WONG MEI YUE v. EFT PAYMENTS (ASIA) LTD AND ANOTHER

HCA 2060/2019

[2026] HKCFI 607

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2060 OF 2019

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J U D G M E N T

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A.  Introduction

1.  In these proceedings, the Plaintiff (“P”) claims against the 1^st Defendant (“EFTP” or “D1”) and the 2^nd Defendant (“Andrew” or “D2”) (together “Ds”) for breach of the Commission Sharing Agreement signed by P and Andrew (in his role as “General Manager” of EFTP which was yet to be incorporated then) on 10 November 2013 (albeit dated 11 November 2013) (“Commission Sharing Agreement” or “Agreement”) regarding the sharing of commission for merchants acquiring business with Alipay.com Co., Ltd (“Alipay”), a company which developed the third party payment platform known as Alipay (支付寶).

2.  The Commission Sharing Agreement was negotiated between Wong Kam Man (“Katy”) and Andrew. Katy is the daughter of P. She graduated from the Chinese University of Hong Kong with a degree in information engineering in 2008. She joined Joint Electronic Tellers Services Limited (銀聯通寶有限公司, “JETCO”) in around March 2010 as a programmer, and became a Business Development Supervisor of JETCO in May 2012. JETCO was initially established by 5 banks in 1982, and developed into a bank consortium with numerous member banks. Its major business was to provide services related to automatic teller machines in Hong Kong and Macau for its member banks.

3.  On the other hand, Andrew has many years of experience in the electronic payment industry. Prior to 2008, he was the Head of Merchants Acquiring Business at Hang Seng Bank in Hong Kong. In 2008, he founded EFT Solutions Limited (a shell company incorporated in 2004 and acquired by him in 2008) (“EFT Solutions”), which engaged in the business of provision of electronic fund transfer at point-of-sale (“EFT-POS”) terminals, peripheral devices sourcing and EFT-POS system support service in Hong Kong.

4.  By way of background, the opportunity of the proposed merchant acquiring business with Alipay (“Alipay Project”) first arose between JETCO (represented by Katy) and Alipay (represented by its employee Carson Huang (“Carson”)) in August 2013. Such business opportunity was presented to but not taken up by JETCO. Thereafter, Katy approached Andrew in October 2013 with a view to pursuing the Alipay Project jointly as business partners. After initial discussions, Katy introduced Carson to Andrew, and further meetings and discussions ensued since early November 2013.  

5.  The gist of the discussions was that Katy and Andrew would set up a new company to pursue the Alipay Project and sign a service agreement with Alipay, Alipay would pay commission to the company, and they would split a portion of the commission paid by Alipay to the company based on a commission sharing agreement to be entered into between them. On 8 November 2013, Andrew submitted documents for setting up a new company (EFTP), and drafts of a “Shield Agreement” were prepared to deal with share transfer and sharing of commissions. At the suggestion of her friend, Katy proposed to proceed by two separate agreements (which Andrew agreed). On 10 November 2013, the Commission Sharing Agreement was executed between P and EFTP (yet to be incorporated). As Katy was an employee of JETCO, the view was taken that the Agreement should be entered into by Katy’s mother, P, instead of Katy herself. On the same day, Katy also sent a draft share transfer agreement to Andrew.

6.  On 18 November 2013, EFTP was incorporated with Andrew as its sole shareholder and director. It was intended that Andrew would execute a share transfer agreement with P to sell and transfer 46% shares of EFTP to P, with such sale to take place a year later. The revised drafts of the share transfer agreement were sent by Andrew’s staff to Katy on 20 and 26 November 2013, but it was never executed in the end.

7.  Meanwhile, draft service contracts between merchants and Alipay and also between EFTP and Alipay were prepared and Katy took part in reviewing them in November 2013. By late November 2013, arguments arose between Carson and Andrew. The matter was ultimately resolved by them in a meeting on 17 December 2013. According to Andrew, he was getting suspicious and concerned with “kick back” arrangement (relayed to him by Carson) between Carson, Katy and Carson’s seniors at Alipay whereby each of them would receive commission from the Alipay Project, and also potential breaches of duties of fidelity by Katy or other breaches of law, and he agreed with Carson in the meeting to terminate all existing cooperation and arrangements between Andrew, Katy and Carson. Although Katy helped to arrange such meeting, she claimed to have no knowledge of the discussions. There was evidence of a phone call between Katy and Andrew on 18 December 2013, and it is Andrew’s evidence that he relayed to Katy what Carson had agreed at the meeting, and Katy indicated to Andrew that she accepted the same. Andrew’s version is denied by Katy.

8.  Since then, not much communications took place between Katy and Andrew. Meanwhile, the service contract was executed by Andrew on behalf of EFTP on 19 December 2013 and by Carson on behalf of Alipay on 2 January 2014 (“Alipay Service Contract”). Katy was not involved in such process; nor did she receive or ask for a copy of the Alipay Service Contract executed between EFTP and Alipay.

9.  In February 2014, Katy left JETCO. Whilst Katy still maintained some contact with Andrew, she did not mention the Commission Sharing Agreement or chase for outstanding commissions. Nor did she bring up the share transfer agreement. All she did was to occasionally ask Andrew in casual chat how his project was doing. Meanwhile, it was Andrew and EFTP which pursued the Alipay Project without Katy’s involvement. As it transpires, the business with Alipay was growing over the years. Andrew is now the Chairman, CEO, executive director and majority shareholder of EFT Solutions Holdings Limited (“EFT Holdings”), a company (i) incorporated in the Cayman Islands on 26 May 2016, (ii) listed on the GEM Board of the Hong Kong Stock Exchange on 15 December 2016 and (iii) currently the parent company of EFT Solutions.

10.  It is common ground that the last contact (before commencement of proceedings) between Katy and Andrew was a meet-up at a coffee shop in May 2018. Thereafter, after the lapse of 18 months and without any prior demand, P commenced the present action against EFTP in November 2019. 3 years later, Andrew was added as D2 in November 2022.

11.  In short, P’s case is that the Commission Sharing Agreement remains subsisting whilst Ds say that it was terminated orally in late December 2013 and P was estopped from enforcing the same. Ds further say that on a proper construction of the Commission Sharing Agreement, P has not performed at all such that P would not be entitled to claim commissions.

12.  A notable feature of this case is that, on the face of it, there are lacunas which may undermine both sides’ case. For instance, whilst Katy claims that the Commission Sharing Agreement remained on foot, there is no evidence of Katy chasing or following up with Andrew on the same (or the share transfer agreement) from December 2013 to November 2019, when this action was commenced right before it is time-barred. Such inaction for almost 6 years casts grave doubt on the factual account of Katy (or P). On the other hand, whilst Andrew says that the Commission Sharing Agreement was terminated orally in late December 2013, it seems somewhat extraordinary that this was not done in writing (despite a specific provision in Article 7 that the Agreement can only be terminated by written notice signed by both parties), or otherwise put on record. Moreover, there are discrepancies in the evidence given by both Katy and Andrew.

13.  The relevant principles applicable to the assessment of credibility and reliability of witness evidence are trite: see e.g. Hui Cheung Fai v Daiwa Development Ltd (unrep., HCA 1734/2009, 8 April 2014),at §§77-83. Nevertheless, it is important to bear in mind that the events in late 2013 took place more than 11 years before trial. On the whole, the Court would consider all relevant circumstances, including the commercial objective and context, contemporaneous documents and inherent probabilities alongside the evidence from both sides (but without placing disproportionate weight on demeanour or discrepancies per se) in making factual findings on a balance of probabilities.  

B.  Agreed issues

14.  The parties have lodged an agreed list of issues as follows:

(1)  Was the Commission Sharing Arrangement terminated in late December 2023?

(2)  If the Commission Sharing Agreement was not terminated, is P nevertheless estopped from enforcing her rights under the Commission Sharing Agreement?

(3)  What is the true construction of the Commission Sharing Agreement? On P’s construction, P’s obligation was to introduce Alipay to D1 (EFTP); whereas on Ds’ construction, P’s obligation was to procure merchants (as opposed to Alipay) who would be using Alipay Payment service.

(4)  Is it an implied term (or true construction) of the Commission Sharing Agreement as pleaded in Re-Amended Defence and Counterclaim (“RADC”) §36A, i.e. P is entitled to commission income only if Katy had performed her role as an “Intermediary” by introducing or procuring merchants to use the Alipay Payment Service?

(5)  Was the Commission Sharing Agreement ratified by D1 (EFTP)? If not, should D2 (Andrew) be personally liable on the Agreement?

(6)  Has there been a breach of the Commission Sharing Agreement by D1 and/or D2?

15.  Issues 1 and 2 above relate to the alleged termination of the Commission Sharing Agreement (“Termination Issues”) whilst Issues 3 and 4 above relate to the construction of the Commission Sharing Agreement (“Construction Issues”). In this Judgment, I would deal with the Construction Issues before the Termination Issues, followed by Issues 5 and 6.

C.  Salient facts

16.  The parties have lodged an agreed chronology (which is relatively brief). There are two factual witnesses, namely Katy on behalf of P and Andrew on behalf of Ds. They have each made witness statement (“WS”) and supplemental witness statement (“Supp WS”), and attended trial to testify. Based on their evidence and relevant documents, the parties set out the factual background in their written submissions. For present purposes, I would adapt and set out the salient facts that are undisputed or beyond reasonable dispute, which would facilitate the analysis of the agreed issues.

C1.  Alipay Project and Initial meetings

17.  While working at JETCO, Katy got acquainted with Carson (Director, International Financial Business Development (Hong Kong)) and Andy Huang (“Andy”) (General Manager, International Financial Business Development (Hong Kong)) of Alipay.

18.  In August 2013, Katy and Carson made a PowerPoint presentation to the board of JETCO. The presentation proposed, inter alia, a project whereby merchants would install the terminals for the Alipay payment service in their points-of-sale so that customers could pay through 支付寶on their mobile phones. However, JETCO decided not to take up the project.

19.  Thereafter, Carson suggested to Katy that she should set up a new company to partner with Alipay and participate in the project. Katy then decided to approach Andrew to participate in the project together.

20.  On 15 October 2013, Katy approached Andrew by WhatsApp, introducing herself as “JETCO’s Katy”. A meeting was arranged which took place on 28 October 2013. Katy brought with her a colleague in JETCO and they mainly discussed a project related to JETCO. Katy mentioned the Alipay Project but it was not discussed in detail.

21.  On 29 October 2013, Katy called Andrew to discuss the Alipay Project, and arranged a meeting between herself, Andrew and her Alipay partner.

22.  On 31 October 2013, Katy, Andrew and Carson met in a restaurant in Wan Chai to discuss the Alipay project(Andy was also present on P’s case). What happened in that meeting is in dispute:

23.  On Ds’ case:

(1)  Carson stated that, since Alipay did not have an established client base in Hong Kong in relation to electronic payment services, Alipay would need to rely on the client connections of Andrew and Katy to procure merchants to use the Alipay electronic payment service in Hong Kong.

(2)  Carson also stated that, given Andrew’s experience in developing EFT-POS systems, Andrew could assist Alipay in providing software development and technical services to merchants in Hong Kong to facilitate their usage of the Alipay electronic payment service.

(3)  Katy told Andrew that she had client connections in the electronic payment industry and that she could assist in procuring merchants to use the Alipay payment service.

24.  On P’s case, however, Carson did not ask Katy to use her “client connections” to procure merchants to use the Alipay payment service, because he was well aware that Katy’s job duty in JETCO involved contacting payment institutions (like banks, Alipay or UnionPay) only but not physical retail merchants. Nor did Katy tell Andrew that she had connections with merchants in such meeting.

