LEE SEU v. CHOW PO LAM AND OTHERS

HCA 1071/1997

IN THE HIGH COURT OF THE HONG KONG

SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. OF 1071 OF 1997

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J U D G M E N T

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1. By this action the plaintiff seeks to recover a property which, by virtue of a power of attorney she says was forged or fraudulently compiled, was assigned out of her name without her knowledge and authority.

Background

2. The plaintiff is a widow, born on the Mainland in 1920, and is now thus 81 years old. She claims to be illiterate and can read and write only a few Chinese characters. These include those which represent her own name. She came to Hong Kong in 1946 and a year later married Tang Ching. The marriage produced three sons and a daughter. Of these Tang Wai Kuen was the second son and Sunny Tang the third.

3. In August 1980 the property the subject of these proceedings, being Flat A, 24th floor and a portion of the roof, Seaview Mansion, Kennedy Town (hereafter called 'the property') was purchased and occupied by the family as their home from then on. Title was registered in the joint names of Tang Ching and Tang Wai Kuen, but Tang Wai Kuen says his father provided all the purchase money.

4. After that there were a series of transactions of which the following are pertinent:

5. In June 1983 the property was transferred to Tang Ching and his wife, the plaintiff, in their joint names. In September 1987 Tang Ching died, vesting the property in the plaintiff's sole name by survivorship. In October 1988 by agreement for sale and purchase she sold the property to herself and Sunny Tang jointly. In November 1988 the plaintiff and Sunny Tang mortgaged the property to Standard Chartered Bank to secure borrowings made to Sunny Tang. That was discharged in November 1990.

6. After this last transaction the title deeds were entrusted by the plaintiff to Tang Wai Kuen to be held by him in his safety deposit box where they remained until these proceedings.

7. In October 1990 the plaintiff executed a power of attorney (hereafter called 'the first PA') in favour of Sunny Tang. It was a general power under Section 7 of the Powers of Attorney Ordinance Cap. 31 (PAO). Her signature was witnessed by a solicitor called P L Tom Chan according to the face of the document. In June 1991 Sunny Tang on his behalf and as his mother's attorney on her's executed a mortgage in favour of Generale Bank Overseas (Belgium) (hereafter called 'the Belgian Bank') securing an advance of $500,000 to Sunny Tang.

8. The document whose validity is disputed and which gave rise to these proceedings follows next. On its face it is a power of attorney dated January 1992, also in general form under Section 7 PAO in favour of Sunny Tang (hereafter called 'the second PA'). On this occasion, the signature purportedly that of the plaintiff was witnessed by a conveyancing clerk called Ng Cheuk Man, whose signature is verified by a partner solicitor of his employer.

9. In January 1992 the plaintiff and Sunny Tang purported to sell the property to the 1st defendant for $1,460,000. That agreement and the consequent assignment were executed by Sunny Tang on his behalf and as his mother's attorney on her's. The 1st defendant borrowed the sum of $808,344 from the 2nd defendant and executed a mortgage in its favour. Part of this was utilised to repay the Belgian Bank and its mortgage was discharged. Sunny Tang was paid the balance. The parties relied on certified copies of the title documents to complete the sale.

10. By September 1992 the 1st defendant was defaulting in payment of the instalments under his mortgage to the 2nd defendant and that default persisted. In April 1994 the 2nd defendant issued proceedings against the 1st defendant for (inter alia) orders for possession and sale of the property, in pursuance of its powers under its mortgage. These orders were made in September 1994. A writ of possession followed in May 1995. The 2nd defendant took possession by padlocking the entrance to the property.

11. By transfer of mortgage dated November 1996 the 2nd defendant transferred its mortgage and with it its rights by court order to possession and sale to the 3rd defendant. By agreement dated December 1996 the 3rd defendant sold the property to the 4th and 5th defendants. That sale and purchase was completed in January 1997 since when and to date the 4th and 5th defendants have remained proprietors of and been in possession of the property.

12. At all material times Sunny Tang was a conveyancing clerk employed by various legal firms in Hong Kong. In that capacity he orchestrated the conveyancing in respect of the property and that included the sale and assignment to the 1st defendant. He was also an inveterate gambler, and debt collectors operating for loan sharks were constant and unwelcome visitors to the property. The plaintiff says this gave him the opportunity and motivation to sell the property without consulting her, as he did to the 1st defendant in 1992, to recover what he could from the sale proceeds, accounting to her for nothing. The 1st defendant did not, following his purchase, take possession, and the plaintiff had no knowledge of events until, in December 1993, she was informed by an officer of ICAC that they were investigating a deception case in which Sunny Tang was a suspect. Then she was shown the second PA and said she might not have signed it; alternatively, that Sunny Tang had invited her to sign a blank piece of paper on the pretext that it was to be engrossed as an application for insurance. If this was the document in question then it had been concocted in its present form as a trick. It was on this occasion that she first learned of the purported sale of the property, without her knowledge or authority, to the 1st defendant. She provided samples of her handwriting to enable comparisons to be made.

13. At some stage following this revelation the plaintiff moved away from the property; whether it was because of the purported sale or to escape the harassment of Sunny Tang's creditors is not clear as I shall come to. But from time to time she returned to water her plants and so on, until she found her way barred by the 2nd defendant's padlocks in May 1995.

14. Meanwhile the ICAC investigation uncovered sufficient information to warrant charging not only Sunny Tang but also the conveyancing clerk Ng Cheuk Man and the 1st defendant. There was one more person arrested and charged but he plays no part in this history. There were a number of charges, all but two of which are unrelated to the property and these proceedings. Those that are are charge 1, in which Sunny Tang and Ng Cheuk Man were charged with forgery of the second PA, and charge 2, in which Sunny Tang, Ng Cheuk Man and the 1st defendant were charged with obtaining a pecuniary advantage by deception from the 2nd defendant.

15. The plaintiff had made a statement to ICAC in support of the allegation in the first charge but was, at her request, excused from attending the trial by reason of age and health. Then prior to trial in September 1995 Sunny Tang while in custody committed suicide. In the event the Crown did not prosecute the first charge. That left the second charge. After trial in May 1996 the trial judge convicted the 1st defendant of charge 2 and acquitted Ng Cheuk Man.

16. The plaintiff filed her writ in January 1997, and in February 1997 registered a copy of the writ in the Land Registry Office as a lis pendens.

The Claim

17. The plaintiff claims her purported signature in the second PA is a forgery or alternatively that it came into being when she was tricked into signing a blank piece of paper in the belief that it was an application for life insurance. The purported sale of the property in reliance on the second PA was therefore a nullity as were all subsequent transactions. The 2nd defendant and subsequently the 3rd and 4th defendants having taken possession of the property did so in acts amounting to trespass and are liable to account to her for losses occasioned thereby. She seeks declarations that the second PA and all subsequent instruments are void, an order for possession, mesne profits for the period she has been denied possession, damages to be assessed, interest and costs.

The Defence

18. The 1st defendant has filed no defence and played no part in the trial. The remaining defendants plead that the second PA was a genuine power of attorney upon which they could rely, but if it was not then the documents transferring the interest of the plaintiff and Sunny Tang in the property were executed whilst the first PA was extant and thus were validly executed. In the alternative the plaintiff having been alerted to the unauthorised sale by at least December 1997 took no steps within a reasonable time to recover the same and, in particular, join the 2nd defendant's action for orders for possession and sale. The plaintiff's own claim begun in January 1997 was barred by estoppel and or in the alternative by the doctrine of laches and or in the alternative by res judicata. It is also pleaded that whatever the outcome of the plaintiff's claim that would not affect the validity of Sunny Tang's assignment of his own interest in the property.

19. The 4th and 5th defendants counterclaimed for damages caused by the loss of a sale that could not be completed because of the lis pendens the plaintiff had registered. In the event they elected not to proceed with their counterclaim at trial, beyond seeking an order to vacate the lis pendens.

The Issues

1. Was the assignment of the property from the plaintiff and Sunny Tang to the 1st defendant dependant upon the genuineness of the second PA?

2. If so, upon whom does the burden of proof lie in establishing whether it was genuine, or false, as the case may be?

3. Are the parties and I bound by the orders for possession and sale made in September 1994?

4. If not, is the plaintiff estopped by reason of her inactivity between the time she first came to know the property had been disposed of and the issue of this writ or by exercise of the doctrine of laches because of delay?

5. If the plaintiff is entitled to have title and possession restored, what else is she entitled to claim, and from whom?

20. Before dealing with these issues, it is necessary for me to consider the evidence and make findings of fact.

The Evidence

21. The plaintiff and her son Tang Wai Kuen had made witness statements and these stood as their evidence in chief. They were called and subjected to cross-examination.

