KAN WING YAU AND ANOTHER v. HONG KONG HOUSING SOCIETY

Civil Appeal

No. 1 of 1988

Headnote

    Conveyancing law and practice - vendor and purchaser summons - assignment executed under power of attorney - whether on the evidence good title or merely good holding title shown - Powers of Attorney Ordinance (Cap. 31) section 5, Conveyancing and Property Ordinance (Cap. 219) section 13 and Conveyancing and Property (Amendment) Bill clause 5(c) considered.

IN THE COURT OF APPEAL

Civil Appeal

No. 1 of 1988

IN THE MAT TER of All Those 48 equal undivided 2321st parts or shares of and in Inland Lots Nos. 4884, 4885, 4886 and 4887 together with the messuages erections and building thereon known as Ka Fai Court No. 18, 20 and 22 Clarence Terrace, Hong Kong ("the building") and All That Flat B on the 18th Floor of the building

and

IN THE MATTER of Section 12 of the Conveyancing and Property Ordinance Cap. 219, Laws of Hong Kong

______________

J U D G M E T

______________

Clough, J.A.:

1. This appeal is concerned with the question whether the defendant vendor ("the vendor.") has shown a sufficient leasehold title to a flat which the vendor contracted to sell to thePlaintiff purchasers ("the purchasers"). The matter was raised in proceedings by way of a vendor and purchaser summons issued by the purchasers pursuant to section 12 of the Conveyancing and Property Ordinance (Cap. 219).

2. The summons is obscurely worded but it was common ground on the appeal that it was treated below as seeking a declaration that the vendor had not shown a good title. On the 1st December 1987 the matter came before Godfrey J. who made a declaration that the vendor had shown a good title to the property in question. The purchasers now appeal against this decision on the ground that the judge wrongly rejected their objections to the vendor's title.

3. A respondent's notice was filed by the vendor but Mr. Denis Yu, the vendor's counsel, indicated during the hearing of the appeal that, in the light of the arguments advanced by Mr Johnny Mok for the purchasers, he was satisfied that the respondent's. notice served no useful purpose. We received every possible assistance from the able argument of both counsel, neither of whom appeared below.

4. The parties had contracted by an Agreement for Sale and Purchase made on the 25th September 1987. The property which was the subject of the transaction was the specified number of undivided shares in four Crown Leases together relating to inland lots Nos. 4884 to 4887 inclusive which gave the usual rights in relation to Flat A on the 18th floor of a building known as Ka Fai Court, No. 20 Clarence Terrace, Hong Kong.

5. Inland Lots Nos. 4884 and 4585 were the subject of two Crown Leases both dated the 22nd November 1938 whereby the Crown had granted to Madam Leung Sui terms of 999 years from the 30th June 1862. Inland Lots Nos. 4886 and 4887 were comprised in two other Crown Leases dated the 30th December 1938 under which the Crown granted to named lessees terms of 999 years from the 30th June 1862.

6. The purchase price for the property was $510,500 of which $10,000 was payable as a temporary deposit on the signing of the Provisional Agreement for Sale and Purchase and $41,050 was payable on the signing of the Agreement for Sale and Purchase. The balance of the purchase price was payable on or before the 19th October 1987.

7. Under Clause 14 of the Agreement for Sale and Purchase the vendor was required at his own expense to show a good title to the property and to "furnish to the Purchaser such attested or other copies of any deeds or documents of title wills and matters of public record as may be necessary to complete such title."

8. Final payment and completion has never taken place because the purchasers raised objections to the vendor's title which were not resolved and eventually became the subject of the purchasers' originating summons. The objections were as follows:-

(1) As to the Crown Leases of Inland Lots Nos. 4884 and 4885 it appeared from Land Registry Searches that Madam Leung Sui had executed the counterparts by her attorney Li Sing Ku. The purchasers objected that the vendor was unable to produce the power of attorney granted by Madam Leung Sui to Li Sing Ku or a certified copy of that instrument.

(2) As to inland Lot No 4887 there were two objections arising out of 'the following transactions which were disclosed when the vendor sought to' make title. By an Indenture dated the 8th January 1951 the 1951 Assignment") the leasehold interest in that Lot was assigned to Cheng Shu Cheung as purchaser. He signed that instrument in Chinese characters when he executed it

    On the 7th December 1954 "Winston Shu Cheung Cheng" executed a notarised deed ("the 1964 power of attorney") in Sydney, New South Wales whereby he constituted his mother Madam Tsoi Kam Sok of Hong Kong to he his attorney with wide powers over his property in Hong Kong, including power to sell that property on his behalf. The address of the donor was stated in the deed to be in Sydney. He signed his name in Chinese characters when executing the deed.

