GOLDENFIX PROPERTIES LTD. v. CHEER HOPE INVESTMENTS LTD.

Headnote

[Where a vendor is bound to provide proof of due execution, the purchaser is entitled to the best available evidence thereof; secondary evidence will be good enough only if it is sufficiently explained why the best evidence is not available]

1992 No.M.P.2940

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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IN THE MATTER OF an Agreement for Sale and Purchase dated the 4th day of June 1992 made between CHEER HOPE INVESTMENTS LIMITED as the Vendor and GOLDENFIX PROPERTIES LIMITED as the Purchaser

and

IN THE MATTER OF Section 12 of the Conveyancing and Property Ordinance 1984

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J U D G M E N T

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1. This is a dispute between vendor and purchaser, which blew up because the purchaser required proof of due execution of one of the documents of title tendered by the vendor. By way of proof of due execution, the vendor offered the purchaser secondary evidence of due execution, in the form of a statutory declaration, and insisted that the purchaser was entitled to no more. The purchaser, for its part, insisted that, if completion was to take place, the vendor must undertake to use its best endeavours to provide after completion better evidence to supplement the secondary evidence offered. There was an impasse. The contract went off and now the purchaser wants its deposit back. If the purchaser was entitled to reject as insufficient the secondary evidence of due execution which it was offered, it succeeds. If it was not, it fails.

2. What then is the degree of proof of due execution which a purchaser is entitled to demand? Is he entitled to "the utmost evidence that the nature of the fact is capable of ... (see Chief Baron Gilbert on Evidence, 1st edition, 1756, at p.4)? Or must he be content with something less?

3. At the conclusion of the hearing, I found myself, despite (or perhaps because of) the able arguments addressed to me, unsure of the correct answer to these questions. Accordingly, I indicated that I would take time to consider the matter further and then reduce my judgment into writing. This is that judgment.

4. The facts of the case (so far as material) are as follows.

5. The contract between the parties was dated 4th June 1992. The defendant ("the vendor") agreed to sell and the plaintiff ("the purchaser") agreed to buy some property at 32 and 34 Clarence Terrace, Hong Kong at the price of $17 million. The purchaser paid to the vendor by way of deposit a total of $3.4 million. Completion was (originally) due to take place on or before 4th September 1992. The vendor undertook to give a good title to the property and to prove his title at his expense and at the like expense to make and furnish to the purchaser such certified copies of any deeds or documents of title, wills and matters of public record as might be necessary to complete such title. Time was in every respect to be of the essence of the agreement.

6. One of the documents of title was an assignment dated 26th January 1988 by which the property had been assigned to the vendor. The assignment to the vendor was made by a company called Commercial View Properties Limited ("Commercial View"). The assignment bore the common seal of Commercial View. It was expressed to be signed by Wan See Wah and Lau Kwuk Kuen as "its duly authorised person". Next to the seal appeared the chop of Commercial View reading "for and on behalf of Commercial View Properties Limited". Under the chop and above the legend "authorised signature(s)" appeared the signatures of Wan See Wah and Lau Kwok Kuen.

7. At the date of the assignment of 26th January 1988, Commercial View had two directors. Each of them was a corporation. One was called Goler Secretarial Services Limited ("Goler") and the other was called Gaining Nominee Limited ("Gaining").

8. By Article 20 of Commercial View's Articles of Association, it was provided that the seal of the company should not be affixed to any deed or instrument except by the authority of a resolution of the board of directors and in the presence of one of the directors of the company and such director should sign every deed or instrument for which the seal of the company was so affixed in his presence.

9. Neither Wan See Wah, nor Lau Kwok Kuen, were directors of Commercial View. Neither were they directors either of Goler or of Gaining. But Lau Kwok Kuen had been a director of Goler on the date, 26th November 1987, when Commercial View had entered, as purchaser, into its own agreement for sale and purchase of the property.

10. The purchaser raised a requisition the effect of which was to require the vendor to supply proof of due execution of the assignment of 26th January 1988.

11. The vendor was unable on the date ultimately fixed for completion to produce the original, or a certified copy, of any resolution of the board of Goler (or, for that matter, of Gaining) authorizing Wan See Wah and Lau Kwok Kuen to sign the assignment on behalf of one of the corporate directors of the vendor. It was however prepared to supply to the purchaser on completion a statutory declaration made by one Gordon Chan Hung Kei, a solicitor, by way of secondary evidence of due execution.

12. This statutory declaration made by Mr Chan was in the following terms :-

"1. I am currently a partner of Messrs. Edward C.T. Wong & Co., solicitors. During the period between the 1st day of August 1987 and the 13th day of January 1990, I was a partner of the firm of solicitors known as Messrs. Ng, Lie, Lai and Chan ("My Firm").

2. My Firm received instruction sometimes in November 1987 from Commercial View Properties Limited ("the Vendor") to dispose of the property being All Those pieces or parcels of ground situate lying and being at Victoria Hong Kong and known and registered in the Land Office as INLAND LOTS NOS.4890 and 4891 and of and in the messages erections and buildings thereon known as Nos.32 and 34 Clarence Terrace ("the said premises") to Cheer Hope Investments Limited. Accordingly, the sale of the said premises was completed under and by virtue of an Assignment dated the 26th day of January 1988 and registered in the Land Office by Memorial No. 3630801 ("the said Assignment"). I was the Solicitor personally in Charge of the transaction at all material times.