22. Tang Wai Kuen came first. In his witness statement he said the first he and his mother came to know something was wrong was when she was interviewed by ICAC. He said Sunny had long been addicted to gambling, was constantly in debt, and it came as no surprise that he was wanted for deception. It was at this time they first came to learn that he had sold the property. As far as he knew his mother, the plaintiff, had no knowledge of the 2nd defendant's action for possession and sale until her entry was barred in May 1995. She moved in to live with him to escape the debt collectors who were constantly knocking on her door.

23. For the purposes of establishing the plaintiff's loss arising from her ouster he said the property was worth about $1 million and would rent for about $5,000 - 6,000 per month.

24. In cross-examination he said if notices issuing from the 2nd defendant's action had been fixed to the front door during the previous year they were not spotted by his mother or otherwise she did not refer to them. And if a representative of the 2nd defendant called upon her in February 1994 to enquire of her interest in the property and she had said she was a tenant, he said that was her standard response to strangers who posed that question for she was continually harassed by loan sharks and other ne'erdowells trying to recover money owed by Sunny.

25. Next came the plaintiff. In her witness statement she said she never signed the second PA nor any other power of attorney for the purpose of selling the property, never having formed the intention of disposing of it. When her son Sunny executed the assignment purporting to convey the property to the 1st defendant he did so unbeknown to her. During the course of the ICAC interview in December 1993 she was shown the second PA. She denied the signature was hers and gave specimens so that tests could be conducted. She claimed not to be aware of the 2nd defendant's action nor that notices had been posted (this is at odds with what she was later to admit in cross-examination) nor that an order for possession and sale in favour of the 2nd defendant was made in September 1994. She said it was not until she found her way barred in May 1995 that she realised she had been dispossessed. Thereafter with the assistance of her son Tang Wai Kuen she began to pursue her own rights but there were delays including an application to Legal Aid which was refused at first before being granted on appeal.

26. In cross-examination, she said she trusted her son Sunny implicitly and this included signing documents in blank at his behest. Taken to the various documents produced in the bundle which dealt with the title to the property carrying her signature she variously denied signing or said she could not remember if she had done so, notwithstanding that it was only one, the second PA, whose authenticity she was challenging. She denied or said she could not remember when it was put to her that on various occasions she and her husband had mortgaged the property. She purported to be unaware of the sale by herself to Sunny and herself jointly. She described many of the transactions, for instance the mortgage to the Belgian Bank, as false, denying knowledge of the circumstances or of the solicitors recorded as having witnessed her signatures. She denied the validity of her signature on the first PA, no less than on the second. Having been taken to the latter her response was poignant:

"So many solicitors names and firms - I don't know who they are; my son was working for a solicitor's firm; I don't know if he made it at the office. I don't know where these matters took place or who these persons are."

27. She also denied having put her signature to a statement to ICAC produced as a document on her behalf. She denied having been visited by a clerk representing the 2nd defendant. But she did admit to knowing a piece of paper had been posted on the door for repossession. Of this she said:

"That's right. A paper was posted there. I was ill. I was told it was for repossession. I have no place to live. No furniture. I went to live with my second son."

28. Mr Chow for the plaintiff then took steps to call a Mr Leung Sze Chung who is a Government Chemist, engaged by ICAC during the course of its criminal investigation to compare the signatures of the plaintiff with that on the second PA. But I excluded his evidence, acceding to an application to do so by Mr Fung, SC representing the 2nd and 3rd defendants, for reasons given and recorded elsewhere.

29. There were no further witnesses called; but before departing from this topic it is, I believe, appropriate to refer again to the bundle of documents which included documents and correspondence relating to the transaction in which the 1st defendant came to take title. Following completion the solicitors representing the vendors, Messrs Alsop Wilkinson, by letter dated 23 March 1992 to Messrs Ng and Shun for the purchaser, forwarded the assignment to the 1st defendant duly signed by Sunny Tang. There was no power of attorney included. But subsequently Messrs Ng and Shum forwarded the documents of title to the 2nd defendant as registered first mortgagee. Included were the first PA and a certified copy of the second PA.

Findings of Fact

30. There was no doubt that Sunny Tang was a crook and a rogue, driven by the excesses of his addiction to gambling into swindling his own elderly and ill mother out of her own home, then paying the ultimate price by taking his life. It is apparent that he manipulated her into signing documents to achieve his own ends, and it is hardly surprising, I suppose, that in the witness box she chose to deny the validity of any of her signatures including even those on her witness statements, though only one, that on the second PA, is the subject of challenge in these proceedings. As to that document; there is only her assertion that the signature on it is a forgery or otherwise penned by a trick; that cannot be conclusive given her evidence about all her other signatures. I can make no finding that forgery or fraud has been established, only that it has been asserted.