By an indenture dated the 18th January 1973 ("the 1973 Assignment") Cheng Shu Cheung, as vendor, assigned the leasehold interest in Inland Lot No. 4887 to Hop Lee Shing Limited ("the company") as purchaser. This deed was executed on behalf of Cheng Shu Cheung by Madam Tsoi Kam Sok as his attorney.

    Arising out of these transactions the purchasers raised two objections to the following effect:

(a) Notwithstanding that the 1973 Assignment purported to have been executed on Cheng Shu Cheung's behalf by his attorney Madam Tsoi Kam Sok more than 12 months after the 1964 power of attorney came into operation (so that section 5(4)(a) of the Powers of Attorney Ordinance (Cap. 31) did not apply) no statutory declaration by an officer of the company in compliance with section 5(4)(b) of the Ordinance had been produced by the vendor to establish conclusively (by the combined effect of section 5(2) and (4) of the ordinance) that the company did not know of the revocation of the 1964 power of attorney at the time of the 1973 Assignment.

(b) The identity of the donor of the 1964 power of attorney had not been.established to be one and the same person as the Cheng Shu Cheung who was a party to the 1951 and 1973 Assignments because (i) the donor of the 1964 power of attorney was named as "Winston Shu Cheung Cheng" and that instrument did not state that.that name was an alias for Cheng Shu Cheung And (ii) the signature of Cheng Shu Cheung in Chinese characters appearing in the 1951 Assignment seemed to be different from the signature in Chinese characters of Winston Shu Cheung Cheng appearing in the 1964 power of attorney.

9. As to objection (1), the vendor admitted in correspondence and by the evidence of its solicitor Mr. Mak Wai Piu that it was not in possession of the power of attorney granted by Madam Leung Sui to Li Sing Ku. However the vendor maintained that it was not required to produce this power of attorney or a certified copy of it because it was not required to produce the counterparts of the Leases of Inland Lots Nos. 4844 and 4885 in order to make title to those lots. Mr. Mak exhibited to his affirmation copies of the Crown Leases of those two lots which had been executed only by the Governor on behalf of the Crown and duly registered.

10. The judge made short shrift of this objection.  He held that the execution of the Leases by the grantee was not necessary for the vesting, in the grantee of the terms of 999 years from the 30th June 1962 granted by the Leases. He added that the property had been held in accordance with the title for almost 40 years.

11. The judge's decision was clearly right Mr. Mok for the purchasers sought to argue albeit somewhat faintly at the end of his very able submissions that execution a lease by a grantee was necessary if he and his successors in title were to be bound by the lessee's covenants. This is true, but it is not in point in the present context where the concern is with the proving of title to leasehold property

12. It was common ground that the Crown Leases in question were executed by the Governor only and that the counterparts of the Leases were executed by Madam Leung Sui's attorney Li Sing Ku. This was in accordance with the common usage (see woodfall on Landlord and Tenant, (28th edition) Vol. I, paragraph 1-0446) whereby the lessor would execute one instrument to be handed to and kept by the lessee (the lease) and the lessee would execute another instrument in the same terms, to be handed to and kept by the lessor (the counterpart).

13. The lessee may sue the lessor on the lease in his possession which is primary evidence of his term whereas the lessor may sue the lessee on the counterpart which is primary evidence of the lesee's covenants: Halsbury's Laws of England 4th edition, Vol. 12 paragraph 1304, note 2. Barber v. Rowe⁽¹⁾ shows that the counterpart may be relied upon as secondary evidence by the lessee to prove the existence of his term where he has lost the lease, but this merely serves to emphasise that the lease by itself proves the lessee's title. It is the instrument under which the lessee holds the property and it is sufficient if the vendor lessee produces that instrument: Halsbury's Laws of England, 4th edition.Vol. 42, paragraph 146.

14. Mr. Mok sought to rely on the opening words of section 13(1) and on section 13(1)(c) of the Conveyancing and Property Ordinance as requiring the vendor to prove title by inter alia producing, both the relevant leases and counterparts and Li Sing Ku's power of attorney. However once it is accepted that the leases executed by the Governor are themselves primary evidence of the term granted to Madam Leung Sui it is clear that they are sufficient proof of her title. It follows that the counterparts and Li Sing Ku's power of attorney are not required as proof of her title and their production is not required.

15. Mr. Yu rightly relied on Lady Naas v. Westminster Bank Ltd.⁽²⁾ to support the judge's decision on this issue, but I venture to think that the settled usage and law referred to above was what the judge had in mind when dealing with the issue in understandably brief terms.

