LAU KWOK CHEONG DINNES AND ANOTHER v. TSE MING CHIU

HCMP 6049/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 6049 OF 2000

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J U D G M E N T

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Introduction

1. This is a vendor and purchaser summons.

2. By a sale and purchase agreement dated 17 April 2000 ("the Agreement"), the plaintiffs agreed to purchase 2/F and the roof, Lot No 953 in Demarcation District No 214, Sai Kung, New Territories ("the Property"). The plaintiffs had paid $738,000 as deposit and part payment of the price. They had prior to the signing of the Agreement taken possession of the Property. Completion was scheduled on 2 May 2000.

3. The defendant signed the Agreement by his attorney, Yu Songquan ("Yu"). The requisite power of attorney was executed by the defendant on 28 August 1999 ("the 1999 power of attorney").

Requisitions

4. On 14 April 2000, the defendant's solicitors delivered title deeds and documents to the plaintiffs' solicitors. On the following day, the plaintiffs' solicitors raised a requisition relating to the execution of the memorandum of agreement and conditions of exchange dated 27 January 1995 ("the Conditions of Exchange"). By virtue of the Conditions of Exchange, the Government granted to the defendant Lot No 953 in exchange of the defendant surrendering some other lots of land. It was executed on behalf of the defendant by his attorney, Chan Chiu Yee ("Chan"). The plaintiffs' solicitors requested a certified true copy of the requisite power of attorney to show due execution of the Conditions of Exchange ("the first requisition").

5. On 19 April 2000, the defendant's solicitors replied that the defendant, being the grantee, was not a necessary party to the Conditions of Exchange. Accordingly, production of the power of attorney was not necessary. On 27 April 2000, the plaintiffs' solicitors wrote back, disagreed with their view and queried if, in the absence of the power of attorney, Chan had the authority to execute the Conditions of Exchange. They insisted on having the certified copy of the power of attorney to complete the chain of title. (The originating summons refers to this requisition but I think in light of its nature and counsel's submissions, it can be conveniently dealt with together with the first requisition.)

6. The solicitors then engaged in correspondence, basically reiterating their respective stance. On 2 May 2000, i.e., the completion date, the plaintiffs' solicitors repeated the need to produce the power of attorney to show good title. They also requested to postpone the completion date to 16 May 2000, having regard to the advice by the defendant's solicitors that they had already written to the Sai Kung District Land Office to obtain a copy of the power of attorney. On the same day, the defendant's solicitors replied in the following terms:

"We are instructed to inform you that our client has (without admitting liability on our client's part) no objection to postpone the date of completion hereof to 2 weeks later, i.e., 16 May 2000 or to the expiry date of a 3 days period after we have provided with you the certified copy of the Power of Attorney requested by you whichever shall be the earlier."

That was accepted by the plaintiffs' solicitors without prejudice to the plaintiffs' right to require the defendant to show good title to the Property before the postponed completion.

7. On 4 May 2000, the defendant's solicitors supplied a certified copy of the power of attorney dated 3 June 1993 executed by the defendant in favour of Chan ("the 1993 power of attorney"). They requested completion on 9 May 2000. Upon receipt of the 1993 power of attorney, the plaintiffs' solicitors raised a further requisition thereon ("the second requisition"):

(1) that it being made more than 12 months prior to the execution of the Conditions of Exchange, a statutory declaration should be made pursuant to section 5(4)(b) of the Power of Attorney Ordinance ("POA"); and

(2) that it was not sealed, contrary to section 2(1) of PAO.

8. In response, on 5 May 2000, the defendant's solicitors supplied a certified copy of the statutory declaration of Chan dated 4 August 1994 and a fresh certified copy of the 1993 power of attorney with a seal thereon. It only prompted a further requisition by the plaintiffs' solicitors on the very same day ("the third requisition"):

(1) that the statutory declaration was not executed by the person dealing with the attorney, i.e., the officer executing the Conditions of Exchange on behalf of the Government; and

(2) that the statutory declaration was not executed within the statutory time limit prescribed by section 5(4)(b) of PAO, raising a doubt on its validity between 4 August 1994 and 27 January 1995 (the date when the Conditions of Exchange was executed).