31. It is not pleaded and it is not the plaintiff's case that the first PA, in general form and in compliance with the PAO, was a forgery, was fraudulently compiled, had been revoked prior to the execution of the assignment to the 1st defendant or was in any other way irregular at the time the property was sold to the 1st defendant. In the witness box the plaintiff denied the signature on it was hers. But as I have already found, she disclaimed authorship of each and every signature that was put before her. And the first PA was one of many of the documents in which the plaintiff's signature was witnessed by his solicitor. I am satisfied it was and remains a genuine document.

32. Both the first PA and a certified copy of the second PA were held as documents of title.

33. I am satisfied that at least by December 1993 the plaintiff and other members of the family came to learn of Sunny Tang's swindle. As to precisely when the plaintiff came to know of the defendant's court action is from the evidence unclear; however I am satisfied that she did so no later than the dates upon which the notices were posted; she was as I find aware of these and what they represented. This was as I find the reason or at least a contributory one for her moving in with her son Tang Wai Kuen.

The Outcome

34. If, as I have found, the first PA was a genuine document, why did those responsible go to the trouble of preparing the second PA, whether by honest or dishonest means? Why is it claimed, as part of the plaintiff's case, that the parties relied on the second PA and not the first?

35. Mr Chow submits that the answer lies in the PAO and conventional conveyancing practice. He said that the presumption invoked by the PAO that a power of attorney had not been revoked only prevailed so long as the document to be relied on was executed within twelve months of the power of attorney. If not then the donee was required to make a declaration of non-revocation within three months of executing the document in question. Mr Chow pointed out the first PA was entered into earlier than twelve months prior to execution of the assignment to the 1st defendant whilst the second PA was dated within that twelve months' period. No declaration of non-revocation having been made it follows the parties must have relied on the second PA.

36. It is Section 5 (2) and (4) PAO which deals with the point whose terms I now reproduce:

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

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(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.

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(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 at 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."

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37. In conveyancing practice a purchaser properly advised will call for a declaration of non-revocation if the power of attorney is more than twelve months older than the assignment executed in exercise of the power, for if he does not he runs the risk of a prospective future purchaser pulling out because of the risk that the donor or his successor might some day prove prior revocation; see, for example, Kan Wing Yau v Hong Kong Housing Society [1986-8] CPR 522.

38. But the difficulty Mr Chow has in developing this argument is that the challenge to authenticity comes not from a purchaser but the donor of the power herself. She cannot say here there was a revocation of the first PA or a risk that it might be proved because only she could have revoked it. Having neither pleaded nor adduced evidence of that it is beyond peradventure that there was no revocation. She is bound by the genuineness of the first PA and by the documents executed in exercise of that power. The second PA on the face of it granting the same rights as the first but second in time is thus otiose. Whether or not it is false or genuine is not relevant.

39. Of course that the plaintiff had not authorised that her power of attorney be used for the purpose of selling her property does not assist her. The transaction is not invalidated by the lack of her, the donor's, consent.

40. The answer to issue (1) is 'No'. It follows that the others fall away. But I propose to deal also with issue (3) and the existence of the orders for possession and sale of September 1994. The relief the plaintiff now seeks even had it been well-founded would have required this court to ignore an order made by a court of equal jurisdiction. This I cannot do. The appropriate course would have been for the plaintiff to seek leave to be made an additional party and to set aside the orders currently in existence before mounting her own application to restore title and possession to her. On this further ground, the plaintiff's claim would have failed.

41. The plaintiff by virtue of the desperate conduct of her son has suffered the loss of her property and then of the son himself. She is deserving of the deepest sympathy. But as I have found she may not now recover the property from her successors in title or otherwise be compensated by them for her loss.

42. The orders now follow.

The Orders

43. The claims of the plaintiff made against the defendants or any of them are dismissed;

44. Registration of the writ of summons herein under Memorial No. 6917207 is hereby to be vacated;

45. Save as above the counterclaims of the 4th and 5th defendants are dismissed.

46. Costs of the 2nd, 3rd, 4th and 5th defendants are to be borne by the plaintiff taxed if not agreed, with a certificate for two counsel for the 2nd and 3rd defendants; these costs orders are nisi at first instance.

47. The plaintiff's own costs are taxed under Legal Aid Regulations.