PANG HIN LAM AND ANOTHER v. LAU WAH KWAN AND ANOTHER

CACV 171/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 171 OF 1998

(On appeal from HCA No. 6378 of 1996)

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J U D G M E N T

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Rogers, J.A. :

Introduction

1. This is an appeal from a judgment of Deputy Judge Jackson given on 9th June 1998. The action was brought by the Plaintiffs for repayment of deposits which had been paid pursuant to an Agreement to purchase a flat in Riviera Gardens, Tsuen Wan and for the reimbursement of the stamp duty incurred and the costs and expenses of investigating title. The Deputy Judge gave judgment for the Plaintiffs holding in their favour on more than one ground.

The facts

2. The original Agreement was made in writing between the parties on 10th March 1996. That Agreement provided for the signing of a formal Sale and Purchase Agreement on or before the 20th March and for completion to take place on or before 23rd May 1996.

3. For the reasons which it is unnecessary to relate, there was no formal Sale and Purchase Agreement. The further deposit that had been required to be paid was however paid.

4. The Purchasers' (Plaintiffs') solicitors had to remind the Vendors' (Defendants') solicitors in early May that they had not yet received the title deeds. On 16th May 1996, 7 days prior to the agreed date for completion, the Vendors' solicitors sent the Purchasers' solicitors 34 documents.

5. The Purchasers' solicitors raised requisitions on the 20th May. Those requisitions included requests for sight of a number of further documents. The Vendors' solicitors refused to supply many of those documents and purported to answer the requisitions in part. By the 23rd May, the Purchasers' solicitors were maintaining that the requisitions had not been satisfactorily answered and that they were entitled to many of the documents originally requested, they said they would not complete until such time as those matters had been attended to. The Vendors' solicitors wasted no time on the 24th May in averring that the Purchasers had failed to complete on the date specified and that the deposit had been forfeited. This action followed soon thereafter.

6. There were a number of matters still outstanding between the parties. There was in particular a requisition relating to a power of attorney and a number of requisitions in which documents said to be documents of title had been requested.

The power of attorney

7. The flat in question was part of a redevelopment of the Caltex Terminal, Tsuen Wan. The first Assignment of the flat took place on 17th May 1990. Prior to that however, the entitlement to the flat had been sold first to a Cheung Wan Mei and Lee Kam Yuk who had on-sold their entitlement on the 27th May 1998 to a Chiu Sun Kwong and Lau Yuk Chun. Because there was to be no Assignment executed in May 1988, the 1st Purchasers (Cheung and Lee) gave the 2nd Purchasers (Chiu and Lau) a power of attorney which was also dated 27th May 1988. That power of attorney was expressed to have been executed "as security for the observance and performance owed to (Chiu and Lau)". The power of attorney was expressed to be irrevocable. Clause 17 of the power of attorney was expressed as follows :-

"17. To appoint substitute(s) ("the Substitute") who shall have power to act on behalf of the Principal as if the Substitute shall have been originally appointed Attorney by this Deed including the power for the Substitute to appoint further Substitute(s) with similar power as aforesaid and the Attorney/Substitute such further Substitute appointing such substitute shall have power to displace and remove such further Substitute as the Attorney/Substitute shall see occasions to think fit."

8. Although the language of that Clause is somewhat obscure, it is clear that there is a power of substitution. That power of substitution would have been required by the Purchasers (Chiu and Lau) because, no doubt, it was in contemplation that they might well wish to sell on the entitlement before Assignment took place and their purchaser would no doubt wish to have the security of having a power of attorney directly from the 1st Purchasers.

9. That is indeed what happened. Chiu and Lau sub-sold their entitlement to Madam Lee Man Ngar on 3rd June 1988. For some reason, instead of executing a simple Deed of Substitution, Chiu and Lau executed a Deed of Delegation. The Third Recital Clause of the Deed of Delegation refers to the power of attorney but then inaccurately, the power to delegate the power of attorney to any other person they may choose. The Deed purports to "irrevocably appoint the Purchaser (in this case, Lee Man Ngar) ..... to be the delegate of the Attorney (Chiu and Lau) ..... to do execute sign seal and deliver all the necessary conveyance, assignment and assurance relating of the Property." Further, Chiu and Lau agreed for themselves as well as on behalf of the original Vendors (Cheung and Lee) "to ratify and confirm all that the Purchaser ..... shall do or cause to be done by virtue" of that Deed of Delegation. It is to be noted that a distinction is drawn even in that clause between delegation and substitution.

