DIANOOR INTERNATIONAL LTD v. AIYER VEMBU SUBRAMANIAM

HCA 806/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 806 OF 2008

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D E C I S I O N

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1.  This is an application by the plaintiff for an order that the reading of the affirmation of a Mr Mohamed Hussain Wani and the affirmation of a Mrs Hukum Sultana be conditional on their appearing at the trial and being subject to cross-examination. This is opposed by the defendant.

2.  The plaintiff used to be owned by a Twenty First Century Holdings Limited which is ultimately owned by a trust called the IMK Family Trust established in Jersey.  The trust owns the business empire that used to be owned by Mr Mubarik and his wife.  They had a matrimonial dispute. Mr Mubarik signed an instrument on 20 April 1998 excluding his wife as a beneficiary from the trust.  Mrs Mubarak petitioned for divorce on 29 July 1998 in England.  She prayed for ancillary relief, including a property adjustment order.  She filed a fresh petition on 10 November 1998. 

3.  The main hearing of ancillary relief took place on 29 November 1999.  Mr Mubarik claimed that he held 45 per cent of his business assets on trust for Mr Wani. Mr Wani also intervened in those proceedings.  Bodey J held in December 1999 that Mr Wani did not have any interest in Mr Mubarik’s assets.  The learned judge also held that the assertion of a partnership and asset‑sharing arrangement was used for the purpose of impeding the establishment and enforcement of the wife’s claims and the affidavits of Mr Mubarik and Mr Wani were untrue.

4.  The learned judge ordered Mr Mubarik to pay Mrs Mubarak GBP4,875,000 with periodic payments of some GBP14,700 per month.  Mr Mubarik’s application for leave to appeal was dismissed by the English Court of Appeal which described the joint evidence of his and Mr Wani as fraudulent and dishonest.

5.  Mr Mubarik did not pay in full as ordered. According to Mrs Mubarak’s solicitors in London, the total amount in arrears at the end of April 2008 was GBP7,962,112.  Since December 1999, Mrs Mubarak has been making various attempts to enforce the order for ancillary relief in England and elsewhere.  On 12 January 2007, Holman J ordered the trustees of the IMK Family Trust to pay Mrs Mubarak the amount owed to her by Mr Mubarik including costs up to the value of the trust assets, less the costs for securing and liquidating the assets and complying with that order.  Mr Mubarik’s application for leave to appeal against this order was again dismissed.

6.  The Royal Court of Jersey made an order on 17 April 2008 giving effect to the order of Holman J of 12 January 2007.  The Royal Court of Jersey further appointed receivers and managers of the assets of the trust.  The receivers were authorised to take steps to place some companies of the trust into provisional liquidation or receivership.  The plaintiff is one of these companies.

7.  Pursuant to the order of the Royal Court of Jersey and the appointment of receivers and managers, Kwan J appointed joint and several receivers and managers to the plaintiff on 25 April 2008.  Barma J on 23 December 2009 appointed the receivers as provisional liquidators of the plaintiff.

8.  After the appointment by Kwan J on 25 April 2008, the receivers started to review the plaintiff’s records to ascertain its financial position and to take steps to protect its assets.  The review was delayed for a few days as the plaintiff did not provide the receivers the password to the computer system.  The receivers were able to access the plaintiff’s financial records in the computer on 29 April.  There was in the records a current account of the plaintiff with the defendant who was one of its directors.  The current account showed that the defendant owed the plaintiff HK$1,327,345.41.

9.  This action was then launched against the defendant for payment of this sum on 8 May 2008.  The defendant filed a defence and counterclaim on 29 July 2008.  The defence pleaded that on 10 April 2008, the defendant procured through Mr Wani, another former director of the plaintiff, the remittance of US$252,500 by a company called Imperial Gems & Jewellery FZCO (“Imperial Gems”) to the plaintiff.  This sum was equivalent to HK$1,969,344.  Out of this sum, HK$1,326,684.54 was lent by Mr Wani to the defendant for discharge of the debt owed by the defendant to the plaintiff. (The sum owed by the defendant to the plaintiff on 19 April 2008 was HK$1,326,684.54.)  The balance of HK$642,659.46 was to be held by the plaintiff to Mr Wani’s credit in his current account with the plaintiff.  The defendant further counterclaimed for rectification of the plaintiff’s accounting records in respect of the US$252,500. 

10.  The plaintiff disagreed and filed a reply.  The plaintiff admitted the receipt of US$252,480 (which was US$252,500 less US$20 for banking charges) from Imperial Gems on 11 April 2008, but it was for the plaintiff’s working capital or for facilitating payments to suppliers or other entities with which it was associated. 

11.  The plaintiff also pleaded that after receipt of the US$252,480 from Imperial Gems, it then paid one MD Exports US$50,060 on 14 April and one Unique Trades US$202,465 on 15 April.  The total sum paid to these two entities was US$252,525.

12.  The defendant has filed a witness statement by Mr Wani and another witness statement by Mrs Hukum Sultana.  Both of them have verified the truthfulness of their witness statements on affirmations. The defendant then listed their witness statements and affirmations in a hearsay notice dated 5 November 2009 indicating its intent not to call them to attend the trial.

13.  The plaintiff then issued this summons on 11 December 2009 requiring Mr Wani and Mrs Sultana to be cross-examined.  The defendant filed an affidavit to oppose the application on the ground that they cannot be available at the trial even by video link. 