16. The crucial objection was objection (2)(a). The evidence relating to the validity of the 1964 power of attorney was extremely sparse. The correspondence between the parties' solictors showed that on the 22nd October 1987 the purchasers' solicitor Mr. Chan Sze Hung had expressed his concern that "the certified true copy of Power of Attorney are not in accordance to section 5(4) of the Power of Attorney Ordinance". The vendor's solicitors had replied on the 24th October 1987 Pointing out that section 5(4) of the Powers of Attorney Ordinance was a deeming Provision and that compliance with that provision was not mandatory. Their letter continued as follows:-

"The question of revocation of a Power of Attorney is one of fact. In This regards (sic), we find nothing which casts doubt as to the validity of the Power of Attorney of Winston Shu Cheung Cheng dated 7th December 1964."

17. As to actual evidence of the validity of the 1964 power of attorney at the date: of the 1973 Assignment when Madam Tsoi Kam Sok purported to exercise the power, there was no direct evidence at all. Mr. Mak exhibited correspondence that had passed in 1983 and 1984 between D.W. Ling & Co., a form of solicitors, and Philip K.H. Wong & Co., the solicitors who had acted for one or other or both parties to the 1973 Assignment. It seems that they probably acted for both parties to that Assignment because one of their partners or assistant solicitors witnessed the execution of that instrument by both parties. The correspondence appears to have been concerned only with the question of the identity of the donor and donee of the 1964 Power of attorney.

18. In a letter dated the 23rd November 1983 from Philip K.H. Wong & Co. they informed A.W. Ling & Co. that their file relating to the 1973 Assignment was "put away" when they moved office in February 1931 but that they did microfilm "the main documents" in the file. They indicated that they have looked at the microfilm and,go on to say:-

"We believe we did make enquiries as to Identity of the Vendor and we accepted the identification of the attorney by her Hong Kong Identity Card."

19. The reference in that letter to the attorney's identity card is readily attributable to the fact that the number of her identity card appears below her signature on the 1973 Assignment.

20. The question of the identity of the donor of the 1964 Power of attorney who was the vendor under the 1973 Assignment was raised again by a letter from D.W. Ling & Co. dated the 19th December 1983. The reply dated the 9th January 1984 from Philip K.H Wong & Co. was in the following terms:-

"As spoken with your Mr. N.K. Bacon we must have been satisfied with the identity of the Vendor as we accepted the power of Attorney and the execution of the assignment by the attorney on behalf of the Vendor."

21. Mr. Mak the defendant's solicitor, also exhibited to his affirmation a letter dated the 26th November 1987 from Philip K.H. Wong & Co. to his firm which again seems to be concerned only with the identity of the donor of the 1964 Power of attorney and the vendor under the 1973 Assignment. In that letter Philip K.H. Wong & Co. confirm that on the execution of the 1973 Asisgnment they were satisfied with the identity of Cheng Shu Cheung because the 1964 power of attorney was notarised They observe that the two Chinese signatures are similar. They go on to say that (as in fact appears from the 1964 Power of attorney) the attorney was Mr Cheng's mother, she was authorised to manage "the said premises" and that it was sold subject to existing tenancies.They conclude by saying that they had no reason to doubt the identity of Mr. Cheng at the time of the execution of the 1973 Assignment

22. I have dwelt on the content of the above mentioned correspondence because it demonstrates that the vendor made no attempt to meet the objection regarding the validity of the 1964 power of attorney at the date of the 1973 Assignment. That objection had not been made in the widest manner because it was confined to the absence of compliance with section 5(4) of the Powers of Attorney Ordinance. The vendor's solicitors had rightly pointed out in the correspondence that compliance with section 5(4) was not mandatory. However, they seemed to think, wrongly in my judgment that they could rely on a presumption of validity in the absence of evidence to the contrary adduced by the purchasers.

23. Thus in his affirmation Mr. Mak deposed as follows:-

"As regards the 2nd Power of Attorney, since in law there is no revocation of a power of attorney by mere lapse of time, I had and have no reason to believe and the Plaintiff's Solicitors have not produced any evidence to show that the 2nd Power of Attorney was revoked at the time of execution of the said Assignment."

24. This view is manifestly erroneous because as Rhind J. reminded' himself in the course of an admirable 'judgment' in Cali Enterprises Ltd. v. Chongmark Ltd.⁽³⁾ at p. 818 there is no presumption of law as to the continuance of life. Moreover whilst a power of attorney (not being granted by a trustee) which is not granted for a limited period is not revoked by lapse of time, it is revoked by death, incapacity or bankruptcy.

