CHAINTOWER CO LTD AND OTHERS v. SNOWBRIGHT CO LTD AND OTHERS

High Court Action No. 11877 of 1983

Courts practice and procedure – judgment debt unsatisfied by debtor - 0.49B, r.1 - imprisonment of debtor - application for direction to bailiff to enlist assistance of Director of Immigration in arresting absconding debtor - Stop List - praecipe did not ask for imprisonment - abolition of writ of ne exeat regno - section 16(2) of the Crown Proceedings Ordinance - proposed order misleading and confusing - whether Court had inherent jurisdiction.

The Plaintiff, a judgment creditor, took out a praecipe for a writ of fi.fa. without expressly asking for the inclusion of a direction to the bailiff to arrest and deliver the judgment debtor to prison. The judgment debt was wholly unsatisfied and the judgment debtor was believed to have left Hong Kong although he was expected to return shortly. The Plaintiff applied for an order which was to be served on the Director of Immigration directing the bailiff, upon information by the Director of Immigration that the judgment debtor is passing through a point of immigration, immediately to attend the said point of immigration and call upon the Director of Immigration to assist him to (inter alia) arrest the judgment debtor and deliver him to prison.

The Attorney General Was permitted by the Court to make submissions on behalf of the Director of Immigration as the application raises a question of public policy on which the Director of Immigration has a view which he desires to bring to the notice of the Court.

HELD:

Application dismissed.

Miss Maria Yuen instructed by Iu, Lai & Li for the Plaintiff

Mr. N. Kaplan, Q.C. and Mr. B. Barlow for the Attorney General

Mr. A. Sakhrani, Q.C. and Mr. Geoffrey Ma instructed by C.Y. Kwan & Co. as amici curiae

Cases cited in the judgment:-

Cases cited in argument but not mentioned in the judgment:-

1983, No. 11877

IN THE SUPREME COURT OF HONG KONG

BETWEEN

____________

___________

JUDGMENT

___________

1. This matter first came up for hearing before me on 21st July 1983 on the application of the Plaintiff. But Mr. Barlow also appeared on behalf of the Attorney General when he was notified of this application. He indicated to me then that the Attorney General would seek permission from the Court to make representations on behalf of the Director of Immigration. I have a discretion to allow the Attorney General to make representations in a case such as this because it raises a question of public policy on which the executive may have a view which it may desire to bring to my notice. This is very well summarised at page 212 of the Supreme Court Practice 1982 (marginal reference 15/6/9A). I indicated to Miss Yuen that I would not be prepared to give an order in terms of the application without hearing full argu-ment. I also indicated that I would like to have the assistance of Mr. Sakhrani, Q.C. and Mr. Ma as amici curiae.  The matter was then adjourned to 28th July 1983 to enable full argument to be advanced.

2. At the resumed hearing, I have the benefit of hearing very well prepared submissions from counsel who all agreed that I should give my judgment in open court. I so do now.

Relief sought

3. It is necessary to set out the order sought by the Plaintiff:-

4. As this is the first time that an application of this nature is properly argued, I think it desirable to summarise counsel's submissions.

Submissions on behalf of the Plaintiff

5. Miss Yuen referred me to the writ of fieri facias which was in the standard form following form 53 made under Order 45 rule 12 of the Rules of the Supreme Court. The material paragraph in the writ of fi fa. reads as follows:-

"[And we further command you that in case you shall not be able to find sufficient property of the said defendant, or the said defendant shall fail to point out to you any property whereon to levy, you do forthwith arrest the said defendant and deliver him into the custody of the Commissioner of Prisons to be kept in a prison as a prisoner for debt for the period ... unless you shall be discharged from the said imprisonment in due course of law.]"

6. Miss Yuen also referred me to Order 49B rule 1(1) of the Rules of the Supreme Court which provides:-

"If the judgment is for money, it may be enforced by the imprisonment of the party against whom it has been given, or by the attachment and sale of his property, or by both imprisonment and sale, if necessary ..."

7. Miss Yuen takes the following points:-

"If any person who is adjudged bankrupt, or in respect of whose estate a receiving order has been made, after the presentation of a bankruptcy petition by or against him, or within 6 months before such presentation, quits the Colony and takes with him, or attempts or makes pre-paration to quit the Colony and take with him, any part of his property to the amount of $100 or upwards, which ought by law to be divided amongst his creditors, he shall (unless he proves that he had no intent to defraud) be guilty of a misdemeanor."

"... Where the plaintiff in any action in any of Her Majesty's superior courts of law at Westminster in which, if brought before the commencement of this Act, the defendant would have been liable to arrest, proves at any time before final judg-ment by evidence on oath, to the satisfaction of a judge of one of those courts, that the plaintiff has good cause of action against the defendant to the amount of fifty pounds or upwards, and that there is probable cause for believing that the defendant is about to quit England unless he be appre-hended, and that the absence of the defendant from England will materially prejudice the plaintiff in the prosecution of his action, such judge may in the prescribed manner order such defendant to be arrested and imprisoned for a period not exceeding six months, unless and until he has sooner given the prescribed security, not exceeding the amount claimed in the action, that he will not go out of England without the leave of the court ..."

"The word 'execution' in its widest sense signifies the enforcement of or giving effect to the judgments or orders of courts of justice. In a narrower sense, it means the enforcement of those judgments or orders by a public officer under the writs of fieri facias, possession, delivery, sequestration, fieri facias de bonis ecclesiasticis, etc."

"expressed in the form of a royal command directing the sheriff of the county in which the judgment debtor's goods are situate to seize in execution such of the judgment debtor's goods, chattels and other property as are authorised to be seized by law, and thereout to 'cause to be made' (namely to sell) so much of the same as may be sufficient to satisfy the amount of the judgment debt and the costs of execution, and also interest on the amount of the judgment from its date until payment."

Submissions made on behalf of the Director of Immigration

Mr. Kaplan made the following preliminary observations:-

"IT IS ORDERED that Solicitors for the Plaintiff Company be at liberty to request the Director of Immigration to put the name of the 2nd Defendant ... onto the 'stop list' of the Immigration Department."

Mr. Kaplan's main submission is that if the order sought is intended to be a mandatory injunction requiring the Director of Immigration to put the 2nd Defendant's name on the stop list, then the Court has no jurisdiction to grant it because of the provisions of section 16 of the Crown Proceedings Ordinance, Cap. 300, which provides:-

8. Mr. Kaplan further submitted that if the order sought is not intended to be a mandatory injunction on the Director of Immigration to put the name of the 2nd Defendant on the stop list, then it will be a completely futile order in that he will never know when the 2nd Defendant is coming into or going out of Hong Kong without putting the 2nd Defendant's name on the stop list, with the result that the bailiff will never be informed by the Director of Immigration of such fact. He submitted that the order is in a form which is intended to be as close as possible to asking the Court to do something which it has no power to do; alternatively, the intention of serving such an order on the Director of Immigration is to mislead him, particularly when accompanied by a letter similar to the 13 letters handed up to me; or to confuse him even if the order were not to be accompanied by such a letter. He further submitted that the draftsman of the proposed order has deliberately used vague language, perhaps hoping that the Director of Immigration will construe it as requiring him to put the 2nd Defendant's name on the stop list.

9. Mr. Kaplan's second main submission is that the desired effect of the proposed order is to stop the 2nd Defendant from leaving Hong Kong, which is in direct conflict with the clear intention of the legis-lature when it abolished the Writs of ne exeat regno (and colonia) in 1974. The Court has, therefore, no power to stop anybody from leaving Hong Kong on the ground that he is a judgment debtor and has failed to satisfy the judgment debt.

10. Mr. Kaplan submitted that it requires a specific provision in the Inland Revenue Ordinance to give power to members of the Immigration Service to stop someone from leaving Hong Kong when he has failed to pay the assessed tax or give security for such tax. As for wardship cases, it is a contempt of Court to remove the ward out of the jurisdiction. That was why the Director of Immigration was prepared to co-operate with solicitors who inform him of such threatened unauthorised removal.