9. The defendant's solicitors did not reply until 23 May 2000 when they reiterated their initial stance that provision of the 1993 power of attorney was unnecessary. They requested completion in the absence of further documents other than those already furnished. That was refused. Further correspondence between the parties did not advance the matter. Eventually on 1 November 2000, the plaintiffs' solicitors informed their counterpart that the defendant had failed to prove good title to the Property and demanded the refund of the deposit. On 6 November 2000, the defendant's solicitors stated that there was no blot on title and refused to refund.

Issues

10. There are essentially three issues before me:

(1) Whether for the purpose of proving title to the Property, the defendant need to produce the 1993 power of attorney in order to show due execution of the Conditions of Exchange on his part. This is the issue the first requisition had raised.

(2) Whether for the purpose of proving title proof of non-revocation of the 1993 power of attorney was necessary. This is the issue raised by the second and third requisition.

(3) Whether the defendant had been estopped from denying that the production of the 1993 power of attorney and proof of its non-revocation was necessary for proof of title. This arose out of the parties' conduct since 2 May 2000, in particular, the provision of the 1993 power of attorney and the subsequent response by the defendant's solicitors to the second requisition.

Production of the 1993 power of attorney

11. Clause 9 of the Agreement provided, inter alia, that the defendant shall prove title to the Property pursuant to section 13 of the Conveyancing and Property Ordinance ("CPO") and to furnish such certified copies of any deeds or documents of title as may be necessary to prove such title. The provisions in section 13(1), insofar as they are relevant, read:

"Unless the contrary intention is expressed, a purchase of land shall be entitled to require from the vendor, a proof of title to that land, only production of the Government lease relating to the land sold and -

(a) proof of that land -

(i) where the grant of the Government lease was less than 15 years before the contract of sale of that land, extending for the period since that grant...

(b) ... and

(c) production of any power of attorney under which any document produced is executed where that document was executed less than 15 years before the contract of sale of that land."

"Government lease" here includes an agreement to a government lease: see section 15(e) of CPO and section 3 of the General Clauses and Interpretation Ordinance, Cap.1. The production of either the original or the certified copy of the power of attorney pursuant to section 13(2) of CPO or section 3(1) and (2) of the POA would suffice: see Hong Kong Conveyancing Law and Practice, Vol 1, para 243.1.

12. The Conditions of Exchange is an agreement to a Government lease: see clause 12 thereof. Dated 27 January 1995, it constitutes the root of title. It had been produced already and no problem arose out of that. The question is whether the 1993 power of attorney need to be produced under section 13(1)(c). Although paragraph (c) is couched in wide terms, it had been held that only those powers of attorney relating to proof of title to the land need to be produced: Lee Kim-ha v Yip Moo-chiu [1990] HKDCLR 29, applied subsequently in Choi Hung Investment Co Ltd v Chinco Investment Ltd [1995] 1 HKC 203.

13. In Lee Kim-ha, the vendor defendant purchased the property from a Madam Lau who in turn purchased it from another person. Madam Lau had executed the assignment in her favour by an attorney. The purchaser plaintiff raised a requisition on the power of attorney and insisted that the original or a certified copy be produced. HH Judge Patrick Chan (as he then was) said at 34E-G:

"Upon the true construction of section 13, I think the purchaser cannot demand the production of all documents falling within the statutory period. He can only ask for those documents which are used 'as proof of title' to the land to be sold. In my view, subsection (c) must be read subject to this and 'an power of attorney under which any document produced...' must be interpreted in this light, ie only those which are necessary as proof of title need be produced and only those powers of attorney which affect the validity of these documents are required. The main purpose of the exercise is to prove title to the land. Any document which is not relevant to the proof of title is unnecessary and the purchaser has no right under section 13 to demand the production thereof."

