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Websports Relies on the Agreement
20. From and after the date that the First Letter of Intent was entered into, and from and after the date that the Agreement was entered into, Websports expended significant resources and significant sums of money in reliance on the commitment of Cryptologic to participate in the development, marketing, launch and operation of the Product. As well, Websports invested substantial sums in Websports’ wholly owned subsidiary, Websports Overseas Licensing Limited, a Malta based company (“WOLL”) to facilitate implementation of the infrastructure, which has since collapsed as a result of the withholding of the funding which was promised. Details of the money and resources expended by Websports pursuant to and in reliance on the First Letter of Intent and the Agreement will be provided prior to the date of trial but are estimated by the Plaintiff to be approximately Three Million Five Hundred Thousand U.S. Dollars ($3,500,000.00 U.S.).
21. At all times throughout the preliminary discussions leading to the First Letter of Intent and, more significantly, as part of and after the execution of the Agreement, Websports relied on what Websports understood to be the good faith representations of Cryptologic that the development of the Product was of great significance to Cryptologic and that Cryptologic would do what ever it was required to do and whatever was commercially reasonable to ensure the commercial success of the Game and the Product. These representations were made by Cryptologic’s President and CEO, John Noelting, who also specifically directed that Websports refrain from engaging or continuing in discussions with any other potential partners until the Product was ready to launch. In reliance, Websports did refrain from pursuing several other opportunities and terminated discussion with a number of other potential partners. It refrained because it had an agreement with “Cryptologic”. Cyptologic’s name has substantial recognition and carries significant weight in the industry. As well, Websports’ investors advanced considerable funds to Websports in furtherance of the development of the Product in reliance on the commitment of Cryptologic and the representations as expressed above. Websports found itself bound to Cryptologic without any option to move forward with another prospective partner.
Cryptologic Efforts Under the Agreement
22. In accordance with its obligations under the Agreement, Cryptologic did execute the guarantee of the leasing arrangement with Sun Microsystems.
23. The Plaintiff states and the fact is that without its knowledge, consent or authority and without consultation and or discussion the Defendant, Crypotologic unilaterally retained Technical Systems Testing North America Inc. (“TST”) a Corporation which specializes in the testing and certification of the commercial viability of various software and internet applications as the independent research firm, for certification purposes to test the Product until receipt of its approval to reasonably ensure its commercial success. TST is one of a few companies in this area with international recognition. Notwithstanding the provisions of the Agreement, Websports was not involved with the selection of TST as the test and certification consultant nor was the Plaintiff involved in the design of the criteria to be used by TST in evaluating and testing the Product nor was the Plaintiff involved in arranging and or outlining any of the parameters with which the test and certification consultant would be able to complete their report and make their recommendations.
24. Inexplicably and unilaterally, Cryptologic without the knowledge or consent of the Plaintiff entered into a non-disclosure agreement with TST (to which Websports was not made a party) under which Cryptologic bound TST to a restrictive non-disclosure agreement which directed and forced TST into a regime of non-disclosure with the Plaintiff and failed to authorize and indeed prohibited the disclosure of any information, proposals, recommendations and the final report by TST on the Product, the Game and the software to Websports contrary to the Agreement and the representations and warranties made by Cryptologic. The Plaintiff states and the fact is that Cryptologic and others not known to the Plaintiff conspired and indeed concealed and forced TST to conceal information which had previously been agreed would be shared to Websports without justification or excuse in an effort to force the Plaintiff to abandon the Product and the Game knowing full well that had the information been provided the Plaintiff would have known that the Product and the Game had no material flaws and were commercially viable. Accordingly, Websports was denied the first hand ability to review information concerning its own Product directly in contravention of the agreement and the representations and warranties previously provided to Websports by Cryptologic. In fact, certain progress reports prepared by TST were not initially disclosed to Websports, hampering its ability to advance the development of the Product. Despite that fact, Websports persevered in the development of the Product. Only after repeated requests was critical information released to Websports.
25. The status of the development of the Product was substantially advanced by September 2001. However, the lack of availability of Cryptologic personnel to perform its obligations under the Agreement, including Cryptologic’s lack of technical staff to integrate the Product with Cryptologic’s cash and security software, prevented the development of the software from further progressing.
26. Accordingly, rather than leaving its technology staff idle (while their expense to Websports’ accrued) Websports entered into an agreement with Cryptologic whereby Cryptologic would engage Websports’ technology team to assist Cryptologic with its separate technology projects. The arrangement was entered into at below market rates (30% below market) in order to enhance the Websports/Cryptologic relationship. The Plaintiff states and the fact is that the Plaintiff acted and conducted themselves in a manner consistent with the best interests of the joint venture and in good faith. The Plaintiff states and the fact is that Cryptologic took advantage of the Plaintiff and received substantial benefits al at the cost of the Plaintiff.