11. Mr. Kaplan submitted that Mareva injunctions are directed to the assets of the defendant and not to his person; and that the power to grant such injunction does not come from the inherent jurisdiction of the Court but is expressly conferred by statute under section 19(1) of the Supreme Court Ordinance which provides:-

"The High Court may grant ... an injunction ... in all cases in which it appears to the High Court to be just or convenient so to do."

12. He further submitted the power to make Anton Pillar Orders and pre-discovery disclosure orders in aid of Mareva injunctions comes from the inherent jurisdiction of the Court; but even there the Court makes these orders so as to control its own processes but not to fill in gaps left open in the law or to do something which is expressly prohibited by law.

13. Mr. Kaplan further submitted that in this case there is no order from the Court as such requiring the debtor to be imprisoned, and that the order from the Court is that the 2nd Defendant should pay a certain sum of money to the judgment creditor. There is therefore no injunction which restrains the judgment debtor from leaving Hong Kong.

14. Mr. Kaplan further submitted that it will be wrong for the Court to order the Director of Immigration to do something which he is not empowered to do so under the Immigration Ordinance or under any other ordinance.

15. Finally, he submitted that the stop list is drawn up purely for interdepartmental convenience. It is non-statutory, and therefore litigants have no right to have a particular person's name put on such stop list.

Submissions by the amici curiae

16. Mr. Sakhrani made the following submissions:-

Form of the writ of fi.fa.

17. The writ of fi. fa. in question was not produced to me as evidence by the Plaintiff; nor was a copy of such writ contained in my file. Miss Yuen addressed me on the basis that the Writ of fi.fa. was as pre-scribed in Form No. 53 in Appendix A to the Rules of the Supreme Court. I will assume this to be so. The important words which have been relied upon by Miss Yuen as a royal command directed to the bailiff to arrest the 2nd Defendant and deliver him to the debtors' jail are contained in square brackets in the prescribed form No. 53. It is important to refer to the last paragraph thereof:-

"N.B. The words in square brackets are only to be included on the express instructions of the party applying for the writ of fieri facias to issue."

18. That is plainly right because rule 1 of Order 49B leaves the choice to the judgment creditor whether to enforce his judgment for money by the imprisonment of the defendant in question or the attachment and sale of his property or by both methods. It is therefore obvious that if the judgment creditor does not specifically ask for the method of execution by imprisonment, the writ of fi fa. when issued should not contain the words in the square brackets. The praecipe for writ of fieri facias filed on 28th February 1983 on behalf of the Plaintiff did not contain the requisite instructions to have the words within the square brackets to be included. This being the case, the actual writ issued should not contain those vital words. If the writ that was actually issued does not contain these words, then clearly the Plaintiff's application must fail in that none of the Defendants in this action is liable to be imprisoned in the debtors' jail.

19. There is, however, another possibility, which is that although the Plaintiff had not requested in the praecipe for the imprisonment of the 2nd Defendant, yet owing to an oversight on the part of the Registry, the words within the square brackets have not been deleted in the writ of fi fa. which was actually issued. In this case, it may be argued that until the writ of fi fa. containing these words had been set aside for irregularity or until it had been amended by the deletion of the words within the square brackets, it remains a valid direction to the bailiff to arrest and deliver the 2nd Defendant to the debtors' jail. But even so, it would clearly be wrong for me to exercise my discretion, even if I have jurisdiction to do so, to give an order in terms of paragraph 1 of the summons which is intended to have the effect of having the 2nd Defendant arrested at an immigration point and be delivered to the debtors' jail. I therefore feel that whether the actual writ had contained the words within the square brackets or not, I would not make an order in terms of paragraph 1 of the summons. On this ground alone the Plaintiff's application must fail.

20. But it will not be right if I do not proceed further and deal with the carefully prepared submissions of counsel. In so doing, I will assume that there had been no irregularity in the issue of the writ of fi.fe. and that the bailiff had been properly enjoined to arrest and deliver the 2nd Defendant to the debtors' jail.

Form of the Judgment

21. According to the Judgment formally entered on 4th February 1983, the 1st, 2nd and 3rd Defendants are adjudged to pay 2 sums of money to the Plaintiff with interests thereon and costs. There is no order requiring the 2nd Defendant to be imprisoned in case of non-payment of the judgment debt, or to remain within the jurisdiction of the Court. Of course, the Plaintiff has a right to put the 2nd Defendant into the debtors' jail by virtue of the provisions of Order 49B of the Rules of Supreme Court; but even if that right had been properly exercised, it would only mean this: that if the bailiff can find the 2nd Defendant who should fail to point to sufficient property to satisfy the judgment debt, then the bailiff would arrest and deliver him to the debtors' jail. As a matter of practice, the bailiff is instructed by the plaintiff or his solicitors to go to a particular place, usually the home of the defendant, to levy execution there. This is borne out by paragraph 4 of the affirmation of Mr. Sammy Tsoi Sinn Ming filed herein on 16th July 1983. But if the defendant cannot be found, and there is no or insufficient property in his home to satisfy the judgment debt, the bailiff will return to his office pending further instructions from the plaintiff or his solicitors. For practical reasons, the bailiff's office does not and is not expected to search all over Hong Kong for the judgment debtor. Supposing a judgment debtor had avoided arrest by the bailiff by leaving his own home and staying with a friend, and supposing he was later found by the judgment creditor and the bailiff, I still do not think that such an "absconding judgment debtor" could be committed for contempt of court for having tried to avoid being arrested and imprisoned. This underlines the point that the royal command contained in the writ of fi. fa. is only directed to the bailiff; it certainly affects the liberty of the judgment debtor; but it is in no Way intended to be an order restraining him from leaving Hong Kong.

Abolition of writ of ne exeat regno

22. With the abolition of the writs of ne exeat regno and ne exeat colonia in 1974, it is obvious to me that the legislature has taken away from the Courts the power to restrain a person from leaving Hong Kong except in circumstances which are covered by Order 44A of the Rules of the Supreme Court which is not applicable here. In these circumstances I cannot see how it can be argued that a Court in Hong Kong still has the power under its inherent jurisdiction to make an order in terms of paragraph 1 of the summons which is intended to have the effect of preventing the 2nd Defendant from leaving Hong Kong.

23. The freedom of movement, that is, to leave or to return to Hong Kong, is one of the many freedoms enjoyed by the citizens of Hong Kong and is a freedom which is dear to us all and should be guarded jealously by the Courts. I am firmly of the view that short of legislative amendment to the law, it will be wrong for the Courts of Hong Kong to deprive a citizen of this freedom to leave Hong Kong even though he is a judgment debtor who is liable to be imprisoned in the debtors' jail.

Stop List

24. I agree with Mr. Kaplan that the stop list kept by the Immigration Department is entirely for inter-departmental convenience and is non- statutory. A litigant has no right to have the name of a judgment debtor put on the stop list; and it is wrong for the Courts to intervene by requiring the name of such a judgment debtor to be put on the stop list. Just as the Executive must not interfere with the Courts, so the Courts must not intermeddle in the daily administration of the Government except by way of Judicial Review. A citizen can of course request the Director of Immigration to put another person's name on the stop list, but whether such a request will be acceded to must be left to the discretion of the Director of Immigration who will no doubt take legal advice whenever necessary.

