FRANCIS ROBERT MULLENS ROBERT BRUCE HINCHCLIFFE v. ELMER YUEN AND OTHERS

HCA1099/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.1099 OF 1997

---------------

---------------

______________________

J U D G M E N T

______________________

INTRODUCTION

1. The focus of this case is the right to the sum of HK$16,890,975.40 presently standing in Court pending resolution of these proceedings. There is no dispute about how or why this sum came to be in Court; what remains controversial is whose money this is. The Plaintiffs claim that it is theirs', whilst the 1st Defendant, their erstwhile joint venture partner, asserts not that it belongs to him, but that it is impressed with a trust in favour of the 3rd Defendant, a Bahamanian company and the parties' joint venture vehicle.

2. The point at issue is thus relatively narrow, and can, I hope, be dealt with without full immersion within the wealth of factual material which has been placed before the Court. In order to understand how matters have come to their present pass, however, a brief explanation is required of the way in which the parties' relationship developed. Accordingly, it is to these introductory matters that I now turn.

THE FACTUAL BACKGROUND

(i) The Parties

3. The Plaintiffs, Messrs Mullens and Hinchcliffe, are professional accountants. Through a company called Acceptor Corporation Limited, they provide trust and company administration services, in terms both of establishment and operational support, to business ventures in Asia.

4. The 1st Defendant, Mr Elmer Yuen, is and was a businessman, and Chief Executive of the Tele-Art Group, which deals in and with electrical products and services.

5. The 2nd Defendant, Downing Group Limited, is a company incorporated in the British Virgin Islands, which was beneficially owned by the 3rd Defendant before control thereof was ceded to nominees of one Stephanie Downs Yuen, the 1st Defendant's second wife, from whom he is now divorced.

6. The 3rd Defendant, Strategic Holdings Limited, was incorporated in the Bahamas by the Plaintiffs. The Directors thereof are Chiswick Trade Limited and Chiswick Time Limited (as from 3rd October 1994) together with the 1st Defendant (as from 27th March 1996); the two 'Chiswick' directors are, I am told, shelf companies supplied by the Plaintiffs. The registered shareholders in the 3rd Defendant are the 1st Defendant (4,000 shares) and one Reserve Assets Limited, another company of the Plaintiffs (1,000 shares), thereby providing for an 80:20 split in beneficial holding; as will shortly become evident, this ratio has loomed large in this case.

(ii) The Joint Venture Agreement of 8th June 1994

7. The Plaintiffs did not meet the 1st Defendant until the early part of 1994. The precise circumstances do not greatly matter; suffice to say that they were first introduced through the offices of Mr Clive Oxley, the former Commissioner of Customs and Excise, at a time when the Tele-Art Group found itself in difficulties with the Inland Revenue Department, and thereafter Messrs Mullens and Hinchcliffe, through Acceptor, provided urgent, sophisticated, and apparently effective assistance to Tele-Art in its tax affairs.

8. At a subsequent social meeting on board the 1st Defendant's boat on 15th May 1994, the Plaintiffs discussed establishing a more formal business relationship with the 1st Defendant; in fact, these discussions had taken place at the end of a day in which Mr Yuen had taken Mr Mullens and Mr Hinchcliffe to visit the newly-formed Mission Hills Golf Club at a time when Mr Yuen held a substantial investment in this project. As will shortly be explained, it was and is the fruits of this project that are at the centre of the present litigation.

9. The discussions which originated during this particular boat trip on 15th May 1994 culminated on 8th June 1994, upon which date Mr Yuen of the one part, and Mr Mullens and Mr Hinchcliffe of the other part, entered into a Joint Venture Agreement, the terms of which have been the subject of considerable attention during the course of this trial.

10. The Recital to the Agreement reads :-

"Whereby the ... parties wish to co-operate in a joint venture to bring to fruition various projects currently in progress, in contemplation, or yet to be determined, and share the distributions so achieved therefrom,"

whilst the structure of the agreement provided for the formation of a joint venture vehicle to be owned 80% by Mr Yuen and 20% by Messrs Mullens and Hinchcliffe [Clause 1.1], that distributions should be made "of all available funds upon receipt" in a like ratio of 80:20 "unless it is mutually agreed to retain any funds for future projects" [Clause 1.2], and that the name of the joint venture vehicle should be Strategic Holdings Limited [Clause 1.3].

