HONG KONG ZHIXIN FINANCIAL NEWS AGENCY LTD v. CHINA MAPLE LEAF EDUCATIONAL SYSTEMS LTD

HCA 2973/2016

[2022] HKCFI 2653

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2973 OF 2016

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JUDGMENT

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A. INTRODUCTION

1.  This is the trial of P’s (“P”) claim and D’s (“D”) counterclaim against each other.  At the outset, P sought specific performance of an agreement dated 8 June 2015 (“Agreement”) as modified by a supplemental agreement dated 17 July 2015 (“Supplemental Agreement”) entered into with D (collectively the “Agreements”), and damages in lieu of and/or in addition to specific performance.  In the course of trial, Mr Li SC for P informed the court that P has made an election in favour of damages instead of specific performance, and Mr Ko for D fairly accepted that P was entitled to make such election at any time before judgment.  On the other hand, D counterclaims against P for misrepresentation, declaratory relief and/or restitution.

2.  Stripped to its bare bones, this case involves a simple claim for the exercise of contractual share options.  On the facts (as I will address further), P has a prima facie (if not overwhelming) case against D.  As the evidence unfolds, it appears that D regretted the commercial bargain struck with P, and it was not until P sought to enforce the deal that D came up with reasons not to perform.  It is of course not the function of the court to examine (let alone opine on) any alleged unfairness in the commercial bargain, which was reached consensually between the parties, with the benefit of legal advice.  The court would approach the matter objectively and test the veracity of the defences against the relevant factual matrix and contractual agreements of the parties at the material times.

3.  During the course of the trial, the parties have drawn to this Court’s attention previous decisions of interlocutory applications in these proceedings.  One such decision is that of Keith Yeung J dated 2 December 2019 (“2019 Decision”), whereby he dismissed D’s appeal against the decision of Master Suen refusing D’s application for security for costs.  The 2019 Decision made observations on D’s defences which remain pertinent to date.

4.  The other decisions are those of Lisa Wong J dated 4 November 2021 (“2021 Decision”) and 3 May 2022 (“2022 Decision”) respectively, whereby she dismissed (i) P’s application for leave to adduce a supplemental witness statement of Mr Guo Xinlin (“Mr Guo”) and (ii) P’s application for leave to amend its Re-Amended Statement of Claim (“RASOC”).  These decisions pertain to P’s attempts to introduce new evidence or pleadings on the relief of damages.  Her Ladyship gave reasons for the former, whilst reserving reasons for the latter.

5.  Relevantly, a matter which took up substantial arguments concerns the proper relief which may be granted to P. Initially, I had some concern whether it is open to P to claim substantial damages which are not expressly spelled out in the RASOC.  As I pointed out to Mr Li SC, this could well mean that, even if P is to succeed in establishing liability, P may end up getting nominal damages.  This is compounded by the 2021 and 2022 Decisions refusing P’s applications to adduce new evidence and amend its pleadings on relief (for which I do not have the benefit of reasons, in respect of the latter).  I have therefore invited the parties to address me specifically on the issue of relief.

6.  P also provided to this Court materials previously placed before Lisa Wong J, for which D raised no objection (albeit questioning their relevance or weight).  As I see it, in the absence of any argument that the 2021 and 2022 Decisions would debar P from arguing its case based on the existing pleadings and evidence (on the ground of abuse of process or otherwise), the question boils down to the relief which P could properly claim based on such existing pleadings and evidence. Inasmuch as P cannot rely on proposed new evidence or pleadings which were disallowed, equally I cannot read those decisions against P so as to preclude P from running its case based on existing pleadings and evidence.

7.  As I will explain later, once it is understood that the subject matter of these proceedings concerns shares of a listed company which have an available market and for which specific performance is ordinarily inapt, it would become clear that P is left with claiming the normal measure of damages in any event, based on the difference between the contractual exercise price and market price of the option shares at the time of breach.  Seen from such light, there could be little surprise or prejudice to D for P to claim damages on such basis, and that would substantially dispose of the legal arguments advanced by the parties (as I will address further below).

B.     BACKGROUND

8.  The parties have prepared a statement of agreed facts and an agreed chronology.  There are also facts, based on contemporaneous documents and/or otherwise set out in P’s Closing Submissions, which are undisputed or beyond reasonable dispute by D.[1] In this section, I summarise the key background facts based on the same.

9.  P, Hong Kong Zhixin Financial News Agency Limited (香港智信財經通訊有限公司), was and is a company incorporated under the laws of Hong Kong and principally engaged in providing investor and media relations (“IR”) services.

10.  D, China Maple Leaf Educational Systems Limited (中國楓葉教育集團有限公司), was and is a company incorporated in the Cayman Islands with limited liability, whose shares were (since November 2014) and still are listed for public trading on the Hong Kong Stock Exchange Limited (“HKEx”) (stock code: 1317). D was and still is principally engaged in the operation of kindergarten, primary and secondary school education.

11.  D’s business was founded by Mr Sherman Jen (“Mr Jen”), who is also its controlling shareholder, chairman of the board, an executive director, and co-chief executive officer (“CEO”).

12.  P’s chairman, Mr Guo, became interested in providing service to D and sought to be introduced.  He was introduced to a Mr Wen Bo (“Mr Wen”), an investment banker who had known Mr Jen for a long time and had done work for D before.

13.  In March/April 2015, Mr Wen introduced Mr Guo to Mr Jen.  They started negotiating 2 agreements: the Agreement between P and D, and a Strategy and Investment Consultancy Services Agreement (戰略及投資咨詢顧問服務協議) between Mr Wen’s company Dingxianghui (Beijing) Investment Management Co. Ltd (“DXH”) and D.

14.  On 22 April 2015, P and DXH proposed 2 draft agreements to D for D’s consideration.  Negotiations continued and on 29 April and 15 May 2015, revised drafts were sent to D for further review.  In particular, these drafts were also reviewed by D’s lawyers.

15.  On 8 June 2015, P and D entered into the Agreement, whilst DXH and D entered into their agreement on the same day.  The Agreement between P and D provides, among others, as follows:

(a) Under the Recitals and Clause 1, P agreed to be an IR (i.e. investor and media relations) consultant to D.

(b) Under Clause 2, D agreed to grant to P an option (“Option”) to subscribe for 17,500,000 shares (“Option Shares”) (although the parties dispute as to whether the grant is subject to any conditions and what conditions).

(c) Clause 2.1(I)(ii)(D) of the Agreement provides that the Option becomes exercisable by P or its nominees upon the following conditions being met: -

(i) 40% of the Option (i.e. 7,000,000 Option Shares) (“1st Batch”) becomes exercisable, if at any time during the 18- month period after the date of the Agreement, D’s market capitalization (“market cap”) is no less than HK$8,000,000,000 on each day for 15 consecutive trading days (“1st Batch Condition”); and

(ii) 60% of the Option (i.e. 10,500,000 Option Shares) (“2nd Batch”) becomes exercisable, if at any time during the 36- month period after the date of the Agreement, D’s market cap is no less than HK$10,000,000,000 on each day for 15 consecutive trading days (“2nd Batch Condition”).

(d) Clause 2 of the Agreement further provides that, inter alia: -

(i) The exercise price is HK$4.00 per Option Share (Clause 2.1(I)(ii)(B)).

(ii) The Option would remain exercisable for 6 months after the relevant condition is met (Clause 2.1(I)(ii)(C)).

(iii) D would grant the Option to P or its nominees within 3 months of the date of the Agreement (Clause 2.1(I)(ii)(E)).

(iv) The allotment of the Option Shares would be subject to the permission of the Listing Committee (“Listing Committee”) of HKEx to deal in the Option Shares. D would be responsible for obtaining such permission from HKEx (Clause 2.1(I)(ii)(F)).

(e) Clause 6.4 of the Agreement provides that the Option would not be affected by any early termination of the Agreement and would be irrevocable once it was granted.

(f) Clause 6.3 of the Agreement further provides that any party unilaterally terminating the Agreement should compensate the other party for the corresponding loss.

16.  For ease of reference, the relevant parts of the recitals and clauses 1, 2 and 6 of the Agreement are quoted as follows:

“甲乙雙方經過友好協商，達成以下發展與維護投資者關係的協議，甲方聘請乙方爲甲方在中國內地（以下簡稱內地）的投資者關係顧問，負責溝通及維護甲方與內地投資者及內地財經媒體的關係，而甲方則按照以下規定向乙方支付報酬。

一、乙方承諾向甲方提供以下專業服務：

……

二、甲方承諾對乙方提供以上服務作出以下報酬：

1. 購股權報酬

I. 購股權報酬：

i. 乙方將收取甲方股份的購股權（以下簡稱「購股權＂））作為本服務合同項下基本投資者關係服務的報酬。

ii. 購股權報酬設置條件：

A. 購股權數：750萬股；

B. 購股權行使價：每股港幣4.00港元；

C. 購股權有效期：自協議簽訂後的42個月之內，但行權時間限制為觸發每次可行權的條件滿足後的6個月內；

D. 購股權行使條件；

a) 第一批，甲方股票在合同簽署18個月內的連續15個交易日的收市市值達到80億港元或以上，乙方可在甲乙雙方商定的有效期內行使上述購股權總數的 40%（即700萬股）。該有效期是指該收市市值達到或超出80億港元後6個月內，終止時間不得超過購股權有效期。在規定時間內未達到以上規定市值，則該部分購股權失效。

b) 第二批，甲方股票在合同簽署36個月內連續15 個交易日的收市市值達到100億港元或以上，乙方可在甲乙雙方商定的有效期內行使上述購股權剩餘的 60%（即1050萬股）。該有效期是指上述收市市值達到或超過100億港元後6個月內，終止時間不得超過購股權有效期。在規定時間內未達到以上規定市值，則該部分購股權失效。

E. 甲方應將上述1750萬股購股權於本合同生效日起3個月內一次性授予乙方或乙方指定承授人。

F. 購股權相關股份的發行，須待香港聯合交易所上市委員會批准購股權股份上市及准許買賣，始可作實。甲方將向聯交所提出申請，批准購股權股份上市及准許買賣。＂

……

六、爭議解決與合同終止

……

3. 任何一方單方面終止合同應賠償對方相應的損失。

4. 合同有效期為自本合同簽訂之日起為期三年。 甲方授予乙方的購股權，不受限於合同提前解除的影響，授出後不可撤銷。＂

17.  In a similar vein, under clause 2 of DXH’s agreement with D, DXH agreed to provide certain strategy and investment consultancy services to D.  Under clause 4.4 of that agreement, in substantially the same wording as clause 2 of the Agreement, D agreed to grant DXH an option for 7,500,000 shares.

18.  As at the date of the Agreement, D’s shares had a market closing price of HK$2.83 per share.  The option exercise price of HK$4 per share was at a premium of 41.34%.  In other words, the Option was deeply out of the money.

19.  It is P’s case that (i) the terms of the Agreement are clear; (ii) the Option was granted; (iii) the only conditions were for the exercise (not grant) thereof; and (iv) the conditions were objective and depended only on D’s market cap (“market cap conditions”).

20.  The above are disputed by D. Nevertheless, D did repeatedly state the above (expressly or by implication) to HKEx and to the public.

21.  On 9 June 2015, D made an announcement titled “Grant of Share Options Under The General Mandate”. In the announcement:

(a)     Under “Definitions”, D referred to the Option (together with another option to a third party) as “granted”

(b)     Under “Reasons for the Granting of Options and Use of Proceeds”, D said, “The Directors considers that the granting of the Option … is fair and reasonable and in the interests of the Company and the Shareholders as a whole”.

(c)     Under “The Exercise Period and Exercise Conditions”, D set out the market cap conditions as stated in clause 2.1.I.ii.D of the Agreement.  There were no other conditions.

(d)     Further, D stated, “The obligation of [D] to issue the Option Shares is subject to the Listing Committee of [HKEx] agreeing to grant the listing of, and permission to deal in, the Option Shares”.  To this end, D stated, “Application will be made by the Company to [HKEx] for the listing and permission to deal in the Option Shares”.

22.  On 9 June 2015, HKEx, having post vetted D’s announcement, asked D for “further information on the reasons for granting the Options”.

23.  On 12 June 2015, D replied to HKEx, explaining the “major terms” of the Agreement and justifying the grant of the Option as pursuant to the general mandate which the shareholders had already given the directors and therefore not requiring a specific mandate, i.e., a specific approval by the shareholders.

24.  On 17 June 2015, HKEx responded and further noted that the Option was “granted … at nil cost” and “The vesting condition … is tied to the future market capitalization … instead of any specific services to be provided …”.  HKEx then stated, “Based on the information provided to us to date and our concerns …, we are minded to require the Company to seek shareholders’ approval for the grant of the Options …”.

25.  On 23 June 2015, D replied to HKEx, stating, “the Company respectfully submits that the Options were issued … at a fair value” and “the Company respectfully submits that Options granted to [P and another party] are only exercisable if [the market cap conditions] are met”.  D went on to repeatedly refer to the Option as “granted” and “issued”, and sought to explain that the Option with conditions “tied to the market capitalisation of [D]” was exactly “to motivate [P] so that [it] can provide the best services possible …”.

26.  On 29 June 2015, HKEx responded to insist that D should seek a specific mandate from, i.e., specific approval by, the shareholders.

27.  On 2 July 2015, D filed its “Monthly Return of Equity Issuer on Movements in Securities” (“Monthly Return”) for June 2015.  Monthly Returns are public documents where a listed company gives details on how many shares it has issued or agreed to issue.  Under the heading “Any other Agreements or Arrangements to Issue Shares of the Issuer which are to be Listed, including Options (other than under Share Option Schemes)”, D stated that 17,500,000 shares may be issued pursuant to “Options granted to [P] on 8 June 2015 pursuant to the general mandate granted to the Board by the shareholders … on 4 February 2015”.

28.  On the same day, D further replied to HKEx.  It insisted that the grant of the Option to P (and the other option to DXH) to be exercisable on the market cap conditions was appropriate.  It assured HKEx that everything had been disclosed and “There are no other arrangements between [P] and the Company and its connected persons”.  It attached as Annex 2 the work plan for P to do for D, and as Annex 3 a draft announcement by which D would confirm publicly there were no other arrangements between P and D.

29.  On 10 July 2015, HKEx reiterated its view that D should obtain a specific mandate from shareholders.

30.  On 13 July 2015, D replied to HKEx to agree to obtain a specific mandate at a general meeting on 25 August 2015 and to amend the Agreement (and the other agreement with DXH) “to reflect the fact that the grant of Options will be subject to the Shareholders’ approval”.  This was despite that D’s compliance adviser shared D’s view that the grant of the Option under the general mandate was already appropriate.

31.  On 14 July 2015, D informed HKEx that the general meeting would be on 24 instead of 25 August 2015 due to scheduling conflict.

32.  On 17 July 2015, P and D entered into the Supplemental Agreement to amend the Agreement, whereby the parties agreed to amend and supplement the conditions to the grant of the Option as follows:

(a) D is to hold an extraordinary general meeting (“EGM”) as soon as possible before the end of September 2015.

(b) The grant of the Option is subject to:

(i) D’s shareholders (“Shareholders”) having approved the specific mandate (“Specific Mandate”) to its directors to grant the Option and to issue and allot the Option Shares on terms set out in the Agreement (as amended by the Supplemental Agreement) in the said EGM.

(ii) HKEx raising no objection to the Specific Mandate approved by the Shareholders (and if there were any objection, it shall be reasonably explained in writing).

33.  For ease of reference, the operative part of the Supplemental Agreement is quoted in full as follows:

“經甲乙從方友好協商，就2015年6月8日簽署的有關投資者關係服務合同（以下簡稱「服務合同」），由於需要符合法規及香港聯交所的相關規定．甲乙雙方做出以下補充協議：

一、 同意服務合同有關購股權的授予條件作出以下的修改補充：

第一、甲方承諾在2015年9月結束前盡快召開股東特別大會；

第二、在以上股東特別大會期間，對以上提及的服務合同的相關購股權條款進行審議批誰；

第三、以上股東特別大會的批准及服務合同須在香港聯交所沒有異議（如有異議需提供書面的合理解釋）的情況下方可生效。”

34.  On the same day, D made an announcement about and setting out the terms of the Supplemental Agreement.

35.  On 30/31 July 2015, D’s board passed a written resolution to call an EGM to be held on 24 August 2015 and that, “conditional upon the shareholders … resolve [sic] in favour … the Board hereby approves the grant of … an option to subscribe for 17,500,000 shares (the “Hong Kong Zhixin Option Shares”) to Hong Kong Zhixin Financial News Agency Ltd, the allotment and issuance of … the Hong Kong Zhixin Shares, credited as fully paid at par value, pursuant to the terms of [the Agreements] and the updating of the register of members of the Company accordingly”.

