STEP BILLION INVESTMENT LTD v. MONTE GENEROSO LTD

HCMP 1482/2017

[2018] HKCFI 743

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1482 OF 2017

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JUDGMENT

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Background

1.  By a sale and purchase agreement (the “Agreement”) dated 26 May 2017 entered into by the Plaintiff and the Defendant, the Plaintiff agreed to purchase and the Defendant agreed to sell the Property known as ALL THAT piece or parcel of ground registered in the Land Registry as THE REMAINING PORTION OF LOT NO 1923 IN DEMARCATION DISTRICT NO 106 together with the messuages erections and buildings thereon (if any) (the “Property”).  The price was in the sum of HK$7,050,000.  Deposits in the total sum of HK$705,000 were paid by the Plaintiff to the Defendant pursuant to the Agreement.

2.  As in any conveyancing transaction, requisitions on title of the Property were raised by the Plaintiff and responses were made by the Defendant.  However, the Plaintiff was not satisfied with the answers given by the Defendant in relation to a requisition on the scope of the power of the donee under a power of attorney dated 16 February 2009 (the “Power of Attorney”) that was used to execute an assignment dated 8 October 2009 (the “2009 Assignment”).

3.  The requisition in question (the “Requisition”) was contained in paragraph 3 of the letter dated 5 June 2017 from the Plaintiff’s solicitors to the Defendant’s solicitors:

“ 3. The ‘Property’ of the Donor was not described in detail in the said Power of Attorney. The ‘Property’ only refer to ‘certain’ land(s) and/or premises. No specific descriptions of the lands and/or premises were referred to. Accordingly, doubts arise as to whether the Donee namely Chiu But Ting Clement was empowered to execute Assignment Memorial No. 09110400170100 for and on behalf of the Donor namely Chiu Sze Lim also known as Chiu Kwok Lim.”

4.  On 26 June 2017, the Plaintiff issued a Vendor and Purchaser Summons (the “Summons”) against the Defendant for the following reliefs:

(1) a declaration that the Requisition has not been sufficiently answered by the Defendant;

(2) a declaration that good title to the Property has not been shown in accordance with the Agreement;

(3) the Defendant be ordered to pay to the Plaintiff the sum of $705,000 being the amount of the deposits paid under the Agreement together with interest at such rate and for such period as the Court shall think just;

(4) the Defendant be ordered to pay to the Plaintiff his costs of investigating the title of the Property and the costs of and incidental to the Summons; and

(5) such further order as the Court shall deem fit.

5.  The following facts are not in dispute:

(1) The Power of Attorney was executed by Chiu Sze Lim who is also known as Chiu Kwok Lim (the “Donor”) appointing his son, Chiu But Ting Clement (the “Donee”) as his attorney to do those matters stated therein.

(2) The Power of Attorney was not a general power of attorney under section 7 of the Powers of Attorney Ordinance.

(3) In 1962, Lot No 1923 in Demarcation District No 106 (the “Lot”) was registered in the name of Chiu Kwok Ching, Chiu Kwok Lim and the Donor.

 (4) On 8 October 2009 and pursuant to the 2009 Assignment, the Lot was assigned to Lo Chi Ming and Law Mang Hin as tenant in common.  The 2009 Assignment was signed by Chiu Kwok Ching, Chiu Kwok Lim and the Donee as the lawful attorney of the Donor.

(5) On 20 May 2010, Lo Chi Ming and Law Mang Hin carved the Lot into three sections, one of which is the Property.  On25 February 2011, the Property was assigned by Lo Chi Ming and Law Mang Hin to the Defendant.

(6) The 2009 Assignment was the intermediate root of title in the present sale and purchase between the Plaintiff and the Defendant.

6.  The recital of the Power of Attorney given by the Donor is in the following terms:

“ WHEREAS:-

(1) I am the registered owner of and beneficially entitled to certain land(s) and/or premises in the New Territories of Hong Kong (hereinafter called ‘my Property in the New Territories’).

(2) I am desirous of selling and disposing all and singular my Property in the New Territories and wish to appoint an attorney to act for me in the respect.”

7.  It is also not in dispute that:

(1) the Lot, to which the Property formed a part, was owned by the Donor as at the dates of both the Power of Attorney and the 2009 Assignment; and

(2) the Lot is situated in the New Territories. 

