SERA LTD. v. EXCELLING PROFIT INVESTMENTS LTD.

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J U D G M E N T

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Penlington, J.A.:

1. This is the judgment of the Court.

This is an appeal from an order dated the 17th August 1992 of Wong J. on a vendor and purchaser summons issued by the plaintiff ("the purchaser") who is the purchaser of a flat in Peak Road, being part of a development known as Stewart Terrace, from the defendant ("the vendor") under an agreement ("the agreement") dated the 9th July 1992. The property is described as Flat 7 on the ground floor and the basement and car-parks numbers 25 and 27. The consideration is $8,700,000 and completion was to be on the 3rd August 1992. That date was extended by agreement to the 17th August.

2. The summons was based on what the purchaser considered were unsatisfied requisitions which it had raised with the vendor's solicitors, Messrs. Slaughter and May. This was pursuant to clauses 6 and 7 of the agreement which respectively provide that the vendor shall show good title and furnish to the purchaser documents of title "as may be necessary to complete such title", and that any requisition on the documents produced shall be made within 7 days of their delivery.

3. So far as is relevant to this appeal, the history of the whole Stewart Terrace property is that it was sold by the then owners, Chi Wo Terrace Ltd ("Chi Wo"), to a Bermudan company, Monroe Ltd ("Monroe"), by an agreement dated the 1st October 1986, for $40,000,000. By a subsequent agreement of 1st December 1986 Monroe re-sold Stewart Terrace to Humphreys Estate (Butterfly Crest) Ltd ("Humphreys") for $42,500,000. The assignment, dated the 1st December 1986, recites these agreements and was executed in favour of Humphreys by Chi Wo as vendor, and Monroe as confirmor. Messrs. Baker and McKenzie were solicitors for both Monroe and Humphreys.

4. The assignment was executed by Chi Wo and Humphreys in the normal way, the common seal of each company being affixed in the presence of two directors and a solicitor.

5. The execution for Monroe however was done by a Mr. Robert Stevenson pursuant to a power of attorney in his favour from Monroe dated the 27th November 1986 and executed by Monroe under seal. The power of attorney states, inter alia, that Mr. Stevenson is authorised

"(a)    to make, sign, execute, seal and deliver any and all of the documents described in the Schedule hereto (hereinafter called "the Documents") and to give such instructions concerning the disposal of the Documents or the holding of the Documents as any of the Attorneys may think fit.

(b). . . . .

(c)    to do, execute, sign, seal, deliver, accept and perform any act, agreement, deed or document matter or thing which in the opinion of any of the attorneys is necessary or expedient for or in connection with the exercise of the powers hereby conferred or the completion or performance of the transactions contemplated by the Documents".

The schedule referred to in turn reads: "

SCHEDULE

1.    An Agreement to be made on or about 1st December 1986 between The Hongkong Land Property Company, Limited, Durban Ltd, Monroe Ltd and others supplemental to the Agreement dated 1st October 1986 between the Hongkong Land Property Company, Limited, Durban Ltd and Monroe Ltd relating to the sale and purchase of shares in and assignment of debts owing by companies in the Humphreys Estate Group and the sale and purchase of certain properties owned by the Chi Wo Group of companies.

2.    Any agreement, deed or document of whatever nature between the Principal and any other party or parties relating directly or indirectly in any manner to the sale and purchase of shares in and/or the assignment of debts owing by any company or companies in the said Humphreys Estate Group and/or the sale and purchase of any of the said properties owned by the said Chi Wo Group of companies.

3. Any agreement, deed or document of whatever nature between the Principal and any other party or parties relating directly or indirectly in any manner to the borrowing or lending or investing or receiving of funds or the granting or taking of any security for such funds in connection with the sale and purchase of shares in and/or the assignment of debts owing by any company or companies in the said Humphreys Estate Group and/or the sale and purchase of any of the said properties owned by the said Chi Wo Group of companies."