36.  By a circular dated 5 August 2015, D circulated to its Shareholders a notice convening an EGM to be held on 24 August 2015.  For such purpose, D issued a Circular titled “Specific Mandate to Grant Options and Allot and Issue Shares Upon Exercise of Options and Notice of the Extraordinary General Meeting”.  The Circular set out the detailed terms of the Agreement, the Option, and the Supplemental Agreement.

(a) Under “Engagement Agreement with [P]”, it described the “Services to be provided by [P]” as “an investor relations consultant to [D] to assist in promoting and maintaining the communication and relationship between [D] and the investors and financial news media in mainland China”, stated the “Term of service” as “three years”, and stated the “Consideration” as “the Option to subscribe for 17.5 million Shares”.

(b) Under “Principal Terms of the Options”, it gave the “Date of Grant” of the Option as 8 June 2015.

(c) Under “Definitions”, D referred to the Option (together with another option to DXH) as “granted”.

(d) Under “Issue Price and Exercise of the Options”, it stated that the exercise price of the Option represents “a premium of approximately 41.34% to the closing price of HK2.83 per Share as quoted on the Stock Exchange on 8 June 2015, being the date of the Engagement Agreements”. 

(e) Under “Exercise Period and Exercise Conditions”, it referred to the market cap conditions as stated in clause 2.1.I.ii.D of the Agreement.  There were no other conditions.

(f) Under “Supplemental Agreements with the Consultants”, it stated, “Pursuant to the Supplemental Agreements, the conditions to the grant of the Options are amended as follows: (a) the Shareholders having approved the specific mandate to the Directors to grant the Options and to issue and allot the Option Shares …; and (b) [HKEx] granting the approval of the listing of, and permission to deal in, the Option Shares to be issued pursuant to the exercise of the Options …”.

(g) Under “Application for Listing”, it foreshadowed, “The Company will apply to [HKEx] for the listing of, and permission to deal in, the Option Shares which may be allotted and issued upon exercise of the Option”.

(h) The “Notice of Extraordinary General Meeting” put to shareholders that, inter alia, the Agreement and the Supplemental Agreement be “approved, ratified and confirmed” and a specific mandate be given to the directors to grant the Option and to allot and issue the Option Shares.

37.  The Circular further confirmed, “The Issue Price and the Exercise Price were negotiated on an arm’s length basis … The Directors consider that the terms of the [Agreements] and the Issue Price and the Exercise Price are fair and reasonable …”.

38.  The EGM was duly convened on 24 August 2015. The Shareholders approved the Specific Mandate by unanimously resolving, inter alia, to approve, ratify, and confirm the Agreement and Supplemental Agreement and to give the directors a specific mandate to grant the Option and the Option Shares.  On D’s case the Specific Mandate was approved on the condition that P must have satisfactorily performed its duties.

39.  On 2 September 2015, D filed its Monthly Return for August 2015.  It stated that 17,500,000 shares may be issued pursuant to “Options granted to [P] on 8 June 2015 pursuant to the specific mandate granted to the Board by the shareholders … on 24 August 2015”.

40.  On 16 September 2015, D made a “Formal Application” on a “Form C1” to HKEx “for the listing of and for permission to deal in” the 17,500,000 Option Shares (plus another 7,500,000 shares) to be issued upon the exercise of the Option (and the other option granted to DXH).

41.  On 30 September 2015, HKEx confirmed “conditional listing approval for any Option Shares which [D] may issue on exercise of the Options subject to fulfilment of all other conditions for the grant of the Options”.

42.  Between 6 October 2015 and 2 June 2016, D filed 9 Monthly Returns, all stating that the Option had been granted to P, and that 17,500,000 Option Shares may be issued to P upon exercise of the Option.

43.  On 27 November 2015, D published its Annual Report, where it said, “On 17 July 2015, the Company entered into a supplemental agreement with each of the Consultants … whereby it is agreed that the options shall be conditionally granted subject to the passing of an ordinary resolution by the Shareholders … approving the specific mandate to the Directors to grant the options and to issue and allot the Shares to be issued pursuant to the options.  The specific mandate was approved by the Shareholders at the extraordinary general meeting … held on 24 August 2015”.

44.  Since entering into the Agreement, P has provided divers IR services to D on numerous occasions.  There are contemporaneous documentary evidence of P’s services to D.

45.  Concurrently, D’s stock price was rising.  By May 2016, the price hit HK$5.88 per share from time to time, producing a market cap of HK$8 billion.  Thus, the condition for the exercise of the 1^st batch of the Option was nearing satisfied.

46.  On 30 May 2016, D’s head of investors relations and company secretary Derek Lau emailed D’s executive director and chief financial officer Zhang Jingxia (“Ms Zhang”) 3 analyses on: (1) the minimum remuneration (最少賺取金額) P would earn by way of the Option, assuming exercise as soon as the conditions were met; (2) analysts’ and investors’ views on how the remuneration was “unreasonable”; and (3) his own opinions (“30 May Email”).

47.  Nowhere in the 30 May Email was it said that P’s services were in breach or short of any contractual obligation. The tanner of the analysis was simply that the Option was becoming valuable and would be too much to pay for P’s services.

48.  By 15 June 2016, D’s market cap had exceeded HK$8 billion on each day for 15 consecutive trading days.

49.  On 15 June 2016, P emailed D expressing its intention to exercise the 1^st Batch of the Option and asked about logistics for doing so.  On 20 June 2016, it sent a chaser email.

50.  On 23 June 2016, D replied that its lawyers were studying the matter.  P responded with surprise.

51.  D’s Derek Lau further replied as follows (exploring alternatives without disputing P’s entitlement to exercise the Option):

“在此事上，本公司一直和公司的律師團對在溝通，希望在此事上找出對雙方最有利的方法，務求使到貴司可取得所得，而又可以減少對本司及其現有股東的影響，達致雙贏局面。

舉個例子，例如本公司在研究以已回購的股票直接代替購股權等等不同方法的可行性，這樣貴司可以避免先附本公司現金，然後再行駛購股權的風險，而這又不用攤薄本公司的現有股東權益。

請貴司明白合同本身的條款是死的，但是處理方法是活的……”

52.  On 3 July 2016, P sent another email chasing for details of the logistics for its exercising the Option.

53.  By a letter dated 7 July 2016, P informed D of the satisfaction of the 1^st Batch Condition and sought to exercise the 1^st Batch in part to subscribe for 2,000 Option Shares, enclosing a cheque in the sum of HK$8,000, being the option price of 2,000 Option Shares (i.e. HK$4 x 2,000).

54.  On 12 July 2016, D filed purported “Amended Monthly Returns” for June 2015 and August 2015 to May 2016 to remove the statement made that the Option had been granted to P and 17,500,000 Options Shares may be issued pursuant thereto.  Instead, the amended returns stated that D had entered into the Agreement whereby it had “agreed to grant options to Hong Kong Zhixin”, that “Specific mandate to the Board to grant the options … was given by the shareholders … on 24/08/2015”, but that “No option has been granted”.

55.  On 14 July 2016, P lodged a complaint against D with HKEx.

56.  By a letter dated 15 July 2016, HKEx queried D about its amended returns.  HKEx referred to D’s Circular dated 5 August 2015 and pointed out:

“Based on the Circular (page 7), the Grant of Options was only subject to shareholders approval of the specific mandate and obtaining of listing approval from the Exchange of the new shares to be issued upon exercise of the Options. We note that the Company’s shareholders approved the specific mandate on 24 August 2015, and we granted the listing approval to the Company on 30 September 2015 ...

… we note from the Circular (page 8) that the Options become exercisable … upon the following conditions are met: [the market cap conditions] …

It appears to us that the condition mentioned in (a) [i.e., for the 1^st batch] above has been met, and the Company’s latest market capitalization is HK$10.2 billion.”

(underlining added)

57.  By a letter dated 18 July 2016, D responded to HKEx.  It asserted that the Option had not in fact been granted.  It further alleged that “Options were to be granted to [P] as consideration for [P’s] provision of specified services”, and because “[P’s] performance of the services has … been unsatisfactory and has not provided [D] with the benefits it bargained for … [D] therefore made the commercial decision not to grant the Options … but planned to negotiate with [P] with a view to reaching a settlement”.

58.  This was the first time D stated in writing any allegation or suggestion that P’s services had been unsatisfactory.

59.  By a solicitors’ letter dated 27 July 2016 (“27 July Letter”), D, through its then solicitors, Messrs. MinterEllison, denied having granted the Option to P and refused to accept P’s exercise of the 1st Batch in part in relation to the 2,000 Option Shares for the alleged reason that P’s “performance of [its] obligations under the Agreement has been totally unsatisfactory and lacking in material respects”.  This was the first time D stated in any written communication with P any allegation or suggestion that P’s services had been unsatisfactory.

60.  That said, on the evidence, oral complaint may have been made by D to P slightly earlier in a meeting in the Four Seasons Hotel, Shenzhen on 2 June 2016.  According to the evidence of Ms Zhang, she had expressed her discontent about P’s services in the meeting with Mr Guo of P.  Nevertheless, Mr Guo’s evidence is that he could not recall that and, if there were any discontent expressed, Mr Guo felt that it would have been a price negotiation tactic on the part of D.

61.  In the 27 July Letter, D also sought to terminate the Agreement by (i) asserting that the alleged “failure to deliver the services required under the Agreement” amounted to a repudiation and (ii) purporting to accept P’s alleged repudiation.

62.  By a letter dated 5 October 2016 (“5 October Letter”), P reiterated its right to exercise the First Batch and sought to exercise the 1st Batch in full to subscribe for the 7,000,000 Option Shares at HK$4 per share, enclosing a cheque (“1st Batch Cheque”) for the sum of HK$28,000,000, being the option price of the 7,000,000 Option Shares (i.e. HK$4 x 7,000,000).

63.  D refused to accept delivery of the 5 October Letter and the 1st Batch Cheque. Therefore, P had no alternative but to leave the same at the D’s office on 5 October 2016.

64.  By a letter dated 11 October 2016, D, through Messrs. MinterEllison, continued to deny P’s right to the Option and returned the 1^st Batch Cheque to P.

65.  On 14 November 2016, P commenced this action, seeking specific performance of the Agreements for the 1^st Batch of 7,000,000 Option Shares, and damages in lieu of and/or in addition to specific performance.

66.  By 4 October 2017, D’s market cap had exceeded HK$10,000,000,000 on each day for 15 consecutive trading days. The 2^nd Batch Condition was thus satisfied on 4 October 2017.

67.  By a letter dated 21 November 2017, P, through Messrs. KCL & Partners, referred to the satisfaction of the 2nd Batch Condition and sought to exercise the 2nd Batch in full to subscribe for the 10,500,000 Option Shares, enclosing a cheque (the “2nd Batch Cheque”) for the sum of HK$42,000,000, being the option price of the 10,500,000 Option Shares (i.e. HK$4 x 10,500,000).

68.  By a letter also dated 21 November 2017, D, through Messrs. DLA Piper, denied P’s right to exercise the 2nd Batch of the Option.

69.  By a letter dated 23 November 2017, D, through Messrs.DLA Piper, returned the 2^nd Batch Cheque to P.

70.  On 29 January 2018, P amended its Statement of Claim to seek specific performance of the Agreements for both the 1^st and 2^nd Batches of 17,500,000 Option Shares, and damages in lieu of and/or in addition to specific performance.

71.  Pursuant to an ordinary resolution passed by way of poll at an EGM held on 6 July 2018, D’s shareholders approved the share subdivision of each ordinary share in D into two ordinary shares.

72.  On 2 April 2019, P re-amended its Amended Statement of Claim to clarify that it sought specific performance of the Agreements for 17,500,000 Option Shares which is now equivalent to 35,000,000 ordinary shares in D, and damages in lieu of and/or in addition to specific performance.

C.     SCOPE OF DISPUTES

C1.    Agreed Issues

73.  The parties have submitted an Agreed List of Issues, which I set out in full here:

“Plaintiff’s Claim

1. Whether the Defendant has granted / is obligated to grant the Plaintiff an option (“Option”) to subscribe for 17,500,000 shares in the Defendant (“Option Shares”) pursuant to the agreement between the Plaintiff and the Defendant dated 8 June 2015 (“Agreement”), as amended by a supplemental agreement dated 17 July 2015 (“Supplemental Agreement”) (collectively, “Agreements”).

2. Whether the grant of / the obligation to grant the Option was subject to any conditions, including:

2.1 On the Plaintiff’s case, (a) the Defendant’s shareholders’ approval by ordinary resolution of the specific mandate to its directors [to] grant the Options and (b) listing approval from [HKEx] of the new shares to be issued upon exercise of the Option. If so, whether these conditions have been satisfied.

2.2 On the Defendant’s case, the alleged HKEx Conditions (as defined in paragraph 12 of the Re-re-amended Defence and Counterclaim (“RAADCC”)). If so, whether the alleged HKEx Conditions were satisfied.

2.3 On the Defendant’s case, the Plaintiff’s satisfactory performance of services provided under the Agreements. If so, whether the Plaintiff rendered satisfactorily performance.

2.4 On the Defendant’s case, the Plaintiff (and Ms Chen Yuhong thereof) do not engage in insider dealing. If so, whether Ms Chen has done so.

2.5 On the Defendant’s case, “permission to deal in the Option” being “applied for by the Defendant and/or granted by the Hong Kong Stock Exchange”. If so, whether it has been so applied for and granted.

2.6 On the Defendant’s case, the subsistence (or non-termination) of the Agreements. If so, whether the Agreements have been validly terminated by either the Plaintiff or the Defendant.

3. Whether the Plaintiff is entitled to exercise the Option on 15 June 2016 (for the first batch) and 4 October 2017 (for the second batch).

3.1     Is the Option exercisable once the First Batch Condition and Second Batch Condition (as defined in paragraph 4 of the Re-Amended Statement of Claim (“RASOC”)) relating to market capitalization of the Defendant are satisfied? [Note: there is no dispute that the First Batch and Second Batch Conditions have been satisfied: RRADCC §§42, 48A.]

3.2 Is the Plaintiff’s right to exercise the Option further dependent on, as the Defendant’s case:

(a) The Plaintiff’s satisfactory performance under the Agreements? If so, whether the Plaintiff has rendered satisfactory performance.

(b) The subsistence (or non-termination) of the Agreements? If so, whether the Agreements have been validly terminated by either the Plaintiff or the Defendant.

(c) The Plaintiff (and Ms Chen Yuhong thereof) not engaging in insider dealing. If so, whether Ms Chen has done so.

4. In the premises, whether the Defendant is obligated to issue and allot the Option Shares to the Plaintiff.

5. If the answer to paragraph 4 above is in the affirmative, what is the proper relief to be granted and/or the quantum of damages to be awarded to the Plaintiff.

Defendant’s Counterclaim

6. Whether the Plaintiff has represented to the Defendant that “the Plaintiff would introduce and had the capability to introduce Mainland investors to the Defendant and procure these Mainland investors to make substantial investments in the Defendant”, and if so, whether this was an actionable a misrepresentation. Further, if it was an actionable misrepresentation, what is the quantum of damages to be awarded to the Defendant.

7. Whether the Plaintiff is liable to make restitution to the Defendant for unjust enrichment for total failure of consideration / failure of basis. In particular:

7.1 Whether the Option was granted to the Plaintiff on the basis that the Plaintiff would render “satisfactory, complete, lawful and entire performance of the Plaintiff’s obligations under the Agreement[s]”.

7.2 Whether such basis has totally failed.

7.3 If so, the Defendant is entitled to “restitution of all benefits, including any Option granted[,] from the Plaintiff”.

