NG CHUNG WO AND ANOTHER v. NG KING WAH AND ANOTHER

HCMP1707/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1707 OF 2002

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J U D G M E N T

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1. This is a Vendor and Purchaser Summons taken out under Section 12 of the Conveyancing and Property Ordinance in respect of the sale and purchase of a property known as Flat B, 23rd floor, Tower 1 Hoi Po Mansion, Riviera Gardens, Nos.1-7 Yi Hong Street, Tsuen Wan, New Territories, Hong Kong ("the Property").

2. By an Agreement for Sale and Purchase dated 8 December 2001, the defendants agreed to sell and the plaintiffs agreed to purchase the Property at the consideration of $1,718,000.00 ("the Agreement"). Upon the signing of the Agreement, the plaintiffs paid the defendant a deposit totalling $171,800.00. Under the terms of the Agreement, completion was to be on or before 18 January 2002.

3. Differences having arisen between the parties as a result of two requisitions which the plaintiffs allege had not been satisfactorily dealt with or answered by the defendant such that the defendants have failed to prove a good title to the Property, this application was taken out by the plaintiffs claiming for the following reliefs :

(a) a declaration that the requisitions raised by the plaintiffs in respect of the Property have not been satisfactorily answered by the defendants;

(b) a declaration that good title to the Property has not been shown by the defendants;

(c) a declaration that the defendants have wrongfully repudiated the Agreement and wrongfully forfeited the deposit of $171,800.00;

(d) a declaration that the plaintiffs be entitled to refund of such deposit;

(e) an order that the defendants do indemnify the plaintiff the conveyancing expenses and other fees paid by the plaintiff relating to the purchase of the Property.

4. The defendants vendor of course do not accept that they were in breach by failing to prove good title but say that despite good title having been shown, the plaintiffs were in breach by failing to complete.

The First Requisition

5. Title deeds and documents relating to title of the Property were delivered to the plaintiff's solicitors on 10 December 2001. One such document contained in the title deeds was an Assignment dated 20 December 1988 and registered in the Tsuen Wan New Territories Land Registry by Memorial No.967186. That Assignment purports to have been executed by Outstanding Glory Company Limited ("OGCL") as vendor.

6. That execution clause reads :

"Sealed with the Common Seal of the Vendor and SIGNED by Wu Kit Wa one of its Directors in the presence of"

7. Against that clause appears the Chinese signature of Wu Kit Wa as well as the common seal of OGCL.

8. By its requisition by letter dated 3 January 2002 the plaintiffs' solicitors requested from the defendants' solicitors a certified copy of the sealing clause of OGCL as well as the relevant Board minutes authorising execution of that assignment.

9. On 11 January 2002, the defendants' solicitors provided the relevant sealing provisions contained in clauses 20 and 21 of the Articles of OGCL to the plaintiffs' solicitors. Those clauses read as follows :

"20. The Seal of the Company shall be kept by the Board of Directors and shall not be used except with their authority.

21. 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, or such person or persons as the Board may from time to time authorised (sic) for such purpose."

10. At the same time the solicitors for the defendants by its letter of the same date (i.e. 11 January) indicated to the plaintiffs' solicitors that they shall endeavour to obtain the relevant board resolutions from OGCL in respect of Assignment Memorial No.967186.

11. However, no board minutes were ever supplied to the plaintiffs' solicitors. Instead on 17 January the defendant's solicitors sent to the plaintiffs' solicitors a copy of a Notice published on 18 September 1998 under Gazette Notice No.4534 which they say shows that OGCL has been dissolved. That was a notice pursuant to Section 291(5) of the Companies Ordinance, the operative part of which reads as follows :

" Company Name: Outstanding Glory Company Limited

Pursuant to Section 291(5) of the Companies Ordinance, notice has been published on 18-09-1998 under Gazette Notice No.4534 and at the expiration of three months from the date hereof, the name of this company will, unless cause is shown to the contrary, be struck off the Register and this company will be dissolved."

12. On 18 January, the plaintiffs' solicitors wrote back to say that the notice produced is no proof of dissolution since that is a notice which is given before the company is dissolved and further that Section 291(7) allows an aggrieved member or creditor of the company within 20 years of the striking off to apply to court to restore the company to the register.

13. On 28 January (i.e. 10 days after completion date), the defendants' solicitors sent to the plaintiffs' solicitors a further notice relating to OGCL which states that pursuant to Section 291(6) of the Companies Ordinance, notice has been published on 22 January 1999 under Gazette Notice No.288 and the name of the company has been struck off the Register and that the company is accordingly dissolved as from the date of the publication of the notice.