25. Godfrey J., however, had no hesitation in rejecting this objection to the vendor's title. He had this to say about it:-

"The third objection is that the absence of conclusive.evidence of non-revocation of the power also amounts to a defect in title. In my judgment there is no more substance in this objection.than there was in the other two. It is true, as I pointed out In Xiamen International Finance Company Limited v. Tsui Tai Yan (8th May 1987, unreported) that there is in theory a risk in such cases of a successful challenge to a purchaser's title on the ground that the power of attorney on which the title depends had been revoked But if in a particular case the facts and circumstances are so compelling that, beyond, any reasonable doubt, the risk is, for all practical purposes illusory then the Court can and should be prepared to ignore it, and accordingly to dismiss any objection to title founded on it. This is such a case. The risk, in 1987, of a challenge by the donor of the 1954 power to the execution by his mother of the 1973 assignment is a 'purely theoretical and not a practical blot' on the title (cp. In re Heaysman's and Tweedy's-Contract (1893) 69 LT 89, per Lindley LJ at p. 91). It may safely be ignored."

26. In my judgment the judge has adopted the correct test but misapplied it to the facts. In so doing he has wrongly equated a good holding title with a good title.

27. The evidence has to be considered.in the light of the basic requirements of conveyancing law and practice. Under the Agreement for Sale and Purchase between the parties the vendor was required to show and prove by proper evidence a good title within the terms of section 13 of the Conveyancing and Property Ordinance

28. A good title is one which can at all times and in all circumstances be forced upon an unwilling purchaser in.an action for specific performance, but the court will not force a doubtful title on a.purchaser A doubtful title includes not only a title on which the court entertains doubts, but also:one in respect of which the court entertains a favourable opinion but may yet be reasonably and fairly questioned by other competent persons. In this connection the court bears in mind that its decision hinds the parties but not other adverse claimants who are not parties to the proceedings. A purchaser will not therefore be forced to take a title which will expose him to risk or hazard: Williams on Title, 4th.edition pp. 565-6; Pyrke v. Waddingham⁽⁴⁾ Mullings v. Trinder⁽⁵⁾.

29. The purchaser is always entitled to proof of all matters of fact which are part of or affect the title: Williams on Vendor and Purchaser, 4th edition, Vol. 1, P. 190. In Fry on Specific Performance, 6th edition, (1921) (1921) at paragraph 889 (which was approved by the House of Lords in M.E.P.C. Ltd. v. Christian-Edwards⁽⁶⁾ at p. 220 A-B), there appears the following statement:-

"889. The doubt which may prevent the Court from compelling the purchaser to accept a title may be a doubt either of law or of fact; ... and as to fact, it may be in reference to facts appearing on the title, or to facts extrinsic to it. Again, it may be about a matter of fact which admits of proof, but has not been satisfactorily proved or about such a matter as from its nature admits of no satisfactory proof, as the negative proposition that there was no creditor of the vendor capable of taking advantage of an act of bankruptcy."

30. A useful modern definition of the obligation of a vendor to make good title is that of Wilberforce J. in In re Stirrup's Contract⁽⁷⁾ at p. 454 where he indicated that " ... a purchaser is entitled to be satisfied that his vendor is seised of the estate which he is purporting to sell, in this case the fee simple, and that the vendor is in the position, without the possibility of dispute or litigation, to pass that fee simple to the purchaser." Wilberforce J. considered that obligation to be discharged by the vendor's document of title if it shows beyond doubt that the vendor "is in possession of the estate and that he is in a position to convey it without any blot or possibility of litigation to the purchaser." In that case a question of law was involved.

31. In the M.E.P.C. Case⁽⁶⁾ the House of Lords, having accepted that the court should not shrink from determining the rights of the parties on a vendor and purchaser summons where the question whether a sufficiently good title had been shown depended on a conclusion or inference as to fact, went on to,lay down a stringent test which they held the vendors in that case. had satisfied when making title. The test was expressed in the opinion of Lord Russell of Killowen at page 220.C-D in the following terms:-

"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."

As I have indicated above, this is the test which the judge below rightly sought to apply.

32. This court is in as good a position as the Judge to determine, on the same affirmation evidence as was before him, whether or not the vendor has made a good title. In doing so we are not bound to accept his decision and we are required to exercise our own discretion and judgment: Fry on Specific. Performance, 6th edition, paragraph 387.

33. The question of fact that is in issue is not one which is capable of determination solely by reference to section 5 of the Powers of Attorney Ordinance. It is whether or not the vendor has established beyond reasonable doubt that the purchasers will not be at risk of successful assertion against them by the donor of the 1964 power of attorney or his successors or assigns that that the 1964 power or attorney was invalid at the date of the 1973 Assignment when it was exercised by Madam Tsoi Kam Sok. I emphasise that the onus of proof on this Issue is on the vendor and not on the purchasers.

