XCHRX LIM SUI CHUN v. BILLION LIGHT INVESTMENT LTD.

HCMP 6426/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 6426 OF 1999

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J U D G M E N T

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1. In these proceedings begun by Originating Summons, the Plaintiff seeks various declaratory reliefs relating to the sale and purchase of a property. The Plaintiff also claims a refund of the deposits and reimbursement of his costs and expenses in relation thereto. The Defendant has given no notice of intention to defend, and was absent at the hearing of the Originating Summons. After hearing submissions from the Plaintiff's solicitors, I granted judgment in favour of the Plaintiff and gave brief oral reasons for so doing. I now reduce the reasons into writing.

Background

2. The Defendant is the registered owner of the property known as Flat B 10/F, King Kwong Mansion, No. 8 King Kwong Street, Hong Kong ("the Property").

3. By a sale and purchase agreement dated 19 October 1999, the Plaintiff agreed to buy and the Defendant agreed to sell the Property at $1.3 million to be completed on 13 September 1999 ("the Agreement"). Pursuant to the Agreement, deposits totalling $130,000.00 had been paid by the Plaintiff to the Defendant. On 2 September 1999, the Defendant's solicitors delivered the title documents to the Plaintiff.

4. By a letter dated 7 September 1999, the Plaintiff's solicitors raised a total of 12 requisitions. The Defendant's solicitors purported to answer them by a letter dated 10 September 1999. The Plaintiff's solicitors followed up on the requisitions by another letter dated 11 September 1999 to which the Defendant's solicitors replied by a letter 14 September 1999. The Plaintiff's solicitors did not accept the reply received and pursued the matter by a letter dated 15 September 1999. The Defendant's solicitors replied by simply stating that a good title had been proved. The Plaintiff did not complete the purchase as scheduled on the basis that the Defendant had failed to prove a good title. By a letter dated 17 September 1999, the Defendant's solicitors forfeited the deposits. On 19 October 1999, the Plaintiff took out these proceedings seeking a determination on the requisitions.

Requisition No. 1

5. The first requisition arises in the following manner. By a letter of nomination dated 7 March 1980, one Tak Fung Construction Company Limited nominated Well-Fill Enterprises Limited to take up the subsequent assignment. The Plaintiff's objection is that the nominator had not in the letter of nomination relinquished its interests in the sale and purchase agreement, and, in particular, the deposit it had paid. The Plaintiff considered that a presumption of resulting trust has arisen in respect of the sale and purchase agreement in favour of the nominator and requested the Defendant to provide evidence rebutting the presumption.

6. The Defendant answered by asserting that since the nomination was prior to the re-development of the site and the construction of the Property, any remedy arising from a resulting trust is in the proceeds of sale only and the title will not be affected.

7. In Formking Development Ltd v. Lee Kwok Hung Robert [1993] 1 HKC 412, Mayo J (as he then was), in construing a letter of nomination in similar terms as the one in the present case, held that a presumption of resulting trust arises where the letter of nomination does not show that the nominator had given up his interest in the property. The learned judge further held that in the absence of evidence rebutting the presumption, the vendor had failed to show good title.

8. It follows from this authority that a presumption of trust does arise as a result of the letter of nomination. The Defendant's answer that the subsequent re-development of the site prevents the resulting trust from affecting the title in that any remedy the beneficiary has is in the proceeds of sale is, in my view, untenable. Any purchaser dealing with the land which is the subject matter of a resulting trust will be fixed with constructive notice of the interest of the nominator. It matters not that the purchaser is only taking a certain undivided share of the land in question. The fact of a re-development does not alter the position.

9. In this regard, the Plaintiff's requisition is properly raised and the Defendant has failed to answer it satisfactorily.

Requisition No. 2

10. Initially by the letter dated 7 September 1999, the Plaintiff asked for certified copies of a mortgage dated 28 August 1980 and of the re-assignment dated 18 May 1981. The Defendant responded by sending plain copies of the 2 documents and undertook to provide the certified copies. By its letter dated 11 September 1999, the Plaintiff raised a further objection regarding the execution of the re-assignment. The Plaintiff requested for evidence of due execution by the two persons signing for Tai Yau Bank Limited. The Defendant replied by referring to S.128 of the Banking Ordinance, Cap. 155, which has since the date of the re-assignment been repealed.