11. The broad scheme of things was that Mr Yuen, who was the established businessman with, it appears, fingers in many pies, "should contribute his current interests, projects and assets to Strategic Holdings as per the list in Appendix 1" [Clause 2.1], and that in turn Mr Mullens and Mr Hinchcliffe "shall provide their experience, connections and expertise to strategise the development of the projects and guide their progress" [Clause 2.3].

12. The overall concept, therefore, was that Mr Yuen would input his ongoing projects, and Messrs Mullens and Hinchcliffe would contribute their commercial focus and expertise, attributes hitherto they had perceived to be lacking in the conduct of Mr Yuen's affairs, and which had been the stimulant for the discussions between the parties which had taken place subsequent to the professional taxation services which the Plaintiffs had rendered.

13. So far as the process of decision making was concerned, the Joint Venture Agreement recited that the Board of Strategic Holdings shall consist of Mr Yuen and Messrs Mullens and Hinchcliffe [Clause 3.1] and that "all decisions of the Board shall be unanimous in order to be binding" [Clause 3.2].

14. Although the actual Joint Venture Agreement was signed on 8th June 1994, the Appendix thereto, which took the form of a Schedule of Mr Yuen's ongoing projects and assets, was not appended to the Agreement until 1st September 1994. The Schedule tabulates Mr Yuen's "approximate beneficial shareholding" within various business categories; for example, he is listed as holding 40+% in the Tele-Art Group.

15. Of more immediate interest, however, at least from the viewpoint of this litigation, is and was Mr Yuen's 15% holding in what is described as the "Mission Hills Holdings Golf and Country Club Development". It is to this particular aspect that I now turn.

(iii) The Mission Hills Golf Club Project

16. As its name indicates, the Mission Hills development was a golf and country club which was being built in Southern China; I understand that with improved road links, Mission Hills can be reached from Hong Kong today in a little under ninety minutes. In any event, at the time that Mr Yuen entered into the Joint Venture Agreement he had (or, as Mr Mullens put it in evidence, and as I accept, he represented that he had) a 15% beneficial interest in the entire project. As matters transpired, this did not turn out to be true, since the 15% Mr Yuen was holding included, as the Plaintiffs were subsequently to discover, the interests of Mr Yuen's second wife, Stephanie Downs Yuen, that of her mother, and also that of a Mr Edward Ting, albeit these matters were not revealed until early 1996. But this is to get ahead of the story.

17. Of more immediate importance was that in or about late 1994, Mr Yuen perceived a need to extricate himself from the Mission Hills project. His motivation so to do is not of great relevance; perhaps, as Mr Mullens suggested, he was concerned about a potential dilution of his interest by his partners in that project, but in any event he was in the course of negotiations with one Mr David Chu, a well-known Hong Kong entrepreneur and one of the partners in the golf club project, to sell the 15% interest in the project in return for the issue of 350 full Corporate Memberships in the club, a deal which was effected by a Deed of Sale and Purchase, dated 17th January 1995, which was entered into between Mr Yuen and Mr David Chu.

18. Following this primary transaction, however, the evidence is that, possibly concerned by a price depression should a large block of such memberships come onto the market, Mr Chu in fact negotiated with Mr Yuen to buy back the bulk of the memberships so held by Mr Yuen as a consequence of the January Agreement. Accordingly, a further Agreement was entered into between Mr Chu and Mr Yuen on 25th March 1996 for the purchase of 295 Mission Hills memberships for a total consideration of HK$159,624,498.00. This Agreement was recorded in a letter dated 27th March 1996 from Mr Chu to Mr Yuen, which letter enclosed four post-dated cheques which were said to "represent full payment for our purchase of 295 memberships of Mission Hills Golf Club from Downing Group Limited".

19. As Mr Mullens told the Court, and as I accept, Downing Group Limited (which is wholly owned by Strategic Holdings Limited) was a nominee shelf company which had been supplied by the Plaintiffs at the time when the negotiations were taking place regarding the sale of Mr Yuen's 15% interest in Mission Hills. In fact, Mr Mullens had suggested to Mr Yuen that the memberships be placed in the name of, and held by, Downing Group Limited; hence, at the time of the sale-back of the 295 memberships to Mr Chu, Downing Group Limited was named as the payee of the four post-dated cheques, the details of which, for convenience of reference, I set out hereunder :-

(a)	Cheque 1:	Cheque dated 15th April 1996 issued by Mission Hills (China) Limited to Downing Group Limited in the sum of HK$17,736,055.00;
(b)	Cheque 2:	Cheque dated 30th May 1996 in the sum of HK$35,472,111.00;
(c)	Cheque 3:	Cheque dated 31st May 1997 in the sum of HK$53,208,166.00;
(d)	Cheque 4:	Cheque dated 31st October 1997 in the sum of HK$53,208,166.00.