8. Whether the Plaintiff is liable to make restitution to the Defendant on the ground that “the Plaintiff had impugned the Agreement by its impropriety or by engaging in suspected market capitalization management and market misconduct”.”

74.  For ease of reference, I will deal with the issues in the trial in accordance with the order set out in the Agreed List of Issues (adopting the numberings therein).

C2.    Abandoned issue of insider dealing

75.  In the course of the trial, Mr Ko for D has confirmed that D will no longer be pursuing the issue of insider dealing.  That corresponds to Issues 2.4 and 3.2(c).

76.  As such, it is not necessary for the court to form any conclusive view on such issue.  I need only add that it is sensible for Mr Ko to do so, as D’s case on insider dealing is, with respect, difficult to sustain.  For completeness, I set out some of my observations below.

77.  First, the pleadings on this issue are defective.  As pointed out by Keith Yeung J in §§24 to 29 of the 2019 Decision:

“24. In any event, even assuming that there had been such a condition, D would still have to plead and prove in due cause the breach thereof. It is in this regard where D seeks to rely on the Insider Dealing Defence.

25. In §21 of the RRAD&C, D pleads that:

“By virtue of its position under the Agreement, [P] (and as a result Chen) have and did may have, from time to time, come into possession and/or had access to ‘inside information’ as defined by s.245 of the SFO e.g. information in relation to [D’s] business development plans, performance market promotion, and other information.”

26. The first point I note is D’s use of the words “may have” (amended from “have and did ”).  That is hardly a sufficient basis to support a serious allegation of insider dealing.

27. When considering an allegation of insider dealing, the starting point has to be the identification of the “inside information” concerned.  According to the definition set out at s 245 of the SFO, “inside information” has to be “specific information”.

28. Paragraphs 26 to 29 of D’s RRAD&C is under the heading of “Inside information during the Trading Period”:

 (a)  In §26 thereof, D refers to certain unspecified “favourable and positive and positive research reports in relation to [D]”. In my view, specificity is wanting;

 (b)  In §28 thereof, D refers to “an important strategic agreement with China Merchants Bank regarding the bank’s arrangement to assist [D’s] business expansion” that was signed on 14 August 2015. Particulars of that agreement are lacking.  Even assuming that this information passes the specificity test, one notes from section D of the Chronology prepared by Mr Ko (which is meant to set out the Trading of Ms Chen on the shares in D) that Ms Chen had not traded in any shares in D during the approximately one and a half months before and after the signing of that “strategic agreement”.

29. On the pleadings before me, the Insider Dealing Defence is vague, lacks specificity, and is verged on being contrived.”

78.  I agree with Keith Yeung J’s observations, and note that D has not sought to amend or improve its plea on insider dealing since 2019.

79.  Second, in the course of cross-examination of Mr Guo, Mr Ko put to Mr Guo an internal email dated 12 August 2015 of D attaching a framework agreement between D and a bank.  Questions were asked to explore if Mr Guo had acquired knowledge of this document in the past.  Upon this Court’s inquiry, Mr Ko accepted that Mr Guo was not copied in such email, and there is no evidence to suggest that Mr Guo acquired knowledge of such document via this email, orally or through any other means.  Indeed, there is no evidence before this Court as to whether D has made any announcement on such matter to the public and, if so, when.  As such, there is no basis to contend that (i) the subject document contains inside information which has to be disclosed to the public ultimately; (ii) Mr Guo acquired knowledge of such inside information before it is made known to the public; and (iii) P (whether through Mr Guo or his wife) traded in shares of D with the benefit of such inside information.

80.  Therefore, had D insisted upon pursuing such issue, it appears likely that D would have failed in any event.

C3.    Abandoned issue of suspected market cap management and market misconduct

81.  In the course of the trial, Mr Ko for D has confirmed that D will no longer be pursuing the issue of suspected market cap management and market misconduct.  It is therefore not necessary for the court to deal with Issue 8.

D.     EVIDENCE AT TRIAL

D1.    Preliminary Observations

82.  The parties have adduced factual and expert evidence before the court.

83.  On factual evidence, the key exchanges between the parties are documented (many of which have been summarised above).  There are draft agreements, emails, WeChat messages, letters or even diary entries.  To the extent the witnesses’ evidence conflict with these records, I would prefer the latter.  Given the amount of contemporaneous documents available, the significance of viva voce evidence is necessarily more limited in this case.

84.  As regards expert evidence, pursuant to the Order of Master Hui dated 8 May 2019, the parties were given leave to adduce expert evidence in the field of corporate finance advisory and companies secretarial, confined to the following issues on liability in relation to the conditions for the grant of Option and the conditions for the allotment of Option Shares:

(a)  Whether HKEx’s approval is required for the grant of Option in addition to the approval for the listing and permission to deal with the Option Shares? (“Question 1”)

(b)  The process of obtaining HKEx’s approval for the listing and permission to deal with the Option Shares. (“Question 2”)

85.  As I have pointed out to Mr Ko for D, the expert witness for D, Mr Li Tak Kwong Charles (“Charles Li”), has addressed an additional question outside the scope of Master Hui’s order, namely “Reasonableness of the validation procedures adopted by [D] in relation to the grant of the Options and their exercise”.  Although there is no application to strike out this part of the report, it is plain that D should not be allowed to rely on such part without the court’s leave.

86.  This is not merely a technical breach, because Mr Charles Li has ventured into a commentary of facts in the present case in his report, which is inappropriate.  For instance, at §5.6 of his report, Mr Charles Li recited instructions from D that “the work performed by [P] had neither been entirely in accordance with their agreed work scope, nor had their services been performed to the satisfaction of [D] … It is therefore not unreasonable that [D] and its directors would consider that the conditions for the grant of the Options had not been fulfilled and withheld the grant of the Options”.  In doing so, Mr Charles Li has trespassed into the territory of factual witness.  It also confuses his role as expert confined to the practice of HKEx, as opposed to expressing a view on the reasonableness or otherwise of what D did (which is a factual matter).

87.  In this section, I would set out some of the relevant evidence of the witnesses, based on the summary in D’s Closing Submissions.  I note that in the Annex to P’s Reply Submissions (Responses to D’s Closing on Facts and Liability), P has not seriously taken issue with such summary of evidence.  In addition, I would make observations on various evidence of the witnesses, which are relevant to my assessment of their credibility and related issues.  Of course, I would go into any further or specific evidence of the witnesses when I address the various issues later on.

D2.    Factual Evidence for P

D2.1  Gao Jing (“Ms Gao”)

88.  Ms Gao had been working for P since 8 March 2013 and was promoted to Vice President therein in about December 2015. During her employment with P, she had been reporting to Ms Cai Min Yu (蔡敏玉, the President of P) (“Ms Cai”) and had been assigned as the project manager providing investor and media services to D.  Ms Gao had later left P in about March 2018.

89.  During cross-examination, it was put by Mr Ko to Ms Gao that the services provided by P were investor relations (i.e. IR) services, which Ms Gao confirmed to be the case.  It is notable that Mr Ko saw fit to put this to Ms Gao, without suggesting at the same time that P was also engaged to provide services of introduction (or successful introduction) of Mainland investors to invest in D.  This does not sit comfortably with D’s case of misrepresentation.  Although D chose to pursue misrepresentation as a counterclaim (not by way of defence), it remains necessary for the court to approach the factual evidence holistically.  It may be that D simply regarded the alleged misrepresentation as inducing D to enter into the contract and yet not forming part of the terms of the contract, but this seems highly artificial and divorced from reality, when all relevant terms of bargain should have been reflected in the terms of engagement.

90.  According to Ms Gao, services provided to D lasted for more than a year, and nearly 300 correspondences were exchanged.  At some time in 2016, Ms Cai told her that P could stop the services to D.

91.  The cross-examination of Ms Gao focused on a few areas in which P had allegedly failed to perform.

92.  First, Ms Gao agreed that one of the contractual services under (Bullet Point 1 of) the Agreement was formulating specific market positioning plans for D.  Upon being asked why there had been no written plan documenting any specific market positioning plan for D, Ms Gao replied that P had communicated over the phone with D for market positioning matters.  Ms Gao further said for all these plans, P had to make sure that decisions could be made afterwards so she found it not easy to put it in the work plans.

93.  Second, in relation to the provision of the Investor Database (Agreement Part I, Point 2), Ms Gao said P had a database specific for D, and she recalled it had been provided to D on one occasion.

94.  Third, for the 29 securities firms listed in P’s Amended Voluntary Particulars dated 17 August 2018, Ms Gao said she was unsure whether those firms had approached D directly, but P had contacted the analysts of all these companies or firms.

95.  Fourth, concerning D’s 1^st Annual Results Announcement Press Conference (“AR Conference”), Ms Gao agreed that, for a listed company like D, the announcement of D’s annual result should be done within 3 months after year end, which should fall within late November of 2015. Ms Gao did not quite remember why D’s AR Conference was not covered in the IR Plan for September to November 2015 which was prepared by her then colleague.  Nevertheless, she testified that she had previously communicated with Ms Zhang in mid-October 2015 via telephone conference, after which she submitted a proposal to D on 5 November 2015.  She said further that because P was experienced in organizing annual result announcements for listed companies, even if there was just 2 weeks’ time, P could still organize such a conference.

96.  Fifth, under the Agreement, P would send its staff to accompany D’s management for interview with media.  Ms Gao said that in relation to Economic Daily, P had comprehensively communicated with the reporter prior to the interview, and D did not ask for P’s presence in such interview.

97.  Sixth, in relation to recommending prizes/awards for D pursuant to the Agreement, Ms Gao could not recall if P had done anything.

D2.2  Mr Guo (i.e. Guo Xinlin)

98.  Mr Guo is the Chairman and CEO of P.  About 1 month after D was listed, he came across D’s prospectus and became interested in providing services to D.  He was introduced through a former schoolmate to Mr Wen, and in turn Mr Jen.

99.  Mr Guo accepted that he would have said that P was very experienced in IR works and he knew a lot of investors in Mainland China and elsewhere.  Despite saying that he would not use the term “熟悉” to describe his relationship with Mainland investors, he later accepted that he told Mr Jen that he was familiar with them (“熟悉內地投資者”).  According to him, he meant he was familiar with their style of investment, and he knew by what means or channel they could be reached (not that he knew them personally).

100.  Specifically, Mr Guo was cross-examined on an email dated 15 May 2015 (“15 May Email”), in which Mr Wen (copying Mr Guo) responded to various points raised by D.  Mr Guo confirmed that the email should have summarised what was discussed (which might not be what was eventually agreed) between P and D in a telephone conference, and that he read the email without finding anything wrong.  In respect of Point no.6 which started off by saying “智信的服務主要是在此階段引入國內的機構投資人”, he said the topic was discussed but he only mentioned introducing investors (“引入投資人”), not successfully introducing investors (“成功引入投資人”).

101.  Concerning AR Conference for D, Mr Guo agreed that it was an important item.  Whilst he did not know why it was not included in the work plan for D, he recalled P’s team made some remedies (“補救”), such as finding analysts to attend the AR Conference and helping D organise another AR Conference in Mainland China.

102.  As regards the services of recommending prizes / awards under the Agreement, Mr Guo could not recall the details but suggested that (i) there was no award suitable for D in the market; (b) his colleagues might have communicated with D regarding awards, but D was not interested in applying; and (c) D did not on its own initiative said which awards D was interested in.

103.  In relation to the meeting with Ms Zhang and Mr Li Yong Tao (“Mr Li”) in Four Seasons Hotel, Shenzhen on 2 June 2016, Mr Guo said Ms Zhang did not express any discontent against P orally, and if she did express discontent by body language or otherwise, he thought it was merely her negotiating tactics to offer HK$1 million to cancel the Agreement.  He further disagreed that Ms Zhang had directly requested to terminate the Agreement.

104.  Further, Mr Guo said that a rising share price (or rising market cap) was an objective standard to evaluate P’s performance.  That said, he accepted that good financial results of D was one of the factors affecting D’s share price.

D3.    Factual Evidence for D

D3.1  Mr Jen (i.e. Shu Liang Sherman Jen)

105.  Mr Jen was the founder, Chairman and Co-CEO of D.  According to him, D’s management intended to attract investments from Mainland Chinese investors which Jen was optimistic about.

106.  Mr Jen struck me as somewhat evasive in his evidence.  For instance, although many of the Monthly Returns were submitted ostensibly in his own name, Mr Jen claimed to have no recollection and involvement as they were handled by someone in the Hong Kong office.  He gave the same explanation for circulars issued to shareholders and announcements made to the public.  Whilst Mr Jen may not be familiar with each and every document, it strikes me as somewhat incredible for him to have no knowledge whatsoever in all relevant returns, circulars and announcements which were supposedly lodged with his knowledge and approval.  It appears to me that Mr Jen was trying hard to disassociate himself from documents which contradict D’s case.  It is notable that Mr Jen was acutely aware of the underlying legal issue (e.g. whether the Option was granted) – indeed, during re-examination, Mr Jen asserted that, despite the (required) procedures being completed, no Option had been granted because of the present dispute between P and D.  No doubt he would have realised the difficulty of reconciling such assertion with the documents, had he acknowledged any knowledge or involvement with them.

107.  Another example is Mr Jen’s participation in the review of draft agreements.  Although he participated in negotiating the contract and signed the Agreement, he claimed to have no involvement in the work that followed, nor did he attend to the concrete terms of the Agreement which he thought Ms Zhang or Mr Li would take care of.  Indeed, he went so far to deny having ever participated in the conference call culminating in the 15 May Email at all.  Apparently, he was anxious to disabuse any suggestion that he had anything to do with the drafting of the contract.  Again, it appears to me that he distanced himself from all these, in anticipation of any challenge as to why he did not request and insist on incorporating the alleged representation into the contract.

108.  On the alleged misrepresentation, Mr Jen claimed that both Mr Wen and Mr Guo told him that they could introduce Mainland investors to P, and the term used was “引進投資”, which he understood as having Mainland investors successfully investing in D.  Mr Jen asserted that this was a fundamental understanding between Mr Guo, Mr Wen and himself, and also a fundamental basis for their initial co-operation.  He said every time when they met, introducing Mainland investors was a point he had emphasized, and Mr Guo never denied P had the ability or responsibility to procure investors from Mainland China to invest in D.  He said that no company would pay such a substantial price to merely obtain a general IR service.  Mr Jen further claimed that D did not need Hong Kong and Overseas investors as it had already been very successful in promoting itself among those investors.

109.  In relation to D’s 1^st AR Conference, there was a WeChat conversation dated 18 November 2015 between Mr Guo and Mr Jen, the English translation of which is as follows: -

“Mr Guo: Mr Jen, has your company recently engaged a Hong Kong public relations company?

[Attachment]

We are just afraid that someone pretends to be your company and disseminates some investors information. …

Mr Jen: Not sure. I will reply after I find out more, but it is definitely not a public relations company. …

Mr Jen: Mr. Guo, it is a promotion agency engaged by Maple Leaf for its results conference, and it is one-off.”

110.  Whilst the above messages suggest that, despite D’s present accusation on the AR Conference, Mr Jen did not express any discontent and even tried to reassure P at the time (i.e. the other company was engaged merely on an one-off basis), Mr Jen explained that he was very supportive of P initially, but after finding out more, he knew that D’s management team was already very dissatisfied with P’s performance, and that his replies were made out of courtesy.  In my view, Mr Jen’s explanation is an afterthought, as it is flatly contradicted by the WeChat messages.

111.  Further, Mr Jen was asked about another WeChat conversation that happened on 4 December 2015, the English translation is as follows:

“Mr Guo: Only 4 days of the month have passed, but the monthly share/volume deals have already exceeded the past 12 months.

Mr Jen: Yes. You have done a lot of work. Maple Leaf does notice that, thank you! Let us keep working hard!”

112.  Again, the above contemporaneous messages contradict flatly D’s accusation of unsatisfactory performance of P.  Faced with such evidence, Mr Jen claimed that he made the remark as a polite expression.  He attempted to reconcile this by saying that P had done some work but alleging that P’s contribution could not bring a change in D’s share price.  In my view, this is another piece of evidence which suggests that D’s complaint of unsatisfactory performance is an afterthought.

