EVER HERO HOLDINGS LTD v. YAU KWONG CHI KELVIN

HCA758/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 758 OF 2010

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BETWEEN

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J U D G M E N T

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Introduction

1.  On 29 October 2010, Master de Souza granted summary judgment to the plaintiff on its claim in this action for HK$3,000,000 plus interest and costs.

2.  On 8 November 2010, the defendant applied by summons for a stay of execution of the judgment pending the disposal of an appeal by the defendant against the summary judgment.

3.  On 11 November 2010, the defendant issued a notice of appeal against the summary judgment.

4.  On 11 November 2010, Master Lai dismissed the defendant’s summons seeking a stay of execution.

5.  On 23 November 2010, the defendant issued a notice of appeal against the order of Master Lai dismissing his summons for a stay of execution. That notice of appeal seeks an order that “the said order of Master R. Lai be set aside”.

6.  On 23 December 2010, the defendant, who had hitherto been represented by Messrs Chin & Associates, filed a notice to act in person.

7.  This is the hearing of the defendant’s appeals against the summary judgment and against the refusal of a stay of execution. 

8.  Since the stay of execution was sought on the basis of the pending appeal against the summary judgment, it became a redundant application once the appeal came on for hearing before me.  The rationale for the stay application having now been superceded by the coming on of the appeal itself, there is no longer any purpose to be served in the defendant’s appeal against Master Lai’s refusal of a stay.  In any event, the order sought on the notice of appeal against the refusal of a stay, namely the setting aside of Master Lai’s order dismissing the summons for a stay, does not serve any useful purpose. For these reasons, I dismiss the notice of appeal against the order of Master Lai with costs to the plaintiff.

9.  It remains to consider the notice of appeal against the summary judgment entered by Master de Souza.

Adjournment application

10.  At the outset of the hearing before me, the defendant informed me that he intended to make an application for legal aid.  He indicated he had the necessary forms but had not yet actually made the application itself. However, he asked for some time, in effect an adjournment of this hearing, to enable him to make the application for legal aid.

11.  The application for an adjournment was opposed and I dismissed the application.  The defendant was unable to provide a good reason for why he had not made the application earlier.  The obvious time for him to have done so would have been at the same time as filing his notice to act in person or immediately after that time.  The defendant’s explanation that he went to the Mainland on a business trip after 23 December 2010 or that he would need to travel to Canada to obtain information in support of his application for legal aid are not, in my opinion, good reasons for his delay in making the application.

The background facts

12.  The following facts are either common ground or not disputed.

13.  The defendant holds 51% of the shares in a company called PAQ International Holdings Limited (“PAQ Holdings”) which in turn owns all the shares in a company called PAQ Concept Limited (“PAQ Concept”).

14.  PAQ Concept has two joint venture businesses with a company called Fobazo.com Limited (“Fobazo”).  The two joint venture businesses are Fobazo Asia Holdings Limited (“FAHL”) and Fobazo Licensing Holdings Limited (“FLHL”).

15.  The two joint venture businesses exploit the licensing rights of a number of world class football players for the Greater China Region.  The rights are owned by Fobazo which has granted assignments over certain of those rights to FAHL and FLHL.  FAHL holds the rights for events and media, whilst FLHL holds the rights in respect of merchandising goods.

16.  In the latter part of 2009, FAHL began negotiations with a view to Real Madrid Football Club playing three matches in China in 2010 (“the Real Madrid Project”).

17.  The plaintiff was interested in investing in the businesses of FAHL and FLHL and negotiations took place between the plaintiff and the defendant.  The negotiations between the parties took place through the medium of a middleman, Mr Peter Ng. 

18.  By the middle of January 2010, the plaintiff and the defendant had reached broad consensus on three options for cooperation between the parties.  In broad summary, in consideration of the payment of HK$3,000,000 by the plaintiff, PAQ Holdings and the defendant would give the following options to the plaintiff, namely:

(1)   Option 1: in the event FAHL concluded the Real Madrid Project, the plaintiff would pay PAQ Holdings and the defendant an additional HK$28,200,000 and PAQ Concept would sell to the plaintiff all its shares in FAHL and FLHL and the defendant would sell to the plaintiff all its shares in PAQ Holdings;

(2)   Option 2: in the event FAHL was unable to conclude the Real Madrid Project, PAQ Concept would sell to the plaintiff its 3,500 shares in FLHL and its 3,500 shares in FAHL; and

(3)   Option 3: in addition to Option 2, PAQ Concept would grant an option to the plaintiff to purchase from PAQ Concept the remaining 1,600 shares in FLHL and remaining 1,600 shares in FAHL at a price of HK$4,800,000.