34. The 1964 power of attorney was not expressed to be irrevocable. Mr. Mok conceded, citing Article 129 in Bowstead on Agency, 15th edition, at page 522 that even if the relevant provisions of the Powers of Attorney Ordinance were not satisfied, the effect of the doctrine of apparent authority was that in the present case there was no risk of the company having obtained a defective title under the 1973 Assignment by reason of Madam Tsoi kam Sok having executed that instrument on behalf of the vendor pursuant to the 1964 power of attorney after her authority had been determined otherwise than by the death or bankruptcy of her principal.

35. However the possibility of the event of death or bankruptcy of the donor of a power of attorney, and particularly his death, are matters which cannot be ignored as they are events which cause a revocation of a power of attorney by operation of law Certainly in English conveyancing practice before the introduction of the provisions of the Conveyancing Acts 1881, 1882 the practice of conveyancers was to eliminate the hazard of the contingency of death working a revocation of a vendor donor's power of attorney by ensuring that the purchase money was held in trust for the purchaser pending the proof after completion that the vendor donor was alive at the date ofcompletion: Sugden, 14th edition, (1862) at pp. 417 and 563.

36. There is no reason to assume that this genuine and justified cautious approach was discarded after the Conveyancing Acts 1881, 1882 had introduced provisions to lighten the evidential burden of proving non-revocation at the date of completion. Indeed after the relevant provisions of the Conveyancing Acts had been superseded by provisions of the Law of Property Act 1925 (which have subsequently themselves been superseded by provisions of the Powers of Attorney Act 1971 from which the relevant provisions of the Powers of Attorney Ordinance derive), the following passage appeared in Dart on Vendors and Purchasers 8th edition (1929), Vol. l at p. 575:-

"Where the conveyance is executed under a power of attorney, unless declared to be irrevocable under the L.P. Act, 1925, the proper course seems to be to let the purchase-money be invested in the names of trustees, at the expense and risk of the vendor, unless and until satisfactory evidence (e.g a statutory declaration under the L.P. Act, 1925, s. 124) is adduced of the validity of the power at the date of the execution of the conveyance.."

37. With the passage of time the question of the proper course of action to be taken before the relevant statutory provisions are complied with, or when they are not complied with, has eased to be dwelt upon in the standard text books on conveyancing: see Emmet on Title, 19th edition at paragraph 10.011 referring back to the 15th edition for the old practice and indicating that the work now deals only with the position under the 1971 Act because the provisions of the 1971 Act have some retrospective operation. This is understandable because compliance with the statutory provisions should not normally present any difficulty and they exist to protect the purchaser and lighten his burden when he subsequently comes to make title after acquiring property under an instrument executed by his vendor's attorney.

38. Although the 1964 power of attorney was granted before the Powers of Attorney Ordinance came into operation on the lst October 1972, the effect of section 5(7) of the Ordinance was that the protection afforded by section 5 to a purchaser against the contingency of revocation of his vendor's power of attorney was available to the company as the purchaser under the 1973 Assignment. The relevant provisions of section 5(2), (4), (5) and (6) of the Ordinance are as follows:-

"(2) Where a power of attorney has been revoked and a person, without knowledge of the revocation, deals with the donee of the power the transaction between them shall, in favour of that person, be as valid as if the power had then been in existence.

(4) where the interest of a purchaser depends on whether a transaction between the donee of a power of attorney and another person was valid by virtue of subsection (2), it shall be conclusively presumed in favour of the purchaser that that person did not at the material time know of the revocation of the power if -

(a) the transaction between that person and the donee was completed within twelve months of the date on which the power came into operation; or

(b) that person makes a statutory declaration, before or within three months after the completion of the purchase, that he did not at the material time know of the revocation of the power.

(5) ... for the purposes of this section knowledge of the revocation of a power of attorney includes knowledge of the occurrence of any event (such as the death of the donor) which has the effect of revoking the power.

(6) In this section -

'purchaser' means -

(a) a purchaser in Good faith for valuable consideration;

(b) a lessee, mortgagee or other person who for valuable consideration acquires an interest in property; and

(c) an intending purchaser; and

'valuable consideration' includes marriage but not a nominal consideration in money."