25.  On 4 November 2013, Katy and Andrew met in Shatin to discuss the Alipay project as follows:

(1)  Katy and Andrew would set up a new company to carry out their cooperation in relation to the Alipay Project. Katy would cause Alipay to sign an agreement with the newly set up company, which would provide services to Alipay in relation to the Alipay project. Andrew would introduce the system developed by EFT Solutions into the new company for the purpose of providing such services.

(2)  Alipay would pay commission to the new company in return for the services provided by it. Katy and Andrew would split the commission paid by Alipay based on a commission sharing arrangement to be entered into between them.

26.  It was also discussed (at or shortly after such meeting) that Katy would ask her mother, P, to sign any relevant contracts, even though Katy would perform the obligations under the contracts. There seems to be little dispute that this was done to reduce Katy’s personal legal risks, bearing in mind she remained an employee of JETCO.

C2.  Negotiation and signing of Commission Sharing Agreement

27.  On 8 November 2013, Andrew submitted the relevant documentation to the Companies Registry to incorporate EFTP (which was eventually incorporated on 18 November 2013).

28.  Between 8 and 10 November 2013, Katy and Andrew exchanged various drafts of contracts. The draft contract initially took the form of a “Shield Agreement” sentby Andrew to Katy on 8 November 2013. Two drafts were sent, but the only difference is the addition of Articles 1.5, 1.6, 2.2 and 2.3 in the second draft. Under the second draft:

(1)  P is defined as “Intermediary”, which in turn is defined in Article 1.2 as someone who “refer Merchant using the facilities provided by EFTP and in return getting profit sharing”.

(2)  Article 2.1 provides that Andrew shall control the operation of EFTP and agrees to transfer 45% shares of EFTP to P after one year.

(3)  Article 2.8 provides that “Commission shall be come from the 65% of the commission income receive from Alipay business”. “Alipay business” is defined under Article 2.6 to be merchant acquiring business.

(4)  Article 2.9 provides that “EFTP operating cost and all expenses, these shall be come from the 35% of the commission income receive from Alipay business”.

(5)  Article 2.10 sets out the commission sharing ratio between EFT Solutions and P in 3 different “plans”: (i) merchant referred to by Alipay; (ii) merchant referred to by EFTP; and (iii) “merchant refer by EFTP sign by Alipay”.

29.  At the suggestion of her friend, Katy proposed (which Andrew agreed) that the contract should be split into two, one dealing with transfer of shares and the other dealing with commission sharing.

30.  On 9 November 2023, Katy sent a draft “Commission Sharing Arrangement” to Andrew, which was apparently modified from the draft Shield Agreement. Under the draft “Commission Sharing Agreement”:

(1)  The “Intermediary” (i.e. P) would “introduce to certain of its institutional clients (each a ‘Client’, and together the ‘Clients’) as a means of providing Clients using the facilities provided by EFTP and in return getting profit sharing”;

(2)  “as compensation for such introductions, EFTP shall pay Intermediary a portion of the commissions that EFTP receives on the Alipay merchant acquiring business (‘Alipay Business’) resulting from such introductions”;

(3)  The commission sharing arrangement is set out in Articles 2.5, 2.7 and 2.8 respectively in terms similar to Articles 2.8 to 2.10 of the second draft Shield Agreement.

(4)  Article 7 provides: “This Agreement may be terminated by either Party for any reason and at any time, by written notice given to the other Party. Any such termination shall have no effect on the rights and obligations of the Parties in respect of Alipay Business prior to such termination. In the event of any termination of this Agreement, the Party that terminate this Agreement should pay the other Party HK$ 50,000,000.”

31.  On 10 November 2013 at 11:37am, Katy sent Andrew an email with a new proposed termination clause providing inter alia that “This Agreement can only be terminated by written notice of both Parties”. The term about payment of HK$50,000,000 was however deleted.   

32.  On 10 November 2013 at 12:03pm, a revised draft “Commission Sharing Arrangement” was sent by Andrew to Katy:

(1)  The definition of “Alipay commission” was added [C1/14/185].

(2)  The percentage under Article 2.5 was changed from 75% (apparently a typographical error) to 65%;

(3)  The description of the 3 plans under Article 2.8 was modified;

(4)  A new Article 7 (incorporating the version in Katy’s email) was adopted.

33.  On 10 November 2013 at 12:23pm, Katy made minor revisions to the draft to delete Clause 2.6 and slightly revise the wording of the termination clause as follows: “This Agreement can only be terminated by written notice which is signed by both Parties”.

34.  On the same day, Katy also sent a draft “Agreement of Purchase and Sale of Shares” to Andrew, under which Andrew would sell to P 46% shares of EFTP at the purchase price of HK$46,000 one year after the date of signing the agreement. This was later revised and sent by Andrew’s staff to Katy on 20 and 26 November 2013, but it has never been executed.

35.  On 10 November 2013 night, the Agreement was signed by P and Andrew (as General Manager of EFTP). It is common ground that Katy insisted that the Agreement must be signed before further discussion with Alipay can take place. This is implicitly accepted by Andrew at his WS §23, stating thathe “reluctantly” signed the Agreement “in order not to jeopardise the ongoing discussion between the parties regarding the Proposed Alipay Project”, even though he argued when cross-examined he could eventually “connect” Alipay given his reputation in the industry.

C3.  Terms of Commission Sharing Agreement

36.  The Agreement contains the following terms:

(1)  The “Intermediary” (i.e. P) would “introduce to certain of its institutional clients (each a ‘Client’, and together the ‘Clients’) as a means of providing Clients using the facilities provided by EFTP and in return getting profit sharing”;

(2)  “as compensation for such introductions, EFTP shall pay Intermediary a portion of the commissions that EFTP receives on the Alipay merchant acquiring business (‘Alipay Business’) resulting from such introductions”;

(3)  Article 1.5: “ ‘Alipay commission’ shall mean ‘Acquiring business’ commission income from ‘Alipay business’ ”.

(4)  Article 2.5: “Sale commission shall be come from the 65% of the ‘Alipay business’ income of ‘Alipay commission’.”

(5)  Article 2.6:

“Detailed Sale Commission Sharing ratio as follows:

Commission share schedule of Sale commission	Intermediary
Plan A -  Merchants which are referred by “Alipay Business”	60%
Plan B -  Merchants which are referred by “EFT”	20%
Plan C -  Merchants which are referred by “EFT” and jointly support with “Alipay Business”	40%”

(6)  Article 7: “The Agreement cannot be terminated by either Party for any reason and at any time individually. The Agreement can only be terminated by written notice which is signed by both Parties. Any such termination shall have no effect on the rights and obligations of the Parties in respect of Alipay Business prior to such termination.”

(7)  Article 9.3: “This Agreement may only be amended by a written agreement signed by the Parties hereto.”

(8)  Article 9.4: “Either Party may waive its right or power provided under this Agreement. However, any delays or omissions by either party to exercise its power or rights stipulated in this Agreement shall not be construed as waiver of such rights or power, and regardless of such delay or omission, either party may exercise such power or rights at any time.”

C4.  Events from signing of the Commission Sharing Agreement to signing of Alipay Service Contract

37.  After the signing of the Commission Sharing Agreement, Andrew (on behalf of EFTP) negotiated further with Alipay. P’s case is that Katy facilitated the negotiation of the Alipay Service Contract. Nevertheless, based on contemporaneous documents, Katy did not take part in direct negotiations, save that she had reviewed and commented on the draft Alipay Service Contract (in November 2013), and had arranged meetings between Carson and Andrew. However, Katy no longer took part after 17 December 2013. According to Ds, this was because the Agreement was orally terminated. P disagrees and argues that Katy took no further part because she had already performed her part, namely to introduce Alipay. This will be analysed further below, and I will focus here on the undisputed events during such period.

38.  To begin with, on 11 November 2013, Carson had a meeting with Andrew, which was apparently arranged by Katy.

39.  On 12 November 2013, Katy chased Andrew for his comments on the draft “Agreement of Purchase and Sale of Shares”.

40.  On 13 November 2013, Katy sent a WhatsApp audio message to Andrew about having a drink together with Carson the next day.

41.  On 17 November 2013:

(1)  At 11:57am, Carson sent Andrew and Katy a draft service contract between merchants and Alipay.

(2)  At 11:03pm, Carson sent Andrew and Katy a draft service contract to be signed between EFTP and Alipayand invited them to make amendments.

42.  On 18 November 2013:

(1)  Carson forwarded his earlier email to Daniel of A.S. Watson’s Group about Alipay’s merchant discount rate (“MDR”) (i.e. a fee that businesses pay to a payment processor) to Katy and Andrew, to facilitate them to comment on the draft service contract between merchants and Alipay.

(2)  Katy chased Andrew again for his comments on the draft “Agreement of Purchase and Sale of Shares”; she also proposed to celebrate Carson’s birthday together on 28 November 2013.

43.  On 19 November 2013, Katy sent her revisions on the draft service contract between merchants and Alipay to Carson and Andrew. Further, on 23 and 24 November 2013, Katy sent her revisions on the draft service contract to be signed between EFTP and Alipay to Carson and Andrew.

44.  On 20 and 26 November 2013, Andrew’s staff, Joey Cheng of EFT Solutions, sent revised drafts of “Agreement of Purchase and Sale of Shares” to Katy (copying Andrew). In her WS §20, however, Katy alleged that Andrew dragged on and did not sign the share transfer agreement. When cross-examined, Katy conceded this is factually incorrect, and alleged that she was hesitant to sign the share transfer agreement as she was very concerned about the need to bear expenses if she became a “boss” or shareholder, and she did not have the necessary financial ability. Whilst she did mention in her Supp WS §7 that Andrew told her there would be many risks in setting up a company, she never relied on it in her Supp WS as a reason for not signing the share transfer agreement.

45.  By late November 2013, the negotiation between Andrew (on behalf of EFTP) and Alipay reached a bottleneck. This can be seen from the WhatsApp messages between Katy and Andrew on 29 and 30 November 2013 (Katy: “個rate個度傾成點哦”; Andrew: “未得”; Katy: “你地到底攪成點？Carson講到灰灰地”; Andrew: “Carson gave me too much pressure”).  In cross-examination Andrew accepted that there was a dispute on the rate of commission.

46.  Fundamentally, according to Ds, after the Agreement was signed, Andrew grew suspicious about a “kick back” arrangement between Katy and Carson in relation to the Alipay Project. Specifically, he was told by Carson about a “kick back” arrangement between Carson, Katy and Carson’s seniors at Alipay whereby each of them would receive commission from the Alipay Project. Andrew was concerned with this, as well as potential breaches of duties of fidelity by Katy or other breaches of law. However, this is denied by P. According to Katy, Carson merely indicated that, if the Alipay Project is successful, he would leave Alipay to join the project and Katy would share with him her commissions and shareholding in EFTP.

47.  Again, this will be considered further below. At this stage, it suffices to say that both parties rely on the following messages exchanged between Katy and Andrew on 13 December 2013:

Sender	Messages
Katy	“我覺得 。。。 你兩個立場完全對立，大家唔讓步。。。好難攪 。。。不如你 wechat佢你覺得危險既原因。。。”
Katy	“其實你同梁總講。。。我唔知佢驚唔驚 。。。 一陣攪到你個邊無左個發展及擴大機會就麻煩。。”
Andrew	“他都一樣”
Andrew	“我唔要，我自己做我的eft”
Katy	“佢最多無左份工。。。 唉。。。攪到咁有咩謂。。”
Andrew	“我不想上身”
Katy	“咁。。。。我同佢講啦。。。。”
Andrew	“他很selfish”
Andrew	(audio message) “好貪心呀佢”
Katy	“佢都唔知有咩危險ma。。。他想法只係合資開公司”
Andrew	“資？” “誰資？” “我資” “所有都是我” “你有沒有同我想過”
Katy	“。。。 佢的點係。。。當初 。。。唔係咁。。。。”

48.  The above messages will be analysed further below.

49.  On 17 December 2013, Katy arranged a meeting between Carson and Andrew in that evening to sort out the matter. Katy however was unable to join, as she was admitted to hospital for a surgery.