10. In the letter of 20th May 1996, the Purchasers' solicitors drew attention to the fact that Lee Man Ngar's power was derived from the Deed of Delegation and the requisition went on to require sight of the original or a certified copy of a statutory declaration of the Purchasers from Lee Man Ngar to prove that they were unaware of any revocation of the power of attorney. This was said to be in accordance with section 5 of the Powers of Attorney Ordinance. Cap. 31.

11. The reply was that the power of attorney of 3rd June 1988 (i.e. the Deed of Delegation) was irrevocable. That answer seems to me to avoid the question because the original power of attorney given by Cheung and Lee was undoubtedly irrevocable because of section 4 of the Powers of Attorney Ordinance. But that section would not apply to a Deed of Delegation. In this respect, the stipulation in the Deed of Delegation that the delegation was irrevocable would affect the immediate parties but would not have any statutory backing.

12. The requisition was further amplified in the Purchasers' solicitors' letter of the 23rd May when it was indicated that the Deed of Delegation would not, under the Ordinance, be irrevocable and that in order to take the benefit of section 5(4) of the Powers of Attorney Ordinance, if any question arises as to a transaction between the donee of a power of attorney (i.e. Lee Man Ngar) and another person the purchaser from her, the purchaser (i.e. the Plaintiffs) is protected if that other person makes a statutory declaration that he did not at the material time know of the revocation of the power.

13. On this interpretation, Lee Man Ngar would, as I have indicated, be treated as the donee of the power for the purposes of section 5. That is perhaps a liberal interpretation of the Ordinance.

14. The Deputy Judge held that the requisition in this respect had not been properly answered. He rightly pointed out that there was a difference between substitution and delegation. In a case of substitution, the original attorney ceases to have any power at all unless the substitution is revoked. In a case of an irrevocable substitution, the attorney would not have it within his power to revoke that substitution. In the case of delegation, the attorney retains a residual power. The meaning of the word "delegation" was demonstrated in the case Huth v. Clarke, 25 QBD 391 in relation to the making regulations. Where a local authority committee had power to delegate the power to make regulations to a sub-committee, it was held that it could itself also make those regulations. Coleridge C.J. said, for example :-

"The word 'delegation' implies that powers are committed to another person or body which are as a rule always subject to resumption by the power delegating, and many examples of this might be given."

15. Wills J. in the same case said :-

"Delegation, as the word is generally used, does not imply a parting with powers by the person who grants the delegation, but points rather to the conferring of an authority to do things which otherwise that person would have to do himself. The best illustration of the use of the word is afforded by the maxim, Delegatus non potest delegare, as to the meaning of which it is significant that it is dealt with in Broom's Legal Maxims under the law of contracts : it is never used by legal writers, so far as I am aware, as implying that the delegating person parts with his power in such a manner as to denude himself of his rights. If it is correct to use the word in the way in which it is used in the maxim, as generally understood, the word 'delegate' means little more than an agent." (emphasis added)

In the circumstances of the present case, any objection to the delegated use of the power of attorney borders, in my view, on the pedantic. The attorneys in question, Chiu and Lau themselves, gave the delegate Lee Man Ngar a power of attorney on their own behalf which Lee Man Ngar also executed at the same time. There can be little doubt that any rights of the original Purchasers, Cheung and Lee had been effectively assigned. Even though the word "delegation" was used, it was used in circumstances where the word "substitution" could have been used. As the citation from Huth v. Clarke shows, it is possible that there are other meanings to the word "delegation" that would entail parting with possession of the power.

16. On the other hand, there is no doubt that powers of attorney must be strictly construed. In normal circumstances, the right to exercise a power of attorney cannot be delegated unless there is express power of delegation. That in itself does not, however, prevent a delegate from exercising a power of attorney if what he is doing is no more than a ministerial act. In the present circumstances, given the multiplicity of purchasers prior to the first Assignment, in my view, the use of the power of attorney by Lee Man Ngar was little more than a ministerial act.