39. Assuming the company to have been a purchaser within the meaning of sub-section (6) and that it had no knowledge of the revocation of the 1964 power of attorney and, in particular, no knowledge of the death or bankruptcy of the vendor under the 1973 Assignment at the material time, the simplest course for the company would have been for one of its officers to make a statutory declaration during, the period permitted by and otherwise in compliance with sub-section 4(b). Such action would have resulted by virtue of the combined effect of sub-sections (2) and (4) in both the company and any purchaser from the company or its successors in title, including the present vendor, having conclusive proof that at the material time the company did not know of the revocation of the 1964 power of attorney The conclusive proof would in practical terms be available to negative knowledge of revocation both where there had in fact been revocation and where no actual revocation was established

40. There was no suggestion that sub-section (4)(b) had been complied with. The point was taken by the court that it would still be open to the vendor to prove, subject to rebutting evidence to the contrary, that the 1973 Assignment was valid, even if the 1964 power of attorney had been revoked at the material time because the company had been without knowledge of the revocation when it dealt with the donee Madam Tsoi Kam Sok. Mr. Yu sought to argue that this was a valid point and that there was evidence to prove the necessary lack of knowledge of revocation on the part of the company. The point had not been taken below and it was not the subject of a respondent's notice. However Mr. Mok did not object to the point being taken during the hearing of the appeal and so the court permitted Mr Yu to pursue it.

41. In many cases it would be a simple matter to obtain and adduce evidence of lack of knowledge of revocation on the part of a person who has dealt with the donee of a power for the purposes of section 5(2). The difficulty that faced Mr. Yu was that those instructing him had evidently never considered obtaining evidence on this point from the company which was the purchaser under the 1973 Assignment. There was no evidence at all from or on behalf of the company itself. How then could there be any evidence one way or the other, regarding its knowledge when it dealt with Madam Tsoi?

42. Mr. Yu was driven to contending that there was circumstantial evidence snfficient to prove the lack of knowledge of revocation on the part of the company. He maintained which indeed seems to have been likely, that Philip K.H. Wong & Co. had acted for both parties to the 1973 Assignment. He said that there was no evidence to show that the company was in any way connected with Madam Tsoi or the donor of the 1964 power of appointment. He referred to the letter from Philip K H. Wong & Co. dated the 9th January 1984 addressed to D.W. Ling & Co. in which the writer of the letter mentioned. that his firm had accepted the 1964 power of attorney. Because Philip K.H. Wong & Co. were apparently satisfied that the 1964 power of attorney was valid at the material time it was reasonable to infer, argued Mr. Yu, lack of knowledge of revocation on the part of the company.

43. In my judgment all the matters relied upon by Mr Yu are wholly equivocal in relation to the knowledge of the company at the material time. If the solicitors acting for the company had had knowledge of the death or bankruptcy of the donor of the 1964 power of attorney at the material time it is reasonable to infer that they would have told the company and that they would not have accepted the power of attorney. However there is no evidence at all of the actual knowledge of the solicitors at the material time regarding revocation or events which cause revocation by operation of law, nor is there any evidence that they made any inquiry about such matters. Furthermore it by no means follows that if the company had known of the death or bankruptcy of the donor of the 1964 power of attorney they would have considered it material or would have informed their solicitors of it. It seems to me that the circumstances relied upon by Mr. Yu as the basis for inferring want of knowledge of revocation on the part of the company were wholly inadequate.

44. It follows that none of the provisions of section 5 of the Powers of Attorney Ordinance avail the vendor in the present case. The onus is clearly on the vendor, without the aid of those provisions, to prove the validity of the power at the date of completion of the 1973 Assignment. In the absence of reliance on the provisions of section 5 of the Ordinance, the solicitors acting, for the company were clearly under a duty to insist on proof, at the very least, that the donor of the 1964 power of attorney granted over eight years earlier in New South Wales was still alive at the material time. The risk of the donor's death during the intervening years was real. Past English conveyancing practice confirms that such a risk had to be eliminated before payment of the purchase price. The reality of the risk is also reflected in the practical "rule of thumb" (that_.a power of attorney over three years old was not acceptable) mentioned at page 256 in Mr. Bramwell's helpful work on Conveyancing in Hong Kong, as having been adopted by conveyancers before the enactment of the Powers of Attorney Ordinance.

45. In my judgment the inevitable conclusion is that, in the absence of evidence of the validity of the 1964 power of attorney at the date of the completion of the 1973 Assignment there is a blot on the title of the company and on the title of the vendor as the company's successor in title, which makes it a doubtful title which the court should not force on unwilling purchasers. Expressing himself to be applying the "beyond any reasonable doubt" test laid down in the M.E.P.C. Case⁽⁶⁾ the judge held that the test was satisfied. Holding that the risk in 1987 of a challenge by the donor of the 1964 power to the execution by his mother of the 1973 Assignment could safely be ignored, he considered that in the words of Lindley. L J in Re Heaysman's and Tweedy's Contract⁽⁸⁾at p. 91, the blot on the title was a "purely theoretical and not a practical blot"

46. I am unable to accept this conclusion on the evidence. The fact that the donee of the 1964 power of attorney was the mother of the donor seems to me to be of no major significance. In the absence of any direct evidence on the issue of revocation the only evidence and admittedly strong evidence, militating against revocation is the fact that the title in question has not been challenged during the period of nearly 15 years which have elapsed between the date of the 1973 Assignment (the 18th January 1973) and the date of the hearing below (the 1st December 1987).

