First Meeting, VC agreed[4] to invest HK$3 to HK$5 million in the business at the first stage to support primarily the product setup (i.e. software development) and licencing for e-sports betting. Such a commitment on the part of VC was backed up by DC’s Facebook message to CW on 5 May 2014, in which DC wrote “if 3 million not enough, he will give us more he says”. 11.On about 25 April 2014, CW took DC to meet the potential Singaporean investors in Singapore. After the meeting, they offered to invest HK$27 million for a 49% stake in CW’s business. The amount of HK$27 million was premised on a sum of HK$3 million primarily for software development and licencing, and a sum of HK$24 million for a 2-year operation after launch. 12.While CW and DC were in Singapore, VC asked his friend Vincent Wee (“Vincent”) to have dinner with them, with the objective of dissuading CW from accepting the offer of the potential Singaporean investors and persuading him to partner with VC instead. 13.After hearing about the offer from the potential Singaporean investors, VC was keen to invest in CW’s business. VC therefore continued to convince DC and CW that they should partner with him rather than the potential Singaporean investors. In order to do so, VC made an urgent offer of lending up to HK$30 million to DC and CW. 14.At a meeting held at VC’s home on 11 May 2014 (“the Second Meeting”), CW, DC and VC agreed that they would establish a joint venture business in e-sports betting (as was presented to VC in the draft business plan), which would be set up outside Hong Kong to avoid legal and regulatory issues. Furthermore, it was agreed that VC would provide the resources for obtaining betting licences and assisting operation overseas. 15.It was after such a meeting that the Company was incorporated with DC initially holding 5,001 shares and CW 4,999 shares. On account of VC’s funding commitment, CW later transferred 1,499 shares to VC, which VC declared as being held on trust for DC. 16.After multiple revisions to the business plan from May to June 2014, VC requested CW in July 2014 to provide financial collateral for the funds that he had promised to provide. This led to another meeting among the parties on 29 July 2014 at the Excelsior Hotel (“the Third Meeting”), in which VC explained that while he would lend HK$30 million to CW and DC, they should sign a share mortgage agreement which set out the required targets of the business, so that VC could call back the shares if the targets were not met. It was also agreed at this meeting that VC would provide HK$5 million at the first stage. 17.By the end of the Third Meeting, the Alleged JV Agreement had been made, which included (but not limited to) the following terms:
18.VC was fully aware of the e-sports betting business to be pursued, and agreed to meet and introduce legal advisers who would handle the betting licencing application in Malta. It was intended that companies would be incorporated in Hong Kong and offshore (e.g. Malta), since it was the consensus that e-sports betting involving real money (as opposed to play money which will be launched first) could not be conducted in Hong Kong. 19.Throughout the course of the Alleged JV Agreement, VC and DC were tardy in their performance while CW worked very hard to realise his business vision. Among other things, contrary to the Alleged JV Agreement, VC and DC refused to pursue the e-sports betting business of the joint venture and VC also failed or refused to advance funds as agreed, including the HK$5 million at the first stage (whether within 7 months of office renovation or by the second quarter of 2015 as agreed or at all), let alone the total of HK$30 million as promised. 20.After CW completed most of the groundwork for the business, such as the odds algorithm and the software development plan, VC decided to kick CW out by throwing baseless accusations at CW. Worse still, VC and DC sought to acquire all of CW’s hard work and to start a new company to the exclusion of CW. 21.On 8 May 2015, VC and DC procured the Company to give oral termination of CW’s position as Chief Operation Officer thereof. 22.On 12 May 2015, VC and DC also purportedly gave notice to remove CW as a director of the Company. 23.In a gist, VC and DC had breached the Alleged JV Agreement by:
THE CASE OF VC AND DC 24.It is undisputed that CW and DC were very close friends at the material time. 25.In September 2013, DC invited CW to join his family dinner with VC. Notwithstanding DC had bounced CW’s business idea to VC, the latter had no interest in CW’s business at all. 26.In April 2014, DC fell out with his former business partner. DC therefore decided to leave their company HK Esports Limited, and to team up with CW. 27.DC had been helping out CW by editing CW’s business plans. Despite the fact that DC had made very little contribution, out of brotherhood, CW gave him 50% of the shares in the UK Company. 28.With a view to getting more insight and advice from VC, DC arranged the First Meeting for CW to meet VC on 21 April 2014. At the time, no one was aware of any so-called in-principle offer from the potential Singapore investors. 29.In the First Meeting, VC took the view that their business plan was not good enough and lacked matured consideration. There was no agreement made whatsoever. 30.On 25 April 2014, DC and CW went to Singapore to make a presentation to the potential Singaporean investors. While they were in Singapore, they had dinner with Vincent twice. During the first dinner (29 April 2014), CW was asked by Vincent to obtain a term sheet from the potential Singaporean investors so that they could discuss further in the second dinner. In the second dinner which was held on 2 May 2014 (the day before CW and DC left Singapore), CW said he was unable to obtain any written and non-binding term sheet from the potential Singaporean investors. 31.During those two dinners, Vincent never attempted to discredit the potential Singaporean investors. Neither was Vincent told in those dinners that there was any in-principle offer on the table from anyone. 32.Upon their return to Hong Kong in early May 2014, VC did not want DC to get involved in the deal with the potential Singaporean investors as VC had concerns about their background. VC told DC that he would support DC if he wanted to set up his own company. 33.DC told CW about the decision. CW then decided not to proceed with the potential Singaporean investors so that he could continue to work with DC. 34.VC asked DC to come up with a business plan. VC was prepared to lend up to $3 million to his company if the business plan was viable and acceptable by VC, and would provide more funding if required. The above was said between father and son in a domestic setting. 35.The purpose of the Second Meeting (held on 11 May 2014) was for VC to give high-level comments on their business plan, which were given. At that time, VC was still not convinced by their business plan and the proposed share structure. Having given his comments, he asked them to perfect the business plans. Again, there was no binding agreement reached whatsoever. 36.The Company was incorporated on 15 May 2014. DC was allotted 5,001 shares while CW was allotted 4,999 shares. 37.DC and CW then went on to revise the business plans in May and June 2014 with a view to obtaining VC’s approval. However, VC still commented their draft business plans were “pure trash”. 38.VC had never agreed to be a business partner of CW and DC and/or in joint venture with them. The loan which VC provided to the Company was given purely out of his parental relationship with DC, and the reason for VC being a shareholder of the Company was because of (a) his provision of the said loan to the Company; and (b) more importantly, he would like to ensure that everything was on the right track so that DC would not be exposed to any risks[5]. 39.On 4 June 2014, CW agreed to trim down his shareholding in the Company to 35% by transferring part of his shares to VC. As VC had no interest in the Company, on the same day, he made a declaration of trust holding such shares on trust for DC. 40.In July 2014, CW became restless as he expected VC would help out by providing some funding. 41.On 27 July 2014, VC told DC in private that he was prepared to provide up to HK$5 million to the Company. 42.In the Third Meeting (held on 29 July 2014), CW and DC provided updates to VC on the business plan. However, no binding agreement had been reached as alleged. 43.The draft business plans prepared by CW and DC were never approved by VC. In as late as December 2014, VC still thought their business plan was trash. 44.In other words, the case of VC and DC was that the Alleged JV Agreement did not exist as such. Furthermore, the relationship between VC and DC is entirely domestic in nature in that VC all along only intended to help DC out of affection as a father. As a result, VC never had any intention to create any legal relationship with CW. 45.In relation to the termination of appointment of CW as the Chief Operation Officer of the Company and his removal as a director thereof, VC and DC alleged that CW prematurely insisted on launching a gaming system in Hong Kong, and had threatened that he would take the Company’s database and evaluation tools elsewhere with him. Therefore, it was said that the Company’s actions taken against CW in May 2015 were justified. CREDIBILITY OF WITNESSES[6] 46.In Hu Lan v David Golden [2023] HKCFI 873, this Court held that:
47.I will bear the above matters in mind when I consider the credibility of the witnesses in the present case. Perry Tam 48.Perry Tam (“Perry”) was the former General Manager of the Company. His evidence mainly revolved around the circumstances under which he came across a copy of the draft share mortgage agreement and his discussions with CW in respect of the potential parting way with the Company. 49.I must say I have a very strong impression that Perry was only trying his best to give evidence in favour of CW’s case, rather than giving truthful evidence in the Court. For example:
50.I therefore reject his evidence. CW 51.General speaking, I find that CW is an incredible witness. As this Court will further explain under different sub-headings below, many aspects of his evidence are contradictory to contemporaneous evidence. He has also changed his own evidence in respect of various matters. At this juncture, I am of the view that it is adequate to give the following examples:
52.All in all, I do not accept CW’s evidence. As aforesaid, further discussion will be found in the latter parts of this Judgment. Vincent 53.While Vincent has been a friend of VC for a long time, I cannot see any reason why he would come to give false evidence in Court for the sake of VC. His evidence is also supported by contemporaneous messages which were sent by DC to VC during the second dinner attended by Vincent, DC and CW on 2 May 2014. 54.Indeed, even CW’s senior counsel accepted that “little could be said about [Vincent]’s manner in giving the evidence”[8]. 55.On my part, I have no hesitation in accepting Vincent’s evidence as I take the view that he is an honest and reliable witness. DC 56.In my view, DC, as a witness, should be categorised somewhere between Vincent and CW. While generally speaking I accept that his evidence is largely consistent with the contemporaneous documents and is inherently probable, it is also evident that he has not been truthful all the time. There were also occasions when he appeared to this Court that he was trying to hide something and did not inform the Court the whole truth. For example:
57.To conclude, while I do not think DC is as unreliable as CW, I take the view that the Court should consider DC’s evidence cautiously. DISCUSSION – VC’S LIABILITY 58.While the Remaining Counterclaims were made by CW against both VC and DC, the bulk thereof was against VC. 59.For the sake of convenience, I will therefore consider CW’s counterclaim against VC first. First Meeting 60.It is CW’s case that the First Meeting was set up after DC had told VC about the in-principle agreement to invest on the part of the potential Singaporean investors and their upcoming meeting in Singapore. 61.While CW was not entirely sure whether the First Meeting was held on 21 April 2014 or 22 April 2014, I do not have any hesitation in finding that it took place on 21 April 2014 in the light of DC’s WeChat message sent on 20 April 2014 to CW, in which DC reminded CW not to be late and encouraged him to “add oil […] tomorrow”[9]. 62.In other words, by the time when the First Meeting was arranged (on or before 20 April 2014), the potential Singaporean investors had not informed CW about their in-principle agreement to invest yet (even assuming CW’s case that he was informed about it on 21 April 2014 is accepted, which is not – see paragraph 51(1) above and the following paragraph). Therefore, the arrangement of the First Meeting could not be because of such an in-principle agreement to invest as alleged in CW’s RRRAD&CC. 63.Pausing here, it is noted that there is a dispute as to when CW was informed about the potential Singaporean investors’ in-principle agreement to invest. I do not propose to repeat what I have already stated in paragraph 51(1) above. It suffices for me to say that it is my finding that the first time CW knew about it was on 29 April 2014. 64.On this matter, it was argued on behalf of CW that:
65.I do not accept this argument, because the subject email of Mr KH Wong reads:
66.In my view, in the context of the email, what Mr KH Wong meant was that an in-principle decision had been made to invest rather than an in-principle agreement had been reached with CW. CW’s argument is therefore misconceived. This conclusion is also supported by the fact that according to Vincent’s evidence, he had not been told about such an in-principle agreement when he met CW in Singapore. 67.Further, if CW was right in that he knew that the potential Singaporean investors had already agreed in-principle to invest by 21 April 2014, I wonder why it was still necessary to have the First Meeting with VC. There was also no need for DC and CW to revise their business plan on 22 April 2014 after the First Meeting. 68.Hence, I accept DC’s evidence that the sole purpose of the First Meeting was for DC and CW to seek insight and advice from VC rather than for them to seek funding from VC. 69.I have not lost sight of the business plan which was presented by CW to VC in that meeting. CW suggested that the timeline therein shows that DC and CW expected that funding from VC would be made immediately available to kick-start the project there and then. However, I do not think much weight should be attached to such a timeline which (i) was just a draft and (ii) could be revised at any time. 70.It is also CW’s pleaded case that there was an agreement reached in the First Meeting in that “VC agreed to, inter alia, invest HK$3 to 5 million”. 71.However, during Closing Submissions, Mr Suen SC clarified that he would not maintain that a binding agreement had been reached at the First Meeting. 72.In any event, the assertion that a binding agreement had been reached in the First Meeting is simply unsustainable and must be rejected. 73.Firstly, CW stated in paragraph 28 of his witness statement that:
74.If there was “no concrete commitment from VC”, it is a non-starter for CW to allege that there was any agreement reached. 75.Secondly, it was clear that CW tried to salvage his case while he was cross-examined in Court, by changing his evidence and alleging that VC had committed to lend him HK$3 – HK$5 million as a loan, for the purpose of helping him and DC to negotiate with the potential Singaporean investors. I do not accept that VC had made any commitment as such:
76.Thirdly, CW’s explanation that he went ahead to see the potential Singaporean investors despite VC’s agreement to lend him a loan so that he could “compare the offers” does not make any sense at all, because if what VC had agreed was only to lend him HK$3 to HK$5 million, there was nothing for CW to compare, given what CW was minded to raise was in the region of at least HK$27 million. 77.Fourthly, CW tried to portrait a picture that VC was already very interested in making an investment in CW’s business in the First Meeting. If that is the truth, then why didn’t VC make an offer there and then, knowing that CW would be flying off to Singapore to meet the potential Singaporean investors? 78.Furthermore, if VC was so interested in CW’s business idea that he had already agreed to invest, why did he propose to CW on 5 May 2014 to get professionals’ view on esport betting?[11] 79.To conclude, I reject CW’s evidence, and find that VC had not agreed to invest in CW’s business at all during the First Meeting. 80.On the other hand, I accept DC’s evidence that the purpose of the First Meeting was for CW and DC to discuss the business plan with VC so that they could get advice from VC, which they duly did. That was the reason why CW and DC revised the business plan after the meeting. Dinner meetings with Vincent 81.It is undisputed that CW and DC flied over to Singapore on 25 April 2014 (i.e. 4 days after the First Meeting) to meet the potential Singaporean investors. 82.It is also agreed that CW and DC had had two dinners with Vincent while they were in Singapore, on 29 April 2014 and 2 May 2014 respectively. 