Craft Bamboo Holdings Ltd v. Richard Paul Coleman and Another
Read the full judgment text of HCA 2665/2017 on BabelCite. This High Court CFI judgment was delivered on 6 June 2024.
1. In this action, the plaintiff company (“ P ”) claims against Richard Paul Coleman (“ D1 ”), its former director and CEO [1] and Team Principal for amongst other things, an account of profits or alternatively sums pleaded, over alleged breach of fiduciary duties and/or breach of contract. P also claims against Mayfield Sports Management Limited (“ D2 ”), a company of which D1 was/is a majority shareholder for amongst other things, an account of profits, or alternatively sums pleaded.
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HCA 2665/2017 [2024] HKCFI 1509 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 2665 OF 2017 _______________________ BETWEEN
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________________ JUDGMENT _________________ _____________________ Table of Contents _____________________ 1.In this action, the plaintiff company (“P”) claims against Richard Paul Coleman (“D1”), its former director and CEO[1] and Team Principal for amongst other things, an account of profits or alternatively sums pleaded, over alleged breach of fiduciary duties and/or breach of contract. P also claims against Mayfield Sports Management Limited (“D2”), a company of which D1 was/is a majority shareholder for amongst other things, an account of profits, or alternatively sums pleaded. 2.Bamboo Engineering Limited (“BEL”) is a private limited company incorporated under the laws of United Kingdom in 2009. BEL was co-founded by D1 and a professional racing driver Harry Vaulkhard (“Harry”) and Harry’s father, the late Nigel Vaulkhard (“Nigel”), as a vehicle to set up a motorsport team called Bamboo Engineering in UK, with D1 owning 10% and Nigel and Harry each owning 45% of the shares[2]. The Vaulkhards’ 90% shareholding was/is held by a company called Vaulkhard Group Limited (“VGL”). According to D1, during 2010 to 2013, he was the figurehead, Team Principal and CEO of the Bamboo Engineering racing team, and he was also a director and an employee of BEL. 3.Craft Racing Holdings Limited (“CRHL”)[3], formerly called Craft Racing Limited (“CRL”), is a private limited company incorporated under the laws of Hong Kong in 2009/2010 by Mr Frank Siu Fung Yu (“Yu”), to operate a motorsport team named Craft Racing in Hong Kong[4]. 4.D1 recruited a professional racing driver Mr Darryl Hayden O’Young (“O’Young”) to race for Bamboo Engineering/BEL between 2010-2014. In 2013, O’Young joined CRHL as a driver, and became one of its directors. 5.It was not disputed that it was O’Young who introduced D1 to Yu, which led to a merger of the two companies CRHL and BEL (“2014 Merger”). 6.A memorandum of understanding was said to be agreed and signed in or around February 2014 (“MOU”) in relation to the 2014 Merger, and thereafter, a new racing team Craft Bamboo Racing was launched in March 2014 and Craft Racing sub-contracted all of its operations to the new team. P was incorporated under the laws in Hong Kong on 9 May 2014, and BEL became a subsidiary of P as from that date. Prior to P’s incorporation, according to D1, the prospective directors had agreed in a board meeting what was set out in a document prepared by D1 setting out the objectives and future strategy of P (“CBH Strategy Document”)[5]. 7.At the time of P’s incorporation, there were 100 issued issues of HKD 1 each and the total paid up amount was HKD 100 and the registered shareholders were:
8.Upon the launching of the racing team Craft Bamboo Racing, D1 was said to be appointed the CEO and Team Principal of P, although the company had yet to be incorporated. Anyway, upon P’s incorporation, D1 became one of its directors, its CEO and also Team Principal, until D1 was removed as CEO, Team Principal, and/or director, of P on 21 November 2017 (“Termination Date”). 9.It was the pleaded case of D1 and D2 (collectively “Ds”) in their amended defence and counterclaim filed on 17 November 2020 (“AD&C”) that in September 2014, given D1’s express intention to undertake motor racing work other than for P, D1 and Yu and/or O’Young on behalf of P orally agreed amongst other things to D1 forming a new company (“Oral Agreement”)[6] and the company and/or D1 could undertake work not in conflict with P’s interest. D2 was thereafter incorporated by D1 in October 2014 in United Kingdom. 10.At all material times, D1 was/is the sole director of D2 and D2’s issued share capital was held as follows:
11.Upon the incorporation of D2, D1 resigned from his position as an employee of BEL. 12.Later, Craft Racing Group Limited (“CRGL”) was incorporated on 19 June 2015 by Yu and upon its incorporation, the legal and beneficial ownership of the entire issued share capital of CRHL was transferred to CRGL, in order for CRGL to hold the shares in P. 13.Around middle of July 2015, P and D1 and/or D2 entered into 4 written agreements (collectively “Agreements”), as follows:
14.It was P’s case that it later discovered D1 wrongfully (1) diverted business opportunities away from P; (2) intentionally misled P; (3) made a secret profit in breach of D1’s fiduciary duties; and/or (4) acted in breach of the Shareholders Agreement. P further alleged amongst other things dishonest assistance on part of D2 to D1’s breach of fiduciary and contractual duties, and D2’s breach of contractual duties. 15.P issued the writ herein on 20 November 2017 and its statement of claim was filed on 11 December 2017. It was amended on 11 October 2019 (“ASOC”) and finally re-amended on 4 September 2023 to reflect the final amount claimed (“RASOC”). 16.Ds first filed their defence and counterclaim on 11 January 2018. D1 counterclaimed for an order for P to deliver up to him his laptop (“Laptop”) and damages for conversion, and D2 counterclaimed against P amongst other things for an injunction to restrain P from using confidential information of D2 and an inquiry or account for breach of confidence and/or profits for use of Ds’ confidential information. After oral evidence at the trial and before closing submissions, Ds issued a summons on 4 October 2023 seeking leave to further amend their AD&C (“Amendment Summons”), which will be considered later in this judgment. 17.There were originally 10 disputed issues, 6 in relation to P’s claim and 4 in relation to Ds counterclaim. 18.Issues 1 and 3 concerned D1’s breach of fiduciary duties allegedly owed to P. Issues 2 and 4 concerned Ds’ respective breach of contractual duties as alleged by P. Issue 5 concerned the Oral Agreement. Issue 6 concerned the reliefs sought by P. 19.At the commencement of the trial, the Court was informed that Ds would no longer rely on the Oral Agreement. Issue 5 is thus no longer a disputed issue. 20.Insofar as P’s plea that D2 is the “alter ego” of D1, Ds indicated that they would not dispute that D1’s knowledge may be attributed to D2. In Ds’ Closing Submissions, Ds also indicated that they would no longer pursue their plea that there was no consideration given for the Coleman Contract. 21.Issues 7 and 8 concerned Ds’ counterclaim, namely P’s alleged conversion of D1’s Laptop and Issue 9 concerned D2’s claim against P for breach of confidence. Issue 10 concerned the reliefs sought by Ds. In Ds’ Closing Submissions, the Court was informed that D2 would not pursue its counterclaim against P for commissions. 22.Mr Hu had in paragraph 10 of his Opening Submissions set out a table of the 9 “deals” (collectively “Deals”) which were subject of P’s original claim in the ASOC together with Ds’ position thereto. Briefly, in chronological order, the Deals, P’s claim and Ds’ position in the RASOC are now as follows:-
23.Thus ultimately in the RASOC, P’s claim concerned only 6 Deals with Ds having admitted liability on the IGO Deal. 24.O’Young and Yu each submitted one witness statement and two supplemental statements on behalf of P. They had attended trial physically to be cross examined. Harry had submitted a witness statement on behalf of P but he was unable to attend the trial due to his passport issues. Pursuant to the order of 11 May 2023[13] (“PTR Order”), his evidence in his witness statement was not admitted. 25.On Ds’ side, Mr Leo Ma (“Leo”) former Chief Operating Officer of Dranix Technology Development Limited (“Dranix”) submitted a witness statement on behalf of Ds and attended the trial physically to be cross examined on his witness statement. Mr Brian Chase (“Brian”) was granted leave on 29 August 2023 to give evidence through VCF. He had provided one witness statement behalf of Ds. Ds’ other witnesses Ms Tanya Maude also known as Tanya Knight (“Tanya”) and Mr Dan Walmsley failed to attend the trial, and their evidence in their respective witness statements was not admitted. 26.D1 submitted 3 witness statements. He was originally scheduled to attend the trial physically but the Court was informed on the 2nd day of the trial, ie 5 September 2023 that he was suffering from Covid and he sought leave to give evidence by way of VCF. This was strongly opposed by P, but eventually, rather than an adjournment of the trial, D1 was allowed by this Court to give evidence by VCF. E. DS’ FIDUCIARY DUTIES AND/OR CONTRACTUAL DUTIES E.1 P’s and Ds’ respective case 27.P’s case was that D1 owed fiduciary duties to P arising out of D1’s role as P’s director and CEO including but not limited to the following duties:
28.It was P’s case that D1 was in breach of his fiduciary duties. 29.It was also P’s case that D1 had also breached his contractual duties under the Shareholders’ Agreement, the Consultancy Agreement, and the Coleman Contract. 30.The wrongful acts of Ds relied on by P were summarised by Mr Hu in his Opening Submissions, as follows[14]:
31.The Court was informed at the commencement of the trial that Ds would submit to judgment on the IGO Deal for breach of the Consultancy Agreement. It is thus not necessary for the Court to consider those issues concerning the IGL Deal in light of Ds’ said admission of liability. As mentioned earlier, Ds decided not to rely on the Oral Agreement originally pleaded in the AD&C. Further, the plea in the AD&C that there was no consideration given for the Coleman Contract[15] was also not pursued by Ds[16]. 32.There was no dispute that D1, being a director and CEO of P, owed fiduciary duties to P. It was D1’s case that his fiduciary duties were limited by the scope of P’s business, prescribed by, in particular, the Shareholders Agreement and that on the true construction of the Agreements, the scope of P’s business did not include the business in which Ds engaged while contracted to P, namely that of a commercial agent, sponsorship broker or intermediary for third parties. In particular, brokering the sponsorship of Formula One (“F1”) teams was not the “Business” of P as provided in the Shareholders’Agreement, nor was an opportunity to do so a “Business Opportunity” for P provided in the Shareholders’ Agreement[17]. E.2 The general legal principles 33.There is no dispute that a director is in a fiduciary relationship with the company of which he/she is a director. There are various duties owed by the director to the company including (i) acting in the company’s best interest; (ii) not to act in conflict of duty and interest; and (iii) not to make secret profits. It is also not disputed that CEO of a company owes the company fiduciary duties. 34.In the leading authority of Poon Ka Man Jason and Cheng Wai Tao FACV 17/2015, [2016] 19 HKCFAR 144, the issue was whether the 1st defendant (1st appellant) was in breach of fiduciary duties, specifically whether the scope of his fiduciary duty was limited by an agreement in that it had been agreed that the company C was a single restaurant company and so the 1st defendant’s fiduciary duties did not extend to his conduct in establishing other restaurants[18]. 35.Spigelman NPJ gave the majority judgment and for reasons stated therein, he was not persuaded that any such agreement had been established by the 1st defendant, to which Ribeiro and Fok PJJ agreed, with Tang PJ and Bokhary NPJ dissenting. The appeal was dismissed. 36.As set out in the headnote[19], it was held , amongst other things, by the majority that:
37.Mr Kat SC had in paragraph 14 of Ds’ Opening Submissions quoted paragraphs 70 to 88 of the judgment of Spigelman NPJ. To summarise, (i) the duty of a director to act in the best interests of the company is a statement of the positive duty of loyalty which is broader than, but encompasses, the conflict rule; (ii) the conflict rule is generally stated in the form that a fiduciary may not put himself/herself in a position where his/her interest and duty conflict; (iii) a “scope of business test” may be applicable to a company director and the facts and circumstances of a particular case may be such as to modify the subject matter to which the fiduciary duties of a director apply: (iv) and at paragraph 91, unless the scope of fiduciary duty is limited in the way contended by the director, the director is in breach of the conflict rule. 38.What is clear from the above is that the burden is on the director to establish the scope of those fiduciary duties owed by the director is restricted in the manner contended by the director. 39.On construction of contracts, Eminent Investments (Asia Pacific) Ltd and DIO Corp [2020] HKCFA 38, (2020)23 HKCFAR 487 is a recent authority from our highest court. Briefly, as seen in the headnote, it was held unanimously (per Ribeiro PJ and Lord Collins of Mapesbury NPJ, with the others agreeing), amongst other things that,
