ESPORTS BUSINESS DEVELOPMENT LTD v. WONG CHUN YEE CHRISTOPHER

HCA 1953/2018

[2023] HKCFI 1349

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1953 OF 2018

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(By Original Action)

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(By Counterclaim)

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JUDGMENT

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BACKGROUND

1.  In this action, Esports Business Development Limited (“the Company”) claimed against Wong Chun Yee Christopher (“CW”) for, inter alia, the deliver up of various properties including certain gaming analytics database and odds calculations and for the administration rights of some Facebook Fanpages (“the Properties Claims”). CW counterclaimed against the Company on the same subject matters, claiming that he had the right thereto instead (“the Properties Counterclaims”). CW also sued Victor Chan How Chung (“VC”) and Daniel Chan Ka Yiu (“DC”), by way of counterclaim, for breaching a joint venture agreement (“the Alleged JV Agreement”) between them, in particular, by failing to inject funds into the Company as agreed.

2.  The Properties Claims and the Properties Counterclaims have been disposed of prior to the commencement of the trial[1]. What remain are CW’s claims against VC and DC on the Alleged JV Agreement (“the Remaining Counterclaims”). The main issues involved are whether there was a binding JV Agreement between the parties as such, and if so, whether VC and DC have breached such an agreement.

3.  Pursuant to the order made by Master M Lam by consent on 12 October 2018, this is a trial on liability only. Damages shall be assessed on a separate occasion if VC and/or DC is/are found to be liable to CW herein.

CW’S CASE

4.  CW and DC were close friends. CW was a Mathematics graduate from Imperial College London. He wished to set up an E-sports betting business.

5.  In April 2013, CW incorporated a company in the United Kingdom (“the UK Company”) to kick-start his business. He worked very hard to develop gaming analytics database and odds calculations algorithms. He also briefly worked at Hong Kong E-sports Limited to gain more experience.

6.  In September 2013, DC as a good friend of CW introduced his father (VC) to CW, so that CW could receive general feedback from VC on his business plan. At the time, VC was the Chairman of Rexlot Holdings Limited (“Rexlot”), a listed company which operated a lottery business in the PRC.

7.  In 2014, CW began to actively look for investors for his business venture of e-sports betting and received very positive feedback.

8.  At around the same time (in March/April 2014), DC told CW that he wished to partner with him. Out of friendship, CW agreed to share his equity with DC.

9.  In around April 2014, CW was introduced to a group of Singaporean investors (“the potential Singaporean investors”), who were interested in CW’s business plan. On 21 April 2014, the potential Singaporean investors had in-principle agreed to invest in CW’s business plan.[2]

10.  DC arranged a meeting with VC and CW on 21 April 2014[3] (“the First Meeting”). In the First Meeting, VC agreed[4] to invest HK$3 to HK$5 million in the business at the first stage to support primarily the product setup (i.e. software development) and licencing for e-sports betting. Such a commitment on the part of VC was backed up by DC’s Facebook message to CW on 5 May 2014, in which DC wrote “if 3 million not enough, he will give us more he says”.

11.  On about 25 April 2014, CW took DC to meet the potential Singaporean investors in Singapore. After the meeting, they offered to invest HK$27 million for a 49% stake in CW’s business. The amount of HK$27 million was premised on a sum of HK$3 million primarily for software development and licencing, and a sum of HK$24 million for a 2-year operation after launch.

12.  While CW and DC were in Singapore, VC asked his friend Vincent Wee (“Vincent”) to have dinner with them, with the objective of dissuading CW from accepting the offer of the potential Singaporean investors and persuading him to partner with VC instead.

13.  After hearing about the offer from the potential Singaporean investors, VC was keen to invest in CW’s business. VC therefore continued to convince DC and CW that they should partner with him rather than the potential Singaporean investors. In order to do so, VC made an urgent offer of lending up to HK$30 million to DC and CW.

14.  At a meeting held at VC’s home on 11 May 2014 (“the Second Meeting”), CW, DC and VC agreed that they would establish a joint venture business in e-sports betting (as was presented to VC in the draft business plan), which would be set up outside Hong Kong to avoid legal and regulatory issues. Furthermore, it was agreed that VC would provide the resources for obtaining betting licences and assisting operation overseas.

15.  It was after such a meeting that the Company was incorporated with DC initially holding 5,001 shares and CW 4,999 shares. On account of VC’s funding commitment, CW later transferred 1,499 shares to VC, which VC declared as being held on trust for DC.

16.  After multiple revisions to the business plan from May to June 2014, VC requested CW in July 2014 to provide financial collateral for the funds that he had promised to provide. This led to another meeting among the parties on 29 July 2014 at the Excelsior Hotel (“the Third Meeting”), in which VC explained that while he would lend HK$30 million to CW and DC, they should sign a share mortgage agreement which set out the required targets of the business, so that VC could call back the shares if the targets were not met. It was also agreed at this meeting that VC would provide HK$5 million at the first stage.

17.  By the end of the Third Meeting, the Alleged JV Agreement had been made, which included (but not limited to) the following terms:

(1)  VC would invest or put in a total of HK$30 million to the joint venture and/or partnership (by way of a loan to the joint venturers (that is, CW and DC), which would be divided into two stages: HK$5 million at the first stage and HK$25 million at a later stage;

(2)  The joint venture and/or partnership amongst CW, VC and DC is based on mutual trust and confidence;

(3)  CW’s continued performance of the Alleged JV Agreement is conditional upon the continuous performance of the Alleged JV Agreement by VC and DC.

18.  VC was fully aware of the e-sports betting business to be pursued, and agreed to meet and introduce legal advisers who would handle the betting licencing application in Malta. It was intended that companies would be incorporated in Hong Kong and offshore (e.g. Malta), since it was the consensus that e-sports betting involving real money (as opposed to play money which will be launched first) could not be conducted in Hong Kong.

19.  Throughout the course of the Alleged JV Agreement, VC and DC were tardy in their performance while CW worked very hard to realise his business vision. Among other things, contrary to the Alleged JV Agreement, VC and DC refused to pursue the e-sports betting business of the joint venture and VC also failed or refused to advance funds as agreed, including the HK$5 million at the first stage (whether within 7 months of office renovation or by the second quarter of 2015 as agreed or at all), let alone the total of HK$30 million as promised.

20.  After CW completed most of the groundwork for the business, such as the odds algorithm and the software development plan, VC decided to kick CW out by throwing baseless accusations at CW. Worse still, VC and DC sought to acquire all of CW’s hard work and to start a new company to the exclusion of CW.

21.  On 8 May 2015, VC and DC procured the Company to give oral termination of CW’s position as Chief Operation Officer thereof.

22.  On 12 May 2015, VC and DC also purportedly gave notice to remove CW as a director of the Company.

23.  In a gist, VC and DC had breached the Alleged JV Agreement by:

(1)  Failing or refusing to obtain and pursue overseas betting licences and operations overseas or to provide operational assistance;

(2)  Failing or refusing to inject funds as agreed, including the HK$5 million promised at the first stage;

(3)  Failing to consult and/or discuss with CW in relation to the business of the joint venture and/or partnership;

(4)  Failing to pursue the business plan of the joint venture and/or partnership and unilaterally changing the business or business plan of the joint venture and/or partnership;

(5)  Excluding CW from the management and control of the joint venture and/or partnership and preferring their own interests to the interests or business of the joint venture.

THE CASE OF VC AND DC

24.  It is undisputed that CW and DC were very close friends at the material time.

25.  In September 2013, DC invited CW to join his family dinner with VC. Notwithstanding DC had bounced CW’s business idea to VC, the latter had no interest in CW’s business at all.