50.  Katy claims to have no knowledge of the discussions in the meeting on 17 December 2013. It is however Ds’ case (denied by P) that:

(1)  Andrew indicated to Carson that he was no longer interested in any cooperation with him or Katy, and would only be willing to carry out further discussions regarding the Alipay Project officially. He asked for Carson’s superior, Mr. Liang Minjun (“Liang”), to be involved. He also made clear that he no longer wished to carry out any negotiations with Carson and Katy on a private basis.

(2)  Carson indicated that he understood and agreed to terminate all existing cooperation and arrangement between him, Katy and Andrew.

51.  It is also Ds’ case (denied by P) that, in late December 2013:

(1)  Katy and Andrew had a phone conversation, in which Andrew told Katy that Carson had agreed to terminate all existing cooperation and arrangement between the three of them.

(2)  Katy indicated (on behalf of P) that she would also accept the same. The Agreement was accordingly terminated.

52.  On 19 December 2013, Andrew signed the Alipay Service Contract (with an effective date of 9 December 2013) on behalf of EFTP.

53.  In cross-examination Andrew said that the phone conversation with Katy in late December 2013 took place on 18 December 2013. P criticises Andrew for tailoring his evidence, as he must have realised that the alleged oral termination ought to have taken place before he signed the Alipay Service Contract for EFTP on 19 December 2013.

54.  On 2 January 2014, Carson signed the Alipay Service Contract on behalf of Alipay.

55.  The Alipay Service Contract provides that:

(1)  Alipay wishes to provide Alipay barcode payment service to its merchants. In essence, the merchant can scan the barcode displayed on the portable device app (such as mobile phones) of the customer, such that the transaction information can be transferred to Alipay which would collect payments from the Alipay app users for the merchant (see the definition of “Alipay Barcode Payment Service” and clause 2.1).

(2)  To facilitate the provision of such service, EFTP shall perform “agent work” on behalf of Alipay to the merchants including (a) assisting with the development of the software to facilitate the Alipay barcode payment service, (b) providing system maintenance, and (c) giving technical assistance to merchants with respect to the Alipay barcode payment service (see clauses 2.2 & 3.1.1).

(3)  In exchange for these services, EFTP is entitled to claim and receive an “Agent Service Fee” from Alipay (clause 3.1.2). The “Agent Service Fee” to be paid by Alipay will be calculated by reference to the total transaction amount generated by a merchant through the use of the Alipay barcode payment service under a scaling-down scheme (see clause 4).

C5.  Events after Alipay Service Contract

56.  It is common ground that Katy was not involved in the implementation of the Alipay Project or the operation of EFTP. She accepted in cross-examination that she never received or asked for a copy of the Alipay Service Contract, but claimed it is due to confidentiality requirement.

57.  The service launch date of the Alipay Service Contract was 9 January 2014. However, Katy did not ask Andrew about the Alipay Project.

58.  In February 2014, Katy left JETCO. However, she did not ask Andrew about the Alipay Project or the share transfer agreement. Nor did she follow up with Andrew about working together in the Alipay Project and/or EFTP. In fact, she joined an app-writing company which did not do payment and merchant acquiring business.

59.  On 8 July 2014, 6 months after the service launch date and over 5 months since their last WhatsApp messages on 31 January 2014, the following WhatsApp messages were exchanged between Katy and Andrew:

(1)  Katy asked “hows ur project”; Andrew replied “Trying hard as always”.

(2)  Andrew said “Know u will join mobizs” and “Going to work together soon”; Katy replied “yesyea” and “work hard play hard together”.

(3)  Katy asked “spot payment transaction ok?”; Andrew replied “Not enough”, “Need to push Alipay more”. Katy then said “not enough cover costs??”; Andrew replied “Haha” and “Too far away” and in response Katy said “咁大獲”.

60.  Notably, in saying they may work together soon when Katy joins Mobizs, they seem to acknowledge they were no longer working together (unlike the period from late October to mid-December 2013). As it transpires, in August 2014, Katy did join Mobizs, which is a technology company.

61.  In April 2015, Katy joined a marketing company called Mome Limited which did not do payment and merchant acquiring business.

62.  On 7 June 2015, the following WeChat messages were exchanged between Katy and Andrew:

(1)  Andrew asked how Katy was recently, and said he heard that she had left Mobizs.

(2)  Katy replied that she left Mobizs and Carson did not communicate with her anymore.

(3)  When Katy asked “Hows ur projects”, apparently Andrew did not reply.

63.  On 6 July 2015, the following WeChat messages were exchanged between Katy and Andrew:

(1)  Katy asked “你地支付寶攪成點呀？”. Andrew replied “還好”. Katy again mentioned that Carson did not communicate with her anymore (“Carson 都唔理我”).

(2)  Katy then apparently had a phone call with Andrew. After the phone call, Katy said in WeChat that “不過 … 支付寶transaction amount 過千，你地都賺好少 [sad emoji] [sad emoji] 我成日好擔心你回唔到本，你知啦 … 係我介紹你地識 ga ma” and “攪到你蝕 [sad emoji]”.

64.  On 15 December 2016, EFT Holdings, of which Andrew is the founder and Chairman, was listed on the GEM Board of the Hong Kong Stock Exchange. EFT Solutions became a subsidiary of EFT Holdings (which, together with its subsidiaries, are referred to as the “EFT Group”). The EFT Group signed various agreements to supply equipment and services to EFTP.

65.  In April 2018, Katy joined Macau Pass S.A. (“Macau Pass”) (澳門通), which partnered with Alipay on the merchant acquiring business in Macau. According to Katy, she learned that Macau Pass earned a lot from Alipay’s merchant acquiring business, and she wondered why EFTP had not profited from the Alipay project.

66.  On 15 May 2018, Katy and Andrew met up in a coffee shop in Macau. According to Katy’s evidence which was not challenged in cross-examination, she mentioned to Andrew that she was working in Macau Pass; she asked Andrew how the company’s business was doing, and Andrew replied that it was not profitable.

67.  On 8 November 2019, P commenced this Action against Ds without any prior demand.

D.  Construction Issues

D1.  Relevant principles

68.  The principles on contractual interpretation are well-established. They have been set out in P’s submissions. Ds do not dispute the same but have supplemented further principles, particularly as to when the Court may take into account pre-contractual negotiations in contractual interpretation. For present purposes, the relevant principles are as follows:

(1)  When interpreting a written contract, the Court is concerned to identify the intention of the parties at the time of the contract by reference to “what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean”: Arnold v Britton [2015] A.C. 1619 at §15.

(2)  The starting point is the ordinary and natural meaning of the words. In many cases that is the ending point also: see Eminent Investments (Asia Pacific) Ltd v DIO Corp (CFA) (2020) 23 HKCFAR 487 at §43. The “rule” that words should be given their “natural and ordinary meaning” reflects the common sense proposition that one does not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had: Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 W.L.R. 896 at 913.

(3)  Whilst the starting point is the ordinary and natural meaning of the words of the contract, and in many cases that is the ending point also, in the more difficult cases, it is not particularly helpful to refer to the “ordinary and natural meaning” of words because in such cases there can be much debate over exactly what is the ordinary or natural meaning of words; and in those cases the surer guide to interpretation is context: Eminent (CFA)(supra)at §43.

(4)  Interpretation is a unitary exercise, i.e. one which involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated: Eminent (CFA) (supra) at §44; see also Wood v Capita Insurance Services Ltd [2017] AC 1173 at §12.

(5)  Where there are conflicting interpretations, account should be taken of (i) the natural and ordinary meaning of the provision in question, (ii) the purpose of the contract and of the provision, (iii) other relevant provisions, (iv) the facts and circumstances known or assumed by the parties at the time that the contract was executed, (v) the quality of the drafting of the instrument, and (vi) commercial common sense: Eminent (CFA)(supra) at§44.

(6)  Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. However, the correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance: Wood v Capita (supra) at §13; Eminent Investments (Asia Pacific) Ltd v DIO Corp (CA) [2019] HKCA 606 at §7.4.

(7)  It does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the Court balances the indications given by each: Eminent (CFA)(supra) at §45(a).

(8)  The Court must be alive to the possibility that one side may have agreed to something which with hindsight did not serve its interest, or that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms: Eminent (CFA)(supra) at §45(b).

(9)  Commercial common sense and surrounding circumstances should not be used to undervalue the importance of the language of the provision which is to be construed, and the mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly for one of the parties, is not a reason for departing from the natural language: Eminent (CFA)(supra) at §45(e).

(10)  Where the draftsman of a contract uses different words in different parts of the document, the presumption is that they mean different things or concepts: Lewison (supra) at §7.18.

(11)  The Court may interpret a recital as carrying with it an obligation: Lewison (supra)at §10.56.

(12)  A draft agreement which does not represent the final consensus between the parties is not taken into account in interpreting the concluded agreement, unless the draft is a standard printed form or represents the final consensus: Lewison, The Interpretation of Contracts (8^th edn) at p.121, §§3.35-3.37.

(13)  Evidence ofpre-contractual negotiations may be looked at to show the surrounding circumstances and, by that means, to explain the commercial or business object of a contract. What is not permissible is to seek to rely on evidence of what was said during the course of pre-contractual negotiations for the purpose of drawing inferences about what the contract should be understood to mean, or as evidence for the interpretation of the terms of a contract. That said, evidence of pre-contractual negotiations should not be used to elucidate detailed points of interpretation, and the Court should exercise considerable caution in the use of pre-contractual negotiations as evidence even as to the general object of the transaction because:

(a)  there is a very fine line between looking at the negotiations to see if the parties have agreed on the general objective of a provision (which is permissible) as part of the task of interpreting the provision and looking at the negotiations to draw an inference about what the contract meant (which is not permissible), a line so fine it almost vanishes; and

(b)  statements made in the course of negotiations are often no more than statements of a negotiating stance at that point in time:

Merthyr (South Wales) Limited v Merthyr Tydfil County Borough Council [2019] EWCA Civ 526 at §§52-55; United Bright Ltd v Secretary for Justice [2015] 2 HKLRD 633 at §§37-38; Lewison (supra)at pp.133-134, §§3.56-3.59; cf. Excelsior Group Productions Ltd v Yorkshire Television Ltd [2009] EWHC 1751 (Comm); Scottish Widows Fund and Life Assurance Society v BGC International [2012] EWCA Civ 607.

69.  Further, Ds also rely on implied term. In this regard, the relevant principles on when a term will be implied as a matter of business efficacy and/or obviousness were summarised by Carr LJ in Yoo Design Services Limited v Iliv Realty Pte Limited [2021] EWCA Civ 560 at §51.

D2.  Analysis

70.  In the present case, Mr Man submits on behalf of P that (i) the Court may interpret a recital as carrying with it an obligation and (ii) it is common ground of the parties that the obligation of the Intermediary (P) is set out in the recital of the Agreement. Accordingly, the Construction Issues primarily turn on the parties’ competing constructions of the recital of the Agreement (i.e. Issue 3), namely:

(1)  On P’s construction, P’s obligation was to introduce Alipay to D1 (EFTP).

(2)  On Ds’ construction, P’s obligation was to procure merchants (as opposed to Alipay) who would be using Alipay Payment service.

