CHING KUN KIN v. LUK SEE KING AND ANOTHER

HCMP1101/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.1101 OF 1998

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JUDGMENT

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1. This is a Vendor and Purchaser Summons. The Plaintiff is the Purchaser and the Defendants are the Vendors of an apartment in a development known as Woodcrest Hills which stands on Sha Tin Lot No.117 ("the property").

2. The Purchaser alleges that the Vendors have failed to satisfactorily answer certain requisitions concerning (i) a document made in 1986 which has been referred to by the parties as the "Power of Attorney" and (ii) a document made in 1984 said by the Vendors to be the "Head Power of Attorney".

3. The first requisition concerned the question of proper execution in accordance with foreign (in this case, French) law and the constitution of the bank whose documents they purported to be. A further requisition raised on the 1984 document was concerned with the English translation provided.

Background

4. The matter arises in this way. The property was originally developed by a company known as Viscount Limited. It obtained finance from Credit Lyonnais Hong Kong Branch. (As no distinction was drawn by the parties between the Hong Kong branch of the Bank and its French parent, I shall refer to it as "the Bank"). Viscount assigned the property to the Bank by way of a Building Mortgage in November 1980.

5. In January 1982, the Bank purported to re-assign the property to Viscount but the relevant document was not sealed. Since any re-assignment transfers the legal interest in the property, it would have been necessary under Hong Kong law for the re-assignment to have been sealed. This document was signed by a Mr R. Anthoine Milhomme simply "for and on behalf of" the Bank.

6. Viscount subsequently mortgaged the property again to the China State Bank. In 1985, this bank exercised its power of sale under the mortgage and sold the property to Cheong Yee Investment Ltd. In 1986, Cheong Yee sold the property to the Vendors.

Confirmatory Re-assignment by the Bank

7. In 1989, a document entitled Confirmatory Re-assignment was made between the Bank and Viscount. This document dated 17 February 1989 was sealed, and was signed by a Mr Daniel A. Bourgery who was described as "the duly appointed attorney in Hong Kong of [the Bank]".

Delegation to Mr Bourgery

8. The documents supplied by the Vendors to the Purchaser revealed that Mr. Bourgery had not been given a Power of Attorney by the directors of the Bank directly, but had derived his authority from a document dated 18 August 1986 entitled "Power of Attorney".

9. This document was made by a Mr Jean Jacques Brutschi, Joint Manager of the International Division of the Bank. It recited that the President of the Bank had conferred a Power of Attorney on Mr Brutschi, according to the deed received by Maitre Tonnellier, Notary in Paris, on May 9, 1984 which was confirmed by Mr Jean-Maxime Leveque, new President of the Bank, according to the deed received by Maitre Tonnellier, Notary in Paris, on 26 July 1986. (This Power of Attorney made by the President of the Bank in 1984 has been referred to by the parties as the "Head Power of Attorney").

10. The 1986 document made by Mr Brutschi recited that the aforementioned Head Power of Attorney contained the right of delegation to any person of his (Mr Brutschi's) own choosing, and Mr Brutschi thereby declared that he wished to delegate to Mr Bourgery, Chief Manager of the Hong Kong Branch, all necessary powers to represent the bank, including the power to execute, sign, seal and deliver all deeds and releases.

"Head Power of Attorney"

11. The Purchaser accordingly called for this Head Power of Attorney, no doubt with a view to seeing whether Mr Brutschi could indeed delegate his authority, as an agent cannot himself delegate his authority in the absence of clear language permitting him to do so.

12. The document delivered by the Vendors to the Purchaser in response comprised 10 pages of French text with 27 pages of English text stapled together. The 1st page in English bears the words "(Translated from the French)". There is however nothing on the pages in English to show who had done the translation.

13. This gave rise to the further requisition from the Purchaser that the Vendors had failed to show that the English text was a correct translation from the French.