40.With the above general principles in mind, I turn to the facts of the present case. 41.In paragraph 8 of the AD&C, it was averred by Ds that the final sentence in Clause 3.1 of the Shareholders Agreement defined “the Business” in Schedule 2[20]. 42.Clause 3.1 states in its entirety:
43.Clause 3.1 consists of 2 sentences. The definition of “Business” is at the end of the 1st sentence. In my view, on plain reading, the definition “Business” refers not to the 2nd or final sentence, but what is stated in the 1st or opening sentence, namely the motorsports business stated therein. 44.The heading of Clause 3 reads “Business activities of the Group”. To the Court, the words “substantially in accordance with the business strategy set out in Schedule 4”, in the 1st sentence, describes how the motorsports business of the Group ,or “Business”, should be carried on, ie the business activities. The words “including but not limited to” are also of a wide scope and not restrictive, and not limited to those business activities set out. 45.In fact, all the 2nd or final sentence of Clause 3.1 says is that the Board (with the consent of a Significant Majority) may approve from time to time particulars of the Asia based business and the UK based business set out in Schedule 2, subject to conditions. I do not agree that Clause 3.1 “qualified ‘Business’ by Schedule 2 into ‘Asia based business’ and ‘UK based business’ ”, as pleaded by Ds in paragraph 9 of the AD&C[21]. 46.Schedule 4 contained the CBH Strategy Document. As pointed out by Mr Kat SC on behalf of Ds[22], the “Purpose” of the document as stated in the opening paragraph was to define the objectives and strategy of the new company, namely P, which was the “business strategy” in accordance with which P was to carry on the motorsports business under Clause 3.1. 47.The paragraph then went on to state:
48.According to D1, the CBH Strategy Document was agreed by all the prospective directors in a “board meeting” on 27 March 2014 and they were “in to implementing”[23]. There was no dispute as to this. 49.There was a list of the key areas for attention set out by D1 under the heading of “Objectives and Strategies” on page 4 of the CBH Strategy Document for “Year 1”. In light of the document being agreed on 27 March 2014, “Year 1” should refer to 2014. The list was clearly stated to be not exhaustive[24]. Further, in the last paragraph under “Year 1”, D1 stated that putting the restructuring process to one side, the next 7 months were vital in terms of “business development for 2015 and beyond”, and he then set out thereunder what subject headings for the “focus for business development”, namely:
50.D1 then set out “Areas of future opportunity”[25] (“Future Opportunity Section”) and it is stated by D1 thereunder:
51.It was submitted on behalf of Ds that there was no mention of “the business of obtaining or brokering commercial sponsorship for third parties in motorsport”[26]. However, as stated by D1 himself in the Future Opportunity Section, it was impossible to pin point all the opportunities. 52.In the “Conclusion” (“Conclusion Section”) D1 further stated:
53.There was no separate action list prepared by D1 subsequent to the CBH Strategy Document that was drawn to the Court’s attention. To summarise, on the natural and ordinary meaning of the words in Clause 3.1 and the CBH Strategy Document, and on my plain reading and as said earlier, the definition of “Business” in Clause 3.1 refers to the “motorsports business” earlier in the sentence, which, in my view, can be wide and extensive and includes all aspects of motorsport business, and in any event not restrictive in scope as suggested by Ds. There was in fact no definition of “motorsports business” in the Shareholders Agreement, nor in the CBH Strategy Document. In D1’s own words in the CBH Strategy Document, it is “a dynamic and fast changing industry and it is impossible to pin point all the opportunities and areas of interest at this stage”[27]. Although D1 then list out 3 areas of interest, it was clearly only at that stage. There was nothing in the CBH Strategy Document that I can see which was to restrict the 2014 Merger to only those 3 areas of interest. I am therefore unable to accept Ds’ submission that the brokering of sponsorship for third parties or brokering of sponsorship for F1 teams did not fall within the definition of “Business” in Clause 3.1 of the Shareholders Agreement. 54.Ds also relied on the definition of “Services” of D2 under “Part 1” in the Schedule of the Consultancy Agreement[28] and argued that D2 was obliged only to seek sponsors and funding for “the Group’s activities”, and D2’s services therefore would not include brokering sponsorship for other third parties[29]. 55.The “Services” was defined as:
56.First, there was only a definition of “Group Company” and there seemed to be no definition of “Group” but assuming they meant the same, “Group Company” was defined to mean P and its subsidiaries. There was nothing to indicate that “subsidiaries” would be limited to only those subsidiaries at the time of the Consultancy Agreement in July 2015, ie BEL or CRHL (CRL)[30] and could include any possible future or other subsidiaries in any “potential acquisitions” referred to in the CBH Strategy Document[31]. Further, “the Group’s activities” were not limited to only those activities of P, BEL and/or CRL at the date of the Consultancy Agreement. Further, the “group strategy” for which D2 was to provide services to implement may be varied from time to time, as set out under “Services”. 57.Second, Clause 3.2 of the Consultancy Agreement provided that “If [P] require any change to the nature or scope of the Services, it shall notify [D2] and provided such change does constitute a material change to the Services the Services shall be deemed amended with effect from the date of the notice”. Thus, P could notify D2 at any time of any change to the nature or scope of the Services. 58.Third, Clause 2.2 of the Consultancy Agreement provided that “[D1] shall devote his full time, attention and ability to [P] in the provision of the Services to [P] during the time period he is engaged to provide the Services”. Clause 3.3 of the Consultancy Agreement provided that “During the period of this Agreement, [D2] shall not provide services to any third party other than a Group Company, without [P’s] express prior written consent which shall not be unreasonably withheld.” 59.Fourth, I do not agree that the Clauses 2.2 and 3.3 were “problematic” as submitted on behalf of Ds, or that neither of the two clauses could have been intended to be construed literally[32]. It was argued that the effect of the restraint of trade in Clause 3.3 went far beyond the business of D2 and of P described in the section under the heading “Background” in the recital. However, although the business engaged by D2 was stated in the recital to be offering consultancy services in relation to the management of motor racing teams, the “Services” agreed to be provided by D2 to P clearly went beyond merely offering consultancy services in relation to the management of motor racing teams. 60.Fifth, it was further argued on behalf of Ds that as Clause 11.1.5 prohibited the provision of services by D2 and its personnel to other persons etc which were in “direct competition” with P, thus this would “countenance that [D2] may in fact provide services to other parties”, and similarly as Clause 11.1.4 permitted D2 to take up such work even if there was a conflict, this clause established that Clause 3.3 could not have been intended to be a blanket ban on D2 providing any services to third parties[33]. However, as seen in the email dated 9 August 2017 from the lawyer Mr Robert Cain to D1, it was clearly Mr Cain’s advice to D1 that if D2 wanted to provide services to another entity, it would need the consent of P[34]. Mr Kat SC submitted that even if that email was admissible, it would at best merely be evidence of Mr Cain’s “shorthand advice” to D1 and that it should be disregarded. Anyway, in a further email of 27 October 2017, Mr Cain also advised D1 that his votes were equal but the Shareholders Agreement spelt out what could and could not be done without the appropriate number of votes and that D1 needed to look at the Shareholders Agreement to make sure that he would have the requisite majority or unanimity as appropriate[35]. There had been no objection to P producing Mr Cain’s emails at the time of discovery or at any time prior to the trial. Although the advice given by Mr Cain to D1 was in August/October 2017, it was prior to the board meeting on the Termination Date. 61.Having considered those provisions in the Consultancy Agreement relied on by Ds, I do not agree that those provisions in the Consultancy Agreement would allow D2 to seek sponsors and funding for any third party, or to provide services to anyone other than P, without P’s express prior written consent. There were similar provisions in the Coleman Contract and again those provisions would not allow D1 to provide services to anyone other than P and/or without P’s express prior written consent, to seek sponsors and funding for other third parties. E.3.2. Whether D1’s fiduciary duties were limited in scope 62.As said earlier, Ds did not deny as a director and CEO of P, D1 owed fiduciary duties to P and their case was only the fiduciary duties were limited by the scope of the P’s business prescribed by, in particular, the Shareholders Agreement and also the scope of D2’s services. In light of what has been set out earlier, in my view, on the natural and ordinary meaning of the relevant provisions, and on my construction of the relevant provisions in the Shareholders Agreement and the Consultancy Agreement, and the Coleman Contract, I find D1 has not been able to satisfy this Court that the fiduciary duties he owed to P as a director and/or CEO were limited in any way by the scope of “Business” as defined in the Shareholders Agreement or scope of D2’s services, or in any other way, as contended by Ds. 63.As said, P’s case was also that D1, and also D2, had breached their contractual duties. P relied on those duties set out below in the Shareholders Agreement, the Consultancy Agreement, and the Coleman Contract. E.4.1. D1’s contractual duties under the Shareholders Agreement 64.The heading of Clause 10 of the Shareholders Agreement reads “Undertakings in relation to business opportunity” and Clause 10 sets out the undertakings of the “Parties (as defined) in respect of any new business opportunities (“Business Opportunity”), as follows:
65.“Parties” is defined under Clause 1 to mean “Party A( CRGL), Party B (D1), Party C (VGL) , Party D (O’Young) and the “Company” (P) and “Party” means any one of them including any other person who becomes a member of the “Company”(P) and who agrees to be bound by all the provisions of this Agreement. 66.Under Clause 10, “Business Opportunity” refers to a new business opportunity relating to the “Business”. In light of my views on the definition “Business” in Clause 3.1, each of the Parties (as defined), including D1, had/has the obligation to direct any new business opportunity relating to the motorsports business to P. 67.The heading of Clause 16 is “Non-competition” and this provision applies to each of the “Shareholders”, which is defined under Clause 1.1 to mean Party A( CRGL), Party B (D1), Party C (VGL), Party D (O’Young), and “Shareholder” means any of them, including any other person who becomes a member of the Company (P) and who agrees to be bound by the provisions of the Shareholders Agreement by executing a “Deed of Adherence”. 68.In particular, Clauses 16(a) (non-compete) and 16.1(b) (non-solicitation) state as follows:
69.Clause 16.4 applies only to “Party D”, ie O’Young and sets out as follows:
70.Clause 16.5 states that nothing in Clause 16 shall prevent Harry or Party E (Yu) from driving for any third party. 71.D1 clearly has the obligation not to compete and not to solicit under Clauses 16.1(a) and (b), as there was no “carving out” for him. E.4.2. Ds’ contractual duties under the Consultancy Agreement and the Coleman Contract 72.The heading for Clause 11 of the Consultancy Agreement is “Restrictive Covenants” and Clause 11.1 sets out those restrictive covenants. Clause 11.1.1 in particular, sets out that D2 shall not and shall procure that its personnel shall not, directly or indirectly:
73.Clause 6.1 of the Coleman Contract provides similar covenant as above. 74.Clauses 11.1.4 and 11.1.5 of the Consultancy Agreement then set out the no conflict and non-compete covenants, and similarly Clauses 6.1.4 and 6.1.5 of the Coleman Contract. Clauses 11.1.4 and 11.1.5 have been considered earlier. 75.It was not really disputed that Ds owed contractual duties as set out in the Consultancy Agreement and the Coleman Contract. As said earlier, this Court is not satisfied that such contractual duties were limited by the scope of the “Business”, or “Service”, or in any other way as contended by Ds. E.4.3. D2s’ contractual duties under the BEL Agreement 76.Mr Kat SC had argued that the BEL Agreement which was executed on the same day as the Consultancy Agreement with P expressly provided for D2’s independence from BEL, and that the purpose was to permit D2 to carry on its own business subject to the identical restrictions in Clause 11 which were identical to Clause 6 of the Coleman Contract[36]. 77.As set out later, I find that the purpose for D2’s incorporation was for tax reasons for D1 in providing his services and duties to P, and it was not to permit D2 to carry on its own business without P’s consent. I do not agree that the purpose of the BEL Agreement was to permit D2 to carry out its own business or motorsport business outside by P without P’s consent. E.5 The parties intention and surrounding circumstances E.5.1. Events leading to the 2014 Merger 78.It was not really disputed that D1 was introduced to Yu by O’Young as an investor in BEL. 79.The discussion of the 2014 Merger first took place at end of 2013/early 2014 between Yu and O’Young on one part and D1 and Nigel on the other, and the MOU was said to be agreed and signed in February 2014. The MOU was not included in the trial bundles and/or no reference was made to its provisions. The CBH Strategy Document prepared by D1 was said to contain what was agreed by the prospective directors of P and P was incorporated on 9 May 2014, on which day D1 became a director and CEO of P, whilst remained to be employed by BEL. 80.According to O’Young, he became a professional race driver in 2004 when he moved back to Hong Kong. He was introduced to D1 in 2009 during the Macau Grand Prix. O’Young’s evidence was that back then he was actively looking for an opportunity to compete in the 2010 World Touring Car Championship and met D1 through an FIA representative. He later joined BEL as a driver and D1 was then the Team Principal of BEL. He competed with BEL in 2010, 2011, part of 2012, and 2014 before the 2014 Merger. By around 2013, O’Young was also racing with CRHL (CRL), and according to O’Young, he met Yu through his involvement with the Hong Kong motorsport industry before he joined CRHL in 2013 as a driver, and later in 2013, he became a director of CRHL. It was O’Young’s evidence that in around March 2013, he and Yu started to consider and discuss a plan to expand the business of CRHL to form a global motorsport business. 81.Yu is an architect by training, and he began his career as an architectural designer in 1986. He started an architectural business (“Gravity”) in Hong Kong in 2003, which according to him, running the business remained his full time job. Yu said he had always been an automotive enthusiast since youth especially in motorsport, and that having started karting as a teenager, he had moved on to various forms of motor racing since 2006. He started his own racing team in March 2009 called Craft Racing, which was then operated under CRL (later CRHL). 82.As for D1, he is a UK citizen who resides permanently in United Kingdom. According to O’Young, D1 began his career as a mechanic for a race team. D1’s written evidence was that he had been working in the motorsport industry since about 2003[37], and that in 2009, he founded BEL with Harry and Nigel. D1 said he recruited O’Young in around 2010 to race for BEL. D1’s evidence was that in round 2013 or 2014, he started to feel that Nigel’s interest in BEL was waning and that the team required a new direction and new sources of investment[38]. He knew that O’Young was working closely with Yu in Hong Kong and that he understood that Yu was already heavily involved with the business side of motorsport, owning a team in Hong Kong called Craft Racing. 83.D1 had confirmed during that the trial that as stated in his witness statement, his duties as the figurehead, Team Principal and CEO of BEL included (but not limited to) liaising with all rights holders, sponsors and regulators, signing drivers, recruiting key staff, finance, engineering and sporting matters[39]. 84.O’Young’s written evidence was that in around December 2013, following a meeting between him and D1 at the Macau Grand Prix (which was held in November 2013), he proposed to Yu that they could consider D1 and BEL as a potential partner to achieve the expansion goals of CRHL and that D1 was also desirous of expanding BEL’s business[40]. O’Young had said that the most important part was that the fact that both companies, ie CRHL and BEL had aligned goals to grow the business into a strong international motorsport group[41]. 85.It was also Yu’s evidence that when he started CRHL, he did not do it for leisure purposes and it was set up with an intent to grow the business into a larger motorsport company and that he began working with O’Young and to set out a strategy to look for equally ambitious companies and partners to grow the business and that he and O’Young recognised with Europe being the industry leader in automotive and motorsport related businesses, they reached out to find equally ambitious and like-minded partners to potentially join forces and bridge the industry between Europe and Asia[42]. 86.According to O’Young, in around end of 2013 (or according to D1, it was in January 2014[43]) he introduced D1, Yu and Nigel to each other to facilitate negotiations for a merger and that they all met in Hong Kong[44]. Yu had said, D1 and Nigel flew to Hong Kong the weekend of 24 January 2014 when they discussed and set forth their plan to expand and diversify their businesses as set out in a “shareholders agreement” with the details of the merger and business which was eventually formalised on 14 July 2015. 87.D1’s written evidence appeared to be that the intention of the 2014 Merger was only to create an integrated race team that could compete in both Europe and Asia. During the trial, when it was put to D1 that the intention was not only to create a racing team but to create a motorsport organisation, he then admitted that there were aspirations beyond simply running a racing team at the time of the 2014 Merger. 88.In fact, the email of 7 January 2014 sent by D1 himself to O’Young[45] (“07.01.14 Email”) was quite telling and evident of D1’s own thinking at the time. In particular, in the last 4 paragraphs thereof, D1 himself had stated as follows:
89.The 07.01.14 Email clearly showed that D1 was keen at the time to find an investor for BEL, and that he was keen on the merger with Yu’s company CRHL and to expand BEL’s business, and he was fully aware of the intention of both companies was to form an all encompassing motorsport organisation in both Asia and Europe. 90.It would appear that the MOU mentioned by D1 was signed on 26 January 2014 in Hong Kong[46]. D1 had referred to the MOU in the Charlton Email (defined below), in which a copy of the MOU was attached. As said, a copy of MOU had not been produced by D1. 91.In any event, D1’s intention at that time of the 2014 Merger was further evidenced by an email dated 14 February 2014 he sent directly to Yu (“14.02.14 Email”)[47] in which he had stated:
92.The 14.02.14 Email was followed by the launching of the racing team called Craft Bamboo Racing in March 2014, and there were discussions for the incorporation of a company to be named “Craft Bamboo Holdings”. This can be seen in an email dated 8 May 2014 sent by D1 to a Mr David Charlton of Baker Tilly Tax and Accounting Limited (“Charlton Email”)[48]. In particular, under the subject matter “Craft Bamboo Holdings”, the CBH Strategy Document[49] was attached, which was stated to be agreed by all the directors during a board meeting on 27 March 2014[50]. 93.The “Reasons for Merging” stated in the CBH Strategy Document were (i) for Craft Racing Limited (CRHL) to expedite the sporting and commercial ambitions of Yu by entering competition at World Championship level, acquiring managerial and engineering expertise for a long term viable motorsport business with stronger links to the European market, and (ii) for BEL, to widen the foundation of the company and gain access to capital investment for future projects, used the combined strength of both companies to benefit from a long term viable business plan with stronger links to the Asian market. 94.As said earlier, D1 himself had stated in the CBH Strategy Document, motorsport is a dynamic and fast changing industry, and it was impossible to pin point all the opportunities and areas of interest at that stage. Having considered the evidence, I find that at that time and prior to the 2014 Merger, D1 was fully aware the intention of the two companies and the objective of the 2014 Merger was to move away from the customer motorsport model and to diversify their motorsport business into the biggest and best world wide[51]. 95.The Charlton Email was sent on 8 May 2014 at about 13:09 UK time, and P was incorporated with the name “Craft Bamboo Holdings Limited” in Hong Kong on 9 May 2014. The CBH Strategy Document attached in the Charlton Email clearly reflected the agreement and the intentions of the parties at the time. 96.Apart from setting out the “Reasons for Merging”, the “Board Structure” of P, it was also, amongst other things, agreed and set out in the CBH Strategy Document that Yu was to be the “Founder & Chairman” having 2 voting rights, Nigel was to be an “Executive Director” holding 1 voting right, D1 was to be the “CEO”, holding 1 voting right, and O’Young was to be an “Executive Director” holding 1 voting right[52]. 97.It was Yu’s evidence that Nigel had represented to him that D1 had a well-rounded knowledge of motorsport and that as a young individual he showed motivation to build a motorsport business group beyond customer racing, and that it was not merely a single skill set he had, but rather an overall knowledge and experience in motorsport that led Yu to believe D1 would be a good candidate to be the full time CEO and partner of their newly formed motorsport group[53]. 98.In the Charlton Email, Mr Charlton was informed by D1 that Robert Cain, the lawyer appointed by BEL, had the latest version of the contract with Nigel’s final amendments which points were verbally agreed with Yu. 99.What D1 had also said in the Charlton Email was:
100.It seemed clear that D1 himself was keen on the merger and although BEL was said by D1 in the Charlton Email to have enough cash to trade, the associated costs of the work undertaken by the BEL staff for “Craft Bamboo Holding” purposes, namely for merger purpose, had already started to be billed to Yu. The evidence showed that D1 was himself was undergoing financial difficulties at the time and it was not disputed that Yu had to lend him £9000 on about 12 May 2014 which was originally going to be lent by Nigel to D1 for him to pay stamp duty for his first home[54]. 101.As mentioned earlier, D1’s pleaded case in AD&C was that in September 2014, given D1’s express intention to undertake motor racing work other than for P, there was the Oral Agreement between P and D1[55]. It was pleaded that amongst other things it was orally agreed:
102.As said earlier, at the commencement of the trial, the Court was informed that Ds would no longer rely on the Oral Agreement. However, there was no application to amend this part of Ds’ pleadings, nor did D1 withdraw any part of his evidence in his witness statements in relation to the alleged Oral Agreement. Further, by not relying on the Oral Agreement, this would mean D1 was no longer relying on (4) above. 103.D1’s evidence was that in or around September 2014, he decided that he wanted to undertake “activities outside of P but still within motorsport”[56]. He said he discussed this with Yu and O’Young and upon D2 being incorporated, he stopped being an employee of BEL and instead created his own company, ie D2, and that D2 consulted for P and BEL, and that he consulted for D2. D1 stressed that he was not nor had he ever been an employee of P. D2 was then incorporated on 1 October 2014. 104.According to D1, he started to invoice both P and BEL for his consultancy services through D2 shortly thereafter, and that this was all approved by Yu. According to D1, Yu understood (as would later be set out in the Agreements) that outside his role as CEO D1 undertook: (i) other activities for P; and (ii) other activities in motorsport. D1 said he did not hide this fact, and that D2’s website (“Mayfield Website”)[57] appeared at the bottom of his email signature and on all invoices. D1 further pointed out that it was stated on the homepage of the Mayfield Website that D2 were “specialists at arranging and striking the right deals between sports teams or individuals and organisations wishing to promote their brand”. According to D1, he had used a contact of P’s Operations Director, Russell O’Hagan (“Russell”), to design the Mayfield website. 105.To summarise, D1’s evidence in his witness statements was that (i) P had understood and/or agreed to him undertaking activities in motorsport outside of P and with other third parties and that (ii) P had agreed to him setting up D2 for the purpose of not only undertaking activities in motorsport with P, but also with others. 106.Although it was not really disputed by P that P (through Yu and O’Young) was informed by D1 of his setting up a new company, their evidence was that this was merely for D1’s UK tax purposes. P denied that they knew or that they had agreed to D1 and/or D2 to undertake the motorsport activities with third parties outside of P. 107.Yu’s evidence was that as the structure of P’s business developed in 2014, D1 expressed to him and O’Young that instead of being paid directly, he wanted to set up a new company ie, D2, for the sole reason of reducing his tax exposure in UK and after a brief discussion, it was agreed that P would sign contracts and make payments to D2 to assist D1 in his personal tax situation, and that it was never disclosed or mentioned that D1 intended to operate D2 as a separate business[58], ie a business to undertake activities with third parties outside of P. 108.O’Young’s evidence was that D2 was merely D1’s corporate vehicle in providing services to P and also a contractor to P pursuant to the Consultancy Agreement and D2 was used by D1 to take advantage of the UK’s corporate tax structure, and D2 was introduced to P in 2014 solely as a company created to give tax benefit for D1 in UK and that he was never aware of any other business dealings for D2 when P was formed[59]. 109.When it was put to D1 during the trial that D2 was not allowed to conduct business with other third parties, D1 responded that this was not in the “scope of business”. 110.It was further put to D1 that the Consultancy Agreement and the Coleman Contract were entered into for tax purposes only and not to reflect that he was not a full time employee of P, D1 replied that those were not the only reasons. 111.D1 was then being shown copies of his what’s app messages with O’Young on 30 January 2016, in which he had told O’Young in relation to his tax issues in UK, as the tax authorities did not like him work for two sides of the same company[60], and that he needed “a legitimate small income from another source”[61]. D1 said he was thinking of managing a couple of drivers not in a big commercial sense but giving them help and advice through D2 for a small monthly fee for £300-500 a month[62]. There were subsequent what’s app messages between D1, O’Young and Yu on 7 February 2016, in which D1 told Yu and O’Young that he got a tax issue in the UK based upon the argument that he was paid by two companies that were the same thing and that it could be argued that he should just be employed “PAYE in UK”, and that he needed another two small customers to be on the right side of the law. He wanted to “manage” a couple of drivers to help his tax situation and he had said “Of course I will ensure they (sic) is no conflict of interest and make sure nothing is time consuming or distracting from CBR.”[63] 112.It was put to D1 that the “driver management” proposal mentioned by D1 in the above what’s app messages was only for tax purposes, to which D1 said it was only one of the purpose and that about 10 days after those messages, there were face-to-face discussions with O’Young and/or Yu in Australia. There had however never been any mention in D1’s witness statements about any face-to-face discussions with Yu and/or O’Young in Australia in about February/March 2016, which was mentioned for the first time by D1 during the trial. 113.First of all, D2 was incorporated only about 5 months after P’s incorporation. At that time, Nigel was still in the picture. There had not yet been any formal shareholder’s agreement finalised, and the only document agreed between the directors, namely Yu , D1, O’Young, and also Nigel at that time, apart from the MOU, was the CBH Strategy Document. As found earlier, the intention of all P’s directors was to move away from customer motorsport model and to diversify P’s motorsport business. Yu had personally lent money to D1 and paid for BEL’s costs of undertaking “CBH” projects. P was newly established and it did not seem probable that by September 2014, Yu and O’Young would have been told or, if indeed told, would have agreed to D1 undertaking activities within the motorsport business with other third parties outside of P. Had they agreed, this would have been incorporated in the Agreements which were only formally signed in mid July 2015. 114.Second, according to O’Young, Nigel suddenly passed away at about end of 2014, and his shares in P passed to his two sons Harry and Oliver holding through their company VGL. There was no sufficient evidence that by the time of the signing of the Agreements, there had been any change of intention on the part of the directors of P in relation to the objectives and strategy of P from that as set out in the CBH Strategy Document. 115.Third, according to O’Young, in a company meeting in December 2015 in Stuttgart, Germany, D1 proposed to the board of directors of P that Russell be promoted to “Operations Manager” for P. Russell was formerly the Project Manager employed by BEL prior to the 2014 Merger[64]. O’Young’s evidence was that D1 had explained to Yu and O’Young that with the work load of running the day to day operations of P, D1 did not have the time or capacity to focus on business development to help P grow. The Board considered D1’s request a reasonable one and therefore agreed that beginning in 2016, Russell would become the “Operations Manager” of P to free up time for D1 to focus on business development for P[65]. O’Young’s evidence in this respect was not challenged. There was no sufficient evidence that O’Young or Yu had known by then, or had agreed by then, that D1 had planned to undertake activities outside of P with other third parties in the motorsport field or that they had agreed to free up D1’s time in order for him to undertake activities outside P. 116.Fourth, although those what’s app messages took place in early 2016, ie more than a year after incorporation of D2, and about 6 months after the Agreements, it can be seen from those what’s app messages that D1 had told O’Young and/or Yu that he had tax issues and that he would need to receive a legitimate small income, and D1 was seeking the permission of O’Young and/or Yu to do so. D1 was seeking permission for him to receive what he called “a small monthly fee” from managing a couple of drivers, said to be due to tax issues. What is clear is that, irrespective of what was stated in the Agreements, D1’s own understanding in January and February 2016 was clearly that for him to undertake any other activities outside P through D2, he would need the consent of Yu and O’Young. 117.Fifth, from those emails between D1 and Russell which took place on 4 May 2016, the Mayfield Website could only have been established sometime thereafter. There was no sufficient evidence that even if P knew that D1 had set up a website for D2, this would mean that P had given D1 permission to undertake activities outside of P in the motorsport field, save those mentioned by D1 in those what’s app messages, ie to manage a couple of drivers for a small income. 118.Having considered all the evidence, I do not find D1’s evidence credible. I accept the evidence of O’Young and Yu that at the time of setting up of D2, they were told that the company was set up for UK tax purposes only. There was no sufficient evidence that there had been any agreement on the part of P for D1 to undertake activities through D2 outside of P, with other third parties, without the consent of P and/or the other directors. E.5.4. The directors’ outside motor-sport related businesses 119.In support of Ds’ argument that the “Business” in the Shareholders Agreement was limited in scope as contended by them, it was pointed out by Ds that both Yu and O’Young had engaged in their own motorsports businesses outside those set out for P in the Shareholders Agreement without a specific “carve-out” along the lines of Clause 16.4, which a permitted O’Young to be engaged as a paid driver for teams not in competition with P. 120.According to D1, O’Young while as Commercial Director of P, undertook a number of external business activities within the motorsport industry for which he did not seek approval from P including being a personal brand ambassador, a driver for other teams and various public speaking events[66]. 121.It was O’Young’s evidence that he started his own company, O’Young Racing Limited in 2007, to handle his own professional driving matters. There were times he was paid by car manufacturers and there were times when he would sign up sponsorship to sponsor his own driving. During the trial, O’Young had said that although he and Yu had businesses outside of P, they had disclosed all their businesses prior to the 2014 Merger, and in particular, there was a special “carve-out” for him in the Shareholders Agreement as he stated clearly that he wanted to continue as a professional race driver. It was also O’Young’s evidence in re-examination that P did not raise his profile as he had begun racing when he was 8 years old in 1988 until the time of the 2014 Merger and that his triple winnings in Macau in 2005, 2007 and 2008 had solidified his fame as champion race driver, and that in fact after he joined P as a director , his racing image started to decline as he had put P as a priority and when he received a substantial sponsorship from a company (VIHL), he directed the sponsorship to P. As seen in the agreement dated 27 May 2016 between P and VIHL[67], the sponsorship was HKD 3 million for each year being 2016 and 2017 and later continued for a total of 5 years and O’Young was the named driver. There was nothing to indicate that O’Young had undertaken any motorsport businesses with other third parties outside of P, without P’s consent. 122.Ds also alleged that Yu undertook a large number of external business activities within the motorsport industry for which he did not seek approval from P including, but not limited to, racing circuit design, investment and development in Asia. 123.It was put to Yu during cross examination that before 2015, apart from Gravity, he had a side business “Racelink”. Yu said he invested for a few years but the business was not doing much, and that the whole business was sold in around 2015/2016. Yu also admitted that by 2014, he had 6 racing cars in his own name and that before 2014, Gravity had signed up a couple of contracts for circuit building. Yu said it was ongoing in 2015-2017 and that he had received director’s drawings and advance of dividends from Gravity to cover unexpected expenses for extra costs of P. Yu said he did not have to account to P for monies received by Gravity for designing the motor buildings. Yu was also asked about meeting Zak Brown of Just Marketing International (JMI). Yu said when he met Zak, Zak was owner of United Autosport with Richard Dean, a friend of his, and that Zak is now CEO of McLaren F1, and according to Yu, he had passed this contact to D1 to follow up. 124.There was no sufficient evidence that Yu had not disclosed his other businesses to P. In fact, D1 himself had produced several emails between 7 August 2017 to 6 September 2017[68] which showed that it was D1 who made the contract for Yu in relation to circuit design and development in Asia and D1 was fully aware of Gravity being involved in circuit design and development. 125.As for CBR Media, it was O’Young’s evidence that this was one of P’s other lines of business which focused on sponsorship acquisitions, public relations and marketing activities etc respectively[69]. D1 alleged this was incorrect and according to him, as P was paying more and more for media content such as press releases, P decided to hire an in-house press officer who operated under the CBR Media banner and that it was never a conduit for sponsorship acquisition during his tenure. On the other hand, O’Young had explained that CBR Media shared the same Business Registration Certificate as P and operated as its branch since 25 July 2016 and that CBR Media was thus a subsidiary of P. 126.It was put to Yu that sponsorship acquisitions was not sponsorship brokerage for third parties. However, Yu’s response was that once sponsorship was acquired then one could broker it. Anyway, as pointed out by O’Young, setting up CBR Media showed P’s intention to expand and diversify its business into aspects of motorsport industry including public relations, marketing and sponsorship activities[70]. 