14.  Mr Wani said in his witness statement that he was one of the shareholders of one Sadeen Jewellery WLL (“Sadeen”), a Kuwaiti company.  Sadeen had trading with Imperial Gems which is a company in Dubai.  During March 2008, Sadeen sold some diamonds to Imperial Gems for US$252,503.  In early April, the defendant asked Mr Wani for a loan of some US$170,000 to repay the plaintiff. Mr Wani then instructed Imperial Gems to pay the plaintiff the US$252,500 owed by Imperial Gems to Sadeen.  He also asked the defendant to put the balance in his current account with the plaintiff to his credit.

15.  Regarding the US$202,450 paid by the plaintiff to Unique Trades, Mr Wani said that this sum was paid by the plaintiff on behalf of Imperial Gems and it came from a sum of US$417,333.85 owed by the plaintiff to Imperial Gems.  Hence, the sum of US$202,450 paid by the plaintiff to Unique Trades was not from the sum of US$252,500 remitted by Imperial Gems on behalf of Mr Wani, but from the US$417,333.85 owed by the plaintiff to Imperial Gems. 

16.  However, a provisional liquidator, Mr Middleton, also made a witness statement to deny that the plaintiff owed Imperial Gems US$417,333.85.

17.  Mrs Sultana said in her witness statement that she was a director of Imperial Gems which was a supplier to the plaintiff.  She confirmed Mr Wani’s case that Imperial Gems owed Sadeen US$252,500 on an invoice, and Imperial Gems had at Mr Wani’s instructions remitted this sum to the plaintiff on 10 April 2008 to discharge the debt due from Imperial Gems to Sadeen.  She also said that before the remittance of this sum to the plaintiff by Imperial Gems, the plaintiff owed Imperial Gems US$417,333.85.  She also provided a breakdown of how this sum had come about.  She also confirmed that the US$202,450 was paid by the plaintiff on behalf of Imperial Gems and it was to be deducted from the US$417,333.85.

18.  Counsel for the plaintiff pointed out that Mr Wani is a cousin, adopted brother and brother-in-law of Mr Mubarik as he married Mr Mubarik’s eldest sister, and Mrs Sultana is the youngest sister of Mr Mubarik.  But neither of them has mentioned their relationships with Mr Mubarik.  Counsel relied on In Re Smith and Fawcett Limited [1942] Ch 304 at 308 where Lord Greene MR emphasised the importance of requiring a deponent to submit to cross-examination if it is desired to charge the deponent of having given a false account of his motives and reasons.

19.  Counsel for the plaintiff also relied on Wendy Wenta Seng Yuen v Philip Pak Yiu Yuen [1984] HKLR 431 where Fuad JA stated at 436 E to H that an applicant has to establish a good and sufficient reason for cross‑examining a deponent, and where the evidence on the affidavits will result in a final order, then it may not be difficult to establish a good and sufficient reason.  What is essential for the applicant to establish is that the proposed cross-examination might be productive of a “useful result” at the stage when the application is made.

20.  Counsel for the defendant asked me to ignore the criticisms of Mr Wani in the English judgments mentioned above as the fact that he has lied in the English proceedings does not mean that he would lie in this action.  I disagree.  This action has developed from the saga between Mr Mubarik and his wife.  Mr Mubarik has not paid his wife as per the English judgments.  This action is part of his wife’s attempts to recover what is due to her under the English judgments.  I cannot at this stage form any opinion on whether the defendant herein, Mr Wani and Mrs Sultana are in collaboration to keep the plaintiff’s money from the reach of Mrs Mubarak, but I cannot disregard that possibility.

21.  Counsel for the defendant further said that the plaintiff has no different case on the US$252,500 to put to Mr Wani or Mrs Sultana.  I again disagree.  If the plaintiff can show that there was no US$417,333.85 owed by the plaintiff to Imperial Gems, then the plaintiff may well be able to show that the sum of US$202,450, admittedly paid by the plaintiff to Unique Traders on behalf of Imperial Gems, was from the US$252,500 and not from the US$417,333.85.  Hence, the plaintiff indeed has a different case to put to Mr Wani and Mrs Sultana.

22.  Counsel also submitted that the evidence of Mr Wani and Mrs Sultana amounts to a complete defence of the defendant.  I say that it is then all the more important for them to be cross-examined.  

23.  Counsel also submitted that Mr Wani and Mrs Sultana are independent from the defendant, but I note that they are all related to Mr Mubarik.  The defendant has also served as a director of the plaintiff when the plaintiff is owned by the IMK Family Trust. 

24.  Counsel also referred to other facts and submitted that the court should not require Mr Wani and Mrs Sultana to be cross-examined.  These, I think, are matters for the trial.

25.  On the whole, I think the plaintiff has shown that I should make the order as prayed for in the summons, but I would not at this stage require Mr Wani and Mrs Sultana to physically appear in this court at the trial because the defendant intends to apply for their evidence to be taken through video link.  I therefore order that:

(1)    the reading at the trial of this action of the affirmation of Wani Mohamed Hussain made on 31 October 2009 together with the exhibits thereto be conditional on the deponent of the said affirmation being the subject of cross-examination;

(2)    the reading at the trial of this action of the affirmation of Hukum Sultana made on 4 November 2009 together with the exhibits thereto be conditional on the deponent of the said affirmation being the subject of cross-examination.

26.  I also make a costs order nisi that the defendant do pay the plaintiff the costs of this application in any event, with certificate for one counsel.