71.  It is not in dispute that the Commission Sharing Agreement is a relatively crude document which is not well drafted. It is fair to say that each construction advanced by the parties may have its own strength and weakness, and perhaps none of them aligns perfectly with all provisions of the Agreement. This is compounded by the draft Shield Agreement which may only be looked at to show the surrounding circumstances and, by such means, explain the commercial or business object, but not for the purpose of drawing inferences about what the contract should be understood to mean. Having considered the relevant factors, I come to the view that Ds’ construction should prevail. I will explain the key considerations, and also address P’s core arguments.

72.  First of all, the Commission Sharing Agreement is not intended to be a standalone document. It originates from the draft Shield Agreement which addresses both share transfer of EFTP and commission sharing. Even without referring to the draft Shield Agreement, the indisputable background is that Katy (via P) and Andrew intended to pursue the Alipay Project jointly with a new company (eventually) owned by them jointly.

73.  This is consistent with the drafts sent by Katy to Andrew. For the avoidance of doubt, such drafts should only be looked at to explain the commercial or business object. In the email from Katy to Andrew on 9 November 2013 at 9:26am attaching the draft Commission Sharing Agreement, Katy described that as “part 1 of agreement only”. In another email from Katy to Andrew on 10 November 2013 at 5:53pm (i.e. before execution of the Commission Sharing Agreement), Katy attached a draft “Agreement of Purchase and Sale of Shares” with the file name “Agreement_2 v1.0.doc”, which seems to be a reference to part 2 of agreement. Notably, in both drafts sent by Katy, they provided that the agreements are dated 11 November 2013. The clear intention was to execute both agreements in parallel – indeed the aim was to have them executed at the same time.   

74.  Viewed against such background, the purpose of the Commission Sharing Agreement is to split and share a portion of the commissions received by EFTP out of the Alipay Project between Katy (via P) and Andrew (via EFTP or, arguably, EFT Solutions) as business partners. The commercial or business object is that they would pursue the Alipay Project jointly, and they would split and share the commission income as a result. It is for Katy and Andrew to work together, and a key aspect must be for them to look for and refer merchants to the Alipay Project. The focus is on joint efforts, rather than the effort of Katy (or the Intermediary) alone. This favours Ds’ construction that P’s obligation was to procure merchants (as opposed to Alipay) who would be using Alipay Payment service.

75.  The above is to be weighed against P’s contentions. Of particular relevance to the above point are the following:

(1)  The Court should reject Ds’ case that Katy and Andrew discussed and agreed that they would each leverage their client connections to procure merchants in the Alipay Project.

(2)  P’s construction makes commercial common sense. On the evidence, EFTP would not have had opportunity to partner with Alipay without the introduction and effort of Katy.

76.  On the first contention, P says Ds’ case was made up because:

(1)  Katy did not in fact have connections with merchants.

(2)  Andrew’s evidence is unsatisfactory. For instance, when cross-examined, he said that Katy had client connections with merchants because she participated in a project related to Taobao.com, but he later withdrew his answer. Further, when asked whether Katy told him between 15 and 31 October 2013 that she had client connections, he said he could not remember, and was only able to point to the 31 October 2013 meeting after being reminded of his evidence.

(3)  Whilst Katy said in her WS §10 that she would “help develop Alipay physical merchants” (協助發展支付寶線下商戶), she already clarified in her Supp WS §6.3 that it only meant she would help negotiation with merchants (such as revising the contracts) upon they are found.

77.  Whilst there is some superficial attraction in such argument, I am unable to accept it in view of the commercial reality and background:

(1)  It is not in dispute that Alipay did not have an established client base in Hong Kong in relation to electronic payment services. This tends to support Ds’ account that Carson did mention that Alipay would need to rely on the client connections of Andrew and Katy to procure merchants to use the Alipay barcode payment service in Hong Kong. One would naturally expect Andrew and Katy (particularly as they were pursuing the Alipay Project jointly as business partners) to respond positively that they would assist, at least to the best they can. Even assuming that Katy did not have much (or any) client connections, it seems unreal to suggest she would decline to assist, or that she would simply confess to have no connections.

(2)  The discussions between Katy, Andrew and Carson were premised on an intended service contract between Alipay and a new company (EFTP) of Katy and Andrew. As far as Alipay (or Carson) is concerned, what they find appealing in such venture would likely include Andrew’s vast experience in electronic payment industry and Katy’s role as JETCO’s “Business Development Supervisor”, which involved “seeking cooperation opportunities with external business partners” (“尋找外部商業夥伴的合作機會”).

(3)  On the latter, as shown in the Powerpoint Slides presented jointly by Katy and Carson to JETCO:- JETCO would function as Hong Kong partner in respect of both merchants and customers (at p.2); the merchant base would include JETCO’s member banks’ acquiring network and existing coupon issuers, e.g. Groupon (at p.3); JETCO’s roles would include connection with merchants (at pp.10, 17). Whilst JETCO’s member banks’ roles include recruiting merchants (at pp.11, 18), this need not be mutually exclusive. Importantly, the reasons for partnering with JETCO include precisely member banks’ merchants (at pp.21-22).  

(4)  Likewise, Katy would have to demonstrate her value in the Alipay Project. Although she said she only dealt with member banks (and institutions such as Alipay) rather than their clients, it seems unreal to suggest she did not acquire any client contacts at all. In any case, it would appear reasonable for Carson and Andrew to proceed on the basis that Katy did have some connections with merchants or, at the very least, she could make use of her contacts with JETCO’s member banks and coupon issuers to capitalise on the latter’s client connections in turn.

(5)  In this regard, as accepted by Katy in cross-examination, it was contemplated by Andrew and Katy that at the initial stages of the Alipay Project, they would focus on recruiting large and established merchants (大型商戶), such as those mentioned in Katy’s PowerPoint Slides (at p.22).

(6)  In line with the foregoing, Katy did mention in her WS §10 that she would “help develop Alipay physical merchants” (協助發展支付寶線下商戶). This also underscores the fact that this is a key aspect of the Alipay Project. Whilst she sought to tone down such role in her Supp WS, it seems unlikely that the parties would seek to limit Katy’s role as such. Rather, it makes commercial common sense for both business partners, including Katy, to at least try their best to look for and refer merchants, as the Alipay Project was meant to be a joint effort.

78.  Importantly, once it is accepted that the commercial or business object is for them to pursue the Alipay Project jointly, it does not matter as much whether Katy (or indeed Andrew) had many (or indeed any) client connections to begin with. Even if they did not, the commercial or business object must be for them to try their best and work together to refer merchants which would in turn result in commission income being received.

79.  As such, even if I were wrong to accept Ds’ account, the factual dispute as to whether Katy and Andrew discussed and agreed that they would each leverage their respective client connections to procure merchants in the Alipay Project fades in significance anyway.

80.  On the second contention, there is some force in P’s argument, as it is not in dispute that Katy insisted that the Agreement must be signed before further discussion with Alipay can take place, and Andrew accepted he signed the Agreement in order not to jeopardise the ongoing discussion. However:

(1)  This does not, without more, suggest that Katy (or P) could do nothing and earn commission indefinitely once she has introduced Alipay as partner. The above could also be consistent with Katy seeking to have a written agreement to protect her interest in earning commission as a joint effort in the Alipay Project, such that Andrew could not bypass her in the end.

(2)  Such intended joint effort is borne out by Katy’s WhatsApp messages to Andrew prior to signing of the Agreement: e.g. “Hope we can do something together” (31 October 2013), “有錢齊齊搵”(4 November 2013), “Hope that our 合作 [with a “work hard” emoji]” (5 November 2013), “partner ma” (7 November 2013), “We are partner” (9 November 2013).

(3)  Whilst Andrew said in cross-examination that Katy insisted that he sign the Agreement before he could have the email address of Carson, I note from the WhatsApp messages that, in fact, Katy already informed Andrew the personal email address of Carson (i.e. a personal one rather than Alipay’s) on 5 November 2013.

(4)  In any case, as submitted by Ds, by the time the Agreement was signed, Katy had already introduced Alipay (or Carson) to Andrew. On the evidence, Andrew already met Carson (and also Andy on P’s case) on 31 October 2013.

(5)  The crux remains that the parties did intend to execute the Agreement and the share transfer agreement in parallel. Indeed, on 10 November 2013 and before signing the Agreement, Andrew sent Katy a WhatsApp message saying “Agreement 2 will be review and complete by coming week”. Consistent with the foregoing, Katy chased Andrew twice on the draft share transfer agreement on 12 and 18 November 2013 – whilst inadmissible for contractual construction (as subsequent conduct), it corroborates the fact that the parties intended to execute both agreements to pursue the Alipay Project as a joint effort. It was never intended that Katy need only introduce Alipay without taking part in the Alipay Project at all.

81.  Second, the general aim and object of the Commission Sharing Agreement was to govern the split of commission between the parties resulting from referrals of merchants. This is borne out by the business object discussed in the first point above, andthe general logic and language of the Agreement:

(1)  Recital §2 provides that the Intermediary (P) is a party that “will introduce” certain of its institutional clients (each a “Client” and together the “Clients”) in return for getting profit sharing. Putting aside the meaning of “institutional clients” (which is considered further below), the word “will” signals an obligation which will be performed in future. This is more consistent with introduction of merchants than Alipay. By the time the Agreement was signed, Katy had already introduced Alipay to Ds.

(2)  Recital §2 envisages that the “institutional clients” would be “using the facilities provided by EFTP”. There is no dispute that to implement the Alipay Project, EFTP would install hardware and software systems at merchants’ points of sales. Whilst P argues that EFTP has no contractual relationship with merchants and would provide the facilities as Alipay’s agent, it remains the case that it would be merchants (rather than Alipay) which would use such facilities. It is thus more natural to speak of merchants (rather than Alipay) “using” the facilities provided by EFTP.

(3)  Recital §3 provides that EFTP shall pay the Intermediary (P) a portion of the commissions that EFTP receives on the “Alipay merchant acquiring business” resulting from such introductions.  The focus is on “merchant acquiring” rather than referring Alipay.

(4)  The Agreement was premised on the subsistence of the Alipay Project. Its drafting presupposes that the Alipay Project would go ahead. It provides for sharing of commission from the “Alipay Business”, rather than commission for bringing about the project.

(5)  The detailed sale commission sharing ratio at Article 2.6 is based on the referrals of merchants under 3 different plans, putting aside the meaning of each plan for the time being.

(6)  Articles 2.1, 2.2 and 3 govern the use, disclosure and property of “client information” by the parties, which presuppose that client information may be disclosed and owned by either party. This is more consistent with referrals of merchants (rather than Alipay) as clients. In particular, these provisions would make sense if the term “clients” refers to “merchants”, because on Ds’ case both Andrew and Katy would be referring merchants.

(7)  Pursuant to Article 3, upon the request from disclosing party, the client information shall be returned and destroyed and/or deleted. This is more consistent with clients being merchants. In contrast, if Alipay is the client, this could result in an anomaly that P can request Alipay’s information be returned, destroyed and deleted, which may obstruct or even put an end to the Alipay Project.

(8)  There is no agreed term or duration of the Agreement, which can only be terminated by written notice signed by both parties under Article 7. As the Agreement may subsist for a long term (if not indefinitely in theory), it makes more commercial common sense for the Agreement to govern the split of commission between the parties resulting from referrals of merchants (which can take place throughout the duration of the Agreement) as opposed to the introduction of Alipay (which is an one-off act).