Analogy to a Mareva injunction

25. I do not think that the order sought under paragraphs 1 and 2 of the summons has the same effect as the service of an Mareva injunction order on a bank for the following reasons:-

Nature of the relief claimed

26. Paragraph 1 of the summons is in the form of a direction given to the bailiff and paragraph 2 merely requires the proposed order to be served on the Director of Immigration. It is immediately apparent that by paragraph 1 of the summons the Director of Immigration is not required to inform the bailiff should the 2nd Defendant be passing through a point of immigration. The relevant words are: "The bailiff shall upon information by the Director of Immigration that ... the 2nd Defendant ... is passing through a point of immigration ..." All the Director of Immigration is required to do is to render assistance to the bailiff if so called upon to assist him to arrest and deliver the 2nd Defendant to the debtors' jail. Miss Yuen submitted that the Director ought, upon the service on him of the proposed order, to put the 2nd Defendant's name on the stop list. I do not agree. The proposed order does not require him to do so; and the Court has no power to direct him to do so by virtue of section 16(2) of the Crown Proceedings Ordinance. If the 2nd Defendant's name is not put on the stop list, then even if the 2nd Defendant should come back to Hong Kong, there will be no way for the Director of Immigration to be apprised of it. He would thus be unable to inform the bailiff of the fact. On this analysis, the proposed order is futile. But if the intention had been to mislead the Director of Immigration into thinking that he was under a duty to put the 2nd Defendant's name on the stop list by means of an accompanying letter as in the 13 cases brought to my attention, or to confuse the Director of Immigration into thinking that he had such a duty even without such an accompanying letter, then I must not allow myself to be instrumental to such a device. There is a primary duty on the Court to ensure that its order is couched in clear and unambiguous language so that people will know exactly whether they are effected by it or not, and if they are, they will know how to comply with it. It is, therefore, wrong for a Court to make an order which is deliberately couched in vague, misleading and confusing language. As a matter of principle, therefore, I will not accede to this application.

Inherent jurisdiction

27. Nor am I satisfied that after the abolition of the writs of ne exeat regno and colonia in 1974, the Court in Hong Kong still has power under its inherent jurisdiction to prohibit a judgment debtor from leaving Hong Kong although the judgment debt has not been satisfied.

28. I appreciate that many solicitors in Hong Kong feel very strongly that Courts should assist in the enforcement of their own judgments or orders by prohibiting judgment debtors from leaving Hong Kong until after their judgment debts have been fully satisfied. But I cannot see how, in the absence of legislative intervention, the Courts can assume such jurisdiction.

29. For these reasons, the application is dismissed.

30. As it has been agreed that costs will not be asked for whichever way my decision goes, I will make no order as to costs.

Representation:

Miss Maria Yuen instructed by Messrs. Iu, Lai & Li for the Plaintiff

Mr. N. Kaplan, Q.C. and Mr. B. Barlow for the Attorney General

Mr. A. Sakhrani, Q.C. and Mr. Geoffrey Ma instructed by Messrs. C.Y. Kwan & Co as amicicuriae

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

_____

___________

JUDGMENT

___________

1. Hong Kong's real estate market enjoyed boon conditions in the summer of 1981. The most spectaculer transaction of all occurred when a consortium of well-known Hong Kong real estate companies paid a world record price of HK$2,800 million for the site on which stands the old wing of the Miramar Hotel, bounded on one side by Nathan Road - aptly known as "The Golden Mile" - and on the other by Kimberley Road in the tourist district of Tsim Sha Tsui, Kowloon.

2. The seller was Miramar Hotel & Investment Co. Ltd. ("Miramar Hotel & Investment"), one of the plaintiffs in the present action. Prime mover amongst the companies in the purchasing consortium was Carrian Investments Ltd. ("Carrian Investments"). Carrian Investments' idea was to buy this piece of land with a view to demolishing the hotel then standing on it, and re-developing the site as shop and office accommodation along the lines of the "The Landmark" building in Hong Kong's Central District.

3. Carrian Investments' initial share in the consortium was 60%. Included in that 60% is a 5% share attributable to China Underwriters Ltd. ("China Underwriters"), but for the purposes of the present action it is unnecessary to treat China Underwriters' share as at any stage separate from that of Carrian Investments.

4. Next largest participant in the consortium was The Hong Kong Land Co. Ltd. ("Hong Kong Land") with 25%. Hong Kong Land had been responsible for "The Landmark" development, and one of the reasons for bringing them into the present consortium was so they could manage the re-development project.

5. Besides being the seller, Miramar Hotel & Investment featured as a 7½% participant in the consortium.

6. Lastly, Sun King Fung Ltd. ("Sun King Fung") took the remaining 7½%.

7. The vehicle used by the members of the consortium for the purchase was Armatys Estates Ltd. ("Armatys"), a company which had previously never done any business. Reflecting the degree of participation by each member of the consortium, the beneficial ownership of the shares in Armatys was therefore at the outset held as follows:

8. Armatys in its turn wholly owned a subsidiary known as Beaux Estates Ltd. ("Beaux") which was another company previously uninvolved in any business.

9. Beaux was used to effect the actual purchase of the land, the purchase money having been advanced to it by Armatys, which in its turn had been lent the money by the participants in the consortium, each participant lending in proportion to its beneficial shareholding in Armatys.

10. The sale and purchase agreement between Miramar Hotel & Investment on the one side and Beaux on the other was dated the 4th August 1981. It is hereafter described as "the Sale and Purchase Agreement". Under that agreement $420 million, being 15% of the $2800 million purchase price, was paid to Miramar Hotel & Investment straight away. A further 18%, amounting to $504 million, fell to be paid six months later, namely on the 4th February 1982. That was duly paid. The outstanding 67%, namely $1,876 million did not become due till the 4th May 1983.

11. It was provided in the Sale and Purchase Agreement that the seller would in effect arrange the financing of this balance of $1,876 million by leaving it on mortgage at an interest rate of 1% above prime, with repayment over three years. During the three year mortgage period, $224 million was repayable at the end of thirteen months, a further $224 million six months later, and the balance seventeen months after that, which of course, coincided with the end of the three year mortgage period.

12. I have no doubt that as a matter of business reality it was from the outset contemplated by all of the companies participating in the consortium that they would all in due course enter into a formal joint venture agreement together to regulate their rights and obligations inter se.

13. This was not, however, done till some fifteen months later, on the 11th November 1982 ("the Miramar Joint Venture Agreement"). By then, the land market presented a very different picture. Gone was the euphoria of the summer of 1981, and in its stead was a much more sombre mood. I do not need go into the details. Anyone living in Hong Kong during that autumn of 1982 knows what it was like. Some fundamental questions about the political future of Hong Kong after 1997 had arisen, and it is no exaggeration to say the Colony was then racked with uncertainty about its future.

14. From the dizzy heights of $2,800 million in the summer of 1981, the value of the land had fallen to something probably closer to twenty-five percent of that figure. The magnitude of the tumble was reflected in a deal done by Sun King Fung a few days before the 11th November 1982. It was content to transfer its 7½% share in the consortium to Miramar Hotel & Investment for approximately one quarter of what it had paid. Further evidence of what had happened came when a professional valuation was made of the property on the 28th February 1983. That put a price-tag of $787 million on it. True, that was some four months later, but it shows a result consistent with the transaction between Sun King Fung and Miramar Hotel & Investment to which I have just referred.

15. Whether or not the decline in value of the land between the summer of 1981 and the autumn of 1982 was precisely 75% is of no real significance. What is significant is that there had been a massive reduction in the value of the land by the time the Miramar Joint Venture Agreement came to be signed on the 11th November 1982. Clearly, the whole project of purchasing and developing the land was looking decidedly less attractive by the 11th November 1982 than it had on the 4th August 1981, and as at the 11th November 1982, any Hong Kong businessman would obviously have been looking at the whole venture with a far from sanguine eye.

16. Between the land purchase on the 4th August 1981 and the formal joint venture agreement of the 11th November 1982, there were changes in the composition of the consortium.

17. There was firstly an increase in Hong Kong Land's participation from 25% to 35% and a corresponding decrease in that of Carrian Investments from 60% to 50% in March 1982. Miramar Hotel & Investment knew of that change almost as soon as it happened, but did not necessarily know why it had occurred. I will assume it did not know why it occurred, and whether it knew or not is not going to affect the outcome of the case. The state of knowledge of Miramar Hotel & Investment was an unexplored area in the case as it did not see fit to put any of its directors, or staff into the witness box.

18. The reason for this transfer of a 10% share by Carrian Investments to Hong Kong Land was that it formed part of a deal between the two companies under which Hong Kong Land sold some flats to Carrian Investments. Hong Kong Land was not over-enthusiastic at the prospect of taking on this extra 10% share, but decided it was worth its while in order to sell its flats. Part of the purchase price for the flats was paid by Carrian Investments through the transfer of this 10%. This change in the composition of the consortium was, of course, reflected by a change in the beneficial ownership of the shareholding of Armatys.

