WOC FINANCE CO. LTD. v. WING ON CHEONG INVESTMENT CO. LTD.

HCMP7316/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.7316 OF 1999

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J U D G M E N T

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The background

1. This is a vendor and purchaser summons. The Property concerned is a flat in the building of May Pont House in Reclamation Street, Kowloon. In relation to the transaction, the purchaser, Wing On Cheong Investment Company Ltd, has raised a requisition regarding title. This involves an interpretation of section 5 of the Powers of Attorney Ordinance, Cap.31, particularly section 5(4)(b).

2. The facts of the case are rather simple. The Property had been acquired by one Kung Chan Yau ("Kung") in January 1986. Kung appointed one Yiu Yuen Ping ("Yiu") as her attorney by a Power of Attorney dated 2 November 1993. Then Yiu, as donee of the Power of Attorney, mortgaged the Property to the plaintiff in April 1996. By a Memorandum of Agreement dated 16 June 1999, the plaintiff contracted to sell the Property to the defendant through an auction sale.

3. It came to the notice of the solicitors for the purchaser that the Property was mortgaged to the plaintiff in 1996 whereas the Power of Attorney was executed in 1993. Hence, the purchaser is raising the requisition as to whether there had been any revocation of the Power of Attorney on or before the date of the mortgage, i.e. 26 April 1996.

4. In relation to the requisition, and in an attempt to satisfy the conditions stipulated in section 5 of the Powers of Attorney Ordinance, the vendor first produced a statutory declaration by Yiu, the donee of the Power of Attorney, stating that she had no knowledge or information of any revocation of the Power of Attorney at the time of execution of the said mortgage. However, the purchaser was not satisfied, and rightly so, because the statutory declaration should have come from the person dealing with the donee of the Power of Attorney. The purchaser's solicitors wrote to the vendor's solicitors on 25 August 1999, stating that :

"Regrettably, your assertion does not satisfactorily answered (sic) this requisition.

We maintain our view that the Statutory Declaration made by the attorney does not fall within the ambit of section 5(4) of the Powers of Attorney Ordinance. Further, even if you are now able to arrange for a Statutory Declaration by appropriate person as to non-revocation of the said Power of Attorney at the time of execution of the said Mortgage Memorial No.6619994 dated 26th April 1996 within 3 months of completion of the present transaction, the same may not help to resolve the problem in the light of the case of Au Siu Wing Jacky v. Choy Ka Lee [1999], HKC 248 referred to in our letter of 12th August 1999."

5. Still, the vendor made arrangement for another statutory declaration to be made by Yam Chuk Ling ("Miss Yam"), a director of the plaintiff company. This statutory declaration was dated 22 October 1999 and Miss Yam declared, inter alia, that the plaintiff had no knowledge or information of any revocation of the Power of Attorney at the time of the execution of the said mortgage. Furthermore, the vendor's solicitor undertook that a fresh statutory declaration would be made within three months from the completion of this transaction.

6. The purchaser was still not satisfied with the situation and hence the present summons was taken out on 25 November 1999.

The issue

7. As I said, the main issue in the present dispute is in relation to section 5 of the Powers of Attorney Ordinance, Cap.31. Section 5(1), (2) and (4) read as follows :

"5. Protection of donee and third persons where power of attorney is revoked

(1) A donee of a power of attorney who acts in pursuance of the power at a time when it has been revoked shall not, by reason of the revocation, incur any liability (either to the donor or to any other person) if at that time he did not know that the power had been revoked.

(2) Where a power of attorney has been revoked and a person, without knowledge of the revocation, deals with the donee of the power, the transaction between them shall, in favour of that person, be as valid as if the power had then been in existence.

(3) .....

(4) Where the interest of a purchaser depends on whether a transaction between the donee of a power of attorney and another person was valid by virtue of subsection (2), it shall be conclusively presumed in favour of the purchaser that that person did not the material time know of the revocation of the power if -

(a) the transaction between that person and the donee was completed within twelve months of the date on which the power came into operation; or

(b) that person makes a statutory declaration, before or within three months after the completion of the purchase, that he did not at the material time know of the revocation of the power.