26.  In April 2014, DC fell out with his former business partner. DC therefore decided to leave their company HK Esports Limited, and to team up with CW.

27.  DC had been helping out CW by editing CW’s business plans. Despite the fact that DC had made very little contribution, out of brotherhood, CW gave him 50% of the shares in the UK Company.

28.  With a view to getting more insight and advice from VC, DC arranged the First Meeting for CW to meet VC on 21 April 2014.  At the time, no one was aware of any so-called in-principle offer from the potential Singapore investors.

29.  In the First Meeting, VC took the view that their business plan was not good enough and lacked matured consideration. There was no agreement made whatsoever.

30.  On 25 April 2014, DC and CW went to Singapore to make a presentation to the potential Singaporean investors. While they were in Singapore, they had dinner with Vincent twice. During the first dinner (29 April 2014), CW was asked by Vincent to obtain a term sheet from the potential Singaporean investors so that they could discuss further in the second dinner. In the second dinner which was held on 2 May 2014 (the day before CW and DC left Singapore), CW said he was unable to obtain any written and non-binding term sheet from the potential Singaporean investors.

31.  During those two dinners, Vincent never attempted to discredit the potential Singaporean investors. Neither was Vincent told in those dinners that there was any in-principle offer on the table from anyone.

32.  Upon their return to Hong Kong in early May 2014, VC did not want DC to get involved in the deal with the potential Singaporean investors as VC had concerns about their background. VC told DC that he would support DC if he wanted to set up his own company.

33.  DC told CW about the decision. CW then decided not to proceed with the potential Singaporean investors so that he could continue to work with DC.

34.  VC asked DC to come up with a business plan. VC was prepared to lend up to $3 million to his company if the business plan was viable and acceptable by VC, and would provide more funding if required. The above was said between father and son in a domestic setting.

35.  The purpose of the Second Meeting (held on 11 May 2014) was for VC to give high-level comments on their business plan, which were given. At that time, VC was still not convinced by their business plan and the proposed share structure. Having given his comments, he asked them to perfect the business plans. Again, there was no binding agreement reached whatsoever.

36.  The Company was incorporated on 15 May 2014. DC was allotted 5,001 shares while CW was allotted 4,999 shares.

37.  DC and CW then went on to revise the business plans in May and June 2014 with a view to obtaining VC’s approval. However, VC still commented their draft business plans were “pure trash”.

38.  VC had never agreed to be a business partner of CW and DC and/or in joint venture with them. The loan which VC provided to the Company was given purely out of his parental relationship with DC, and the reason for VC being a shareholder of the Company was because of (a) his provision of the said loan to the Company; and (b) more importantly, he would like to ensure that everything was on the right track so that DC would not be exposed to any risks[5].

39.  On 4 June 2014, CW agreed to trim down his shareholding in the Company to 35% by transferring part of his shares to VC. As VC had no interest in the Company, on the same day, he made a declaration of trust holding such shares on trust for DC.

40.  In July 2014, CW became restless as he expected VC would help out by providing some funding.

41.  On 27 July 2014, VC told DC in private that he was prepared to provide up to HK$5 million to the Company.

42.  In the Third Meeting (held on 29 July 2014), CW and DC provided updates to VC on the business plan. However, no binding agreement had been reached as alleged.

43.  The draft business plans prepared by CW and DC were never approved by VC. In as late as December 2014, VC still thought their business plan was trash.

44.  In other words, the case of VC and DC was that the Alleged JV Agreement did not exist as such. Furthermore, the relationship between VC and DC is entirely domestic in nature in that VC all along only intended to help DC out of affection as a father. As a result, VC never had any intention to create any legal relationship with CW.

45.  In relation to the termination of appointment of CW as the Chief Operation Officer of the Company and his removal as a director thereof, VC and DC alleged that CW prematurely insisted on launching a gaming system in Hong Kong, and had threatened that he would take the Company’s database and evaluation tools elsewhere with him. Therefore, it was said that the Company’s actions taken against CW in May 2015 were justified.

CREDIBILITY OF WITNESSES[6]

46.  In Hu Lan v David Golden [2023] HKCFI 873, this Court held that:

“36. When I consider the credibility of various witnesses who had given evidence in court, I shall take the following matters into account:

(1)  Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility;

(2)  Importance should be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events;

(3)  The court will also attach importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement;

(4)  The court should consider a witness’ motive for deliberately not giving truthful testimony. For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest;

(5)  It is essential to have regard to the entirety of a witness’ evidence. A witness can make mistakes, but the mistakes do not necessarily affect other parts of his evidence. Likewise, a witness may lie. However, lies themselves do not mean necessarily that the entirety of that witness’ evidence is to be rejected. A witness may lie in a stupid attempt to bolster his case, but the actual case nevertheless remains good irrespective of the lie;

(6)  On the other hand, where it is shown that a witness has been discredited over one or more matters to which he has testified, this fact is relevant to the assessment of his overall credibility; 

(7)  While the court is entitled to take demeanour into account when assessing testimony, it should be borne in mind that demeanour can be deceptive and is therefore to be approached with care.”

47.  I will bear the above matters in mind when I consider the credibility of the witnesses in the present case.

Perry Tam

48.  Perry Tam (“Perry”) was the former General Manager of the Company. His evidence mainly revolved around the circumstances under which he came across a copy of the draft share mortgage agreement and his discussions with CW in respect of the potential parting way with the Company.

49.  I must say I have a very strong impression that Perry was only trying his best to give evidence in favour of CW’s case, rather than giving truthful evidence in the Court.  For example:

(1)  While he had never seen legal document such as share mortgage agreement before, he alleged that he could infer that VC had agreed to invest HK$30 million into the Company by just glancing through the draft share mortgage agreement. This is totally incredible;

(2)  In his witness statement, he accused DC of “slacking more and more, leaving [CW] to do all of the hard work of developing the betting platform on his own” [7]. However, it is undisputed that even on CW’s case, CW (as opposed to DC) had all along been responsible for this aspect of the work;

(3)  While he was the General Manager of the Company, he claimed that he did not know what DC did other than administrative work. This is again incredible;

(4)  When he was asked why he claimed that the draft share mortgage agreement was drafted by Baker & McKenzie, he answered that (1) DC mentioned that VC liked to engage the services of Baker & McKenzie and (2) it might be that he had had a glimpse of the words “Baker & McKenzie” on the draft share mortgage agreement. When this Court clarified with him whether it was his evidence that he did see the words “Baker & McKenzie” on the draft share mortgage agreement at the material time, he immediately retracted his answer. In my view, when he first gave such an answer, he simply did not care whether it was true or not, otherwise he would not have retracted it so quickly.