82.  Third, Recital §§2 and 3 provide as follows:

“ WHEREAS EFTP has selected Intermediary as a party that it will introduce to certain of itsinstitutional clients (each a “Client, and together the “Clients”) as a means of providing Clients using the facilities provided by EFTP and in return getting profit sharing; and

WHEREAS EFTP and Intermediary have agreed that, as compensation for such introductions, EFTP shall pay Intermediary a portion of the commissions that EFTP receives on the Alipay merchant acquiring business (“Alipay Business”) resulting from such introductions;”

83.  The central question, therefore, is the meaning of “institutional clients”. On P’s construction, the term is not a reference to merchants, but a reference to payment institutions/ platforms, including Alipay. I do not agree, as P’s construction does not accord with the language and the purpose of the Agreement (see also the first and second points above):

(1)  If Katy had intended to charge commission for introducing Alipay to Ds, this could be easily reflected on the Agreement by referring to Alipay directly in Recital §2. Yet, this was not done.

(2)  The word “institutional clients” is in plural form, indicating multiple clients. Yet, there were no discussions between Katy and Andrew that Katy would introduce any payment institutions/ platforms other than Alipay. Prior to the execution of the Agreement, the parties only contemplated that one payment institution/ platform would be involved in the Alipay Project, namely Alipay itself.

(3)  P argues that Katy could, in theory, introduce payment institutions/ platforms other than Alipay (e.g. banks, Macau Pass) to be the acquirer to acquire merchants for the use of the Alipay payment method, and get commission sharing resulting from such introductions. However: (i) such business prospects were never discussed between Katy and Andrew; and (ii) there was no precedents either (Andrew’s unchallenged evidence is that it was not practically possible then to find any banks who would be interested, and it was not until 2018 that Bank of China became the first bank in Hong Kong to act as acquirer on behalf of Alipay).

(4)  Indeed, as the commercial object and purpose of the Agreement is the sharing of commission arising from the Alipay Service Contract envisaged to be entered into between EFTP and Alipay, any “institutional clients” besides Alipay is simply irrelevant. Indeed, it is P’s own evidence in Katy’s WS that (i) after JETCO decided not to pursue the Alipay Project, Carson Hung suggested to Katy that a new company be set up to pursue the Alipay Project with Alipay (not any other payment institutions/ platforms) (§6); (ii) the manner of co-operation discussed between Katy and Andrew was to set up a new jointly owned company to provide services to, and in return receive a portion of the acquiring business income of, Alipay (not any other payment institutions/ platforms) (§9); and (iii) Katy agreed with Andrew on 4 November 2013 to set up a new jointly owned company which would sign a service contract with Alipay (not any other payment institutions/ platforms) (§10).

84.  The above thus favours Ds’ construction. Further:

(1)  The Alipay Project would involve the procurement of many merchants to use the Alipay payment service. The fact that the term “institutional clients” is in plural form would make sense if it were construed as a reference to merchants, with the word “institutional” being a reference to the parties’ intention at the time to focus on recruiting large and established merchants, which may loosely be referred to as institutions.  

(2)  Arguably, the introduction of “institutional clients” may also cover situations where Katy makes use of her contacts with institutions such as JETCO’s member banks and coupon issuers to capitalise on the latter’s client connections in turn.

(3)  All these help to explain why “institutional clients” rather than “merchants” are used to highlight such specific focus or clientele.

85.  Fourth, pursuant to Article 2.6, the percentage of P’s commission share varies depending on whether merchants are referred by “Alipay Business” (Plan A), “EFT” (i.e. EFT Solutions) (Plan B), or EFT Solutions with joint support of “Alipay Business” (Plan C). P contends that, as Article 2.6 does not provide for the scenario where merchants would be referred by the “Intermediary”, this is fatal to Ds’ construction. I do not agree:

(1)  There is no uncertainty in the meaning of “EFT”, which is concerned with merchants referred by EFT Solutions.

(2)  However, as regards “Alipay Business”, its meaning in Article 2.6 cannot be resolved on a pure textual analysis because, under the Agreement, it is defined as the “Alipay merchant acquiring business”, and it makes little sense to speak of “Merchants which are referred by [Alipay merchant acquiring business]”.

(3)  In terms of language, one simply cannot equate “Alipay merchant acquiring business” with Alipay (as argued by P). Further, in terms of context, since Alipay did not have an established client base in Hong Kong, it makes little commercial sense for “Alipay Business” to mean Alipay either.

(4)  On Ds’ case, a merchant procured by “Alipay Business” means a merchant procured by Alipay through Katy’s client connections. This seems implausible as “Alipay Business” does not mean Alipay and there is no reference to Katy (or P).

(5)  In my view, Article 2.6 is best reconciled if “Alipay Business” is to mean the Alipay merchant acquiring business (i.e. Alipay Project) jointly pursued by Katy and Andrew. If a client is referred in the process of pursuing such business jointly, it would be governed by Plan A. Further, if a client is referred by EFT Solutions with the support of such jointly pursued business, it would be governed by Plan C.

(6)  It is not strictly necessary for the Court to come to a conclusive view on the construction of Article 2.6. It suffices to say that, at least on the construction explained above, it is compatible with Katy taking part in the jointly pursued business to refer merchants. This is corroborated by Katy’s own evidence in her WS §10 that, as agreed with Andrew in the meeting on 4 November 2013, she would “help develop Alipay physical merchants” (協助發展支付寶線下商戶).

(7)  There is also no inherent inconsistency between the reference to “institutional clients” in Recital §2 and “merchants” in Article 2.6. The former focuses on recruiting large and established merchants as part of the Intermediary’s obligation, whilst the latter deals with commission sharing ratios in different scenarios (depending on how merchants are referred).

(8)  In contrast, it is difficult to see the rationale of an arrangement (per P’s case) whereby P’s share of commissions would depend on whether merchants are introduced by EFT Solutions or Alipay. If P’s only role is to introduce Alipay, there need only be a single sharing ratio for all commission income arising from the Alipay Project.

86.  Fifth, whilst the above should suffice, insofar as it is necessary, Ds’ construction also finds support from the commercial or business object as demonstrated in the draft Shield Agreement.

(1)  In the draft Shield Agreement, the recital refers to two parties, namely Andrew and the Intermediary (P), and Article 1.2 defines the Intermediary to mean “who refer Merchant using the facilities provided by EFTP and in return getting profit sharing”. Instead of relying on it for construction, the point is that this is evidence in support of the parties’ commercial object (per Ds’ case, and corroborated by Katy WS §10) that Katy would introduce merchants to use the Alipay payment service. In other words, Andrew would likely put forth such wording to reflect what was discussed with Katy in prior meeting.

(2)  Although the term “merchant” was later replaced by the term “institutional clients” in subsequent drafts circulated by Katy, the relevant structure and provisions remain largely unchanged, and many provisions were simply transplanted from the draft Shield Agreement. This tends to suggest that, despite the revision of the term, there is no fundamental change in the commercial object of the Agreement, particularly the role of the Intermediary. This tends to favour Ds’ construction.

87.  For all these reasons, I rule in favour of Ds’ construction under Issue 3, i.e., P’s obligation was to procure merchants (as opposed to Alipay) who would be using Alipay Payment service. It is not in dispute that P (or Katy) did not perform such obligation to procure any merchant at all. Since P has failed to perform such obligation throughout, P’s claim should be dismissed on such basis alone.

88.  In any case, insofar as it is necessary, I also find in favour of Ds on Issue 4 that it is the true construction, or alternatively, an implied term, of the Agreement that commission would only be payable to P if P (through Katy) has performed the role of an “Intermediary” as envisaged under the Agreement, i.e. to introduce or procure merchants to use the Alipay payment service.

89.  On construction, given the parties’ acceptance that the recital can impose an obligation, it is clear from Recital §§2-3 that it is only as compensation for performance of such obligation that EFTP shall pay P commissions.

90.  Further, as regards implied term, as the business object and purpose of the Agreement is to reward P for procuring merchants to use the Alipay Payment Service, it is necessary to give business efficacy to the Agreement (and it goes without saying) that commission would only be payable by EFTP to P if P (via Katy) has introduced or procured merchants to use the Alipay Payment Service. As submitted by Ds, without the implied term, the contract would lack commercial or practical coherence because P would be entitled to commission even without having performed any referral role for an indefinite period of time given the lack of any specific provision as to the duration or term of the Agreement.   

91.  Since P never introduces or procures any merchant to use the Alipay payment service, no commission would be payable to P under the Agreement.

E.  Termination Issues

92.  In view of my ruling on the Construction Issues above, it is not strictly necessary to determine the Termination Issues. Without prejudice to this, I would first consider if there was oral termination of the Agreement on the evidence, followed by analysis of estoppel by representation.

E1.  Oral Termination of Agreement

93.  As submitted by P, Ds’ case on oral termination is as follows:

(1)  According to Andrew’s WS §25, Carson informed him about an under-the-table “kick back” arrangement in several phone calls (clarified to be WeChat calls in cross-examination), which he considered to be unlawful. He was also concerned that the receipt of commission by Katy would be a breach of her duty of fidelity to JETCO or involve conflicts of interest.

(2)  Eventually, in a meeting between Andrew and Carson on 17 December 2013 (“December Meeting”), Andrew said he “no longer wish to carry out any negotiations with Katy and Carson on a private basis”, and Carson “indicated that he understood and agreed to terminate all existing cooperation and arrangement between him, Katy and myself” (see Andrew WS §28).

(3)  Then, in late December 2013 (which Andrew claims to be 18 December 2013 in cross-examination), Katy and Andrew had a phone conversation (“December Conversation”), in which Andrew told Katy that Carson had agreed to terminate all existing cooperation and arrangements between him, Katy and Andrew; Katy then indicated (on P’s behalf) that she would also accept the same. The Agreement was “accordingly” terminated (see Andrew WS §29).

94.  In P’s submissions, P seeks to challenge each of the above in turn. Whilst there is logic to such approach, one must not lose sight of the big picture and the overall circumstances. P only saw fit to commence the present action almost 6 years afterwards. The event in December 2013 took place over 10 years before the date of the WS and over 11 years before trial. As such, the mere fact that there may be discrepancies in a party’s account (or indeed the accounts of both sides) is not, without more, determinative or conclusive.

95.  On the other hand, and even putting aside what happened precisely in December 2013 for the time being, there are telltale signs that the arrangement between Katy and Andrew has terminated, including in particular:

(1)  WhatsApp exchanges on 13 December 2013 in which Andrew referred to “dangers” (危險) which, as Katy said in reply, could lead to the termination of the proposed cooperation between Andrew and Alipay or Carson losing his job at Alipay; 

(2)  The December Conversation being a watershed moment of the Alipay Project and the parties’ cooperation, in that the frequency and volume of communications between Katy and Andrew dropped drastically from an almost daily basis to sporadic casual contact every few months (or even 1 to 2 years);

(3)  The fact that Katy never referred to or discussed the Agreement with Andrew or chased him for outstanding commission after the December Conversation;

(4)  The fact that the parties never signed the agreement regarding the sale and transfer of shares in EFTP, even though this was all along part of the terms of the parties’ proposed cooperation, intended to be executed in parallel with the Agreement; and

(5)  The fact that Katy was no longer involved in the negotiation and preparation of the Alipay Service Contract in December 2013/ January 2014 and that no one (not even Katy herself) saw the need for Katy to receive a copy of the Alipay Service Contract.

96.  The above lends support to Ds’ case and militates against P’s case. Put simply, if the Agreement remains on foot, one would have expected Katy to take a much more active role. P’s account of events, i.e. Katy simply sat back and did nothing after introducing Alipay, is unreal. It cannot sit well with Katy’s proactive role prior to December 2013, when she told Andrew they were partners. The suggestion that, despite the Agreement allegedly remaining in force, both Katy and Andrew saw fit not to discuss any further or work together on their venture, neither of them chased each other on share transfer of EFTP, Andrew was content to borrow money and put in every effort into the Alipay Project exclusively on his own, and yet Katy could just sit back and earn as much as 60% of commission, simply defies commercial common sense.

