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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J U D G M E N T

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1.  This is a claim by the plaintiff against one of its former directors for repayment of HK$1,327,345.41 which is due from the director to the plaintiff on his current account with the plaintiff.

2.  The background to this action has been set out in my decision given on 29 September 2010 on an interlocutory matter in this action.  It all started from the divorce proceedings between Mr Mubarik and Mrs Mubarak in July 1998.  The plaintiff used to be part of the business empire controlled by Mr Mubarik.  It was placed in receivership for recovery of money due from Mr Mubarik to Mrs Mubarak.  It is now in liquidation. 

3.  The defendant, who has chosen to act in person since 27 October 2010, has not appeared at the trial.  I will therefore decide the claim on the basis of the evidence adduced by the plaintiff.

4.  The liquidators of the plaintiff were first appointed by Kwan J (as she then was) as receivers and managers of the plaintiff on 25 April 2008.  They could only have access to the plaintiff’s financial records in the computer on 29 April because they could not obtain the password from the plaintiff’s staff.  They then located the current account of the defendant with the plaintiff which showed that the defendant was indebted to the plaintiff in the sum of HK$1,327,345.41.  The plaintiff then started this action on 8 May 2008, claiming this sum from the defendant.

5.  The defendant filed the defence on 29 July 2008, alleging that he had procured through the other director of the plaintiff, Mr Wani, the remittance of US$252,500 by a company known as Imperial Gems & Jewellery FZCO in Dubai UAE (“Imperial Gems”) to the plaintiff on 10 April 2008.  Of this sum, HK$1,326,684.54 (which was the sum due from the defendant to the plaintiff on the current account on 10 April 2008) was used to discharge the defendant’s indebtedness to the plaintiff.  The balance of HK$642,659.46 was to be held by the plaintiff to the credit of Mr Wani.  The defendant further counterclaimed for rectification of the plaintiff’s accounting entry in respect of the US$252,500. 

6.  The plaintiff filed a reply on 10 September 2008.  It admitted that there was a remittance of US$252,500 to it by Imperial Gems, but denied that it was procured by the defendant through Mr Wani.  It pleaded that after this sum was received by it from Imperial Gems on 11 April 2008, it transferred US$202,450 to one Unique Trades on 15 April 2008.  It further pleaded that the payments it received from Imperial Gems were used for its working capital or to pay suppliers or entities associated with it.  It denied of having received instructions from Imperial Gems or others to settle any outstanding amount due from the defendant in his current account with the plaintiff.

7.  The full story of the defendant has been set out in a letter dated 11 October 2008 from Mr Wani to the defendant.  The letter reads:

“This is to confirm that:-

(1) At my request, Imperial Gems & Jewellery FZCO has remitted a sum of US$252,500 to DIL (the plaintiff) on or about 10 April 2008;

(2) Out of the said sum of US$252,500, a sum of HK$1,326,684.54 was intended to be applied for settlement of the outstanding balance of that amount in your current account due to DIL, and the remaining balance was intended to be credited to my current account with DIL;

(3) Immediately before and after the aforesaid remittance was made on 10 April 2008 DIL was still holding a balance of US$1,411,963.85 on its accounts to the credit of Imperial Gems;

(4) On instruction from Imperial Gems a sum of US$202,450 was remitted to a firm known as Unique Traders on or about 14 April 2008. The said sum of US$202,450 should properly be debited to the credit balance of Imperial Gems in the said sum of US$1,411,963.85 (thus reducing it to US$1,209,513.85) instead of the said remittance of US$252,500 made on 10 April 2008.”

8.  The US$1,411,963.85 allegedly due from the plaintiff to the Imperial Gems was composed of four sums of US$994,630, US$49,833.85, US$200,000 and US$167,500. 

9.  The sum of US$994,630 was allegedly for jewellery consigned by Imperial Gems to the plaintiff on 6 August 2007, but there is also evidence that this jewellery had been “returned” to one Kuwait Jewellery House in Minda and Manoj Sagar, Bombay on 7 August 2007. 

10.  The second and third sums were for price of goods sold by Imperial Gems to the plaintiff.  The last sum was paid by Imperial Gems to the plaintiff allegedly as advance payment for purchase of paintings.  The last three sums do appear in the current account of Imperial Gems with the plaintiff.  They total US$417,333.85.