50.  I therefore reject his evidence.

CW

51.  General speaking, I find that CW is an incredible witness. As this Court will further explain under different sub-headings below, many aspects of his evidence are contradictory to contemporaneous evidence. He has also changed his own evidence in respect of various matters. At this juncture, I am of the view that it is adequate to give the following examples:

(1)  In CW’s case, he has all along alleged that the potential Singaporean investors have indicated their in-principle agreement to invest in his business on 21 April 2014. When it was put to him by DC and VC’s counsel that he did not know about this stance by the time of the First Meeting (which was held on 21 April 2014), he disagreed, and asserted that he had received an email from them (he did not rely on any other basis at that time). The emails which CW disclosed indeed show that a Mr KH Wong (one of the potential Singaporean investors) did write on 21 April 2014 to a “Lawrence” and, having stated that his side (Mr Wong’s side) have in-principle agreed to invest, invite “Lawrence” to participate in the investment as well. In response, “Lawrence” raised a number of questions on 26 April 2014 for Mr Wong to answer, and as a result, Mr Wong forwarded his email chain with “Lawrence” to CW on 29 April 2014 and asked him to draft a response. In other words, CW could not have known about the in-principle agreement to invest by 21 April 2014 as alleged. When it became apparent to CW that Mr Wong’s email to “Lawrence” was not forwarded to him until 29 April 2014, he started to add more evidence on his knowledge about the “in-principle agreement”. He claimed that it was confirmed in writing on 21 April 2014. He also alleged that his friend Bryan had also told him about it (the potential Singaporean investors were introduced to CW via Bryan’s father). But the problem is that the alleged “confirmation in writing” was never produced in these proceedings. Neither were these additional means of knowledge referred to by CW in any of his witness statements. In my view, CW clearly made them up along the way;

(2)  When it was put to CW that VC was like his mentor and a fatherly figure to him, CW was very evasive, and only agreed that VC was intelligent and that he (CW) respected him (VC). He then went on to deny what was put to him. It was only after Mr Chong’s repeated attempts that CW finally accepted that he regarded VC as his mentor. But he still refused to accept that VC was a fatherly figure to him. However, in fact, that was what he himself stated in his WeChat message to DC on 27 July 2014: “I truste (sic) him like a fatherly figure”. When this was pointed out to CW, he explained that that feeling only arose subsequently in late June 2014 but not earlier. Again, I am of the view that he just made it up in a desperate attempt to explain away the inconsistency in his evidence;

(3)  While CW accepted in his 2^nd Supplemental Witness Statement that he drafted his own employment contract, he denied that in Court, and alleged that it was drafted by Perry. When he was reminded that he had accepted that he drafted the employment contract in his witness statement, he changed his evidence and alleged that both he and Perry had involvement in the drafting of the same. However, he maintained that Perry was the main person who drafted it under VC’s instructions. This is obviously a lie, for if it was so, he would not have stated that he drafted the said employment contract in his witness statement in the first place.

52.  All in all, I do not accept CW’s evidence. As aforesaid, further discussion will be found in the latter parts of this Judgment.

Vincent

53.  While Vincent has been a friend of VC for a long time, I cannot see any reason why he would come to give false evidence in Court for the sake of VC. His evidence is also supported by contemporaneous messages which were sent by DC to VC during the second dinner attended by Vincent, DC and CW on 2 May 2014.

54.  Indeed, even CW’s senior counsel accepted that “little could be said about [Vincent]’s manner in giving the evidence”[8].

55.  On my part, I have no hesitation in accepting Vincent’s evidence as I take the view that he is an honest and reliable witness.

DC

56.  In my view, DC, as a witness, should be categorised somewhere between Vincent and CW. While generally speaking I accept that his evidence is largely consistent with the contemporaneous documents and is inherently probable, it is also evident that he has not been truthful all the time. There were also occasions when he appeared to this Court that he was trying to hide something and did not inform the Court the whole truth. For example:

(1)  On 22 March 2015, DC sent the following WeChat message to CW:

“I have just talked to boss, he said he would prefer having the next meeting with both of you present […]”

During cross-examination, DC claimed that the above message was typed up by himself – he typed what he had been told by VC’s staff Paddy or Jennifer, and denied that he was forwarding Paddy or Jennifer’s message. Taking into account the wordings used, this is simply incredible. I agree that it may well be that DC was trying to cover up the fact that he had messages with others which had not been disclosed in these proceedings;

(2)  DC had deliberately played down the role of real money betting in CW’s business plan by insisting that real money betting was only an option. However, it is quite clear from the contemporaneous documents and business plans that real money betting has always been regarded by both DC and CW as the ultimate target of the business;

(3)  According to the contemporaneous documents, CW must have met some potential Singaporean investors in March 2014. Given CW and DC’s relationship, and since DC was a shareholder of CW’s UK company, CW must have told DC about such potential Singaporean investors. However, DC denied that CW had ever told him about it, which is incredible;

(4)  DC claimed that the draft share mortgage agreement and term sheet were only “learning materials”. In my view, this assertion is unbelievable.

57.  To conclude, while I do not think DC is as unreliable as CW, I take the view that the Court should consider DC’s evidence cautiously.

DISCUSSION – VC’S LIABILITY

58.  While the Remaining Counterclaims were made by CW against both VC and DC, the bulk thereof was against VC.

59.  For the sake of convenience, I will therefore consider CW’s counterclaim against VC first.

First Meeting

60.  It is CW’s case that the First Meeting was set up after DC had told VC about the in-principle agreement to invest on the part of the potential Singaporean investors and their upcoming meeting in Singapore.

61.  While CW was not entirely sure whether the First Meeting was held on 21 April 2014 or 22 April 2014, I do not have any hesitation in finding that it took place on 21 April 2014 in the light of DC’s WeChat message sent on 20 April 2014 to CW, in which DC reminded CW not to be late and encouraged him to “add oil […] tomorrow”[9].

62.  In other words, by the time when the First Meeting was arranged (on or before 20 April 2014), the potential Singaporean investors had not informed CW about their in-principle agreement to invest yet (even assuming CW’s case that he was informed about it on 21 April 2014 is accepted, which is not – see paragraph 51(1) above and the following paragraph). Therefore, the arrangement of the First Meeting could not be because of such an in-principle agreement to invest as alleged in CW’s RRRAD&CC.

63.  Pausing here, it is noted that there is a dispute as to when CW was informed about the potential Singaporean investors’ in-principle agreement to invest. I do not propose to repeat what I have already stated in paragraph 51(1) above. It suffices for me to say that it is my finding that the first time CW knew about it was on 29 April 2014.

64.  On this matter, it was argued on behalf of CW that:

“In any case, as one is talking about an in-principle “agreement”, this must be referring to an in-principle “agreement” reached between the two sides. Any suggestion that an in-principle agreement was reached without CW knowing it is illogical and contrary to business common sense.”[10]

65.  I do not accept this argument, because the subject email of Mr KH Wong reads:

“As spoken, we met up with a young start up company recently and think there is potential for growth and success especially if we can find the right partners. We have in-principle agreed to invest in the company and are hoping your side would be interested to participate as well. […]”

66.  In my view, in the context of the email, what Mr KH Wong meant was that an in-principle decision had been made to invest rather than an in-principle agreement had been reached with CW. CW’s argument is therefore misconceived.  This conclusion is also supported by the fact that according to Vincent’s evidence, he had not been told about such an in-principle agreement when he met CW in Singapore.

67.  Further, if CW was right in that he knew that the potential Singaporean investors had already agreed in-principle to invest by 21 April 2014, I wonder why it was still necessary to have the First Meeting with VC. There was also no need for DC and CW to revise their business plan on 22 April 2014 after the First Meeting.

68.  Hence, I accept DC’s evidence that the sole purpose of the First Meeting was for DC and CW to seek insight and advice from VC rather than for them to seek funding from VC.

69.  I have not lost sight of the business plan which was presented by CW to VC in that meeting. CW suggested that the timeline therein shows that DC and CW expected that funding from VC would be made immediately available to kick-start the project there and then. However, I do not think much weight should be attached to such a timeline which (i) was just a draft and (ii) could be revised at any time.

70.  It is also CW’s pleaded case that there was an agreement reached in the First Meeting in that “VC agreed to, inter alia, invest HK$3 to 5 million”.

71.  However, during Closing Submissions, Mr Suen SC clarified that he would not maintain that a binding agreement had been reached at the First Meeting.

72.  In any event, the assertion that a binding agreement had been reached in the First Meeting is simply unsustainable and must be rejected.