The learned judge held that the execution of an assignment by a purchaser served as an acknowledgement of the passing of title and all interests by the vendor to him; that the consequence of a defective execution was that the vendor could not enforce any of the covenants in the assignment against the vendor; that Madam Lau's execution on the assignment to her as a purchaser was not necessary for the passing of title to her; and that accordingly, the power of attorney was irrelevant and unnecessary for proof of title.

14. Mr Cheung, counsel for the defendant, argued that the due execution of the Conditions of Exchange on the defendant's part was not necessary for the passing of title of Lot 953 to him. He was not assigning any interest in Lot 953. Thus, applying Lee Kim-ha, production of the 1993 power of attorney was unnecessary.

15. Ms Chan, counsel for the plaintiffs, contended that Lee Kim-ha is distinguishable. She submitted that due execution of the assignment there was unnecessary because Madam Lau was merely accepting as a purchaser the title and all interests in the property assigned to her by the vendor and "there was nothing for her to assign or convey": see 32G-H of the judgment. But in the present case, the nature of the Conditions of Exchange is very different in that the defendant as the grantee had to surrender some lots of land in exchange of Lot No 953. Thus, due execution of the Conditions of Exchange by the defendant was plainly necessary for the purpose of passing title of Lot No 953 to him. Ms Chan further relied on Tang Joseph Yiu Tin v Ma Ka Chun & another, HCMP 2890 of 1993, unreported, 6 September 1993, where Barnett J said:

"Either a document passes or purports to pass an interest in the property, in which case it is a document of title and must be produced together with any related power of attorney; or it does not, in which case no further time need be spent upon it."

16. In my view, the answer lies in how the legal estate of Lot 953 was vested in the defendant. Under section 14(1) of CPO, where a person has a right to a Government lease of any land upon compliance with any conditions precedent, then, upon compliance with those conditions, the equitable interest under that right shall become a legal estate in that land as if held under a Government lease issued in accordance with that right; and such a Government lease shall be deemed to have been issued upon compliance with those conditions. Further, under subsection 3(a), which is applicable here, a person having a right to a Government upon compliance with any conditions precedent shall be deemed for the purposes of this section to have compiled with those conditions upon the issue by the Government of a certificate of compliance and the registration thereof in the Land Registry. In the present case, there is no dispute about the issuance and registration of the certificate of compliance. By virtue of section 14 of CPO, the defendant holds a legal estate in Lot No 953 as if held under a Government lease. A certified copy of the certificate of compliance had also been produced as evidence that he held the legal estate in the lot: see Chen & Another v Lord Energy Ltd [1999] 1 HKLRD 205, CFA.

17. From the above analysis, it is clear that the legal estate in Lot 953 became vested in the defendant, not by the due execution of the Conditions of Exchange on the part of the defendant but by operation of the law upon compliance of the conditions. Thus for the purposes of proving title, it is not necessary to prove due execution of the Conditions of Exchange by the defendant. It follows that, applying Lee Kim-ha, it is not necessary to produce the 1993 power of attorney for proving title.

18. I do not consider the dicta of Barnett J in Tang Joseph Yiu Tin assists the plaintiff. His dicta should be understood in context. There, the developer of the property had entered into a sale and purchaser agreement and a subsequent cancellation agreement with a Madam Teng. The cancellation agreement was signed by Madam Teng's attorney. The developer then sold the property to another person. Eventually, the defendant acquired the property. His purchaser required as proof of title the production of the cancellation agreement and the power of attorney. The request was refused. Counsel for the defendant argued that the agreements between the developer and Madam Teng were not documents going to proof of title. Consequently, their production and the production of the power of attorney was unnecessary. In rejecting the argument, the learned judge made the observation quoted above. He then held that those agreements were documents of title. They, together with the power of attorney, must be produced. It is obvious that those agreements were documents of title because they passed an interest in the suit property. By virtue of the sale and purchase agreement, the equitable interest in the suit property was passed onto Madam Teng. The cancellation agreement then passed the equitable interest back to the developer. No doubt in those circumstances, the power of attorney had to be produced. Here, the defendant did not pass or purport to pass any of his interest in Lot 953 by virtue of the Conditions of Exchange. His interest in the lots to be exchanged might well have passed onto the Government upon signing of the Conditions of Exchange. But that is not an interest in Lot 953. Accordingly, I do not think Tang Joseph Yiu Tin is applicable.

