JONES, MARK DEAN v. BOHMANN INTERNATIONAL LTD

HCMP 2623/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2623 OF 2011

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JUDGMENT

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1. This is a vendor and purchaser summons. The plaintiff as purchaser seeks a declaration that the defendant had failed to prove a good title to the property known as Office Unit No. 4, 8^th Floor, Arion Commercial Centre, Nos. 2-12 Queen’s Road West, Hong Kong (“the Property”) agreed to be sold and purchased. He also seeks for the return of the sum of $522,000 being deposit forfeited by the defendant, and for liquidated damages in the sum of $522,000 plus legal fees and disbursements in the sum of $12,500.

Background

2. The plaintiff as purchaser and the defendant as vendor signed a provisional sale and purchase agreement dated 20 June 2011 (“the Agreement”) through an estate agent who acted for both parties in the sale and purchase of the Property.

3. The price for the sale of the Property was $5,220,000 with the completion date on or before 27 September 2011.  A deposit of $300,000 was payable upon the signing of the Agreement, with a further deposit of $222,000 payable upon the signing of the formal sale and purchase agreement on or before 8 July 2011, and the balance of the purchase price in the sum of $4,698,000 payable upon completion.

4. The initial deposit of $300,000 was duly paid by the plaintiff to the defendant upon the signing of the Agreement.

5. The parties did not sign the formal sale and purchase agreement, but the plaintiff did pay the further deposit of $220,000 to the defendant on 8 July 2011.  There is no dispute that the terms of the Agreement continued to govern the transaction thereafter.

6. Subsequently, the plaintiff’s solicitors raised requisitions of title to the Property.  There was a dispute as to whether the title to the Property was proved by the scheduled date of completion.  No completion took place on 27 September 2011.  By a letter dated 28 September 2011, the defendant’s solicitors insisted that the title to the Property was proved and gave notice that if no completion was to take place on 30 September 2011, the deposit would be forfeited.  The plaintiff’s solicitors by letter dated 28 September 2011 treated the failure by the defendant to prove title of the Property as repudiation, thereby gave notice that the Agreement was repudiated and sought the return of the deposit in the total sum of $522,000.  Consequently, no completion took place on 30 September 2011.  The defendant purported to forfeit the deposit and the Agreement was repudiated.

7. The dispute boils down to whether the following 2 requisitions were properly raised by the plaintiff’s solicitors and/or properly dealt with by the defendant’s solicitors:

(i)  whether there was due execution of the assignment dated 17 June 2008 (“the Assignment’) under which the defendant acquired the title of the Property from its predecessor, Super Top Investment Limited (“Super Top”); and

(ii)  whether rectification was required relating to the identification of the defendant in the Stamp Certificate attached to the Assignment (“the Stamp Certificate”).

8. I will deal with these 2 requisitions in turn.

Execution of the Assignment

9. The first requisition was raised by the plaintiff’s solicitors in their letter dated 25 August 2011 when they asked for proof of due execution of the Assignment under which the defendant acquired the title of the Property from Super Top.

10. The execution clause of the Assignment reads:

“SEALED with the Common Seal of the Vendor and SIGNED by Kwan Yee Chung Zeus, the person as duly authorized by resolution of the board of directors in the presence of … … …”

11. After the said execution clause, it contained the following 3 signatures:

(i)  the signature of a solicitor known as Chiang Kam Wah;

(ii)  the signature of Kwok Yee Chung Zeus (which is not disputed) under the company chop of Super Top;

(iii)  a signature which looks the same as that of Kwok Yee Chung Zeus under the company chop of one Pro (Nominees) Limited (“Pro Nominees”).

12. According to these 2 company chops, Kwok Yee Chung Zeus was signing the Assignment “for and on behalf of” Super Top and Pro Nominees respectively.

13. Upon the defendant’s solicitors reply in the letter dated 7 September 2011 that Super Top had already been deregistered and proof of due execution was unnecessary, the plaintiff’s solicitors pointed out by letter dated 8 September 2011 that as Super Top might be reinstated, proof of due execution was still required.