3. In the said Assignment, due to clerical error it was mistakenly stated the Vendor executed the same under seal by two of its authorised persons, namely Messrs. Wan See Wah and Lau Kwok Kuen. In fact the said Messrs. Wan See Wah and Lau Kwok Kuen were duly authorised by Goler Secretarial Services Limited to sign on its behalf as one of the corporate directors of the Vendor. I vividly remember prior to the execution of the said Assignment, I was produced with a certified copy of the minutes of meeting of the board of directors of Goler Secretarial Services Limited with a resolution authorising Messrs. Wan See Wah and Lau Kwok Kuen to execute the said Assignment on its behalf as corporate director of the Vendor which I had perused and satisfied that such resolution had complied with the mode of execution by the Vendor under seal.

4. Recently, I have caused the file of the transaction in question of My Firm to be checked but unfortunately, the copy of such minutes of meeting of the board of directors of Goler Secretarial Services Limited cannot be found or located.

5. To the best of my knowledge and belief, Messrs. Wan See Wah and Lau Kwok Kuen had signed the said Assignment as duly authorised persons of Goler Secretarial Services Limited on behalf of Goler Secretarial Services Limited as one of the corporate directors of the Vendor."

The purchaser was prepared to complete on being supplied with a statutory declaration substantially in that form subject to the provision of an undertaking by the Vendor's solicitors in the following terms :

"To use your best endeavours to contact Goler Secretarial Services limited ("the Company") or the officers or former officers of the company and to obtain a true copy of the minutes of a meeting of the board of directors of the company in which it was resolved that Messrs Wan See Wah and Lau Kwok Kuen be authorised to sign the assignment Memorial No.3630801 on behalf of the company as the corporate director of the Vendor".

13. The solicitors for the vendor were unwilling to give this undertaking; the purchaser's solicitors were unwilling to complete without it.

14. Clearly the statutory declaration tendered by the vendor is not the best evidence of due execution of the assignment of 26th January 1988; however, I am satisfied it is admissible evidence. The real question is whether it is sufficient evidence.

15. I have come to the conclusion that the statutory declaration was not sufficient evidence.

16. In my judgment, in a case (such as this) where a vendor is bound to provide proof of due execution (i.e. a case where as I hold there is no presumption which is of assistance), the purchaser is entitled either to the best evidence, or to such an explanation why the best evidence is not available as, in effect, to make the secondary evidence tendered the best available evidence.

17. In the present case, the vendor, if it had got down to it in time, might have been able to produce the original minute of the board of directors of Goler authorising Wan See Wah and Lau Kwok Kuen to sign on its behalf as one of the corporate directors of Commercial View. Failing that, it might have been able to produce a further certified copy of the minute in substitution for the certified copy which Mr Chan said he "vividly" remembered but which could no longer be found or located. If however it had proved impossible to find the original minute, and the person who had made the search for it had made a statutory declaration to that effect, that, too, would have been sufficient to justify the vendor in requiring the purchaser to accept the secondary evidence of due execution tendered here by the vendor to the purchaser.

18. But none of this happened. The purchaser was offered only a statutory declaration to the effect that the certified copy of the minute originally seen by Mr Chan could itself no longer be found or located. That, in my judgment, was not good enough.

19. It may seem a small point; but solicitors acting for purchasers in Hong Kong, where time for completion is almost invariably made the essence of the agreement, and where vendors almost invariably seek to forfeit the purchaser's deposit if the purchaser's solicitors persist in a requisition which the vendor is unable or unwilling to answer, often find themselves facing this sort of dilemma over such points. If they persist in their requisition, the vendor will seek to forfeit the purchaser's deposit; if they abandon it, they take the risk of finding themselves faced with an action for professional negligence if, when the purchaser himself comes to sell the property later, a similar requisition is successfully raised by the new purchaser's solicitors. It would be a great deal better for vendors and purchasers, and for their respective professional advisers, if they could be brought to understand that difficulties like this can be sorted out by the court on a vendor and purchaser summons at an early stage, before the contract is allowed to founder, with each side blaming the other.

20. I indicated at the outset of this judgment that the one point which had caused me concern was the degree of proof which in this sort of case a purchaser is entitled to expect. Since the conclusion of the argument, I have had an opportunity of looking into the authorities; but I should emphasize that none of the authorities, to one of which I am about to refer, were in fact cited to me. They have had no effect on my mind in coming to the conclusion to which I have come and which I have expressed above. But it would I believe be helpful if I refer to Parr v. Lovegrove (1857) 4 Drew.170 where at p.179 I find Kindersley V-C saying this :-

"Then, what is the rule when a vendor is bound to produce evidence of a fact? Why, that he is bound to produce the best evidence reasonably within his reach. If there be obvious means of ascertaining the fact, and he can so ascertain, the vendor is then bound to produce that evidence."

21. This authority appears to me to support my conclusion.

22. I will therefore declare that the purchaser is entitled to the return of its deposit. Pursuant to order 42 rule 5B(6) of the Rules of the Supreme Court I will order that the costs of the purchaser of these proceedings be taxed (if not agreed) and paid by the vendor to the purchaser.