20. The Court was further told by Mr Mullens that this sale-back necessitated considerable documentation, and that, via his efforts, this documentation "was ready and delivered to Mr Chu the same day", that is, 27th March 1996. However, Mr Mullens further stated that on the following day he was surprised to learn of the litigation which had just been commenced by Mr Yuen's second wife in connection with Mr Yuen's interest in the Mission Hills project. This too was to have a signal bearing on the development of the present case.

(iv) High Court Action No.A3547 : The Stephanie Downs Yuen Litigation

21. These proceedings had been commenced by Mr Yuen's second wife on the very day of the receipt of the four post-dated cheques representing the proceeds of the Mission Hills memberships. The purpose of this litigation was clear, namely to safeguard the interest of Mrs Downs Yuen, that of her mother, and that of Mr Edward Ting in the proceeds of sale. Injunctive relief was initially obtained against Mr Yuen and Downing Group Limited restraining disposition of these monies pending determination of the interest asserted. For the purposes of this case, however, there is perhaps no need to do other than to record the fact of this litigation, and of its compromise.

22. On 18th May 1996 the Stephanie Downs litigation was settled by means of a Deed of Settlement respectively executed between the three third party claimants together with Mr Yuen and his son Robert, and Downing Group Limited. This document speaks for itself. Suffice to say that the effect of the settlement provided for the distribution of the sale proceeds of the Mission Hills memberships between the parties to the Deed of Settlement. The compromise related to the proceeds of Cheques 2, 3 and 4 only; in broad terms it allotted approximately HK$57.5 million to the claiming third party interests, and HK$84.5 million to Mr Yuen and his son. Downing Group Limited, as the payee of these three cheques, was to distribute the monies in this manner, and in order to ensure that such distribution took place it was further arranged that the three post-dated cheques were to be held by Mrs Downs' solicitor as stakeholder, and that control of Downing Group Limited should pass to Mrs Yuen or her nominees. As a result, therefore, Messrs Mullens and Hinchcliffe, the Plaintiffs herein, relinquished control of Downing Group Limited, which they had hitherto exercised via one of their own companies, Chiswick Trade Limited, which company had been the sole director of Downing Group prior to 14th May 1996 and which on that date was replaced by Escalon Capital Limited, a nominee of Mrs Downs Yuen.

23. This settlement was subsequently embodied in a Consent Order of 15th May 1996, a document that effectively terminated the Stephanie Downs Yuen litigation.

(v) The Side Agreement of 15th May 1996

24. The Deed of Settlement and consequent Consent Order were not, however, the only documents executed on 15th May 1996. A collateral agreement, which has been referred to during this case as a "Side Agreement", was executed also on that day between Stephanie Downs Yuen, Mr Yuen and the Plaintiffs herein. It is a somewhat unusual document, and on reflection I am not entirely sure that I fully understand its provenance. In any event, since much has been made of it in this case I should, I think, set out the relevant parts, substituting in each case the original letter references with the relevant names of the parties :-

"WHEREAS

(A) [Francis Mullens and Robert Hinchcliffe] claim that they have the absolute ownership of the 20% of the monies to be distributed to [Elmer Yuen] under the Deed of Settlement of even date in High Court Action No.3547 of 1996;

(B) [Elmer Yuen] acknowledges the said claim of [Francis Mullens and Robert Hinchcliffe] in Recital (A);

(C) [Stephanie Downs Yuen] notes the position of [the other three parties] in Recitals (A) and (B) above.

THIS AGREEMENT witnesseth as follows :-

1. In consideration of [Elmer Yuen] agreeing to enter into a Deed of Settlement of the same date with other parties in full and final settlement of the disputes raised in High Court Action No.A3547 of 1996, [Stephanie Downs Yuen] agrees at the request of [Elmer Yuen] that in the event of any matrimonial proceedings between her and [Elmer Yuen] or in any other disputes between her and [Elmer Yuen], she would not advance or make any claims in respect of 20% of the monies to be distributed to [Elmer Yuen] under the said Deed of Settlement which are, upon the said distribution, to be held by [Elmer Yuen] for [Francis Mullens] and [Robert Hinchcliffe]."