14. Further, even assuming that it was a proper translation, it became apparent to the Purchaser in the course of the hearing that the document was not itself the Head Power of Attorney made by the President of the Bank to Mr Brutschi, but was a document signed by Maitre Tonnellier, the notary, narrating the contents of a deed signed by the President of the Bank that he (Maitre Tonnellier) had received and which he thereby authenticated to be a true copy. The Purchaser accordingly asked for leave, which I granted, to amend the Originating Summons to add the query whether by the production of the document signed by Maitre Tonnellier, the Vendors had adequately answered the request for a certified true copy of the Head Power of Attorney.

Termination of agreement

15. After a great deal of correspondence passing between the respective solicitors, matters came to a head on 3 March 1998, when the Vendors put an end to the agreement and forfeited the deposit paid one day after completion was due. On 12 March 1998, the Purchaser issued the Originating Summons herein seeking, amongst other things, various declaratory relief and the return of the deposit.

16. As is sometimes the case with Vendor and Purchaser Summonses, the true issue here is not whether the Vendors have a good title, but whether they had satisfactorily answered the Purchaser's requisitions before the agreement was terminated. It may well be that the Vendors here do have a good title, but in my judgment, they need to refine their proof of title.

17. It is not good enough for a vendor simply to supply documents (especially foreign documents) to a purchaser, assert that they prove title and expect the purchaser to sort them out for himself; the vendor should familiarize himself with the documents and be ready to answer such relevant queries as the purchaser may have. The title is the vendor's, those are his documents, and the burden is on him to show and prove that he has good title. In my view, the Vendors here have failed to satisfactorily answer the Purchaser's requisitions before terminating the Agreement and purporting to forfeit the deposit.

Requisition on proper execution not satisfactorily answered

18. The first requisition dealt with proper execution. In the 1984 document referred to by the parties as "the Head Power of Attorney", Maitre Tonnellier, the notary, authenticates a copy of a document said to have been signed on 9 May 1984 by the President of the Bank singly. (The document supplied was not the Head Power of Attorney itself, but a document signed by Maitre Tonnellier narrating the contents of the deed he received. For present purposes, I have treated it as a certified true copy of the Head Power of Attorney).

19. The Vendors relied on s.23 of the Conveyancing and Property Ordinance (the presumption of due execution). But what was being queried was not the fact and circumstances of execution by the President of the Bank; what was being queried was whether the President, signing singly, had the authority to bind the Bank - hence, the Purchaser's request for an opinion on French law and the Bank's constitution.

20. There was nothing to show that the document signed by the President alone was sufficient under French law and the constitution of the Bank to effect the delegation of the Bank's powers to Mr Brutschi.

21. An opinion on one aspect of French law, from Maitre Henri Asso, a French notary, given in 1988, was provided by the Vendors to the Purchaser. But this opinion merely said that under French laws, companies did not have the obligation to have a Common Seal, but had the obligation to state in their issued documents certain information such as issued capital, address and registration of business.

22. There is no dispute that the requisite information had been given in the 1984 document, but this legal opinion does not, in my view, answer the requisition whether the signature of the President singly was sufficient for proper execution.

23. It is one thing to say that in a bank's documents, certain information must be stated. But what makes a document the document of the Bank in the first place? It is this query that the Purchaser was raising, and the Vendors had in my view, failed to answer it.

24. It cannot logically be the case that whenever the requisite information is given in a document, that document becomes the document of the Bank. Otherwise any unauthorised person in the Bank's employ who has access to the information (which is the sort of information which is available on public records) could simply, by stating that information in a document, execute a Power of Attorney (or indeed any other important document) on behalf of the Bank. That would be nonsensical. So the legal opinion from Maitre Asso did not answer the Purchaser's query.

25. Nor is the fact that the copy of the Head Power of Attorney was authenticated by Maitre Tonnellier of any help to the Vendors. All that Maitre Tonnellier did was to narrate what was in the deed signed by the President of the Bank. Nowhere is there any statement by Maitre Tonnellier asserting or confirming the legal validity of the document as an act of the Bank.

26. The Vendors attempted to rely on the fact that in a letter dated 23 February 1998, the Bank confirmed that the 1984 Power of Attorney and 1986 Deed of Delegation were valid and not revoked at the time of execution of the Confirmatory Re-assignment. However, the issue of proper execution or authority is a matter of French law. I am unable to see how a simple assertion of non-revocation by the Bank, without legal reference, can assist the Vendors.