14. Together with that notice under Section 291(6) were also sent an Assignment Memorial No.560275, a Mortgage dated 25 May 1988 and two Legal Charges dated 30 April 1988 and 21 June 1988. These four documents were wholly unrelated to the Assignment, the subject matter of the requisition, or for that matter the transaction in question. The only purpose in sending over these four documents was to show that Wu Kit Wa had on other occasions signed on each of these four documents and in each of them he was described as the "Authorised Signatory" of OGCL.

15. By letter dated 29 January, the plaintiffs' solicitors stated that the further reply from the defendants' solicitors came too late and that the defendants had failed to prove good title or answer their requisitions satisfactorily before completion. It was also stated that the plaintiffs have accepted the repudiation by the defendants and have rescinded the Agreement.

16. On 31 January the defendants' solicitors replied stating that the defendants had shown a good title to the Property and all the requisitions had been duly answered before 17 January 2002. It further stated that it was the plaintiffs who had failed to complete and was therefore in breach. It further stated that as a matter of courtesy the defendants have extended the time for completion to 2 February and if the plaintiffs still fail to complete by then the defendants will forfeit the deposit and rescind the Agreement.

17. On these facts described above, in so far as the due execution of the Assignment registered in the Tsuen Wan Land Registry by Memorial No.967186 is concerned, the facts of this case are indistinguishable from the facts in the case of Grande Trade Development Ltd v. Bonance International Ltd [2001] 2 HKLRD 759 and on the authority of the judgment of the Court of Appeal in that case I am of the view that due execution of that Assignment has not been proved by the defendants when they failed to produce the Board resolution of OGCL authorising Wu Kit Wa to sign that Assignment.

18. Moreover, I do not accept the argument put forward by Mr Chong, who appears for the defendants, that the four documents produced by the defendants' solicitors under cover of their letter dated 28 January showing that Wu Kit Wa had signed on those documents as the "authorised signatory" of OGCL can have any bearing or significance to this requisition. The fact remains that on the Assignment, the subject matter of this requisition, nothing on the face of the execution clause showed that Wu Kit Wa was authorised to sign nor was he described as the Chairman of the Board. Furthermore, those documents were only produced on 28 January, ten days after the completion date.

19. Having arrived at that conclusion, the only other matter which merits consideration is whether the defendants have shown that by reason of the dissolution of OGCL, there is no risk of the title being affected despite the fact that the defendants have not been able to prove due execution by Wu.

20. In this respect I agree with the submission by counsel for the plaintiffs that the notice dated 18 September 1998 initially produced by the defendants' solicitors on 17 January which was a notice under Section 291(5) of the Companies Ordinance was not sufficient proof of the dissolution of OGCL. That is self apparent from the wording of the notice itself. It merely gave notice that the name of OGCL will be struck off the Register at the expiration of three months unless cause is shown to the contrary. As such it cannot be evidence of the dissolution or even the striking off of OGCL.

21. I do accept however, that the later notice (given pursuant to Section 291(6)) would be good evidence of the dissolution of OGCL effectively as from 22 January 1999. However that notice was only produced to the plaintiff's solicitors on 28 January 2002, ten days after the date of completion, and as such it could not effectively be part of the answer or reply to the requisition raised by the plaintiff.

22. In all the circumstances and for the above reasons, I have come to the conclusion that the requisition raised by the plaintiffs relating to the due execution by OGCL of the Assignment registered by Memorial No.967186 has not been satisfactorily dealt with or answered by the defendants by the time of completion on 18 January 2002.

23. In so saying, I am well aware that there was a further point raised in argument by counsel for the defendants relating to the plaintiffs having by its conduct extended the time for completion. I shall deal with that point at a later part of this judgment.

The Second Requisition

24. This involves a Partial Release registered in the Tsuen Wan New Territories Land Registry by Memorial No.788976 ("the Release") by the Canadian Imperial Bank of Commerce ("the Bank"). The Release purports to be signed on behalf of the Bank by its attorney Mak Pak Hung and was part of the title documents delivered by the defendants' solicitors to the plaintiffs' solicitors in this transaction.

