TOWN BRIGHT INDUSTRIES LTD. v. BERMUDA TRUST (HONG KONG) LTD. AND ANOTHER

CACV 137/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 137 OF 1998

(ON APPEAL FROM HCMP NO. 3269 OF 1997)

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J U D G M E N T

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Godfrey, J.A. :

Introduction

1. This is an appeal from an order of Hartmann, J. made on 30 April 1998, resolving a dispute between vendor and purchaser in favour of the vendor. The purchaser now appeals.

The facts

2. The contract between vendor and purchaser was made on 8 August 1997 between Bermuda Trust (Hong Kong) Limited ("the vendor") as vendor and Town Bright Industries Limited ("the purchaser") as purchaser. The subject of the sale was Units 1 and 2, 2/F Hing Yip Commercial Centre, Des Voeux Road, Central, Hong Kong. The price was HK$28,800,000. The date fixed for completion was 10 September 1997 (later extended by agreement to 24 September 1997). Time was expressed to be of the essence.

3. The vendor entered into the contract in the capacity of trustee. It had obtained the legal estate under an assignment dated 4 May 1989 made in its favour as trustee for an unincorporated association known as the Chartered Institute of Bankers Hong Kong Centre ("the Centre"), constituted under the aegis of the Chartered Institute of Bankers, itself incorporated in the United Kingdom under Royal Charter. (Under the Charter, the Council of the Chartered Institute of Bankers had power to establish and dissolve local centres consisting of members of that Institute in such regions or places as the Council might think fit.)

4. The Centre was registered under the Societies Ordinance, Cap. 151, on 20 September 1963. The constitution of the Centre provided that the Centre's property should be vested in a trustee, obliged to deal with the property as directed by the Executive Committee, which was given power to deal with any premises which in their judgment were no longer required for the purposes of the Centre. The constitution also provided that on the dissolution of the Centre its funds after payment of liabilities should be distributed in such manner as the Executive Committee should determine prior to such dissolution.

5. As the judge noted, although the Centre had its own constitution, it was "closely allied" to the parent body in the United Kingdom and in light of Hong Kong's impending change of sovereignty it was considered appropriate that the Centre should be dissolved and replaced by a body to be incorporated in Hong Kong and called the Hong Kong Institute of Bankers ("the Institute").

6. Accordingly, on 17 November 1994 the Executive Committee of the Centre resolved that all the Centre's assets including its property be transferred on dissolution to the (future) Institute.

7. On 6 April 1995, the Centre (in effect) directed the vendor to regard the Institute as the beneficial owner of the property.

8. On 13 April 1995, the vendor replied that it regarded itself as holding what was formerly the property of the Centre as the property of the Institute.

9. On 16 August 1995, the Institute was duly incorporated under the Companies Ordinance, Cap. 32.

10. On 6 October 1995, the Centre in general meeting resolved to transfer all its business and assets to the Institute.

11. On 24 April 1996, the Centre was removed from the Register kept under the Societies Ordinance (on notification given by the Centre on 27 March 1996 that the Centre was to be formally dissolved on 31 March 1996).

12. On 8 August 1997, the vendor entered into the contract with the purchaser on the directions of the duly authorised officers of the Institute.

The dispute

13. The purchaser objected on a number of grounds to the title shown by the vendor. Among other things, it asserted that the Executive Committee of the Centre had no power to dispose of the beneficial interest in the property for no consideration ("the first objection"). It claimed that a transfer of the beneficial interest in the property from the Centre to the Institute had to be in writing, and that there was no such writing ("the second objection"). It contended that the minutes of the general meeting held on 6 October 1995 required to be stamped and that they had not been stamped ("the third objection").

14. However, on 25 September 1997, the vendor's solicitors, presumably unwilling to entertain further any objection to the vendor's title, purported to deal with those objections and wrote to the purchaser's solicitors "to give you notice to complete."

15. This letter might have crystallised the dispute. If there were then outstanding requisitions with which the vendor was unable or unwilling to comply and with which it was under a duty to comply, it was not entitled to call on the purchaser to complete. By doing so it would have been intimating that the vendor was not prepared to honour its obligations. In those circumstances, the purchaser would have become entitled to call off the contract.

16. But, in fact, the purchaser did not then elect to call off the contract. It elected to give further consideration to the matter, claiming that the "notice to complete" was premature and that "the title queries have not been settled" (see the reply letter of 25 September 1997 from the purchaser's solicitors to the vendor's solicitors).

17. By a letter dated 26 September 1997 (a Friday) the vendor's solicitors made a further attempt to meet the purchaser's solicitors' objections to the title; but they failed. The purchaser's solicitors replied the same day explaining why and saying that "our queries on title are therefore not resolved". But they gave the vendor's solicitors little, if any, further chance to resolve them; for, on 29 September 1997, by a fax sent that day at 12.22 p.m., they called off the contract and asked for the return of the initial deposit of $3,270,000 which the purchaser had paid.