D3.2  Mr Wen (i.e. Wen Bo)

113.  Mr Wen is the legal representative of DXH, and a friend of Mr Jen for many years.  It was Mr Wen who introduced Mr Guo to Mr Jen.  Mr Wen does not appear to have any pecuniary interest in the outcome of this litigation.  Moreover, he answered questions directly and strikes me as an honest witness whose evidence should be given appropriate weight, subject to any documentary evidence to the contrary.

114.  According to Mr Wen, in the Meeting in Dalian held over the weekend of 21-22 March 2015, Mr Guo had told Mr Wen that he was “very familiar (非常熟悉) with institutional investors and Chinese securities firms in Mainland China and had connections with many parties that could allow Maple Leaf to have a wider research coverage from more securities firms and to gain support from many institutional investors in Mainland China”.[2]

115.  It is also Mr Wen’s evidence that, in the meeting in late April 2015, “Mr. Guo continued to talk about [P’s] capabilities in financial public relations and reiterate his familiarity (熟悉關係) with securities firms and institutional investors in Mainland China”.[3]

116.  When being asked about Point no.6 of the 15 May Email, it was Mr Wen’s understanding that the question posed by D consisted of 2 parts: (a) one was about the service of P was mainly to introduce Mainland institutional investors; (b) second, D/Mr Jen were worried that the style of investment of the Mainland investors might cause fluctuation of D’s share price.

117.  That said, Mr Wen explained that his understanding was that P and D had different expectations of the engagement of P by D.  In particular, Mr Wen said that, whilst Mr Guo did not deny that P could help D to attract Mainland investors, Mr Guo had never promised to do so either.

D3.3  Ms Jiang (i.e. Zhang Jingxia)

118.  Ms Zhang was the Executive Director and Chief Financial Officer of D.  She came across to me as a witness who is quite keen to say things in favour of D, even at the risk of exaggeration.

119.  According to Ms Zhang, she attended the meeting of Mr Jen, Mr Guo and Mr Wen in Dalian on 8 June 2015 when the Agreement was executed, and Mr Guo emphasized in the meeting that Mr Guo/P had a strong connection with Mainland Chinese investors and P could bring in those investors to invest in D, but in the end, P failed to do so.[4] It is notable that well before such meeting, Mr Jen said that P and D already reached in principle agreement on P’s engagement.  As such, there was little reason why Mr Guo had to make the alleged misrepresentation to entice D to execute the agreement.  Indeed, the meeting on 8 June 2015 was presumably scheduled to execute the Agreement which had been finalised between the parties.

120.  Ms Zhang was rather dismissive of P’s work.  According to her, P’s services were all along unsatisfactory, as P could not even complete the work they were required to be done.  Notably, instead of saying that P’s services were not worth the consideration bargained for, Ms Zhang was adamant that P’s services did not create any value for D. Yet, Ms Zhang testified that she only expressed her discontent about P’s services in the meeting with Mr Guo in the Four Seasons Hotel in Shenzhen on 2 June 2016, but not before.[5] Throughout such period of about a year, P provided services continuously and D never complained or asked P to stop, nor did D purport to terminate P’s engagement until a month later in July 2016.  If P’s services were indeed of no value, one would have expected D to have complained and/or taken other necessary steps much earlier.  Ms Zhang’s evidence is plainly an exaggeration (if not a lie).

121.  Further, Ms Zhang denied that P had anything to do with the increase in D’s share price in 2015 to 2016.  She was adamant that the appreciation of D’s then share price was due to D’s financial performance, not because of P’s services.  With due respect, there could be many factors contributing to a change in share price, and these factors need not be mutually exclusive.  Again, it seems to me that Ms Zhang was keen to underplay P’s role or contribution whenever she could, which betrays her partisan stance.

122.  In relation to the work for D’s AR Conference, Ms Zhang Zhang also denied that Ms Gao had contacted her in October 2015.  I will deal with this later.  Suffice it to say that, properly analysed, this was not a matter of great significance.

123.  During cross-examination, Ms Zhang was asked questions about the 30 May Email from Derek Lau to her.  As mentioned earlier, in such email, Derek Lau set out 3 analyses on: (1) the minimum remuneration (最少賺取金額) P would earn by way of the Option, assuming exercise as soon as the conditions were met; (2) analysts’ and investors’ views on how the remuneration was “unreasonable”; and (3) his own opinions.  The 30 May Email is an internal email of D.  It was addressed to Ms Zhang, and she should have no difficulty understanding the same.  Yet, despite repeated questioning, Ms Zhang testified that she did not understand Derek Lau’s calculations on the minimum remuneration for P.  It appears to me that she was trying to evade the question.  It could not be realistically suggested that Ms Zhang was ignorant of the difference between the exercise price of HK$4 and the minimum market price of HK$5.88 (for 15 consecutive trading days) at which the 1^st Batch of the Option became exercisable, which was what Derek Lau calculated.  The reality is that Ms Zhang must have understood these analyses from Derek Lau – if not she would have asked for clarifications from him.  Plainly Ms Zhang realised that the tanner of the 30 May Email was that the Option was becoming valuable and would be too much to pay for P’s services, which would suggest that D had regretted the bargain struck with P – hence Ms Zhang’s attempt to distance herself from such email.

124.  Another instance of Ms Zhang’s attempt to distance herself from the matter is her evidence that she was not the person in charge of negotiating, reviewing and revising the draft agreement with P.  As it transpires, none of Mr Jen, Ms Zhang and Mr Li claimed to be responsible for such matter.  Such shirking of responsibility militates against D’s evidence as a whole.

D3.4  Mr Li (i.e. Li Yong Tao)

125.  Mr Li had been the Financial Controller of D but he had already left D in September 2021.

126.  According to Mr Li, Mr Guo had, during the meeting on 8 June 2015 with Mr Jen and Mr Wen (being the day when the Agreement was executed), said that he had the ability to assist D by successfully introducing Mainland Investors to invest in D, to ensure the deal between P and D could be sealed.

127.  Mr Li did not profess to have any direct involvement in the negotiations or meetings prior to 8 June 2015.  It is instructive to note that, as confirmed by Mr Li, the final version of the Agreement was already prepared, printed out and ready for signing at the meeting on 8 June 2015.  As such, there was indeed no logical reason why Mr Guo had to make or repeat any alleged misrepresentation to seal the deal between P and D, there being no suggestion that D had not yet decided to enter into the Agreement at the time.

128.  I also note that Mr Jen had confirmed during cross-examination that P and D had reached agreement in principle much earlier, and time was required to attend to the procedure or formality.  Hence, it is unconvincing for Mr Li to suggest that Mr Guo was still anxious to pitch the deal on 8 June 2015, to the extent of representing that P had the ability to successfully introduce Mainland investors to invest in D.

129.  Further, Mr Li denied that he was the person in charge of negotiating, reviewing and revising the draft agreement with P.  It appears that none of Mr Jen, Ms Jiang and Mr Li claimed to be in charge, in an attempt to evade questions as to why, if they were in charge, they did not request and insist on the incorporation of P’s alleged representation into the terms of the Agreement.

D4.    Expert Evidence

130.  As mentioned above, the parties were given leave to adduce expert evidence on the following questions:

(a)  Whether HKEx’s approval is required for the grant of Option in addition to the approval for the listing and permission to deal with the Option Shares? (i.e. Question 1)

(b)  The process of obtaining HKEx’s approval for the listing and permission to deal with the Option Shares. (i.e. Question 2)

D4.1  Dr Ngai Wai Fung Maurice (“Dr Ngai”)

131.  Dr Ngai was P’s expert.  During cross-examination, Mr Ko for D appeared to challenge the expertise of Dr Ngai. I pointed out to Mr Ko that no such notice was given by D, and the expertise of Dr Ngai is not a disputed matter set out in the Agreed List of Issues.  Nevertheless, Mr Ko contended that he merely sought to undermine the weight to be attached to Dr Ngai’s evidence, as Dr Ngai never held a Type 6 SFC License (Advising on Corporate Finance) and his expertise lies mainly in listed company secretarial services.  In the end, I do not think much would turn on this.  First, Mr Ko has not challenged Dr Ngai’s expertise, and his submissions merely go to the question of weight.  Second, Dr Ngai has explained in his oral evidence his vast experience in dealing with the affairs of listed companies. Third and in any case, the court can form its own view on the proper construction of the Listing Rules (“LR”), even without the assistance of expert evidence.  On the whole, I am not satisfied that one should discount the views of Dr Ngai on account of his experience.

132.  On the 1^st Question, Dr Ngai’s initial answer is “No”.  As he explained, HKEx’s clearance for the publication of the circular and grant of listing approval indicated that HKEx did not have further regulatory concerns regarding the grant of the Option and D’s obligation thereunder to issue and allot the Option Shares and, in practice, HKEx would not further issue any “separate approval letter” to authorize the grant of an unlisted option (such as the Option itself) as it falls out of its regulatory regime to govern matters relating to listing of securities on HKEx.[6]

133.  During cross-examination, Dr Ngai accepted that under LR 15.02, one would need the approval of HKEx for the grant of the Option, but there are no specific or stipulated procedures or letters for approval of a grant of options.  For ease of reference, LR 15.02 is quoted below: 

“15.02 All warrants [options included] must, prior to the issue or grant thereof, be approved by the Exchange and in addition, where they are warrants to subscribe equity securities, by the shareholders in general meeting (unless they are issued by the directors under the authority of a general mandate granted to them by shareholders in accordance with Rule 13.36(2))…” [Emphasis added]

134.  Dr Ngai’s latest evidence is that the answer to Question 1 should be “yes, on the facts of the present case”. Properly understood, there is no contradiction in Dr Ngai’s evidence.  What he meant is that HKEx’s “approval” is required under Listing Rules 15.02, although in practice HKEx would not issue any “separate approval letter”. On the facts of the present case, he does not consider it necessary to obtain any “separate approval letter” from HKEx either.

135.  For completeness, Dr Ngai’s views on the approval for grant of the Option may be briefly summarised as follows:

(a)     The circular of specific mandate required pre-vetting by HKEX (Main Board Rule 13.52(1)(e))[7];

(b)     Approval of granting the Option should be completed after the pre- and post-vetting process of such Circular[8];

(c)     The grant of the Option does not require HKEx’s approval for listing as the Option was not listed as per Listing Rule 2A.06[9];

(d)     Therefore, the grant of the Option became unconditional on 30 September 2015 (when HKEx granted approval for the listing and permission to deal with the Option Shares);

(e)     HKEx would not further issue a “separate approval letter” to authorize the grant of an unlisted option[10].

136.  Further, Dr Ngai’s views on the approval for issuance and allotment of the Option Shares may be briefly summarised as follows:

(a)     HKEx’s approval of the listing of and permission to deal with the Option Shares were given after D had submitted the Form C1 on 16 September 2015, which was approved by HKEx on 30 September 2015[11], which stated:-

“We confirm our conditional listing approval for any Option Shares which you may issue on exercise of the Options subject to fulfillment of all other conditions for the grant of the Options”

(b)     The above is the general wording adopted by the HKEx. “Other condition” does not mean HKEx had imposed other conditions, and it simply means the grant of Options would be subject to other conditions as the case may be[12].

137.  As regards the alleged HKEx Conditions (as defined in RAADCC §12), Dr Ngai’s views are as follows[13]:

(a)     there must not be any violation of Listing Rules and/or the Securities and Futures Ordinance on the part of P when it is rendering its services to D;

(b)     the operation of the Agreements must not affect the operation of a fair and orderly market;

(c)     there must be genuine valuable services actually rendered by P to D;

(d)     the shareholders’ interest of D must not be prejudiced in any way; and

(e)     matters in (b) and (d) above should be confirmed by HKEx during the pre- and/or post-vetting of the Circular.

D4.2  Charles Li (i.e. Li Tak Kwong Charles)

138.  Mr Charles Li was D’s expert.  It is his views that:

(a)     there shall be 2-tier approval from HKEx for (a) grant of options (unless issued by way of general mandate) under the LR Chapter 15 and (b) listing of and permission to deal with the underlying shares under LR Chapter 17[14];

(b)     approval of the grant of the Option was required under LR 15.02[15];

(c)     as a general principle, HKEx would require the grant of the options and the subsequent issue of the underlying shares to be appropriate, proper and in the best interest of the Company and its shareholders as a whole[16].

139.  Upon cross-examination, Mr Li further explained as follows:

(a)     In the present case, HKEx had given its approval in principle for the grant of the Option.  However, there are other conditions to be fulfilled;

(b)     HKEx would not allow the Option to be granted simply upon fulfilment of some quantitative conditions, although he agreed that part of the conditions to grant the Option in the present case was quantitative conditions;

(c)     During the entire process, if HKEx got information that a transaction entered into by a listed company is (or appears to be) suspicious or inappropriate, they might step in and challenge the transaction, even if that may affect or reverse the bargain between the contractual parties;

(d)     HKEx is playing a proactive role to protect the shareholders of listed companies and the investing public;

(e)     The mere fact that HKEx had granted in-principle approval does not mean that the terms of the Agreement were approved, and HKEx can still enquire into the matter;

(f)     The vetting process of HKEx is a continuous one;

(g)     If HKEx does not intervene, the form of approval by HKEx would be via no further comment confirmation.

140.  Mr Ko contended that it was Mr Charles Li’s opinion that the grant of the Option would require “separate approval” under LR 15.02, but there was no LR 15.02 approval in the present case.  Whilst I will address this further below, I do not think there is in fact material difference in the opinions of Dr Ngai and Mr Charles Li. Ultimately, both of them accepted that (i) approval of HKEx is needed under LR 15.02 and (ii) there was (at least) approval in principle by HKEx.  The latter must be right because, without such approval, HKEx could not have gone on to grant approval for listing of and dealing with the underlying Option Shares. Fundamentally, even if “separate approval” was required as a matter of concept, it does not mean that such approval could only be embodied by “separate approval letter”, nor does it debar the HKEx from giving approval by implication. In the present case, once it is accepted that HKEx at least gave approval in principle, it would appear that the approval requirement under LR 15.02 is prima facie satisfied.  Whether HKEx can (and will) revisit the matter subsequently ought not affect such conclusion.

E.     ANALYSIS

E1.    Issue 1: Whether D has granted / is obligated to grant P the Option

141.  Issue 1 is to some extent linked with Issue 2, and P’s Closing has dealt with both issues together.  For ease of reference, I will deal with them in turn, although my views on both issues should be read together for completeness.

142.  P’s case is that D granted P the Option on 8 June 2015.  P submits that there is an abundance of evidence showing that the Option was granted (e.g. the Monthly Returns).  This is irrevocable and not to be affected by any early termination (see Clause 6.4).  The Supplemental Agreement added 2 conditions subsequent to the grant of the Option: (1) specific approval / specific mandate by D’s shareholders; and (2) HKEx raising no objection.  These were the only 2 conditions, and both have been satisfied because (i) D’s shareholders gave specific approval / specific mandate for the Option at the EGM on 24 August 2015 and (ii) HKEx has never raised any objection (and even granted listing approval for, and permissions to deal in, the Option Shares on 30 September 2015).

143.  On the other hand, D’s case is that no Option had been granted, as evidenced by other documents (e.g. D’s Annual Reports and Amended Monthly Returns).  The crux of D’s contention is that the grant of the Option was subject to various other conditions (under Issue 2).  As those conditions were not satisfied, no Option had been granted.

144.  The reason why the battle line is drawn as such under Issue 1, is attributable to the contractual effect of the grant of the Option under Clause 6.4 of the Agreement, which provided as follows:

“合同有效期為自本合同簽訂之日起為期三年。甲方授予乙方的購股權，不受限於合同提前解除的影響，授出後不可撤銷。”

145.  D argues that, if the Option has not been granted, the issue of “irrecoverability” (or irrevocability) of the Option would not arise.  The corollary is that, if the Option was granted, the effect is irrevocable, and D cannot rely on any alleged conditions or termination of the Agreements to brush aside the Option already granted to P.

146.  In my view, D’s argument is repugnant to the plain intent of the Agreement.  The obvious design under Clause 6.4 is to make the grant of the Option irrevocable so that the parties cannot rely on other alleged conditions or early termination to renege from it.  Seen from such light, D’s argument, if successful, would mean that D can introduce numerous conditions through the backdoor and allege that no Option was granted until each and every condition was satisfied, thereby rendering Clause 6.4 superfluous or nugatory.  D’s argument presupposes that the grant of the Option is subject to various conditions, which seem to be what Clause 6.4 seeks to avoid.  Such anomaly militates against D’s case on alleged conditions of the Option (which I will consider further under Issue 2).