83.CW stated that the purpose of VC arranging his friend Vincent to have dinners with them was with the objective of dissuading CW from accepting the offer of the potential Singaporean investors, and persuading him to team up with VC. 84.On the other hand, according to Vincent, the purpose of the dinner on 29 April 2014 was for him and his wife to understand the business ideas of CW and DC so that he and his wife could share their business experience with CW and DC on how start-up business raised funds. As Vincent realised that the potential Singaporean investors had not given any proposal in writing to CW, Vincent suggested DC and CW to get a written term sheet so that the terms of the proposed investment would be clear. As CW told Vincent that he would try to get a written non-binding term sheet from the potential Singaporean investors before he left Singapore on 3 May 2014, Vincent suggested that another dinner be arranged for 2 May 2014, so that he could review the term sheet to be obtained. While the second dinner did take place accordingly on 2 May 2014, since CW told Vincent thereat that he could not get any term sheet from the potential Singaporean investors as suggested, they could not discuss the terms as planned. Another friend of VC, Mr Goh, who was also present at the second dinner, told CW and DC that it was not possible for the deal to move forward without a term sheet. Vincent emphasized that at no time during those dinners did he, his wife, nor Mr Goh try to convince DC/CW to proceed with their business in any particular way. 85.As aforesaid, I accept Vincent’s evidence. I reject CW’s evidence that Vincent had tried to persuade him during those dinners that he should partner with VC rather than the potential Singaporean investors. 86.My reasons are as follows:
87.While CW was in the witness box, he also said that he received a phone call from the potential Singaporean investors on 28 April 2014[13] in which they made a firm and confirmed offer to invest in his company, and that if he said “yes”, then it would become a binding contract. Although he only stated in his witness statement that he “was inclined to accept the generous offer”[14], he stated in Court that he had in fact said “yes” to the offer, and therefore he “was in some sort of breach”. I find this evidence incredible. In my view, CW only said that to boost his case. My reasons are as follows:
88.CW said DC then told VC about the potential Singaporean investors’ offer and CW’s inclination to accept the offer, and as a result, VC urgently made an offer to DC on the phone and urged them (DC and CW) to accept his new offer, which was to provide capital rounded up to HK$30 million. This must be another lie:
Second Meeting 89.As far as the Second Meeting is concerned, CW’s most up-to-date pleaded case is as follows:
90.It is noted that according to CW’s latest pleaded case as referred to above, VC did not agree to invest anything in the region of HK$30 million during the Second Meeting. 91.However, it is remarkable that this was different from his previous pleaded case. In his Re-Amended Defence and Counterclaim (dated 3 February 2017), CW pleaded, inter alia, that it was orally agreed at the Second Meeting that VC would invest a total of HK$30 million in the Company, which would be divided into two stages: HK$5 million at the first stage and HK$25 million at a later stage[16]. 92.This alleged oral agreement to invest was kept in the Re-Re-Amended Defence and Counterclaim dated 26 January 2018 which was settled by Mr Suen SC, save that the reference to the Company was amended to “the joint venture and/or partnership”. 93.The plea of the above oral agreement to invest allegedly reached in the Second Meeting was deleted altogether in CW’s RRRAD&CC (CW’s latest pleading) which was dated 29 June 2020. It appears that it is now pleaded that VC’s offer to provide a HK$30 million shareholder loan was made before the Second Meeting[17]. 94.However, CW’s position as reflected in his witness statement was different. In his supplemental witness statement, he alleged that by the end of the Second Meeting, VC offered to provide HK$30 million by way of a loan[18]. He further alleged that following VC’s promise to invest at the Second Meeting, the Company was incorporated on 14 May 2014[19]. He also stated that:
95.As a matter of completeness, I should also set out paragraphs 32 and 34 of CW’s witness statement referred to in the quoted paragraphs above:
96.In his oral evidence, CW also alleged that VC had agreed to invest a total sum of HK$30 million during the Second Meeting. 97.CW’s case is not accepted. 98.First of all, I do not accept that CW turned down the offer of the potential Singaporean investors upon his agreement with VC allegedly reached in the Second Meeting:
99.Pausing here, it should also be noted that, if CW had already told the potential Singaporean investors on 9 May 2014 that he was not going to pursue any partnership with them, there was no need for VC to further persuade CW and DC to partner with him instead of the potential Singaporean investors. This is just another lie told by CW. 100.Moreover, CW’s case that he had reached an agreement with VC for him to invest HK$30 million (or up to HK$30 million) in his business is simply contradicted by various pieces of documentary evidence and his own evidence, as demonstrated by the following quotations:
101.It may also be added that CW’s evidence that VC was very interested in his business plan is contradicted by the alleged offer of VC to provide $30 million loan rather than share purchase. 102.If there was no agreement as such reached in the Second Meeting, it follows that this must be an additional reason why CW’s case that VC had made an urgent offer to invest HK$30 million via a telephone call after CW’s trip to Singapore must be rejected. 103.During cross-examination, DC admitted that VC agreed to help him and CW to introduce legal consultants for gambling licencing in Malta and suitable IT companies for software development. It appears to me that VC might well have indicated in the Second Meeting (as well as before that meeting) that he might lend some money to the Company. Be that as it may, I do not accept that such an agreement on the part of VC would amount to a legal obligation as such. I agree that what VC had agreed to do was only to help out his son DC and DC’s business partner as a father. Third Meeting 104.In CW’s RRRAD&CC, he pleaded, inter alia, that it was orally agreed in the Third Meeting that:
105.It was also pleaded by CW that VC, DC and CW had entered into the Alleged JV Agreement which was “formed, embodied and evidenced partly orally, partly in writing and/or partly from the conduct of CW comprising the following”[22]:
106.CW’s case in relation to the Third Meeting is equally hopeless. 107.Firstly, while CW alleged that it was agreed in the Third Meeting that every important decision for the joint venture must be made by VC, DC and himself unanimously, this was contradicted by what he put in the Owners’ Manual which was prepared in August 2014, in which it was provided that:
108.It was also stated in another draft manual which CW prepared in August 2014 that:
109.Secondly, while he maintained under cross-examination that full agreement had been reached by the end of the Third Meeting, it was his own evidence in his supplemental witness statement that:
110.Thirdly, although CW said in Court that the agreement reached in the Third Meeting was that the first tranche in the sum of $5 million was immediately payable, it was actually his pleaded case that:
111.Fourthly, on 8 August 2014, DC forwarded a draft Business Plan (“the 8 August Business Plan”) to VC for his perusal. It is undisputed that the 8 August Business Plan was mainly prepared by CW. It was stated, among other things, that:
112.The significance of this statement is that if CW had ever reached any agreement with VC to invest HK$5 million as such, CW would not have put down only HK$4 million as the capital required as he did, particularly when CW had in fact complained to DC on 26 July 2014 that VC had only “pump[ed] 200k by 200k”[25]. He would have put in HK$5 million which is the alleged amount which he was entitled to. 113.Fifthly, in the 8 August Business Plan, it was further stated that:
114.This is plainly inconsistent with CW’s case that the second tranche of investment was in the sum of HK$25 million. 115.Sixthly, CW accepted in Court that he had always kept all options open, in that if he were able to raise money, such money would be used to repay VC as soon as possible. That is in direct contradiction against CW’s case that VC hoped to invest in the Company as alleged. I just wonder: if VC had reached a binding agreement with CW that VC would be allowed to invest in the Company, how come CW could take this right away from VC out of CW’s own will? 116.Seventhly, Mr Suen SC and Ms Chan argued that after the finalized version of the 8 August Business Plan was prepared, there was no further revision of the same, and this, it was said, supports CW’s case that a firm JV Agreement had already been reached by the parties. With greatest respect, this is factually incorrect. One only needs to refer to paragraph 34(b) of CW’s supplemental witness statement, in which he stated that he still “continued working on the draft business plan” in December 2014 to March 2015. 117.In my view, all VC had done in the Third Meeting was to indicate that he was willing to advance a “bridging loan” to the Company so as to help out DC. However, I do not accept that he had ever assumed a positive obligation to lend money to the Company or CW as alleged, still less to enter into the Alleged JV Agreement with CW. VC simply did not have any intention to enter into any binding agreement with CW/DC. Timing of the Alleged JV Agreement 118.Having dealt with what happened in the Third Meeting, this is the right point of time to dispose of the following CW’s argument:
119.I must say, with respect, this is a very desperate attempt on the part of CW’s legal team to salvage CW’s ever-changing case. One must not forget that in the present case, it was CW himself who pleaded very distinctly as to what had been agreed in the First Meeting, the Second Meeting and the Third Meeting respectively. In my view, the Court is obliged to consider CW’s own evidence in such light, and see whether he had proved his case. In the event, as it is the case here, that his own evidence was very different from his pleaded case, the Court is of course at liberty to take this matter into account when considering CW’s credibility. The draft share mortgage and term sheet 120.It was alleged by CW that after multiple revisions to the business plan from May to June 2014, VC requested CW in July 2014 to provide financial collateral for the funds that he had promised to provide. It was said that this led to the Third Meeting, in which it was agreed that parties shall sign a share mortgage, so that in the event the required targets of the business are not reached by the stipulated time, VC would have the right to call back the shares of the Company. 121.On the other hand, it was DC’s evidence that there was no discussion of the issue of collateral in the Third Meeting at all. 122.However, it is noted that DC had, subsequent to the Third Meeting, prepared a draft share mortgage agreement and a draft term sheet for CW’s consideration. In his evidence, DC explained that he prepared these documents for his own exercise only and that they were only “learning materials”. 123.With respect, DC’s evidence in this regard is incredible and is rejected. I do not believe that he had prepared the share mortgage and the term sheet as internal exercise as alleged only. In my view, it is more probable than not that DC did prepare the documents with the intention that they might have to be executed in future. That being the case, I also take the view that the topic of signing share mortgage had more likely than not been mentioned and discussed in the Third Meeting. 124.Be that as it may, I do not think the fact that these documents had been prepared would advance CW’s case:
Conclusion on the Alleged JV Agreement 125.All in all, I am of the view that CW has failed to discharge his burden of proof. He has failed to prove on the balance of probabilities that he had entered into the Alleged JV Agreement with VC. 126.It is also my finding that, generally speaking, the case of DC and VC makes much more sense, and is inherently more probable. I accept DC’s evidence that, VC, for the purpose of assisting his son, had agreed to lend money to the new business venture, provided the money were to be spent reasonably, even though VC was not interested in the business as alleged by CW. VC also agreed to provide the necessary assistance, for example, by introducing legal advisers and IT experts to DC and CW. Viewed objectively, in so doing, VC only wanted to help his son in starting up his own business. That was why the “investment” was injected as a loan rather than as capital into the Company. That was also the reason why VC still constantly criticised CW’s business plan as “trash”, which he would not have done so if he was as eager as CW alleged to persuade CW that he (VC) was a suitable investor. 127.It was also because of VC’s intention to help out his son that he had agreed to lend money to the Company, and it was under such circumstances that some figures (such as HK$5 million and HK$30 million) might have been mentioned between DC and VC (VC even stated that there was no limit as to how much he would give DC and CW so long as it was reasonable). No matter what figure(s) had been mentioned, I am of the view that it was done purely in a domestic context, even if it was mentioned in the presence of CW. There was no intention on the part of VC to enter into any legal relation with CW or DC at all[27], still less to be legally obliged to invest any sum of money into the Company. 128.CW heavily relied on VC’s involvement in the Company (for example, his appointment to the Board of Directors thereof, and his development of his own financial projection model for the betting business), and argued that VC had great interest in CW’s business plan. I do not accept such an argument. I think it is more likely than not that VC, by what he did, was only trying to assist his son to construct a feasible business plan and implement the same properly. If VC was in fact keen to participate in the business, there is absolutely no reason why VC would execute the declaration of trust over the shares in the Company that CW transferred to him. As pointed out by Mr Chong and Mr Lee, it makes no sense for an eager participant in the business to give up all the beneficial interests in the shares of the Company. 129.I also do not accept CW’s argument that since the subject matter of the agreement concerns a business venture, parties should be presumed to intend that the agreement reached between them would have legal effect unless the contrary is shown. The reliance of CW on the case of New World Development Co Ltd &Another v Sun Hung Kai Securities Limited (2006) 9 HKCFAR 403 at [14] is misplaced, because this Court is faced with a totally different factual scenario here. In the present case, any representation of provision of funding on the part of VC was made in a family setting between father and son. This conclusion is not affected even if such representation(s) had been made in the presence of CW, because CW was DC’s business partner. Hence, if money was lent to the Company, CW would also be benefitted naturally. The fact that CW could take advantage of VC’s fatherly love towards DC should not elevate what VC represented in his meeting with DC and CW into a binding legal obligation. Viewed objectively, it was clearly not VC’s intention to enter into any legal relation as such. Breach of the Alleged JV Agreement 130.It was further argued on behalf of VC that even if there was a binding JV Agreement, VC could not have been in breach. His counsel referred to a number of aspects of work which VC had done to assist the Company, for example, he had introduced different professionals and given advice to the Company. 131.Without disrespect to counsel, I do not intend to go through such assistance rendered by VC, because at the end of the day, it is accepted by VC that he had only lent HK$2.16 million to the Company between June 2014 and May 2015. In other words, if there was indeed a binding obligation on his part to lend HK$5 million to the Company at the first stage, VC had simply not discharged that obligation, and that would amount to a breach of the Alleged JV Agreement anyway. 132.Mr Chong and Mr Lee further argued that even if VC was in breach, CW had not accepted VC’s breach and CW had affirmed the contract. However, this has not been pleaded as a defence. I do not think the Court should consider this argument. Fiduciary duties 133.Apart from alleging that VC owed CW certain duties pursuant to the Alleged JV Agreement, CW also asserted that VC owed him certain fiduciary duties. 134.It is undisputed that whether or not partners[28] owe fiduciary duties to each other is fact-sensitive: Snell’s Equity (34th Ed.) at §7-006. 135.CW’s counsel submitted that the Court may find fiduciary duties in the present case between CW and VC on the basis of the following matters:
136.With respect, CW’s argument is rejected. 137.As pointed out by Mr Chong and Mr Lee, the alleged fiduciary duties stem from, and have no separate existence from, the Alleged JV Agreement. Given it is this Court’s finding that there was no such agreement, CW’s case on fiduciary duties is bound to fail. 138.Furthermore, in the circumstances of the present case, where VC’s agreement to lend money and assist in the business of DC and CW was only procured by his intention to help out his son, I do not agree that VC should be held to owe fiduciary duties to CW as suggested. Conclusion on liability of VC 139.By reasons of the aforesaid, CW’s counterclaim against VC is hereby dismissed. DISCUSSION – DC’S LIABILITY 140.Mr Suen SC argued on behalf of CW that even if VC did not enter into the Alleged JV Agreement with CW, it is undeniable that VC and DC did agree in the Second Meeting on the main theme of the joint venture business, the corporate structure of the Company, etc., and as a result, DC should still own certain duties to CW, and the finding that there was no Alleged JV Agreement as asserted by CW would not be the end of CW’s case against DC. 141.Even if Mr Suen SC is right on this, as it will be further explained below, this argument cannot salvage CW’s case against DC. The alleged breaches 142.In his closing submissions, CW relied on the following breaches on the part of DC and VC:
143.I will consider these alleged breaches in turn below. Overseas betting licences and assistance 144.It appears from CW’s closing submissions that CW only targeted at VC in relation to this breach, even though he vaguely referred therein to his evidence that:
145.It is therefore not entirely clear whether CW was also blaming DC for VC’s alleged fault. 146.However, what CW actually meant in his closing submissions[30] does not matter, for it is indisputable that, according to his pleaded case, the alleged relevant obligation fell on VC rather than DC. It was pleaded in CW’s RRRAD&CC that:
147.CW is bound by his pleadings. The Court will therefore not consider any of CW’s unpleaded allegation against DC. Injection of funds 148.The allegation of failing or refusing to inject funds is apparently directed at VC only, for it has never been CW’s case that DC was obliged (and failed) to inject any capital into the Company. Consultation/Discussion with CW 149.As pointed out by Mr Chong and Mr Lee, there was no pleaded express or implied term that VC/DC had to “consult and/or discuss with CW in relation to the business of the joint venture and/or partnership” in CW’s RRRAD&CC. For this reason alone, this ground should be rejected. 150.In any event, it is apparent from CW’s closing submissions that the complaint was directed at VC rather than DC. 151.Indeed, it is evident that CW was in frequent and direct contact with DC at all material times. 152.Further, on as late as 5 May 2015, CW still sent WeChat messages to DC saying that:
153.It can therefore be seen that CW had no complaint against DC even on 5 May 2015 – three days before his appointment as Chief Operation Officer was terminated, and one week before his directorship was removed. 154.This complaint is therefore not made out against DC. Changing of and failing to pursue business plan 155.CW’s closing submissions read:
156.While CW’s counsel tried to drag DC into the picture by making a reference to DC in paragraph 105 of CW’s closing submissions, it is clear that the alleged delay or change in business direction (if any) were caused by VC but not DC:
157.Even if DC should be held responsible for VC’s email and for what Paddy said in the meeting on 5 May 2015, I do not accept that CW has proved his case against DC because:
158.It may also be recalled that CW sent WeChat messages on 5 May 2015 to DC, saying that he still wanted to work with DC, and he did not want to “break the partnership” with DC. Those messages were sent in the night of 5 May 2015, after CW had had the said meeting with Paddy and Jennifer. This demonstrates that CW knew that DC should not be blamed by whatever Paddy said in the meeting. 159.CW’s complaint against DC in this regard must therefore fail. Exclusion from management and control of the JV 160.Turning to CW’s being excluded from the management of the Company, DC relied on two matters in support of his case that the removal of CW was justified:
161.DC further told the Court that, on or about 7 May 2015, he heard from Sunny Ip that CW and Perry were discussing in the Company’s office that they would sell the Company’s data and system to an investor if VC would not give CW a satisfactory reply. 162.Despite my view that the Court should consider DC’s evidence cautiously, I am of the view that his evidence in this regard should be accepted because:
163.I therefore hold the view that the exclusion of CW from the management and control of the Company was justified. 164.Relying on various solicitors’ letters sent on behalf of VC and DC and the fact that VC has caused the incorporation of another Hong Kong company known as Esports XP Limited in June 2015, CW alleged that VC and DC were seeking to exclude CW on the pretext of theft and hoping to acquire the odds calculations algorithm for their own business pursuit. With respect, this is pure speculation on the part of CW without basis. Conclusion on DC’s liability 165.Therefore, CW’s counterclaim against DC should also be dismissed. DISPOSITION 166.By reasons of the aforesaid, the Remaining Counterclaim made by CW against VC and DC is hereby dismissed. COSTS 167.Costs should follow the event. 168.I make a costs order nisi that CW shall bear the costs of VC and DC of the Remaining Counterclaim (including all costs reserved), with Certificate for two counsel, to be taxed if not agreed. 169.The above order nisi shall become absolute in the absence of application to vary (which, if any, shall be made by letter, and will be disposed of on paper) within 14 days hereof.