19. Why Hong Kong Land was less than overjoyed to increase its stake in Armatys was that while ownership of shares in that company could confer great benefits, it could also, as the obverse side of the coin, bring on heavy burdens.

20. Theoretically, a 10% stake in Armatys meant not only an indirect 10% share in the land via Beaux but also the right to be paid 10% of the loans advanced to Armatys by the consortium. However, the entitlement to be repaid the loans in due course must have appeared somewhat illusory in a falling land-market, and throughout 1982 land prices were falling.

21. As against the mere hope of being repaid the loans to Armatys at some remote future time, a shareholder had to take into account the immediate reality of needing to dig into his pockets the whole time to fund Armatys so it could pass on the money to Beaux which still had to pay Miramar Hotel & Investment the balance of the purchase price of the land, while also needing money for the preposed redevelopment.

22. Thus, increased participation in the consortium was by no means an unmixed blessed, a circumstance of which I am sure Hong Kong Land was at all times acutely aware, and no doubt increasingly so as the land market deteriorated.

23. Next, Hong Kong Land agreed to take a further 15% share from Carrian Investments, so that Hong Kong Land's share would become 50% while Carrian Investments' share went down to 35%. Provision for such a transfer was first made in an agreement dated the 22nd June 1982 between Carrian companies on the one side, and Hong Kong Land subsidiaries on the other. That agreement is known as the "Miramar Purchase Agreement". The actual transfer did not take place till the 8th November 1982 under a supplemental agreement ("the Miramar Purchase Supplemental Agreement").

24. The Miramar Purchase Agreement together with the Miramar Purchase Supplemental Agreement own their origin to another agreement dated the 22nd June 1982, known as "the May Road Agreement" under which Hong Kong Land, through subsidiaries, sold flats to a joint venture company called Emlyn Investments Ltd. ("Emlyn") which was owned as to 50% by Hong Kong Land, and as to the other 50% by Carrian Investments.

25. The total amount payable under the May Road Agreement was $998 million so that the half share Carrian Investments had to find was $499 million. It was agreed Carrian Investments could pay that by four instalments, the first being of $50 million, the second $158.2 million, the third $95.4 million and the final instalment $95.4 million.

26. That second instalment of $158.2 million was to be satisfied by the transfer of 15% of the shares in Armatys which carried the corresponding right to be repaid 15% of the borrowings of Armatys at that stage, such 15% amounting to $158.2 million.

27. In considering whether to enter into the May Road Agreement, Hong Kong Land faced a dilemma. On the one hand, Hong Kong Land regarded the May Road Agreement as generally favourable from the commercial point of view, but, on the other hand, it did not really want to take on any greater degree of participation in the Miramar Hotel joint venture.

28. Hong Kong Land sought to resolve that dilemma by agreeing with Carrian Investments that Carrian Investments' parent company, Carrian Holdings would buy back 15% of the shareholding in Armatys together with the benefit of the loans to Armatys on the 1st December 1983, which, was the date Carrian Investments was due to pay the final instalment under the May Road Agreement. That way, on the 1st December 1983, Hong Kong Land would revert to a 35% holding in Armatys whilst Carrian companies would go back to 50%.

29. The May Road Agreement, and the Miramar Purchase Agreement together with the Miramar Purchase Supplemental Agreement are all carefully dovetailed, so as to make provision for Hong Kong Land to reduce its stake in Armatys to 35%.

30. For ease of exposition I have spoken somewhat loosely so far of the subsidiaries of Hong Kong Land and Carrian Investments. Now it will be necessary to specify who some of those subsidiaries are in an endeavour to make this case more intelligible, and to explain who the parties are.

31. Besides Carrian Investments, and Carrain Holdings, the other parties to the Miramar Purchase Agreement are:

32. S.C.L. was a wholly owned subsidiary of Carrian Investments, whilst Gwynedd and Welsh Pool were both wholly owned subsidiaries of Hong Kong Land.

33. For stamp duty reasons, Gwynedd was to receive the transfer of the Armatys shares whilst Welsh Pool was to take the benefit of the debts.

34. The parties to the Miramar Purchase Supplemental Agreement were expanded to include Hong Kong Land and Emlyn, but I do not see that anything turns on that pair being added at that stage: they could just as easily have been included in the line-up for the Miramar Purchase Agreement.

35. It is Clause 3 in the Miramar Purchase Agreement which deals with the buy-back. I need only set out paragraphs (A) and (B), which are as follows:

36. Relevant additions are made by Clause 4 of the Miramar Purchase Supplemental Agreement, which provides:-

37. Attention needs also be given to Caluse 6(C) which provides:-

38. From as far back as July 1982 Miramar Hotel & Investment was aware that Hong Kong Land was increasing its take in Armatys to 50% as the result of a transfer from Carrian Investments. It also knew before the 11th November 1982 that in future Hong Kong Land might want to out its stake back to 35% again. Mr. Gavriloff, a senior executive of Hong Kong Land informed Mr. Albert Young, Miramar Hotel & Investment's managing director of that in the few days before the 11th November 1982. What Mr. Gavriloff does not seem to have spelled out explicitly to Mr. Young on that occasion was that Carrian Holdings was due to buy-back 15% in Armatys on the 1st December 1983.

39. Perhaps I will just add in at this point I found both Mr. Gavriloff, and his immediate boss, Mr. Goodman, who was Hong Kong Land's general manager for joint ventures, honest and reliable witnesses whose evidence I accepted.

40. Whether Miramar Hotel & Investment knew of the buy-back pro-vision is an unexplored issue. I will assume it did not know.

41. What Miramar Hotel & Investment did most certainly know, though, was that in the Miramar Joint Venture Agreement signed on the 11th November 1982 Hong Kong Land's subsidiary, Gwynedd, expressly reserved to itself the right to transfer the shares it held in Armatys to Carrian Holdings without the consent of any other shareholder in Armatys. That provision is to be found in Clause 10(2) of the Miramar Joint Venture Agreement. I will set out that provision in due course. Moreover, Gwynedd's right to transfer shares in Armatys to Carrian Holdings is set out in Article 33 of the Articles of Association of Armatys. That Article 33 exactly mirrors the provisions of Clause 10(2) I have just been referring to.

42. I have already mentioned how the May Road Agreement and the Miramar Purchase Agreement together with the Miramar Purchase Supplemental Agreement all dovetail. They in their turn interlock with the Miramar Joint Venture Agreement of the 11th November 1982 to form a cleverly orchestrated whole.

43. The point has now been reached where it is convenient to look at the Miramar Joint Venture Agreement itself.

44. For a start, it is necessary to see who the parties were to it.

45. Of the original participants in the consortium, only Hong Kong Land is a party. The only reason it is a party is because it is the manager of the project. Actual ownership of any shares in Armatys is not held by Hong Kong Land itself but by its subsidiary, Gwynedd. Hence Gwynedd is a party to the Miramar Joint Venture Agreement, and its shareholding in Armatys is, of course, 50%, following on the events I have described.

46. Likewise, Carrian Investments and Miramar Hotel & Investment (neither of which is a party) have their subsidiaries as shareholders of Armatys and hence parties to the Miramar Joint Venture Agreement.

47. Although neither Carrian Investments nor Miramar Hotel & Investment is a party to this agreement, each of them is indirectly involved by virtue of guaranteeing the obligations of its subsidiary under the agreement. Likewise, Hong Kong Land, which, as I have said is a party to the agreement, also guarantees its subsidiary. Those guarantees, which bear the same date as the agreement, dovetail, needless to say, with the agreement. I will deal more fully with those guarantees in due course.