14. By a letter dated 9 September 2011, the defendant’s solicitors enclosed the Articles of Association of Super Top (“the Articles of Association”), and the annual returns of Super Top for the years 2007 and 2008 which show that Pro Nominees was a director of Super Top at the material time.  Further, Article 20(a) of the Articles of Association reads:

“The seal of the Company shall not be affixed to any deed or instrument except by the authority of a resolution of the Board of Directors and in the presence of one of the Directors of the Company and such Director shall sign every deed or instrument of which the seal of the Company is so affixed in his presence.”

15. The stance of the defendant’s solicitors in that letter was that those documents were adequate proof of the due execution of the Assignment.

16. By a further letter dated 22 September 2011, the defendant’s solicitors enclosed the annual return of Pro Nominees for the year 2008 which shows that a Kwan Yee Chung was its only director at the material time. Further, the annual return of Pro Nominees was signed by Kwan Yee Chung whose signature is remarkably similar to those 2 signatures appearing on the execution page of the Assignment.

17. By the letter also dated 22 September 2011, the plaintiff’s solicitors refused to accept that the defendant had proved its title. The basis of the objection can be listed out as follows:

(i)  Article 20(a) of the Articles of Association was not complied with in that the person executing the Assignment was the person authorised by the board of directors, and whereas under Article 20(a), the person executing the Assignment shall be a director of Super Top.  In other words, the plaintiff was saying that although Kwok Yee Chung Zeus was authorised to sign the Assignment, he was not a director of Super Top as required by Article 20(a);

(ii)  the name of the person executing the Assignment in the capacity as the authorised person of Super Top (Kwok Yee Chung Zeus) differs from that appears in the annual return of Pro Nominees (Kwok Yee Chung); and

(iii)  s 23 of the Conveyancing and Property Ordinance, Cap 219 (“CPO”) did not apply.

18. I agree with Mr Chiu, counsel for the defendant, that the plaintiff’s objection is misconceived.

19. According to my interpretation, Article 20(a) have 3 requirements:

(i)  the seal of the company shall be affixed to a deed or instrument with the authority of a resolution of the board of directors;

(ii)  the seal of the company shall be affixed to a deed or instrument in the presence of one of the directors of the company; and

(iii)  such director shall sign every deed or instrument of which the seal of the company is so affixed in his presence.

20. In my judgment, these 3 requirements are satisfied in the present case.

21. Firstly, the execution clause of the Assignment has clearly stated that the seal of the company was affixed with the authority of the board of directors of Super Top.  The first requirement is therefore satisfied.

22. Regarding the second requirement, one of the directors of the Super Top was a corporate director, ie Pro Nominees.  The corporate director could not be physically present when the seal of Super Top was affixed to the Assignment.  A corporate director can only act through its directors.  Hence, if the director of Pro Nominees, Kwan Yee Chung, was present when the company seal of Super Top was affixed to the Assignment, and the said Kwan Yee Chung had expressly declared that he was signing the Assignment “for and on behalf of” Pro Nominees which was the corporate director, such corporate director should be regarded as being present when the seal was affixed to the Assignment.  The second requirement is therefore also satisfied.

23. The third requirement requires such director of Super Top to sign the deed or instrument of which the seal of Super Top was so affixed in his presence.  As mentioned above, the corporate director, Pro Nominees, could only act through its directors.  As the director of Pro Nominees, the said Kwan Yee Chung, had expressly declared that he was signing the Assignment “for and on behalf of” Pro Nominees, the corporate director of Super Top (ie Pro Nominees) should be regarded as having signed the Assignment.  The third requirement is also satisfied.

24. The plaintiff’s objection is in fact a simple one.  According to the execution clause, Kwan Yee Chung Zeus had been authorised by the board to sign the Assignment.  However, under Article 20(a), only the directors of Super Top were allowed to execute the Assignment.  Since Kwan Yee Chung Zeus was not a director of Super Top at the relevant time, there had been no due execution of the Assignment.