8.  The Plaintiff accepts that there was proper power under the Power of Attorney to execute the 2009 Assignment.  The issue is one of scope, namely, whether the terms of the Power of Attorney cover the Property (that formed part of the Lot).  The Plaintiff alleges that nowhere in the Power of Attorney set out the full details of the property to which the Power of Attorney applied.  The scope of the Power of Attorney is doubtful as Recital (1) only defines the property as certain land(s) and/or premises in the New Territories owned by the Donor.

9.  The gist of the Defendant’s argument is that since the Property (or the Lot to which the Property is part of) was in fact owned by the Donor and situated in the New Territories as at the date of the Power of Attorney, it is clear from the language of the Power of Attorney that it applied to the Lot or the Property even though the Lot was not specifically mentioned in the Power of Attorney.

Issues

10.  The Plaintiff alleges that the Defendant has failed to answer the Requisition satisfactorily.  There are two issues before the Court:

(1) whether the Requisition has been properly raised; and

(2) whether it has been satisfactorily answered.

The law

11.  It is accepted by the Defendant that, as the vendor, it has a duty to show and give good title to the Property (see clause 15(a) of the Agreement and section 13 of the Conveyancing and Property Ordinance).  It means that not only does the Defendant have to give good title, it also has to answer the requisitions raised by the Plaintiff satisfactorily.  These are two separate obligations.  The duty to answer requisitions satisfactorily remains even if the vendor does have good title to the property (see Active Keen Industries Ltd v Fok Chi Keong [1994] 2 HKC 67 at p 76 and Kok Chong Ho v Double Value Developments Ltd [1993] 2 HKLR 423 at p 432).  If the Defendant has failed to answer the Requisition satisfactorily, it would not be entitled to enforce the Agreement. 

12.  There is no dispute in this case that under section 13(1)(c) of the Ordinance, the Defendant has to produce the Power of Attorney in proving title.

13.  As to whether a requisition has been satisfactorily answered, Fok JA (as he then was) said this in So Mariko v Tse Chun Chung John & anor [2011] 3 HKC 174, at para 39:

“ … The relevant question is instead whether there is proper conveyancing evidence to provide a satisfactory answer to the requisition. In other words, are the facts and circumstances so compelling that the court can conclude beyond reasonable doubt that the Confirmors were all the beneficiaries of Mr Ho’s estate and there is no real risk of another beneficiary coming forward to assert a claim to the Property: see Active Keen at p 83D–F applying the test laid down in MEPC Ltd v Christian-Edwards [1981] AC 205 at p 220C–D.”

14.  Applying this to the present case, the test is whether the facts and circumstances (which could be shown by proper conveyancing evidence) are so compelling that there is no real risk of a challenge that the Power of Attorney did not empower the Donee to assign the Lot on behalf of the Donor under the 2009 Assignment.

15.  Furthermore, in dealing with whether a vendor has given good title, the court would look at the situation from the standpoint of a willing vendor and purchaser both possessed of reasonably robust common sense (see para 40 of the So Mariko case above).

The Requisition and the answers

16.  As stated above, the Requisition was first raised by the Plaintiff’s solicitors in their letter dated 5 June 2017. 

17.  On 16 June 2017, the Defendant’s solicitors replied to the Requisition in the following terms:

“ It is clearly shown in the Power of Attorney dated 16^th February 2009 that the Donor was the registered owner of certain land(s)/‌premises in the New Territories and that he was desirous of selling and disposing the same and wished to appoint Chiu But Ting Clement to act for him in the respect. As the above property was one of the Donor’s properties in the New Territories and he therefore appointed the said Chiu But Ting Clement as his lawful attorney to sell the same. No doubt as to whether the Donee was empowered to execute the said Assignment.”

18.  The Plaintiff’s solicitor was not satisfied with the answer.  They sent a letter on 21 June 2017 saying:

“ … the said Power of Attorney only stated that the Donor was theregistered owner of certain land(s)/premises in the New Territories. No specific reference to the land(s)/premises was made in the said Power of Attorney. One could not ascertain whether it is the intent of the Donor to include the subject Property as part of the certain land(s)/premises in the said Power of Attorney.”

19.  The Defendant’s solicitors replied on the same day stating that:

“ We maintain our view that the above property was one of the Donor’s properties in the New Territories and he had appointed the said Chiu But Ting Clement as his lawful attorney to sell his properties in the New Territories. No doubt as to whether the Donee was empowered to execute the said Assignment will arise. Unless you have documentary evidence to show that the Donor has no intention to include the subject Property as part of the certain lands/premises in the said Power of Attorney, your requisition will not be entertained.”