73.  Firstly, CW stated in paragraph 28 of his witness statement that:

“After hearing my presentation at the First Meeting, VC proposed to invest HK$3 to 5 million in the business at the first stage so DC and I could proceed with the betting software development which was the core of the business. […] However, since there was no concrete commitment from VC at that stage, I decided to proceed with the meeting with the Singaporean Investors to compare the offers.” (emphasis added)

74.  If there was “no concrete commitment from VC”, it is a non-starter for CW to allege that there was any agreement reached.

75.  Secondly, it was clear that CW tried to salvage his case while he was cross-examined in Court, by changing his evidence and alleging that VC had committed to lend him HK$3 – HK$5 million as a loan, for the purpose of helping him and DC to negotiate with the potential Singaporean investors. I do not accept that VC had made any commitment as such:

(1)  The ever-changing stance on the part of CW has undoubtedly shown that he is not a reliable witness at all, to say the least;

(2)  The assertion that VC had agreed to lend him money for the purpose of helping him in his negotiation with the potential Singaporean investors is contradictory to CW’s case that VC had tried hard to persuade him to cooperate with him (VC) instead of the potential Singaporean investors;

(3)  According to CW, what VC said was that: “咁你地要去傾吖嘛，咁我俾住三五百萬你地，你地搞住啲 software，整呢整路先囉。有錢無錢同人傾都差好遠啦，你一蚊都無，同人傾，人地點信你啊”. In my view what VC had allegedly said does not make sense:

(a)  The reason why investor had to be looked for was because DC and CW had no money to implement their business plan.  It is difficult to understand why their plan would be more “believable” if they had HK$3 – HK$5 million in their account;

(b)  It is CW’s own case that DC and CW were going to fly off to Singapore soon (in 4 days’ time) for the meeting with the potential Singaporean investors. The software could not be made ready in such a short time.

76.  Thirdly, CW’s explanation that he went ahead to see the potential Singaporean investors despite VC’s agreement to lend him a loan so that he could “compare the offers” does not make any sense at all, because if what VC had agreed was only to lend him HK$3 to HK$5 million, there was nothing for CW to compare, given what CW was minded to raise was in the region of at least HK$27 million.

77.  Fourthly, CW tried to portrait a picture that VC was already very interested in making an investment in CW’s business in the First Meeting. If that is the truth, then why didn’t VC make an offer there and then, knowing that CW would be flying off to Singapore to meet the potential Singaporean investors?

78.  Furthermore, if VC was so interested in CW’s business idea that he had already agreed to invest, why did he propose to CW on 5 May 2014 to get professionals’ view on esport betting?[11]

79.  To conclude, I reject CW’s evidence, and find that VC had not agreed to invest in CW’s business at all during the First Meeting.

80.  On the other hand, I accept DC’s evidence that the purpose of the First Meeting was for CW and DC to discuss the business plan with VC so that they could get advice from VC, which they duly did. That was the reason why CW and DC revised the business plan after the meeting.

Dinner meetings with Vincent

81.  It is undisputed that CW and DC flied over to Singapore on 25 April 2014 (i.e. 4 days after the First Meeting) to meet the potential Singaporean investors.

82.  It is also agreed that CW and DC had had two dinners with Vincent while they were in Singapore, on 29 April 2014 and 2 May 2014 respectively.  

83.  CW stated that the purpose of VC arranging his friend Vincent to have dinners with them was with the objective of dissuading CW from accepting the offer of the potential Singaporean investors, and persuading him to team up with VC.

84.  On the other hand, according to Vincent, the purpose of the dinner on 29 April 2014 was for him and his wife to understand the business ideas of CW and DC so that he and his wife could share their business experience with CW and DC on how start-up business raised funds. As Vincent realised that the potential Singaporean investors had not given any proposal in writing to CW, Vincent suggested DC and CW to get a written term sheet so that the terms of the proposed investment would be clear. As CW told Vincent that he would try to get a written non-binding term sheet from the potential Singaporean investors before he left Singapore on 3 May 2014, Vincent suggested that another dinner be arranged for 2 May 2014, so that he could review the term sheet to be obtained. While the second dinner did take place accordingly on 2 May 2014, since CW told Vincent thereat that he could not get any term sheet from the potential Singaporean investors as suggested, they could not discuss the terms as planned. Another friend of VC, Mr Goh, who was also present at the second dinner, told CW and DC that it was not possible for the deal to move forward without a term sheet. Vincent emphasized that at no time during those dinners did he, his wife, nor Mr Goh try to convince DC/CW to proceed with their business in any particular way.

85.  As aforesaid, I accept Vincent’s evidence. I reject CW’s evidence that Vincent had tried to persuade him during those dinners that he should partner with VC rather than the potential Singaporean investors.

86.  My reasons are as follows:

(1)  If the whole purpose of VC was to try to persuade CW in partnering with him rather than the potential Singaporean investors, there was no need for VC to engage a stranger/outsider in Vincent to do that, as DC could have done the job;

(2)  Contemporaneous chat messages between VC and DC which were exchanged during the second dinner[12] support DC/VC’s case that Vincent and Mr Goh did ask for non-binding term sheet. Those messages also show that it is a lie when CW stated in his witness statement that Vincent “barely touched on the necessity of obtaining a term sheet from the Singaporean Investors” and that Vincent “spent most of the time convincing [CW] that […] VC would be a much more trustworthy business partner”;

(3)  CW initially also stated in Court (on Day 2 of the trial) that he did not ask the potential Singaporean investors for any term sheet. However, on Day 3 of the trial, he had probably forgotten that he had told a lie on the preceding day, and said it was unfair to give the potential Singaporean investors only a few days to prepare a term sheet. This slip of tongue supports Vincent’s evidence that he requested CW on 29 April 2014 to get a term sheet so that they could discuss the same on 2 May 2014;

(4)  In fact, during cross-examination, CW agreed that he and DC met Vincent in Singapore because VC was concerned about the background of the potential Singaporean investors and therefore VC asked DC and CW to meet Vincent so that the latter could give them some insight.

87.  While CW was in the witness box, he also said that he received a phone call from the potential Singaporean investors on 28 April 2014[13] in which they made a firm and confirmed offer to invest in his company, and that if he said “yes”, then it would become a binding contract. Although he only stated in his witness statement that he “was inclined to accept the generous offer”[14], he stated in Court that he had in fact said “yes” to the offer, and therefore he “was in some sort of breach”. I find this evidence incredible. In my view, CW only said that to boost his case. My reasons are as follows:

(1)  If what CW said was true, given the alleged investment amount was HK$27 million, the parties must have been minded to put the agreement into writing. However, CW had not produced a single sheet of document in support, not even an email from the potential Singaporean investors confirming the consequential arrangement of the execution of agreement;

(2)  Neither did CW produce any communication record between him and his friend Bryan (CW stated that the potential Singaporean investor were introduced via Bryan’s father) on around 28 April 2014 to support his case;

(3)  CW had given various reasons to explain why he could not produce any communication record in support. For example, (1) he does not have those chat records in his possession anymore, (2) he did not have the same mobile phone or same accounts, (3) CW had fallen out with Bryan and his father (although they reconciled in 2016-2017), (4) he deleted his conversations with Bryan since they often deleted ridiculous things in the chat, (5) sometimes he swiped to delete and therefore everything in the conversation would be deleted, (6) he made screenshots of the conversations with DC back in 2015 but did not make screenshots of his conversations with Bryan, (7) he approached Bryan but Bryan did not want any of his messages to be disclosed since he is friend of DC, (8) CW did not think that he would be able to get Bryan and his father to stand as his witness(es). I reject these reasons as incredible;

(4)  There is before the Court an email sent by the potential Singaporean investors to CW asking for further information even on 29 April 2014. This shows that the potential Singaporean investors were not in a position to make any “confirmed offer” as alleged; 

(5)  If CW had really received any “confirmed offer” as alleged on 28 April 2014 (or between 29 April 2014 and 2 May 2014), he would have told Vincent about it on 2 May 2014, and there is no reason why Vincent still asked CW and DC to get non-binding term sheet from the potential Singaporean investors during the dinner on 2 May 2014.