25. The final clause of this Side Agreement (as rendered in italics) has clearly been added on the original by a type-face different to that of the rest of the document. I do not know precisely how or why it came to appear in this fashion, nor for that matter did Mr Mullens; in any event, the content of this document is heavily relied upon by the Plaintiffs in support of their case.

26. And the date of this Side Agreement, namely 15th May 1996, is significant, also, in that this is the last date upon which there appears to have been any actual direct communication between the Plaintiffs and Mr Yuen, notwithstanding what I have been told were the Plaintiffs' strenuous efforts by fax and by telephone to get in touch with Mr Yuen to discuss the events which had taken place, and more particularly the status of the Joint Venture.

(vi) The Monies in Court

27. The sum presently in Court, namely HK$16,890,975.40, therefore represents 20% of the total sum actually received by the 1st Defendant from the proceeds of Cheques 2, 3 and 4, the remaining 80% having been released to Mr Yuen with the agreement of the Plaintiffs. No monies from the proceeds of the Cheque 1 are in Court nor, I am told, are such monies the subject of any claim by the Plaintiffs in this action or at all.

28. These monies were ordered to be so deposited in Court as a consequence of interlocutory injunctive relief obtained by the Plaintiffs pursuant to Orders of Keith, J. dated 31st January 1997 (with respect to 20% of the proceeds of the Cheque 3) and the Order of Rogers, J., as he then was, dated 24th October 1997 (with respect to 20% of the proceeds of Cheque 4 and 20% of the proceeds of Cheque 2). In other words, by these Orders the Plaintiffs sought only to enjoin the 20% allegedly due to themselves.

(vii) The Evidence before the Court

29. In addition to the bundles of documents placed before the Court by agreement, as to which there was no dispute in terms of authenticity and admissibility, the only viva voce evidence that was called in this case was that of Mr Francis Mullens, the 1st Plaintiff herein.

30. No oral evidence was called on behalf of the 1st Defendant, nor was any Acknowledgment of Service filed in this case by the 2nd and 3rd Defendants.

THE RESPECTIVE CASES

31. Against this background, the positions of the parties were clearly signposted from the outset. On behalf of the Plaintiffs, Mr Gerard McCoy, S.C., made no bones about the situation. The 1st Defendant, Mr Elmer Yuen, had received 'his' 80% of the residual proceeds of Cheques 2, 3 and 4 after deduction of the Stephanie Downs Yuen settlement, and he submitted that on the basis of the agreed 80:20 ratio, his clients, the Plaintiffs, undoubtedly were now entitled to the remaining 20% without any further involvement on the part of the 3rd Defendant, Strategic Holdings Limited, whose only function was to have been to hold assets of the Joint Venture as "a mere nominee of the Joint Venture". When taken together, paragraph 1.2 of the Joint Venture and the Side Agreement of 15th May 1994 showed that the monies in Court is and was "our money absolutely" said Mr McCoy. The situation was very clear, he suggested; with the consent of the Plaintiffs, the 1st Defendant "had managed to get his money first, and without any involvement on the part of Strategic Holdings", with the result that, as Mr McCoy colourfully described it, Mr Yuen had been doing "a Caribbean calypso with our money".

32. For his part, Mr Warren Chan, S.C., made it clear to the Court from the outset that "the 1st Defendant does not claim the money in Court belongs to him". To the contrary, said Mr Chan, his case was that "the money belongs to the 3rd Defendant, the Joint Venture Company, and that "this includes not just the monies in Court but all the monies received by Mr Yuen under the Deed of Settlement", which 80%, he added, had been used exclusively for the business of the Joint Venture Company.

33. Senior Counsel for both parties have approached the case along broadly similar lines, and for the purposes of this judgment I am content to follow the classification of the issues as propounded in argument.

(1) The Joint Venture Agreement : The Trust Issue

34. The dividing line between the parties is clear, and in my judgment this issue dominates the case and constitutes the primary issue for determination. It is this : does the 1st Defendant, Mr Elmer Yuen, hold the post-settlement cash deriving from the sale of the Mission Hills corporate memberships in trust for the 3rd Defendant, Strategic Holdings Limited, or alternatively in trust for and on behalf of the Joint Venture, so that in the circumstances as they have arisen the monies which are now reposing in Court must be regarded as held by Mr Yuen on trust for the Plaintiffs?