19.  On 18 January 2010, the defendant sent three draft agreements to Mr Ng in relation to the proposed investment by the plaintiff and, on 19 January 2010, Mr Ng sent these on to the plaintiff’s solicitors, Messrs Benson Li & Co. (“BLC”).

20.  On 26 January 2010, BLC then sent to Mr Ng and the defendant four draft agreements in respect of the plaintiff’s proposed investment, the first of which was referred to as the Ever Hero and Classic Rich Agreement.

21.  On 4 or 5 February 2010, BLC sent a redrafted set of agreements.  In clause 2.1 of the redrafted Ever Hero and Classic Rich Agreement, it was provided that :

“Upon signing of this Agreement, Ever Hero shall pay the sum of HK$3,000,000 … to [the defendant] and PAQ Concept to acquire and obtain the rights and options as set out in Clauses 3, 4 and 5 below.”

The options in clauses 3, 4 and 5 were the options referred to in paragraph 18 above.

22.  On 5 February 2010, a meeting took place between the plaintiff and the defendant at the offices of BLC.  It was the defendant’s intention to sign the agreements and collect the payment of HK$3,000,000.

23.  However, at that meeting, certain amendments were made to the agreements, which the defendant initialled.  The agreements so amended were not signed and the defendant took them away to show his lawyer.

24.  A cashier order in the sum of HK$3,000,000 was available for the defendant at the meeting on 5 February 2010 upon his signing the agreements as contemplated.  Although the agreements were not signed, the plaintiff agreed to provide the cashier order to the defendant upon his signing a written acknowledgment (“the Acknowledgment”).

25.  The Acknowledgment, which is dated 5 February 2010, reads as follows :

“I, Yau Kwong Chi Kelvin … hereby acknowledge receipt [sic] the above cashier’s order in the sum of HK$3,000,000.00 for payment of the consideration from Ever Hero Holdings Limited under an agreement (attached hereto) to be entered into between me, PAQ Concept Limited, Fobazo Licensing Holdings Limited, Fobazo Asia Holdings Limited, PAQ International Holdings Limited and Ever Hero Holdings Limited regarding the exploitation of the rights over a number of international professional football players and acquisition of shares in Fobazo Licensing Holdings Limited, Fobazo Asia Holdings Limited, PAQ International Holdings Limited.”

26.  The defendant did not sign the agreements but instead, by an email from his solicitors dated 12 February 2010, sent an amended version of the Ever Hero and Classic Rich Agreement.  This version was unacceptable to the plaintiff and was not signed by it.  The agreements remained unsigned.

27.  FAHL did not secure a contract with Real Madrid Football Club and the Real Madrid Project therefore did not materialise.

28.  On 17 May 2010, the plaintiff issued a demand letter for the return of the HK$3,000,000 and, on 26 May 2010, the plaintiff issued its writ in this action claiming the return of that sum plus interest and costs.

The relevant principles

29.  The relevant principles applicable to an application for summary judgment are well‑known.  The case being clearly one within the scope of RHC O.14 and the plaintiff having satisfied the preliminary requirements of the procedure (by service of the statement of claim, O.14 summons and supporting affirmation verifying the facts on which the claim is based and deposing to a belief that there is no defence to the claim), the burden is on the defendant to satisfy the court why judgment should not be given against him.  To do so, the defendant must show that there are triable issues or that there ought for some other reason to be a trial of the claim.

30.  In determining whether the defendant has demonstrated that there are triable issues, it is not appropriate to embark on a mini‑trial of the action on affidavit evidence.  The Court simply asks itself whether what the defendant says is credible.  As Godfrey JA put it in Ng Shou Chun v. Hung Chun San [1994] 1 HKC 155 at 158 : “The issue is not whether the defendant’s assertions are to be believed; it is whether those assertions are believable”.

Discussion

31.  In his affirmation dated 3 August 2010 and filed in opposition to the plaintiff’s summary judgment application, the defendant contends that the payment of HK$3,000,000 was made by the plaintiff to the defendant to secure a right of first refusal on the two proposed joint venture projects.  The defendant says that he made the request for this payment on 2 or 3 February 2010 and that it was accepted by Mr Kong Lung Cheung, a director of the plaintiff: see paragraph 17.  In paragraph 18 of his affirmation, the defendant states: “By the payment of the $3 million the deal was concluded.”  In the same paragraph he then goes on to refer to a meeting between Mr Kong and himself for the first time on 4 February 2010 at the Grand Hyatt Hotel.  In paragraph 20 of his affirmation, the defendant says of the payment, “as far as I am concerned [Mr Ng] and I have agreed it was to secure [Mr Kong’s] right of first refusal.  The HK$3 million was a deposit, as security for the deal.”  In paragraph 41 of his affirmation, the defendant states: “The truth was that both party [sic] considered the deal had been closed or done after the payment of the deposit of $3 million and the Plaintiff was not too bothered or in any rush to execute any formal agreement.”