25. I cannot accept such argument.  On plain reading of Article 20(a), there is no requirement for a resolution of the board to appoint a particular director to execute the document bearing the common seal. If one then reads the execution clause, it recites that the resolution of the board had authorised the following 2 matters: (i) the affixing of the common seal to the Assignment; and (ii) the signing of the Assignment by Kwan Yee Chung Zeus. What it does not mention is the identity of the director authorised by the resolution of the board.

26. In my judgment, the contents of the execution clause cannot disturb the fact that the 3 requirements laid down in Article 20(a) of the Articles of Association are in fact satisfied in the present case.  Further, the court cannot just look at the execution clause in isolation.  The manner in which the signatures were put down has clearly indicated that Kwan Yee Chung Zeus was not just signing the Assignment as someone authorised by the resolution.  He was also signing the Assignment “for and on behalf of” the corporate director, Pro Nominees.  By so doing, the corporate director was present when the common seal was affixed to the Assignment and the corporate director had in fact signed the Assignment, thereby satisfying all the requirements laid down in Article 20(a).

27. I agree with Mr Chiu that the present case is very different from cases such as Wong Yuet Wah Manday v Lam Tsam Yee & Anr [1999] 3 HKC 268 and Grand Trade Development Ltd v Bonance International Ltd [2001] 2 HKLRD 759 where, in the absence of mention in the relevant execution clauses of the attesting directors being authorised by a board resolution, failure to provide a specific board resolution was fatal.

28. In those 2 cases, the articles empowering the use of company seals were differently worded in that they expressly required the mode of execution and the attesting directors should be determined by a resolution of the board. In Wong Yue Wah, the article reads: “All deeds … requiring the seal of the Company shall be signed by two Directors or by one Director and countersigned by the secretary or in such manners as the Directors shall from time to time by resolution determine.”  In Grand Trade Development Ltd, the relevant clause was Article 114 of Table A which reads: “ … every instrument to which the seal shall be affixed shall be signed by a director and shall be countersigned by the secretary or by a second director or by some other person appointed by the directors for the purpose.”

29. Taking into account the wordings of those articles, it is not surprising that, in the absence of any mention of the attesting directors being authorised by the board, the court would require the production of the relevant board resolution.  In the present case, Article 20(a) does not require the attesting director should be one appointed by the board. I agree with Mr Chiu that what is proscribed is a state of affair, namely, presence of any one director and the putting of his signature on the deed or instrument.

30. The present case is also quite different from Li Ying Ching v Air-Sprung (Hong Kong) Limited [1996] 4 HKC 418 which is relied upon by Mr Lee, counsel for the plaintiff.  In that case, the relevant article reads: “Every document required to be sealed with the Seal of the Company shall be deemed to be properly executed if sealed with the Seal of the Company and signed by the Chairman of the Board of Directors singly or by any two directors jointly.”  The court upheld the objection in that case because one Judy Hsu who signed on the assignment was described in the execution clause as a director and not the chairman, and no admissible evidence was produced to show that Judy Hsu was in fact the chairman.  Hence, s 23 of the CPO could not assist the vendor in that particular case.

31. Undoubtedly, whether Article 20(a) has been complied with must depend on what are contained on the execution page together with all the documents that have been tendered to the plaintiff’s solicitors for the proof of title.  In my judgment, the requisition here had been adequately answered as the admissible evidence shows that Pro Nominees was present and the person signing the assignment was in fact a director of Pro Nominees at the time.  Hence, all the requirements of Article 20(a) are complied with.

32. There is a dispute between the parties as to whether the defendant is able to rely on s 23 of the CPO to prove the due execution of the Assignment.  S 23 reads as follows:

“An instrument appearing to be duly executed shall be presumed until the contrary is proved, to have been duly executed.”

33. As pointed out by Le Pichon JA in Grand Trade Development Ltd, s 23 only applies where, on its face, the instrument appears to be duly executed, which, in the context of a document purportedly executed by a company, in turns depends on the requirements specified in the articles of association.  If the articles require the document to be executed by the chairman, and the person executing the document is only described as a director in the execution clause, then s 23 is certainly not applicable.

34. However, Article 20(a) here requires, inter alia, the presence of a director and the signing of the deed by a director. As stated in the execution page of the Assignment, someone was present and signed the Assignment for and on behalf of the corporate director of Super Top.  In such circumstances, the Assignment, on its face, appears to be duly executed.  Although the defendant’s solicitors stated in their letter that it was not necessary for them to rely on s 23 of the CPO in answering the requisition, there is nothing to prevent the defendant from relying on such provision for the purpose of the present proceedings.

35. Finally, the plaintiff’s solicitors raised the query that, according to the company return, the director of Pro Nominees was “Kwan Yee Chung”, whereas the name of the signatory described in the execution clause was “Kwan Yee Chung Zeus”.  However, since the signature of “Kwan Yee Chung” as appeared in the company record of Pro Nominees is remarkably similar to the signatures of “Kwan Yee Chung Zeus” as appeared in the execution page of the Assignment, I accept that there is sufficient evidence to show that the 2 names actually refer to the same person.

36. Furthermore, I wonder whether it makes a difference if there were in fact two different persons.  The company chop of Pro Nominees in the execution page shows that the person (whether it was Kwan Yee Chung or Kwan Yee Chung Zeus, if they were different persons, or a third person) was so authorised to sign on behalf of Pro Nominees.  With the assistance of s 23 of the CPO, that would be sufficient to satisfy the requirements in Article 20(a) which requires the presence of and the signing of the Assignment by the corporate director.  Hence, whoever might have signed on behalf of Pro Nominee is quite irrelevant.

37. Based on the aforesaid, I find that the defendant had satisfactorily answered the plaintiff’s requisition relating to the due execution of the Assignment.

The identification of the defendant in the Stamp Certificate

38. I then turn to the second requisition.  Super Top assigned the Property to the defendant on 17 June 2008.  There was the Stamp Certificate attached to the Assignment certifying that the Assignment had been duly stamped.  However, the purchaser stated in the Stamp Certificate is “Bonhmann International Limited”, whereas the proper name of the defendant is “Bohmann International Limited”.  In the letter dated 20 September 2011, the plaintiff’s solicitors requested the defendant’s solicitors to rectify the matter.

39. I do not accept that this was a valid requisition. Firstly, it is clear that the name of the defendant has been misspelt in the Stamp Certificate.  In fact, the Stamp Certificate contains all the particulars of the Assignment, including the description of the vendor, the description of the Property, the date of the Assignment and the price for the sale of the Property.  There is no doubt that the Stamp Certificate refers to the Assignment itself.  Further, by asking the defendant’s solicitors to rectify the Stamp Certificate, even the plaintiff’s solicitors accepted that the mistake about the name of the defendant in the Stamp Certificate was a typo only.  In my judgment, no reasonable person reading the Stamp Certificate (if they can detect the typo in the first place) would have treated the Assignment as not properly stamped, and in such circumstances, no formal rectification is required.

40. Further, it had been held in Town Bright Industries Ltd v Bermuda Trust (Hong Kong) Ltd & Anr [1998] 2 HKC 445 that non-payment of stamp duty is not a matter of title.  It is a matter of conveyance which does not affect title even if the stamp duty to an instrument or title was not paid.  In some cases, the vendor may have to give an undertaking to have the relevant documents stamped if they are found by the court to be instruments which passed title.  However, after reading the Stamp Certificate, no reasonable person would have treated the Assignment as not properly stamped, and so there is no danger that the plaintiff would have to pay the stamp duty again for the registration of the Assignment.  Hence, there is nothing in the Stamp Certificate requisition.

41. When the plaintiff’s solicitors raised the Stamp Certificate requisition, the defendant’s solicitors just replied that they would not entertain the requisition because of the lapse of time.  Mr Chiu, quite sensibly, accepts that lapse of time is not a good reason to justify the defendant’s refusal to answer the requisition.  It was certainly unwise for the defendant’s solicitors to ignore such requisition, but since I find that that the requisition was neither a valid nor reasonable one, the defendant is still able to succeed in its defence to the plaintiff’s claim.

42. Based on the aforesaid, I dismiss the originating summons.  I also make an order nisi that the costs of the originating summons be to the defendant, which shall be made absolute 14 days after the date of the handing down of this Judgment.