35. In this regard Mr McCoy, S.C. submitted on numerous occasions that it was necessary to distinguish the Joint Venture itself from the 3rd Defendant company, which only ever was intended to hold assets as "a bare nominee" for the Joint Venture, so that Strategic Holdings Limited would have had no beneficial interest in any of these assets. And indeed in his evidence, and particularly in cross-examination when pressed on the point, Mr Mullens was at pains to distance the Joint Venture from Strategic Holdings Limited.

36. Let me say at the outset that I do not find this distinction particularly easy to grasp in the circumstances of this case, and in the context of an argument in which both sides agree that the assets itemised in the Schedule to the Joint Venture Agreement, including the Mission Hills monies, are impressed with a trust, the only disagreement being as to upon whose behalf they are being held.

37. It is entirely clear on the evidence, and I so find, that the obvious intention of the parties to the Joint Venture was that the projects or interests listed in the Schedule to the Joint Venture Agreement would be injected into the 3rd Defendant, Strategic Holdings Limited. Equally it is clear in my view that had such transfer formally been effected (which it was not) that the 3rd Defendant would have been the legal and beneficial owner of such interests; as Mr Warren Chan, S.C. pointed out, it is trite law that the assets of a company belong to the company itself and not to its shareholders.

38. The idea of the scheduled assets being held on trust by the 1st Defendant on behalf of Strategic Holdings Limited is not an issue which appears to have caused Mr Mullens any problems in his earlier affidavit evidence, both in this litigation and also in that commenced by Stephanie Downs Yuen against Mr Elmer Yuen. For example, when swearing his first Affidavit dated 29th January 1997 in support of the injunctive relief sought by the Plaintiffs in this action, Mr Mullens says in terms, at paragraph 5 thereof :-

"... The Strategic Holdings Agreement was signed on 8th June 1994. At the time that the Agreement was signed the schedule, or appendix, was not signed and it was only some time later, in September, that this was in fact agreed and signed. Accordingly, the appendix has a different date to the Agreement itself. It will be seen that the Mission Hills Golf Club project was included amongst those interests. As I understood matters the 1st Defendant had a 15% stake in this project. After the Strategic Holdings Agreement was signed I considered that this stake was held on trust by the 1st Defendant for Strategic Holdings."

39. And thereafter, at paragraph 11 of the same Affidavit, Mr Mullens observes :-

"This [a meeting with the 1st Defendant in late January 1996] was the first time I became aware that Stephanie Downs Yuen or any other parties had any interest in relation to the stake held by the 1st Defendant in the Mission Hills Golf Club Project beneficially owned by Strategic Holdings Limited."

40. Again, in affidavit evidence given on behalf of Mr Elmer Yuen in the Stephanie Downs Yuen litigation, Mr Mullens states at paragraph 8 of his Affidavit dated 24th April 1996 :-

"As stated above it was intended under the Strategic Holdings Agreement that all of the 1st Defendant's assets would be owned by Strategic Holdings Limited ('Strategic Holdings') ..."

and again, at paragraph 14 :-

"I would also reiterate that as from 8th June 1994 as far as I was concerned the 1st Defendant was holding the 15% interest in the Mission Hills Golf Club project on behalf of Strategic Holdings ..."

and further, at paragraph 28 :-

"The Plaintiff [Stephanie Downs Yuen] is aware that the only significant source of funding for Strategic Holdings is the sale of the Mission Hills debentures. These funds are urgently required to support Bipolar Integrated Technology Inc. and Golden Bridge Technology Inc. and likewise the Tele Art Group which has also run into serious cash flow difficulties recently. The result of the cessation of funding from the 2nd Defendant to Strategic Holdings is that the latter has not been able to provide funds to Bipolar Integrated Technology Inc. and Golden Bridge Technology Inc. and Tele Art to enable these companies to pay their staff, suppliers and other running expenses which if continued is certain to cause the collapse of those companies. This will cause irrepairable damage to Strategic Holdings which the Plaintiff will not be able to make good under her undertaking in damages ..."

41. Against this background, therefore, it is perhaps unsurprising that in his evidence Mr Mullens found himself in some real difficulty, in my judgment, in adequately explaining under cross-examination that his earlier reference to the 15% stake in the Mission Hills project "being held on trust by the 1st Defendant for Strategic Holdings" did not in fact mean for Strategic Holdings Limited but, to the contrary, "I would see that as meaning 'for the Strategic Holdings Joint Venture' ", and that the reference to beneficial ownership of the 15% stake by Strategic Holdings Limited was "probably an error to have 'Limited' included". So that when it was expressly put to him by Mr Chan that obviously it had always been his belief that the Mission Hills project was beneficially owned by Strategic Holdings Limited, his response of "I reject that suggestion fully" in my view lacked weight and conviction.