48. Carrian Investments' subsidiary is S.C.L. which holds 35% of the Armatys shares.

49. By the time of this Miramar Joint Venture Agreement, 15% of the shareholding in Armatys was under the control of Miramar Hotel & Investment. This was made up firstly of the 7 1/2% stake held by Miramar Hotel & Investment in the consortium from the outset. That 7 1/2% was held by Miramar Hotel & Investment's subsidiary, Chaintower. Another 7 1/2% came Miramar Hotel and Investment's way a few days before the 11th November 1982. Mention was made earlier of how Miramar Hotel & Investment acquired Sun King Fung's 7 1/2% for something like a quarter of what it had cost Sun King Fung. Somewhat coyly, Miramar Hotel & Investment did not want it bruiting around that Sun King Fung had decided to pull out so instead of having the whole 15% put in the one subsidiary, it had 7 1/2% put in the name of Wise Maneon Investment Limited ("Wise Maneon") which was held by Sun King Fung as nominee for Miramar Hotel & Investment. Thus, Wise Maneon too became a party.

50. The remaining parties are Armatys and Beaux.

51. Some of the provisions of that Miramar Joint Venture Agreement which are relevant for present purposes can now be looked at.

52. There is the first recital which describes S.C.L., Gwynedd ("GWIL"), Chaintower (also known as "Miramar"), and Wise Maneon ("WM") as "the Shareholders", meaning of course the shareholders in Armatys.

53. Another recital which can be noted is number 9 relating to the guarantees I have already spoken of. Perhaps it will aid understanding if I set that recital out in full together with "the First Schedule" to which it refers.

54. Clause 1 describes the share capital of Armatys, and in paragraph (b) shows how the four Shareholders own shares in the percentages I have already mentioned. Paragraph (g) makes provision for Armatys to adopt new Articles of Association. Those new Articles of Association of course include the new Article 33 empowering Gwynedd to transfer shares to Carrian Holdings without any other shareholders' consent.

55. Recognition is given by Clause 2 that Beaux is the wholly owned subsidiary of Armatys.

56. One finds a declaration of the business of Armatys and Beaux in Clause 3. It is an important provision so I will set it out in full (Armatys is "the Company" and Beaux is "the Subsidiary"):-

57. In paragraph 4 are contained the provisions about Hong Kong Land's role as project manager.

58. How the whole venture is to be financed is described in Clause 5. It is an extraordinarily complex provision, running to approximately seven closely typed pages. A study of it reveals the high degree of sophistication of the lawyers involved in drawing up this agreement. It is what one would expect where the transaction relates to the most expensive piece of land in the world. Nothing is left to chance. All i's are dotted and all t's crossed.

59. I will not set Clause 5 out in full; it is far too long. Instead, I will refer to some of its more important feature. Parts of it need to be studied with a wet towel wrapped around one's head, as Mr. Grabiner, Q.C., so rightly said.

60. A crucial provision of Clause 5, and fortunately one of the easier to understand, is found in the first sentence of paragraph (2), which reads:

61. The "proportions set out in the First Schedule" reflect the shareholdings, namely, S.C.L. 35%, Gwynedd 50%, Chaintower 7½% and Wise Maneon 7½%.

62. That is the provision which fixes the shareholders with the burden of each paying its proportion of the balance of the purchase price of the land under the Sale and Purchase Agreement. That balance amounts to $1,876 million. If Gwynedd is locked into having to pay 50% of that amount, it will need to find $938 million, whereas if it can transfer 15% of its shares to Carrian Holdings, as contemplated by the May Road Agreement, Miramar Purchase Agreement and the Miramar Purchase Supplemental Agreement the figure becomes $656.6 million, a difference of $281.4 million.

63. Whether, in the events which have happened, Miramar Hotel & Investment can get Gwynedd or its parent, Hong Kong Land, to pay that difference of $281.4 million is what this case is really all about.

64. Of particular significance for the purposes of that paragraph (2) are the words in brackets "(or in such other proportions as they may from time to time hold the shares in the Company following transfers duly made in accordance with sub-clause (8), or Clause 7 or 10)".

65. Clause 10 I have already touched upon; it is the one empowering Gwynedd to transfer shares to Carrian Holdings without the consent of other shareholders. Clause 7 is concerned with insolvency. I will set it out in full:

"7.

INSOLVENCY, ETC. In the event that any of the Shareholders or any of the Guarantors shall become insolvent, be unable to pay its debts as they fall due, stop, suspend or threaten to stop or suspend payment of all or a material part of its debts, or make or propose any general assignment or arrangement or composition with or for the benefit of its creditors, or if any present or future charge on or over all or a material portion of its present or future assets becomes enforceable and any step is taken to order made for its winding-up, then the Shareholder which is (or the Guarantor of which is) concerned shall forthwith upon being required to do so by the holders of a majority of the issued shares (excluding shares held by any defaulting party) transfer for cash at par to the other Shareholders or as they may direct all the shares in and the benefit of all the Shareholders' Loans to the Company held by it and for such purpose each party hereto hereby appoints each of the other parties hereto to be its attorney for the purpose of executing or completing any document, act or thing in connection with or in relation to any such transfer."

66. Sub-clause 8 of Clause 5 is concerned with the not unrelated topic of how if a shareholder or its guarantor defaults in advancing a loan to Armatys, then the other shareholders can take over the defaulter's shares or bring in a new investor.

67. Having moved out of sequence to deal with the important provision in brackets in Clause 5, paragraph (2), I will now deal with the other Clauses in numerical order.

68. Clause 6, which deals with charges over shares, is of no significance, and Clause 7 has already been set out in full.

69. Neither Clause 8, nor Clause 9 need looking at in detail. 'They are concerned with directors, management and administration.

70. Although the substance of Clause 10 has already been touched upon, it still needs to be set out in full. I now do that.

71. It is convenient at this point also to set out the relevant Articles of Armatys in full.

"32.    Subject to such of the restrictions of these Articles as may be applicable, any Member may transfer all or any of his shares by an instrument of transfer in the usual common form or in any other form which the Board may approve.

 

33.    No Member shall be entitled to transfer any shares in the Company save with the prior written consent of the holder or holders of not less than seventy-five per cent. (75%) of all the issued shares (other than the shares which are proposed to be transferred) of the Company, provided that no such consent shall be required for any transfer of shares from Gwynedd Investments Limited to Snowbright Company Limited or Carrian Holdings Limited or any subsidiary of Carrian Holdings Limited or for any transfer from Snow-bright Company Limited to Gwynedd Investments Limited.

 

34.    The instrument of transfer of a share shall be signed by or on behalf of the transferor and the transferee and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register in respect thereof. All instruments of transfer, when registered, may be retained by the Company.

 

35.    The Board shall not register any transfer of any share (except pursuant to the proviso to Article 33) unless the written consent referred to in Article 33 is produced to the Board with such transfer. The Board shall register any transfer in respect of which such written consent is so produced and shall register any transfer made pursuant to the proviso to Article 33."

72. No time needs be spent on Clause 11 and 12 which are entitled "Notices", and "The Completed Development" respectively.

73. Great reliance is placed by the plaintiffs on Clause 13(1). Clause 13 has the rubric "Miscellaneous" and its paragraph (1) reads:

74. Some reference was also made in argument to paragraph (8) which I set out, though I did not find it had any significance:

75. Having set out the relevant parts of the Miramar Joint Venture Agreement, the next task is to look at the interlocking guarantees. Each of Hong Kong Land, Carrian Investments, and Miramar Hotel & Investment gave a guarantee dated the 11th November 1982 in substantially identical terms.

76. It is only necessary to look at the guarantee given by Hong Kong Land: ("the Guarantee")

77. The Guarantee was expressed to be in favour of "the Covenantees" who were set out in a schedule as:

Carrian Investments

Miramar Hotel & Investment

S.C.L.

Chaintower

Wise Maneon

Armatys; and

Beaux

78. Recitals (C), (D) and (E) explain what the Guarantee is about and what the consideration is:

79. Clause 2 is headed "Performance Guarantee" and reads:

"         For the consideration referred to in Recital (E) hereto the Guarantor HEREBY IRREVOCABLY AND UNCONDITIONALLY COVENANTS AND UNDERTAKES with and to each Covenantee (and so at the covenants and undertakings to each Covenantee shall treated as separate and independent obligations):-

80. Under Clause 3, which is headed "Warranty, Further Covenant And Indemnity", it is only necessary to look at the first sentence of paragraph C.

