OVERSEAS TRUST BANK LTD v. TANG CHE CHING AND OTHERS

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J U D G M E N T

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Kempster, JA :

1. This is an appeal by the first to fifth defendants, inclusive, from a judgment of Liu J given on 16 February last in favour of the Overseas Trust Bank Ltd, the respondents, against all seven defendants for HK4,834,668 and for interest on HK$2,400 of that sum as well as for possession of premises known as 167 Castle Peak Road, Yuen Long, which are owned by the defendants as tenants in common.

2. By originating summons dated 15 April 1986 the respondents had claimed such relief as against the defendants, all but the sixth, their sister, being brothers, under covenants contained in a mortgage deed dated 8 October 1979 and in further charges dated 1 February and 17 September 1980 and 20 August 1981 expressed to secure loans and banking facilities made available to the seventh defendant, Tang Chi Yuen. The respondents had already signed judgment as against the seventh defendant for HK$5,898,290.20 on 23 January 1986.

3. On 16 June 1978 the appellants, who were living and working in Europe, executed powers of attorney in common form in favour of the seventh defendant, who was living and working in Hong Kong, on the strength of which he purported to execute the mortgage and charges on their behalf and in his personal capacity to secure loans or banking facilities which, as the terms of the instruments demonstrated, were paid or made available for his exclusive benefit or for the purposes of his own business. The issue which arose at trial was whether the terms of the powers of attorney put the respondents on notice of any relevant restriction upon the authority conferred by the appellants upon the seventh defendant. The judge held that they did not and it falls to us to determine whether or not he was right.

4. Insofar as the first ground of appeal alleges fiduciary duties arising as between the appellants and the seventh defendant and his breach of such duties it has no relevance to these proceedings. Insofar, however, as it raises points of construction in relation to the deeds it is highly relevant. By the second ground it is alleged that the respondents knew that the loans and facilities were granted to the seventh defendant and the mortgage and charges on the property accepted for his benefit rather than for that of the appellants and, being privy to a breach of trust, held such mortgage and charges as constructive trustees for the appellants.

5. A power of attorney is a deed whereby a principal confers authority upon his agent and if, as in he instant case, its existence is known to a party dealing with the agent it usually constitutes a definitive statement both of his actual and of his ostensible authority. When a third party is about to conclude an agreement with a principal by the agency of his attorney he will be concerned to satisfy himself that the agent is acting within the scope of his authority as defined by the deed. The motive of the agent is neither here nor there. Hambro v Burnand [1904] 2 KB 10.

6. Liu J expressly relied upon the following clauses of the powers of attorney :

"13. To borrow money upon such terms as my Attorney shall think fit upon the security of my said properties or any part thereof.

14. From time to time if and when my Attorney shall think fit to sell (either by private contract or by public auction) exchange surrender give up mortgage charge pledge redeem demise lease or dispose of my said properties or any part or parts thereof upon such terms as my attorney shall think fit.

16. To receive the consideration purchase money or loan for my said properties or any part thereof and to given good and proper receipts and discharges therefor which receipts shall exonerate the person paying such money from seeing to the application thereof or being responsible for the loss non-application or misapplication thereof.

21. To execute sign seal and as my acts and deeds deliver enter into acknowledge perfect and do all such agreements for sale and purchase assignments mortgages reassignments surrenders releases agreements for leases assurances deeds and all other instruments and documents as shall be required or may be deemed proper for or in relation to all or any of the purposes or matters aforesaid and generally to act as my Attorney in relation to my said properties as I myself f could do if personally present".

The judge also relied upon the concluding words of the deeds :

"And I hereby expressly declare that the particular powers enumerated above shall be given the widest interpretation and shall not be construed as setting limits to the general authority conferred on my Attorney and that the power of Attorney hereby created shall not be revoked by my death, incapacity or bankruptcy and shall be, being given to secure a proprietary interest and the performance of an obligation owed to my Attorney, irrevocable unless and until I shall have first had and obtained the written consent of my Attorney".

Liu J stated :

"From the recital of each of the Powers of Attorney, it can readily be seen that the documents were executed to cater for, inter alia, the absence of the respective donors from jurisdiction. At one time, reliance was sought to be placed on another part of the recital in each of these Powers of Attorney, but that line of argument is no longer pursued".

Mr Lim for the appellants had declined to make further submissions in relation to the recitals in the deeds to which I shall shortly refer. His final words on the point were :

"I submit these words would assist in interpretation".