6. The assignment was registered by memorial No. 3241997 on the 23rd December 1986 by Messrs. Baker and McKenzie. Monroe was dissolved on the 6th January 1989.

7. The other document relevant to this matter is a release of mortgage dated the 13th May 1987 executed by Wardley Ltd as agent for the Hong Kong and Shanghai Bank which was the mortgagee and Dunbarry Ltd, a company incorporated in Jersey in the Channel Islands, as confirmor. The release was executed under seal by Dunbarry Ltd by Mr. Wilson H. Banks. Although not recited in the release that was pursuant to a power of attorney dated the 5th May 1987. That document has been produced and there is no dispute that on its face it purports to authorise Mr. Banks to execute the release on behalf of Dunbarry.

8. On the 13th July 1992 the purchaser's solicitors, Messrs. S.H. Leung and Co., were supplied with a bundle of title documents relating to the property. As a result, by two letters dated the 14th July, the purchaser's solicitors called for a sight of a large number of documents (or certified copies thereof) relating to the conveyancing history of the property. The bulk of these requisitions have been answered, including one relating to the Building Authority's permit which was originally included as part of the summons. For the purposes of this appeal we are only concerned with the powers of the attorney from Monroe Ltd to Mr. Robert Stevenson and Dunbarry Ltd to Mr. Wilson Banks.

9. The main problem so far as the power of attorney from Monroe Ltd is concerned is that its schedule limits the powers given to Mr. Stevenson to the execution of deeds relating to the sale by Monroe, pursuant to the two agreements, to Humphreys of "certain properties owned by the Chi Wo Group of Companies". It was the case for the purchaser before Wong J. that it had to see the two agreements so as to be satisfied that the property was one of those referred to in the power of attorney. They had requisitioned on that basis but had been told that Baker and McKenzie had declined to produce those agreements as they related to other matters in addition to the sale of Stewart Terrace which they could not disclose without breach of the professional confidence they owed to their clients. However in substitution they did forward a statutory declaration from Mr. G.M. Morgans, a partner of Baker and McKenzie, stating that his firm dealt with the project contained in the agreements of 1st October and 1st December 1986 involving Monroe and that the Stewart Terrace land was included within the "certain properties" referred to in Mr. Stevenson's power of attorney (which the declaration initially referred to as being dated the 27th November 1989). It was the vendor's case that such a declaration was sufficient to overcome the difficulty caused by its inability to produce the agreements.

10. Wong J. found that the agreements should have been produced and the vendors had not made a good title without them. He acknowledged that a declaration such as the one from Mr. Morgans could be used as proof of title in conveyancing matters but it should be from a disinterested party. He found that Mr. Morgans, having acted for Monroe in the previous transactions was not so disinterested but, more importantly and clearly it was a point which caused him much concern, he was under the impression that Baker and McKenzie had "provided copies of the agreements" to the vendor's solicitors but somehow objected to the purchaser's solicitors seeing the documents. He could see no reason for this as any duty of confidentiality had already been breached by providing the vendor's solicitors with copies. There was no basis for that finding which, it is conceded, was factually wrong. Baker and McKenzie refused to disclose the contents of the agreements to either party.

11. Wong J. found support for refusing to accept Mr. Morgans's declaration as being sufficient to show title in the decision of Godfrey J. in Lee Yeung Chun and another v. Ng Choi Chun [1990] 1 HKLR 468 which was relied on here by Mr. Edward Chan, Q.C., leading counsel for the purchaser. That case however seems to be authority for the proposition that a conveyancing declaration, like a litigation affidavit, should not be sworn before the declarant's own solicitor. Here the declaration was made before Mr. Raymond Kwok of Denton, Hall, Burgin and Warrens, totally disinterested solicitors. It is however argued by Mr. Chan that Mr. Morgans is himself an interested party in that if the conveyance executed by Mr. Stevenson on behalf of Monroe was not duly authorised, his firm could be liable in an action brought by Monroe. What the nature of that claim might be he did not specify.