88.  CW said DC then told VC about the potential Singaporean investors’ offer and CW’s inclination to accept the offer, and as a result, VC urgently made an offer to DC on the phone and urged them (DC and CW) to accept his new offer, which was to provide capital rounded up to HK$30 million. This must be another lie:

(1)  It can be seen from the contemporaneous chat record between DC and VC on 2 May 2014 that VC never mentioned his offer, not to mention urging his son to accept it. In fact, if VC was so eager to invest in CW’s company, which is also DC’s company, VC could have used his fatherly authority to pressurise DC. However, there is no evidence which shows any imposition of such pressure on the part of VC.

(2)  On around 9 May 2014, DC sent a revised business plan to VC. VC replied by email shortly afterwards and raised a lot of queries. Then DC and CW jointly drafted another email on the same day (9 May 2014)[15] and explained, in which they stated, inter alia:

“the valuation we put is not the valuation we will proceed to fund raising”.

If VC had indeed made an offer “urgently” already as alleged by CW, then DC and CW would not be required to conduct further fund-raising exercise.

Second Meeting

89.  As far as the Second Meeting is concerned, CW’s most up-to-date pleaded case is as follows:

(1)  At the Second Meeting, CW made a finalised presentation on his business plan, and VC continued to persuade CW that he (VC) was a more suitable choice than the potential Singaporean investors;

(2)  Considering VC’s extensive experience in the gaming industry and his identity as the Chairman of a listed company of the Rexlot Group, as well as his father and son relationship with DC, CW agreed to accept VC’s offer and reached a joint venture and/or partnership agreement with DC and VC;

(3)  At the Second Meeting, it was orally agreed among VC, DC and CW, inter alia, that:

(a)  The main theme of the joint venture business is the “betting platform” and an objective of their joint venture and/or partnership is to establish a betting or gaming platform in the long run;

(b)  The betting or gaming platform will be outside Hong Kong so as to avoid violating the law and an offshore or non-Hong Kong company will be incorporated to undertake the same outside Hong Kong;

(c)  A Hong Kong company will be incorporated to provide non-betting operational assistance and serve for management purposes and such Hong Kong company can only operate a media platform without any betting activity or marketing activity promoting the same;

(d)  VC would provide the resources for obtaining betting licences and assisting operations overseas.

90.  It is noted that according to CW’s latest pleaded case as referred to above, VC did not agree to invest anything in the region of HK$30 million during the Second Meeting.

91.  However, it is remarkable that this was different from his previous pleaded case. In his Re-Amended Defence and Counterclaim (dated 3 February 2017), CW pleaded, inter alia, that it was orally agreed at the Second Meeting that VC would invest a total of HK$30 million in the Company, which would be divided into two stages: HK$5 million at the first stage and HK$25 million at a later stage[16].

92.  This alleged oral agreement to invest was kept in the Re-Re-Amended Defence and Counterclaim dated 26 January 2018 which was settled by Mr Suen SC, save that the reference to the Company was amended to “the joint venture and/or partnership”.

93.  The plea of the above oral agreement to invest allegedly reached in the Second Meeting was deleted altogether in CW’s RRRAD&CC (CW’s latest pleading) which was dated 29 June 2020. It appears that it is now pleaded that VC’s offer to provide a HK$30 million shareholder loan was made before the Second Meeting[17].

94.  However, CW’s position as reflected in his witness statement was different. In his supplemental witness statement, he alleged that by the end of the Second Meeting, VC offered to provide HK$30 million by way of a loan[18]. He further alleged that following VC’s promise to invest at the Second Meeting, the Company was incorporated on 14 May 2014[19]. He also stated that:

“Most importantly, even though DC and I were very close friends, I did not turn down an investment offer worth up to HK$30 million just because I wanted to maintain my partnership and friendship with DC. The only reason I would turn down such an attractive offer and a real business opportunity from the Singaporean investors, was because VC urgently made a similar offer to invest HK$30 million into my company (§32 of my 1^st WS).

Moreover, I only turned down the offer from the Singaporean investors after the Second Meeting with DC and VC (§34 of my 1^st WS).”[20]

95.  As a matter of completeness, I should also set out paragraphs 32 and 34 of CW’s witness statement referred to in the quoted paragraphs above:

“32. Subsequently, I understood that DC told VC about the above offer from the Singaporean investors and my inclination to accept the offer. VC then urgently made an offer to DC on the phone and urged us to accept his new offer, which was to provide capital rounded up to HK$30 million with a new company to be incorporated so that the said business plan can be proceeded with […]”

“34. It is notable that VC’s offer did not actually surpass the offer I received from the Singaporean Investors, as he only offered to provide HK$30 million by way of a loan and not by way of share purchase. Nevertheless, I trusted that VC would try his best to help his son (and his partner) succeed, so I decided to work with him. I accepted VC’s offer and the three of us entered into the JV Agreement set out below. I then turned down the offer from the Singaporean Investors.”

96.  In his oral evidence, CW also alleged that VC had agreed to invest a total sum of HK$30 million during the Second Meeting.

97.  CW’s case is not accepted.

98.  First of all, I do not accept that CW turned down the offer of the potential Singaporean investors upon his agreement with VC allegedly reached in the Second Meeting:

(1)  The potential Singaporean investors simply did not provide CW with any term sheet (not even a non-binding one) by which the proposed investment in CW’s business was put in writing, despite his request made after his first dinner with Vincent on 29 April 2014. There was no concrete offer for him to accept as such;

(2)  In my view, CW had only decided not to pursue with the potential Singaporean investors because of his inclination to work with DC, because he knew that if he insisted to partner with the potential Singaporean investors, DC would have to quit upon the instructions of VC, since VC had concern in relation to the background of such potential investors;

(3)  According to CW’s own evidence given in Court, he had turned down the potential Singaporean investors by the time of his email dated 9 May 2014 (referred to in paragraph 88(2) above) was sent to VC – that was before the date of the Second Meeting (11 May 2014);

(4)  In CW’s Facebook message dated 18 May 2014, he told DC that:

“the guys in singapore wont do it unless we Join venture with them which we dont wanna do”

This simply does not support his own case.

99.  Pausing here, it should also be noted that, if CW had already told the potential Singaporean investors on 9 May 2014 that he was not going to pursue any partnership with them, there was no need for VC to further persuade CW and DC to partner with him instead of the potential Singaporean investors. This is just another lie told by CW.

100.  Moreover, CW’s case that he had reached an agreement with VC for him to invest HK$30 million (or up to HK$30 million) in his business is simply contradicted by various pieces of documentary evidence and his own evidence, as demonstrated by the following quotations:

(1)  In CW’s witness statement, he said that:

“VC [at the beginning of July 2014] promised to set aside and lend DC and [CW] HK$4 million provisionally for start-up; any loan would be paid back if [they] were able to raise money for the next stage”[21].

(2)  In paragraph 24 of his supplemental witness statement, CW stated that:

“By the time of early July 2014, DC and [CW] had been progressing steadily. Under the revised business plan, VC would set aside and lend DC and [CW] HK$4 million first, which would be paid back if DC and [CW] could raise money for the next stage.”

(3)  Even on 2 June 2014, DC told CW that VC said:

“our plans are just pure trash. Just do it for fun in our own time, don’t bother anymore with him. It will take too long to perfect it.”