The judge went on to say :

"It was submitted by Mr Lim, counsel for the 1st to the 5th defendants, that these Powers of Attorney were prima facie executed for the benefit of the donors. Any power to borrow money or to mortgage for the benefit of the attorney himself must be specifically provided for".

He concluded that clauses 13 and 14 conferred on the seventh defendant "Clear powers to borrow and to mortgage" whether or not for the benefit of the appellants.

7. In my opinion the recitals in the deeds cannot be ignored if the parameters, if any, of the seventh defendant's authority are correctly to be ascertained. They are not included merely as mattes of history or explanation. As was said by Kay J in Danby v Coutts & Co [1885] 29 Ch D 500 at pp 514 and 515:

"     The true rule is given in the language of Lord Hatherley in Rooke v Lord Kensington 2 K & J 769, 'that you cannot control clear words of conveyance by words of recital', but he goes on to point that, 'the exception will be found to be always, that general words are not within that description of clear words of conveyance which cannot be controlled by the recital'.

    And in Jenner v Jenner LR 1Eq 361, where the authorities are collected and examined, the same learned Judge acted upon that principle, relying upon Lord Ellenborough's words in Payler v Homersham 4 M & S 423, 'the general words of a release may be restrained by the particular recital. Common sense requires that it should be so, and in order to construe any instrument truly you must have regard to all its parts, and most especially to the particular words of it ... A power of attorney, like a release or a bond as in the case of Lord Arlington v Merricke 2 Wms Saund 813, seems to me precisely the kind of instrument which may be limited by a recital. And the only question upon which it appears to me there can be any reasonable doubt is whether that is the true effect of the recital in this power.

    It is said that it was only inserted for the purpose of skewing the motive for giving the power of attorney, but I can see no object in introducing the recital for that purpose".

In the deeds with which we are concerned the material recitals read :

"WHEREAS I am one of the registered owners as Tenants in Common of the properties more particularly described in the Schedule hereto .... AND whereas I am now residing abroad and will not return to Hong Kong in the near future AND WHEREAS I have borrowed from Tang Chi Yuen a sum of US$5,000.00 which is still owing to him and unpaid AND WHEREAS for the purpose of securing a proprietary interest and the performance of an obligation I owe to the said Tang Chi Yuen I hereby create this irrevocable Power of Attorney appointing him my Attorney to act for me in connection with my said properties in manner hereinafter appearing".

In this content reference may again be made to the concluding words of the deeds as well as to the first power conferred, by clause 1, being "to manage my said properties in manner as my Attorney shall in his absolute discretion think fit".

8. It would be surprising if the terms of an agent's appointment were to be found susceptible of the construction that he was permitted to act otherwise than in the interests of his principal. As Russell J observed in Reckitt v Barnett, Pembroke and Slater, Ltd [1929] 2 KB 244 at p 268 in the course of a judgment subsequently approved in the House of Lords ((1929] AC 176) :

"It is said that the plaintiff's statement to the bank that he wishes the power of attorney to cover the drawing of cheques upon them by Mr Woodhouse 'without restriction', operates to enlarge the powers conferred by the power of attorney, and to such a sweeping extent that Lord Terrington became authorized to do what he liked with the plaintiff's moneys, even to the extent of applying them in payment of his own personal debt. It would need words unambiguous and irresistible to enable me to attribute such a meaning and intention to a power of attorney. The primary object of a power of attorney is to enable the attorney to act in the management of his principal's affairs. An attorney cannot, in the absence of a clear power so to do, make presents to himself or to others of his principal's property".

It none the less appears that the seventh defendant was entitled to exercise the powers conferred on him to recover for himself the overall sum of US&25,000 stated to be owed to him by the five appellants. But once those debts were extinguished the seventh defendant's authority was limited to the exercise of such powers in and about the management of the property in which the absent appellants were beneficially interested; as the words of clause 21 make clear. No alternative argument has been addressed to us on the basis of the seventh defendant's limited proprietary interest.

9. Since the respondents knew that they were advancing the monies which were the subject matter of these proceedings to the seventh defendant upon the security of property owned as well by the appellants for purposes of his own rather than in connection with the management of such property they should have been aware that he was acting in excess of the powers conferred upon him. There was no ostensible authority permitting them to hold the appellants liable. Liu J, who had referred to the relevant authorities, came to the wrong conclusion by failing to construe the terms of the deeds as a whole.

10. I would allow this appeal and set aside the judgment of 16 February 1989 as against the appellants.

Clough, JA :

11. I agree.

Power, JA :

12. I also agree.