42. Although I accept a good deal of what Mr Mullens said in his evidence as to the origin and general history of the parties' relationship - indeed, much of the factual evidence in this case is not in issue - I regret to say that I did not find him a convincing witness in this vital regard. A highly qualified Chartered Accountant with an impressive curriculum vitae, and obviously highly intelligent and with a sophisticated grasp of company law, I found that the fine distinctions that Mr Mullens was endeavouring to draw in his evidence were difficult to accept, nor do I accept them; in fact, it was hard to avoid being driven to the conclusion that it was precisely because of the argument which was being mounted on his behalf that it was necessary for such distinctions to be drawn, distinctions which, it seems to me, manifestly ran counter to his prior deposed views on the subject.

43. In all the circumstances, therefore, after having reflected upon the totality of the evidence before the Court, in my judgment there can be little doubt that upon the signing of the Joint Venture Agreement, the Scheduled interests, including the interest in the Mission Hills project, were impressed with a trust, be it implied or constructive, in favour of the 3rd Defendant. I also have no hesitation in finding, the lack of formal transfer notwithstanding, that the parties undoubtedly intended and regarded such interests as being beneficially owned by the 3rd Defendant, and in this regard I reject Mr McCoy's "bare nominee" argument.

44. I therefore reject what appears to be the Plaintiffs' proprietary claim to the monies presently in Court, and I find that the 1st Defendant does not hold 20% of the residual proceeds of the Cheques 2, 3 and 4 upon trust for the 1st and 2nd Plaintiffs. In my judgment the Plaintiffs' case in this regard is not made out, either on the facts or as a matter of company law.

45. Nor does the fact that, on the Plaintiffs' case, the 1st Defendant allegedly misappropriated some or all of the Mission Hills monies and failed to use such monies for the purposes of the Joint Venture projects, or alternatively 'short-circuited' the appropriate procedures laid down in the Articles of the 3rd Defendant for the distribution of funds, in my view constitute an appropriate basis for the Plaintiffs' present claim to the monies in Court. What the Plaintiffs are effectively saying, it seems to me, is that 'what is sauce for the goose is sauce for the gander', which with respect provides a less than satisfactory analytical underpinning for their argument. And in so far as the Plaintiffs' allegations of misappropriation are concerned, although there is, I think, no necessity in this case for a specific finding on the issue, I would merely observe that a considerable amount of the documentation before the Court seems to point the other way, and lends credence to the 1st Defendant's allegation, albeit made through his Counsel, that the monies retained from the sale of the Mission Hills assets in fact were devoted to various of the Joint Venture projects, and in particular to endeavouring to keep the Tele-Art Group financially afloat.

(2) The Joint Venture Agreement : The Contractual Claim

46. I likewise reject any contractual claim advanced on behalf of the Plaintiffs and based upon Clause 1.2 of the Joint Venture Agreement. Clause 1.2 reads as follows :-

"Distributions shall be made of all available funds upon receipt in the ratio of 80% to [1st Defendant] and 20% to [Plaintiffs] unless it is mutually agreed to retain any funds for future projects."

47. In this connection I agree with the submission of Mr Chan, S.C. that, in short, "available funds" means available funds of the Joint Venture as opposed to available funds arising from any specific project. Accordingly Mr Chan submitted, in my view correctly, that the phrase "available funds" in this context (which effectively mirrored the provisions of Article 137A of the Articles of Association of Strategic Holdings Limited) could not and did not encompass the funds arising from the sale of the Mission Hills shares, an eventuality which Mr Mullens accepted in evidence was entirely unexpected and which came at a time when, as was again accepted in evidence, the Tele-Art Group was in severe financial difficulties and chronically short of cash. In fact, Mr McCoy, S.C. had opened the case on the basis of a Joint Venture in which "everything needed cash", and although in cross-examination Mr Mullens was disinclined to accept the proposition that Mr Yuen had applied his 80% of the Mission Hills funds to the use of Tele-Art and associated projects - "I could not say with any certainty what he had done with it" - it seems eminently probable, as I have earlier indicated, that on the face of the material placed before the Court that Mr Yuen was indeed engaged in ploughing money into the Joint Venture projects, and in particular Tele-Art and its major banking creditors. I further note that 50 Mission Hills memberships which had been sold by Downing Group Limited prior to the deal with Mr David Chu, the sale of which netted cash of around HK$17 3/4 million, was accepted by Mr Mullens to be used for the other current projects of the Joint Venture, whilst Mr Mullens also accepted in his evidence that Mr Yuen and his colleague, Mr P.K. Yuen had told the Plaintiffs that without the Mission Hills funds arising from Cheque 1, Mr Yuen's companies would collapse.