18. Failing to get its deposit back, the purchaser instituted these proceedings. It lost; and the judge held the vendor entitled to forfeit the deposit.

The issue

19. The issue before the judge, and before us, is whether the purchaser was entitled, on 29 September 1997, to call off the contract. This depends, as I have already indicated above, on whether there was then any outstanding well-founded objection to the vendor's title which the vendor could not meet. If there was, the purchaser was entitled to succeed. Accordingly, we, like the judge, must examine the purchaser's three objections to the title, mentioned above, to see if there was anything in them; if we conclude that there was not, we must affirm the judge and if conclude that there was, we must reverse him. I will now examine the vendor's various objections to the title in the order in which I have referred to them above.

The first objection

20. In my judgment, the Executive Committee clearly had power, under the Centre's constitution, to direct the vendor, as they did on 6 April 1995, to treat the Institute, on the Centre's dissolution, as entitled to the property as successor to the Centre, a decision later ratified by a general meeting of the Centre's members on 6 October 1995. The judge found "no merit" in this point. I agree with him.

The second objection

21. This is founded on s.5(1) of the Conveyancing and Property Ordinance, Cap. 219, which provides that no equitable interest in land can be disposed of except by writing. It is said by the purchaser that here there is a purported disposal of the equitable interest in the property from the Centre to the Institute; but no writing effecting it. Mere evidence, even in writing, of an intention to effect such a disposition will not do. But this objection cannot, in my judgment, stand with the well-known cases of Grey v. IRC [1960] AC and Vandervell v. IRC [1967] 2 AC 291. It is apparent from these cases that for the purposes of 53(1)(c) of the Law of Property Act, 1925 (on which s.5 of the local Ordinance is based) a direction given to a trustee by a person entitled in equity directing it to hold the trust property in trust for another is a disposition of his equitable interest; and here we have just such a direction. The case on which the judge relied, In re Strathblaine Estates Ltd [1948] 1 Ch. 228, in which the court treated minutes of a meeting of shareholders, signed by the Chairman, as sufficient to satisfy the requirements of s.53(1)(c), also supports his conclusion that this objection is misconceived. In the face of all this, there is, in my judgment, no risk that any former member of the Centre (there can be no-one else) could successfully assert a claim on behalf of himself and other former members of the Centre to the beneficial ownership of the property. If, contrary to my view, there is any such risk, it is fanciful not real, and the court will not allow the purchaser to escape from its bargain or the strength of it. It is as well to recall the purpose of s.53(1)(c) (and, no doubt, its local equivalent). That purpose is not to defeat the reasonable expectations of honest men; it is "to prevent hidden oral transactions in equitable interests ..... making it difficult, if not impossible, for the trustee to ascertain who are in truth his beneficiaries" : see Vandervell at p.311, per Lord Upjohn.

The third objection

22. I am prepared to assume, without deciding, that the purchaser was in fact entitled to require the direction given by the Centre to the vendor, or the minutes of the meeting approving the disposal of the property in favour of the Institute, to be stamped ad valorem. But a stamp objection relates to a matter of conveyance, not title. It is a good answer to such an objection for the vendor to undertake to have the document in question stamped before completion. Here the vendor was willing to meet the purchaser's objection, but the purchaser called off the contract before completion and deprived the purchaser of the opportunity of doing so. There is, therefore, no merit in this objection either.

Conclusion

23. There being no substance in any of the three objections, the purchaser, having called off the contract, is itself in breach of it. The vendor was entitled to forfeit the deposit up to an (agreed) limit of $2,180,000. I would dismiss this appeal.

Mayo, J.A. :

24. Both counsel agreed that it was a matter of great importance whether or not the Appellant had acted correctly when its solicitors wrote to its vendor's solicitors on 29th September 1997 in these terms.

"Despite the efforts we have made, your client has not proved title to the property. The completion date, as extended, has expired on 24 September 1997.

We now give you notice that our client rescinds the agreement for sale and purchase. Your client is requested to return the deposit of HK$3,270,000.00 to us forthwith."

25. I agree that this is a very important matter.

26. It is necessary to consider the letter in the context in which it was written.

27. Mr. Warren Chan, S.C. for the Respondents contended that the only circumstances when a party would be entitled to rescind a contract in such a situation is where either the vendor refuses to answer a requisition or he states that the title is good. I agree that this is right.

28. The question which has to be considered is whether either of these situations had arisen on 29th September 1997 when the letter was written.

29. The extension to the completion date expired on 24th September 1997. The Appellant's solicitors had written to the Respondents' solicitors on 20th September 1997 requesting a further extension to 8th October 1997. The Respondents' solicitors replied that they would seek their clients' instructions. They did not give an answer to the question by 24th September 1997. However in their letter of 25th September 1997 they stated that they did not consider any postponement necessary and more importantly gave the Appellant's notice to complete.