25. When the title documents were delivered to the plaintiffs' solicitors there was also included a document dated 18 January 1991 which purports to be the Power of Attorney. The relevant and operative part of that Power of Attorney reads as follows :

"This witnesses that R.D. Bridge and C.A. Evans the undersigned Vice-President and Assistant Secretary under the seal of the Bank hereby appoint William Ferguson Spence and Peter Peace Tulloch in substitution for David William Robbie, Brian Patrick Twohey and Donald Douglas Gibbons to the effect that Geoffrey Edward Webb, Dudley Gordon Willson, Mak Pak Hung, Brian Charles Gunderson, John Archibald Welch, William Ferguson Spence and Peter Peace Tulloch or any of them shall be the true and lawful attorney of the Bank in Hong Kong pursuant to the terms of the said resolution and power of attorney."

26. By letter of 3 January 2002, the plaintiffs solicitors requested for a certified copy of the relevant Power of Attorney appointing Mak and also confirmation of non-revocation by the Bank if the Power of Attorney was given 12 months before the execution of the Release. The same letter further pointed out that the Power of Attorney dated 18 January 1991 "only appoint William Ferguson Spence and Peter Peace Tulloch as substitutes, not Mak Pak Hung who executed the Partial Release".

27. By letter in reply dated 11 January 2002, the defendants solicitors stated that although one of the effect of the Power of Attorney dated 18 January 1991 was to appoint William Ferguson Spence and Peter Peace Tulloch as substitutes, it also had the effect of stating that any one of the named persons (including Mak Pak Hung) shall be the true and lawful attorney of the Bank in Hong Kong.

28. This was not satisfactory to and not accepted by the plaintiffs' solicitors.

29. By a further letter of 15 January 2002, the defendants' solicitors further stated that the Power of Attorney in question should be the one dated 14 March 1979 executed in pursuance of the resolution dated 1 March 1979 of the Board of Directors of the Bank both of which had been supplied to the plaintiffs solicitors together with the title documents. It further reiterated their position that the Power of Attorney dated 18 January 1991 confirmed that Mak Pak Hung or any one of the persons named therein shall be the true and lawful attorney of the Bank pursuant to the terms of the said resolution and the said Power of Attorney. Moreover, the solicitors for the defendants further sought to rely upon a letter by the Bank dated 11 March 1992 addressed to Messrs Joseph Chu & Co., Solicitors, in which the Bank purports to confirm that Mak Pak Hung was the lawful attorney of the Bank in Hong Kong at the time of the execution of the Release. By relying on this confirmation from the Bank dated 11 March 1992, the defendants' solicitors says that the Bank is therefore estopped from denying that Mak Pak Hung was the attorney of the Bank and therefore there can be no doubt that the Release was duly executed.

30. The Power of Attorney dated 14 March 1979 (referred to in the letter from the defendants' solicitors dated 15 January 2002) appointed Holger Kluge and Gerald Simon Niessen as the lawful attorneys of the Bank in Hong Kong pursuant to a resolution of the Board of Directors of the Bank passed on the same date and gave them the power to appoint any substitute or substitutes and to delegate to such substitutes all or any of the powers conferred upon them by that Power of Attorney. That Power of Attorney however makes no mention, even in name, of Mak Pak Hung.

31. Further correspondence followed but the defendants solicitors did not or were not able to furnish any power of attorney which appointed Mak Pak Hung as the lawful attorney of the Bank.

32. The plaintiffs' solicitors took the stance that the answers given by the defendants' solicitors did not satisfactorily answer the requisition whilst the defendants' solicitors were of the view that they had fully answered such requisition.

33. In my view, the Power of Attorney dated 18 January 1991 does not assist the defendants. Whilst it appointed William Ferguson Spence and Peter Peace Tulloch, it was not a power of attorney which appointed Mak Pak Hung. Although it goes on to mention that Mak Pak Hung was one of the true and lawful attorney of the Bank, the fact remains that it was not the document which appointed Mak Pak Hung as the attorney of the Bank.

34. When it comes to proving the powers granted to an attorney, it is of fundamental importance that the power appointing the attorney be produced firstly to show the time when the attorney was appointed and secondly to show the extent of the powers conferred upon the attorney.

35. Neither of these matters are shown in relation to Mak Pak Hung when reliance is made simply of the Power of Attorney dated 18 January 1991.

36. Indeed, at the hearing before me, Mr Chong attempted to submit to me the law in relation to use of secondary evidence. However, in so doing, he seemed to have overlooked that one of the requirements to be fulfilled before secondary evidence can be admissible is that there has to be proof of the loss or destruction of the original document. Even assuming that the Power of Attorney dated 18 January 1991 can amount to secondary evidence of Mak Pak Hung's appointment as the Bank's attorney (despite its inability to show the time of appointment or the extent of the power granted to Mak Pak Hung), there has been nothing in any of the answers from the defendants' solicitors to show or indicate that the original power appointing Mak Pak Hung has been lost or destroyed.