20.  On 22 June 2017, the Plaintiff’s solicitors wrote back stating their disagreement with the Defendant’s solicitors.  They reiterated the Requisition and their previous view that the Defendant had the duty to prove that the Power of Attorney applied to the Property.

21.  The Defendant’s solicitors replied on the same day in these words:

“ By the Power of Attorney dated 16^th February 2009, CHIU Sze Lim also known as Chiu Kwok Lim had duly appointed his attorney with general power to sell or dispose of his properties in the New Territories (of which the subject property formed part). With respect, we are not aware of the existence of any law requiring specific particulars of each and every part of the propertycomprised in the subject matter of the power of attorney. We consider we have already sufficiently answered your requisition.”

22.  By the Plaintiff’s solicitors’ letter dated 23 June 2017, the Plaintiff maintained its disagreement with the Defendant and that the Defendant had failed to answer the Requisition.  The Plaintiff’s solicitorsstressed that in the absence of a schedule listing out the lands to be includedin the Power of Attorney, there were doubts as to whether the “certain land(s) and/or premises” did refer to the Property.

23.  The Defendant maintained their previous views and threatened to forfeit the Plaintiff’s deposits and make claims against the Plaintiff if the latter failed to complete the sale and purchase by 26 June 2017.  The Plaintiff responded on 24 June 2017 disputing that the Defendant was entitled to forfeit the deposits as a result of its failure to answer the Requisition satisfactorily.  The Plaintiff also said that it had always been ready and willing to complete the purchase of the Property had the Requisition been answered satisfactorily.  Following that, the Plaintiff issued the Summons.

The analysis

24.  The Defendant’s case is that the absence of a schedule or specific reference to the Property (or the Lot to which it forms a part) would not render the Power of Attorney void or ineffective.  The scope of the Power of Attorney was referred to as certain land(s) and/or premises in the New Territories of Hong Kong to which the Donor was the registeredowner of and beneficially entitled to.  Even though the Property (or the Lot to which the Property forms a part) was not specifically mentioned, it is clear from the language of the Power of Attorney that the subject matter included the Property, since the Property is located in the New Territories and that at the time of the execution of the Power of Attorney, the Donor was the owner of the Property. 

25.  Whilst it is desirable for the avoidance of doubt to list out the full details of the relevant property in the body or the schedule of the power of attorney, I am of the view that the absence of the full details of the property is not necessarily fatal, provided that the it is plain from the natural meaning of the language of the power of attorney that it applies to a particular property.

26.  In the present case, the Power of Attorney applied to “certain land(s) and/or premises” in the New Territories that was owned by the Donor.  Both Mr Wong and Ms Tang accepted that the word “certain” means “some”.  In the Oxford Dictionary, “certain” means “to talk about a particular thing or person without naming it or them”.

27.  It is not clear from the words “certain land(s) and/or premises in the New Territories” whether it was intended to cover all the properties in the New Territories that were owned by the Donor, or whether they referred to only some of the properties owned by the Donor.  If they were referring to only some of the properties of the Donor, it would not necessarily include the Property (or specifically the Lot).  Furthermore, as I have pointed out, at the time of the execution of the Power of Attorney, the Donor was only one of the three co-owners of the Lot (to which the Property forms a part).  Rather than being the registered and beneficial owner of the Lot or the Property, the Donor was only one of the registered and beneficial owners.

28.  Mr Wong sought to rely on the facts of the case of Lo Hung Biu v Lo Shea Chung & Another [1997] HKLRD 721 and Excelling Profit Investments Ltd v Sera Ltd [1992] 2 HKC 262 where the property was not specifically listed in the power of attorney and there was no objection raised as to the scope of the power of attorney.  However, the language of the power of attorney and the circumstances in those cases were different from the present case.  No assistance can be drawn to the interpretation of the Power of Attorney.  At most, those cases tend to support my conclusion that absence of the full details of the property in a power of attorney is not necessarily fatal.

29.  In the premises, I am of the view that the language of the Power of Attorney is ambiguous as to whether it applied to the Property.  It was proper for the Plaintiff to raise the Requisition.

30.  The next question is whether the Defendant has provided sufficient conveyancing evidence to show that there is no real risk of a challenge that the Power of Attorney did not empower the Donee to enter into the 2009 Assignment on behalf of the Donor.

