ACE Project Group Pty Limited & Anor v Ginger Development Enterprises Pty Limited &

Supreme Court of NSW|2005-10-06|Before: Lloyd AJ, Mr J, Ms J

CITATION : ACE Project Group Pty Limited & Anor v Ginger Development Enterprises Pty Limited & (2) Ors [2005] NSWSC 1379

CATCHWORDS : CONTRACT: - construction - partnership/joint venture agreement - rights and duties of the parties

LEGISLATION CITED : Uniform Civil Procedure Rules 2005 Pt 28 r 2

ACE Project Group Pty Limited - First Plaintiff ACN 082 232 479 Shan Ruan - Second Plaintiff

PARTIES : Ginger Development Enterprises Pty Limited - First Defendant ACN 074 997 792 Yau Fong Yuen - Second Defendant Yuk Mui Kum - Third Defendant

Mr J B Whittle SC and Ms J E Stuckey-Clarke (barrister) - Plaintiffs COUNSEL : Mr A J L Ogborne (barrister) - Defendants

Raymond Lee & Co - Plaintiffs SOLICITORS : Dennis Wong & Co - Defendants

7 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

5702/02 ACE PROJECT GROUP PTY LIMITED & ANOR v GINGER DEVELOPMENT ENTERPRISES PTY LIMITED

1 HIS HONOUR: The parties have asked the Court for the determination of five separate questions which arise in these proceedings. I think it is appropriate that I make a formal order under Pt 28 r 2 of the Uniform Civil Procedure Rules 2005 that those questions be determined separately from any other question. This is because the question of the precise amounts due or payable by one party to the other are not able to be resolved at this stage. I observe that the parties have approached the whole issue in a sensible way and the answer to these questions will assist, it is hoped, in the final resolution of the proceedings. 2 The questions for determination raise the respective rights and obligations of the parties arising under an agreement, or perhaps a series of agreements, in a property development venture involving two properties, one in Arden St, Clovelly, and the other in Crown St, Surry Hills. Three documents are said to evidence the parties' agreement. 3 The first is described as minutes of a meeting of the first defendant, Ginger Development Enterprises Pty Limited, held on 3 April 1998 at 10:00 am at the office of an accountant, Ka Lung Wu CPA. Those minutes are signed by the second plaintiff, Shan Ruan, who effectively controls the first plaintiff, Ace Project Group Pty Limited. They are also signed by the second defendant, Yau Fong Yuen, and his wife, Yuk Mui Kum, also known as Mrs Yuen. Both of the latter persons effectively control Ginger Development Enterprises Pty Limited. This document may be described as annexure "F" to the affidavit of Yau Fong Yuen sworn 18 March 2004. 4 The second document is minutes of a meeting between the parties on the same afternoon of the same day and this document is annexure "G" to the same affidavit. 5 The third document is said to be the minutes of a meeting between Yau Fong Yuen, Yuk Mui Kum and Shan Ruan at Sydney International Airport on 5 April 1998. This document is annexure "H "to the same affidavit. 6 The documents are written in Chinese - I assume it is Cantonese - and for convenience I incorporate into this judgment the English translation of each of the three documents. [Annexure "F"] GINGER DEVELOPMENT ENTERPRISE PTY. LTD. Minutes of Meeting. Date: April 3, 1998 at 10 o'clock. Present at Meeting: Yau Fong Yuen, Yuk Mui Kum, Shan Ruan, Ka Lung Wu. Location: The Office of tile Accountant, Ka Lung Wu CPA.

The following matters were resolved at the meeting:

The executive directors Yau Fong Yuen and Yuk Mui Kum have decided to increase Ginger's capital from 380,000 to 760,000. All necessary processes will be carried out by the Accountant Ka Lung Wu.
To make a new declaration that, as from March 5, Ginger Development Enterprises Pty Ltd has moved from 117/330 Wattle St. Ultimo, NSW Australia, to 39/330 Wattle St. Ultimo, NSW Australia, and terminate all relationships with A+C DESIGN TEAM.
Shan Ruan will establish a new company the ACE PROJECT GROUP PTY. LTD. and will provide to Ginger: project management, building design service, as well as all managements of its businesses, including the assignment to property agents of the sales operations. The remunerations received by ACE PROJECT GROUP PTY. LTD. will be 10% of the construction costs, and will be paid according to the project's progress.
The office of the Accountant Ka Lung Wu will provide an account summery [sic] of the Company's past incomes and expenditures. The Office of the A Ka Lung Wu will provide a current account summery [sic] once every three months and report to the directors.
Ginger's leased vehicles will be dealt with by one of the following methods: (i) Thomas Chan will transfer the vehicles to his name, and he will pay for the leasing charges. (ii) Return the vehicles to the leasing company. (ii) Continue with the leases by Ginger, but ACE PROJECT GROUP PTY.LTD. will be responsible for all expenses, including insurances.

