SONATINA INTERNATIONAL LTD v. YF INTERNATIONAL LTD

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H E A D N O T E

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In 1978 M agreed to sell a property to L. In 1979 L, before taking a conveyance of the property, agreed to sub-sell it on to B at an enhanced price, B paying L the difference in price and taking an irrevocable power of attorney from L enabling B to execute the conveyance (in which L was to join as confirmor) on L's behalf. In 1981 the conveyance to B was duly made and executed by B on L's behalf. In 1987B sold the property to the defendant. In 1989 the defendant agreed to sell the property to the plaintiff, who objected that since the defendant (as was the fact) had offered no proof that the irrevocable power of attorney had not been revoked with the consent of B before the date of the 1981 conveyance, the title was defective.

HELD:     that the objection should not be upheld; it was inconceivable that B had consented to the revocation of the power of attorney given to B for its own protection and duly used by B as intended to enable it to execute the 1981 conveyance on L's behalf.

1989, M. P. No. 421

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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IN THE MATTER OF an Agreement for Sale and Purchase dated 15th February, 1989 between Y F. International Limited and Sonatina International Limited.

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J U D G M E N T

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Godfrey, J. This a vendor and purchaser summons. Such are the law's delays in Hong Kong that it was not until today, Monday, that it was possible to find time to hear this case, notwithstanding that the originating summons was issued as long ago as last Friday. The court sometimes has the unpleasant duty of criticising solicitors for procrastination. It gives me great pleasure in the present case to commend the parties' solicitors and counsel, and the listing authorities, on the promptitude with which this matter has been brought on for hearing. It shows the profession that it can be done; and it shows how helpful a vendor and purchaser summons, properly used, can be.

2. The Plaintiff Sonantina International Limited, is the purchaser under an Agreement for Sale and Purchase dated 15th February 1989. The defendant, Y. F. International Limited, is the vendor. The property is office 904, on the 9th Floor of Tower I, Admiralty Centre. Completion is due to take place on 15th March 1989.

3. The background is as follows. On 19th September 1978, the Mass Transit Railway Corporation ("MTRC") sold the property to one Lee Seck Man for HKf$6,147,580. On 18th September 1979, Lee agreed to sub-sell the property at the enhanced price of HK$6.853,040 to a company with the improbable name of Bik Bok & Nam Nam Company Limited (which I shall call ("BBNN"). On the same day, 18th September 1979, BBNN paid Lee HK$705,460 and Lee gave BBNN an irrevocable power of attorney to execute the conveyance from MTRC on Lee's behalf as confirmor. In this sort of way, the interest of the sub-purchaser and the interest of the original purchaser can be protected, even if the original purchaser wants his profit at once. The original purchaser constitutes the sub-purchaser as his attorney to execute as confirmor the eventual conveyance of the property by the vendor to the sub-purchaser. That is what happened here.

4. The conveyance was eventually made on 9th February 1981 the parties to it were MTRC as vendor, Lee (acting by BBNN his attorney) as confirmor, and BBNN as purchaser. The donee of the power given by Lee (BBNN) and the purchaser (BBNN) are thus one and the same person.

5. On 8th August 1987 BBNN sold the property to the present vendor, on 15th February 1989, the present vendor entered into the Agreement with the present purchaser to which I have already referred. On 22nd February 1983 the purchaser's solicitors raised a requisition on title. They did so by letter, the letter reads as follows: -

"upon perusal of title deeds to the above premises, we note that the confirmor in Assignment Memorial No. 2048639 executed the said Assignment by an Attorney under an irrevocable power of Attorney dated the 18th September 1979. The said Assignment was executed on the 8th August 1987 which is more than 12 months from the date on which the said Power of Attorney came into operation. Further we understand that no Statutory Declaration under Section 5 (4) (b) of the Powers of Attorney Ordinance Cap.31 had been made by your client before or within the 3 months time limit after completion of the purchaser. We are raising this point by way of requisition in respect of title to the above premises under Clause 13 of the Agreement for Sale and Purchase dated 15th February 1989 you are therefore requested to rectify the position by preparing a confirmatory assignment by Lee Seck Man, the confirmor of Assignment Memorial No. 2048639 forthwith."

In reply the vendor's solicitors, on 23rd February 1989, wrote this: -

" It is our view that section 5 of the Powers of Attorney Ordinance applies only to revocable Powers of Attorney because a Statutory Declaration required under Section 5(4) of the said Ordinance could not possibly be necessary in the case of a irrevocable Power of Attorney which is covered under the Section 4 of the said Ordinance concerning its revocation."

