APPAR KARTAR MAKER AND ANOTHER v. WHITFORD HOLDINGS LTD AND OTHERS

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. This is an appeal by the defendants from a decision of Master Beeson given on the 25th January 1990 when she allowed the plaintiffs' application to amend the writ of summons and statement of claim and ordered a stay of the proceedings until the outcome of proceedings instituted in England by the 2nd and 3rd defendants. There was also a consequential order to stay discovery of documents.

2. This action concerns a family dispute as to the ownership of the 1st defendant, Whitford Holdings Limited (Whitford). The 1st plaintiff, Mr A.K. Maker has conducted a very successful business in the development of real estate in several countries in the world. The 2nd plaintiff Mrs R.A. Maker is Mr Maker's wife whilst the 3rd defendant Mrs Joshi is their daughter and the 2nd defendant Mr Joshi is Mrs Joshi's husband.

3. Whitford was incorporated in Hong Kong in 1981 for the purpose of channelling fund through subsidiary companies to companies owned by Mr Maker in the United States. According to Mr Maker, Whitford was formed on his personal instructions with funds provided by him or by third parties. Following its incorporation, Mr and Mrs Joshi were appointed to be the directors and became the only shareholders. Of the 200 shares issued, 25 were allotted to Mr Joshi and 175 to Mrs Joshi. Nevertheless, Mr Maker claims that he is the sole beneficial owner of the entire issued share capital of Whitford for Mr and Mrs Joshi were intended to be his nominees and trustees. In July 1983, Mrs Joshi resigned as a director and was replaced by Mrs C. Klemmstein, another daughter of the plaintiffs, and her husband Mr E. Klemmstein. The plaintiffs also became directors of Whitford in November 1983.

4. At the time of the appointment of the plaintiffs as directors, Mr Maker alleges that there was an oral agreement between him, his wife, Mr and Mrs Joshi and Mr and Mrs Klemmstein, for Mrs Joshi to transfer 100 of her 175 shares to the plaintiffs. If the transfer had taken effect, Mr Maker would have held 50 shares, Mrs Maker 50 shares, Mr Joshi 25 shares and Mrs Joshi 75 shares. However, the transfers were never registered. Although Mr Maker maintains that he is entitled to the whole of the issued share capital of Whitford, he claims in the alternative, a declaration that he and his wife are entitled to a 50% beneficial interest arising as a result of the oral agreement for the transfer of the 100 shares by Mrs Joshi. Apart from the declarations sought as to ownership declarations are also sought for various breaches of the Companies Ordinance.

5. On the same date as the issue of the writ, on the 5th June 1989, I granted an ex parte injunction in favour of the plaintiffs restraining the defendants from disposing of the assets of Whitford which injunction was continued on the 16th August 1989 after the hearing of the inter partes summons.

6. On the 22nd May 1989 Mr and Mrs Joshi filed a writ in London against Dr. R.A. Maker, a son of the plaintiffs, as the first defendant, Dr. N.R. Gupta, another daughter, as the 2nd defendant and Mr Maker himself as the third defendant in which Mrs Joshi claims a declaration that a partnership between her and the three defendants had been dissolved or in the alternative, an order for the partnership to be dissolved and for an order that the affairs of the partnership be wound up. The statement of claim in this action was served on the 20th July 1989. The claim relates to assets world wide divided into those situated in India and those in other countries in the world described as non-Indian assets. Mrs Joshi claims that the business was originally started by her father in about 1965, that Dr. R.A. Maker joined him in about 1968 and that she became a partner in the middle of 1969. Mrs Joshi alleges that some time in the mid to late 1970s, she and the defendants and Mr Maker's wife agreed that the profits property and assets of the partnership were to be allocated and owned in certain proportions with her proportion to be 25%. Mrs Joshi claims her entitlement of 25% on an alternative basis under various memoranda of understanding (MOUs) that had been drawn up and executed by the parties between May 1987 and November 1988 in an attempt to achieve a settlement. Mrs Joshi claims that the MOUs constitute evidence of the partners' intention to dissolve the partnership in support of her entitlement to receive 25% of the profits, property and assets of the overall partnership worldwide. By a variation made on the 28th November 1987 that related to non-Indian assets, it was agreed inter alia that shares held by Mr and Mrs Joshi were to be transferred to Mr Maker whilst Mrs Joshi alleges that she acted in accordance with the agreements. This is denied by Mr Maker who contends that Mrs Joshi acted unilaterally to try to obtain control of Whitford. A claim for US$1 million by Mr Joshi in the English proceedings has been struck out as being appropriate for trial in a separate action. By their defence and counterclaim, the defendants deny the claim that there was an overall partnership and claim declarations that mirror the declaration's sought in the present action with the exception of the claims under the Companies Ordinance.