Signed by the Directors: Yau Fong Yuen Yuk Mui Kum Shan Ruan [Annexure "G"] Shan is establishing a new company. Shan will continue to provide to Ginger Development project management, including construction design services, as well as the daily business management of Ginger. Ginger has 380,000 in capitals [sic] which is provided by the two share holders Uncle Yuen and Auntie Yuen. The remainder of the funds are invested from Hong Kong, and are considered to be loans to the company from Uncle Yuen, AuntIe and Ah Kau, and calculated at 10% interest. Uncle Yuen and Auntie will receive 51% of the profits. Shan will receive 49% of the profits. Method of calculating the profits: Deduct the following items from the amounts received from the sales of the building properties. (1) All amounts for land purchases [sic], and all expenses paid to government departments. (2) All expenses of the engineer/s and the planner/s (deduct construction costs). (3) All commissions to the property management agents. (4) Construction costs and bank loan interests. (5) The 10% interest for the loan from Uncle Yuen, Auntie and Ah Kau. (6) All solicitor's and accountant's fees. (7) Construction insurance fees." (8) Taxes. Deduct from Shan's 49% profits, or as repayments to the company: (1) Salaries paid by the company. (2) All vehicle expenses. (3) Expenses for hiring people to assist in construction design, supervisions and dratting. (4) All of the company's day to day expenses, rents, telephone, postage and printing- (5) Shan's company will receive from Ginger 10% of the construction costs Not including the costs in land purchases and other engineering fees) as design and management fees, paid in advance by Ginger. Design fee for Arden St: 900,000 X 10% = 90,000. Currently completed work 60%: Therefore advance payment from Ginger 54,00. Design fee for Crown St: Assume project construction costs as 1,300,000 x 10 = 130,000. Current completed work 25%. Therefore advance payment from Ginger 32,500.

In total, Shan's company receives pre-payments from Ginger 86,500. However, from Shan's final profits need to be deducted the pre-payments for the design fees.

GINGER DEVELOPMENT ENTERPRISE PTY. LTD. Minutes of Meeting. Date: April 5, 1998 at 10 o'clock. Present at Meeting: Yau Fong Yuen, Yuk Mui Kum, Shan Ruan. Location: Sydney International Airport. The following agreement was resolved at the meeting: 1. The apportionment of the future profits derived from the two projects by Ginger at ARDEN ST and CROWN ST. (1) Yau Fong Yuen and Yuk Mui Kum will receive 51% of the profits. (2) Shan Ruan or her private company will receive 49% of the profits. 2. Method of calculating the profits: From the amounts obtained from the sales of the building properties deduct the following items: (1) All amounts for the land purchases. (2) All expenses paid to government departments. (3) All expenses paid to the engineer/s and the planner/s. (4) All commissions paid to the property agent/s in the renting or sales of the building properties and advertising fees. (5) Construction costs and interests for bank loans. (6) The 10% interest for the loans from Shiu Kau Yuen, Yau Fong Yuen and Yuk Mui Kum (from the amounts remitted from Hong Kong, 380,000 will be capital, and the remainder will be considered as loans to the company, including the increased amount of the expanded capital from 380,000 to 760,000.) (7) All solicitor's and accountant's fees. (8) Building insurance fees. (9) Taxes payable by the company. (10) Advance payments to Shan Ruan or to her private company. (11) Others. Note: The amounts from the sales of the building properties will be calculated from the market values after the project's completion. Should any director decide to purchase the completed building properties at costs, the differences between the property's market prices and cost prices will be considered as part of the profits. 3. The 49% of the profits obtained by Shan Ruan or her private company shall be responsible for the following items of expenditure: (1) The past salary payments paid by the company to Shan Ruan. (2) All company vehicle expenses (including insurance). (3) All expenses of the company's employees. (4) All of the day to-day-expenses of the company, rents, electricity, telephone, printing, correspondences, etc. (5) The design fee already paid by Ginger to Shan Ruan's private company. Signatures: Yau Fong Yuen Yuk Mui Kum Shan Ruan 7 I now turn to each of the questions raised for determination. Question (1): Do the three documents constitute the agreement between the parties? 8 The parties had previously entered into an informal arrangement for the development of the two properties. The three documents amount to a formal record of the previous informal arrangement and the two documents, being annexure "F" and annexure "H" to the affidavit, signed by the parties, constitute the basic agreement between them. 9 I observe that whether the arrangement is a partnership agreement, or a profit sharing agreement, or some other kind of agreement is not relevant for the purpose of determining the questions I have to answer. The parties' respective entitlements and obligations are conveniently set out in the documents.

