LI YING CHING v. AIR-SPRUNG (HONG KONG) LTD

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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JUDGMENT

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The application

1. This is a vendor and purchaser summons issued by the Plaintiff (Purchaser) who has agreed to purchase the property at Flat E, 6/F, Elegance Court, Hillgrove Village, Discovery Bay, Lantau Island ("the property")from the Defendant (Vendor).

The requisition

2. The Plaintiff seeks requisition of title on one of the title documents, namely an assignment dated 18th July 1988 in which Hong Kong Resort Limited, as vendor, sold the property in question to New World Development Co. Ltd. as the 1st Confirmor and God Given Co. Developments Co. Ltd. ("the Company") as the 2nd Confirmor and Judy Hsu as the Purchaser. Judy Hsu later sold the property to the Defendant. In the assignment, the Company executed the document by affixing its common seal onto it and having it signed by Judy Hsu as its Director.

3. Article 20 of the Memorandum and Articles of Association of the Company provides that:

"Every document required to be sealed with the Seal of the Company shall be deemed to be properly executed if sealed with the Seal of the Company and signed by the Chairman of the Board of Directors singly or by any two directors jointly".

The Plaintiff contends that the assignment was not validly executed by the Company because Article 20 was not observed: Judy Hsu was not described as the Chairman which would entitle her to sign singly. She was described as a director and the Article required two directors to sign the document.

Authorities

4. Authorities such as Qualihold Investments Ltd. v. Bylax Investments Ltd, [1989-91] 426 CPR and Perfectime Ltd. v. Ko Ming Bor & Another [1994-95] CPR 471 clearly established that the execution was not valid by reason of the failure to comply with the Articles in the execution of the document.

Section 23 of the Convevaning and Property Ordinance

5. These authorities are not disputed by the Defendant but it is argued that the situation is saved by s.23 of the Conveyancing and Property Ordinance ("the Ordinance") which provides that an instrument appearing to be duly executed shall be presumed until the contrary is proved to have been duly executed. In Tread East Ltd. v. Hillier Development Ltd., (H.C.A. No.A907 of 1991) the Article of a company stated that:

"All deeds had to be signed by two of its directors or in such manner as the directors shall from time to time by resolution determine."

A director of the company purported to sign on an assignment as authorised by the Board of Directors. Godfrey J (as he then was) at page 9 of the judgment stated that:

"In my judgment, in these circumstances the presumption of due execution referred to in s.23 of the Conveyancing and Property Ordinance, Cap.219, applies, and the purchaser was not entitled to call for sight of a resolution authorising the assignment to be signed in this way. A purchaser is not entitled to enquire into matters of internal management of a limited company; it is enough for him to satisfy himself that the power to do what has been done did exist."

6. It is clear from the judgment that in the execution clause, the director who signed the document was described as "one of its Directors as directed and authorised by the Board of Directors to sign". This clearly complied with the Article of that company.

Section 23 not applicable

7. The difficulty that the Defendant faces in this case is that Judy Hsu was not described as the Chairman of the Company. If she was so described, quite apart from satisfying the requirement of Article 20, s.23 of the Ordinance will preclude any demand of proof that she was properly appointed as a Chairman. But in this case, she was described as a Director. It would, in my view, stretch the ambit of s.23 to an unacceptable width by saying that one is entitled to presume that she was qualified as a Chairman and in fact was appointed as a Chairman and that the Plaintiff was not entitled to raise requisitions on her appointment. Even if she was so qualified, so was the other directors of the Company. If the Defendant said that she signed as a Chairman, then it is for the Defendant to show that she signed as the Chairman even though such description did not appear at the execution clause.

8. I agree with Mr Chan that one is putting the cart before the horse to say that there is no evidence to rebut that Judy Hsu was the Chairman.

9. It is also submitted that there is evidence that Judy Hsu was the Chairman. This is referred to in the correspondence in which it was said that the solicitors who handled the execution had such evidence. There is, however, no admissible evidence adduced that Judy Hsu was in fact the Chairman.

10. In my view, s.23 has no application to the facts of the present case. The requisition has not been answered and I shall now hear the parties on the relief sought by the Plaintiff.

[Submission by Counsel]

11. The orders I shall make are: