CHAIN YORK INTERNATIONAL (HOLDINGS) LIMITED v. LEUNG TAK WAI

HCA 7319/1993

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7319 OF 1993

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J U D G M E N T

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1. In this action, the Plaintiff is a limited company called Chain York International (Holdings) Limited. The Defendant is an individual. The action concerns a property known as Shop No. G01B on the ground floor and Shop No. 101 on the first floor of Nam Fung Court, Tower 3, Harbour Height, Electric Road, North Point, Hong Kong.

2. The property was the subject of a document purporting to be a provisional sale and purchase agreement between the Plaintiff company and the Defendant dated 22 September 1992 whereby the property was to be sold by its registered owner, the Plaintiff company, to the Defendant for a sum of $8.1 million and for which a deposit of $500,000.00 was deemed to have been paid by the Defendant.

3. In fact, no money had changed hands that day. According to the evidence of the Defendant, what had happened was as follows. Mr Jimmy Kan Yau Ming, the majority shareholder of the Plaintiff company and one of its directors, had owed him, the Defendant, some money as a result of business transactions between the two of them. Mr Kan had given the Defendant a post-dated cheque of the Plaintiff company supposedly for repayment of Mr Kan's debts, but this cheque had been dishonoured upon presentation. Subsequently, there were negotiations between Mr Kan and the Defendant at which it was finally agreed that the Plaintiff company would sell the property to the Defendant for $8.1 million for which the $500,000.00, said to be owed by the Plaintiff company to the Defendant under the dishonoured cheque, would be set off against the deposit payable by the Defendant.

4. Throughout the negotiations, no other directors of the Plaintiff company had taken part.

5. The provisional sale and purchase agreement was signed by Mr Kan only. There was nothing written against his signature to say that he was signing on behalf of the Plaintiff company, or to say that he had been authorized by the Board of Directors of the Plaintiff company to sign it. There is not even the usual rubber stamp identifying the signatory as an authorized signatory.

6. Despite the provisions in the purported provisional sale and purchase agreement, the Plaintiff company did not proceed to sign the formal sale and purchase agreement or the assignment. It did not even instruct solicitors. There was complete silence from the Plaintiff company. Completion date passed without any assignment taking place.

7. In August 1993, the Plaintiff company issued the present action. The relief was as follows:

(1) For a declaration that the document purported to be made between the Plaintiff and the Defendant on 22 September 1992 and registered in the Land Office by Memorial No. 5483086 was a forged document and that the same is null and void and of no effect;

(2) An injunction restraining the Defendant whether by himself or by his servants or agents or otherwise howsoever from allowing, permitting, causing the said document to remain registered in the Land Office so as to create a blot on the Plaintiff's title to the property or otherwise dealing with the said property;

(3) An order that the Defendant do all necessary acts and execute all such necessary documents so as to vacate or remove the said document from the Land Office;

(4) Damages;

(5) Interest;

(6) Further or other relief; and

(7) Costs.

8. The Statement of Claim asserted that the signature purporting to be that of Mr Kan was not his, or that if it was his, that he had signed on a blank sheet of paper.

9. The Reply said quite clearly at para. 2 that "the Plaintiff says and repeats that the Plaintiff has not at all material times entered into any agreement with the Defendant as alleged or at all".

10. The trial of this action started yesterday. The Plaintiff company's solicitors came off the record earlier in October. The Plaintiff company did not attend and no one sought leave to represent the company at the trial.

11. The Defendant sought to proceed with his counterclaim. His original counterclaim sought various reliefs including an order for specific performance, damages for breach of the provisional agreement, a declaration that the Defendant is relieved from all liability for the further performance of his obligations, an order for repayment of the initial deposit with interest, a declaration that the Defendant is entitled to a lien for his deposit and interest and any damages and costs, interest, costs, and further or other relief.

12. Yesterday, Mr Li, acting for the Defendant, indicated that the Defendant would only be seeking the return of the deposit and a sum equivalent to the same as liquidated damages under the usual clause for double deposit under the provisional sale and purchase agreement.

13. The Defendant and the estate agent were called to give evidence that in fact, the document purporting to be the provisional sale and purchase agreement had been signed by Mr Kan in their presence. In the absence of any evidence from the Plaintiff company and in the light of the evidence from the Defendant and his witness which I accept, I find that the document had in fact been signed by Mr Kan. However, that is not the end of the matter.

14. The Defendant is asserting an interest under the provisional sale and purchase agreement against the Plaintiff which is a limited company. The question is whether Mr Kan had authority from the Plaintiff company to enter into that agreement for the sale of the Plaintiff company's land.

15. Mr Li has referred me to section 32 of the Companies Ordinance which states at section 32(1)(b) that a contract which if made between private persons, would be by law required to be in writing, signed by the persons to be charged therewith, may be made on behalf of a company in writing, signed by any person acting under its authority, express or implied.

16. Mr Li accepts that there was no express authority. There is no resolution of the Board of Directors of the Plaintiff company authorizing Mr Kan to enter into the provisional sale and purchase agreement. In this connection, I note the evidence from the estate agent that she had asked Mr Kan for a resolution of the Board of Directors authorizing him to sign the provisional sale and purchase agreement. Mr Kan promised her that he would give it to her in due course. However, this was never provided. Further, there was no other evidence that the Board of Directors of the Plaintiff company had ever authorized Mr Kan to contract to sell its property.

17. As I have said, the provisional sale and purchase agreement on which the Defendant relies, was signed only by Mr Kan, signing in his personal name. There was nothing against his signature to say that he had been authorized by the Board of Directors. Therefore, although the Articles of Association of the Plaintiff company do permit the Board of Directors to delegate their powers to one director, there was nothing on the face of the document from which it could be implied that Mr Kan had in fact been so authorized. In this connection, I would refer to the line of cases in Hong Kong starting with Tread East Limited v. Hillier Development Limited [1992] No. A8907 of 1991. In the line of cases which followed that decision, the courts have considered whether authority could be implied if there was something on the face of the document to show that the signatory had been authorized by the Board of Directors. However, as I have said, in the present case, there was nothing.

18. Accordingly, I can find no express or implied authority from the company to Mr Kan for the execution of the document purporting to be the provisional sale and purchase agreement. I have also looked at the pleadings to see if in any way one can see any admission of the authority of Mr Kan. I have not been able to find any. Indeed, as I have indicated, in its reply, the Plaintiff company has pleaded that it "has not at all material times entered into any agreement with the Defendant as alleged or at all". Further, there has been no evidence of any ratification by the company of Mr Kan's act.

19. In the circumstances, the order I have to make is that the action of the Plaintiff company is dismissed, and in relation to the counterclaim, that also has to be dismissed. I should only add, as a matter of completeness, that as far as the property is concerned, that has been sold prior to the commencement of this trial by mortgagees acting under their power of sale. Therefore, it is not necessary for me to consider references to the registration of the provisional sale and purchase agreement against the property.

20. Since I have dismissed both the claim and the counterclaim, I would, subject to hearing from Mr Li, order that there should be no order as to costs.

[Submission on Costs]

21. I have heard from Mr Li in relation to his submissions as to costs. Perhaps it will end up the same, but in view of the order that I have made, my order as to costs will be as follows: that the costs of the Plaintiff's action be to the Defendant and the costs of the Defendant's counterclaim be to the Plaintiff.