147.  Insofar as Issue 1 is concerned, I am satisfied that the Option was granted by D to P at the time of the Agreement on 8 June 2015, or alternatively upon satisfying the conditions in the Supplemental Agreement by 30 September 2015 at the latest.

148.  Clause 2.1(I)(i) of the Agreement provides that “乙方將收取甲方股份的購股權（以下簡稱「購股權＂））作為本服務合同項下基本投資者關係服務的報酬”.

149.  Clause 2.1(I)(ii)(E) further provides that “甲方應將上述1750萬股購股權於本合同生效日起3個月內一次性授予乙方或乙方指定承授人”. 

150.  On the face of it, the Agreement obliges D to grant the Option to P or P’s nominee within 3 months of the effective date of the Agreement.

151.  Nevertheless, this is an obligation imposed on D, and Clause 2.1(I)(ii)(E) does not purport to impose any condition for the performance of such obligation by D.  It would appear that the 3-month period is a matter of administrative convenience, e.g. to allow time if P requests that the Option be granted to a separate entity.  Not surprisingly, D has not seriously relied on this clause to contend that the Option was never granted.  Indeed, it would appear that if there were a failure to grant the Option within 3 months, that would have constituted a breach of the Agreement by D.  It would be extraordinary to suggest that D could somehow rely on its own breach as a defence to P’s claim for specific performance or damages in respect of the Option (which seems to be the argument in D’s Closing, claiming that P can have no recourse except to sue D for breach of Clause 2.1(I)(ii)(E), which is however not P’s pleaded case).  In this regard, it is trite that a person is not permitted to take advantage of his own wrong, and will be prevented from asserting rights or claiming benefits which arise in consequence: Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381 at §91.

152.  Moreover, although D contends that nothing in the Agreement indicated the Option would be automatically granted upon execution of the Agreement, D has not seriously argued that a grant of the Option requires any formality, or a separate instrument. There is force in the submission by Mr Li SC that an option is a contractual right/obligation, and is created when parties contract for the right/obligation. It does not need to exist or be embodied in a separate or particular instrument.  Viewed in such light, the Option can be regarded as having been granted to P upon entering into the Agreement, and the object of Clause 2.1(I)(ii)(E) is to cater for the scenario where P requests the Option be granted to a separate entity.

153.  It seems to me perfectly viable to say that, unless P directs the Option to be granted to a separate entity, the grant of the Option to P can simply take place upon entering into the Agreement, and in any case through confirmation by D (e.g. by documents or conduct).

154.  As a matter of fact, none of the parties considered it necessary for a separate instrument to be issued at the time, and the contemporaneous evidence suggests that both parties proceeded on the basis that the Option had been granted by D.  It was not until 2016 that D sought to amend various documents in an attempt to renege from such position.

155.  In this regard, I also agree with Mr Li SC that there is an abundance of evidence showing that the Option was granted by D.

156.  First, D’s own announcement, Circular, and public filings all recorded that D had already granted P the Option on 8 June 2015.  For instance, the Circular dated 5 August 2015 expressly stated the “Date of Grant” of the Option as “8 June 2015”.  In a similar vein, the Monthly Returns, including those submitted ostensibly by Mr Jen, positively and repeatedly stated that the Option has been granted. 

157.  As Mr Jen agreed, he and D’s board had an obligation to provide the regulator and the investing public all material information as well as to ensure that the information was truthful and not misleading.  Mr Jen signed the Circular which contained the letter from D’s board, and in turn, the statement on “date of grant”.  As regards the Monthly Returns, as mentioned above, it strikes me as evasive for Mr Jen to disassociate himself from those returns, even alleging that it was normal for some unknown person to use his name in submitting such documents. In any event, the returns are D’s public filings, and D has offered no sound explanation how any alleged mistake was made in their contents.

158.  Whilst D points to other documents to the contrary, such as D’s Annual Reports and Amended Monthly Returns, they were prepared by D subsequently.  Little weight should be attached to these documents which seem to be an attempt by D to renege from the parties’ original position.

159.  Second, D’s board had in fact resolved to grant the Option. According to the written resolutions of all the directors of D (signed by Mr Jen and other directors of D on 31 July 2015), D’s board resolved that, conditional upon shareholders’ approval, D’s board approved “the grant of … [the Option] to [P]”.  Therefore, even if a separate act (in addition to entering into the Agreement) is required, this should not pose a problem on the facts of the present case.

160.  For completeness, I note that the resolution of D’s board came after 8 June 2015, and sought to give effect to the Supplemental Agreement.  Logically, D’s board should have made an earlier resolution to give effect to the Agreement, although there is no direct evidence before the court.  Nevertheless, the evidence before the court suggests that, at the very least, D has granted the Option to P conditional upon shareholders’ approval, and such condition was fulfilled on 24 August 2015.

161.  Third, it was on the basis of the Option having been granted that D applied to HKEx, and HKEx then gave its listing approval of and permission to deal in the shares to be issued upon the exercise of the Option.

162.  The above analysis is not affected by the Supplemental Agreement.  I agree with the submission of Mr Li SC that, to the extent that the Supplemental Agreement (which came after 8 June 2015) stipulated further conditions to the grant, those would be conditions subsequent. They do not affect whether the Option was already granted.

163.  D’s shareholders were asked to “approve, ratify, and confirm” the Agreement and Supplemental Agreement.  Insofar as the Agreement embodying the grant of the Option was amended to be subject to the specific mandate, the shareholders have ratified the Agreement, in that the Option remained granted on 8 June 2015.  Similar analysis could apply to the condition of HKEx raising no objection, and HKEx has confirmed its position by 30 September 2015 at the latest.

164.  Alternatively, even if the effect of the Supplemental Agreement is to impose conditions precedent to the grant of the Option, those conditions would have been satisfied by 30 September 2015, and the Option would have been granted by that time.

E2.    Issue 2: Whether the grant of or obligation to grant the Option was subject to any conditions

E2.1  Parties’ Cases

165.  P’s case is that the only conditions are (a) D’s shareholders’ approval by specific mandate and (b) listing approval by HKEx.

166.  D’s case is that there are also conditions of (a) HKEx conditions, (b) P’s satisfactory performance, (c) not engaging in insider dealing (now abandoned), (d) permission to deal in the Option, and (e) the subsistence (or non-termination) of the Agreements.

E2.2  Issue 2.1: Fulfilment of Conditions in P’s Case

167.  It is common ground that (a) D’s shareholders did approve by ordinary resolution of the specific mandate to D’s directors to grant the Option and (b) HKEx gave listing approval for the new shares to be issued upon exercise of the Option.

168.  Hence, if P is right, there can be no dispute that the conditions for grant of the Option were fulfilled. Therefore, what remains is whether there are further conditions as contended by D.

E2.3  Whether D can rely on further conditions

169.  Having considered the matter, I am of the view that it is not open to D to rely on further conditions as alleged.

170.  First, the Agreement expressly provided that the grant of the Option was irrevocable.  As I have held under Issue 1, the Option was already granted by D to P upon entering into the Agreement (or alternatively by 30 September 2015).  Thereafter, pursuant to Clause 6.4 of the Agreement, the Option once granted is irrevocable.  Therefore, in the absence of the agreement of the parties (such as the Supplemental Agreement), it is not open to D to introduce any further conditions to invalidate the grant of the Option.

171.  In the present case, D’s alleged further conditions simply cannot be found in the terms of the Agreements. Further, in D’s contemporaneous statements to HKEx, to its shareholders and to the public, D stated that all the terms and conditions were stated in the Agreements.

172.  Second, D’s argument on the alleged further conditions is contrary to the plain intent of the Agreement.

173.  Mr Ko accepts that once the Option was granted, it is irrevocable.  Nevertheless, he contends that there are further conditions which, if not fulfilled, would mean that no Option was granted such that the matter would be revocable.  This is, with respect, a highly artificial argument, divorced from the terms of the Agreement as a whole.

174.  As I have observed under Issue 1 above, D’s argument is repugnant to the plain intent of the Agreement.  The obvious design under Clause 6.4 is to make the grant of the Option irrevocable so that the parties cannot rely on other alleged conditions, breaches or early termination to renege from it.  Yet, D’s argument seeks to achieve the contrary.  It is an impermissible attempt to introduce conditions through the backdoor.

175.  Third, I accept Mr Li SC’s submissions that D has confused between a condition being an event on which the grant of the Option is contingent (i.e. condition precedent / subsequent), and a condition being a term of an agreement (i.e. obligation): see Chitty on Contracts, 34^th ed., §§4-194 to 4-196.  As such, even if the alleged further conditions are to be implied into the Agreements, they should merely constitute implied terms which might entitle D to sue for damages in the event of breach (or to terminate in the event of a repudiatory breach).  They cannot be elevated into events which must occur as a condition to the grant of the Option.  Hence, the alleged further conditions can at most be relevant insofar as they are pursued by counterclaim, but not as a basis to dispute the grant of the Option which, pursuant to Clause 6.4, is irrevocable.

176.  In the circumstances, it is not open to D to invoke alleged further conditions to the Agreements as a defence to P’s claim on the Option.

177.  Given my view, it is not strictly necessary to address the alleged further conditions in question.  That said, for completeness, I will deal with them in turn.  Where appropriate, I would also consider whether, assuming there were the alleged further conditions, P had breached them on the facts of the present case.

E2.4  Issue 2.2: Alleged HKEx Conditions (as defined in RAADCC §12)

178.  D says HKEx had imposed a set of conditions, namely that: (1) there must not be violation of the Securities and Futures Ordinance or the Listing Rules; (2) the operation of the Agreements must not affect the operation of a fair and orderly market; (3) there must be genuine valuable services actually rendered by P to D; and (4) the interests of D’s shareholders must not be prejudiced in any way.  D calls these the “HKEx Conditions”.  In my view, there is no merit in D’s contention.

179.  First, the starting point is that the Agreements do not contain the alleged HKEx Conditions.  There is simply no basis for the court to rewrite the parties’ bargain.  Indeed, the HKEx itself noted in its letter dated 15 July 2016 that “the two conditions precedent [to the grant of the Option] have been fulfilled”^[17] – no other condition (as alleged by D) was suggested or referred to by HKEx.

180.  Second, it is not clear why the conditions should be implied.  For conditions (1) and (2), they appear to be a matter of concern between D (a listed company) and HKEx (rather than P and D).  For condition (3), the Agreements contain express terms on the services to be provided by P to D, and there is no room for implied term.  In any case, whether P has actually rendered genuine valuable services is, at most, relevant to any alleged breach of contract, but not a “condition” of grant of Option.  As regards condition (4), the interests of D’s shareholders are safeguarded by the specific mandate – there is no room for any further implied term.

181.  Third, as explained above, even if there were room for implication of terms, there is no basis to contend that they should be implied as condition (or contingent event) for the grant of the Option.

182.  Fourth, D appears to incorporate in the condition of approval by the HKEx a requirement to satisfy all other conditions, through which he introduces a number of other implied conditions into the contract.  However, insofar as HKEx refers to all other conditions, this is not a basis for D to introduce any other condition at liberty. Instead, HKEx could only be taken to mean that, insofar as there are other conditions, those other conditions would have to be satisfied.  This begs the question whether the alleged further conditions did exist in the first place.  Given my view that they did not, HKEx’s reference to all other conditions (if any) cannot create conditions which did not exist in the first place.

183.  Fifth, it is difficult to see how the alleged HKEx Conditions were breached.  Conditions (1) and (2) seem out of the picture given that D no longer pursues the issue of insider dealing.  Condition (3) hardly assists because, on the evidence, P had rendered genuine valuable services to D (and whether P’s services have fallen short of contractual requirement is a different issue relevant to alleged breach of contract).  Condition (4) is also a non-starter given the specific approval given by shareholders in the EGM on 24 August 2015.

E2.5  Issue 2.3: P’s satisfactory performance of services provided under the Agreements

184.  D argues that its obligation to grant the Option was also conditional upon P’s satisfactory performance of services under the Agreements.  Again this has no merits.

185.  First, this is flatly contradicted by the express terms of the Agreements.  There was simply no such condition.  To the contrary, the Agreement provides that the grant of the Option was irrevocable.

186.  Second, such condition is unworkable and contrary to the plain intent of the Agreements.

187.  The Agreements are for a term of 3 years.  However, the condition on market capitalisation can take place at any time during such term.  Clause 2.1(I)(ii)(C) requires the 1^st and 2^nd batches of the Option to be exercised within 6 months of the relevant market cap condition being satisfied.  This may be (as it was in the present facts) before completion of the 3-year term of service of the Agreements.  If one were to wait until 3 years are over to ascertain, e.g., whether P has provided satisfactory services, the exercise period would have already lapsed, there would be no point to grant the Option, and P would be left with no Option, no Option Shares, and no remuneration.

188.  Alternatively, if the Options are granted during the 3-year term and P chooses to exercise the same, D even on its case could not rely on any subsequent unsatisfactory performance to claw back the Options.  Yet, on D’s argument, there is no logical reason why the grant of the Options should be linked to satisfactory performance up to the time of grant of Option or crystallisation of the condition of market capitalisation but not thereafter, if D’s point is that the grant of the Options is conditional upon P’s satisfactory performance in a 3-year term.

189.  Either way, D’s argument is plainly contrary to the parties’ objective intention under the Agreements.  In particular, it contradicts Clause 2.1(I)(ii)(E) which obliges D to grant the Option to P or P’s nominee within 3 months (and not any time thereafter, let alone the end of the 3-year term).  In truth, this is nothing but a misconceived attempt by D to elevate a term of contract into a contingent event for the grant of the Option, thereby circumventing Clause 6.4.

190.  Third, D argues that the condition is necessary because the Option is granted as remuneration to P for the “entire performance” of P’s obligations under the Agreements.  However, properly analysed, the parties’ agreement is for D to grant the Option in consideration for P’s agreement to provide the services under the Agreements.  It bears emphasis that there are risks to be borne by both sides.  Insofar as P is concerned, it runs the risk of receiving no remuneration if the condition on market capitalisation did not materialise (due to factors beyond P’s control), even though P may have performed diligently and used its best endeavours to assist D.  On the other hand, D runs the risk of having to honour the exercise of the Option, even though P may have performed unsatisfactorily and acted in breach of contract.  In such scenario, D is not without recourse because it can sue P for damages and, in the event of a repudiatory breach, terminate the Agreements.  This is, however, not itself a reason to rewrite the parties’ bargain on the Option which, as analysed, embodied consensual risk-taking by both sides.

191.  Fourth, even if there were to be any such condition, it seems untenable to suggest that D can refuse to grant the Option whenever there is unsatisfactory performance, even if this only amounts to a breach sounding in damages but not a repudiatory breach entitling D to terminate.  The Agreements stipulate various services to be provided by P and it does not accord with commercial common sense to suggest that, as long as there is a breach of any provision (irrespective of its seriousness or materiality), that would deprive P of the grant of the Option, which represents the entirety of P’s bargains.

192.  Hence, even assuming that P’s performance is somehow relevant, the matter should at most be approached, not by posing the question whether P had performed satisfactorily, but by inquiring whether P had committed a repudiatory breach of the Agreements, which repudiation was accepted by D so that the Agreements were validly terminated before any Option was granted.  It is clear from the arguments advanced by D that it is primarily relying on alleged unsatisfactory performance in breach of contract, without seriously contending that it amounts to a repudiatory breach.  As such, D can at most rely on the alleged unsatisfactory performance in its counterclaim (which I will consider further below), but not as a defence to P’s claim on the Option.

E2.5.6  Issue 2.5: HKEx’s approval of Grant or Issue of Option by HKEx / Permission to deal in the Option

193.  D also alleges as a condition that it must have applied for “and/or” HKEx must have granted permission to deal in the Option.

194.  However, the terms of the Agreements did not condition the grant upon HKEx’s approval.  The Supplement Agreement only referred to shareholders’ approval of the Agreement and no objection from HKEx.  D does not suggest that HKEx has objected to the grant or the exercise of the Option.