81. The weeks leading up to the execution of the Miramar Joint Venture Agreement on the 11th November 1982 were not a happy time for Carrian Investments. It started to look as if this former idol of the stock market might have feet of clay.

82. Having announced an interim dividend at the beginning of October 1982, Carrian Investments sent shock waves through the stock market on the 26th October 1982 by announcing that the interim dividend would not be paid, but instead shareholders would receive a bonus issue. One does not need to know much about stocks and shares to realise that a bonus issue in those circumstances is a worthless piece of paper as the only result of such an exercise is a dilution of the company's equity. The company announced at the same time it was going to raise $500 million cash through an issue of preference shares.

83. Carrian Investments was experiencing a liquidity crisis. This did not come entirely as a surprise to Hong Kong Land as it had suspected as much since May 1982 (See Agreed Bundle of Correspondence, page 362). Moreover, Hong Kong Land itself being a property company would have good reason to be aware that Carrian Investments which was heavily involved in property deals would be likely to be experiencing a deteriorating financial position on a falling property market.

84. What was bad news for Carrian Investments was also bad news for all its associated companies like Carrain Holdings and S.C.L. They were all likely sink or swim together as a matter of economic reality, and this was common knowledge.

85. Financial colummists harped on the woes of Carrian companies (See Agreed Bundles of Correspondence at, for example, pages 782; 783; 784; 790; 798; 799; 800 and 801). At the time any observer with even a passing interest in financial matters could see that Carrian Investments and the companies in the so-called Carrian empire such as Carrian Holdings and S.C.L. were beginning to look a little shaky.

86. Far from dispelling the apprehension which Hong Kong Land, in common with everyone else, must have been feeling about Carrian companies at the time, a letter dated the 5th November 1982 from Mr. George Tan, the Chairman of Carrian Investments to Mr. Trevor Bedford, the Managing Director of Hong Kong Land spelt out that all was indeed not well with Carrian.

87. I set out the relevant parts of that letter:

"Most unfortunately, due to the uncertainty of the future of Hong Kong and particularly subsequent to the recent visit of the British Prime Minister to China, the property market in Hong Kong appeared collapsed and dead. The Overseas Chinese have no confidence to continue to invest, especially on the property side. Therefore, we are apparently facing the temporary cash tight problems resulting from non-receipt of payments amounting around HK$500 million:

In the circumstance that we were unable to get the receivables, we have to pay and meet our various commitments, including the HK$83 million to The Hong Kong Land Co. Limited. Other payments which were supposed to be automatically rolled over were met with refusal and we were forced to pay out cash of approximately HK$600 million.

 

At this time of distress, we have no intention to blame anybody or attempt to make any excuse but we need your support and help. Therefore, I have made the following suggestion to you:-

 

        Trust that our proposals meet your favourable consideration."

88. Whether even at the time the Miramar Joint Venture Agreement was executed on the 11th November 1982 Carrian Holdings was solvent is not clear on the evidence. At the very least, there was a cloud hanging over the financial well-being of all Carrian companies at that stage. Nonetheless, the Miramar Joint Venture Agreement, which included the provision about Gwynedd being able to transfer shares to Carrian Holdings without other shareholders' consent, was duly executed on the 11th November 1982.

89. The early symptoms in October and November 1982 that the Carrian empire was ailing were proved all too correct by subsequent events. The illness has in fact proved terminal for both Carrian Investments and Carrian Holdings so that they are now under compulsery liquidation. However, that is perhaps jumping too far ahead in the story.

90. After entering into the Miramar Joint Venture Agreement and the Guarantee on the 11th November 1982, the next big date which loomed ahead for the interested parties was the 4th May 1983 when the Sale and Purchase Agreement in respect of the land was due for completion.

91. From as early as December 1982 Hong Kong Land began pondering the possibility whether it might be better to try to cut its losses by writing off the money it had so far invested in the Miramar joint venture scheme, and "walking away" from the scheme. The land market was still depressed, and the figures for the whole scheme looked horrendous (See Agreed Correspondence Bundle at page 941).

92. At the very least, Hong Kong Land wanted to unload on to Carrian Holdings 15% of the shareholding of Armatys and the obligations that went with it as soon as possible. The May Road Agreement, the Miramar Purchase Agreement and the Miramar Purchase Supplemental Agreement all contemplated that transfer taking place on the 1st December 1983, but already, in December 1982, Hong Kong Land began turning its thoughts to whether that transfer might be accelerated.

93. With no sign of any improvement in the property market, a reprieve was granted to Beaux by Miramar Hotel and Estates on the 16th April 1983 when the completion date under the Sale and Purchase Agreement was extended by one year to the 4th May 1984.

94. As the year 1983 progressed, Hong Kong Land disentangled itself from various joint ventures with companies in the Carrian group. Such disentanglement was to both Carrian's and Hong Kong Land's advantage. The Carrian companies were in no position to meet their commitments under the joint ventures. Hong Kong Land obviously did not wish to continue being involved with companies in such a position, while the Carrian group for its part thought its prospect of being "rescued" by banks would be enhanced if it could extricate itself from the joint ventures.

95. In July 1983, Carrian companies and Hong Kong Land began negotiating terms on which Hong Kong Land would buy out Carrian's interest under the May Road Agreement. By the end of August 1983, the details had been finalised, (See Agreed Bundle of Correspondence at pages 1233 to 1235). Basically, Hong Kong Land agreed to buy out Carrian Investments' stake in Emlyn for $31.5 million, while Carrian Holdings agreed to accept a transfer of 15% of the Armatys shares straight away rather than wait till the 1st December 1983. As part of the consideration for agreeing to that, Carrian Holdings had the accompanying obligation to buy the benefit of 15% of the debts owed by Armatys postponed from the 1st December 1983 till the 31st December 1986. By the 1st December 1983, the figure to be put on that 15% of the debts would be $183,835,742.17, plus a further amount for interest. As a further inducement for Carrian Holdings to agree to the accelerated share transfer, it was only required to pay interest at the modest rate of 6% on that sum of $183,835.17 between the 1st December 1983 and the 31st December 1986.

96. There is no doubt that by the end of August 1983, Carrian Holdings was in no position to pay its debts. That is in effect acknowledged, albeit somewhat euphemistically, in a recital of the agreement which actually sought to bring about the transfer of 15% of the Armatys shares to Carrian Holdings:

97. That agreement is dated the 3rd September 1983, and is made between Gwynedd, Welsh Pool and Carrian Holdings. The mechanics of the agreement were that Gwynedd sold 15% of the Armatys shares to Carrian Holdings with immediate effect, while Welsh Pool's assignment to Carrian Holdings of the benefit of the Armatys debt was not to be completed till the 31st December 1986.

98. Detailed provision was made in that agreement for the transfer of the shares, and for what was to happen about the directors in Armatys pending the completion of the assignment of the debt to Welsh Pool, but as nothing really turns on any of that I do not propose to go into it.

99. A further development in the Carrian saga occurred on the 11th September 1983 when the Chairman and Managing Director of Carrian Investments and Carrian Holding were arrested by officers of the Commercial Crime Bureau.

100. On the 14th September 1983, the Secretary of Armatys gave notice of a board meeting for the 23rd September 1983 when one item on the agenda was "To approve the transfer of shares".

101. Mr. Young, who, through his interest in Wise Maneon and Chain-tower, is a director of Armatys, duly received his copy of that notice and agenda. As already mentioned, he is also managing director of Miramar Hotel & Investment.

102. Through the enquires of his solicitors, Mr. Young found out about the sale of the 15% of the Armatys shares to Carrian Holdings on the 3rd September 1983.

103. Mr. Young's solicitors, acting on behalf of the three plaintiffs in the present action, threatened to seek on injunction unless there was a postponement of the board meeting of the 23rd September 1983, as the plaintiffs objected to the transfer being registered.

104. The Secretary of Armatys went ahead on the 21st September 1983 and purported to register the transfer. Later that day, the plaintiffs went before a judge ex parte and got an interim injunction to forbid the board meeting due for the 23rd September 1983 from approving the transfer.