Mr Jenkin Suen SC leading Ms Tinny Chan, instructed by W. K. To & Co., for the plaintiff (by counterclaim) Mr Patrick Chong and Mr Adrian Lee, instructed by Baker & McKenzie, for the defendants (by counterclaim) [1] The Properties Counterclaims were settled on Day 1 of the trial, before CW’s senior counsel made his opening submissions [2] Paragraph 13(b) of CW’s Re-Re-Re-Amended Defence and Counterclaim (“CW’s RRRAD&CC”) [3] While it is CW’s pleaded case that the First Meeting was held on 22 April 2014, CW agreed in Court that he could not tell whether the meeting was held on 21 April 2014 or 22 April 2014. In CW’s opening submissions, it was stated that the meeting was held “on or about 21 or 22 April 2014”. On the other hand, it is the pleaded case of DC and VC that the meeting took place on 21 April 2014, and this assertion is supported by contemporaneous messages exchanged between DC and CW [4] While it was pleaded in CW’s RRRAD&CC that VC “agreed” to invest HK$3 to HK$5 million in the First Meeting, CW’s senior counsel used the word “offered” instead of “agreed” in his opening submissions [5] Paragraph 11(c)(xvi) of the Re-Amended Defence of VC and DC [6] While VC did serve two witness statements for the purpose of this action, he did not give evidence at the trial, as his application to give evidence by video conferencing facilities had been refused by this Court: [2022] HKCFI 2627. Mr Suen SC and Ms Chan initially argued that adverse inference should be drawn against VC by reason of his absence and his (and DC’s) failure to call some other witnesses to give evidence. However, this argument was abandoned on the last day of the trial. [7] Paragraph 14 of his witness statement [8] Paragraph 23 of CW’s closing submissions [9] [D5/1154] [10] Paragraph 49 of CW’s closing submissions [11] [D1/94] [12] [D1/91] [13] During re-examination, CW changed his evidence and alleged that the confirmed offer was actually received between 29 April 2014 and 2 May 2014. This change does not have any impact in this Court’s finding that the potential Singaporean investors did not make such “confirmed offer” as alleged. [14] Paragraph 31 of CW’s witness statement [15] Sent on 9 May 2014 at 11:36pm [16] Paragraph 14(d)(i) thereof [17] Paragraph 13(f) of the RRRAD&CC [18] Paragraph 14(d) of CW’s supplemental witness statement [19] Paragraph 15 of CW’s supplemental witness statement [20] Paragraph 12(c) and (d) of CW’s supplemental witness statement [21] Paragraph 40 of CW’s 1st witness statement [22] Paragraph 16 of CW’s RRRAD&CC [23] Paragraph 22 of CW’s supplemental witness statement [24] Paragraph 16A(d) of CW’s RRRAD&CC [25] [D2/366] [26] Paragraph 6 of CW’s reply submissions [27] Yu Man Fung Alice v Chiau Sing Chi Stephen [2020] HKCFI 2923 at [39] (affirmed on appeal [2021] HKCA 1456 at [41]) [28] Assuming VC and CW are partners for the sake of argument only [29] Paragraph 113 thereof [30] Including his reply submissions in which he did not refer to any evidence against DC in this regard although it was maintained that he has a case against DC: see paragraphs 16 – 17 thereof [31] Paragraph 14(d) and (e) of CW’s RRRAD&CC [32] This is accepted by CW: see paragraphs 85 and 86 of his closing submissions [33] Paragraph 40(d) of CW’s supplemental witness statement | ||||||||||||||||||||||||||||||||||||||
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