97.  For such reasons and having considered the matter further, I find in favour of Ds’ case, as elaborated below.

98.  First, I agree with Ds’ submissions that Andrew’s concerns are borne out by the contemporaneous WhatsApp exchanges between Andrew and Katy on 13 December 2013, particularly the following: 

(1)  Andrew expressed his concerns about certain “dangers” (危險) of proceeding with the existing arrangements between the parties: “我不想上身”, “我唔要，我自己做我的eft”, “你有沒有同我想過”.

(2)  In reply, Katy recognised the seriousness of Andrew’s concerns, acknowledging they could lead to the termination of the proposed cooperation between Andrew and Alipay (“一陣攪到你個邊無左個發展擴大機會就麻煩”) or even Carson losing his job at Alipay (“佢最多無左份工”).

99.  The main difference between the parties hinges on what the “dangers” meant. In her witness statements, Katy suggested that the “dangers” merely referred to her discussions with Carson that after the Alipay project has achieved progress, Carson would leave Alipay and Katy would split shares and income of EFTP to Carson.

100.  On the other hand, Andrew said in cross-examination that he was concerned with “kick back” arrangement whereby Carson, his seniors and Katy would split the commissions and the shares of EFTP which Katy would receive under the Agreement and the intended share transfer agreement. On Andrew’s version, there is no reference to Carson leaving Alipay. In my view, Andrew’s version is more likely to be the truth:

(1)  On P’s version, there is apparently nothing unlawful if Carson would only receive benefits after leaving Alipay. If this is all that was discussed, it would not cause much concern or “dangers”. This tends to undermine Katy’s version.

(2)  When asked what she meant by “dangers” in cross-examination, Katy said that apart from step 1, she also discussed step 2 with Andrew, i.e. whether Carson would joint EFTP, whether shares would be given to Carson, and Andrew responded he was not used to co-investing with others in a company and said it would be dangerous. However, Katy did not seem to have qualified such discussions as being premised on Carson leaving Alipay first.

(3)  Notably, in the WhatsApp exchanges, Katy did not tell Andrew that she considered his concerns unjustified. She only said Carson took a different view and ask Andrew to discuss further with him.

(4)  As far as Katy is concerned, there was no discussion or agreement that she would only receive benefits after leaving JETCO, or that she must resign from JETCO before she became entitled to commission (under the Agreement) and shares in EFTP (under the intended share transfer agreement). There is no sound reason why any arrangement discussed with Carson was on a different basis.

(5)  In his WhatsApp messages, Andrew deplored Carson’s conduct as very “selfish” and very greedy (“好貪心呀佢”). This is more consistent with a reference to Carson seeking to have the best of both worlds, viz. remaining as Alipay’s staff whilst reaping benefits from its counterparty, EFTP (via Katy).

(6)  This also explains why Andrew described it as “kick back”, which usually refers to secret benefits received by a staff of a company from its counterparty. Apparently, because of its nature as secret benefits received by a staff, Andrew even thought of coming clean and telling Liang (Carson’s boss), which prompted Katy’s response that she was not sure if Carson would be worried by that:- “其實你同梁總講。。。我唔知佢驚唔驚 。。。”

(7)  Katy’s message that Carson would at most lose his job at Alipay (“佢最多無左份工”) tends to suggest that Carson would not leave Alipay on his own accord, although he might expose himself and risk losing his job under such arrangement.

(8)  Apparently, as Andrew developed serious concerns over Carson receiving benefits whilst remaining as Alipay’s staff, he also became concerned with Katy as she would receive commission and shares of EFTP whilst remaining as employee of JETCO. Of course, Carson’s situation is worse as Alipay is an intended party to the Alipay Service Contract, whereas JETCO is not. Even then, as the business opportunity of Alipay Project came from Katy’s position at JETCO, the risk of breach of fiduciary duties remains.

(9)  The above helps explain why Andrew would want to put an end to all cooperation and arrangement between Carson, Katy and himself, particularly when Andrew can hardly ensure that Katy would not share with Carson the commission and shares of EFTP received by her. There is force in Ds’ submissions that the whole arrangement is tainted by this “kick back” arrangement such that Andrew was not comfortable either with the share transfer or the Commission Sharing Agreement.

(10)  Indeed, as Andrew explained in cross-examination, the turning point is when Carson requested that the commission obtained after referring merchants is to be further distributed to Carson and his senior and Katy also mentioned distributing shares to Carson. Once that was mentioned he wanted to stop everything.

(11)  Notably, Katy also said in cross-examination that in view of Andrew’s concerns over Katy giving shares to Carson in future, she did tell Andrew let’s not do it at all (“不如成個不做”), in order to make a threat as part of business tactics. In my view, this demonstrates that Andrew did have very serious concerns at the time which culminated in the parties discussing putting an end to all cooperation and arrangement (even though Katy sought to brush it aside as a mere threat as part of business tactics).

101.  Second, the date of 18 December 2013 represents a watershed moment in the parties’ discussions and cooperation about the Alipay Project, as borne out the WhatsApp (and WeChat) messages between Andrew and Katy.

(1)  Before such date, there were frequent messages between Andrew and Katy about the Alipay Project on an almost daily basis (over 50 pages from 15 October to 18 December 2013).

(2)  After such date, the frequency and volume of messages between them dropped drastically (only 4 pages from late December 2013 to May 2018, in a span of over 4.5 years). In addition, most of the messages consisted of casual chit chats and festive greetings.

(3)  Katy suggested in cross-examination that she no longer contacted Andrew as frequently after 18 December 2013 as she had already performed her role as “referrer” (介紹人) and procured Alipay to sign the Alipay Service Contract with EFTP. However, the Alipay Service Contract was only signed by Alipay two weeks later on 2 January 2014. Yet, not a single message was exchanged and there is complete silence. This is most extraordinary because on P’s case, the signing of the Alipay Service Contract is the only last step required for claiming commission. At the very least, one would expect Katy to check with Andrew that the Alipay Service Contract was in fact executed, without which Katy cannot claim any commission. Indeed, it was not until 23 January 2014 (over 1 month later) that Katy messaged Andrew saying she had not seen her for long (“咁耐無見，晤見曬影既你”). She asked nothing about Alipay Service Contract at all.

(4)  Such drastic reduction in frequency and volume of exchanges between Katy and Andrew corroborates Ds’ case that Andrew orally terminated all the arrangement including Agreement with Katy on 18 December 2013.

102.  Third, Katy never mentioned the Agreement or chased Andrew for outstanding commission after the December Conversation, which supports Ds’ case that the Agreement was already terminated orally:

(1)  On P’s construction of the Agreement, P is entitled to a share of the commission which EFTP receives from Alipay regardless of whether P has made any referrals of merchants. Yet, Katy has never demanded for payment of commission. Nor did Katy ask for any accounts or even mention the Agreement.

(2)  The absence of follow-up for almost 6 years speaks volume. If the Agreement remained subsisting as alleged, it is inexplicable that Katy never brought up the Agreement at all.

(3)  Katy’s explanation is that Andrew told him that his project was not profitable. This is hardly an excuse as Katy only asked about the project sparingly (say every 1 to 2 years). If Katy’s case was genuine, she would have followed up much more frequently.

(4)  Notably, Andrew’s EFT Group got listed in 2016. It seems unreal to suggest that Katy was unaware of Andrew’s apparent business success until 2018. In any case, it is inherently improbable that Katy was content to rely on Andrew’s mere say-so for almost 6 years. At the very least, she could and would have asked for documents such as accounts.

(5)  Even after the meet-up in May 2018, it takes another 18 months before P commenced legal proceedings. Worse still, there was no prior demand by Katy. This is symptomatic of an opportunistic claim pursued by Katy with the benefit of hindsight in 2019.

(6)  Importantly, under the Agreement, the sale commission shall come from 65% of the income received by EFTP from Alipay under the Alipay Service Contract (Article 2.5). It is clear from the parties’ discussions that the remaining 35% was intended to cover the costs of EFTP. It follows that costs is not an issue as the entire 65% was intended to be made available for sharing with Katy under Article 2.6 irrespective of the question of profit or loss.

(7)  In any case, neither Article 2.5 nor Article 2.6 refers to net income received by EFTP. As such, regardless of whether EFTP operated at a profit or at a loss, the totality of the 65% income received by EFTP from Alipay was to be split and shared with Katy (via P). It follows that, even on P’s case, there is no excuse for Katy not to demand or chase Andrew for commission at all.

(8)  Remarkably, on the few occasions where Katy casually referred to the Alipay Project, she consistently referred to it as “ur project[s]” or “你地支付寶”. In cross-examination, Katy sought to explain she was very casual in referring to it as Andrew’s project since she was not a shareholder of EFTP whilst Andrew was shareholder and the boss. However, on P’s case, Katy still had a substantial stake in the commission income of the Alipay Project and it would be odd for her to refer to it as if it had nothing to do with her. In contrast and before 18 December 2013, she often referred herself as Andrew’s “partner” in Alipay Project.

103.  Fourth, the share transfer agreement was never executed in the end. This lends support to Ds’ case that Katy and Andrew agreed to terminate all cooperation and arrangement between them in late December 2013:

(1)  It was the parties’ intention to execute the Agreement and the share transfer agreement in parallel (as part 1 and part 2). Specifically, the share transfer agreement would govern the parties’ venture to set up and operate a new company (EFTP) to jointly pursue the Alipay Project, with Andrew transferring part of his shares in the company to P within 1 year.

(2)  Drafts of the share transfer agreement were prepared, revised, and ready for signing by late November 2013.

(3)  Yet, Katy did not sign such share transfer agreement in the end. Had the Agreement remained on foot, the parties must have at least discussed or followed up on this. The complete silence against corroborates Ds’ case that all arrangement and cooperation had been terminated.

104.  In cross-examination, Katy disowned her pleaded case and evidence in her WS §20 that Andrew “delayed” the signing of the share transfer agreement (“那時候他一直拖着不簽EFTP的股份轉讓合同”), and came up with a novel account of how she did not wish to sign because she was worried that she would have to contribute to the operating costs (營運資金) of EFTP upon becoming a shareholder. In particular, she said Andrew mentioned there were lots of expenses and said he paid like HK$5 million, and hence she was worried if she became shareholder she would need to contribute like HK$2.5 million which she couldn’t. Katy’s belated explanation is incredible:

(1)  Katy accepted in cross-examination that she never expressed such alleged “concerns” to Andrew, nor sought legal advice on whether shareholders are somehow obliged to contribute to the operating costs of the company.

(2)  Under the terms of the latest draft share transfer agreement, P would only have to settle the purchase price of a relatively modest sum of HK$16,000, one yearafter the agreement was signed. This is an amount Katy could afford, and there is no mention in any provision that Katy has to pay anything on top of HK$16,000.

(3)  Even if Katy still harboured under any concern, such concern would not materialise at least until after one year later. Even then, P could withdraw from the agreement by simply not paying the purchase price, the only consequence being the forfeiture of her right to purchase (at Clause 3.2.2 of such draft).

(4)  There is also no evidence of Andrew ever asking Katy to contribute to the operating costs of EFTP, still less HK$2.5 million as suggested by Katy.

(5)  In any case, it appears to be the parties’ common understanding that Andrew would be solely responsible for the costs of setting up EFTP: see e.g. WhatsApp message from Andrew on 13 December 2013 (“資？誰資？我資？所有都是我”).