195.  Having said that, P’s expert, Dr Ngai, accepted that Rule 15.02 of the Listing Rules applies to unlisted warrants (including options) and hence HKEx’s approval is required before the grant or issue of the Option.  As such, it may be argued that such approval is required as a matter of law.  The issue then is whether such approval was given by HKEx.  It appears to me that D characterizes such approval as permission to deal in the Option.

196.  Whilst Rule 15.02 does require approval, it does not mean that separate or standalone approval has to be obtained, let alone separate or standalone approval letter.  As explained by Dr Ngai, there was no stipulated procedure to apply for such approval, and there was no specified form to be lodged either (cf. Form C1 for the listing of and permission to deal in the shares to be issued on the exercise of the Option).  On the evidence, I am satisfied that such approval was granted.

197.  First, by pre-vetting the Circular and allowing D to issue it to seek shareholders’ approval for the grant of the Option, HKEx in effect gave its approval for the grant of the Option.  At the very least, HKEx gave in principle approval for the grant of the Option, subject to obtaining such shareholders’ approval.

198.  Second, as HKEx gave listing approval of the new shares to be issued upon exercise of the Option, HKEx could not have given such listing approval without having approved the grant of the Option in the first place. The issue of new shares upon exercise of the Option, for which listing approval was granted, presupposed the grant of the Option.  So this is either the necessary basis of HKEx’s listing approval, or is implicit from HKEx granting the listing approval.

199.  Third, D’s expert, Mr Charles Li, accepts that the HKEx has granted in principle approval for the grant of the Option, as well as the issue of new shares upon exercise of the Option.  What Mr Li seeks to emphasise, however, is that even after such in-principle approval was granted, the HKEx is not powerless and still retains residual power to scrutinize and intervene if necessary.  Even assuming this is the case, it is not mutually exclusive with (i) the HKEx having already approved the grant of Option and granted listing approval, and (ii) such approvals remaining extant unless and until revoked or set aside by the HKEx due to any subsequent intervention.

200.  In my view, the Court has to approach the matter with practicalities and common sense.  It is clear that there was a vetting process and in the present case, such process has been duly completed.  It would be highly artificial to suggest that, although such vetting process was done, there was somehow outstanding approval which the HKEx could or would only grant at an unknown time in future.  This does not make much practical commercial sense.

201.  Fourth, under the Agreements, the Option should be granted to P or P’s nominees within 3 months.  It is plain that this is an obligation imposed on D.  Specifically, under the Agreements, the burden rests on D to obtain the necessary approval from the HKEx.  Insofar as there were any failure to obtain the requisite approval from the HKEx, D would be acting in breach. Hence, to the extent that D has not obtained such approval within 3 months (through no fault on P’s part), it seems to me not open to D to rely on its own failure to set up a plea against P’s claim for specific performance or damages under the Option.  This is in accordance with the well-established principle against allowing a person to benefit from his own wrong.

E2.5.7  Issue 2.6: Subsistence (or non-termination) of the Agreements

202.  D further says it is a pre-condition to the grant of the Option that the Agreements had not been terminated.  Again, there are no merits.

203.  First, the Agreements contain no such condition.  To the contrary, Clause 6.4 of the Agreement expressly provides that the Option is irrevocable regardless of the early termination of the Agreement.

204.  Second, as mentioned, D is primarily relying on alleged unsatisfactory performance in breach of contract, without seriously contending that it amounts to a repudiatory breach entitling D to terminate. Therefore, such condition is immaterial on the facts in any event.

E3.    Issue 3: Whether P is entitled to exercise the Option on 15 June 2005 (for the 1^st Batch) and 4 October 2017 (for the 2^nd Batch).

E3.1  Satisfaction of conditions to exercise

205.  Subject to other conditions alleged by D, there should be little doubt that the 1^st and 2^nd batches of the Option are exercisable.  Indeed, as stated in the Agreed list of issues, “there is no dispute that the First Batch and Second Batch Conditions have been satisfied”.

E3.2  Other alleged conditions

206.  D contends that P’s right to exercise the Option is further dependent on (a) P’s satisfactory performance under the Agreements, and (b) subsistence (no non-termination) of the Agreements.  As mentioned, D no longer pursues the insider dealing issue.

207.  D already alleges these as further conditions for the grant of the Option.  It is difficult to see how D could re-argue the matter under the guise of exercise of the Option. Inasmuch as the grant of Option does not depend on other alleged further conditions, this is a fortiori the case for the exercise of the Option.  As expressly provided under Clause 6.4 of the Agreement, the Option is irrevocable once it was granted.

E4.    Issue 4: Whether D is obligated to issue and allot the Option Shares to P

208.  In the premises, I conclude that D is obligated to issue and allot the Option Shares to P.  D is prima facie entitled to specific performance of the Agreements and damages in lieu of and/or in addition to specific performance.

E5.    Issue 5: What is the proper relief to be granted and/or quantum of damages to be awarded to P

209.  In the course of trial, Mr Li SC for P informed the court that P has made an election in favour of damages instead of specific performance.  P’s entitlement to make such election before judgment is not disputed by D.

210.  Nevertheless, D takes issue as to whether P can claim substantial damages based on P’s pleaded case.  As mentioned above, I had some concern initially whether it is open to P to claim substantial damages which are not expressly spelled out in the RASOC.  I am also aware of the 2021 and 2022 Decisions which disallowed P’s attempts to introduce new evidence or pleadings on the relief of damages.  However, this should not preclude P from arguing its case based on the existing pleadings and evidence.

E5.1  P’s case on damages

211.  P’s case is relatively straightforward.

212.  The market cap conditions of 1^st and 2^nd batches of the Option were satisfied by 17 June 2016 and 4 October 2017 respectively.

213.  On P’s case, it was entitled to and did exercise the 1^st batch of the Option on 5 October and the 2^nd batch on 21 November 2017.  D breached the Agreements in refusing P’s exercise and refusing to allot and issue shares to P for the 1^st batch on 11 October 2016 and for the 2^nd batch on 21 November 2017.

214.  According to the RASOC §32, P’s pleaded loss was that “it has been deprived of the 17,500,000 Option Shares at the exercise price of HK$4 each (now equivalent to 35,000,000 ordinary shares) in the Defendant”.

215.  P accepts that there was an available substitute market for shares in D, and that P had a duty to mitigate.  In particular, P accepts what Lisa Wong J pointed out at §7 of the 2021 Decision: - “There is certainly no suggestion that the plaintiff could not, for any reason, have acquired the requisite number of shares in the defendant in the open market.”  P contends that, where one party could and should take steps to mitigate the other party’s breach at the date of breach, damages, including damages in lieu of specific performance, are assessed as at that date: Johnson v Agnew [1980] AC 367 at 401C; Chitty on Contracts, 34^th ed., §30-104; Semelhago v Paramadevan[1996] 2 SCR 415 at §§11-13.

216.  Assessing damages as at the dates of the breaches, P contends that its loss and damage was (a) the number of Option Shares which D wrongfully refused to allot and issue it (7,000,000 for the 1^st batch and 10,500,000 for the 2^nd batch), times (b) the difference between the market price of the shares at the respective date of breach (HK$6.86 and HK$8.84) and the contracted exercise price (HK$4).  This gives a figure of HK$70,840,000.

217.  It is true that P does not plead such figure in the RASOC.  That said, such figure can be derived based on existing evidence of stock price of D, which is before the court.

E5.2  D’s case on damages

218.  D opposes P’s claim for substantial damages.

219.  First, D contends that, as matters stand (in view of §32 and Relief (1) to the RASOC), P’s claim is for specific performance of the Agreement by the allotment of 17.5 million shares in D at the exercise price of $4 (or 35 million shares in D at the exercise price of $2 after the share splitting).   D confirms that, if the Court finds liability to have been established, D shall specifically perform the Agreement and issue 35,000,000 ordinary shares in D (or the number of shares the Court deems appropriate) to P at the exercise price of $2.  That should adequately address the primary relief of specific performance sought by P, and the damage pleaded in P’s RASOC would be made good by such performance. 

220.  In particular, D relied on the dicta of DHCJ Au (as Au JA then was) in Zhang Jianhe v Citic 21 CN Company Limited, HCA 1968/2006 (23 June 2009) at §71 that “damages will be assessed on the basis of his minimum legal obligation, that is, on the alternative which would have been least onerous, or most beneficial to the contract breaker.”

221.  D’s stance is not surprising, because it is common ground that the shares in D are currently trading substantially below the exercise price (whether at HK$4 or HK$2).  As such, D would indeed profit by performing the Agreement or, as D put it, P has in fact avoided a loss by not having been allotted the Option Shares now.

222.  Be that as it may, D’s argument can be quickly disposed of.  It is trite that a plaintiff is entitled to “proceed by action for the … remedies (viz. specific performance or damages) in the alternative.  At the trial he will however have to elect which remedy to pursue”: Johnson v Agnew (supra) at 392G; see also Tang Man Sit v Capricious Investments [1996] AC 514 at 521D-F.  The fact that RASOC §30 remains as is does not prevent P from making such election (as it did).  Nor does it prevent the court from ordering damages after such election.  In any case, given that D accepts that P is entitled to make an election for damages instead of specific performance, it is not an answer for D to say it is prepared to perform the Agreement if D fails on the issue of liability.  The election is a choice for P, not D.

223.  D also relies on the above argument to suggest that, if damages in lieu of specific performance should be awarded to P, no damages are payable to P given that the shares in D are currently trading substantially below the exercise price.  Whether this is the case goes to the date of assessment of damages (which I will consider further).

224.  Second, D contends that P fails to properly plead quantification of damages including in particular the date of assessment and the share price at such date, and is only entitled to nominal damages.  D argues that any special damage must be pleaded and particularized, without which no recovery would be allowed, or only nominal damages could be recovered (Hong Kong Civil Procedure (2022) Vol 1, §18/12/44; Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd[1951] 1 All ER 873 at 875; Atelier Engineering Limited v Hong Kong Interior Design & Engineering Company Limited [2021] HKCFI 1526at §45).

225.  D contends that P cannot sidestep this difficulty in lack of pleadings by relying on the “normal rule” that damages are to be assessed at the time of breach by taking the difference between the market price and contract price, as it is only a prima facie rule subject to the fact-specific arguments that the parties may raise as to (1) the proper time for assessment of damages and (2) whether the “general rule” is applicable.  D further argues that, had P properly pleaded its case, D would have been entitled to invite the court to assess damages in a way similar to that adopted by DHCJ Au in Zhang Jianhe (supra) and require P to prove that it had the necessary financial means to purchase the Option Shares.

E5.3  Analysis

226.  Having considered the respective arguments from both sides, I am of the view that P is entitled to claim damages in the amount of HK$70,840,000 based on the normal measure of assessing damages at the time of breach by taking the difference between the market price and contract price.  I will set out my reasoning below.

227.  First, the crux of the arguments boils down to whether the present claim of damages by P would result in any surprise or prejudice to D, such that it is unfair and unjust to allow P to pursue the same.  As I see it, the very nature of the Option Shares, being publicly traded shares of a listed company, has 2 necessary implications: - (i) P cannot claim special damage above and beyond the normal measure of assessing damages (e.g. profit in selling the Option Shares after acquiring and holding them for some time) and (ii) P cannot obtain the relief of specific performance.  The corollary of these is that P can only claim normal measure of damages, which should not be a surprise to D.

228.  Indeed, both implications were set out by Lisa Wong J in the 2021 Decision at §§7-8:

“7. The ultimate subject matter of those agreements were shares in the defendant. The defendant is a listed company. Its shares are freely traded at, and can at all material times be purchased through, the Hong Kong Stock Exchange Limited. There is certainly no suggestion that the plaintiff could not, for any reason, have acquired the requisite number of shares in the defendant in the open market. Indeed, the historical statistics disclosed by the parties show the active trading of this share in substantial quantity at the material times. It is trite that specific performance is not to be granted where damages is an adequate remedy. It is therefore generally not available to compel an allotment or sale of publicly-listed shares as the plaintiff in the instant case seeks to do.

8.     The true and correct analysis should be that upon the defendant’s successive breaches of the subject agreements on 11 October 2016 and 21 November 2017, the plaintiff came under a duty to mitigate its loss and damage.  The most obvious way of mitigation would be to immediately acquire the same number of shares in the defendant under each of the First Batch Option and Second Batch Option in the open market.  The plaintiff would suffer loss only if the replacement shares should cost more than the option price of $4.  And the plaintiff’s loss is just the difference between $4 and the price at which it bought or should have bought the replacement shares.  What the plaintiff should not have done at the defendant’s expense was to sit back and theorise about the profit that it would have made if it had been allotted the subject shares and then sold them within 6 months to 2 years at a price much higher than the option price of $4 when the market was rising. In any event, even assuming that there had been such a condition, D would still have to plead and prove in due cause the breach thereof.  It is in this regard where D seeks to rely on the Insider Dealing Defence.” [Emphasis added]

229.  What Lisa Wong J disallowed under the 2021 Decision is P’s attempt to put in a supplemental statement of Mr Guo to say that P would have held onto the Option Shares for a while and to claim for more than the normal measure of damages.  This was refused on the basis that the Option Shares are publicly-listed shares, and P should have mitigated its loss by immediately acquiring such shares in the open market and claim difference between the contract price and market price, but not any further profit or indeed specific performance.  Hence, what P claims now is indeed what one would expect P to have claimed as a matter of law.  It is difficult to see how such claim results in any surprise or prejudice to D.

230.  Second, the above analysis is borne out by authorities on the measure of damages.

231.  The normal measure for non-delivery of shares in breach of contract is market price of the shares less contract price on date of breach, being the contractual time for delivery: McGregor on Damages, 21^st ed, §29-003; Chitty on Contracts, §30-025 (in line with 2021 Decision §8).  The formula is well recognised and applied in law.  As the learned editors of McGregor state at §29-003:

“The normal measure of damages is the market price of the shares at the contractual time for delivery less the contract price. This represents the amount required to put the buyer in the position they would have been in had the contract been carried out, since to do so they must buy equivalent shares in the market.”

232.  This measure of damage fits with the requirement of mitigation.  Where one party could and should take steps to mitigate the other party’s breach at the date of breach, damages, including damages in lieu of specific performance, are assessed as at that date, and hence P is deemed to have mitigated its loss by buying substitute shares at the date of breach: Chitty§30-104; Johnson v Agnew(supra) at 401C; Semelhago(supra) at §11-13.

233.  Whether the market price goes up or down subsequent to the breach becomes irrelevant.  The wrongdoer is not liable for “any subsequent market movement”.  The “speculation which way the market will go is the speculation of the claimant”: Bunge SA v Nidera BV [2015] UKSC 43; [2015] 3 All ER 1082 at §80. 
 This is in line with Lisa Wong J’s decision to disallow P’s application to adduce further evidence to claim profit on the basis of holding onto the shares for 6 months to 2 years (being subsequent market movement for which D is not responsible for).  As Lord Toulson observed in Bunge(supra) at §§79-80:

“[79] The rationale is that in such a situation that measure represents the loss which may fairly and reasonably be considered as arising naturally, ie according
to the ordinary course of things, from the breach of contract (Hadley v Baxendale). It is fair and reasonable because it reflects the wrong for which the guilty party has been responsible and the resulting financial disadvantage to the innocent party at the date of the breach. The guilty party has been responsible for depriving the innocent party of the benefit of performance under the original contract (and is simultaneously released from his own unperformed obligations). The availability of a substitute market enables a market valuation to be made of what the innocent party has lost, and a line thereby to be drawn under the transaction.

[80] Whether the innocent party thereafter in fact enters into a substitute contract is a separate matter. He has, in effect, a second choice whether to enter the market—similar to the choice which first existed at the time of the original contract, but at the new rate prevailing (the difference being the basis of the normal measure of damages). The option to re-enter or stay out of the market arises from the breach, but it does not follow that there is a causal connection between the breach and his decision whether to re-enter or to stay out of the market, so as to make the guilty party responsible for that decision and its consequences. The guilty party is not liable to the innocent party for the adverse effect of market changes after the innocent party has had a free choice whether to re-enter the market, nor is the innocent party required to give credit to the guilty party for any subsequent market movement in favour of the innocent party. The speculation which way the market will go is the speculation of the claimant.” [Emphasis added]

234.  A reasonable person in P’s position could have mitigated its loss on the dates of D’s breaches of contract by entering into substitute/ replacement contracts, i.e., by purchasing shares in the open market.