32.  The assertion that the payment was to secure a right of first refusal is not supported by any documentary evidence whatsoever.  As such it is a bare assertion.

33.  As against this bare assertion, such an explanation for the payment is contradicted by the terms of the Acknowledgment signed by the defendant.

34.  Furthermore, the defendant’s assertion is not consistent.  He refers to the payment as being “akin to earnest money” or “deposit”, “for the exclusive reservation of the right of first refusal” (paragraph 19 of his affirmation).  Elsewhere he refers to it as “a security for the deal” (paragraph 20 of his affirmation).  Yet, he also states that by its payment “the deal was concluded” (paragraph 18 of his affirmation) and that the parties “both … considered the deal had been closed or done after the payment” (paragraph 41 of his affirmation).  If it was a deposit or security for the deal, it is difficult to see how the parties could have thought the deal was closed or done.  In my opinion, the protean nature of the defendant’s characterisation of the payment weighs heavily against its believability.

35.  In addition, clause 9 of the Ever Hero and Classic Rich Agreement was an entire agreement clause which indicates that the parties’ intention was clearly that the executed written agreement should constitute the entire agreement and understanding between the parties in connection with the subject matter of the agreement.  It would be contrary to this term if the payment of HK$3,000,000 was somehow a payment made for some other agreement such as an agreement of a right of first refusal.

36.  In the course of his oral submissions in support of the appeal, the defendant argued that the entry of judgment was unfair because, as a result of the payment of the HK$3,000,000 by the plaintiff, he had acted on the basis that the agreements between the plaintiff, the defendant, PAQ Concepts, FAHL, FLHL, and PAQ Holdings would proceed notwithstanding that they were not signed.  He submitted that there were other parties with whom he might have gone into business to pursue the Real Madrid Project but he gave up those other opportunities on the basis of the agreement with the plaintiff.

37.  There were a number of documents to which the defendant referred in support of this contention.  First, he referred to a document entitled “Memorandum of Understanding between [Fobazo], [PAQ Holdings] and Emperor Entertainment Development Limited (“Emperor”).  This recorded an agreement in respect of a five year term during which Emperor would pay Fobazo and PAQ Holdings a sum of US$1 million per year in respect of a proposed media and merchandising venture.

38.  However, leaving aside the fact that the document exhibited is only signed by Emperor and not by Fobazo or PAQ Holdings, the subject matter of this Memorandum of Understanding is entirely different to the nature of the proposed agreements with the plaintiff, which were for the acquisition of an equity interest in FAHL, FLHL and PAQ Holdings.  Furthermore, since the date of the Memorandum of Understanding was 24 June 2009, it pre-dated the payment of HK$3,000,000 by the plaintiff to the defendant by more than six months. Finally, it was the defendant’s own case that the Memorandum of Understanding with Emperor was not pursued because his partner, Mr Tom Matthiesen, had researched the background of Emperor and did not feel comfortable doing business with it: see the defendant’s 2^nd affirmation dated 22 October 2010 at §11.

39.  Secondly, the defendant referred to a document in Chinese. Mr Kent Yee, counsel for the plaintiff, informed me that the document was only a promotional brochure of a production house in the Mainland which claimed it would soon obtain the endorsement of PAQ Holdings and its subsidiaries to grant it the agency rights in respect of top class footballers. It is dated October 2009.  The defendant did not challenge this description of the document by Mr Yee.  It is therefore difficult to see how this evidences the defendant acting in the way he says he did after the receipt of the HK$3,000,000 from the plaintiff.  There is no suggestion the production house in the Mainland was interested in pursuing the options which were the subject matter of the Ever Hero and Classic Rich Agreement.

40.  Thirdly, the defendant referred to another Chinese document, which it was common ground was the second page of an agreement.  In the defendant’s affirmation, the parties to it were identified as the defendant and a company called Magus Sam Trade & Management.  However, the identity of the parties to the agreement is not clear from the document itself and it is undated. Mr Yee informed me it recorded that one party was willing to appoint another as its sole agent to look for business and the defendant did not dispute this characterisation of the agreement.  Be that as it may, this is a far cry from evidence that the defendant ceased to pursue other interested parties following the payment by the plaintiff of the HK$3,000,000.