48. So I do not accept that what amounted to a totally unanticipated Mission Hills 'windfall' was available for immediate distribution under Clause 1.2 of the Joint Venture Agreement, as now appears to be alleged. Generally speaking, a company only makes a distribution out of its profits, and it makes little or no commercial sense that there would be an immediate distribution of funds unexpectedly received from one project when other projects within the Joint Venture were overwhelmingly in need of capital. It is manifestly clear, after taking account the other current projects, that there were insufficient 'available funds' for distribution, and in my judgment argument upon these lines fails to assist the Plaintiffs in this case.

(3) The Side Agreement

49. This was presented by Mr McCoy as his "second issue" and was strongly pursued in tandem with the trust argument; indeed, in opening Mr McCoy observed that this Agreement was and is "an echo of the noise created by the Joint Venture". Possibly, also, it was the final clause to the Side Agreement, that is, the words "to be held by Party B [Elmer Yuen] for Party C [Francis Mullens] and Party D [Robert Hinchcliffe]" which stimulated this action in its present form, so that the Plaintiffs' present claim in respect of their alleged absolute interest in the Mission Hills monies standing in Court was specifically isolated from their claim in a subsequent collateral action, namely High Court Action No.A11594 of 1997, wherein the same Plaintiffs are suing the same three Defendants for "an account of all sums due from the 1st Defendant [Elmer Yuen] and/or the 3rd Defendant [Strategic Holdings Limited] to the Plaintiffs upon the Plaintiffs' lawful withdrawal from the Joint Venture Agreement", together with a prayer for an Order that "the 1st Defendant do pay or that he procure that the 3rd Defendant do pay to the Plaintiffs all of the sums found to be due from the 1st Defendant and/or the 3rd Defendant to the Plaintiffs upon the taking of the account".

50. Be that as it may. As I understand the way the case is put in this regard, the Side Agreement is now invoked either in terms that it constitutes a declaration of trust in favour of the Plaintiffs by the 1st Defendant or, alternatively, that it imposes a contractual obligation on the 1st Defendant to make payment to the Plaintiffs, albeit that the latter argument does not appear this way on the pleadings.

51. As a matter of historical fact, Mr Mullens was unsure precisely how the final clause in the last line of paragraph 1 came to be there; he observed that the clause was in a different type-face and he "assumed [it was] typed on it by Stephanie Downs' lawyers", as also, he thought, were the handwritten amendments on the face of the Side Agreement itself.

52. Whatever its provenance, however, I agree with Mr Chan, S.C. that it is difficult to see how, on this basis, the 1st Defendant has to make payment to the Plaintiffs as a matter of contract. Mr Chan submitted that the operative part of this Agreement contained an agreement between Mr Yuen and Stephanie Downs Yuen, not between the 1st Defendant and the Plaintiffs. Moreover, he said, if there was indeed such an agreement whereby the 1st Defendant was to hand over the 3rd Defendant's funds, it was curious that the 3rd Defendant was not a party thereto. In my view, however, what is far more pertinent appears to be the apparent absence of any consideration for such Agreement moving from the Plaintiffs to the 1st Defendant, which in itself seems to me to be a fatal flaw in terms of any substantive argument along these lines.

53. Turning now to the suggestion that these words may constitute a declaration of trust, this seems to me to be equally difficult to establish in the circumstances. Mr Chan, S.C. submitted, and I agree, that it is not easy to see how the 1st Defendant could declare himself a trustee for the Plaintiffs of funds belonging in equity to the 3rd Defendant, as Mr Chan argued was clearly the case, and if the intention had been for the 3rd Defendant to give away assets of the company, it would have been the directors (who unlike the shareholders are seized with running the company) of the 3rd Defendant at the time, namely Chiswick Trade Limited and Chiswick Time Limited together with the 1st Defendant, who in this capacity would have made such a decision and would have caused the 3rd Defendant to be privy to the document. I do not think that this argument gets off the ground.