47. I accept that, as a matter of common sense, after the expiration of nearly 15 years following the 1973 Assignment without challenge to the title, the risk of future challenge may be regarded as very substantially reduced and that the probability is that the title will remain undisturbed. Further than that I do not consider the evidence permits the court to go

48. The most likely challenge to the title would be by the personal representatives of the donor of the 1954 power of attorney which was exercised 8 years after he had granted the power in New South Wales. There is no means of being satisfied beyond reasonable doubt on the evidence before the court that the donor did not die during the 8 years between granting the power and its exercise by his mother when executing the 1973 Assignment. Put another way, just because the judge may have made up his mind (although he did not in terms refer to the possibility of the death of the donor of the power) that such an event did not occur, can it be said that the purchasers are not reasonably and fairly questioning the title when they suggest that in the absence of clear evidence on this matter, which is one which admits of proof, but has not been proved by the vendor, they doubt the title. I think not.

49. Given the reasonable possibility, on the evidence, of the death of the donor of the 1964 Power of attorney before the execution of the 1973 Assignment and of a challenge within the next five years to the purchasers' enforced title by his personal representatives on the grounds of revocation by operation of law, it is by no means clear that, in the words of Lindley L.J. in Re heaysman's and Tweedy's Contract⁽⁸⁾ at p. 91, their claim would be "ridiculous" or that they, would be "laughed out of court Furthermore there could be no question of the purchasers setting up a possessory title because section 7(2) of the Limitation Ordinance (Cap. 347) requires a period of 20 years adverse possession for such a title.

50. In Re Heaysman's and Tweedy's Contract⁽⁸⁾ the court was concerned with an objection to title based on the possibility of an equitable mortgagee of a lease (to which the property in question had been subject but which had been terminated some years earlier by an order of ejectment for non-payment of rent in default of defence by the lessee) taking proceedings to set aside the judgment in the ejectment action and establish his equitable charge on the property. In considering whether the title was doubtful Lindley L.J. observed at p. 91:-

"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."

51. The court concluded on the facts that the equitable mortgage would be advancing a ridiculous claim and would be "laughed out of court" if he sued. It was for this reason that the supposed blot on the title was described by Lindley L.J. as . "a purely theoretical and not a practical blot." In my judgment, for the reasons given above, the supposed blot and the facts of that case are clearly distinguishable from this blot.and the facts of the present case where the risk of a lawsuit may be slight but it not disproved beyond reasonable doubt, as it clearly was in the M.E. P.C. Case⁽⁶⁾ and in the Cali Enterprises Case⁽³⁾

52. I conclude that the judge has wrongly identified what undoubtedly is a good holding title as a good title good holding title is one like the title now under consideration which presents no probability of an adverse claim being made and can usually be sold and forced on a purchaser under a special condition requiring, him to assume certain facts (in the present case the validity of the 1964 power of appointment) upon which the title depends: Halsbury's Laws of England 4th edition, Vol. 42, para. 143, note 3; Williams on Title, 4th edition, p. 566, note 5

53. The court has no jurisdiction to accept a mere holding title on a vendor and purchaser summons: M.E.P.C. Ltd. , Christian Edwards⁽⁹⁾ at p. 294B. No question of a partly possessory title within 'the Principles applied in Re Atkinson and Horsell's Contract⁽¹⁰⁾ arose.

54. If the vendor had acted in accordance with the sensible recommendation of Mr. Bramwell at p. 259 of his work and inserted a suitsble special condition in the Agreement for Sale and Purchase regarding the validity of the 1964 power of attorney, it would have been clear to the purchasers that they were being offered a good holding title. They would then have had the opportunity of deciding whether or not' to contract to take such a title with the element of risk involved.

55. I would therefore uphold objection (2)(a) and allow this appeal on the strength of that objection alone.

56. It becomes unnecessary to deal with objection (2)(b) concerning (i) the apparent disparity of name between the Cheng Shu Cheung who was a party to the 1951 and 1973 Assignments and the "Winston Shu Cheung Cheng" who was the donor of the 1964 power of attorney; and (ii) the apparent differences between the signature in Chinese characters of Cheng Shu Cheung in the 1951 Assignment on the one hand and of Winston Shu Cheung Cheng in the 1964 power of attorney on the other hand.