127.Similarly, O’Young said P’s involvement in the Grand Prix Kart Scholarship Series in Mainland China which was said to be a grassroots initiative for karting in Mainland China was another example of P’s intention to widen its business to activities other than just car racing and whether the business was profitable or not was another matter, it was a “Business Opportunity” directed to P. 128.It was also O’Young’s evidence in about July 2017, Yu saw the announcement of a new TCR race series in UK and inquired with D1 about it and thought it would be a good championship to look into and that Yu had some leads to potential investors looking to invest into race series and championships and that they found out that D1 was already working with TCR UK in secret without notifying or obtaining P’s consent beforehand. D1’s evidence was that this was not a “Business Opportunity” available to P. 129.Suffice to say, having considered the above, I am satisfied that the evidence showed that the intention of P was to diversify its business activities and to work outside the scope of merely being a racing team and it was not for D1 to decide what was a “Business Opportunity” or not, it was a master for the board of P. 130.To conclude, D1 owed both fiduciary duties and contractual duties to P, and D2 owed contractual duties to P. There was no scope or limits of the “Business” or the “motorsport business” agreed at the time of the CBH Strategy Document, and although certain areas were identified as to be of immediate interest at the time of the 2014 Merger, the intention of Yu, O’Young, Nigel and D1 was to develop and diversify the motorsport business of P in every aspect. In my view, each of them was under the obligation to bring to the attention of the Board of any new “Business Opportunity”. It was not the parties’ intention or agreement for D2 to carry out motorsport business outside of P with third parties without P’s consent. F. D1 - ANY BREACH OF FIDUCIARY DUTIES AND/OR CONTRACTUAL DUTIES F.1.1. The Eurotech Deal and the Strakka Deal 131.As mentioned earlier, in the RASOC, P now claims against Ds for the value of contract in 6 of the Deals with Ds admitting liability on the IGO Deal. P’s evidence of the 6 Deals was not really challenged. 4 of the 6 Deals concerned Dranix and will be considered separately, and the remaining were the Eurotech Deal and the Strakka Deal. 132.Regarding the Eurotech Deal, D1 admitted that he had brokered and negotiated the Deal and that D2 entered into a Commercial Representation Agreement on 1 September 2016 with Industrial Control Distributors Limited, a racing team operator based in the United Kingdom, which operated the Eurotech Racing Team who competed in the British Touring Car Championship (BTCC)[71]. Ds did not deny entering into the Deal. Their evidence was that P did not enter a car in the BTCC, and therefore the Deal did not fall within “Business” and was not in conflict with D1’s interests and obligation to P. 133.As for the Strakka Deal, again it was not denied that D1 brokered and negotiated the Deal and on 5 September 2016 D2 entered into a Commercial Representative Agreement on 5 September 2016 with Strakka Racing Limited (“Strakka”). D1’s evidence was that P was not a commercial agent of sponsorship deals and there was no conflict and therefore the Deal did not fall within the scope of the “Business”. 134.In light of my earlier finding on the scope of “Business”, I find no reason why the Eurotech Deal and the Strakka Deal could not have been directed to P. F.1.2. The F1 Deals involving Dranix sponsorship 135.The 4 Deals which involved Dranix were the Sauber F1 Deal, the 1st Force India Deal, the Bently Deal and the 2nd Force India Deal. Apart from the Bentley Deal, the rest were for F1 races. Dranix is a marketing company undertaking sponsorship activities for a number of gaming/gambling brands including K8, 918, KB 88, W11, AG88 and W66[72]. During the trial, Leo also mentioned a brand F66. 136.According to O’Young, he was the one who introduced Dranix to D1 through an agency SportQuake, as a potential sponsor of P’s motorsports activities after D1 joined P as a director and CEO. It was O’Young’s evidence that he was introduced to Matt House of SportQuake (“Matt”) by Jonathan Gale (“Jonathan”). 137.In D1’s written evidence, he seemed to regard Jonathan to be his “personal contact” and he had said Jonathan worked for Prodrive, the commercial team behind Aston Martin’s racing operation, and that Jonathan introduced D1 to Matt[73] who then introduced D1 to Leo of Dranix. 138.P had produced a chain of emails from 13 July 3015 onwards[74], which demonstrated that it was Jonathan who introduced Matt to O’Young by email on 13 July 2015 in relation to a potential sponsor Kashbet for P at the Macau Grand Prix and thereafter Matt had followed up and, he and O’Young met up in Hong Kong when Matt was here. About two days after Matt returned to UK, he had sent O’Young an email on 23 July 2015 attaching the “918 file” and “K8 file” for design of logos[75]. Both “918” and “K8” were brands represented by Dranix. 139.P had also produced what’s app messages between O’Young and D1 which showed that when O’Young went to UK on about 14 August 2015 he had introduced Matt to D1[76]. D1 then followed up on the introduction and sent an email to Matt on 20 August 2015 with subject matter “Macau GP – Aston Martin – Craft Bamboo” and thereafter, D1 started to negotiate with Matt over the proposed sponsorship of Kashbet for P[77]. According to a later email sent by O’Young to Jonathan, the Kashbet sponsorship did close but with no profit margin[78]. Those email messages sent out by O’Young and/or D1 bore P’s logo, and below the signing-off name, the sender with his title at P under P’s logo. 140.Further, in an email dated 11 September 2015 from D1 to Matt, D1 was proposing another sponsorship to Matt , and this time D1 had asked Matt to forward the email to Leo, which later on the same day, D1 himself also forwarded directly to Leo[79]. It would seem clear that by then, D1 had been introduced to Leo through Matt. The subject matter of D1’s email was “Macau GP –revised deck” and those emails again bore P’s logo. According to D1, after discussion with Leo, the Kashbet brand used by deck would be switched to F66. This was followed by an email dated 22 September 2015 sent by D1 to Leo, copied to “Judyl”[80] as well as Matt , and the subject matter was “Macau Grand Prix –w11.com design Aston Martin”[81]. 141.About a month later, on 14 October 2015 , D1 sent another email to Matt, with the subject matter “Macau GP – Formula 3” and with P’s logo[82]. D1 told Matt that he had put together the best possible options for Matt which D1 thought would best suit Leo’s needs, and he had said he wanted to help Leo as much as possible and to create a good relationship for future projects. D1 had also proposed a driver, who according to D1, was about to be testing for McLaren F1, and the branding D1 used was based on W11.com[83]. D1 had stressed to Matt that with the McLaren F1 test it was a really good time to get in. 142.The sponsorship with W11 for P was closed with Dranix. The Macau Grand Prix took place over the weekend of 19-22 November 2015. Leo’s evidence was that he met D1 in person for the first time at the Macau Grand Prix 2015. 143.According to Leo, he became the Chief Operating Officer at Dranix in early 2015. He confirmed that his email address at “iv66.net” was his email address at Dranix until he left Dranix in 2018, which would seem to be after his witness statement which was dated 19 October 2018. 144.When it was put to Leo during the trial that the W11 sponsorship was obtained for P by Dranix through Matt of Sportquake, Leo seemed to deny he knew of Matt’s involvement and he said he thought it was through Jonathan. Leo then went on to say that it was his former manager at Dranix who set up the relationship with Jonathan and that he only knew Matt was the middle man when he met D1 in London in early 2016. When it was pointed out to Leo that D1’s email to Matt of 11 September 2015 was forwarded to him as well, he said he did not really read the email, and just downloaded the attachment, and that the Kashbet deal was in 2014 done by his former team which continued until 2015, and that according to Leo, Kashbet did not want the deal in the end, and he and they then gave it to F66. 145.As mentioned earlier, D1 had in his email of 11 September 2015 to Matt asked Matt to forward his email to Leo. D1’s email of 5 October 2015 to Judy at the “iv66.net” address was also copied to Leo at the same “iv66.net” address, as well as copied to Matt at “sportquake.com” and this email was in relation to the “Macau GP revised contract”[84]. Further, in an other email dated 11 November 2015, Leo had asked D1 for VIP seats for 21 and 22 in the Macau Grand Prix, and in a reply email dated 17 November 2015 to Leo, D1 had offered to Leo another VIP option instead. D1’s reply email to Leo was copied to Matt, as well as to Judy[85]. D1’s offer was accepted by Leo in an email of the same date, with Leo saying “… for sure, we will catch up together with Matt sometime in our stay at Macau (19th to 22nd night)”. Having considered all the emails, it did not seem probable that Leo did not know of Matt’s involvement in the sponsorship. 146.During the trial, Leo had also denied that he knew that D1 was the CEO of P at the time of the Macau Grand Prix 2015, and claimed that he thought D1 was only the “Sporting Director” of the CB racing team. However, in the email dated 11 September 2015 from D1 to Leo with subject matter “Fwd: Macau GP – revised deck” mentioned earlier, below D1’s signed-off name, there was P’s logo with “Richard Coleman Group CEO” stated[86], and also in the email dated 17 November 2015 from D1 to Leo of subject matter “Re:AMR Team VIP Seats”, again, below D1’s signed-off name, there was P’s logo with “Richard Coleman Group CEO” stated[87]. Similarly, in emails dated 25 November 2015, and 3 December 2015, after the Macau Grand Prix, sent by D1 to Leo and Judy, again P’s logo with “Richard Coleman Group CEO” appeared below D1’s signed-off name[88]. 147.When Leo was asked by Mr Hu whether he had spoken to D1 about sponsorship opportunities when they met during the Macau Grand Prix in 2015, Leo replied that he only asked D1 whether he knew other racing teams as Leo wanted to have more opportunities and more relationships. Leo was then shown an email dated 25 November 2015 sent to Leo and Judy by D1, post the Macau Grand Prix, in which D1 had referred to the conversations he had with Leo. D1 had said in that email he looked forward to working with Leo “over the course of next year” and hope to have “some proposals as per Leo’s requests in the next coming weeks”. When asked, Leo replied he did not make any formal requests to D1 and just asked D1 some questions. I find he was clearly being evasive. 148.What was clear was that on 3 December 2015, D1 had followed up on Leo’s “questions” by sending Leo various options, 8 of which concerned F1 races[89] (“Options Email”). Leo agreed that the Options Email was sent to him on P’s logo and that D1 had sent it as the Group CEO of P, but Leo maintained that he had understood that D1 was only the “Sporting Director” of P’s racing team, and that he had always thought of P being a “racing team”. 149.Leo admitted under cross examination that he and D1 had met in London and they had discussed in January 2016 about a Porsche offer from P for W66 as P’s sponsor in GT Asia Championship 2016 which was mentioned by D1 in his email dated 29 January 2016 sent to Leo and a “Chloe” at “iv66.com” together with a copy of the sponsorship agreement which was ready for signature[90]. As seen therein, the sponsorship by W66 was from the date of the agreement and to continue until the end of the weekend of the “Race” (as defined). 150.Having considered the above emails and all the evidence, I do not find Leo’s evidence credible. I find Leo should be fully aware that D1 was the CEO of P involved in the negotiation of sponsorships for P in the Macau Grand Prix 2015, and that Leo was also aware that Matt was the middleman in Dranix providing sponsorship for P at the Macau Grand Prix 2015. I accept O’Young’s evidence that Matt was first introduced to him by Jonathan and that it was O’Young who introduced Matt to D1 in London in August 2015. I find it was through Matt that D1 was introduced to Leo and Dranix. In any event, when D1 first met Leo in person at the Macau Grand Prix 2015, he met Leo in his capacity as CEO of P. In short, Leo and/or Dranix was P’s contact. 151.It was Leo’s evidence during the trial that after the Macau Grand Prix 2015, he had called D1 many times to discuss business with him, and that D1 was his only contact with P. Leo had mentioned an incident during the Macau Grand Prix 2015 when his client (W11) was not happy as not all the client’s benefits and/or its full Chinese name were displayed on the race car (“W11 Incident”) and Leo said he was not able to find any one at P’s hospitality room, and that in the end he managed to contact D1 who helped to contact P’s lawyer to deal with the matter. Leo said he found D1 very professional in dealing with the W11 Incident, but Leo admitted during the trial he did not know whether it was only D1 or the collective efforts of others at P who managed to resolve the issue. In fact, even in D1’s email of 25 November 2015, he had referred to “our team did everything we possible could to ensure that your return on investment was made….”. It was clearly not D1’s solo effort in resolving the W11 Incident. 