(4)  On 13 June 2014, CW sent DC a revised business plan. In his covering email, he stated that:

“[…] If it works, then next year we will hire to perform real money launch, which we need to raise approximately 10 million more […]”

(5)  There was an email sent by CW to DC on 5 July 2014 in which CW asked DC to make the following proposal to VC:

“[…] The proposal now would be that we will call for 4 million hong kong dollars to the central of the company. In order to provide cashflow flexibility, we propose that 1.5 million to be deposited to the company at this stage.

The 2.5 million will be called upon after we spend the 1.5 million according to our plan.

[…]

This 4 million will be under a IOweU note payable by our company to uncle as uncle proposed, and it is to be paid back when our company is able to successfully raise for money at the next stage if possible. […]”

(6)  On 25 July 2014, CW wrote an email to DC, in which he mentioned that:

“[…] The deal at this point was a 4 million loan to get a beta working product and office setup, this debt is to be paid back by the company when we are profitable. If we are to require future capital, we then again raise by stock dilution”.

(7)  On 27 July 2014, CW sent a WeChat message to DC and stated that:

“[…] The promise [VC] made was he will give me a couple million and we get half of it […]”

101.  It may also be added that CW’s evidence that VC was very interested in his business plan is contradicted by the alleged offer of VC to provide $30 million loan rather than share purchase.

102.  If there was no agreement as such reached in the Second Meeting, it follows that this must be an additional reason why CW’s case that VC had made an urgent offer to invest HK$30 million via a telephone call after CW’s trip to Singapore must be rejected.

103.  During cross-examination, DC admitted that VC agreed to help him and CW to introduce legal consultants for gambling licencing in Malta and suitable IT companies for software development. It appears to me that VC might well have indicated in the Second Meeting (as well as before that meeting) that he might lend some money to the Company. Be that as it may, I do not accept that such an agreement on the part of VC would amount to a legal obligation as such. I agree that what VC had agreed to do was only to help out his son DC and DC’s business partner as a father.

Third Meeting

104.  In CW’s RRRAD&CC, he pleaded, inter alia, that it was orally agreed in the Third Meeting that:

(1)  VC would invest or put in a total of HK$30 million to the joint venture and/or partnership by way of a loan to CW, which would be divided into two stages: HK$5 million at the first stage and HK$25 million at a later stage. The HK$30 million agreed to be put in by VC would be accompanied or secured by a share mortgage; and

(2)  Every important decision of the joint venture must be made by VC, DC and CW unanimously.

105.  It was also pleaded by CW that VC, DC and CW had entered into the Alleged JV Agreement which was “formed, embodied and evidenced partly orally, partly in writing and/or partly from the conduct of CW comprising the following”[22]:

(1)  Matters referred to in paragraphs 13 to 15 of the RRRAD&CC which include, inter alia, CW’s agreement to form a joint venture with VC in view of his experience in the gaming industry;

(2)  The agreement reached in the First Meeting, the Second Meeting and the Third Meeting;

(3)  The draft Business Plan sent by DC to VC on 8 August 2014.

106.  CW’s case in relation to the Third Meeting is equally hopeless.

107.  Firstly, while CW alleged that it was agreed in the Third Meeting that every important decision for the joint venture must be made by VC, DC and himself unanimously, this was contradicted by what he put in the Owners’ Manual which was prepared in August 2014, in which it was provided that:

“For day to day operations and business directions, [DC] will remain his rights on making final decisions.”

108.  It was also stated in another draft manual which CW prepared in August 2014 that:

“Our company will take the approach of majority voting rights hence [DC] has over-riding power in all final decision making […]”

109.  Secondly, while he maintained under cross-examination that full agreement had been reached by the end of the Third Meeting, it was his own evidence in his supplemental witness statement that:

“After the Third Meeting and by August 2014, it was clearly agreed that VC would loan [CW] up to HK$30 million in two tranches, with the first tranche of HK$5 million immediately payable […]”[23] (emphasis added)

110.  Thirdly, although CW said in Court that the agreement reached in the Third Meeting was that the first tranche in the sum of $5 million was immediately payable, it was actually his pleaded case that:

“VC had to put in HK$5 million at the first stage (a) within 7 months of the completion of office renovation and (b) by the second quarter of 2015 (whichever is earlier)”[24]

111.  Fourthly, on 8 August 2014, DC forwarded a draft Business Plan (“the 8 August Business Plan”) to VC for his perusal. It is undisputed that the 8 August Business Plan was mainly prepared by CW. It was stated, among other things, that:

“At this stage, we require a funding amount of $4,000,000 Hong Kong Dollars to cover our CAPEX and OPEX as stated above […]”

112.  The significance of this statement is that if CW had ever reached any agreement with VC to invest HK$5 million as such, CW would not have put down only HK$4 million as the capital required as he did, particularly when CW had in fact complained to DC on 26 July 2014 that VC had only “pump[ed] 200k by 200k”[25]. He would have put in HK$5 million which is the alleged amount which he was entitled to.

113.  Fifthly, in the 8 August Business Plan, it was further stated that:

“If the target is reached, we will discuss for a further loan payable by [VC] to extend our companies into a later stage business; whether that may be gaming related or tournament hosting.”

114.  This is plainly inconsistent with CW’s case that the second tranche of investment was in the sum of HK$25 million.

115.  Sixthly, CW accepted in Court that he had always kept all options open, in that if he were able to raise money, such money would be used to repay VC as soon as possible. That is in direct contradiction against CW’s case that VC hoped to invest in the Company as alleged. I just wonder: if VC had reached a binding agreement with CW that VC would be allowed to invest in the Company, how come CW could take this right away from VC out of CW’s own will?

116.  Seventhly, Mr Suen SC and Ms Chan argued that after the finalized version of the 8 August Business Plan was prepared, there was no further revision of the same, and this, it was said, supports CW’s case that a firm JV Agreement had already been reached by the parties. With greatest respect, this is factually incorrect. One only needs to refer to paragraph 34(b) of CW’s supplemental witness statement, in which he stated that he still “continued working on the draft business plan” in December 2014 to March 2015.

117.  In my view, all VC had done in the Third Meeting was to indicate that he was willing to advance a “bridging loan” to the Company so as to help out DC. However, I do not accept that he had ever assumed a positive obligation to lend money to the Company or CW as alleged, still less to enter into the Alleged JV Agreement with CW. VC simply did not have any intention to enter into any binding agreement with CW/DC.

Timing of the Alleged JV Agreement

118.  Having dealt with what happened in the Third Meeting, this is the right point of time to dispose of the following CW’s argument:

“[…] it is clear from the evidence that various terms of co-operation were discussed and offered, and it is CW’s case that, at the latest, a binding agreement was reached by the Third Meeting. For the purpose of this trial, what really matters is whether the parties reached a binding agreement in the end. It is not strictly necessary for the Court to delve into questions such as whether a binding agreement was already reached at the First or Second Meeting, or indeed any other time in between these meetings […]”[26]

119.  I must say, with respect, this is a very desperate attempt on the part of CW’s legal team to salvage CW’s ever-changing case. One must not forget that in the present case, it was CW himself who pleaded very distinctly as to what had been agreed in the First Meeting, the Second Meeting and the Third Meeting respectively. In my view, the Court is obliged to consider CW’s own evidence in such light, and see whether he had proved his case. In the event, as it is the case here, that his own evidence was very different from his pleaded case, the Court is of course at liberty to take this matter into account when considering CW’s credibility.

The draft share mortgage and term sheet

120.  It was alleged by CW that after multiple revisions to the business plan from May to June 2014, VC requested CW in July 2014 to provide financial collateral for the funds that he had promised to provide. It was said that this led to the Third Meeting, in which it was agreed that parties shall sign a share mortgage, so that in the event the required targets of the business are not reached by the stipulated time, VC would have the right to call back the shares of the Company.

