MAN KWOK LAM v. KEUNG YEUK CHUN and Another

MP 4067/97

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Headnote

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Conveyancing - company's common seal affixed to the receipt clause instead of execution clause in the assignment - whether the assignment had been duly executed

Held: If a party signs a document and affixes the seal with the intention of executing the document as a deed, then that document is effectively executed as a deed.

HCMP 4067/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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FACTS & CHRONOLOGY

1. By an agreement for sale and purchase dated the 9th October 1997 the Plaintiff agreed to purchase from the Defendants the property known as Flat Q on the 2nd floor of No.37, Kam Lam Street, Kowloon for $1.12 million and that completion of the said sale and purchase should take place on or before 3rd November 1997.

2. Pursuant to the agreement that Plaintiff paid to the Defendants a sum of $112,000.00 being the deposit and had paid stamp duty in the sum of $84,000.00 and a further sum of $11,200.00 being the agency commission.

3. On the 15th October 1997 the Defendants through their solicitors Messrs. Rowland Chow, Chan & Co. sent to the Plaintiff's solicitors the title deed and relevant documents of that property to prove title.

4. On the 23rd October 1997 by letter the Plaintiff raised requisitions in respect of title, the requisition which is the subject matter of the present proceedings is as follows: -

"2. Assignment Memorial No.690149

The Vendor therein executed this Assignment without affixing its Common Seal thereon. We return herewith the original of the same for your rectification. Please return the same to us duly rectified together with its Memorial, cheque and explanatory either for re-registration purpose."

5. On the 24th October 1997 the Defendants' solicitors replied to the above requisition as follows: -

"We observe that there is a common seal affixed on the last page of the Assignment Memorial No.690149 which certainly forms part of the said assignment. We return the said assignment for your retention. Please acknowledge receipt."

6. On the 30th October 1997 the Plaintiff's solicitors replied by saying:

"We do not share with your view that the Assignment Memorial No.690149 is properly executed. We take the view that a Vendor assign its interest of a property by Assignment by signing at the execution clause thereof and if the Vendor is a limited company, a Common Seal should be affixed in the presence of the person or persons authorised in accordance with the Particles of Association of such company. As the common Seal was not affixed by the Vendor in Assignment Memorial No.690149, doubt has arisen as to whether the Vendor has properly assigned all its interest in the Property to the Purchaser. We insist on having the said Assignment duly rectified before completion. We send again herewith the said Assignment for your further action. Please let us have the same duly rectified together with its signed Memorial, explanatory letter and cheque for re-registration fee for our attending re-registration thereof. Kindly acknowledge receipt of the same by signing and returning the duplicate of this letter."

7. On 31st October 1997 the Defendants' solicitors replied by repeating that the common seal was affixed on the said assignment which formed part of the assignment and they were of the view that S.23 of the Conveyancing & Property Ord. Cap.219 applied and by a further letter of the same date contended that since the assignment was executed on 21st July 1969 any action to be brought by Yue On Construction and Investment Co. Ltd. is statute barred and there is no risk of litigation.

8. On the 1st November 1997 the Defendants' solicitors further faxed a letter from Edmond H.C. Wong & Co. solicitors (presumably the solicitors for the then purchaser) expressing their view that that assignment was duly executed.

9. By a letter dated the 3rd November 1997 (date for completion) from the Defendants' solicitors they maintained that their clients had proved good title and enclosed a letter from Messrs F. Zimmern & Co. solicitors for Yue On Construction and Investment Co. Ltd. stating that their client has been wound up and is not possible to remedy the defect in the execution clause by executing a confirmatory assignment and the omission did not affect the title of the property.

10. By letter of the same date the Plaintiff's solicitors maintained that the vendor had still failed to prove title to their satisfaction.

11. The Defendants' solicitors on the same date replied re-iterating that they have satisfactorily proved good title and asked for the balance of the purchase price.

12. The Plaintiff's solicitors thereby on the same date by letter terminated the agreement on 2 grounds namely:

1. the vendors had failed to answer the requisitions adequately and satisfactorily before the time agreed for completion and

2. the vendors had failed to show and give a good title.

13. On the 26th November 1997 the Plaintiffs commenced the present proceedings.

THE ISSUES

14. There are 2 issues namely: -

1. whether the Defendants had proved good title

2. whether the Defendants had satisfactorily answered the Plaintiff's requisitions.

15. The crux of the matter is whether Yue On Construction and Investment Co. Ltd. had passed a good title to the vendor by the assignment dated 21st July 1969 by affixing its common seal on the receipt clause.

THE PLAINTIFF'S CASE

16. The Plaintiff contends that the seal should be affixed opposite or next to signatures of the officers of the company for the purpose of execution. The seal on the last page of the assignment was not identified or referable to the execution of the assignment. The most material part of an assignment is the execution of the assignment by the vendor. As the assignment is in the form of a deed there is no need for any acknowledgment of receipt of consideration and such part is not and should not be treated as part of the assignment. So strictly speaking there is no common seal on any part of the assignment.