......"

8. In the present case, section 5(4)(a) does not apply as the transaction between the person dealing with the donee and the donee was not completed within 12 months of the date on which the power came into operation. As to whether section 5(4)(b) applies, both sides have different views.

The submissions

9. To put simply, the plaintiff argues that the term "the purchase" referred to in section 5(4)(b) means any subsequent purchase, whereas the defence argues that it means only the "original transaction" involving the donee and the person dealing with the donee. Against the background of the present case, it would be the mortgage in April 1996 by which the plaintiff acquired the title to the Property.

10. The defence's main concern comes from the authority of Au Siu Wing Jackey v. Choy Ka Lee [1999] 1 HKC 248. It is argued that the decision by Barnett J supports a narrow interpretation of section 5(4)(b). In order to rely on the section, the person dealing directly with the donee must make a statutory declaration, before, or within three months after the completion of the purchase, regarding the lack of knowledge of any revocation of the power.

11. On the face of it, the facts in Au Siu Wing Jackey are somewhat similar to the present case. However, in that case, the person dealing with the donee only made a statutory declaration three years after he sold the Property and, at the time, there was no transaction pending. It seemed that it was on this basis that Barnett J had decided against the vendor. He pointed out that "a statutory declaration wholly unattached to a purchase in time dictated by contract was not what was contemplated by section 5(4) of the Powers of Attorney Ordinance. For the purpose of section 5(4)(b), provided the declaration was made within three months of completion, the title would be good." The judgment actually stated that "the purchase", which appeared in section 5(4)(b) of the Powers of Attorney Ordinance, was not confined to the sale by the statutory person to his purchaser. It might be any purchase subsequent thereto.

12. This view was clearly consistent with the judgment by Bokhary J (as he then was) in Kung Wing Chuen, Francis and Another v. Antony Louis Marden (1990) 1 HKLR 540. It was a decision regarding the same section, i.e. section 5(4)(b) of the Powers of Attorney Ordinance. It was held that a statutory declaration under the section must be made before or within three months of the purchase by the purchaser whose interest is called into question, not within three months of the transaction between the attorney and any other person. This decision and the reasoning were accepted as the correct principle by the academics. (See Hong Kong Conveyancing by Sihombing and Wilkinson, Chapter VI). It is stated that the statutory declaration may be made by the person dealing directly with the donee at any time within three months of any subsequent purchase. (See paragraph 229)

13. In the premises, I would agree with the plaintiff's submission. It is therefore my finding that section 5(4)(b) covers a subsequent purchase and is not restricted to the first transaction made between the donee and the person dealing with the donee.

14. As to the additional argument raised by the defence that section 5(4)(b) does not apply at all to a situation where the vendor is also the person dealing with the donee, I am unable to agree. I consider that the wording of the section does not support such a restrictive interpretation so as to exclude the person who is both the vendor and the person dealing with the donee. However, if he is in fact the same person, he would presumably make the statutory declaration forthwith before the transaction, as is happening in this case, and would not require the grace period of three months after completion.

15. I take the view that the declaration sought by the plaintiff should be granted in that the requisition raised by the defendant's solicitors, which concerns the execution of the mortgage dated 26 April 1996 and registered in the Land Registry by Memorial No.6619894, has been sufficiently answered by the plaintiff and that good title to the Property has been shown by the plaintiff.

16. The parties have agreed that there shall be no order as to costs for this application. I agree this is the right order to make in the circumstances and I shall do so accordingly. Regarding the outstanding undertaking by the plaintiff's solicitor, I consider it unnecessary to make it part of my judgment. However, the undertaking has been offered and it should be honoured if such is the wish of the purchaser.

Orders

1. In the circumstances, I shall give judgment to the plaintiff and hereby declare that the requisition raised by the defendant in this purchase has been sufficiently answered by the plaintiff and that good title in the Property has been shown by the plaintiff.

2. No order as to costs.

3. Liberty to apply within 14 days from the date of handing down of this judgment in relation to any ancillary relief to be made, if any.