105. It was realistically conceded before me on behalf of the plaintiffs that, in view of the composition of the board, if the board meeting had been allowed to go ahead on the 23rd September 1983, the transfer would undoubtedly have been approved and registered.

106. From the mountains of documents and days of submissions shines forth the simple issue of whether that registration should be allowed to stand. Hinging on that simple issue is, of course, the serious consequence of whether Hong Kong Land is liable or not for seeing that $281.4 million gets channelled Miramar Hotel & Investment's way under the Sale and Purchase Agreement.

107. Having set out the facts, the point has now been reached to consider the grounds in law on which the plaintiffs hope to keep Gwynedd locked into a 50% holding of the shares in Armatys.

108. In essence, only two grounds are relied on. One of them relates to the technicalities of registering the transfer. That can swiftly be disposed of.

109. It was pointed out on behalf of the plaintiffs that there was a technical infringement of Article 35 when the transfer was entered in the Register on the 21st September 1983 without the requisite board meeting. Realistically, though, it was conceded that the board would have approved such registration, had it not been for the fact that it was prevented by the plaintiffs' injunction from considering this time at the meeting fixed for the 23rd September 1983.

110. Plainly, no court is going to allow any party to derive an advantage from an injunction, if the injunction was wrongfully granted in the first place. Nothing could be more inequitable than to allow a party to profit, in effect, from his own wrongful act.

111. Thus, it is only if the plaintiffs turn out to have been justified in obtaining the injunction of the 21st September 1983 that the court will take any step to rectify the Register of Armatys.

112. That no one shall be allowed to profit from his own wrong is one of those principles of the law so basic that no authority really need be cited, but, for the sake of completeness, I will just mention Bentley-Stevens v. Jones⁽¹⁾ as an illustration of how, when the circumstances are appropriate, the court will decline to rectify entries in a company's register, despite technical non-compliance with Articles.

113. It is, therefore, only if the plaintiffs were justified in obtaining their injunction of the 21st September 1983 that they have any prospect of preventing full effect being given to the registration of 15% of the shares in the name of Carrian Holdings.

114. This leads into the crucial second ground in law relied on by the plaintiffs, namely, in effect, that the contractual arrangements and the surrounding circumstances were such that a term should be implied in effect prohibiting the transfer to Carrian Holdings when it is insolvent.

115. How the implication was said to arise was, broadly speaking, as follows. By Clause 13 of the Miramar Joint Venture Agreement, the parties which, of course, include Gwynedd and Hong Kong Land undertake to ensure full effect is given to the provisions of that agreement, and to procure that Armatys and Beaux comply in all respects with its terms. One of the terms of the Miramar Joint Venture Agreement that Gwynedd and Hong Kong Land must therefore comply with is Clause 3 which declares that the business of Armatys is to advance funds to Beaux and to ensure that Beaux discharges its obligations under the Sale and Purchase Agreement. Under Clause 5, the shareholders in Armatys must lend Armatys the money payable under the Sale and Purchase Agreement in proportion to their shareholdings.

116. Putting those various clauses together, the plaintiffs say an implication should be spelt out that no shares should be transferred to Carrian Holdings at a time when it will be unable to fulfil its financial obligations under the Miramar Joint Venture Agreement, including an obligation to shoulder its share of the money to be advanced to Armatys for the purposes of the Sale and Purchase Agreement. By allowing such a transfer to go ahead, Gwynedd and Hong Kong Land would be acting at variance with their duty of ensuring that Beaux fulfils its obligations under the Sale and Purchase Agreement, as well as to redevelop.

117. The implications arising against Hong Kong Land are alleged to be fortified by the undertakings it gave to the Govenantees under the Guarantee.

118. Apart, I believe, from custom and usuage, every type of implied term known to the law of contract was preyed in aim on the plaintiffs' behalf. Despite the vast learning, ingenuity, and energy employed on the plaintiffs' behalf, an insuperable barrier always stood in their way.

119. Gwynedd has merely done the very thing which Clause 10 of the Miramar Joint Venture Agreement has expressly stated it can do, namely transferred shares to Carrian Holdings without the consent of any other shareholder.

120. An implied term cannot contradict an express term. Inconvenient though this      proposition must be to the plaintiffs with so much money at stake, there is simply nothing they can do to get around it. Trying to imply a term which contradicts an express term is one of those exercises in futility, like trying to square a circle.

121. Any implication sought by the plaintiffs to the effect that there exist limits to Gwynedd's right to transfer to Garrian Holdings simply founders on the undeniable fact that to impose such limits flies in the face of a provision which, without qualification, says Gwynedd can transfer to Carrian Holdings.

122. The plaintiffs' case is unarguable in my opinion, and the injunction should never have been granted.

123. Even if one could ignore the principle that an implied term cannot contradict an express term, and pretend that there could somehow exist scope for making implications in such circumstances, there is still no hope of the court upholding the particular implied term the plaintiffs urge here.

124. Almost certainly fatal to any implied term contended for by the plaintiffs in the highly sophisticated and detailed Miramar Joint Venture Agreement and the Guarantee is the presumption that agreements, particularly commercial agreements, contain all the terms the parties intend to be included, so that if a point is not covered it is presumed the parties intended no provision should be made for that point: Aspdin v. Austin⁽²⁾; Luxor (Eastbourne) Ltd. v. Cooper⁽³⁾. The more detailed the agreement, the less scope for implied terms: Shell U.K. Ltd. v. Lostock Garages Ltd.⁽⁴⁾ and Codelfa Construction Pty. Ltd. v. State Rail Authority of New South Wales⁽⁵⁾ where Mason, J. of the High Court of Australia had this to say:-

"For obvious reasons the courts are slow to imply a term. In may cases, what the parties have actually agreed upon represents the totality of their willingness to agree; each may be prepared to take his chance in relation to an eventuality for which no provision is made. The more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue."

125. Agreements less appropriate for the implication of terms than those falling to be considered in the present case would be difficult to imagine.

126. In any event, I find it difficult to believe that the plaintiffs' lawyers could have actually overlooked the contingency of Carrian Holdings' insolvency when the agreements were drawn up. For many days before the Miramar Joint Venture Agreement and the Guarantee were executed it was public knowledge that Carrian Holdings through its association with Carrian Investments was experiencing financial difficulties. No great feat of lateral thinking was required by the plaintiffs' lawyers to hit upon the idea that perhaps one day Carrian Holdings might not be in a sound enough financial position to honour any obligations imposed by the Miramar Joint Venture Agreement. It should be remembered that the plaintiffs were part of a group of companies which already had $924 million in its pocket from the sale of the land, so they could afford lawyers capable of thinking of not unduly esoteric points like the one I have just mentioned about Carrian Holdings.

127. To me this looks like a straight-forward case of the term the plaintiffs now want implying being omitted from the Miramar Joint Venture Agreement not because it was overlooked but because the plaintiffs never intended it to be there.

128. Assuming the plaintiffs could somehow rebut the presumption that agreements embody all the provisions the parties intend to cover their situation, it then becomes necessary to look at the different types of terms which can be implied.

129. According to the text-books, implied terms can be divided into two broad categories, namely those implied by law, and those implied in fact from the presumed intention of the parties.

130. As an incident of a particular type of relationship the law will sometimes imply a term into a contract. This can happen even though the party against whom the term is to be implied might not have agreed to such a term if it had been put to him at the time the contract was made and even though the term cannot be formulated with any great precision. Lister v. Romford Ice and Cold Storare Co. Ltd.⁽⁶⁾ and Liverpool C.C. v. Irwin⁽⁷⁾ are examples of this principle at work. The law implies such terms for policy reasons.

131. For the plaintiffs it was argued that, as a necessary incident of the relationship of joint venturers, the court, as a matter of law, should imply a term to the effect that none of them should take any steps which might imperill the joint venture.

132. I was unable to discern any policy reason which might prompt the court to imply any such term.

133. If anything, policy reasons dictate that the courts should refrain from tinkering with the sort of complex commercial arrangements which existed amongst the parties before me.