19. For the above reasons, I hold that it is not necessary to produce the 1993 power of attorney for the purpose of proving title to the Property.

Proof of non-revocation of the 1993 power of attorney

20. Since the production of the 1993 power of attorney is unnecessary, it follows that proof of its non-revocation is also unnecessary. Consequently, I do not think I need to address counsel's submissions in length except to mention three points.

21. First, Ms Chan objected to certain paragraphs of Yu's affirmation. They essentially dealt with the execution and subsistence of the 1993 power of attorney. She argued that Yu could not confirm the matter one way or the other. Only the defendant was able to do so. She may have a point but I do not think it makes any real difference. For I have arrived at my conclusion on production of the 1993 power of attorney and proof of its non-revocation above without relying on these paragraphs.

22. Secondly, Mr Cheung submitted that the request for statutory declaration was misconceived because the "purchase" in section 5(4) of POA referred to the present transaction, so that upon completion, the defendant still have 3 months to obtain the relevant statutory declaration from the Government. I agree. Indeed, I do not think Ms Chan had sought to argue the contrary. This disposed of the first limb of the third requisition: see paragraph 8(1) above.

23. Thirdly, Ms Chan relied on Kan Wing Yau v Hong Kong Housing Society [1988] 2 HKLR 187, CA, and submitted that by way of proving his title, the vendor must establish beyond reasonable doubt that the purchaser will not be at risk of a successful assertion against him by a donor of a power of attorney or his successors on the grounds that the power was invalid at its date of exercise. She argued that in the absence of proof of non-revocation, there is a risk that the defendant, who was the donor of the 1993 power of attorney, might later set aside the power on the ground of invalidity. In reply, Mr Cheung submitted that the emphasis should not be on the risks of claims, but should be on the risk of claims being successful: Wong Wai Ming v Tang Tat Chi [1993] 1 HKC 341. He contended that a successful challenge by the defendant against the 1993 power of attorney on the ground of invalidity is fanciful in the present circumstances. The defendant had already complied with the conditions in the Conditions of Exchange, including the surrender of the lots in exchange of Lot 953, as evidenced by the issue of the certificate of compliance. He then executed the 1999 power of attorney in favour of Yu for the purpose of selling the Property to the plaintiffs. In the circumstance, there is no doubt that the 1993 power of attorney had been relied on by the defendant himself. With respect, I agree with Mr Cheung. If need be, I would hold that the risk of a successful assertion by the defendant against the 1993 power of attorney on the ground of invalidity is fanciful and that there would be no blot on title arising out of that. This disposed of the second limb of the third requisition: see paragraph 8(2) above.

Estoppel?

24. Was the position changed by the parties' conduct since 2 May 2000? Ms Chan submitted that by producing the 1993 power of attorney and agreeing to extend the completion date without reservation, the defendant was estopped from asserting that its production and proof of non-revocation was necessary for the purpose of proving title. Mr Cheung argued that this point had never been raised before and that in any event, production and proof of non-revocation was unnecessary for proving title.

25. Whether any estoppel arose out of the production of the 1993 power of attorney appears to be academic. After all, it had been produced although it was unnecessary. But I am not satisfied that on the evidence before me, the defendant's solicitors had by conduct or otherwise represented that proof of its non-revocation was required for proving title. In any event, for the reasons set out in paragraphs 22 and 23 above, any attack on title based on the lack of proof of non-revocation would be futile.

Conclusion

26. For the foregoing reasons, I find that the defendant had proved title and the plaintiffs are not entitled to any of the reliefs claimed. The summons is dismissed accordingly.

Costs

27. Costs should follow the events. I do not see any reason to the contrary. I will make an order nisi that costs be to the defendant, to be taxed if not agreed. The order nisi is to be made absolute after 14 days of handing down.