11. S.128 of the repealed Banking Ordinance provides:

"Notwithstanding anything contained in the articles of association or regulations of any authorized institution incorporated in Hong Kong with respect to the execution of instruments under its seal, but without prejudice to anything in such articles or regulations or inconsistent herewith, the seal of the institution shall not be affixed to any instrument except in the presence of a director of the institution and of one other person being either a director or an officer of the institution duly authorized on that behalf, and that director and such other person shall sign every instrument to which the seal of the institution is so affixed in their presence." (emphasis supplied)

12. I cannot see how this section can assist the Defendant. S.128 does not do away with the need of proving due execution in accordance with the articles of association of a bank. The Defendant has therefore failed to answer this part of the requisition satisfactorily.

Requisition No. 3

13. There are 3 parts to this requisition which relates to an assignment dated 6 May 1980 from Hon Kat Company Limited to Well-Fill Enterprises Limited. Only 2 of them remain relevant. They consist of request by the Plaintiff for certified copies of 2 reassignments referred to in the assignment. The Defendant replied by saying that the plain copies of the 2 documents were sent and gave an undertaking to provide the certified copies. In fact, the Defendant only sent the memorials of the 2 documents.

14. In Lai Chung Yue & Anor v. Chau Shing & Anor [1987] 3 HKC 406, Godfrey J (as he then was) held that the conveyance and the memorial of it are two separate and distinct things. Applying this principle, it is insufficient for the Defendant to provide the memorials in lieu of certified copies of the 2 documents. Further, under clause 11(c) of the Agreement, the Defendant is obliged to provide certified copies of the documents of title. The Defendant has therefore failed to satisfactorily answer this requisition.

Requisition No. 4

15. This requisition relates to the Deed of Mutual Convenants of the building in which the Property is situated. The Plaintiff initially requested for certified copy of the Deed. The Defendant sent a plain copy and gave an undertaking to supply it. On 11 September 1999, the Plaintiff further requested for evidence of due execution by a So Shiu Tong described as the managing director of Yue Tai Hing Company Limited. The Defendant's reply was that it was not obliged to prove due execution. I agree with the Plaintiff that the Deed of Mutual Convent is a document of title and it is accordingly no answer for the Defendant to say that due execution needs not be proved.

Requisition 5(b)

16. This requisition relates to an assignment dated 30 January 1984. The Plaintiff requested for certified copy of the assignment. Again, the Defendant only provide a copy of the memorial plus an undertaking to supply the certified copy. When further pressed, the Defendant stated that it was not in possession of the document. This answer is clearly unsatisfactory. The Defendant also fails to answer this requisition.

Requisition No. 6

17. This requisition concerns an assignment dated 8 April 1987 by a Chan Chak Yee under seal as a director of Cheson Union (1978) Limited. The Plaintiff's request is for evidence of due execution. The Defendant answered to the effect that the board solution is not required because of the principle in the Royal British Bank v. Turquand (1856) 6 E & B 327.

18. Article 71 of the articles of association of Cheson (1978) Limited required the company seal to be affixed "by the authority of a resolution of the board of Director, ... and in the presence of a director." In Wong Yuet Wah Mandy v. Lam Tsam Yee & Anor HCMP 4998/1998 (unreported), Deputy Judge Chung (as he then was), in dealing with an article of association providing for the mode of execution to be determined by resolution of the board, held that there was an obligation on the vendors' part to supply a copy of the resolution to show that there was due execution. In this case, Chan Chak Yee was only described as "director", without indication of his being authorized by the Board. The Plaintiff's request to have evidence of due execution is therefore a proper one. The Defendant's reference to the Turquand case and its rationale is irrelevant and affords no answer to the requisition.

Requisition No. 9

19. This again concerns the Deed of Mutual Convenants. The Plaintiff requested for evidence of due execution by 3 parties to the Deed, all of whom are limited Companies. The Defendant's answer is similar to that for requisition No. 6.