37. Indeed that could not have been the situation as the plaintiffs' solicitors were able to obtain from the Bank a copy of the power of attorney appointing Mak Pak Hung which was in fact dated the 10 November 1987. This document however was only obtained by the plaintiffs' solicitors at a time after the completion date and after rescission by them of the Agreement.

38. Nor can the Power of Attorney dated the 14 March 1979 assist the defendants either since it does not even make mention of Mak Pak Hung in the whole of that document.

39. As for the confirmation letter dated 11 March 1992, I am of the view that that letter would serve as good confirmation of Mak Pak Hung's authority as an attorney of the Bank was still good and had not been revoked when the Release was executed provided that the actual Power appointing Mak had been supplied. But on its own, all that it states is that "we hereby confirm that Mr Mak Pak Hung was the true and lawful attorney of the Bank in Hong Kong at the time of execution of the Partial Release Memorial No.788976 dated September 10, 1991." It does not even say that Mak Pak Hung was the true and lawful attorney in the execution of the Release. I therefore cannot accept the submission that based on this confirmation letter the Bank would be estopped from denying the authority of Mak Pak Hung in the execution of the Release.

40. For these reasons, I have come to the conclusion that the defendants' solicitors have also failed to adequately answer the second requisition from the plaintiffs' solicitors.

Time for Completion

41. Under the Agreement, the date agreed for completion was the 18 January 2002 which was a Friday. Clause 3 of the Agreement provides that for a weekday, the time for completion is to be between 10.00 a.m. and 5.00 p.m. Clause 13 of the Agreement further provides that time shall in every respect be of the essence of the Agreement.

42. A further point was taken in argument by Mr Chong for the defendants that when the plaintiffs' solicitors, by their letter of 18 January 2002 which was received by the defendants' solicitors at 3.55 p.m. through the fax, raised the effect of Section 291(7) in respect of the First Requisition and required the production of the Power appointing Mak Pak Hung in respect of the Second Requisition, by so demanding had waived the date agreed for the completion.

43. If I understood Mr Chong, his argument is based on the premise that what was raised by the plaintiffs' solicitors in their letter of 18 January 2002 were consequential requisitions such that the defendants must be given a reasonable time to answer same and therefore the plaintiffs could not insist on the defendants answering same on or before 5.00 p.m. the same day.

44. In those circumstances, it is submitted, it was not unreasonable for the defendants to reply by letter of 21 January 2002 suggesting that the completion date be postponed for a further 14 days for the defendants to reply to the plaintiffs on those matters.

45. It follows therefore that the reply of the defendants' solicitors by their letter of 28 January 2002 was reasonably within such extended time and that reply contained (inter alia) the notice under Section 291(6) which gives notice that OGCL has been struck off the Register and dissolved since 22 January 1999.

46. In my view that argument of Mr Chong has no merit at all. The entirety of that argument is founded on the basis that what was raised in the letter dated 18 January 2002 by the plaintiffs' solicitors are consequential requisitions. I take the view that they were nothing of the sort but were matters which all along had been raised by the plaintiffs' solicitors from the outset but had never been adequately or sufficiently answered or dealt with by the defendants' solicitors.

47. Moreover, the suggestion by the defendants' solicitors to postpone the date of completion for 14 days in their letter of 21 January 2002 had never been agreed to by the plaintiffs.

48. In these circumstances, I am unable to see how it can be said that the time for completion had been waived by the plaintiffs or that it was other than as agreed by the parties in the Agreement bearing in mind that the parties had agreed that time was to be of the essence in all respects.

49. For the above reasons, I hold that the defendants have failed to prove good title and there will be judgment for the plaintiffs upon its Originating Summons. The Order which I shall make is as follows :

(1) The defendants do return the deposit of $171,800.00 paid under the Agreement to the plaintiffs;

(2) The defendants do indemnify the plaintiffs the sum of $38,300.00 being the conveyancing expenses payable by the plaintiffs in the purchase of the Property and the sum of $1,495.00 being the administration and application fees paid by the plaintiff to Hong Kong Housing Authority;

(3) Interests on the aforesaid sums at 5% p.a. from the date of the Originating Summons until judgment and thereafter at judgment rate;

(4) Cost of this application and hearing, being a cost order nisi, be to the plaintiffs to be taxed if not agreed.