134. In the context of implying incidents in a relationship, it was pointed out for the plaintiffs in the pleadings that there are duties of mutual trust, confidence and reliance upon duties of good faith and fidelity to each other to co-operate to carry out all of the incidents of the joint venture. I agree with all of that, and also with what was said in the American case of Meinhard v. Salmon⁽⁸⁾ to the effect that joint adventurers owe one another the duty of the finest loyalty. A case on similar facts in Hong Kong would have arrived at the same result through the application of the well known principle in Keech v. Sandford⁽⁹⁾. However, I could not see how any of this assisted the plaintiffs in the case before me. What the plaintiffs are asking of Gwynedd and Hong Kong Land is the equivalent of an act of altruism in surrendering an express right to transfer shares without consent, and the suggestion that duties such as loyalty, co-operation and the like extend as far as altruism is one I find novel. This comes back to the fundamental flaw of the plaintiffs' case which is that no implied term car contradict an express term.

135. Were it not for the express provisions of Clause 10 always standing in their way, the plaintiffs might, if anywhere, have been able to derive some assistance from the type of implication of law exemplified by Stirling v. Maitland⁽¹⁰⁾ and Southern Foundries Ltd. v. Shirlaw⁽¹¹⁾. The principle of those cases, which can be found in the head-note of Stirling v. Maitland⁽¹⁰⁾ is that, "If a party enters into an arrangement which can only take effect by the continuance of a certain existing state of circumstances there is an implied engagement on his part that he shall do nothing of his own motion to put an end to that state of circumstances under which alone the arrangement can be operative". In the Southern Foundries Ltd.⁽¹¹⁾ case, Lord Atkin added in relation to that passage, "That proposition in my opinion is well established law. Personally I should not so much base the law on an implied term, as on a positive rule of the law of contract that conduct of either promisee or promisee which can be said to amount to himself "of his own motion" bringing about the impossibility of performance is in itself a breach."

136. Unlike the sort of situation covered by Lister v. Romford Ice & Cold Storage Co. Ltd.⁽⁶⁾ and Liverpool C.C. v. Irwin⁽⁷⁾, I very much doubt whether the principle in Stirling v. Maitland⁽¹⁰⁾ and Southern Foundries v. Shirlaw⁽¹¹⁾ dispenses with the need for a precise formulation of the term which is to be implied, and I doubt too whether the court would insist on such a term being implied where it was clear that had such a term been suggested at the time the contract was made it would never have been agreed to.

137. Stirling v. Maitland⁽¹⁰⁾, Southern Foundries Ltd. v. Shirlaw⁽¹¹⁾ and the case of Mackay v. Dick⁽¹²⁾ which was cited in the same context were not cases where there appears to have been any problem of how the term to be implied should be formulated, or where there was any likelihood of the defendant having disagreed with the term if it had been proposed to him at the time the contract was made.

138. In the case before me, there is a difficulty experienced by the plaintiffs in formulating the term they say should be implied, and I have no doubt that neither Gwynedd, nor Hong Kong Land would for one moment have agreed at the time of the execution of the Miramar Joint Venture Agreement to the inclusion of a term along the lines which the plaintiffs now prepose.

139. That difficulty of formulation and the fact of the likelihood of refusal by the opposite party to have agreed to any such term would I think be fatal to any attempt by the plaintiffs to derive any benefit from cases like Stirling v. Maitland⁽¹⁰⁾ or Southerr Foundries v. Shirlaw⁽¹¹⁾.

140. I cannot help wondering if those two cases I have just mentioned really do exhibit any different characteristics from the next category of implied terms, which is those implied in fact on the basis of the presumed intention of the parties. I would have thought that Stirling v. Maitland⁽¹⁰⁾, Southern Foundries v. Shirlaw⁽¹¹⁾, as well as Mackay v. Dick⁽¹²⁾ were all cases where the terms sought to be implied by the plaintiffs could be implied as a matter of fact on the basis of the presumed intention of the parties.

141. This leads into the topic of terms implied in fact. As such term are based on the presumed intention of the parties, there is clearly no scope for any such implication where the evidence indicates the term would in fact not have been agreed to had it been suggested before the contract was made. It is incumbent upon the plaintiffs to prove that Hong Kong Land or Gwynedd would have agreed to such a term: Luxor (Eastbourne) Ltd. v. Cooper⁽³⁾ and Shell U.K. Ltd. v. Lostock Garages Ltd.⁽⁴⁾

142. There is no doubt in my mind that neither Gwynedd nor Hong Kong Land would have agreed to any proposal from the plaintiffs at the time of the execution of the Miramar Joint Venture Agreement and the Guarantee that a transfer of shares to Carrian Holdings could not take place if it turned out Carrian Holdings was insolvent.

143. Had the plaintiffs dared to insist upon such a provision at the time, I do not doubt that Gwynedd and Hong Kong Land would simply have refused to enter into the Miramar Joint Venture Agreement and the Guarantee. I do not think the plaintiffs would have been so foolhardy as to suggest such a provision in case it scared off Hong Kong Land and Gwynedd from executing the agreements at all at a time when everyone was very edgy about Hong Kong's future.

144. Since the May Road Agreement and the Miramar Purchase Agreement on the 22nd June 1982, Gwynedd and Hong Kong Land had carefully planned their affairs on the basis that the 50% holding in Armatys was a temporary state of affairs which would last till the 1st December 1983 at the latest.

145. As Carrian Holdings' financial difficulties started coming to light in the run up to the execution of the documents on the 11th November 1982, Gwynedd and Hong Kong Land would, if anything, have been more, not less, keen to keep an unqualified entitlement for Gwynedd to transfer Armatys shares to Carrian Holdings. I find it an irresistible inference that they must have foreseen there could be a continuation of difficult times ahead for the property market, so there would be no reason to want to lock themselves into a 50% share of the obligations of Armatys in such circumstances. Certainly, they, like anyone else, could see as a matter of common sense that the financial difficulties of the Carrian empire could only have an adverse effect on the property market.

146. Besides it being obvious that neither Gwynedd nor Hong Kong Land would have agreed to the sort of term the plaintiffs now want to see implied, I do not think such a term could pass the test of reasonableness. I do not see anything reasonable in passing on all the risks of Carrian Holdings' failure to Gwynedd and Hong Kong Land. The financial difficulties of Carrian Holdings were as obvious to the plaintiffs as to anyone else at the time the documents were executed on the 11th November 1982, but the plaintiffs were prepared to allow then to be executed in the form they took. I can see nothing reasonable in such circumstances in now requiring that Gwynedd and Hong Kong Land alone should be saddled with the consequences of Carrian Holdings difficulties. In this context, I bear in mind the famous words of Bowen L.J. from "The Mobrcock":⁽¹³⁾

"In business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are business men; not to impose on one side all the perils of the transaction, or to emancipate one side from all the chances of failure, but to make each party promise in law as much, at all events, as it must have been in the contemplation of both parties that he should be responsible for in respect of those perils or chances."

147. In view of the foregoing, the plaintiffs' claim stands dismissed and the interim injunction is discharged.

(1)    (1974) 1 W.L.R. 638

(2)    (1844) 5 Q.B. 671

(3)    (1941) A.C. 108, 137

(4)    (1976) 1 W.L.R. 1187, 1200

(5)     Vol. 56 A.L.J.R. 459

(6)    (1957) A.C. 555

(7)    (1977) A.C. 239

(8)     (1928) 164 N.E. 545

(9)    (1726) Sel. Ch. Cas. 61

(10)    (1864) 5 B & S 840

(11)    (1940) A.C. 701

(12)    (1881) 5 A.C. 251

(13)    (1889) Vol. XIV P.D. 64, 68

Representation:

Mr. Donald Rattee, Q.C. with Mr. Robert G. Kotewall (Lovell, White & King) for plaintiffs

Mr. Raymond Leung (K.C. Yung & Co.) for 1st defendant

Mr. Anthony Grabiner, Q.C. with Mr. Robert Ribeiro (Slaughter and May) for 3rd, 4th and 5th defendants

No appearance for 2nd defendant