20. The articles of association of 2 of these 3 Companies, Carcase Company Limited and Yetly Company Limited, required the use of the company seal to be signed by the chairman of the Board or any person authorized by the Board. The person who executed the Deed for Carcase Company Limited, Chue Chee Yau, was described as its director. There is no indication that he is the chairman or is someone authorized by the Board of Directors. In the case of Yetly Company Limited, one Yiu Shek Kin signed on its behalf without any indication as to his capacity nor his authority. Under these circumstances, the Plaintiff is entitled to ask to see the board resolution: see Li Ying Ching v. Air-Sprung (Hong Kong) Ltd [1996] 4 HKC 418.

21. As for the articles of association of the third company, Wonhai Limited, it required the use of the company seal to be signed by person authorized by the Board of Directors. One Chow Pui Wah executed the document and he was described as the Chairman. It was however not indicated whether he had been authorized by the Board to sign. In the circumstances, the Plaintiff is also justified to request evidence of due execution.

22. The Defendant's purported answer to these objections, namely, by reference to the principle in the Turquand case, is for reasons previously stated, unsatisfactory.

Requisition No. 10

23. This requisition arises out of an assignment dated 9 August 1989 between Carcase Company Limited and Fung Top Development Limited. The Plaintiff's request is for evidence of due execution by the 2 companies. The Defendant took the same stance, that it is not necessary to produce the resolution because of the rule in the Turquand case.

24. On this assignment, the same Chue Chee Yun signed for Carcase Company Limited as a director whereas one Michael Lam signed the document for Fung Top Development Limited as its director. The articles of association of Top Fund Company Limited dealing with the authority to affix the seal is the same as that governing Carcase Company Limited.

25. For the reasons given above, the requisition is a proper one and the Defendant has failed to answer it satisfactorily or at all.

Defendant's Title to the Property

26. It follows from the above holdings that the Defendant has failed to answer the requisitions set out above, that the Defendant has failed to prove and show a good title to the property.

Reliefs

27. The Plaintiff is therefore entitled to the declarations that the Defendant has failed to answer the requisitions raised by the Plaintiff through his solicitors, that the Defendant has failed to show a good title and that the Plaintiff is entitled to rescind the Agreement.

28. It follows that the Defendant should return the deposits i.e. 130,000.00 to the Plaintiff.

29. The Plaintiff has claimed the costs of investigating the title of the Property and the costs of the stamp duty paid. The claim for estate agent's commission was not pursued. The receipt from the Defendant's solicitors dated 12 October 1999 shows that a total of $4,300.00 had been spent on investigating the title of the Property. The other receipt from the Plaintiff's former solicitors shows the Plaintiff had paid stamp duty in the sum of $9,850.00. In the circumstances, the Plaintiff is entitled to recover the 2 sums of $4,300.00 and $9,850.00 from the Defendant. There is one other receipt dated 26 August 1999 from the Plaintiff's former solicitors for the amount of $2,000. This is not recoverable as it is part of the costs of the aborted purchase. There should be interest on the amounts recoverable as well as on the deposits held by the Defendant at judgment rate from the date of the Writ until full payment.

30. I also grant a declaration that the Plaintiff is entitled to an equitable lien on the Property for the said sums of the deposits and the costs of investigating the title of the property.

31. Finally, in respect of the costs of this action, it should be borne by the Defendant to be taxed.

Conclusion

32. There is judgment for the Plaintiff for:

(1) Declarations as per the terms of paragraphs 1 to 3 of the Originating Summons.

(2) An order for the return of the $130,000.00 deposit as per paragraph 4 of the Originating Summons.

(3) An order that the Defendant pays the Plaintiff the costs of investigating the title in the sum of $4,300.00.

(4) An order that the Defendant reimburses the Plaintiff the stamp duty paid in the sum of $9,850.00.

(5) An order that the Defendant pays the Plaintiff interests on the said sums of $130,000.00, $4,300.00 and $9,850.00 at judgment rate from the date of the Originating Summons to the date of full payment.

(6) A declaration that the Plaintiff is entitled to an equitable lien on the Property for the deposit of $130,000.00 and the costs of investigating the title in the sum of $4,300.00.

(7) Costs of the action to be taxed.