30. On the next day 26th September 1997 the Respondents' solicitors wrote a further fairly lengthy letter which attempted to resolve the points raised by the outstanding requisitions. They summarised their conclusions in this way:

"In conclusion, we take the view that

(1) no Vesting Assignment is required to vest the land in CIB since CIB as equitable owner can make an equitable assignment of its interest by direction in writing;

(2) no Vesting Assignment is required to vest the property in HKIB because the trust has been properly constituted, but we are prepared to advise client to execute a Vesting Assignment if required;

(3) the trustee and the Executive Committee of CIB have not acted ultra vires."

31. It is true that the Appellant's solicitors did respond to this letter. They commented on the outstanding matters and expressed the view that the notice to complete which had been given was premature.

32. It is also necessary to add that the Respondents' solicitors at the conclusion of their letter of 29th September 1997 enquired when the Appellant would be in a position to complete. It is implicit in this request that the solicitors are stating that they have done everything they intend doing to satisfy the requisitions which have been raised.

33. I do not think that this of itself is necessarily conclusive. It is necessary also to consider the outstanding requisitions and decide whether they were in fact satisfactorily dealt with.

34. I agree with the submission of Mr. Huggins, S.C. for the Appellant that the most important outstanding requisition was the question whether the terms of section 5(1)(a) of the Conveyancing and Property Ordinance, Cap. 219 had been complied with. Section 5(1)(a) provides:

"(1) Subject to section 6-

(a) no equitable interest in land can be created or disposed of except by writing signed by the person creating or disposing of the same, or by his agent thereunto lawfully authorized in writing, or by will, or by operation of law."

35. It was clearly the case that the subsection had not been complied with. At the time when the Appellant's solicitors wrote the letter on 29th September 1997 rescinding the contract there was no evidence that Ms Ting the Executive Officer of the 2nd Respondent had written authority to dispose of the property. I am by no means convinced that all of the other outstanding requisitions had satisfactorily been dealt with.

36. I have come to the conclusion that the Appellant was legally justified in rescinding the contract on 29th September 1997. In my view this appeal should be allowed.

Rogers, J.A. :

37. There are 3 important issues in this Appeal :-

(1) Did the vendors have good title to the property?

(2) By the time the Purchasers gave notice of rescission on the 29th September 1997 had the vendors shown good title?

(3) Were the vendors entitled to rescind the contract on the 29th September 1997?

38. The Judge below decided the first and third questions in the Vendors' favour. Having decided that it was not necessary for him to deal directly with the second question, but by implication, it seems that he decided that the Vendor had shown good title at least on the 29th September even if it were shortly after the Purchaser's letter rescinding the contract.

39. It is trite law that in addition to delivering an abstract of title, the Vendor must produce all evidence necessary to prove the title. In my view, a great deal of the difficulty in this case stemmed from the Vendor's inability either to show or to prove title. A perusal of the correspondence can only engender the conclusion that, up until almost the end, the Defendants' solicitors were floundering and had not ascertained how the title to the property would be established.

The Background facts

40. The background to this matter has been set out in the judgment below and it is therefore unnecessary to recite the facts in full detail. Nevertheless, for convenience, I will set out some of the salient points.

41. The property which Defendants had contracted to sell originally was held by the 1st Defendant as trustee for the Chartered Institute of Bankers - Hong Kong Centre which has been referred as the "Centre". The Centre was not a company. It was registered as a Society and it had its own Constitution. Under Article 3 of the Constitution, the members of the Centre were all to be members of the Chartered Institute of Bankers in London (which will be referred to as the "Chartered Institute") or the Institute of Bankers in Scotland.

42. The Chartered Institute naturally had its own Charter. That took effect on the 10th May 1987. Previously it had been the Institute of Bankers which was an unincorporated association founded in 1879. Clause 17(1) of the By-laws of the Chartered Institute provided that the Council of the Chartered Institute should have power to establish and dissolve local centres of membership/groups of the Chartered Institute but gave the power to authorise members of the Institute at those local centres to appoint persons as members of the local Centre Committee to control and manage the groups.

Relationship between the Centre and the Chartered Institute

43. The Constitution of the Centre which has been produced in this case was passed on the 3rd August 1989 although it seems that the Centre must have existed before then. The certificate of registration under the Societies Ordinance is dated 20th September 1963. Although it is not entirely clear from the document we have been shown, it seems possible that the name was changed in November 1987 to add the word "Chartered". This would coincide with the granting of the Charter a few months prior thereto.

44. Under Article 4 of its Constitution, the affairs of the Centre were to be managed by the Executive Committee who were given wide powers under the Constitution.

45. Of interest in particular, is Article 29 of the Constitution which provided that the Chartered Institute of Bankers, London, might make grants as and to the extent that its Council thought fit. The Article went on that if additional funds were required, the Executive Committee might raise them in such manner as they thought fit, but that no subscription should be payable by members of the Centre. Also of interest was Article 35 which provided that the audited accounts of the Centre would be forwarded to the Chartered Institute of Bankers, London, for submission to their Council.

46. The link between the Centre and the Chartered Institute of Bankers was confirmed by Article 37 of the Constitution of the Centre which provided that :-

"Insofar as anything done by the Institute (here meaning the Centre as referred to herein) shall be inconsistent with the terms of the Constitution of the Chartered Institute of Bankers, London, it shall be ultra vires provided that it shall be intra vires the Institute to do anything expressly authorised by or within the terms of this Constitution notwithstanding that the same may be inconsistent with the terms of the Constitution of the Chartered Institute of Bankers, London."

47. It might seem, therefore, that the Chartered Institute of Bankers, London could have considerable interest in any property held by the Centre.

48. As far as the property in issue in this case is concerned, this conclusion has to be somewhat tentative and speculative as the Constitution of the Centre was only adopted 3 months after the assignment of the property to the 1st Defendant to be held on trust for the Centre. Furthermore, the Chief Executive Officer's letter of the 8th November 1994 to the trustee refers to the property as being "self-acquired". If that meant that the property had been purchased from funds wholly derived from sources other than the Chartered Institute then of course there would be no difficulty.

49. The question might then naturally arise as to what might be done with property belonging to the Centre should the Centre decide to dissolve itself. That, of course, is what happened albeit with the intention of the business of the Centre being transferred to and thereafter being carried on by the 2nd Defendant. The 2nd Defendant is a company and it does not have the direct links with the Chartered Institute of Bankers, London which the Centre had.

50. There was discussion as to whether there was power for the property of the Centre to be given by way of gift to the 2nd Defendant. Clause 5 of the Royal Charter of the Chartered Institute of Bankers strictly limited the application of the property of the Chartered Institute towards the promotion of the objects of the Institute and prohibited the distribution of any such property to the members.

51. Were it not for Articles 39 to 41 of the constitution of the Centre, it would appear to me that there would perhaps be difficulties in the distribution of any assets which were held in the name of or on behalf of the Centre upon any dissolution. However, those Articles provide for the possibility of there being a dissolution of the Centre. Article 41 provides that :-

"On the dissolution of the Institute, the funds of the Institute after payment of the liabilities, shall be distributed in such manner as the Executive Committee shall determine prior to such dissolution."

52. It seems to me that on the basis of that Article, it is possible to construe the powers of the Executive Committee as including the power of disposal of the equitable interest in any leasehold property held on behalf of the Centre.

53. The Judge below considered that the provisions of Article 4 of the Royal Charter included objects which were defined broadly enough to include the giving away of property to other organisations which pursued common objects in banking and related subjects. However, in my view, this is not of direct assistance in this matter since Article 4(h) refers to "confer, consult, communicate or cooperate .....". If this related to some act on the part of the Centre then of course upon dissolution, the Centre would not be in a position to do any of those acts. Therefore, for the Centre to construe its own powers as including those powers would be of no assistance since after giving away the property and dissolving itself, the Centre would not be, for example, cooperating with anybody. Insofar as those powers relate to the Chartered Institute, it would require some evidence that the Chartered Institute was performing those acts and had given away its property with a view to those acts being performed. There is no suggestion in this case that that had happened.

54. In view of the conclusion that on a perusal of the Royal Charter and By-laws and the constitution, it may well be that the Chartered Institute may have made some grant which paid for or contributed to the payment for the property, it would thus have had some interest in any property held by the 1st Defendant on behalf of the Centre. It would thus be all the more important that any person having notice of this and desirous of purchasing any property which had been previously held by the Centre and given away by it upon its dissolution should be satisfied that the Centre's interest in that property had been properly transferred to the entity receiving it.

The relevant events relating to the Centre's property

55. There are 4 events which are of significance in this case.

56. On the 17th November 1994, an Executive Committee meeting of the Centre resolved that :-

"..... all assets including the property of the Chartered Institute of Bankers - Hong Kong Centre, upon dissolution, be transferred to the future Hong Kong Institute of Bankers."

57. On the 6th April, the Chief Executive Officer, Cecilia Ting, sent a memorandum to the 1st Defendant, forwarding a copy of those minutes. The memorandum contained the following :-

"..... confirming that it is the wish of the Chartered Institute of Bankers Hong Kong Centre to have the property transferred to the Hong Kong Institute of Bankers when it is established."

58. The 1st Defendant replied to that on the 13th April 1995 saying :-

"We write to confirm that Bermuda Trust (Hong Kong) Limited now regards the Hong Kong Institute of Bankers as the beneficial owner of (the property in question)."

59. It could be added in parenthesis here that this perhaps anticipated matters since at that stage the 2nd Defendant was not yet in existence.

60. The final event took place on 6th November 1995 when the Centre held its 32nd Annual General Meeting at the same time as the 2nd Defendant held its 1st General Meeting. The first matter which is recorded was that :-

"The Chairman moved to transfer all business, and assets of the Chartered Institute of Bankers - Hong Kong Centre, as at 10 August 1995 to the Hong Kong Institute of Bankers."

61. The motion was seconded and is recorded as being carried. It is perhaps not too pedantic to note that another motion at the same meeting is recorded as having been carried unanimously. Whether there is any distinction to be drawn to the extent that this motion was not carried unanimously is not known.