WAS THE RECEIPT CLAUSE PART OF THE ASSIGNMENT

17. In the assignment after the 2 officers of the company signed on the 4th page, the purchaser signed and sealed on the 5th page and continuing on the same page were the signatures of those 2 officers with the company's common seal. Then there was the back sheet in which the Memorial No. in respect of the registration in the Land Office was stamped. In my judgment the acknowledgment of receipt and the back sheet formed part of the assignment because all the signatures of the vendor and purchaser were appended at the same time and they were part and parcel of the assignment.

DUE EXECUTION OF A DEED

18. Whether a deed has been duly executed is a question of law and fact. In law a deed has to be signed, sealed and delivered. If a party signs a document and affixes the seal with the intention of executing the document as a deed, then that document is effectively executed as a deed.

19. In Stromdale & Ball, Ltd. v. Burden [1952] All ER 59 at 62 per Danckwerts J.,

"Time was when the placing of the party's seal was the essence of due execution. Signature was not, indeed, necessary to make a deed valid: see NORTON ON DEEDS, 2nd ed., p.7. But with the spread of education, the signature became of importance for the authentication of documents and since 1925 it has become essential by reason of the provisions of the Law of Property Act, 1925, s.73 (1). Meticulous persons executing a deed may still place their finger on the wax seal or wafer on the document, but it appears to me that at the present day if a party signs a document bearing wax or wafer or other indication of a seal with the intention of executing the document as a deed, that is sufficient adoption or recognition of the seal to amount to due execution as a deed."

20. As to where in the deed the common seal should be affixed, I am not aware of any authority or statute which states or suggests any particular place in the deed the common seal should be affixed.

21. In Gore-Browne on Companies 44th Ed. at Section 5.8 the learned author stated, "If the seal of a corporation is found to be affixed to a deed, it will be presumed to be regularly fixed and those who assert the contrary must strictly prove their case".

22. In construction of a document one should look at the document as a whole and construe the document with business efficacy.

23. In TCB Ltd. v. Gray [1986] 1 All ER 587 it was held that "Where a person executed a deed by stating that it had been 'signed, sealed and delivered' but without in fact sealing it and another person relied on the deed to his detriment the person executing the deed was estopped from denying that it was sealed ..."

24. Also S.20 (1) of the Conveyancing and Property Ord. Cap.219 states

"In favour of a person dealing with a corporation aggregate in good faith, his successors in title and persons deriving title under or through him or them, a deed shall be deemed to have been duly executed by the corporation if the deed purports to bear the seal of the corporation affixed in the presence of and attested by its secretary or other permanent officer of the corporation and a member of the corporation's board of directors or other governing body or by 2 members of that board or body."

25. In the assignment it was stated in the 4th page "In witness whereof the vendor hath hereunto affixed its common seal and the purchaser hath hereunto set his hand and seal the day and year first above written". Even though the common seal was affixed on the next page the intention of the vendor to execute this document as a deed is clear. The assignment had the seal of the company affixed in the presence of the 2 officers. The deed is deemed to have been duly executed.

26. In my judgment the assignment had been duly executed as a deed and the vendor had passed the title to the purchaser.

WHETHER THE REQUISTION HAS BEEN SATISFACTORILY ANSWERED

27. When this requisition was raised by the Plaintiff's solicitors on the 23rd October 1997 the Defendants' solicitors had promptly on the 24th October 1997 replied by saying "We observe that there is a common seal affixed on the last page of the Assignment Memorial No. 690149 which certainly forms part of the assignment". Since there is no authority to say where the common seal should be affixed, I am of the view that the requisition had been promptly and satisfactorily answered.

RISK OF LITIGATION

28. In the alternative even if I am wrong and that the assignment had not been duly executed, relying on TCB Ltd. v. Gray above and the fact that the assignment was made over 20 years any claim by Yue On Construction and Investment Co. Ltd. must fail and in any event is time barred. The assumed blot on title is purely theoretical and not real. There is no risk of litigation.

29. Since the Defendants have proved title and had answered the requisition the Plaintiff was therefore in breach and had failed to complete the purchase on 3rd November 1997. The Plaintiff had wrongfully repudiated the sale and purchase agreement. In the premises the claim by the Plaintiff is dismissed with costs.

RIDER

30. Had the Plaintiff's solicitors exercised some common sense and made some research on law this requisition should never have been raised. I would like to adopt the words of the trial judge which was echoed by Litton J.A. in Active Keen Industries Ltd. v. Fok Chi-keong [1994] HKLR 396 which is as follows: -

"... if those instructed to act for purchasers could be brought to realise that they would serve their clients better by exercising their common sense rather than by exhibiting their zealousness, matter would be ... improved. The time has come for Hong Kong conveyancers to put an end to the practice of magnifying difficulties which are really non-existent ..."