105.  Moreover, whilst P argues that such belated explanation is the reason why Katy did not sign the share transfer agreement not only after the December Conversation but also during the period from late November to the December Conversation on 18 December 2013, one must not forget that on Ds’ case, since late November 2013, Andrew already had differences with Carson and learnt about the “kick back” arrangement in several WeChat calls.

106.  On the whole, the reason why no share transfer agreement was ever signed is that the parties had orally agreed to terminate their cooperation in late December 2013, following the differences and concerns developed by Andrew over Carson since late November 2013.

107.  Fifth, after late November 2013, Katy ceased to have any involvement in the negotiation and execution of the Alipay Service Contract:

(1)  In the draft last commented upon by Katy, the “Agent Service Fee” was a flat rate of 0.4% of the transaction amount. Yet, in the executed version, it provided for much a more elaborate scheme with three different rates depending on (inter alia) whether the transaction occurs during or after the first year from the “launch date” of the Alipay project. Katy did not have any involvement in negotiating or preparing such elaborate provision.

(2)  Katy accepted in cross-examination that, after 24 November 2013, she no longer participated in subsequent textual revisions of the draft service contract (“同意我冇參與文字修改”). If the Agreement remained on foot, it is extraordinary that Katy ceased to be involved any further at all.

(3)  In cross-examination, when asked by this Court what did she do after 17 December 2013, Katy mentioned for the first time that she did enquire with Carson how the discussion was, and she did try to appease Carson. When asked by this Court that she did not mention this in her WS, Katy then said Carson just mentioned something similar to those before the December Meeting but the end result is that they did sign the Agreement. In my view, Katy was trying to make up answers in an attempt to show that she still had some involvement after the December Meeting, which was however not mentioned in her WS.

(4)  As accepted by Katy, there is no record of Katy ever receiving a copy of the signed Alipay Service Contract, even though she still has access to the email account which she used at the time. Katy could not recall whether she received the contract or asked for a copy. In fact, the executed Alipay Service Contract is a document disclosed by Ds alone in discovery. Whilst Katy sought to brush this aside by alleged confidentiality concern, this is a lame excuse as no such concern existed at the stage of preparing the draft service contract which was circulated to Katy.

(5)  The Alipay Service Contract is a key (if not the most important) document on P’s case, as Katy’s role is simply to introduce Alipay and procure the signing of the Alipay Service Contract. That is what P need to claim her commission. Yet, no one (not even Katy herself) saw the need for Katy to receive a copy of the final Alipay Service Contract. As submitted by Ds, this is consistent with Andrew’s evidence that Katy no longer had any role in the Alipay Project after the December Conversation.

108.  Sixth, whilst P says there are discrepancies in Andrew’s evidence, they do not detract from the big picture and overall circumstances examined above. Moreover, even on P’s case that the “dangers” are merely concerned with sharing commission and shares of EFTP with Carson after his departure from Alipay, the objective fact remains that, from the contemporaneous WhatsApp messages, Andrew (rightly or wrongly) took great issue with such arrangement so much so that he wanted to run his own “eft”, which favours Ds’ case that it culminated in a discussion in late December 2013 agreeing to terminate all arrangement and cooperation between Katy, Carson and Andrew.

109.  In any event, whilst I have dealt with some of P’s arguments or evidence in my analysis above, for completeness I would address below P’s core challenges directed against the three parts of Ds’ case.

110.  First, on the “kick back” arrangement:

(1)  P says the allegation of the illegal “kick back” arrangement requires cogent evidence from Ds. However, what Andrew said in his WS §25.2 is that he did not know the details of these arrangements but was very concerned about the lawfulness of the arrangements, or at the minimum, their potential impact on his cooperation with Alipay. Ds are not advancing a case that there was in fact illegal arrangement. In any case, Andrew’s concerns are borne out by his WhatsApp messages which refer to “dangers”.

(2)  P says there is discrepancy in Ds’ plea and Andrew’s evidence in cross-examination. However, Ds’ plea does not go so far to say that Katy herself would receive some unlawful “kick back” (as alleged by P). Fairly read, Ds have pleaded an arrangement whereby each of Carson, Katy and Carson’s seniors would receive commission from the proposed Alipay Project. This is not inconsistent with Andrew’s oral evidence that the commission income paid by Alipay to EFTP would be paid to Katy, and then Katy would pay some of the commission to Carson and his seniors as “kick back”. The concern remains that Carson (and his seniors) as staff of Alipay would receive “kick back” in the form of commission originating from a counterparty of Alipay, EFTP.

(3)  P says if there were indeed an unlawful “kick back” arrangement, Carson would not possibly have mentioned that to Andrew (an outsider), and (contrary to Andrew’s excuse in cross-examination) Carson did not need to seek Andrew’s help as Katy could simply pay Carson after receiving her commission from EFTP. However, all that Andrew said is that he had serious concerns over its legality, not that it is necessarily unlawful. Moreover, under the arrangement, Carson would receive not only commission but also shares in EFTP from Katy. The prospective transfer of shares to Carson and his participation as a shareholder of EFTP are plainly matters which would concern and affect Andrew. In any case, the fact that Andrew was told about share transfer to Carson (which caused him great concerns) is borne out by contemporaneous WhatsApp messages, e.g.: “我唔要，我自己做我的eft”, “我不想上身”, “佢都唔知有咩危險ma。。。他想法只係合資開公司”, “資？”, “ 誰資？”, “我資”, “所有都是我”.

(4)  P says Andrew could not be genuinely concerned about Katy’s being in breach of her duty of fidelity to JETCO. However, the fact that Andrew was not initially concerned does not mean he could not develop concern alongside his growing concerns over an arrangement which now involves Carson and his seniors. The Alipay Project remained an opportunity acquired by Katy as JETCO’s staff (albeit not pursued by JETCO). As Andrew had explained with some force in cross-examination, he would not want to risk his cooperation with Alipay and business prospects (including the possibility of listing) which could be tainted as such.

(5)  P says Ds have not disclosed the WeChat record between Andrew and Carson. When cross-examined on this, Andrew said he thought it was not necessary to check the record. Given that P never asked for such documents by specific discovery, I would not go so far to say that Andrew’s explanation is made up or false. Importantly, there are contemporaneous WhatsApp and WeChat messages between Katy and Andrew disclosed by Ds (not P). On the one hand this militates against the suggestion that Ds sought to withhold documents. On the other hand, the messages disclosed by Ds already demonstrate arguments and concerns by Andrew over Carson receiving shares of EFTP and becoming its shareholder under the arrangement related by Carson to him.

111.  Second, on the December Meeting:

(1)  P says it is likely that Carson and Andrew sorted out their outstanding differences in relation to the Alipay Project. This seems to be common ground and does not undermine Ds’ case.

(2)  Significantly, Andrew has explained in cross-examination how he convinced Carson in the meeting against proceeding further with the arrangement. In particular, he told Carson if he wanted to play “kick back” then he would not do it, unless Carson came out from Alipay and they did it together. Andrew said that Carson had a daughter of two years old in 2013 and he said to Carson that his daughter was so young and asked him not to do this. Andrew’s oral evidence came across as candid and truthful.

(3)  P says that discussing the ceasing of any (potentially) unlawful arrangement would not lead to the termination of the legitimate arrangement between P/Katy and EFTP/Andrew, to which Carson is not a party. However, it must not be forgotten that Katy is privy to the arrangement with Carson, and Andrew could hardly ensure that Katy would not split commission with Carson after receiving the same from EFTP.

112.  Third, on the December Conversation:

(1)  P says that Andrew’s evidence is that Carson agreed to terminate all existing cooperation and arrangements between him, Katy and Andrew, which Katy accepted in the December Conversation, but the Agreement was not an arrangement involving Carson. As I have said, Katy is also privy to the arrangement and if Andrew wanted to terminate such arrangement, understandably he would also want to terminate the cooperation and agreement with Katy without which no commission or shares could be split with Carson.

(2)  P also criticises Andrew for coming up with the date of 18 December 2013 (which would not ordinarily be regarded as late December) just to fit P’s case. However, there is no dispute that Carson met Andrew on 17 December 2013 followed by a phone call between Katy and Andrew on 18 December 2013, after which there is no more message between them until 23 January 2014. This shows that Katy and Andrew must have discussed about the Alipay Project on 18 December 2013 which culminated in cessation of any further cooperation between them. This supports Ds’ case. The fact that Andrew was able to pinpoint the specific date by reference to the WhatsApp message is not a matter against him. In any case, the event took place long time ago and hence even if there is some discrepancy on timing, this is far from material (and in any event not fatal).

(3)  P says there is no reason why Andrew did not himself sign and ask Katy to sign the written notice required under Article 7 for termination of the Agreement. However, one must not forget that the Agreement is very much a homemade agreement, and the parties have proceeded with their dealings in a casual manner.

(4)  Echoing that, Andrew explained in cross-examination that it did not cross his mind about Article 7 at the time. As he explained, the Agreement was drafted in early November, the parties did not engage lawyers, he asked his accounting staff Joey to copy and paste, and the Agreement was poorly drafted. Further, Andrew stressed that his thinking then is that an oral agreement is still an agreement, and he told Katy in the conversation that they would not proceed with the project and there it is. He added that if he really wanted to avoid the risk he could have set up another company instead of using EFTP (which he did not). On the whole, his account came across as candid and credible.

113.  In the premises, I accept Ds’ case and evidence on the oral termination of the Agreement in the December Conversation.

E2.  Estoppel by Representation

114.  Pursuant to Article 7 of the Agreement, termination of the same can only be effected by a written notice signed by both parties. On the evidence, whilst I have found that the Agreement was terminated orally in the December Conversation between Katy and Andrew, the requirement of Article 7 is not satisfied. In order to get around that, Ds resort to “estoppel by representation” as pleaded in RADC §40, i.e. Issue 2.

115.  In the parties’ opening submissions, they are ad idem that the essential elements of estoppel by representation are:

(1)  a representation or conduct amounting to a representation intended to induce a course of conduct on the part of the person to whom the representation is made;

(2)  an act or omission resulting from the representation, whether actual or by conduct, by the person to whom the representation is made;

(3)  detriment to such person as a consequence of the act or omission.

See Redland Precast Concrete Products (China) Ltd v Permasteelisa Hong Kong Ltd[2020] HKCFI 1820 at §117.

116.  As to element (1), Ds rely on the positive representation by Katy (on behalf of P) accepting the termination of all cooperation and arrangement including the Agreement. In response, P disputes element (1) on the facts.

117.  As to elements (2) and (3) (action resulting from representation and detriment), P submits that EFTP would have proceeded with the Alipay project anyway regardless of whether the Agreement was terminated, and argues there is no clear evidence of detriment suffered by EFTP.

118.  In relation to element (1), I raised a query during oral opening whether Article 7 of the Agreement (which requires a written notice signed by both parties) operates like a “no oral modification” clause (“NOM clause”). I drew the parties’ attention to the dicta of Lord Sumption in the UK Supreme Court’s decision in MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2019] AC 119 and the obiter of DHCJ Winnie Tsui J (as she then was) in Chinachem Financial Services Ltd v Century Venture Holdings Ltd [2023] HKCFI 457, and invited the parties to make further submissions at closing.

119.  On behalf of P, Mr Man submits at closing that Lord Sumption upheld the validity of a NOM clause in Rock Advertising (supra). In particular, Lord Sumption observed at §16 that a person can be estopped from relying on a contractual provision laying down conditions for the formal validity of a variation; but at the very least (i) there would have to be some words or conduct unequivocally representing that the variation was valid notwithstanding its informality; and (ii) something more would be required for this purpose than the informal promise itself. He emphasised there has to be a recognition of the formality requirement but the parties still go ahead.