31.  At the hearing, Mr Wong sought to argue that there is no real risk of a challenge of the Donee’s reliance of the Power of Attorney in entering into the 2009 Assignment.  He gave the following reasons:

(1) The Power of Attorney was prepared as the Donor was stated to be desirous of selling and disposing his property in the New Territories.  In fact, the Lot was sold within 8 months of the signing of the Power of Attorney.  It would be extremely unlikely that the Donor can challenge the validity and/or the scope of the Power of Attorney. 

(2) The Donee is the Donor’s son.  The Donee did not use the Power of Attorney to assign the Property to himself or company that he was interested in.

(3) It would also be impossible for the subsequent owners, Lo Chi Ming and Law Mang as well as the Defendant itself to challenge the scope of the Power of Attorney, as they themselves had relied on the Power of Attorney in acquiring the title to the Property.  

(4) In response to Ms Tang’s submission that the Defendant shouldobtain a statutory declaration from Messrs Yu Tsang & Loong (“YTL”), the firm of solicitors who prepared the Power of Attorney and acted for the Donor (through the Donee) in relation to the 2009 Assignment, Mr Wong submitted that it would be of no use to write to YLT as it was almost certain that they would confirm that the scope of the Power of Attorney included the Lot and thus the 2009 Assignment was validly made.

32.  It does appear to me that evidence could be provided to show that the risk of a challenge is so remote from the standpoint of a willing purchaser and a wiling vendor, both possessed reasonably robust common sense.  However, the Defendant had never attempted in their answer to the Requisition to provide any of these answers or evidence.  The gist of the answer was that the language of thePower of Attorney was clear enough to prove the scope since the Property was in the New Territories and the Donor was the owner of it.  I have already dealt with this point.  In view of the ambiguity, the Defendant should have offered further explanation and evidence in answering the Requisition.  It was too late for the Defendant to do so through its Counsel at the hearing. 

33.  Even assuming that the answer from YTL would most likely be favourable to the Defendant, the Defendant should seek that confirmation in order to show beyond reasonable doubt that there is no real risk of a challenge.

34.  The Defendant’s solicitors have also sought to argue that unless the Plaintiff had documentary evidence to show that the Donor had no intention to include the Property as part of the certain lands/premises in the Power of Attorney, there was no obligation to entertain the Requisition.  This is clearly wrong as the Defendant has the burden of showing good title. The same argument was rejected in the case of Lo Hung Biu v Lo Shea Chung & Another [1997] HKLRD 721, at 727J to 728A.  

35.  Mr Wong submitted that the Property had already been sold two times since the execution of the Power of Attorney and there was apparently no objection from the purchasers.  There are two problems with this submission.  First, the absence of any objection does not necessarily mean there was no issue with the scope of the Power of Attorney.  Also, there was no direct evidence to show that no objection was raised in previous transactions.

36.  Having looked at the parties’ correspondence on the Requisitionand for the reasons aforesaid, I find that the Defendant had failed to answer the Requisition raised by the Plaintiff satisfactorily.

37.  It follows that the Defendant shall return the deposit in the sum of HK$705,000 to the Plaintiff.  As to the interest payable, I will set it at 5% per annum.

38.  In the Summons, the Plaintiff also claims for the costs of investigating the title of the Property.  However, no evidence on such costs was adduced in the affirmation filed by the Plaintiff. In both the Plaintiff’s affirmation and its Counsel’s submission, it only sought to claim for the return of the deposit.  In these circumstances, I make no order on the Plaintiff’s claim for the costs of investigating the title of the Property.

Order

39.  By reason of the foregoing, I make the following Order:

(1) there be a declaration that the Requisition has not been satisfactorily answered by the Defendant;

(2) there be a declaration that the Defendant has not shown good title to the Property in accordance with the terms of the Agreement; and

(3) the Defendant shall pay the Plaintiff the sum of HK$705,000, being the amount of deposits paid under the Agreement together with interest at the rate of 5% per annum from 26 June 2017 until payment. 

40.  In relation to the question of costs, I see no good reason why costs should not follow event.  Accordingly, I make an order nisi that the Defendant should pay the Plaintiff’s costs of the Summons including the hearing of the Summons, with certificate for counsel, such costs should be taxed if not agreed.

41.  I would like to thank both Counsel for their assistance.