41.  The final document to which the defendant referred was an agency agreement between the defendant, FAHL and a company called Wisdom Vision Limited (“Wisdom”).  The document is signed by the defendant but not by Wisdom.  It states the purpose of the agreement to be that Wisdom would be appointed by the defendant and FAHL to look for an investor.  It is dated 30 October 2009 so, on its face, it merely shows that the defendant was keen to look for an investor, not that there was in fact such an investor interested in pursuing a business venture with the defendant and FAHL.

42.  In short, there is no documentary evidence to support the defendant’s contention that, after the receipt of the HK$3,000,000 from the plaintiff, he turned down or stopped talking to other investors.  Although there may have been negotiations prior to the date of the payment, there is no documentary evidence to show that the negotiations ceased because of the state of affairs with the plaintiff.

43.  A further submission made by the defendant was that, after the payment of the HK$3,000,000 by the plaintiff, he provided services in accordance with the plaintiff’s instructions.  He asserted that he incurred expenditure in pursuing the Real Madrid Project.  However, there is no documentary evidence to substantiate this.  A series of emails was produced which did show that around 8 or 9 February 2010, shortly after the payment was made, the defendant’s partner arranged a conference call with personnel of Real Madrid but this did not appear to involve the plaintiff and does not evidence the expenditure of any monies by the defendant. 

44.  A proposal document was exhibited by the defendant which was prepared by FAHL and presented to Real Madrid under the heading “Idea Proposal”.  It is undated and relates to an invitation to Real Madrid to travel to the Mainland to play a number of football matches.  Although the document refers to the FAHL “professional organizing team” there is no mention of the plaintiff.  Instead, another company, Birmingham International Holdings Limited is referred to as supporting the project.  Mr Yee explained that, at the hearing before Master de Souza, it was clarified that this company dropped its interest in the Real Madrid Project before the plaintiff came into the picture.  To this, the defendant did not demur.  This, therefore, cannot support the contention that the defendant incurred expenditure in reliance on any concluded agreement with the plaintiff.

45.  The defendant further referred to the arrangement for the plaintiff of a video clip of a footballer named Ryan Babel as an example of expenditure in reliance upon the concluded agreement with the plaintiff.  However, the exchange of emails concerning this demonstrates that the arrangement was paid for by the plaintiff settling payment of EUR5,000 directly to the defendant’s partner, Mr Tom Matthiesen.  The payment was made in respect of Fobazo’s intellectual property rights in respect of the image of Ryan Babel. I accept Mr Yee’s submission that this was a separate arrangement between the plaintiff and Fobazo and not one made under the agreements given to the defendant to sign on 5 February 2010. 

46.  Finally, the defendant submitted that the real reason the plaintiff pulled out of the agreements was not because the defendant had not signed them but because it discovered that it would be subject to liabilities under the rules of the Alternative Investment Market of the London Stock Exchange, on which PAQ Holdings was listed, in respect of a reverse takeover of PAQ Holdings.

47.  This submission, however, was shown by Mr Yee to be groundless by reference to the fact that the plaintiff was advised by a solicitor in London that the Takeover Code did not apply in respect of a company registered offshore and/or whose management and control was outside the jurisdiction.  Since, PAQ Holdings was incorporated and registered in the Cayman Islands, the Code would not apply unless its articles provided otherwise.  There was no evidence that its articles did so provide.

48.  At the end of the day, the Acknowledgment is a clear statement of the purpose of the payment of HK$3,000,000 by the plaintiff to the defendant. I accept the submission of Mr Yee that the effect of the payment and Acknowledgment is that of an offer accompanied by the pre-payment of consideration.  It is clear that, instead of signing the agreements contemplated in the Acknowledgment, the defendant’s solicitor made substantial amendments to the agreements.  These were unacceptable to the plaintiff.  The consequence of this is that no contract was ever reached between the parties and the payment was made for a consideration which wholly failed.

49.  I do not regard the evidence or submissions of the defendant as sufficient to raise a triable issue in respect of the plaintiff’s claim which is a straight forward restitutionary claim for repayment of HK$3,000,000 on the grounds of money had and received and/or unjust enrichment.  In my judgment, the claim in restitution is unassailable and, notwithstanding the submissions made by the defendant, has not been shown to be subject to the outcome of any triable issue raised by him.

Disposition and costs

50.  For the reasons set out above, I dismiss the defendant’s appeal against the summary judgment entered by Master de Souza.  I make an order nisi that the defendant pay the costs of the appeal against Master de Souza’s order to the plaintiff, to be taxed if not agreed.

51.  As set out in paragraph 8 above, I also dismiss the appeal against the order of Master Lai refusing a stay of execution.  Again, I make an order nisi that the defendant pay the costs of the appeal against Master Lai’s order to the plaintiff, to be taxed if not agreed.