27. In conclusion, I would agree with the Purchaser that the Vendors have failed to provide a proper answer to this requisition.

Requisition on English translation not satisfactorily answered

28. Then there is the translation issue. I accept that the French and the English pages were stapled together and were certified as true copies by the Bank. But that was just a certification that the copy was true to the original. That is not to say that the English was a true translation of the French.

29. Further the Vendors' assertion that the English translation had been authenticated by Maitre Tonnellier appears to be a misreading of the document. Nowhere does Maitre Tonnellier certify that the English translation was correct.

30. The Purchaser's request for a sworn or certified translation was not met by the Vendors. The point is not whether a French reader could see that the English text had been translated from the French. The burden was on the Vendors, who were proving their title, to disclose the effect of the document to the Purchaser's solicitors in the official language of conveyancing in Hong Kong. Insofar as there was a translator's endorsement, that endorsement should be in English to enable the Purchaser's solicitors to know and satisfy themselves who had done the translation.

31. The Purchaser also made the point in correspondence that there was no evidence that the English text was translated from the document in French. In fact, there is a point of reference even without referring to the French language. The 1st page of the French text contains a round stamp with 65/1 written in, and that number appears on the 1st page of the English text. However this was not pointed out by the Vendors to the Purchaser at any stage. Indeed the Vendors' representatives did not appear to be aware of this reference even at the hearing.

32. Therefore, on this requisition as well, I find that the Vendors have failed to provide a satisfactory answer.

Not pre-root

33. As a matter of completeness, I should also deal briefly with the argument that the requisition raised a pre-root matter. It is not clear on the correspondence if the Vendors were really raising this as an argument, but if they did, that was in their letter dated 28 February 1998 (Saturday) received by the Purchaser's solicitors shortly before close of business. The 2nd of March (Monday) was the scheduled completion day and the Vendors purported to forfeit the deposit and terminated the agreement on 3 March. In my view, that did not give the Purchaser enough time to respond to the new argument, if indeed the argument was being raised.

34. Further, even if enough time had been given, I would have thought that the question was not pre-root. The Confirmatory Re-assignment was necessary to cure the defect of the original Re-assignment, which did not contain a seal for it to be valid under Hong Kong law, nor the requisite information that a document issued by a French company needed to have under French law.

Conclusion

35. I therefore find that the Vendors were not entitled to terminate the Agreement and forfeit the deposit on 3 March 1998 before they had satisfactorily answered the Purchaser's requisitions. The point is not whether the Bank is likely to assert any interest in the property. It is whether the Vendors have proved that the Bank had passed the legal interest in the property by way of the Confirmatory Re-assignment, which was signed by a delegate of a person who may or may not have validly been given a Power of Attorney by the Bank.

Order

36. I would grant an order under paragraph 1 of the Originating Summons as follows:-

"a declaration that the Defendants have failed to answer adequately and/or sufficiently whether the Power of Attorney dated 18th August 1986 ("the said Power of Attorney") and/or the copy of the head Power of Attorney dated 9th May 1984 had been duly executed in accordance with the French law and the constitution of the Bank Credit Lyonnais";

an order under paragraph 2 as follows:-

"a declaration that the Defendants have failed to answer adequately and/or sufficiently in what way an English translated copy supplied by the Defendants' solicitors is a translation from the document said to be a copy of the head Power of Attorney";

and an order in terms of paragraphs 5, 6, 7, and 8 & 9 (pursuant to cl. 33 of the Agreement).

37. As for paragraph 10, I see no reason why the Purchaser should be entitled to recover the costs of investigation of title by his proposed mortgagees' solicitors, and I have not been taken to any provision in the Agreement to enable him to do so.

38. As for paragraph 12, I would order interest from the date of issue of the Originating Summons to the date of judgment at savings rate (in the absence of any express provision on interest in the Agreement, and as it would appear that the parties were individuals entering into a transaction on a residential property) and thereafter at judgment rate until payment. I would also make an order nisi that the costs be paid by the Defendants.