62. From those matters, the following can be derived.

(1) The Executive Committee clearly intended that the equitable interest in the property in question should be transferred to the 2nd Defendant on its coming into existence. The Certificate of Incorporation of the 2nd Defendant was issued on the 10th August 1995.

(2) It is clear that the members of the Centre were content to ratify the Executive Committee's decision as to the transfer of the property (at least by majority even if not unanimously).

(3) There is no evidence as to this, but it would be very surprising if these events did not take place with the knowledge of the Chartered Institute of Bankers. It is interesting, however, that the minutes of the meeting of the Executive Committee of the 2nd Defendant held on the 28th September 1995 record the fact that the new Secretary General of the Chartered Institute did not "desire" to discuss the transitional arrangements when he was in Hong Kong 10 days previously.

63. In these circumstances, it seems to me that it was the intention of the members of the Centre and in all probability the Chartered Institute that the 2nd Defendant would be the owner of the equitable interest in the property in question but the question then arises as to whether those intentions have been effectively carried out.

Was the interest of the Centre in the property transferred to the 2nd Defendant?

64. The primary point taken in this case by Mr. Huggins, S.C. on behalf of the Plaintiff, Appellant was that the Centre's interest in the property was not effectively transferred to the 2nd Defendant.

65. Both because the Centre was an unincorporated association and because of Article 14D of its constitution, the property belonging to the Centre was vested in the 1st Defendant as its trustee. The Centre therefore held an equitable interest in the property. Under Section 5 of the Conveyancing and Property Ordinance, Cap. 219, it is provided that :-

"(1) Subject to section 6-

(a) no equitable interest in land can be created or disposed of except by writing signed by the person creating or disposing of the same, or by his agent thereunto lawfully authorized in writing, or by will, or by operation of law;"

66. There were 4 documents which are relevant to the attempt to transfer of the Centre's interest in the property to the 2nd Defendant.

(a) The Minutes of the meeting of the Executive Committee of the Centre on 17th November 1994

67. In my view, it is impossible to rely upon the resolution or the minutes as constituting an effective transfer of the Centre's equitable interest in the property to the 2nd Defendant upon the 2nd Defendant's incorporation.

(i) The resolution

68. At the meeting of the Executive Committee of the Centre which was held on the 17th November 1994 the resolution which I have set out above was passed.

69. The resolution was on the face of it an oral resolution. Whether one looks upon the purported effect of the transaction as being the creation of an equitable interest in the land in the future 2nd Defendant or as a disposition of the equitable interest in the property by the Centre, both would fall within Section 5(1)(a).

70. If authority were needed for the proposition that an oral disposition of an equitable interest will not be effective, it could be found in the case of Grey & Another v. Inland Revenue Commissioners [1960] A.C. 1 which was a decision affirming the Court of Appeal's reversal of Upjohn, J. which were reported in [1958] 1 Ch. 690 and 375 respectively. That case concerned the construction of Section 53(1)(c) of the Law of Property Act 1925 which is comparable to Section 5(1)(a) of the Conveyancing and Property Ordinance and reads as follows :-

"a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will."

71. In that case, trustees had held shares on behalf of the settlor as his nominee. The issue in the case was whether an oral direction which the settlor subsequently gave to his trustees to hold those shares on certain trusts was ineffective. Section 53(1)(c) of the Law of Property Act only related to "disposition". It will be noted that section 5(1)(a) of the Conveyancing and Property Ordinance relates to the creation of an equitable interest as well as a disposal thereof. In the Grey case, Upjohn, J. had given a narrow meaning to the word "disposed" and held that the interest had passed because the shares had been disposed of by way of creation of a trust and not by way of assignment. The Court of Appeal and the House of Lords held that notwithstanding there may have been a creation of a new trust, there was clearly also a disposition within the meaning of Section 53(1)(c). Since this disposition was an oral disposition and not in writing, it was therefore ineffective.

(ii) The Minutes

72. The minutes of the meeting do not constitute an assignment of the equitable interest in the property, although they may constitute evidence of the Executive Committee's resolution. There is no evidence as to the signing of these minutes but in the normal way, it can be assumed that they would be signed only by the Chairman at the following meeting where, presumably, they were approved.

73. Article 14E of the Centre's Constitution provided that the Trustee should deal with the property of the Institute as directed by the Executive Committee and that it would be protected by a resolution evidenced by a copy signed by two members of the Committee and the Honorary Secretary. There has been no suggestion that that particular provision has been complied with. Indeed, the Defendants' solicitors' letter of the 30th September 1997 appears to offer compliance with that by the time of completion. Nor is there any suggestion that the Chairman, or whoever else signed the minutes, was an agent who was lawfully authorised in writing to sign a document assigning the Centre's equitable interest. If there had been a resolution in writing signed by all members of the Executive Committee under the provisions of Article 14 of the Constitution then, again, that might have been different, since that would be the signature of the body empowered under Article 14A to deal with the property.