235.  It does not matter whether P in fact did do.  The Court assess damages by reference to what a reasonable person would have done.  It is well recognised that the so-called duty to mitigate is not a duty in the sense that the innocent party owes an obligation to the guilty party to do so; rather, it is an aspect of the principle of causation that the contract breaker will not be held to have caused loss which the claimant could reasonably have avoided: Bunge(supra) at §81.

236.  Viewed in such light, P’s formulation of damages in in line with well-established authorities, having regard to the undisputed nature of the Option Shares as publicly-listed shares.

237.  Third,§32 of the RASOC pleads the loss and damage suffered by P, i.e., the deprivation of Option Shares at the exercise price of HK$4 each.  The Option Shares are not, in and of themselves, loss and damage, because P would have to pay the exercise price of HK$4.  Viewed in context, the loss and damage suffered by P is the deprivation of the right to buy, at the exercise price of HK$4, shares which were then trading at different market price.

238.  Although the RASOC does not expressly plead such market price, the RASOC has pleaded D’s denial (and hence breach) of exercise of the 1^st and 2^nd batches of the Option on 11 October 2016 and 21 November 2017.  Whilst not entirely satisfactory, it seems to me that a reasonable reader should have understood, in context, that P is claiming loss by reference to the amount of the difference between the market value on those dates (which can be readily ascertained from evidence before the court) and the exercise price of the Option Shares.

239.  To suggest that P should recover nominal damages simply because it fails to expressly plead the market value of the shares as at the date of breach, would seem to give D a windfall when, on an objective basis, the premise (albeit not the figure) of P’s claim has been pleaded.

240.  Fourth, D contends that “special damages” must be specifically pleaded.  However, as submitted by Mr Li SC, what P now claims is not special damages, which refer to “damage of a kind which is not the necessary and immediate consequence of the wrongful act”, such that the plaintiff claiming it “ought to give warning in his pleadings in order that there may be no surprise at the trial”: McGregor at §51-020. Instead, P’s present claim for damages is based on the normal measure of damages, which is a necessary and immediate consequence of the breach.

241.  Fifth, D initially prays in aid the dicta of Lord Millett NPJ in Lau Suk Ching Peggy v Ma Hing Lam (2010) 13 HKCFAR 226 at §61 that “although the general rule was that damages for breach of contract are assessed as at the date of breach, where a party brings an action for specific performance but elects (or is forced to elect) for damages they should be assessed at the date when the contract was lost”, and suggests that damages should be assessed at the date on which P accepted D’s repudiation, as the date when the contract was “lost”.

242.  However, as I have intimated to Mr Ko in the course of his oral closing submissions, the position in Lau Suk Ching is rather different because the court was concerned with a flat in that case, and in general a real property is regarded as a unique property which justifies the grant of specific performance (unlike publicly-listed shares, which are not unique).  Not surprisingly, on the basis that the plaintiff was entitled to specific performance (see the observations of Lord Millett NPJ at §64) but the circumstances were such that specific performance could no longer be ordered (such circumstances being the sale of the flat by the defendant vendors shortly before the hearing in the Court of Appeal, such that the plaintiff was left with no choice but to accept repudiation), the court considered it open to the plaintiff to claim damages assessed at the date of sale of the real property (being more favourable to the plaintiff due to rising price, and reflecting the plaintiff’s entitlement to specific performance) as opposed to the date of breach.  This has no application to the present case.  As explained above, the nature of the Option Shares is such that P would not be entitled to the relief of specific performance. Mr Ko for D fairly accepted and acknowledged such difference.

243.  Further, as submitted by Mr Li SC, in claiming for specific performance, P affirmed the Agreement – in the sense that it waived the right to terminate further performance (or, as Lord Millett NPJ put it in Lau Suk Ching at §60, P had not accepted D’s original repudiation).  It did not waive the original breach itself.  It certainly did not waive its right to damages for the breach: Chitty on Contracts, 34^th ed., at §§27-060, 27-062, and 27-063.  D’s breaches occurred when it denied P’s exercises of the Option.  P never waived those breaches or the right to damages for them.

244.  The dicta in Lau Suk Ching(supra) at §61 about assessing damages as at the date when the contract was “lost” is based on Johnson v Agnew (supra).  The latter actually held that there is no invariable or absolute rule as to the date of assessment: see One Step (Support) Ltd v Morris-Garner [2019] AC 649 at §47.

245.  As the English Court of Appeal explains in Homsy v Murphy(1997) 73 P&CR 26 at 39, a contract is not “lost” only when P accepts D’s repudiation; it all depends on what P ought to have reasonably done in the circumstances. Ultimately, the court is guided by what is just and fair in fixing the date of assessment: Johnson v Agnew (supra) at 400G, 400H-401A; One Step (Support)(supra)at §47.

246.  In the circumstances, I accept the submission of Mr Li SC that, in line with well-established authorities, as P ought reasonably to mitigate its loss at the time of the breaches, justice and fairness require assessment of damages as at the dates of breaches.  This is also consistent with the reasoning of Lisa Wong J in §8 of the 2021 Decision.

247.  Sixth, D’s reliance on Zhang Jianhe(supra) does not assist.  I note at the outset that it is not D’s case that damages should be assessed based on how much profit P would have expected to earn after acquiring the Option Shares and thereafter selling the same (which is however the basis upon which DHCJ Au (as he then was) approached the matter in Zhang Jianhe(supra)).  It is also important to bear in mind that such approach does not accord with well-established authorities on normal measure of damages.

248.  The authority is of little assistance to D anyway because (1) the judge’s discussion on quantum is entirely obiter, having already dismissed the plaintiff’s claim; (2) the discussion on how long it would take the plaintiff there to sell the shares followed from the way the plaintiff pleaded his case, which the defendant adopted and even called expert evidence thereon – an approach agreed between the parties (without the benefit of full legal arguments); (3) the decision should not be read to suggest that the approach taken represents the normal measure of damages.

249.  Seventh, D also relies on Zhang Jianhe (supra)to argue that, had P properly pleaded its case, the burden would be on P to prove its financial means to pay the exercise price for the Option Shares.  This is misconceived because (1) such issue only arises under the approach adopted by the parties in Zhang Jianhe (supra); and (2) as mentioned above, the Court assess damages by reference to what a reasonable person would have done, and the so-called duty to mitigate is not a duty in the sense that the innocent party owes an obligation to the guilty party to do so.  Hence, there is no need for the court to inquire into whether P would (or could) mitigate by acquiring the Option Shares in the open market.  In any event, the indisputable fact is P tendered 2 cheques in full amount of the exercise price, and hence there is no evidential basis to suggest that D is prejudiced by not being afforded an opportunity to explore this issue.

250.  Eighth, whilst there is some attraction in Mr Ko’s argument that the normal measure of damages is merely a prima facie rule subject to the fact-specific arguments that the parties may raise as to (1) the proper time for assessment of damages and (2) whether the “general rule” is applicable, the court has to approach the matter with practicality.  During oral closing submissions, I have asked Mr Ko to substantiate how D was surprised and prejudiced, for instance by identifying issues or alternative bases of measure of damages which could have been raised by D, had P properly pleaded its case. However, Mr Ko has not pointed to any substantive issue or alternative bases or dates of assessment of damages, other than those based on Lau Suk Ching (supra) and Zhang Jianhe (supra) above.  In any case, any such alternative bases or dates of assessment of damages would not be relevant to a property which is not unique and for which there is an available substitute market.

251.  I note further that, when D opposed P’s application for amendment of RASOC, D argued that it would want to respond in its pleading that P had failed to mitigate by acquiring replacement shares “from the market after the alleged breach” and to challenge P on “why it was reasonable not to have purchased the shares from the market”. However, as submitted by Mr Li SC, such a response would be irrelevant.  The normal measure of damages already requires P to mitigate and assesses P’s loss on the basis that P did mitigate.  Whether P in fact did so is immaterial: Bunge(supra) at §81.


252.  For the avoidance of doubt, whilst the matter should be approached with practicality, I do not find favour with the submission of Mr Li SC that D cannot complain of any surprise, on the basis of D’s internal calculation in Derek Lau’s 30 May Email, P’s election for damages based on the normal measure during the hearing for summary judgment before Master J Wong on 27 October 2017, and D’s own skeleton for the hearing on security for costs before this Court (then sitting as Master).  In my view, those documents are at best inconclusive.  In particular: (1) a counterparty’s view in a pre-litigation document (such as the 30 May Email) can hardly be relied upon to dispense with proper pleadings; (2) P’s election during the summary judgment hearing preceded the exercise of 2^nd batch of the Option (hence confined to the 1^st batch of the Option) and P still sought specific performance for both batches thereafter (until trial); and (3) D’s own skeleton referring to damages of HK$70 million means that D was aware of this as a potential quantum – it remains necessary to consider whether, realistically, there are other issues or alternative bases of measure of damages (such that any alleged failure to plead quantification may give rise to genuine surprise and prejudice).

253.  Further, I have some reservation on the submission of Mr Li SC, in reliance of UTB v Sheffield United & Ors[2019] EWHC 2322 (Ch) at §492, that even if P had not particularised its claim for damages in lieu of specific performance, the Court should not leave the claimant with no remedy.  Whilst the decision suggests that the court has jurisdiction to award damages in lieu of specific performance where damages are not expressly claimed, this is not exactly the issue here.  There is no dispute that the court has jurisdiction to award damages, but the issue is whether P has sufficiently particularised its claim for damages, and whether such failure (if any) caused surprise and prejudice to D, with the result that P could only obtain the relief (or remedy) of nominal damages.

254.  Last but not least, I fully take note of the fact that Lisa Wong J has disallowed P’s proposed amendments to the RASOC in her 2022 Decision.  However, Lisa Wong J has not handed down reasons for such decision.  It may well be the case that she considered that, if the proposed amendments were material, they should not be allowed at a late stage; alternatively if the proposed amendments were immaterial, then they are not strictly necessary anyway.  Either way, it remains necessary for the court to consider the existing pleadings and relevant authorities, as canvassed above.  In the circumstances, I do not think the 2022 Decision itself should preclude P from claiming the damages now sought by it.

255.  In all, I am of the view that P is entitled to claim damages in the amount of HK$70,840,000, assessed as at the dates of breach of contract by D, in accordance with the normal measure of damages.

E6.    Issue 6: D’s Counterclaim for Misrepresentation

E6.1  Misrepresentation as counterclaim, not defence

256.  In the course of his oral opening submissions, Mr Ko for D has confirmed that D is not relying on misrepresentation as a defence to P’s claim; nor does D seek rescission of the Agreements as a result.  Instead, D relies on alleged misrepresentation by way of counterclaim.  Mr Ko fairly accepts that he is bound by D’s pleadings.  As I have pointed out to Mr Ko, observations on the plea of misrepresentation were made by Keith Yeung J in the 2019 Decision at §32.  Since then, D has not taken any step to amend its pleadings to address such point.

257.  D’s Closing further clarifies that it was not D’s case that the alleged misrepresentation was part of the Agreement terms.  In particular, D makes it clear that, had that been P’s contractual duty under the Agreements, then D’s complaint would be in the form of breach of contract, but not misrepresentation.  In other words, D is not counterclaiming P for damages for breach of contract.

E6.2  Whether there was (actionable) misrepresentation

258.  D’s case is that P made misrepresentation that P would introduce and had the capability to introduce Mainland investors to D and procure these Mainland investors to make substantial investments in D.

259.  With respect to Mr Ko, I find it difficult to see how such claim could prevail, both as a matter of logic and on the facts of the present case.

260.  First and foremost, the alleged misrepresentation is repugnant to the terms of the Agreements.

261.  It is common ground that P was engaged by D to provide investor relations services to D.  As expressly set out in the recital of the Agreement, P was engaged as D’s investor relations consultant in Mainland China (“甲方聘請乙方爲甲方在中國内地…的投資者關係顧問”).  Indeed, Mr Ko for D has put to P’s witnesses that P was retained by D to provide services on investors relations.

262.  The obvious point is that the Agreements made no reference whatsoever to the alleged misrepresentation.  Had the alleged misrepresentation been made, there is no reason why D would not have insisted on incorporating it as a term of the services to be provided by P.

263.  Importantly, the terms of the Agreements inform us as to the nature of the services to be provided by P.  Clause 1 of the Agreement set out the professional services which P undertook to provide to D, under 3 categories, namely (1) investor relations related work (“投資者關係工作”); (2) media relations related works (“媒體關係工作”); and (3) A-share securities firms financial public relations services (“A股券商財經公關服務”).  None of these encompass the alleged misrepresentation.  To the contrary, they all concern public relations works.

264.  The nature of the agreed contractual services provided by P to D is relevant and critical in two aspects: (1) the likelihood of the alleged misrepresentation being made; and (2) how the alleged misrepresentation (if any) should be understood in context.  In view of the express terms of the Agreements, D could hardly turn around and claim that P was somehow engaged to introduce, in the sense of successfully introducing, investors from the Mainland.  Putting the matter in context, the most that can be said is that P was engaged to provide investors relations services on Mainland investors, with a view to attracting them to invest in D, but that would not constitute any representation or promise of the end result or outcome.  These would include organising roadshows, providing public relations services, etc which are indeed the tasks specified under the Agreements.

265.  Second, D’s claim of misrepresentation is rather vague.  It is not suggested by D that P has made representations or promises as to (1) how many Mainland investors are to be introduced; (2) the amount of the investments to be introduced; and (3) the timeframe within which this must be done.  As such, it is difficult to see how any alleged misrepresentation can be said to be clear, or that there was reliance by D.

266.  Third, the alleged representation is contradicted by D’s own statements to HKEx, its shareholders, and the public.  As D repeated stated, there was no other arrangements between the parties, P’s services to D were as stated in the Agreement, and that the Option was not granted for any other reason.

267.  Fourth, in 2016 when D instructed its then solicitors MinterEllison to purportedly accept P’s repudiation of the Agreement, nothing was mentioned about such alleged misrepresentation.  If, as now alleged, this was the fundamental basis on which D engaged P, it is to say the least surprising that no mention whatsoever was made of it, particularly after the parties’ relationship had turned sour and after D has had the benefit of legal representation.

268.  Fifth, the alleged misrepresentation is not borne out by contemporaneous documents.

269.  According to Mr Jen’s evidence in cross-examination, this alleged representation was the foundation of D’s cooperation with P.  Every time the parties met, the same was emphasised and P would confirm.  Without this alleged representation, the cooperation would be meaningless.

270.  This begs the question why the representation was never inserted into the Agreement (including the various drafts thereof) despite the many rounds of negotiations and revisions on 22 April 2015, 29 April 2015, 15 May 2015 and 16 May 2015.

271.  It is telling how each of Mr Jen, Ms Zhang and Mr Li shift responsibility as to who was negotiating, reviewing, and revising the Agreement (as canvassed above).  No doubt they all knew that, on D’s case, whoever was responsible for the Agreement would have to answer the difficult question of why an alleged material representation was never reflected in the Agreement or in writing.  There is no answer.  None of D’s witnesses wanted to own up to it.  All these cast grave doubt on the credibility of D’s witnesses on the alleged misrepresentation.

272.  Not even Mr Jen’s own diary notes, which he claims to have taken contemporaneously to help him remember the key points, contained any reference to the alleged representation.  Instead, Mr Jen stated in his diary that Mr Guo mentioned that they could promote D to media and funds in the Mainland (“他們說可以推廣楓葉給國內媒體和基金公司”), which is miles away from the alleged representation.

273.  In a similar vein, Mr Wen wrote in his email to Mr Jen on 29 April 2015, stating that “智信和我聯手，從投資者關係管理，財經媒體管理，戰略優化，有節奏而有效的並購及重組等各方面來幫助楓葉更上一層樓，盡快成為一家名副其實的教育巨頭”.  There was no mention at all of introducing investors.  As he confirmed under cross examination, what he wrote meant that if P was to help D attract investors, it would do so through its IR and media relations work.