54. Finally, in the context of the Side Agreement, Mr McCoy, S.C. ran an estoppel point. He submitted, as a consequence of the Stephanie Downs Yuen settlement, that Mr Mullens and Mr Hinchcliffe had given up their control of Downing Group Limited, and that the detriment suffered was the monies having been paid over to Mr Yuen; as the position was put in the pleading, such detriment was in the form of "procuring the resignation of their nominees from the control of the 2nd Defendant, thus permitting the Deed of Settlement and the Consent Order to proceed and thereby permitting the funds from the cheques to pass directly into the 1st Defendant's hands." In this context, reliance was also placed on the letter dated 1st June 1996 from the 1st Defendant to the Plaintiffs.

55. With respect, I do not think that this argument succeeds either, and I accept Mr Chan's argument that, upon analysis, the requisite ingredients of estoppel have not been made out on the facts. In particular, assuming for the purposes of argument the existence of a clear and unequivocal representation of fact, it was not easy to discern in this case what the Plaintiffs had done after 15th May 1996 to constitute reliance, nor in my view was detriment established, either by the letter dated 1st June 1996 or otherwise. Mr Mullens' evidence was that from 13th May 1996 he had no control over Downing Group Limited or the money, whilst the Side Agreement was not signed until 15th May 1996; indeed it is clear that certain parts of it only came into existence upon that morning. Further, quite apart from the letter of 1st June, which could not constitute any detriment to the Plaintiffs, Mr Chan submitted that there was no detriment because the funds claimed by the Plaintiffs remain in Court, citing in this context Spencer Bower and Turner, the Law Relating to Estoppel by Representation, 3rd Ed., wherein the learned authors comment, at pages 109-110 :-

"... It is only when the representor wishes to disavow the assumption contained in his representation that an estoppel arises, and the question of detriment is considered accordingly, in light of the position which the representee would be in if the representor were allowed to disavow the truth of the representation."

56. For my own part I am not entirely convinced that the fact that the funds are presently in Court provides a complete answer on the detriment issue, but in any event, looking at the matter in the round, I am not satisfied that a case of estoppel is made out, and accordingly I reject this argument also.

DECISION

57. It follows from the foregoing that the Plaintiffs' claim to be absolutely entitled to the monies presently in Court is rejected.

58. In terms of the relief specifically sought in the Amended Statement of Claim, I refuse to grant the declarations prayed for at paragraphs 1 and 6 to the effect that the monies in Court, representing 20% of the proceeds of Cheques 2, 3 and 4, are impressed with a trust in favour of the Plaintiffs. To the contrary, I have found that they are not.

59. I also refuse to grant the declaration sought at paragraph 13 of the amended prayer, and in the circumstances it must also follow that I decline to make any order for payment out of the monies in Court which, for the avoidance of doubt, are to so remain until further order of this Court.

60. With regard to the categories of relief otherwise claimed in the Amended Statement of Claim, there is no need in the present circumstances to consider any further form of injunctive relief, which relief as pleaded was clearly pursued upon an interlocutory basis prior to crystallisation of the situation pursuant to the Orders of Keith J. and Rogers J.

61. One aspect remains outstanding, however. I note that at paragraph 12 of the amended prayer, the Plaintiffs seek alternative relief in terms of a declaration that the 1st Defendant holds the sums in Court, together with interest thereon, on trust for Strategic Holdings Limited; the relief here sought mirrors the amendments to the body of the Amended Statement of Claim, at paragraph 21 thereof, which were made to assert this alternative contention.

62. In this judgment I have of course arrived at the conclusion of law reflected by this alternative plea, which in itself also represents the case put forward in argument on behalf of the 1st Defendant. Whilst formally pleaded in this manner, however, this alternative case manifestly was not that which was pursued by Mr McCoy S.C. on behalf of the Plaintiffs, nor by Mr Mullens in evidence; indeed, Mr McCoy urged the Court not to so hold on the basis, inter alia, that this was a "spoiling case" and that Mr Yuen's present stance was designed solely to obstruct and to force the Plaintiffs indirectly to pursue their entitlement via the 3rd Defendant, which course of action Mr McCoy suggested did not represent the direct or "optimum route".

63. In any event, in the context of such alternative relief, it strikes me that it is possible that locus problems may arise in granting a declaration in this form at the instance of the Plaintiffs, and accordingly I am presently disinclined to do so without hearing Counsel further on the point, and also upon the precise form of the Order consequent upon this judgment.

64. As to costs, after some consideration I have decided not to make an Order nisi, and in due course I will entertain submissions thereon including, if such be necessary, argument as to any reserved or contingent orders which may already be in place in this litigation.

65. I thank all Counsel for their assistance.