74. In summary therefore, neither the resolution nor the minutes thereof could constitute a valid assignment of the Centre's equitable interest in the property because of the provisions of Section 5(1) of the Conveyancing and Property Ordinance.

Memorandum of the 6th April 1995

75. Very simply, this document was signed by the Chief Executive Officer but there is no suggestion that she was lawfully authorised in writing, within the meaning of Section 5(1)(a), to dispose of the Centre's equitable interest. The resolution itself did not give that authorisation. Article 20 of the Centre's Constitution upon which reliance was placed at one stage of the correspondence relates to the Honorary Secretary and not the Chief Executive Officer. This therefore was ineffective to assign the Centre's equitable interest.

The 1st Defendant's letter of the 13th April 1995

76. In this letter, the 1st Defendant indicated that it regarded the Hong Kong Institute of Bankers as being the beneficial owner of the property. Apart from the fact that the Hong Kong Institute of Bankers had yet to be formed whatever effect this document might have amongst the immediate parties thereto, it can have no effect in relation to the transfer of the equitable interest held by the 1st Defendant as trustee.

77. It can only be a matter of regret that the professional trustee did not insist on compliance with Article 14E of the Centre's Constitution. This is all the more so because in November 1994 the trustee had been requested to advise as to what steps should be taken in relation to the transfer of the property.

The joint meeting of the Centre and the 2nd Defendant

78. This resolution again was clearly an oral resolution and for this reason on its own was ineffective to satisfy the provisions of Section 5(1)(a). The minutes, again, for the same reason as the minutes of the Executive Committee meeting were likewise ineffective.

79. The Judge in the Court below appears to have considered that the minutes of the Executive Committee meeting of the 17th November and the letter from the Chief Executive Officer of the 6th April, when read together, were sufficient to satisfy the requirements of Section 5 of the Ordinance. He said :-

"..... the minutes of the Executive Committee meeting of the Centre dated 17th November 1994 constituted both the decision and the direction to the trustee to transfer equitable interest. The letter from the Chief Executive Officer dated 6th April 1995 to the trustee amounted to the communication of the Executive Committee's direction to hold the equitable interest for the benefit of the Institute. The minutes and the letter are, therefore, to be read together, the one being inextricably linked to the other."

80. In my view, these 2 documents even together are not sufficient. Although two documents may be read together, the reading of documents together does not negate the requirement that there be a signature which satisfies the requirements of Section 5(1)(a). The case of Re Danish Bacon Co. Ltd. Staff Pension Fund Trusts [1971] 1 W.L.R. 248 referred to in the judgment of the Court below is merely authority relating to the reading together of two documents both signed by the relevant person.

The Strathblaine case

81. The Judge in the Court below relied upon the case of In re Strathblaine Estates Limited [1948] 1 Ch. 228 as giving general support for the conclusion that the minutes of the meeting of the 17th November as sent by the Chief Executive Office constituted sufficient writing.

82. That case concerned a property company all the shares in which had been held by three shareholders. The shareholders agreed amongst themselves that the remaining properties should be divided amongst themselves in specie. That decision was reported to a Directors meeting and recorded in the minutes which were signed by the Chairman. The company later held an Extraordinary General Meeting in which it was resolved to wind-up the company and the agreement regarding the properties was recorded. The documents of title relating to the properties were handed to the shareholders but no other action was taken to transfer the properties and the company was dissolved.

83. The difficulty which arose in the case was that by reason of Section 181 of the Law of Property Act 1925, the legal estate in the properties came to an end on the dissolution of the company. It was therefore necessary to apply to the Court for an order under Section 44 of the Trustee Act. It is noteworthy that the application made on behalf of the former shareholders was supported by Counsel for the Attorney-General and hence, the application became, in effect, an unopposed application. The passage where Jenkins, J. said :-

"The minutes relating to the agreement to divide the company's unsold properties were signed by the chairman, and I think they constitute sufficient written evidence to satisfy the requirements of s.53 of the Law of Property Act, 1925."

was a reflection of the submission by Counsel for the Applicants. As Mr. Huggins has correctly pointed out, however, that passage does not identify Section 53(1)(c). Indeed, it is clear from the opening sentence of the judgment that the Judge considered he was dealing with a case where the company had become trustee of the properties of which it had previously held both the beneficial and legal interest. In those circumstances, Mr. Huggins is correct that the particular sub-section which was relevant was Section 53(1)(b) of the Law of Property Act which read :-

"A declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will."

84. That Section corresponds with Section 5(1)(b) of the Conveyancing and Property Ordinance.

85. There is of course an important distinction between Sub-sections 53(1)(b) and (c). In the first of those sub-sections, there is no requirement that the trust need be declared in writing. It is sufficient that it is proved by some writing. Furthermore, the report of the case does not deal with the question of the authority of the Chairman of Strathblaine Estate Ltd. to sign documents. Even if the Chairman did not have the appropriate authority, all that can be said is that this was not a point which was contested by Counsel for the Attorney-General who seems to have been disposed to be as helpful to the Applicants as he could have been.