121.  On the other hand, it was DC’s evidence that there was no discussion of the issue of collateral in the Third Meeting at all.

122.  However, it is noted that DC had, subsequent to the Third Meeting, prepared a draft share mortgage agreement and a draft term sheet for CW’s consideration. In his evidence, DC explained that he prepared these documents for his own exercise only and that they were only “learning materials”.

123.  With respect, DC’s evidence in this regard is incredible and is rejected. I do not believe that he had prepared the share mortgage and the term sheet as internal exercise as alleged only. In my view, it is more probable than not that DC did prepare the documents with the intention that they might have to be executed in future. That being the case, I also take the view that the topic of signing share mortgage had more likely than not been mentioned and discussed in the Third Meeting.

124.  Be that as it may, I do not think the fact that these documents had been prepared would advance CW’s case:

(1)  The mentioning about execution of share mortgage/term sheet does not necessarily mean that VC had assumed any positive obligation to lend money to CW or the Company. In my view, he had not;

(2)  It is more likely than not that VC was minded to have the said documents executed if he really injected further money into the Company one day. Having said that, that does not mean that there was a binding obligation on the part of VC to lend the money;

(3)  At the end of the day, the drafting of the documents was not even completed;

(4)  According to CW’s case, it was VC who proposed to have the share mortgage executed for his own protection. It is undisputed that VC in the end did not insist to sign such a document. This objective fact does not sit well with CW’s allegation that VC had agreed to inject HK$30 million into the Company.

Conclusion on the Alleged JV Agreement

125.  All in all, I am of the view that CW has failed to discharge his burden of proof. He has failed to prove on the balance of probabilities that he had entered into the Alleged JV Agreement with VC.

126.  It is also my finding that, generally speaking, the case of DC and VC makes much more sense, and is inherently more probable. I accept DC’s evidence that, VC, for the purpose of assisting his son, had agreed to lend money to the new business venture, provided the money were to be spent reasonably, even though VC was not interested in the business as alleged by CW. VC also agreed to provide the necessary assistance, for example, by introducing legal advisers and IT experts to DC and CW. Viewed objectively, in so doing, VC only wanted to help his son in starting up his own business. That was why the “investment” was injected as a loan rather than as capital into the Company. That was also the reason why VC still constantly criticised CW’s business plan as “trash”, which he would not have done so if he was as eager as CW alleged to persuade CW that he (VC) was a suitable investor.

127.  It was also because of VC’s intention to help out his son that he had agreed to lend money to the Company, and it was under such circumstances that some figures (such as HK$5 million and HK$30 million) might have been mentioned between DC and VC (VC even stated that there was no limit as to how much he would give DC and CW so long as it was reasonable). No matter what figure(s) had been mentioned, I am of the view that it was done purely in a domestic context, even if it was mentioned in the presence of CW. There was no intention on the part of VC to enter into any legal relation with CW or DC at all[27], still less to be legally obliged to invest any sum of money into the Company.

128.  CW heavily relied on VC’s involvement in the Company (for example, his appointment to the Board of Directors thereof, and his development of his own financial projection model for the betting business), and argued that VC had great interest in CW’s business plan. I do not accept such an argument. I think it is more likely than not that VC, by what he did, was only trying to assist his son to construct a feasible business plan and implement the same properly. If VC was in fact keen to participate in the business, there is absolutely no reason why VC would execute the declaration of trust over the shares in the Company that CW transferred to him. As pointed out by Mr Chong and Mr Lee, it makes no sense for an eager participant in the business to give up all the beneficial interests in the shares of the Company.

129.  I also do not accept CW’s argument that since the subject matter of the agreement concerns a business venture, parties should be presumed to intend that the agreement reached between them would have legal effect unless the contrary is shown. The reliance of CW on the case of New World Development Co Ltd &Another v Sun Hung Kai Securities Limited (2006) 9 HKCFAR 403 at [14] is misplaced, because this Court is faced with a totally different factual scenario here. In the present case, any representation of provision of funding on the part of VC was made in a family setting between father and son. This conclusion is not affected even if such representation(s) had been made in the presence of CW, because CW was DC’s business partner. Hence, if money was lent to the Company, CW would also be benefitted naturally. The fact that CW could take advantage of VC’s fatherly love towards DC should not elevate what VC represented in his meeting with DC and CW into a binding legal obligation. Viewed objectively, it was clearly not VC’s intention to enter into any legal relation as such.

Breach of the Alleged JV Agreement

130.  It was further argued on behalf of VC that even if there was a binding JV Agreement, VC could not have been in breach. His counsel referred to a number of aspects of work which VC had done to assist the Company, for example, he had introduced different professionals and given advice to the Company.

131.  Without disrespect to counsel, I do not intend to go through such assistance rendered by VC, because at the end of the day, it is accepted by VC that he had only lent HK$2.16 million to the Company between June 2014 and May 2015. In other words, if there was indeed a binding obligation on his part to lend HK$5 million to the Company at the first stage, VC had simply not discharged that obligation, and that would amount to a breach of the Alleged JV Agreement anyway.

132.  Mr Chong and Mr Lee further argued that even if VC was in breach, CW had not accepted VC’s breach and CW had affirmed the contract. However, this has not been pleaded as a defence. I do not think the Court should consider this argument.

Fiduciary duties

133.  Apart from alleging that VC owed CW certain duties pursuant to the Alleged JV Agreement, CW also asserted that VC owed him certain fiduciary duties.

134.  It is undisputed that whether or not partners[28] owe fiduciary duties to each other is fact-sensitive: Snell’s Equity (34^th Ed.) at §7-006.

135.  CW’s counsel submitted that the Court may find fiduciary duties in the present case between CW and VC on the basis of the following matters:

(1)  CW reposed deep trust in VC;

(2)  CW and VC had come together for the common end of developing an e-sports betting business;

(3)  There was a significant resource imbalance between them, such that CW relied on VC’s funding to build the business, and that VC was the experienced businessman out of the joint venturers critiquing the business plans.

136.  With respect, CW’s argument is rejected.

137.  As pointed out by Mr Chong and Mr Lee, the alleged fiduciary duties stem from, and have no separate existence from, the Alleged JV Agreement. Given it is this Court’s finding that there was no such agreement, CW’s case on fiduciary duties is bound to fail.

138.  Furthermore, in the circumstances of the present case, where VC’s agreement to lend money and assist in the business of DC and CW was only procured by his intention to help out his son, I do not agree that VC should be held to owe fiduciary duties to CW as suggested.

Conclusion on liability of VC

139.  By reasons of the aforesaid, CW’s counterclaim against VC is hereby dismissed.

DISCUSSION – DC’S LIABILITY

140.  Mr Suen SC argued on behalf of CW that even if VC did not enter into the Alleged JV Agreement with CW, it is undeniable that VC and DC did agree in the Second Meeting on the main theme of the joint venture business, the corporate structure of the Company, etc., and as a result, DC should still own certain duties to CW, and the finding that there was no Alleged JV Agreement as asserted by CW would not be the end of CW’s case against DC.

141.  Even if Mr Suen SC is right on this, as it will be further explained below, this argument cannot salvage CW’s case against DC.

The alleged breaches

142.  In his closing submissions, CW relied on the following breaches on the part of DC and VC:

(1)  Failing or refusing to obtain and pursue overseas betting licences and operations overseas or to provide operational assistance;

(2)  Failing or refusing to inject funds as agreed, including the HK$5 million promised at the first stage;

(3)  Failing to consult and/or discuss with CW in relation to the business of the joint venture and/or partnership;

(4)  Failing to pursue the business plan of the joint venture and/or partnership and unilaterally changing the business or business plan of the joint venture and/or partnership;

(5)  Excluding CW from the management and control of the joint venture and/or partnership and preferring their own interests to the interests or business of the joint venture.