11.  The defendant’s case that the sum US$202,450 paid to Unique Trades was from the US$1,411,963.85 allegedly due from the plaintiff to the Imperial Gems was only mentioned by Imperial Gems in a letter from it to the plaintiff and dated 28 September 2008.  Before that letter, Imperial Gems had been claiming that the plaintiff owed it US$1,411,963.85 without any deduction.

12.  I should also mention that it is the defendant’s case that the sum of US$252,500 remitted by Imperial Gems to the plaintiff was originally owed by Imperial Gems to one Sadeen Jewellery of Kuwait. Mr Wani was a partner/shareholder of Sadeen Jewellery.  The remittance of this sum by Imperial Gems at Mr Wani’s direction to the plaintiff also allegedly discharged the debt due from Imperial Gems to Sadeen Jewellery.

13.  There is also evidence that Imperial Gems is owned by Mr Mubarik’s father and younger sister.

14.  I now refer to the plaintiff’s evidence.  One of the liquidators, Mr Middleton, gave evidence for the plaintiff.  He is a chartered accountant.  He adopted his witness statement as his evidence-in-chief. He referred to the defendant’s current account with the plaintiff which had been maintained for some years.  The current account as at 24 April 2008 had a debit balance of HK$1,327,345.41 due from the defendant.

15.  The defendant does not dispute that he owed the plaintiff HK$1,326,684.54 as at 10 April 2008.  The dispute between the parties is whether the defendant had paid off this sum on 11 April when the plaintiff received the remittance of US$252,500 from Imperial Gems.  The plaintiff denied the alleged settlement of the defendant’s indebtedness from this remittance. The plaintiff maintained that there was this indebtedness on 11 April 2008 which was varied by subsequent dealings to HK$1,327,345.41 as at the commencement of this action. 

16.  These further dealings have been set forth in the re-amended statement of claim and are as follows:

17.  Mr Middleton added in his oral evidence that the plaintiff’s accounts had been kept in a meticulous manner.  There is no credit of HK$1,326,684.54 to the defendant’s account or a credit of HK$642,659.46 to Mr Wani’s account on or about 11 April 2008.  The sum of US$252,500 was, however, credited to Imperial Gems’ current account with the plaintiff.

18.  The defendant alleged in his witness statement that he was not stationed in Hong Kong and had come here from time to time to give instructions to the accountant regarding the nature of the transactions of the plaintiff for updating of the plaintiff’s account.  Though he was in Hong Kong from 13 April 2008 to 20 April 2008, he was ill and could not have gone to the plaintiff’s office to give instructions to the accountant regarding the US$252,500 before the plaintiff was taken over by the receivers and managers on 25 April.  The accountant thus was not aware of the nature of the US$252,500 and did not make entries to reflect the same. 

19.  Since the defendant has not appeared at the trial, I do not need to consider his defence or witness statement.  However, I would say that such allegation in his witness statement prima facie is not convincing at all.  Despite the defendant’s allegation of inability to give instructions to the accountant because of illness, there were indeed two transactions of loan and repayment of loan in his current account on 18 and 19 April. 

20.  Furthermore, if he indeed had to give the alleged instructions to the accountant, he could have done so by email or fax or even a phone call from overseas on or about 10 April 2008.  There was no need for him to wait until he had time to come to Hong Kong to give instructions to the accountant face to face.  There are indeed letters from Imperial Gems and Mr Wani setting out matters that could be used as the alleged instructions to the accountant, but these letters all came into being after the plaintiff had been placed in receivership or appeared to be so.

21.  Furthermore, if instructions on how to deal with the receipt of US$252,500 were indeed pending, then one would expect the plaintiff’s accountant to have placed this sum in a suspense account.  Mr Middleton has confirmed that this should be so.  But that was not how this sum was dealt with by the plaintiff’s accountant.  She just entered this sum as a credit to Imperial Gems.

22.  I accept Mr Middleton’s evidence that the plaintiff’s accounts have been kept in a meticulous manner.  There is nothing to contradict the correctness and accuracy of the defendant’s current account with the plaintiff.  I therefore find that the defendant is indebted to the plaintiff in the sum of $1,327,345.41.  I give judgment to the plaintiff for this sum together with interest at the judgment rate from the issuance of the writ to payment. 

23.  I also dismiss the defendant’s counterclaim as there is no basis to vary the plaintiff’s account in relation to the US$252,500.  I also make a costs order nisi that the defendant do pay the plaintiff the costs of this action, including the counterclaim, to be taxed.  I also certify the matter fit for one counsel.