12. We do not accept that argument. Mr. Morgans' firm was clearly interested in the 1986 transactions as acting for two of the three parties but that interest has now ceased as Monroe was dissolved in January 1989, almost four years ago. Mr. Morgans is not now acting for any party involved in this matter. That there is any real possibility that he would now make a false statutory declaration to protect his firm against some sort of a claim by Monroe seems to us wholly fanciful.

13. A further point taken before us, although not argued below and not the subject of any requisition, was the reference in Mr. Morgan's declaration to the power of attorney being dated 1989 not 1986. This was pointed out by the solicitors for the purchaser and the error - and clearly it was a typographical error and nothing more - was corrected, both Mr. Morgans and Mr. Kwok signing the alteration. Mr. Chan's argument on this is that the declaration should be treated as the equivalent of an litigation affidavit and any alteration is governed by Order 41 Rule 7 and the note thereto. The rule states that an affidavit shall not be used if it contains an alteration unless such alteration has been initialled by the person before whom the affidavit was sworn. Here that has been done both by Mr. Kwok and^- Mr. Morgans. However the note to the rule states that if there is an alteration the affidavit should be re-sworn and there is nothing here to show that.

14. Mr. Andrew Li, Q.C., leading counsel for the vendor, submits that the point is simply not open to the purchaser at this stage. It was not the subject of a requisition, nor was it taken before Wong J. In either event it would have been a simple matter to correct. We agree. We do not think this highly technical point is now open to the purchaser.

15. Mr. Chan submits that if a party to a conveyance executes by its attorney, the power of attorney is a very important document and relies heavily on the decision of Rhind J. in Chan Pak Ho v. Standard Chartered Asia Ltd (1988) 1 HKLR 216. He held that a power of attorney must be produced and could not be assumed to be valid even if a letter was produced from the party which gave the power confirming the attorney's power. He considered that on the facts before him there was a real risk of equities being raised against the purchaser even after 20 years. However he reached that conclusion "after much hesitation?and clearly was greatly influenced by the fact that the vendor had_. an easy remedy available to overcome its difficulty. He thought that Hong Kong should not be thought of as a "town where anything goes" in conveyancing matters. We think that decision was reached very much on its own facts and is by no means on all fours with the position here.

16. The principle as regards showing good title to property was clearly and succinctly stated in M.E.P.C. v. Christians-Edwards (1981) AC 205 by Lord Russell of Killowan, at 220:

"In my opinion if the facts and circumstances of a case are so compelling to the mind of the court that the court concludes beyond reasonable doubt that the purchaser will not be at risk of a successful assertion against him of the incumbrance, the court should declare in favour of a good title shown."

Here Baker and McKenzie are on record as stating that the property was included in those referred to in Mr. Stevenson's power of attorney from Monroe and one of its partners has made a statutory declaration to that effect. In the light of that it seems to us that the possibility of the ghost of Monroe rising some four years after its liquidation in Bermuda to bring a claim seeking equitable relief against the purchaser here is utterly remote. The relevant power of attorney has been produced and we do not consider there was sloppy conveyancing practice as Rhind J. clearly found in Chan Pak Ho. We do not consider that the vendor was obliged to go to further effort and expense in its endeavours to obtain copies of the agreements from other sources than Baker and McKenzie, as was suggested by Mr. Chan they should do, so as to secure the best possible evidence as to title, even if it was open for them to do so by approaching the parties direct.

17. In considering the question of a possible claim being brought against a purchaser of real property, conveyancing solicitors while being careful to protect their client's interests should bear in mind what Lord Lindley said in Brocklesby v. The Temperance Bldg. Soc., The Law Times, 23rd September 1893:

"In this case we have to consider whether the title to the property agreed to be sold cannot be made good in consequence of the non-production of the lease. It is a general principle that a purchaser ought not to be forced to accept a doubtful title or to buy a lawsuit. In applying that principle, however, we must exercise our common sense and see if the proposed lawsuit has any basis whatever. We must see if there is the slightest reasonable chance of any such lawsuit being instituted. If we come to the conclusion that the supposed lawsuit exists only in the imagination of the purchaser, we ought to disregard it, giving him the advantage of every reasonable doubt".