120.  On the other hand, Mr Kwan (with Mr Tsui) submits at closing that the conventional analysis of estoppel remains applicable because:

(1)  As observed by Recorder Richard Khaw SC in Re Mega Gold Holdings Ltd [2024] 4 HKLRD 583 at §82(1), with reference to the UK Supreme Court’s decision in Rock Advertising Ltd [2019] AC 119 [D#9]):

“It is well-established that a no oral modification clause does not exclude an estoppel defence. It involves a factual determination of whether there were words or conduct which ‘unequivocally representing that the variation was valid notwithstanding its informality’, which is something more than the informal promise itself: Rock Advertising at [16].”

(2)  The precise nature of that “something more” is not entirely clear and remains to be established, but it would appear to require a significant or material course of action by both parties in reliance upon the efficacy of the informally agreed variation: Chitty on Contracts (35^th ed) at §26-042.

(3)  As noted by the learned editors of Chitty (supra) at footnote 191 to §26-042, the guidance as to the circumstances in which estoppel might be successfully invoked is found in the English CA’s judgment in Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait) [2020] 1 CLC 90 at §§71-81.

(4)  In particular, one of the situations where a party may be precluded by its conduct from relying on a “no oral modification” provision is where the person making the promise stood by and allowed the other party to perform the terms which had been agreed orally: Asher v Jaywing Plc [2022] EWHC 893 (Ch) at §211.

(5)  To the extent that Rock Advertising does impose a higher threshold on the party alleging estoppel by requiring the parties to “acknowledge in some way the formality requirement but nonetheless choose to go ahead to vary the contract in an informal manner”, this Court is not strictly bound by a decision of the UK Supreme Court.

(6)  The only decision in Hong Kong which suggests that as a result of Rock Advertising (supra), the requirements for an estoppel may be more stringent where there is a NOM clause is Chinachem Financial (supra), but the observations of DHCJ Winnie Tsui (as she then was) were tentative and obiter as her Ladyship found that “even applying the conventional analysis, the estoppel is not made out on the facts as found” (at §467).

(7)  In Charles Lim Teng Siang v Hong Choon Hau [2021] SGCA 43, the Singapore CA reached a provisional view that the test on when it can be necessarily implied that the parties had intended to depart from a no oral variation clause is “whether at the point when parties agreed on the oral variation, they would necessarily have agreed to depart from the NOM clause had they addressed their mind to the question, regardless of whether they had actually considered the question or not”.

(8)  Pulling the strands together, the nature of the “something more” required is essentially captured by elements (2) and (3).

121.  As mentioned, given my ruling on the Construction Issues, it is not strictly necessary to determine the Termination Issues. On a tentative basis and without expressing any final or conclusive view, I am inclined to think that the Court should apply Rock Advertising which imposes a higher threshold on the party alleging estoppel, by requiring the parties to “acknowledge in some way the formality requirement but nonetheless choose to go ahead to vary the contract in an informal manner”. In particular:

(1)  As in the case of an NOM clause, there was no principled reason why parties could not agree to bind themselves to a provision laying down specified conditions for any subsequent termination of their contract.

(2)  A written termination clause (such as Article 7 of the Agreement) served a legitimate business purpose and was intended to achieve contractual certainty about the termination of an agreement.

(3)  The scope of an estoppel defence cannot be so broad as to destroy the whole advantage of certainty for which parties stipulate when they agree upon a NOM clause (MWB Business (supra) at §16).

(4)  By analogy, the reasoning should also apply to any purported departure from a written termination clause, which serves to increase legal certainty.

(5)  Relying on the observations by the Singapore CA in Charles Lim Teng Siang (supra), Ds says that a requirement that when considering estoppel, the parties must address their mind to the NOM clause (or a written termination clause here), could drastically narrow down estoppel and give rise to injustice, as it is a fanciful possibility that the parties would address their mind to such clause and still ignore it. Yet, the other side of the coin is that, if one can simply rely on the conventional approach despite such clause, this would drastically narrow down such clause or defeat the purpose of having such clause in the first place. It goes against the purpose of such clause to increase legal certainty.

(6)  Accordingly, as reasoned by Lord Sumption in Rock Advertising (supra) at §16, there has to be a recognition of the formality requirement, and something more would be required. If so, simply standing by would unlikely be sufficient to constitute estoppel. Something more, such as words or conduct representing that the termination was valid notwithstanding its informality, is required.

(7)  Even Asher v Jaywing (supra)at §211 recognised that the question whether what Lord Sumption had in mind in Rock Advertising (supra) might include a situation where the person making the promise stood by and allowed the other party to perform the terms which had been agreed orally, is to be explored in future.

(8)  Equally, it seems unlikely that the nature of the “something more” required can be captured by elements (2) and (3), which would be no different from application of the conventional approach.

(9)  Rather, in order to constitute an unequivocal promise for the purposes of sustaining a defence of estoppel by representation, there must at least be some words or conduct unequivocally representing that the oral termination was valid notwithstanding a written termination clause (such as Article 7), and that something more would be required than the informal oral termination itself.

(10)  The above aligns with the dicta of Recorder Khaw SC in Mega Gold (supra) that the question is whether there were words or conduct unequivocally representing that the variation (or in this case, the termination) was valid “notwithstanding its informality”.

122.  For completeness, I do not think that the waiver clause in Article 9.4 of the Agreement would warrant a different view. Article 9.4 provides that either party may waive its right or power provided under the Agreement. It only goes so far to affirm that even a written termination clause such as Article 7 may be waived, but this does not thereby undermine Rock Advertising (supra). In fact, Rock Advertising (supra) does not preclude the possibility of estoppel or waiver. It merely imposes a higher threshold on the party alleging estoppel.

123.  On the evidence, even though I have found in favour of Ds’ case of oral termination, Ds have not suggested that there were words or conduct unequivocally representing that the oral termination was valid notwithstanding Article 7 and/or the informality of such oral termination. Based on my tentative view of the law, it would appear that the oral termination during the December Conversation does not constitute an unequivocal representation for the purposes of estoppel by representation (in which case such defence would fail), although I need not express any final or conclusive view.

124.  Without prejudice to the foregoing, I would move on to consider elements (2) and (3) of the estoppel by representation. In my view, they can be satisfied here:

(1)  I accept Ds’ evidence that, in reliance on the December Conversation whereby EFTP (under Andrew’s directorship) would pursue the Alipay Project without Katy’s involvement, EFTP had made significant investments in terms of funds, manpower and resources towards the Alipay Project, including:

(a)  Injecting several million HKD worth of capital into the Alipay Project by (a) obtaining loans from banks and (b) mortgaging two of Andrew’s properties in Hong Kong as security for the loans;

(b)  Hiring a team of technicians to develop the software system for Alipay to run the Alipay barcode payment service in Hong Kong;

(c)  Hiring a team of around 40 salespersons to procure merchants in Hong Kong to use the Alipay barcode payment service;

(2)  In order to establish the requisite causal link between the representation/assurance and detriment, it is not necessary to show that “but for” the representation/assurance, EFTP/Andrew would not have acted in the way they did. It is sufficient to show that the representation/assurance was an inducement which could be proved by inference: Tang Lui Leo v Wong Elaine [2020] HKCFI 3087 at §39; Hong Kong Hua Qiao Co Ltd v Cham Ka Tai [2015] 4 HKC 167 at §30;

(3)  The oral termination of the Agreement served as an inducement for Ds to proceed with the Alipay Project and to make significant investments in the same. In contrast, Ds’ willingness to invest money and resources into the Alipay Project would have been lower if EFTP was required to split the commission income from Alipay with Katy and cannot reap the fruits of the Alipay Project fully.

(4)  P’s argument that EFTP would have proceeded with the Alipay Project and invested funds and sources into it regardless of whether Katy agreed to terminate the Agreement is unreal. There can be little quarrel that there would be more inducement for Andrew to invest more funds if he could benefit from the Alipay Project exclusively on his own. It is neither here nor there to suggest that Andrew was fully prepared to invest into the Alipay project since November 2013, as it overlooks the degree of willingness to invest, as well as the extent of funds which Andrew is content to invest.

125.  In the premises, but for my tentative view against Ds on element (1) as a result of the written termination clause (Article 7), I would have found in favour of Ds on the Termination Issues as a whole.

F.  Issues 5 and 6

F1.  Issue 5

126.  Ds do not dispute that EFTP has ratified the Commission Sharing Agreement (as confirmed in Ds’ opening and closing submissions).

127.  Nevertheless (and probably out of prudence), P submits that even if Ds do not contest ratification, the Court may have to consider whether the conduct relied upon and pleaded by P is sufficient in law to constitute ratification. I am not sure if this is strictly necessary as Ds have already made concessions on the issue of ratification.

128.  Without prejudice to that, I am in any event satisfied that EFTP has ratified the Agreement and thus should be liable, or alternatively Andrew should be liable, had I ruled against Ds on both the Construction Issues and the Termination Issues. As submitted by P (and not contested by Ds):

(1)  Andrew purported to enter into the Agreement on behalf of EFTP on 11 November 2013 (when Andrew had submitted documents for incorporating EFTP, even though EFTP was only incorporated a week later).

(2)  P’s primary position is that, as ETFP had ratified the Agreement, it should be liable to P’s claim pursuant to s.32A(1)(b) of the Companies Ordinance (Cap. 32) (“CO”).

(3)  Ratification may be express or by conduct. Ratification will be implied whenever the conduct of the person in whose name or on whose behalf the act or transaction is done or entered into is such as to amount to clear evidence that it adopts or recognises such act or transaction, and may be implied from the mere acquiescence or inactivity of the principal: Bowstead & Reynolds on Agency (23^rd edn) at §2-074.

(4)  The words or conduct must be unequivocal: they must not be such that they could be accounted for by other interpretations: Bowstead (supra) at §2-077.

(5)  Ratification needs not be communicated to the other party, so long as manifested: Bowstead (supra) at §2-078.

(6)  The commission sharing arrangement under the Agreement was premised on EFTP signing a service contract with Alipay and receiving commission income from Alipay. By signing the Alipay Service Contract and participating in the Alipay Project, EFTP ratified the Agreement by conduct.

(7)  Alternatively, in the event the Court holds that EFTP did not ratify the Agreement, Andrew shall be personally liable under the Agreement in respect of the failure to pay commission to P by virtue of s.32A(1)(a) of CO.

F2.  Issue 6

129.  Had I found in favour of P against Ds on both the Construction Issues and the Termination Issues, there should be no dispute that Ds have failed to pay P her share of commission pursuant to Article 2.6 of the Agreement and that EFTP has been in breach.

130.  Alternatively, insofar as the Court finds that Andrew should be liable, P is content to confine her claim to losses after 20 August 2015 for limitation purpose as P only sought to amend her Statement of Claim to join Andrew on 20 August 2021.

131.  For completeness, I should mention that there is an order for split trial. Had I held that EFTP or alternatively Andrew should be liable to P, I would also have made further directions on the trial on quantum.

G.  Conclusion

132.  For all these reasons, as P fails on the Construction Issues, P’s claim should be dismissed. As such, it is not strictly necessary for the Court to determine the Termination Issues. In any case, I have found in favour of Ds on the oral termination of the Agreement, even though I would be inclined (without making any final or conclusive view) to hold that there is no estoppel by representation by adopting the approach in Rock Advertising (supra).

133.  Further, as costs should follow the event in general, I would make a costs order nisi for P to bear Ds’ costs of this action on a party to party basis, with Certificate for one Counsel.

134.  Last but not least, it remains for me to thank Mr Man for P and Mr Kwan and Mr Tsui for Ds for the helpful assistance given to the Court.