Question (2): As to annexure "G" in the paragraph commencing "Deduct from Shan's 49%", do the words "company" in the first line and in subparagraph (1) and "company's" in subparagraph (4) refer to the first plaintiff or the first defendant? 10 This question is not really relevant. I simply note that the parties have agreed that insofar as annexure "G" may be relevant, in the paragraph commencing "Deduct from Shan's 49%", the words "company" in the first line and in subparagraph (1), and "company's" in subparagraph (4), refer to the company known as Ginger Development Enterprises Pty Limited. Question (3): As to annexure "H", whether subparagraph 2(10) means advance payments to either of the plaintiffs are to be deducted in calculating the profits of the two projects referred to in the annexures or the 49% share of the profits going to the plaintiffs? 11 The defendants submit that the fundamental overall agreement between the parties suggests that this item is to come out of Shan Ruan's 49% share of the profits. The defendants rely upon a conversation held between Shan Ruan and Yau Fong Yuen. It is not clear when the conversation occurred but, according to the evidence, I infer that it occurred in about March or April 1998, in which Mr Yuen said words to the effect: You can deduct ten percent off the construction costs to use for the administration costs in running your office but don't forget this will come out of your forty nine percent share of the profits . 12 The defendants point to the fact that these advance payments are dealt with in paragraph 3 of annexure "H"; that is, paragraph 2(10) is absent from annexure "G". It is submitted that the fundamental overall agreement suggests the advance payments to Shan Ruan or to her private company are to come out of her 49% share of the profits. 13 I must admit that I had some difficulty in resolving this question. However, I am inclined to agree with the former contention. Advance payments to either of the plaintiffs are to be deducted in calculating the total profits of the two projects referred to in the annexures. These payments are not to be deducted from the 49% share of the profits going to the plaintiffs. The reason for this is that subparagraph 2(10) seems to have been deliberately inserted into the document. It was not present in the previous document and it is a document which, as I have said, is or forms at least part of the agreement between the parties. This view is reinforced by the fact that such an interpretation is admitted in the pleadings. That is, the plaintiff has alleged an agreement between the parties which includes a term along the lines in paragraph 2(10) of annexure "H" and that has been admitted by the defendant. Question (4): As to annexure "H" clause 1, does that mean that the future profits derived from the two projects taken together are to be ascertained and paid separately as to each project without reference to any profit or loss made on the other project? 14 As I understand it, the issue is this: are profits to be calculated on the completion of a project; that is, the profit must be determined at completion and sale of each project and the profits then distributed and determined on a project by project basis; or are they all to be lumped in together? 15 Again, I am able to resolve this by a simple process of construction. The parties apparently envisaged only two projects. This appears from paragraph 1 of annexure "H". That is to say, only two projects were to be entered into by them. Paragraph 1 of annexure "H" expressly states: The apportionment of the future profits derived from the two projects by Ginger, Arden St and Crown St, are to be apportioned in the manner described (emphasis added). 16 The agreement was only to operate for the purpose of developing the two projects as identified. The two projects are those projects contemplated by the agreement and they are to be taken together for the purpose of calculating the overall profit, or loss, as the case may be. Question (5): Whether any of those annexures permit the payment to either of the plaintiffs of $10,000 on account of each tender received in respect of the Crown Street property? 17 I note that the parties are agreed that this question should be answered "no". 18 As to the further conduct of the proceedings, I make the directions by consent set out in the short minutes of order. I grant liberty to apply on two days notice. I also reserve the question of costs.

I hereby certify that the preceding 18 paragraphs are a true copy of the reasons for judgment herein of the Honourable Mr Justice D H Lloyd.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

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