57. However, I mention that I accept Mr Mok's argument that on the available evidence this objection increases the doubt which has been raised concerning the vendor's.title. For my part, I would have been disposed to depart from the strict rules of evidence and accept that a Hong Kong Court could properly apply its own knowledge that it is common practice for Chinese people to transpose their names prefixed by a Westernised first name when in other countries or when they consider it appropriate in the course of their dealings withforeigners, particularly Westerners.

58. There did not therefore seem to me to be any real substance to ground (2)(b)(i). As to ground (2)(h)(ii) which the judge also rejected on the basis that there was ample evidence for so doing, I agree with Mr. Mok that there was in fact no such evidence. It was common ground between counsel on the hearing of the appeal that the Chinese characters in both the relevant signatures were in the same order. However as Mr. Chan pointed out in his affirmation, the two signatures did not look the same. This in itself is a reasonable ground for suspicion and entitled the purchasers to demand reasonable proof. of execution on the ground that the presumption of due execution, does not arise under section 23 of the Conveyancing and Property Ordinance because there is not the appearance of due execution: Williams on Title, 4th edition, p. 659 halsbury's Laws of England 4th edition, Vol. 42 para. 157.

59. The only evidence adduced on behalf of the vendor on this matter consisted of letters (to which I have referred above) passing between solicitors which were exhibited to Mr Mak's affirmation. They do not disclose the means of knowledge of the writers and they are not themselves evidence on affirmation in the proceedings. Mr. Mak affirmed regarding the, two signatures in question that:-

".. it suffices to say that such discrepancy as there may be in the signature of Cheng Shu Cheung in 1964 and in 1973 is not sufficiently material for the title to be questloned.

60. I agree with Mr. Mok that that statement is merely an assertion of the deponent's belief and opinion and that without any indication of his means of knowing that what he asserts is so, and without any suggestion that Mr. Mak is a handwriting expert, the statement has no evidential value: c.f. the observations of Judge John Finlay Q.C. in Walia v. Michael Naughton Ltd.⁽¹¹⁾ at p. 1121G.

61. None of the evidence adduced on behalf of the vendor on this matter had any probative value. Objection (2)(b)(ii) was, in my judgment, properly raised and never satisfactorily dealt with. This objection increases the doubt regarding the vendor's title. It should not have been summarily rejected.

62. In the course of the hearing of the appeal, reference was made to clause 5(c) of the Conveyancing and Property (Amendment) Bill to which the judge had referred in his judgment. For my part I feel considerable disquiet that it should be proposed to legislate to bring about a situation whereby a vendor who has only a good holding title because he, or a predecessor in title, has failed to avail himself of the very liberal evidential provisions of section 5(2) and (4) of the Powers of Attorney Ordinance should he permitted to contract to sell his property with a good title within the 20 year limitation period provided by section 7(2) of the Limitation Ordinance, and thereafter compel the purchaser to take that good holding title unless the purchaser can prove that the relevant power of attorney was revoked when exercised. This seems to me to be putting a premium on breach of contract. If clause 5(c) were expressed to apply only to documents executed, before the Powers of Attorney Ordinance came into force and not less than 20 years before the contract of sale of the land in question under a power of attorney I would not be so concerned.

63. It will be necessary to hear counsel regarding the order to be made on this appeal. We understand that, although the matter was not raised in the purchasers' ordginating summons, a question may now be raised concerning deposit money paid by the purchasers and forfeited by the vendor.

Silke, V.-P.:

64. While we are, with respect, differing from the conclusions of the judge I do not feel that I can add anything of very great use to the comprehensive judgment just delivered by my Lord Clough J.A.. I am in agreement with it.

65. Were the deficiencies in title set out as a special condition in the Agreement for Sale and Purchase then an intending purchaser might well decide to accept that which is a good holding title in knowledge of the risks which do exist.

66. I do not consider that a purchaser should have forced upon him by the Court as a good title that which is merely, in this context, a good holding one when the decision of the Court binds only the parties to the Vendor and Purchaser summons.

67. I too share the disquiet to which my Lord Clough has given voice as to the effect of the proposed clause 5(c) of the Conveyancing and Property (Amendment) Bill.

68. I would allow the appeal and hear counsel as to the form of order.

Fuad, V.-P.:

69. I agree that the appeal should be allowed for the reasons given by my Lord Clough J.A..

(1) [1948] 2 All E.R. 1050 (C.A.)

(2) [1940] A.C. 366 (H.L.)

(3) [1986] H.K.L.R. 816

(4) (1852) 10 Hare 1

(5) (1870) L.R. 10 Eq. 449

(6) [1981] A.C. 205

(7) [1961] 1 W.L.R. 449

(8) (1893) 69 L.T. 89 (C.A.)

(9) [1978] Ch. 281 (C.A.)

(10) [1912] 2 Ch. 1 (C.A.)

(11) [1985] 1 W.L.R. 1115