143.  I will consider these alleged breaches in turn below.

Overseas betting licences and assistance

144.  It appears from CW’s closing submissions that CW only targeted at VC in relation to this breach, even though he vaguely referred therein to his evidence that:

“[…] DC then reassured CW that VC would procure the necessary IT and legal assistance.”[29]

145.  It is therefore not entirely clear whether CW was also blaming DC for VC’s alleged fault.

146.  However, what CW actually meant in his closing submissions[30] does not matter, for it is indisputable that, according to his pleaded case, the alleged relevant obligation fell on VC rather than DC. It was pleaded in CW’s RRRAD&CC that:

“14. At the Second Meeting, it was orally agreed by [CW], VC and DC that, inter alia:-

[…]

(d) VC would provide the resources for obtaining betting licences and assisting operations overseas;

(e) Further to the Second Meeting, it was discussed and agreed in around May to June 2014 that: -

[…]

(ii) VC would meet and introduce legal advisers who would handle the betting licensing application in Malta.

(iii) VC would find the suitable IT company to complete the product and reach out to officials in Malta for betting licencing.”[31]

(emphasis added)

147.  CW is bound by his pleadings. The Court will therefore not consider any of CW’s unpleaded allegation against DC.

Injection of funds

148.  The allegation of failing or refusing to inject funds is apparently directed at VC only, for it has never been CW’s case that DC was obliged (and failed) to inject any capital into the Company.

Consultation/Discussion with CW

149.  As pointed out by Mr Chong and Mr Lee, there was no pleaded express or implied term that VC/DC had to “consult and/or discuss with CW in relation to the business of the joint venture and/or partnership” in CW’s RRRAD&CC. For this reason alone, this ground should be rejected.

150.  In any event, it is apparent from CW’s closing submissions that the complaint was directed at VC rather than DC.

151.  Indeed, it is evident that CW was in frequent and direct contact with DC at all material times.

152.  Further, on as late as 5 May 2015, CW still sent WeChat messages to DC saying that:

“I honestly don’t care much about money or valuation or whatever bs, I just want to work this together with u and perry to get this done right”

“I don’t even want to break the partnership, especially with you, and I’d be so upset if your dad makes ur leave even if he gives me everything I would have no motivation”

153.  It can therefore be seen that CW had no complaint against DC even on 5 May 2015 – three days before his appointment as Chief Operation Officer was terminated, and one week before his directorship was removed.

154.  This complaint is therefore not made out against DC.

Changing of and failing to pursue business plan

155.  CW’s closing submissions read:

“105. Despite all the business plans clearly stating the purpose of the joint venture as setting up an e-sports betting platform, VC (and DC) delayed such pursuit of e-sports betting business, and ultimately refused to devote the resources necessary or, indeed, to pursue the same as agreed.

106. This was communicated to CW at least on two occasions.

107.  On 16 March 2015, after a unilateral meeting with Paddy Chan and Jennifer Shum in the absence of CW and DC, VC sent an email steering the joint venture to a completely different business direction (only operating as a statistics or media platform in the next 1-2 years, with e-sports betting being denigrated to a mere possibility or option) and drastically deviating from the original timeline […]

108. On 5 May 2015, at a meeting with DC, Jennifer Shum and Paddy Chan, CW was told that gaming was no longer in the business plan, and there could not be any gaming element in the business model purportedly as this would be illegal in Hong Kong: CW’s WS at §86 [B/6/173], CW’s email of 5 May 2015 [D4/75/839 at 840], and CW’s oral evidence [Day 4/PM]

109.  VC and DC claimed that CW had subjectively misunderstood the message, and that rather, the meeting was to ensure CW would not cause the Company to conduct any illegal gaming business. He also claimed that he did not rule out this possibility in the future if it was operated legally: VC’s WS at §§49-50 [B/7/201-202]. This could not be true […]”

156.  While CW’s counsel tried to drag DC into the picture by making a reference to DC in paragraph 105 of CW’s closing submissions, it is clear that the alleged delay or change in business direction (if any) were caused by VC but not DC:

(1)  The email dated 16 March 2015 referred to in paragraph 107 of CW’s closing submissions was sent by VC;

(2)  Jennifer Shum and Paddy Chan were apparently attending the meeting on 5 May 2015 with DC and CW on behalf of VC.[32] 

157.  Even if DC should be held responsible for VC’s email and for what Paddy said in the meeting on 5 May 2015, I do not accept that CW has proved his case against DC because:

(1)  A fair reading of VC’s email dated 16 March 2015 shows that VC did not say that gaming was not in the plan. Indeed, CW accepted in cross-examination that VC did not rule out real money betting in paragraph 8g of the email;

(2)  I do not accept CW’s evidence that he was told in the meeting on 5 May 2015 that gaming was no longer in the business plan.

158.  It may also be recalled that CW sent WeChat messages on 5 May 2015 to DC, saying that he still wanted to work with DC, and he did not want to “break the partnership” with DC. Those messages were sent in the night of 5 May 2015, after CW had had the said meeting with Paddy and Jennifer. This demonstrates that CW knew that DC should not be blamed by whatever Paddy said in the meeting.

159.  CW’s complaint against DC in this regard must therefore fail.

Exclusion from management and control of the JV

160.  Turning to CW’s being excluded from the management of the Company, DC relied on two matters in support of his case that the removal of CW was justified:

(1)  CW’s threat to take the business elsewhere; and

(2)  CW’s admission that he asked Smarks – the Company’s website vendor – for a zip copy of the Company’s webpages source code and data base on 8 May 2015.

161.  DC further told the Court that, on or about 7 May 2015, he heard from Sunny Ip that CW and Perry were discussing in the Company’s office that they would sell the Company’s data and system to an investor if VC would not give CW a satisfactory reply.

162.  Despite my view that the Court should consider DC’s evidence cautiously, I am of the view that his evidence in this regard should be accepted because:

(1)  Even CW accepted in his witness statement that he had had “exploratory discussion with Perry Tam regarding a very preliminary possibility of how [CW] could find another investor”[33]. In my view, CW was only trying to down-play such discussion which he had with Perry by adding adjectives such as “exploratory” and “preliminary”;

(2)  The Court should take into account the surrounding circumstances at the material time. It is undisputed that CW was under great financial pressure at the material time, as (i) he had received low salary for a long time, (ii) his request for a pay-rise had been rejected by VC, and (iii) he had lost a lot of money in the casino in Macau. It was therefore more likely than not that CW had become impatient, and was ready to act against the interest of the Company.

163.  I therefore hold the view that the exclusion of CW from the management and control of the Company was justified.

164.  Relying on various solicitors’ letters sent on behalf of VC and DC and the fact that VC has caused the incorporation of another Hong Kong company known as Esports XP Limited in June 2015, CW alleged that VC and DC were seeking to exclude CW on the pretext of theft and hoping to acquire the odds calculations algorithm for their own business pursuit.  With respect, this is pure speculation on the part of CW without basis.

Conclusion on DC’s liability

165.  Therefore, CW’s counterclaim against DC should also be dismissed.

DISPOSITION

166.  By reasons of the aforesaid, the Remaining Counterclaim made by CW against VC and DC is hereby dismissed.

COSTS

167.  Costs should follow the event.

168.  I make a costs order nisi that CW shall bear the costs of VC and DC of the Remaining Counterclaim (including all costs reserved), with Certificate for two counsel, to be taxed if not agreed.

169.  The above order nisi shall become absolute in the absence of application to vary (which, if any, shall be made by letter, and will be disposed of on paper) within 14 days hereof.