6. I have now to decide whether this requisition on title has or had not been satisfactorily answered. In order to so I must refer to the relevant Sections of the Powers of Attorney Ordinance. There are Sections 4 and 5, and read (so far as material) as follows" -

"4.(1)    Where a power of attorney is expressed to be irrevocable and is given to secure-

(i)    by the donor without the consent of the donee; or

(ii)    by the death, incapacity or bankruptcy of the donor or, if the donor is a corporation, by its winding up or dissolution.

(2)    A power of attorney given to secure a proprietary interest may be given to the person entitled to the interest and persons deriving title under him to that interest, and those persons shall be duly constituted donees of the power for all purposes of the power but without prejudice to any right to appoint substitutes given by the power,

(3)    This section applies to powers of attorney whenever created."

"5.(1)    A donee of a power of attorney who acts in pursuance of the power at a time when it has been revoked shall not, by reason of the revocation, in cur any liability (either to the donor or to any other person) if at that time he did not know that the power had been revoked.

(2)    Where a power of attorney has been revoked and a person, without knowledge of the revocation, deals with the donee of the power, the transaction between then shall, in favour of that person, be as valid as if the power had then been in existence.

(3)    Where the power is expressed in the instrument creating it to be irrevocable and to be given by way of security then, unless the person dealing with the donee knows that is was not in fact given by way of security, he shall be entitled to assume that the power is incapable of revocation except by the donor acting with the consent of the donee and shall accordingly be treated for the purposes of subsection (2) as having knowledge of the revocation only if he knows that it has been revoked in that manner.

(4)    Where the interest of a purchaser depends on whether a transaction between the donee of a power of attorney and another person was valid by virtue of subsection (2), it shall be conclusively presumed in favour of the purchaser that that person did not at the material time know of the revocation of the power if-

(a)    the transaction between that person and the donee was completed within twelve months of the date on which the power came into operation, or

(b)    that person makes a statutory declaration, before or within three months after the completion of the purchase, that he did not at the material time know of the revocation of the power."

7. Both Section 4 and Section 5 contemplate the possibility that a power of attorney, whether irrevocable or not, may be revoked with the consent of the donee (as, if course, is always the case ). Where the power is expressed to be irrevocable, then, under section 5(3), the person dealing with the donee is entitled to assume that the power is incapable of revocation except by the donor acting with the consent of the donee.

8. I am not concerned with a person immediately dealing with the donee. I am concerned here with a subsequent purchaser. The subsequent purchaser naturally wants to be sure that the power was not revoked with the consent of the donee before the execution, on 9th Ferbruary 1981, of the conveyance executed in reliance on that power. It says rightly, that it does not have the protection of Section 5(4).

9. I should perhaps say that an attempt has now been made to get over the supposed difficulty tendering a statutory declaration made not by BBNN but by the present vendor. But in my judgment this would not, anyway, satisfy the provisions of Section 5 (4) (b) (I return to this point below). The real question is whether on the facts of the present case the purchaser needs the protection of Section 5(4) at all. I have already drawn attention to the fact that the donee of the power under which the 1981 conveyance was executed was BBNN and that the purchaser under the 1981 conveyance was also BBNN. The power was conferred on BBNN for its own protection. It is inconceivable that BBNN would, in fact, have first consented to the revocation of an irrevocable power given to itself for its own protection and then gone on nevertheless to use it.

10. Since here the donee of the power and the person in whose favour it is exercised are one and the same person it is difficult to apply to the facts of the case the provisions of Sections 4 and 5 of the Powers of Attorney Ordinance, which plainly contemplate cases in which those persons are different, but one thing these Sections do make clear is that there is not way in which an objection can be taken to the exercise of an irrevocable power of attorney unless the donee has consented to its revocation.

11. Having come to the conclusion here that such a possibility is inconceivable, there is no objection which can be taken to the vendor's title on the ground suggested.

12. There is no blot on the title on the ground suggested, either theoretical or real. If there was a blot, it would in my judgment be theoretical only and thus within the realm of the acceptable mentioned in In re Heavsman's and Tweedy's Contract, (1893) 69 LT 89.

13. For these reasons, I propose to declare that the requisition raised by the purchaser has been satisfactorily answered. I will only add, in case there is any doubt about the matter, that, in my opinion, the statutory declaration which has to be made to satisfy the provisions of Section 5(4)(b) must be one made by the person ("that person") who originally dealt with the donee of the power of attorney. It does not matter when or how late the statutory declaration is made provided that it is made before or within 3 months after the completion of the purchase in question. But it must be made by "that person" and not by somebody else.

14. So I decide this dispute in favour of the vendor. The vendor stating that it does not ask for costs, I make no order as to costs.