He went on, dealing with the facts of that case:

"The equitable mortgage has never made the, slightest claim. He does not now. There is no reason to suppose he threatens to bring any action against the purchaser. Such a claim would be ridiculous: he would be laughed out of court. The purchaser says that he may. But is it a reasonable blot to give effect to? I think not. I think the facts are such that this supposed blot is a purely theoretical and not a practical blot".

We think those words are very apposite here.

18. Section 290 of the Companies Ordinance provides that the liquidator of a company or any other interested party can apply for an order that the dissolution be set aside and proceedings taken as if there had been no such dissolution but such action must be taken within two years of the liquidation. Monroe is a Bermuda company and there was no evidence as to the law of Bermuda but there is a presumption that it is the same as Hong Kong, in the absence of evidence to the contrary. (The Parchin (1918) AC 157 per Lord Parker at 161.) The time has therefore long since expired for such an action to be brought in respect of any claim by Monroe which is now dissolved.

19. The other two claims listed in the summons can be dealt with together. Declarations are sought that good title has not been shown because there is no evidence that the power of attorney to Mr. Stevenson was properly executed in accordance with Bermuda law and that to Mr. Banks, with Jersey law. In reply to that the vendor relies on Sections 20(1) and 23 of the Conveyancing and Property Ordinance, Cap. 219. These read as follows:

"20. (1) 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.

. . .

23. An instrument appearing to be duly executed shall be presumed, until the contrary is proved, to have been duly executed."

20. That the term "corporation aggregate" includes an incorporated company is clear. It is simply a corporation with several members, as opposed to a corporation sole which has only one. (Dictionary of English Law, Second Ed., Vol. 1, p. 475.)

21. Before Wong J. the purchaser sought to distinguish companies incorporated under the Hong Kong Companies Ordinance and foreign companies but the judge held that Section 20(1) of the Conveyancing and Property Ordinance did not apply to foreign companies. He recited the Companies Ordinance as defining a "company" is one incorporated under that Ordinance. That does not, in our view, mean that in the context of the Conveyancing and Property Ordinance it should be so limited. We agree with Mr. Li that the underlying purpose of that Ordinance is to provide certainty in conveyancing matters and we would require compelling authority for the proposition that a purchaser could rely on the presumption of due execution only in the case of a Hong Kong registered company. We are satisfied that, for the purposes of this Ordinance, "corporation aggregate" includes a foreign company and that the vendors were entitled to rely on the statutory provisions. There is therefore a presumption, which was not rebutted, that both powers of attorney were properly executed.

22. There is a further point raised in a Respondent's Notice that there was no evidence that Monroe or Dunbarry were authorised by Bermuda or Jersey law to grant the respective powers of attorney. This point was not the subject of any requisition and we were told was not argued below, though it is mentioned in Wong J.'s decision. Again this point, if taken earlier, could have been easily met and we do not consider it can be raised at this stage. Moreover we consider that the presumptions of regularity in the Conveyancing and Property Ordinance are again applicable.

23. Finally it was argued that there was no evidence that the original vendor, Chi Wo Terrace Ltd, was one of the "Chi Wo Group of Companies" referred to in the power. of attorney to Mr. Stevenson. This point was also not part of the requisition and, if taken before, could have been easily satisfied. Again we do not consider it is open to the purchaser to raise it at this stage.

24. For these reasons we allow the appeal, set aside the order of 17th August, dismiss the purchaser's summons and make a declaration that the vendor has shown good title to the property.

25. There will be an order nisi that the vendor have its costs here and below.