274.  Sixth, D’s Closing relies heavily on the statement “智信的服務主要是在此階段引入國內的機構投資者” in topic no.6 in Mr Wen’s email of 15 May 2015.  In my view, this does not assist D.

(a)  The statement is not the misrepresentation pleaded by D.

(b)  Topic no.6 was a query from D’s side, which should be quoted in full: “智信的服務主要是在此階段引入國內的機構投資者，以國內A股市場的泡沫未來推高後回落，以及國內投資者的投資風格是否未來讓楓葉的股價大起大落？有什麼保障能讓楓葉的市值能穩定在100億以上?” No part of the question was any representation from Guo.  The most that can be said is that the topic was raised, but it is not direct evidence that Mr Guo of P has made promise to such effect. 

(c)  As Mr Wen confirmed under cross examination, the gist of the topic and question was a concern about fluctuation of share price.  In response, Mr Wen explained inter alia that, “我們的服務是在挖掘並合理傳播楓葉實際應有的公司價值”.   This underscores that P’s (and DXH’s) role was to help D promote its value (which may attract investors), as opposed to undertaking to introduce investors successfully.

(d)  D placed a lot of emphasis on the words “引入” in the email.  However, the words must be understood against the proper context.  It must be clear to both sides that P was proposed to be engaged to provide IR and media relation services.  This was indeed what was expressly provided in the terms of the draft contract.  Having regard to such terms and the nature of the services to be provided by P, the words should properly be understood as a reference to the goal which the parties hoped to achieve, i.e. attracting or introducing Mainland investors, via the provision of IR and media relations services by P.  They do not, without more, impose an obligation on P to guarantee the successful introduction of Mainland investors.

275.  Seventh, putting D’s case to its highest, as Mr Wen said during cross-examination (as D’s witness), there was a difference in expectation in that Mr Jen may have expected P’s help to include successfully bringing in investors, but Mr Guo did not actually make such a promise.  Mr Wen further confirmed that the parties’ final agreement was embodied in the Agreements (without the alleged representation or any commitment to the same effect).  D can hardly base its case of misrepresentation on D’s own expectation, in the absence of any promise or commitment by P.

E6.3  Quantum of damages

276.  D has not adduced any evidence on the quantum of the loss and damage suffered by it as a result of the alleged deceit or misrepresentation by P.  Indeed, there is neither any plea nor any evidence as to (i) the number of Mainland investors, (ii) the total amount of investments, and/or (iii) the relevant timeframe of investments, which P has promised to successfully introduce.  As such, there is simply no basis to properly assess the amount of loss and damage which may be suffered by D. Therefore, it would appear that even if liability can be established, D would only be entitled to nominal damages against P.

277.  In line with the foregoing, D’s Closing also accepts that nominal damages should be granted if the court is with D.

E7.    Issue 7: D’s Counterclaim for Restitution, particularly whether P is liable to make restitution (including any Option granted) to D for unjust enrichment for total failure of consideration / basis, on the basis that P would render satisfactory, complete, lawful and entire performance of P’s obligations under the Agreements

E7.1  Analysis on Restitution

278.  In my view, D’s counterclaim for restitution is, in substance, no different from D’s argument that the grant of the Option was conditional upon the satisfactory performance of P’s services. It is another way of saying that, because of such condition, P’s failure to render satisfactory and complete performance should revert any Option otherwise granted to P.  This is an impermissible attempt to get around Clause 6.4 of the Agreement which provides expressly that the Option, once granted, is irrevocable.

279.  The thrust of D’s argument is that the grant of the Option is subject to full performance by P, that being an “entire obligation”, such that any unsatisfactory performance would disentitle P to the Option.  However, a contract is said to be “entire” when complete performance by one party is a condition precedent to the liability of the other, and in such a contract the consideration is usually a lump sum which is payable only upon complete performance by the other party (hence, the reference is sometimes to a “lump sum contract”): Chitty on Contracts, 34^th ed, §24-026.  In line with my analysis on Issues 1 to 3 above, there is no such condition precedent to the grant or exercise of the Option.  Indeed, the Option is to be granted within 3 months (on an irrevocable basis), and not upon complete performance of services at the end of the 3-year term.

280.  D’s Closing also raises, for the first time, the argument that P has provided incomplete performance, in that P had only performed one year of services out of the 3-year contractual period. D thus contends that P was not entitled to any Options (as it is subject to full performance); alternatively the court may set off D’s counterclaim for the unperformed 2/3 of the Agreements against any damages that may be awarded to P.

281.  The alleged failure by P to perform 2/3 of the Agreements is not properly pleaded by D.  In any case, as explained, there is no “entire obligation”, the Option is to be granted within 3 months, and full performance is not / cannot be condition precedent to the grant or exercise of the Option.

282.  Moreover, as submitted by Mr Li SC, D purported to terminate the Agreement on 27 July 2016, and P had in good faith continued to deliver services at least until September 2016.  D itself by conduct and its continuous breach, represented that it would not require P’s further services.  In this regard, I agree that P can pray in aid the following principles:

“if the innocent party elects to keep the contract alive notwithstanding a prior repudiation by the party in default, then so long as the repudiating party persists in his refusal to perform, he absolves the innocent party from his obligation to perform the contract in accordance with its terms” (Chitty on Contracts, 34^th ed., §27-064)

“The first [exception where innocent party is released from obligation to perform] arises where the party in breach has, by words or conduct, represented to the innocent party that he will no longer require performance of a particular obligation under the contract, and the innocent party acts upon that representation.” (Chitty on Contracts, 34^th ed., §27-065)

283.  Once D’s arguments are disposed of, it is clear that D’s claim for restitution must fail.

284.  It is trite that an action for total failure of basis must depend on the failure being total.  If even a very small part of the benefit has been conferred, no action will lie: Goff & Jones: Unjust Enrichment, 9^th ed. at §12-16.

285.  Whatever complaint D now makes about P’s performance of services, it is indisputable that P has provided at least some services.  The bulk of the evidence in the trial bundles are contemporaneous records of what P did for D.  Without going into the details, the sheer volume of work done are beyond dispute.  Moreover, in respect of quantified work to be performed during the year (“年內主要工作量化”), P has reached the performance target at least in the first 3 (out of 4) items. Indeed, Mr Jen conceded in cross-examination that P “certainly did us some work”.  He even accepted that P made some positive contribution, albeit claiming that D’s share price increase was not entirely (or even mostly) because of it.

286.  In the premises, D simply cannot mount a claim in unjust enrichment for total failure of consideration/ basis.

287.  It is significant that D only counterclaims restitution, without seeking any rescission of the Agreements or claiming damages for breach of contract.  As such, given that (1) satisfactory performance is not a condition to the grant of the Option, and (2) there is no valid claim in restitution for unjust enrichment for total failure of consideration, it will be unnecessary to try to analyze what the consequence of any alleged breach may be.  In any case, whether such breach is fundamental enough to entitle D to terminate the Agreement, or whether the breach would only sound in damages, is irrelevant for present purposes: -

(a)     As provided under Clause 6.4, the grant of the Option is irrevocable irrespective of termination of the Agreement.  Whether D may be entitled to accept a repudiatory breach (if any) and terminate the Agreements is neither here nor there.

(b)     D is not even seeking damages for breach of the Agreements.  There is likewise no attempt to identify what loss D has suffered as a result of the alleged breaches or to quantify such loss.

(c)     Insofar as D might suggest that the loss it suffered as a result of these breaches is the grant of the Option, this is wrong as a matter of law.  There is no causal link between the two – it cannot be said that “but for” the breaches, D would not have granted the Option.  The Option had been granted, and D had already assumed obligations therefor, whether or not the alleged breaches took place.

288.  In the circumstances, once it is decided that D is not entitled to claim restitution, it is not strictly necessary to consider whether there is any breach (let alone repudiatory breach) of contract.  Without prejudice to the foregoing, I will consider D’s allegations for completeness.

E7.2  Whether there was (repudiatory) breach

289.  In my view, there are little merits in D’s allegation of unsatisfactory performance.  On balance, I do not find P in breach (let alone repudiatory breach) of the Agreements.

E7.2.1  General Observations

290.  To begin with, I make a few general observations which militate against D’s allegation of unsatisfactory performance of services.

291.  First, D’s allegation does not sit well with contemporaneous documents, and appears to be nothing but an afterthought.

292.  Before P sought to exercise the 1^st batch of the Option in June 2016, D had never indicated any dissatisfaction to P.[18]  The first time there was any written record of such discontent came only after P had complained to HKEx about D’s refusal to issue and allot the Option Shares; and even on such occasion, the complaint is a general one without proper particulars.  In my view, if D were indeed dissatisfied by the performance of P, one would have expected complaints to be made and particularised much earlier.

293.  Yet, there was no such evidence.  To the contrary, there is written record of Mr Jen praising and thanking P for its work: e.g. WeChat message on 4 December 2015 from Mr Jen stating “You have done a lot of work. Maple Leaf does notice that, thank you! Let us keep working hard!”.

294.  Second, many of the instances complained about is that P has not done this or that, as per the scope of services under the Agreements. However, it bears emphasis that the Agreements provide for various scope of work of P, in a contract for a term of 3 years.  The dispute arose between P and D since around June 2016, which was just 1 year after the date of the Agreement.  It does not follow that simply because certain task was not done during the first year it would not be undertaken by P at all.  It would not be correct for D to treat the scope of services as an absolute benchmark and to accuse P of acting in breach whenever there was any item of service not yet provided by P during the first year.  The mere fact that certain services have not yet been provided by the end of the first year does not, without more, amount to a breach.

295.  In any event, if P has not yet undertaken a particular task yet, D could, of course, request for provision of services – it is however not D’s case that it had made such requests and yet P failed or refused to provide services as requested.

296.  Third, D has not seriously suggested that its complaints, if established, constitute repudiatory breach of contract by P.

297.  Fourth, it is at least arguable that by continuing to work with P, D has elected to affirm the Agreements and waive its right to terminate (if there is such a right).  This would be a partial waiver, in that D would have waived its right to terminate but not the right to sue for damages.  Hence D can no longer terminate.  Nor can D claim damages without identifying any loss suffered as a result of the alleged breaches.  For the avoidance of doubt, I note D’s argument that any such waiver should be pleaded.  Given my other reasoning, I do not find it necessary to express any conclusive view on this.

E7.2.2  Scott Schedule and D’s Complaints

298.  There is in the bundles a Scott Schedule setting out the parties’ respective positions on the issue of alleged unsatisfactory performance of services, and also summary tables prepared by P on P’s performance.  Given my views above, it is not necessary to deal with them at length.  For present purposes, I focus on a few major complaints by D.

299.  First, D refers to an incident about its annual results presentation in November 2015, alleging P’s “failure to make arrangements for this important corporate event” and its need to “engage third party organizations … to assist”.  I do not find such complaint substantiated:

(a)     D complains about P’s failure to include the 2015 annual presentation in its quarterly IR plan for September to November 2015 dated 9 September 2015.  However, the quarterly IR plan was not set in stone, and it was open to D to inquire with P on any omission if necessary.

(b)     In any case, P had been making inquiries with D at least a few weeks prior to the event, which was followed up later in Ms Gao Jing’s email on 5 November 2015 (see the reference to “有關之前跟你提及過的2015年度業績發佈會”).  Whether this constitutes P’s remedies (補救) as alluded to by Mr Guo is neither here nor there – the fact is that P did follow up.

(c)     Specifically, P emailed D on 5 November 2015 attaching a proposal dated 3 November 2015.  D replied that it would discuss internally, and did not say whether the event was going ahead.  D did not suggest at the time that P’s proposal was somehow late.

(d)     There is also no objective evidence to suggest that P could not organise the presentation in time. Indeed, D engaged DLK Advisory Ltd (“DLK”) only on 3 November 2015, about 3 weeks before the presentation held on 27 November 2015.

(e)     On 18 November 2015, P received an invitation from DLK for a press conference on D’s annual results.  P checked with D on whether this was genuine.  Instead of complaining about D’s non-performance, D reassured P that DLK was not a public relations company and its engagement was one-off.

(f)     Notwithstanding that DLK was organizing the event, P did its part to assist.

(g)     It would appear that D did not need P’s assistance in Hong Kong.  As Mr Jen explained upon being cross-examined, the annual results presentation in Hong Kong which DLK organized “had nothing to do with [P]” because P was supposed to be “focused on the Mainland market”.

(h)     On the facts, P offered to assist but D elected to engage DLK instead.  This cannot amount to a breach by P.

(i)     In any event, the Agreement refers to 2 Mainland or Hong Kong results announcement (without specifying interim or annual) or shareholders meeting (“協助舉辦2場內地或香港業績發佈會或股東大會”).  Hence, there is no basis to suggest that P must assist in the annual results presentation in November 2015 as opposed to other occasions.

300.  Second, D alleges that P fails to devise a yearly plan in respect of activities for the year (see Clause 1, 1^st table on “投資者關係工作”, 1^st entry (制定全年相關活動計劃)).

301.  D’s complaint is misconceived because such requirement did not mandate the form of a “yearly plan” as alleged.  All that was required was that P should devise plans for relevant activities for the year.  This could equally be done via quarterly plans, which P had compiled consecutively for 4 quarters.

302.  Third, D alleges that P fails to provide promotion plans/proposals which refer to strategies specific to D (as opposed to strategies in general terms).

303.  Such complaint is unwarranted. The plans were, as stated, necessarily preliminary and subject to D’s actual needs to be discussed (“上述工作計劃緊為初步想法，具體工作還需根據貴公司的需求來落實，若有需要修改或者調整的地方，請及時告知我們，非常感謝”).  More importantly, the various works actually done in each quarter by P were, of course, specific to D.

304.  Fourth, D alleges that P fails to send someone to accompany D’s management to attend media interviews (Clause 1, 2^nd table on 媒體關係工作, 1^st entry (乙方會派員陪同公司之管理層進行訪問)); and/or to arrange reporters to accompany field trips by investors/analysts (Clause 1, 1^st table on 投資者關係工作, 4^th entry (根據公司需要，可安排記者同行出考察團，並跟進後續報道)).

305.  Whether P had to (a) send someone to accompany D’s management to attend media interviews or (b) arrange for reporters to accompany field trips by investors/analysts necessarily depended on D’s needs.  This was expressly stated in relation to media interviews (“乙方將視乎甲方的需要”) as well as arranging reporters (“根據公司需要”).  The long and short of it is that D never asked P to send someone and never complained.

306.  Indeed, the only occasion explored by D during cross-examination concerns an interview by Hong Kong Economic Times.  It is however not D’s case that, despite D’s request, P refused to send representative to accompany D.  In any event, P on its own motion arranged for a field trip with Hong Kong Economic Times.

307.  Fifth, D alleges that P fails to assist D with applying for applicable awards (Clause 1, 2^nd table on 媒體關係工作, 8^th entry (各類獎項收集並協助公司申請)).

308.  Yet, as Mr Guo explained, in accordance with practice, P paid attention to whether there were suitable awards for D and would communicate with D.  There were none suitable.  Even if there were, D was not interested in them at the time.

309.  Sixth, D alleges that P fails to build a database of investors and of investment firms and managers for D (Clause 1, 1^st table on 投資者關係工作, 2^nd entry (數據庫)).

310.  Yet, as explained in P’s answer in the Scott Schedule, P did prepare lists, and it was D which was unwilling to allow P access to more information.

311.  All in all, I do not find D’s complaints substantiated.  Moreover, these complaints are blown way out of proportion.  They are subsidiary items amongst the numerous areas of work set out under Clause 1.  To allege unsatisfactory performance by cherry-picking a handful items is to make a mountain out of a molehill.

312.  In these circumstances, I find force in the submission of Mr Li SC that D is simply seeking to renege on the Agreements because it perceived its deal with P to be too favourable to P. Such sentiment is indeed borne out by Derek Lau’s 30 May Email.

F.     CONCLUSION

313.  For the above reasons, I grant judgment in favour of P and order D to pay P damages in the amount of HK$70,840,000 together with interest.  Further, I dismiss D’s counterclaims against P.

314.  I also make a costs order nisi that costs of these proceedings be paid by D to P, with certificate for 2 counsel, to be taxed if not agreed.

315.  It remains for this Court to thank Mr Li SC and Mr Ko (and their respective juniors) for their submissions and assistance rendered to the court.