Cryptologic’s Breach of the Agreement
27. Websports states that Cryptologic has breached the Agreement and each of the representations made to Websports and has expressed to Websports that is has no intention of honouring its future obligations under the Agreement, as particularized below notwithstanding that Websports has conducted itself in accordance with the obligations imposed upon it by the agreement and consistent with the best interests of the joint venture and the intentions expressed in the Agreement and to one another while the agreement was being negotiated and finalized. In fact, despite its representations that it considered itself fully bound to the Agreement and despite the advice to Websports from Cryptologic’s counsel (who also acted as counsel to Websports) that it considered the Agreement to be a “good one”, Cryptologic has decided to reject its commitment and obligations under the Agreement for no good or valid reason. The Plaintiff states and the fact is that several meetings with Cryptologics technical team were promised and unilaterally cancelled by Cryptologic without rescheduling any of the meetings and without conducting any work to the game or product, leading to further delays in the launch of the game and product and damages naturally arising from the said delays.
28. In accordance with the Agreement, Sun Micro Systems provided equipment to Websports and Websports provided the down payment as well as all monthly lease payments required of it. Upon Crypotologic deciding not to continue to honour its commitments and obligations to Websports, Cryptologic without the knowledge or consent or authority of Websports paid the outstanding debt to Sun Mircosystems Finance and took possession of the equipment and failed to account to this Plaintiff or reconcile with this Plaintiff for the value of the down payment provided to obtain the equipment financing and for the value of the monthly lease payments made by this Plaintiff all at the expense and loss of this Plaintiff.
29. Websports further states that Cryptologic used its influence and or authority over TST to demand that TST conceal, manipulate and re-engineer the true results of the test and certification process of the Game and Product and to compromise, obscure, fabricate and misrepresent TST’s true findings after the test and certification stages to Websports in an effort to deceive and betray Websports with bogus test results and reports from the knowledge of the truth of the commercial viability of the Game and Product and in an effort to allow Cryptologic the opportunity, excuse, justification and method to avoid the responsibilities it had agreed to under the terms of the Agreement with Websports and to call the Agreement with Websports at an end without consequence or lawful reason all at the expense and with substantial damages incurred by Websports and to Websports’ sole detriment. As a result, TST has apparently declined further involvement in this project. This conduct on the part of Cryptologic was contrary to the letter and the spirit of the Agreement and was an attempt by Cryptologic to deliberately avoid its obligations to Websports, especially in light of the fact that the Reports and recommendations prepared by TST in connection with the Product have indicated that its development had been quite satisfactory and that it was on target to be completed by the launch date. This, of course, assumed that Cryptologic would comply with its obligations under the Agreement with Websports. Cryptologic’s conduct as set out in this paragraph has had the effect of impairing WebSports’ reputation in the international marketplace. The attempt by Cryptologic, and by others not known to the Plaintiff to convince TST to fabricate, rewrite and alter the reports and recommendations in a manner which sheds negative light on the Product and the Game constitutes conspiracy, collusion and deceit with the intent to cause economic damage and harm to the Plaintiff. In the alternative the same action constitutes intentional and unabashed interference with the Plaintiffs economic interests and intentionally inducing a breach of contract.
30. Finally, Cryptologic has refused to reimburse Websports for the costs that it incurred under the Agreement in developing the Product, the down payment of the equipment financing and the monthly lease payments made by the Plaintiff and, in fact, refused to advance the funds required of it pursuant to the Agreement. As a result, Websports does not have access to the funding that is required to make the final adjustments required to ready the Product for its market launch.
31. As a result of Cryptologic’s utter disregard for the Agreement that binds the parties and the misrepresentations, attempts at conspiracy and collusion to cause economic harm, the intentional interference with the Plaintiffs’ contracts, the inducing of a breach of contract and the unfulfilled commitments and obligations agreed and made by and on behalf of Cryptologic and its representatives on which Websports relied, Websports has lost the operational infrastructure required to advance the Websports’ business and, if possible, will have to rebuild the Websports infrastructure to facilitate the development of the Product to enable it to proceed to market. Websports has lost considerable value due to the breach of contract of Cryptologic, its improper and high handed conduct, and the lack of regard and respect that Cryptologic and others unknown to the Plaintiff who conspired with Cryptologic have shown the Plaintiff.
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