152.In the email of 17 November 2015 referred to earlier, Leo had mentioned catching up with D1 and Matt at the Macau Grand Prix 2015. It was clear after the Macau Grand Prix 2015, Matt had continued to be involved with D1 and Leo in sponsorship deals. After the Options Email , D1 had sent an email to Matt on 11 December 2015 with subject matter “Leo -2016 Proposals”[91]. Although this email was not copied to Leo, it again showed Matt’s involvement in relation to proposals for Leo, since D1 had asked Matt “ … do you want to ping something over to Leo and or other clients so we can get to work on things?” D1 was seen to be keen in getting things going. 153.D1 had followed up and sent to Leo a memorandum with D2’s logo and prepared by D2 regarding options of interest for 2016[92] (“Options Memorandum”). It appeared in the memorandum that it was D1 who was trying to convince Leo of sponsorship in F1 in the opening paragraphs and then under “Initial 2016 Options”, it stated “2016 GT Asia - Partner Sponsor for Craft Bamboo Porsche Team” and the price. Then proposals for sponsorship for 3 F1 races were set out, followed by the proposal for “2016 World Endurance Championship Shanghai 05.06 November 2016” and also the proposal for the Macau Grand Prix 2016. 154.When asked during the trial, Leo said the Options Memorandum should be given to him by D1 after their meeting in London at end of January 2016. However, in the Options Memorandum, the sponsorship of the Porsche Team for P for 2016 GT Asia appeared to be still in the proposal stage, but a copy of the W66 sponsorship agreement for 2016 GT Asia was already attached in D’s email dated 29 January 2016 to Leo and Chloe with D1 asking them whether it was ok for signature. In fact, during the trial, D1 himself had said the Options Memorandum was given to Leo sometime between November 2015 and February 2016. I find more probable than not, the Options Memorandum was provided to Leo shortly after the Options Email. 155.Anyway it would appear that W66 sponsorship deal was closed for P at end of January 2016. It was D1’s written evidence that it was in or around February 2016 after the W11 and W66 deals that Leo contacted him and asked him to assist in finding another racing team in the GT Asia Championship for W11 who had changed their mind about sponsoring an Asian GT team during the 2016 season[93], and that Leo had informed him that W11 would not be able to enter into a sponsorship agreement with P because W66, a rival gambling brand to W11 was sponsoring P. D1 then said he understood that Absolute Racing’s Bentley Team was looking for a sponsor for the GT Asia Series, D1 (through D2) had instructed Venture North (a company operated by D1’s sister-in-law Tanya) to negotiate and subsequently activate the deal between W11 and Absolute Racing’s Bentley Team. The Bentley Deal was later closed in August 2016. 156.At the time of closing the W66 sponsorship deal for P, both Leo and D1 must be aware that W11 and W66 were rival competitors, and W11’s change of mind must have been within D1’s contemplation and D1 must have been looking for an alternative for W11 without bringing it to P’s attention. 157.There was no mention by Leo in his witness statement of the Bentley Deal, nor was he cross examined over the Bentley Deal. Tanya had provided a witness statement but later she did not attend trial for cross examination. 158.It was not disputed that after the Options Memorandum, Dranix’s client AG88 became the sponsor for the Sauber F1 team for the Singapore and Japan Grand Prix, and the sponsorship agreement between Dranix and D2 was signed on 12 March 2016[94] (“2016 Sauber Agreement”). During re-examination, Leo had said that AG88 was the biggest betting group and that they only wanted high level and high quality target, which was F1, and that although P was good in Macau, P was not in F1, and there was no media coverage , or live television broadcast, of the Macau Grand Prix in Mainland China, whereas there would be live broadcast in Mainland China of the F1 races in Singapore and Japan. 159.In fact, it seemed that GT Asia also enjoyed live coverage in Mainland China. This can be seen in an earlier email to Matt of 11 October 2010, D1 had provided the GT Asia Calendar Events and crowds to Matt for consideration and that D1 had said that “GT Asia enjoys live coverage on LeTV in China and on Fox Sports and Star Sports in Asia, the last race had 6.3m viewers (actual not cumulative)”[95]. In any event, there was no sufficient evidence that AG88 was only interested in sponsoring racing teams in F1 races in 2016 as portrayed by Leo. 160.The brands mentioned in the 2016 Sauber Agreement were AG88 for the race in Singapore and F66 for the race in Japan[96]. In the emails mentioned earlier, it would appear that there had been mention between Matt and/or Leo on behalf of Dranix and D1 on behalf of P for F66 to be a sponsor of P during the Macau Grand Prix 2015. Again, there was no sufficient evidence that F66 would only be interested in sponsoring racing teams in F1 races in 2016. 161.According to Leo, D1 told him that D2 was D1’s own marketing management company. Leo said he did not know that the 2016 Sauber Agreement was the 1st and only agreement that D2 (through D1) had brokered for third parties at that time. According to Leo, he had trusted D1. Leo also seemed to say that he did not know the money paid in the sponsorship for P in the Macau Grand Prix 2015 was paid to P as when he took over Dranix, the money had already been paid. What Leo said was confusing, as the 5 October 2015 email sent by D1 to Judy copied to Leo seemed to suggest that the sponsorship agreement for W11 for P in the Macau Grand Prix 2015 was concluded with Leo and Judy[97]. Further, in the penultimate paragraph of the Options Email, D1 was chasing Leo for the W11 payment for the remaining balance and D1 had also mentioned he had paid personally for the extra lawyers’ work[98]. I find it was not probable that Leo did not know to whom the payments of and/or arising out of the W11 sponsorship for P in the Macau Grand Prix 2015 were made. 162.Leo had confirmed that after the 2016 Sauber Agreement, Dranix also signed with D2 a sponsorship agreement for the 1st Force India Deal in June 2016 and later the Force India was renamed Sahara Force India and Dranix signed a sponsorship agreement for 2017 and 2018 with D2, but the team then went bankrupt in the 2nd year 2018, and that D2 had found a replacement team “Red Bull” for Dranix. Leo said he was not involved at that time as he was leaving Dranix and he had handed over the matter to his successor. 163.It would appear from what Leo said was for Year 2 of the Deal, the Force India team was replaced by another team. Leo’s evidence did not support Ds’ case that there was no further payments from Dranix for Year 2. 164.In any event, Leo’s evidence did not support Ds’ case that Dranix was only interested in F1 sponsorship and/or that those Deals involving Dranix were not within the scope of the “Business”. F.1.3. The Ravenol sponsorship 165.2 of the Deals, namely the Ravenol Strakka Deal and Ravenol Williams Deal, appeared to involve Ravenberger Schmierstoffvertrieb GmbH, a German company (“Ravenol Germany”), which develops, manufactures and markets high-quality lubricants under the brand name “Ravenol”. 166.D1 had called Brian, the Managing Director of Ravenol UK Limited (“Ravenol UK”), the UK distributor of Ravenol Germany to give evidence on behalf of D1. Brian gave a witness statement on 22 October 2018[99], and gave evidence at the trial via video link. It was Brian’s written evidence that Ravenol Germany signed a sponsorship deal with P to sponsor P’s cars in the WTCC[100] for a small part of the 2014 season and the whole of the 2015 season. When the sponsorship came to an end, according to Brian, he discovered that P had signed a sponsorship deal with LUKOIL, a direct competitor to Ravenol, and a few months later, he was contacted by Dan Walmsley, the Team Principal of Strakka Racing, and later Ravenol entered into sponsorship deal with Strakka for the 2016 season[101]. 167.During the trial, Brian mentioned that the Ravenol WTCC sponsorship agreement was from 8 February 2013 to 31 December 2015. When it was pointed out to him that the original sponsorship agreement was with BEL as P was not yet was incorporated in 2014, he agreed and he then said he later passed the details to Ravenol Germany, and he assumed the sponsorship was transferred to P upon the 2014 Merger. 168.P had produced a copy of the WTCC Sponsorship Agreement dated 16 January 2015 between Ravenol Germany and P (“WTCC Ravenol Agreement”)[102]. Pursuant to the WTCC Ravenol Agreement, Ravenol was to become a partner of “Craft Bamboo” and as a commercial sponsor of the teams WTCC campaign for 2015. When shown a copy of this agreement, Brian said he had never seen it before. The WTCC Ravenol Agreement bore what appeared to be D1’s initial on the right hand bottom corner on each page and signed by D1 on behalf of P “Craft Bamboo” on the last page and his signature was witnessed by a Mark Birkett, but there was no signature on behalf of Ravenol Germany seen on the copy produced. The date of signing by D1 was written to be 22 January 2014[103]. 169.Anyway, when asked about the WTCC Ravenol Agreement, Brian then said that he personally had no dealings with P since 2014 and that he was not personally aware of how the transfer of sponsorship from BEL to P was effected[104]. 170.As said earlier, it was Brian’s written evidence that after the sponsorship to P ended at end of 2015, a few months later, he was contacted by Dan Walmsley, who was the Team Principal at Strakka Racing[105], and subsequently Ravenol entered into a sponsorship deal with Strakka for the 2016 season. According to Brian’s written evidence, Strakka Racing raced in the Le Mans Prototype 2 and would Entrance Championship. When asked whether it was D1 who made the introduction of Dan Walmsley to him, Brian replied it was not directly. 171.There was an email sent by Dan Walmsley on Monday 18 January 2016 to Brian and copied to D1[106], with subject matter “Ravenol & Strakka Racing”. In the email, Dan Walmsley had mentioned meeting Brian with D1 at the Autosport International Show (“AIS”) the past Thursday[107]. When Brian was shown the email, he admitted seeing D1 that day at the show and that D1 was walking around with various people whom he had introduced Brian to, but Brian said he could not recall Dan Walmsley specifically as he was only one of many people he was introduced to. 172.What was clear was that in the above email to Brian, Dan Walmsley had attached a proposal for Brian to consider, which Brian admitted during the trial and Brian said he then made a recommendation to Ravenol Germany. 173.Notwithstanding that Brian did not seem to recall that Dan Walmsley was introduced to him by D1, what was clearly stated by Dan Walmsley in his email to Brian was:
174.I find what was stated above, clearly indicated that it was D1 who made the introduction of Dan Walmsley to Brian for the sponsorship deal for Strakka Racing with Ravenol for the 2016 season. 175.P had produced a draft copy of the collaboration proposal between Ravenol and the Williams F1 Team and Williams Grand Prix Engineering Ltd[108]. Brian said he had no contact with Williams F1 team, and that Ravenol had no relationship with any F1 team. As it was only a draft, it was not clear whether the Deal was closed. 176.Anyway, as seen in the RASOC, P was no longer claiming under the Ravenol Strakka Deal or the Ravenol Williams Deal[109]. 177.D1’s evidence was that he had closed the W11 Deal for P worth around USD 75,000 and also the W66 Deal for P for both the 2016 Asia GT Series and the 2016 GT Asia Macau Grand Prix worth about HKD 150,000. However, compared to some of the Deals he closed for others including D2 and Venture North, these amounts were not of same level. It was D1’s own written evidence that that he had built a strong relationship with Dranix by end of 2015 and as those two gambling brands W11 and W66 represented by Dranix had sponsored or were already sponsoring P, and neither of those brands were the subject of the potential F1 sponsorship, to further cement his relationship with Dranix, D1 decided to help Dranix in F1 sponsorship[110]. 178.Although D1 mentioned W11 and W66, as mentioned earlier, in the email dated 11 September 2015 from D1 to Matt, and forwarded to Leo, there had been proposal of F66 being the sponsor for P at the Macau Grand Prix 2015. As said earlier, there was no sufficient evidence that F66 was only willing to sponsor teams in F1 races. There was also no sufficient evidence as to why P could not have brokered those sponsorship through D1 or for D1 to refer those sponsorships to P. 179.D1 admitted that prior to the Sauber F1 Deal, neither he nor D2 had brokered any F1 deals. It was put to him under cross examination that apart from scale of money, what one needed to do to broker a deal for GT level or F1 level was the same. It was further put to him that the costs incurred by the broker when brokering a deal for GT or for F1 was roughly similar, D1 responded by saying such variables were impossible to co-relate. I do not find his evidence convincing. 180.Although D1 said it was very unusual for one sports team to broker a deal for another sports team, he had agreed that there was nothing in the emails or in the CBH Strategy Document that stated P’s business focused only on racing teams. D1 further agreed that the intention of P was to diverse the business. 181.Having considered all the evidence, and even though P had its own racing team at the material times, I find there was nothing in the Agreements to prevent P to broker sponsorship for various other teams including teams in F1 races. In fact, as pointed out by Mr Hu, which I agree, CBR Media was another incident of diversification for P. 182.Further, D1 (through D2) successfully brokered the Sauber Deal for Dranix on 12 March 2016, and this had to be seen in the light of those what’s app messages between D1 and O’Young on 30 January 2016 and then the group messages on 7 February 2016 mentioned earlier. It was D1’s own message to O’Young and Yu that he wanted D2 to manage a couple of drivers to receive a small monthly income for tax purposes and that he had ensured Yu and D1 there was no conflict of interest and that nothing was time consuming or distracting from P. 183.In fact, back on 14 November 2015, D1 was already trying to set up a driver management agency for 2016 as seen in his email to a Dave Scott “bcc to” Dan Walmsley with subject matter “Ryan Cullen-Driver Management”[111] (“Scott Email”). This email was on P’s logo and with D1’s title as “Group CEO”. What D1 was proposing to Dave Scott appeared to be something more than what he had told O’Young in his what’s app messages on 30 January 2016 and subsequent group messages between D1, O’Young and Yu, and in fact instead of “managing a couple of drivers” in the Scott Email, D1 was talking about 4-6 drivers and further D1 was saying to Dave Scott that Dan Walmsley was someone he had a huge respect for and that with the two of them working together they anticipated that they would be able to “cover off all angles of professional motorsport and to provide a good agency for selected drivers”. D1 in fact went on to say that they would:
184.What can be seen in the Scott Email is that by mid November 2015, D1 was already looking out for various motorsport business opportunities outside of P and with other third parties without disclosing them to P. In fact, D1’s own evidence was that D2 was incorporated because in or around September 2014 D1 had decided to undertake motorsport activities outside of P. It thus appeared that at the time of the incorporation of D2, D1 had already formed the intention of undertaking other motorsport activities outside of P through D2. Yet, there was no disclosure by him of his intention in any of the Agreements which were only signed around mid July 2015. 185.The Scott Email showed what D1 was contemplating or proposing on managing drivers was on a different scale to what he had told D1 had told O’Young and Yu in those what’s app messages in February 2016, that he (through D2) would be only be managing 1 to 2 drivers for a small monthly fee, and D1 had said “… it’s more of a “box-ticking” exercise but who knows it might bring [P] a future benefit”. He clearly failed to inform P what he had said in the Scott Email and what he told O’ Young and Yu was misleading, to say the least. 186.D1 attended the Macau Grand Prix 2015 as P’s Group CEO and all P’s benefits at the event were afforded to him, yet he took the opportunity to build up his personal connections with people such as Matt and Leo who were P’s contacts and whom he was introduced through O’Young and/or as Group CEO of P. As P had pointed out, D1 had provided Leo and Judy an enjoyable time at the Macau Grand Prix 2015 at P’s expense and also D1 seemed to take all the credit over resolving the W11 Incident even though it was resolved through P’s team effort. 187.P also complained that D1 had billed Dranix more than double what the lawyer Robert Cain had charged for his legal advice regarding the W11 Incident at the Macau Grand Prix 2015. As seen in the Options Email, D1 had represented to Leo that D1 had personally paid the lawyer and according to P, D1 had billed Dranix through D2, whereas the lawyer Robert Cain had billed P directly. When cross examined over this during the trial, D1’s answer was he had sought advice from another lawyer and paid out of his own pocket, but there was no sufficient evidence to support what he said. 188.Those what’s app exchanges D1 had with O’Young and Yu on 7 February 2016 took place when D1 was actively pursuing “Business Opportunities” with Leo and Matt, and in particular those exchanges had to be seen in the light of D1’s email to Tanya of 9 February 2016 (“Tanya Email”). In this email, D1 was explaining to Tanya that D1 received his remuneration for being Group CEO of P, and that aside to that, he managed some drivers and broker sponsorship deals in F1 and other top tier motorsport categories, which he told Tanya that there was nothing in his contract to preclude that but that being said, he did not want to be seen to put financial resource into a rival team in the same series, and on the flip side he had an agreement with this company [Dranix] to handle all of their motorsport sponsorships[112]. He then went on to tell Tanya what to do in relation to the sponsorship of Dranix which led to the Bentley Deal. The Tanya Email indicated that D1 was asking Tanya to use her dormant company Venture North for the Bentley Deal. 189.The Tanya Email clearly showed that it was D1 who was telling Tanya what to do and he was the one carrying out the negotiations throughout for Venture North. If D1 was indeed of the view that what he was doing did not fall into the scope of “Business” in the Shareholders Agreement, there was no reason why he could not have told O’Young and Yu what he had told Tanya in February 2016. Instead, about 3 months later he only casually brought up the W11 Bentley Deal with O’Young, but he did not disclose his own involvement in that deal. What D1 had told in his what’s app exchanges to O’Young on 4/5/2016, 11:20:34 was that D1 had dinner with the “betting guys” the night before and they had a small sponsorship on the Bentley with “AR”, and he said “They couldn’t put with us as rival brand… They aren’t having a good experience with AR[113] compared to CBR which makes things look good for Macau.” Later, at 9/5/2016 10:23:00, when O’Young said “I’m surprised they used W66 for Bentley, to which D1 said that “they used W11 for Bentley.”[114] 190.The Bentley Deal appeared to be the 1st one D1 started to discuss with Leo which was outside P. The fact that D1 decided to negotiate that deal through Tanya and using Venture North without informing P would in my view indicate that D1 knew that he would not obtain the consent of P due to conflict of interest in light of his fiduciary duties and contractual duties to P, and yet he decided to proceed. In fact, this can also be seen in D1’s email dated 20 April 2016 to Leo and another at “@ iv66.net” said, “As you know, I have a degree of separation from Bentley with W11 as they are a direct competitor. I am hoping my associate Tanya will also be able to join us on the line.”[115] He was clearly carrying out that deal behind P’s back. 191.Whether the Deal was for F1 sponsorships, other sponsorships or commercial representation or management agreement, in my view, they all fell into motorsport business, and “Business” and “Business Opportunity” of the Shareholders Agreement. It was not for D1 to decide which sponsorship to direct to P and which to direct to others and/or “rival teams”. As a director and a Group CEO of P, he was under an obligation to act bona fide in the best interests of P. In light of my earlier finding that D1’s fiduciary duties were not limited by the scope of “Business” or contractual provisions as contended by Ds, I find D1, by failing to disclose to P in full those “Business Opportunities” and by D1 directing those opportunities which were part of motorsport business to “rival teams” and/or third parties without informing P, D1 was not acting bona fide in the best interests of P, and further he had acted and/or placed himself in a position in which his personal interests did or might conflict with P’s interests and he had profited secretly. There was no reason why D1 should not have brought to P’s attention those “Business Opportunities”. Even if P did not have the interests or capacity or resources at the time, it was for P to evaluate and to decide under Clause 10 of the Shareholders Agreement and not for D1 to decide. In short, I find D1 was in breach of the fiduciary duties as pleaded by P. I find D1 also in breach of Clause 10 of the Shareholders Agreement, and also Clauses 2 and 6 of the Coleman Contract. 192.I further find D2 and/or Venture North, by arranging the Deals which were part of the motorsport business or P’s “Business”, were competitors to P. By arranging the Deals through his company D2 and/or through his sister-in-law’s company Venture North, D1 was also in breach of the non-competition provisions in Clause 16.1(a) and the non-solicit provision in Clause 16.1(b) of the Shareholders Agreement, in addition to his breach of fiduciary duties, and breach of Clause 10 of the Shareholders Agreement. Further, in light of what he had said in the Tanya Email and subsequently to Leo, I find D1 was clearly aware that there was a conflict of interest and a breach of fiduciary and contractual duties in what he was doing. G. D2 - ANY DISHONEST ASSISTANCE / KNOWING RECEIPT / BREACH OF CONTRACTUAL DUTIES 193.Ds accept that D1’s knowledge may be attributed to D2. However, insofar as “dishonesty” was concerned, as pointed out by Mr Kat SC, “dishonesty” is an essential element to be proved for the claim of dishonest assistance against D2, and as it was D1’s knowledge that was to be attributed to D2, it was necessarily alleged against D1. There was no “dishonesty” pleaded against D1 and further this allegation against D1 was not specifically put to D1 during cross examination. I agree with Mr Kat P may not now maintain its claim of “dishonest assistance” against D2. 194.As for “knowing receipt”, Ds complained that this claim was unparticularised. As said, D1’s knowledge was attributed to D2. In light of my earlier findings that D1 was in breach of his fiduciary duties and his contractual duties, and that D1’s knew that he was in breach and the monies received were clearly received by D1 through D2 in breach of his fiduciary duties and contractual duties. D2 thus had knowledge that the Deals which were procured by D1 without full disclosure to P and without obtaining the consent of P and in breach of his fiduciary and contractual duties to P, and D2 had received the proceeds and/or profits therefrom. I find D2 was liable for “knowing receipt” of all sums received by D2 and now claimed by P. 195.D2 separately owed P contractual duties under the Consultancy Agreement. I find D2 was also in breach of its contractual duties under the Consultancy Agreement, in particular Clause 3.3 and Clause 11.1. 196.Ds had agreed to the net sums received by D2 in respect of the Sauber Deal, the Eurotech Deal, the 1st Force India Deal, the Bentley Deal, the Strakka Deal, and the IGO Deal. 197.The only dispute between the parties was in respect of the 2nd Force India Deal. It was undisputed that an agreement was entered into by D2 and Dranix on 18 December 2016 for the 2nd Force India Deal for the 2017/2018 F1 championship ie from 25 December 2016 until one week after last race in 2018 with an option to renew a 3rd year on same terms for 2019, to be exercised on 21 July 2018[116] (“2nd Force India Agreement”). Under the agreement, Dranix was to pay D2 USD 2,600,000 per annum. This was followed by a sponsorship agreement between “Force India Formula One Team Limited” (“Force India”) and D2 dated 19 December 2016 as sponsor (“Sponsorship Agreement”)[117]. Under this agreement, D2 was to pay Force India USD 1,300,000 per annum. Ds’ case was that the 2nd year of the 2nd Force India Agreement was terminated. According to Ds, Force India ceased to exist about end of July 2018 and went into liquidation on 7 August 2018 and the assets were acquired by Lawrence Stroll and team changed to “Racing Point”. However, as mentioned earlier, Leo’s evidence was that after Force India went bankrupt, it was replaced by “Red Bull F1 Team”. 198.The “First Term” stated in the Sponsorship Agreement commenced on 19 December 2016 and ended 1 December 2017, or the date that is 7 days following the last race of the 2017 World Championship season, or earlier on lawful termination. The Second Term commenced the later of (i) 2 December 2017 or 8 days of the 2017 World Championship season and ending of (i) 1 December 2018; or (ii) the date that is 7 days following the last race of the 2018 World Championship season or earlier on lawful termination[118]. P had produced a letter dated 12 June 2017 sent by the then called Sahara Force India F1 Team to D2 confirming amendments to the Sponsorship Agreement which was acknowledged and agreed by D2 on 16 June 2017[119] (“Amendment Agreement”). Pursuant to the Amendment Agreement, the payment schedule per Clause 16.1 of the Sponsorship Agreement was deleted and replaced as follows[120]: -