The Vandervell case

86. Finally, the case of Vandervell v. I.R.C. [1967] 2 A.C. 291 does not, in my view, assist the position any further. In that case, on the oral direction of the settlor, the legal interest in 100,000 shares had been transferred to a college subject only to an option to re-purchase at a later date. The provisions of Section 53(1)(c) were held to be inapplicable in these circumstances because it was not a case where the equitable interest alone was assigned but it was a case where there was a transfer of the legal ownership which carried with it the equitable ownership. The House of Lords in that case held that Section 53(1)(c) was inapplicable since it was directed to cases where the dealings with the equitable estate or interest were divorced from the legal estate.

87. Returning to the present case, in conclusion therefore, on the material which has been presented, there was a difficulty in relation to the property since there had not been an assignment of the equitable interest in the property to the 2nd Defendant which would satisfy the provisions of Section 5(1)(a) of the Conveyancing and Property Ordinance. This is even ignoring the point that the disposition of the equitable interest would, if effected in April 1995 have been to an entity which did not at that stage exist. This, in my view, was all the more important because of the previous constitution of the Centre. Whilst it might be said that, as a practical matter, it was unlikely that there would be any challenge to the title to the property but in view of the close links between the Centre and the Chartered Institute of Bankers, I consider that the Plaintiff was fully justified in requiring proper documentation: possible difficulties could arise from the fact that on the face of the Constitution, the Centre appears to have derived its finances from the Chartered Institute and it could have been that the Chartered Institute had as much interest in any residuary property upon dissolution of the Centre as any members of the Centre. In coming to the conclusion that the risk of difficulty arising from the failure to secure a proper assignment of the Centre's equitable interest was low, the emphasis must be on the identity of the personalities behind the entities involved. That, in my view, would not be a proper basis for holding in law that an equitable interest had been properly assigned.

Were the Vendors entitled to rescind the contract on 29th September 1997?

88. The brief facts in relation to this are that the Sale and Purchase Agreement provided that time should be of the essence. The completion date was originally fixed for 10th September 1997. That was extended to 24th September 1997. On the 20th September, a further extension to the 8th October was requested by the Plaintiff's solicitors. That request was never acceded to. The matters relating to the proper assignment of the Centre's equitable interest had been the subject of some considerable correspondence between the solicitors. It is quite clear from the correspondence that the Defendants' solicitors were floundering and had no clear idea of how they were maintaining the equitable interest had been passed to the 2nd Defendant. On 23rd September 1997, the Plaintiffs' solicitors wrote refuting one of the spurious argument which had been raised and asking what the position was as in relation to their request for an extension and expressing themselves as still not satisfied. On 25th September, new solicitors wrote on behalf of the Defendants. They expressed themselves as not agreeing entirely with what the previous solicitors had said. They raised new arguments which in part have not been pursued in these proceedings and concluded :-

"We do not consider any postponement necessary and write to give you notice to complete."

89. No date for completion was specified in that letter.

90. There was a reply on the same date in which the Plaintiff's solicitors indicated that they had not received the enclosures to that letter and suggested that a vesting order should be obtained from the Court to resolve the matter.

91. There was a further letter from the Defendants' solicitors the following day, the 26th September, again, putting forward various arguments and enclosing a number of documents including a copy of the letter of the 13th April 1996 from the 1st Defendant.

92. The same day, Friday, the 26th September 1997, the Plaintiffs' solicitors replied shortly. They expressed their concern about the non-compliance with Section 5(1) of the Conveyancing and Property Ordinance and said that their queries on title were not resolved.

93. It is to be noted that although on the 25th September, the new solicitors for the Defendants had indicated that they did not consider any postponement was necessary, correspondence had continued on both sides. Neither side had made time of the essence; still less had either side stipulated a reasonable time for completion of the contract. The Defendants' solicitors' letter of the 25th September did have an air of finality but this was then followed by further correspondence.

94. On Monday, the 29th September 1997, the Plaintiffs' solicitors wrote :-

"We now give you notice that our client rescinds the agreement for sale and purchase."

95. Thereafter, further correspondence followed in which the conveyancing points were dealt with. As I have mentioned, it would seem that at least in paragraph 2 of the Defendants' solicitors' letter of the 30th September, reference was made to a course which it would appear would have solved the problem. That, however, was rejected on the basis that the contract had already been rescinded.

96. In my view, the Judge below was correct in saying that before the Plaintiff was entitled to take such a stand, time should have been made of the essence again and a demand should have been made for completion within a reasonable time. Clearly, the letter on the Friday was not sufficient to do that. Even if it had been notice to that effect, the period from the Friday to the following Monday would not, in my view, have been adequate.

Extent of defect in title

97. The Judge below considered that it was difficult to see from where the risk of a challenge to the title to the property would emanate. Whilst the risk could be categorised as being low, in my view, the Plaintiff was still entitled to demand good title and by the 29th September 1997 that still not had been shown. As I have indicated, it seems to me that questions could arise not only about the interest held by any former members of the Centre but also about any interest on the part of the Chartered Institute.