7. In the London proceedings Mr and Mrs Joshi obtained an ex parte injunction against the defendants to restrain them from disposing of shakes in a Liechtenstein company, but the injunction was discharged upon an inter partes hearing by Peter Gibson J., who, during the course of his judgment, held that no arguable case had been made out to substantiate the contention that there was an overall partnership. This decision was affirmed by the Court of Appeal.

8. Peter Gibson J. in his judgment considered that if there was an overall partnership, the proper law for its determination is that of the State of Maharashtra in India. He went on to say that Mrs Joshi's allegation that the Whitford shares are not partnership assets although included in the non-Indian MOU of November 1987, as an asset that was to go to Mr Maker, was inconsistent with her claim that there was an overall partnership. In the reply and defence to counterclaim Mrs Joshi contends that the proper law of the overall partnership since 1983 is English law.

9. In view of the allegations made by Mrs Joshi in the English proceedings, the plaintiffs sought to amend the writ and statement of claim by pleading a further alternative to the primary allegation made that if contrary to their contention, it is held at the trial of the action that there was an overall partnership, then the entire issued share capital of Whitford is an asset of the partnership.

10. Miss Mok, counsel for Mr and Mrs Joshi objected to the amendments on the grounds that the plaintiffs have not pleaded facts, but merely assertions while the claim is wholly contradictory and inconsistent to the plaintiffs' case and has no chance of success. However, the amendments merely arise from the allegations made by Mrs Joshi in England on the basis that at the trial it is found that there was an overall partnership. Further I do not see any merit in the argument that the allegations are contradictory, but in any event, if they are, this does not debar the plaintiffs from making their application. The amendments, in my judgment, are unobjectionable.

11. In support of her application for a stay, Miss Mok made the following submissions. First, the relief is different in the two actions for all three reliefs in Hong Kong concern the beneficial ownership of Whitford which are not sought in England. The reliefs claimed in the present action and in the counterclaim in England are, however, substantially the same. Second, an English judgment cannot be registered in Hong Kong unless it is a monetary judgment. This is correct, but any judgment in England will be highly persuasive whilst the plaintiffs agree to be bound by any judgment given in England. Third, the Court should look at the natural and appropriate forum and fourth, where a claim is made in two jurisdictions, the claimant must elect in which jurisdiction he wishes to proceed and after making his choice, the other action should be dismissed.

12. However, the reality of the situation is that Whitford forms part of the non-Indian assets which is referred to in the MOU of the 28th November 1987. It will therefore be necessary to consider the overall family relationship of the business in order to decide who provided the funds for the company.

13. The factors that clearly support the granting of a stay include the presence of all the witnesses in England or within easy access, that a great deal of discovery has taken place in the English proceedings and it is necessary to decide . the question of the existence or otherwise of the alleged partnership together with its precise terms, and a consideration as to the proper law that governs the overall partnership if it is found that such a partnership exists. If an overall partnership is found to exist, the proper law as found will also apply to Whitford. Although, as I have said, the English judgment will not be binding on the Hong Kong court, it will be highly persuasive as to the proper law to be applied. There are admittedly the declarations sought with regard to the company resolutions which can only be heard in Hong Kong, but they are subsidiary to the main claims that are made. Whitford clearly cannot be dealt within isolation as was contended on behalf of Mrs Joshi. In so far as Mr Joshi is concerned, his interest in the proceedings is marginal so that he can in no way be subject to any prejudice.

14. Although the plaintiffs have instituted these proceedings, the main reason for so doing was to obtain an injunction to preserve the assets of Whitford in Hong Kong. Insofar as the application for a stay is concerned, it will not apply to the appeal against the injunction that I granted last year.

15. Having regard to the unusual circumstances in this case, I am quite satisfied that Whitford cannot be dealt with on its own for it is more appropriate for the matter to be dealt with in the proceedings in England. However, there is no justification for the submission that the action should be dismissed having regard to the issues relating to the company matters which can be restored at a later date for determination if necessary.

16. Accordingly, the appeal will be dismissed and there will be an order nisi for costs in favour of the plaintiffs.