199.From the bank statements disclosed by Ds[121], most of the information had been redacted, but it could be seen that Force India was paid US$768,000 on 21 December 2016, US$300,000 on 10 February 2017, US$426,000 on 2 June 2017, and US$398,880 in 5 October 2017[122]. In total, US$1,892,880 was paid by D2 to Force India which appeared to be in excess of the US$1,600,000 to be paid for 1st year under the Sponsorship Agreement. 200.On the last day of the trial for the closing submissions, Mr Kat SC had handed up to the Court a table setting out the amounts paid by Dranix to P and paid out by P to Force India to show that there was no “excess” payment to Force India over Year 1, and which indicated that the total gross income of the 2nd Force India Deal for Year 1 was US$2,600,000 and that the total expenditure was US$1,892,880,000 gross inclusive of VAT and D2’s profit was USD 707,120, net of VAT. However, the Court’s attention was not drawn to any VAT invoices issued by Force India to D2 under clause 16.3 of the Sponsorship Agreement. 201.Mr Hu had pointed out that D2 had issued an invoice dated 30 October 2017 to Dranix for USD 1,300,000 for the first payment of the 2nd contractual year[123]. 202.Mr Hu had also referred to Exhibit P1 which showed that the logo belonging to the sponsor W66 appeared on the Force India team race car and then the race car of its successor, the Racing Point Force India team, up to the conclusion of the 2018 Championship season and submitted the 2nd year of the 2nd Force India Deal was completed as well. 203.There was no sufficient evidence from Ds as to whether and if so, when the 2nd Force India Agreement was terminated or amended. As mentioned earlier, Leo’s evidence was D2 had found a replacement team for Dranix which Leo mentioned was “Red Bull”. There was no sufficient evidence from Ds to satisfy this Court that Ds did not receive any income for Year 2 from Dranix, or the invoice dated 30 October 2017 was not paid. 204.It was in fact not specifically pleaded by Ds that Year 2 was not completed. There was also no such evidence in any of D1’s witness statements. Having considered the submissions, the Court is prepared to draw an adverse inference from Ds’ failure to make full disclosure by putting before the Court all relevant documents such as bank statements, invoices, and any notices of termination pertaining to the 2nd Force India Deal as such disclosure would have exposed facts unfavourable to Ds. In short, I accept P’s case and I find in favour of P in respect of its claim under the 2nd Force India Deal. 205.After the completion of oral evidence, and about 8 days before the date fixed for oral closing submissions, Ds suddenly issued the Amendment Summons for leave to amend its counterclaim against P, attaching a draft re-amended defence and counterclaim (“Draft RADC”). The reason put forward for this late amendment on behalf of Ds was said to align with the issues and evidence raised before and at the trial. Ds’ application was opposed. At the hearing, this Court reserved its decision on the Amendment Summons. 206.Ds’ defence and counterclaim was first filed on 11 January 2018, and in paragraphs 69 and 70, it was pleaded that D1 was the owner of the Laptop which at the date of the alleged conversion on 21 November 2017, ie on the Termination Date, was worth £600 and D1 counterclaimed amongst other things delivery up of the Laptop and damages for conversion. There was no proper claim pleaded by D2 for breach of confidence. Ds subsequently amended their pleadings and their AD&C was filed on 17 November 2020. 207.Under paragraphs 69 and 70 of the AD&C, it remained D1’s pleaded case that he was the owner of the Laptop, and that during the board meeting of P on the Termination Date (21 November 2017), one of P’s agents unlawfully and without D1’s consent took the Laptop, and that at the date of the conversion, the Laptop was worth £600[124]. In paragraphs 75 to 80 of the AD&C, D2 set out their pleaded case on breach of confidence, and it was clear that D2 was the claimant for damages for breach of confidence. D2’s claim was based on the transactions in D2’s bank accounts which were said to be confidential information stored in the Laptop, namely the information on those transactions belonged solely and absolutely to D2 and it was confidential information related to D2 and owned by D2. It was D2’s pleaded case in the AD&C that P was under an obligation of confidence not to disclose the information or to use it in public[125]. 208.However, D1’s 1st witness statement was filed on 14 November 2018, prior to the AD&C. D1’s written evidence on the ownership of the Laptop was:[126]
209.Thus, according to D1’s above evidence, the Laptop would appear to belong to D2. When Ds obtained leave to file their AD&C, they should know what their own evidence was and that D1’s own evidence was that the Laptop was an asset of D2. There was no reason as to why Ds’ pleadings were not amended accordingly to reflect this at the time. 210.In paragraph 47 of his 1st witness statement, D1 had also stated that he believed that much of the data on the Laptop, including sensitive financial details, personal material (including family photographs) had been accessed by P or its agents without his authority, and that P had picked that information to support their case and deliberately withheld information from D1 to allow him to properly defend himself in the present action[128]. Thus, D1 was in fact saying that there were his personal material (including family photographs). Yet, the breach of confidence claim in the AD&C was only confined to D2’s claim as set out earlier. 211.As stated in a letter dated 28 September 2023 from P’s solicitors to Ds’ solicitors, whether the Laptop was allegedly owned by D1 personally or by D2 should be well within Ds’ knowledge from the outset, and there was no reason why Ds would seek leave only after the trial to re-amend their AD&C. Further, the counterclaim in respect of breach of confidence was always predicated upon use of the D2’s confidential banking data and never on D1’s personal, private and confidential data relating to D1’s private, family and personal life. 212.In the above circumstances, it was far too late for Ds to seek amendment of their pleadings after completion of all evidence at the trial, and the proposed amendments were a material departure from Ds’ pleaded case and P was precluded to amend their pleadings and/or to cross examine D1 on Ds’ amended case. I decline to grant leave for Ds to file the draft RADC. I.2 The evidence on ownership of the Laptop 213.In any event, even if the amendments were allowed, there was no sufficient evidence that the Laptop was owned by D2 or any asset of D2 as at 21 November 2017. 214.O’Young had in his 2nd witness statement of 9 August 2021 referred to BEL’s credit card statements which showed that it was BEL which purchased the Laptop and BEL became P’s subsidiary at the time of the 2014 Merger. There was no record of any alleged transfer or approval of any alleged transfer of the Laptop to D2 by BEL or by P. There was also no sufficient evidence that there was any consideration paid by D2 to BEL for any transfer of asset, ie the Laptop to D2. There was further no sufficient evidence as to the value of the Laptop at the alleged date of conversion. Having considered all the evidence, I find no sufficient evidence of any alleged conversion and/or any alleged value of the Laptop. I.3 The evidence on breach of confidence 215.In Ds’ Closing Submissions, the counterclaim for breach of confidence was only limited to D1’s private and personal information and data on the Laptop including his family photographs. In other words, D2 was no longer pursuing its pleaded claim for breach of its confidential banking information/data. 216.There was however no evidence in D1’s witness statements as to how P was in breach of confidence, apart from stating that he believed that much of the data on the Laptop, including sensitive financial details and personal material (including family photographs) had been accessed by P[129]. During trial, D1’s evidence was that a senior director told him that O’Young had looked at the intimate photographs in the Laptop around the time when he left P. As pointed out by Mr Hu, this was never pleaded nor did D1 even mention this in any of his 3 witness statements. 217.Having considered the evidence, I find no sufficient evidence to support D1’s claim. I.4 Conclusion on D’s counterclaim against P 218.In light of all above said, I dismiss Ds’ counterclaim. 219.To summarise, I find D1 was in breach of his fiduciary duties and contractual duties to P. I find D2 had knowingly received the sums as claimed by P under the Deals in the RASOC. I have also found D2 was in breach of its contractual duties to P. 220.P elected to claim for the total amount of HKD 19,723,449.80 in the RASOC in lieu of seeking an account or inquiry on profits. I give judgment for the amounts claimed by P, which shall be paid by D1 and D2 jointly and/or severally within 28 days. 221.Ds’ counterclaim is dismissed. 222.P is clearly the successful party and I order Ds to pay P’s costs of this action including the counterclaim and the Amendment Summons and all reserved costs with certificate for two counsel. This is an order nisi which shall be made final after 14 days.
Mr Derek Hu and Ms Jacqueline HH Chan, instructed by King & Company, for the Plaintiff Mr Nigel KAT SC and Mr Bernard Lam, instructed by Howse Williams for the 1st and 2nd Defendants [1] Chief Executive Officer [2] See para 5a, Amended Defence; para 2, D1’s witness statement ,D:286 [3] Name of CRL changed to CRHL on 15 February 2013, see para 4, C:254 [4] Para 11, C:201; para 4, C:254 [5] E1:549-556 [6] See para 5f, A:60 [7] E1: 479-513 [8] E1:533-547 [9] E1:520-532 [10] E1:514-519 [11] A:29-30 [12] A:75-76 [13] B:142 [14] See para 17, P’s Opening Submissions [15] Paras 26(f), 30(b), 33(b), 35(h), 41(a), 48(a), 59(a), 60(d) (A:66,68,70,51,73,75,78, 80); [16] See para 13, Ds’ Opening Submissions [17] See paras 10,11 Ds’ Closing Submissions [18] See Headnote , at pg144 [19] At pgs 144-145 [20] See para 8, E1:61 [21] See E1:61 [22] See para 6, Ds’ Closing Submissions [23] See last paragraph, E1:431 [24] Penultimate paragraph , E1:437 [25] E1:555 [26] See para 8, Ds Closing Submissions [27] E1:440 [28] E1:532 [29] See para 11, Ds’ Closing Submissions [30] See Clause 11.3. E1:529 [31] See under “Acquisitions”, E1:439-440 [32] See paras 22-37 of Ds’ Closing Submissions [33] See para 24, Ds’ Closing Submissions. [34] E2:936-2 [35] E2:936-4 [36] See para 38:Ds’ Opening [37] According to D1, he had been working in the motorsport industry for around 15 years at the time of his witness statement (14.11.18), see para 2, D:286 [38] See para 5, D:287 [39] See para 3, D:286 [40] See paras 14, 15 C:202 [41] At para 14, C:202 [42] At para 12, C:256 [43] Para 6, D:287 [44] At para 16, C:203 [45] E1:427 [46] See reference to the MOU, E1:431 [47] E1:429 [48] E1:430-432 [49] E1:433-441 [50] Last paragraph, E1:431 [51] See E1:441 [52] E1:434 [53] See para 16, C:258 [54] E1:443-446 [55] See para 5 f, A:60 [56] Para 13, D:289 [57] Extracts produced by D1 at D:327-332 [58] See para 19, C:262 [59] See paras 30, 31 , C:156 [60] According to D1, he was being paid by BEL and being paid by P, see what’s app exchanges between D1 and O’Young on 30/1/2016 at 8:24:24 to 8:25:26, E1:675-676 [61] At 30/1/2016 8:18:04pm, E1:678-1 [62] At 30/1/2016, 8:26:09 pm, E1:678-2 [63] At 7/2/2026, 8:24:28 pm, E1:679 [64] See “Senior Staff Structure”, E1:550, and “Project Staff Allocation”, E1:551 [65] At para 36, C:158 [66] See para 18, D:290-291; see also D:375394 [67] E2:766-791 [68] D:405-409 [69] See para 27, C:212 [70] See para 3, C: 269-2 [71] E3:1165-1176 (unsigned copy) and F2:1603-1615 (signed copy) and invoices of D2, F2:1696-1700 [72] See Leo’s witness statement, para 1, D:271 [73] See para 25, D:293 [74] E1: 472- 477; also E1:564- 572 [75] At E1:570 [76] E1:600 [77] E1:573 [78] E1:585 [79] E1:574 [80] According to Leo, Judy Li was his assistant at Dranix [81] E1:466 [82] E1:575 [83] E1:575 [84] E1:584 [85] E1:595-596 [86] E1:574 [87] E1:595 [88] E1:599, 615 [89] E1:614-615 [90] E1:662-674 [91] E1:577 [92] E3:1224-1225 [93] See para 30, D:295 [94] E2:708-719 [95] E1:578 [96] See Clause 4.1.1, E2:712 [97] E1:584 [98] E1:615 [99] At D:274 [100] World Touring Car Championship [101] In para 3, D:275 [102] E1:455-460 [103] At E1:460 [104] Clause 4.2 of the WTCC Sponsorship Agreement provided that Ravenol had the options to extend the contract which had to be taken before August 2015. It appeared there was no extension. [105] Dan Walmsley’s email address appeared to show “@paragonmotion.com”, see E1:597 [106] E1:620 [107] ie Thursday 14 January 2016 [108] E3:1028-1034 [109] See para 11A, A:29 [110] See para 26, D:294 [111] E1:597 [112] E1:684 [113] Probably referring to Absolute Racing [114] E2:747-751 [115] E2:726 [116] E2:817-832, and see clauses 2.1 and 2.2, E2:820 [117] E2:833-871 [118] See Schedule 1, at E2:851, 853 [119] E2:870-871 [120] E2:846 [121] F1:1324-1477 [122] Respectively at F1:1498, 1499, 1504, 1508 [123] E3:1053 [124] A:83 [125] See para 78, A:85-86 [126] See paras 44-45, D:298 [127] See D:400 and D:401 [128] D:298-299 [129] At para 47, D:298 |
Cases cited in this judgment
Further hearings and rulings under HCA 2665/2017