98. In view of the facts of the case, I do not consider that it would have been impossible to have secured the execution of documents to perfect the Defendants' title. I have in mind particularly the possibility of restoration of the Centre with a view to the proper execution of the necessary documents which the Defendants subsequently expressed themselves willing to do. In my view, however, the Plaintiff's attempt to rescind the agreement was, in the circumstances, premature. Although it might not have been necessary to have waited any further period had the Defendants indicated unequivocally that they would do nothing further, the position, seems to have been sufficiently fluid that more time should have been allowed to elapse.

Relief

99. Two questions arise as to the relief to which the Defendants are entitled. The first is as to the quantum of the deposit which the Defendants are entitled to forfeit and the second is as to whether the Defendants are entitled to an order for an inquiry as to damages.

Deposit

100. Clause 2 of the Agreement provided that the purchase price should be the sum and paid as set out in Schedule 3. Schedule 3 of the Agreement provided that the purchase price would be HK$21,800,000.00 and that it should be paid in 3 instalments. The first instalment was to be an initial deposit which was 5% of the purchase price. The second was to be a further deposit which was a sum equivalent to 10% of the purchase.

101. Accordingly, by the time of the Plaintiff's letter seeking to rescind the Agreement the sum of HK$3,270,000.00 or 15% of the purchase price had been paid.

102. Clause 18 of the Agreement provided for forfeiture should the Purchaser fail to observe the contract and the material words are :-

"..... the Vendor shall be entitled to forfeit to the extent of 10% of the purchase price paid to the Vendor absolutely without prejudice to any other rights and remedies of the Vendor."

103. It will be noted that no reference is made in Clause 18 to "deposit", the reference is to 10% of the purchase price paid.

104. Admittedly, Clause 18 of the Agreement is not very happily drafted. Nevertheless, Schedule 3 makes clear that the two sums paid as deposit are part of the purchase price. In my view, the construction which should be given to the words I have quoted above is that the amount forfeited should be 10% of the full purchase price insofar as it has been paid.

105. Mr. Huggins, S.C. argued that the amount should be 10% of that which had been paid which would therefore be HK$327,000.00. My reason for saying that the words in Clause 18 of the Agreement should be read as meaning 10% of the purchase price insofar as it has been paid takes into consideration the fact that it is conventional and almost standard practice that the deposit for the purchase price is usually 10%. It is that 10% which is normally forfeited for default by a purchaser. The point of a deposit is, afterall, to provide some security for due performance. In those circumstances, I consider it would be necessary to have clear words in an Agreement to change the amount forfeited from 10% of the full purchase price to 10% of the deposit which has been paid. As I have indicated, however, that the wording of the Agreement left this matter open for argument. The appeal must be allowed however to the extent of reducing the amount forfeited from HK$3,270,000.00 to $2,180,000.00. The Defendants conceded this.

Damages

106. The Defendants contend that in addition to the forfeiture of 10% of the purchase price, they are entitled to damages to be assessed in an inquiry. No such order was made in the Court below. There is no cross-notice of appeal. The only indication that the Defendants wished to have this matter raised on the appeal was in the skeleton argument submitted shortly prior to the hearing. On that basis alone, the Defendants would not, in my view, be entitled to raise the matter. Since the claim to an inquiry appears to me to be unsustainable for other reasons, I shall shortly explain why.

107. In the Court below, at the end of the Defendants' submissions, Counsel raised the question of the counter-claim and indicated that the Defendants sought forfeiture of 10% of the purchase price and damages. He made specific reference to an order for directions made on 4th December 1997 by Mrs. Justice Le Pichon. That order was never drawn up. The Judge however found the Court note of the order which read :-

"Court directs that,

1. the affirmation of Ronald Poon be treated as a counter-claim that the 1st Defendant is entitled to forfeit the deposit."

108. The order as recorded and as read out by the Judge below made no reference to damages. Neither the affirmation of Mr. Poon nor any of the exhibits thereto make any reference to damages. In those circumstances, there would, on the face of it, have been no counter-claim for damages.

109. The reserved judgment in the Court below merely states that :-

"As for the counter-claim, that is allowed."

When the order was drawn up, there was no order in relation to damages.

110. If despite the fact that there was no counter-claim for damages, the Defendants contend that the Judge intended in his judgment that his order should include an order for an inquiry, application should have been made to him under Order 20 rule 11 (the slip rule). Failing that, the absence of any proper application to have the matter ventilated in this appeal is conclusive.

111. Furthermore, in the light of the view which I take of the Defendants' proof of that title, their right to any damages would be highly questionable.

Godfrey, J.A. :

112. The result is that by a majority the appeal is dismissed (save that the deposit forfeited is to be limited to $2,180,000). We will make an order disposing of the appeal in terms to be agreed between the parties. In default of agreement, either party is to be at liberty to restore the appeal to the list for further argument as to the form of the order.