17. However, having given the matter considerable thought, I am not prepared to disturb the finding of the Deputy Judge. That finding, as I have indicated, was that the requisition was not properly answered. On a strict analysis, the Deputy Judge's view seems to me to be correct, albeit, the requisition could, in my view, have been easily answered and a proper answer would probably not have required the provision of a statutory declaration.

18. In the circumstances of the present case, I do not consider that any leeway should be given to the Vendors in this regard. The title deeds were provided a mere 7 days before the day for completion. That gave the Purchasers scarcely enough time in which to consider the documents and raise requisitions. The Vendors' subsequent insistence on the adherence to the original date for completion and their refusal to have the matter resolved by a vendor and purchaser summons, in my view, does not dictate that the Court should be anxious to give any generous or liberal interpretation to their answers.

Requisition in respect of Amended Master Layout Plan and Development Schedule

19. Under Clause 9(d) of the Special Conditions of the grant in respect of the land in question, it was provided that :-

"9(d) The Master Plans and Landscaping Proposals shall not be amended, varied, altered, modified or substituted without the prior written approval of the Director, and no amendment, variation, alteration, modification or substitution of any of the Master Plans and Landscaping Proposals shall be valid or binding on the Government or the Grantee unless a record thereof shall have been signed by the Director and the Grantee and registered in the Tsuen Wan District Lands Office ....."

20. The land search shows that there was a Certificate of Compliance which was registered on 14th May 1993.

21. On 26th October 1994, there was registration of a letter with Amended Master Layout Plan annexed. The requisition in respect of that was that "Please prove ..... Letter with amended Master Layout Plan M/S 977830 having been duly approved by the Director pursuant to Clause 9(d) of the Special Conditions."

22. The Vendors' solicitors replied on two occasions. The first making reference to the Certificate of Compliance and the second stating that the Amended Master Layout Plan had been registered with the Land Registry.

23. The Deputy Judge held that any risk of enforcement action was merely theoretical or fanciful and not a practical or real blot on the Vendors' title. There was no appeal against this finding. In my view, the Deputy Judge's decision in this respect should also be upheld. At worst, the Special Conditions only provide that the Amended Master Layout Plan would not be binding without the appropriate consent. Since the Certificate of Compliance had been issued after the first Assignment of the flat in question, in my view, the Deputy Judge was correct that any risk in this respect was fanciful.

24. Furthermore, what was being asked for was not strictly what was required under the Special Conditions.

25. As a matter of completeness, a copy of the Amended Master Layout Plan and Development Schedule has been produced in this Court. What it shows is that the amendment which was made in December 1993 was the reinstatement of an office building as part of the commercial centre. This had absolutely no effect upon title to the flat in question and as I have indicated, even if the necessary consents had not been obtained, the only effect would be that any amendment would not have been binding upon the Government. In my view, the Plaintiffs' case in this regard was rightly dismissed.

Requisitions in respect of other documents of title

26. The learned Judge dealt with the other requisitions which related to demands to inspect what were alleged to be documents of title and held that the Plaintiff was entitled to inspection of the same. Since, in my view, this would be correct in respect of some of the documents but not others, I shall deal briefly with those documents.

Memorial No. 387170

27. The Purchasers' solicitors requested sight of the Guarantee by the Standard Chartered Bank which was registered under Memorial No. 387170. There was however a Memorial of the Release No. 777331. A copy of the Release and the Memorial was supplied by the Vendors' solicitors on the 21st May. The Release on behalf of the Director of Buildings and Lands says that the Guarantee was "hereby cancelled and surrendered and delivered up to the Bank". In my view, there was no merit in requesting sight of the original Guarantee.

Memorial No. 402449

28. A request was made for a copy of the letter of approval of the draft Deed Poll as per plan Memorial No. 402449. The Deed Poll had been registered under Memorial No. 402939 and was amongst the documents which had been sent by the Vendors to the Purchasers. The Deed Poll contained the Recital that the carving out of the reserved portion for the Government was made pursuant to Special Condition 14(a). In view of the Certificate of Compliance to which reference has already been made, which itself was made some 7 years after the Deed Poll, any requisition in respect of the original letter of approval was, in my view, no more than fanciful.

Memorial No. 387169

29. This document was dated 3rd April 1986. It was registered under the Register of Land Charges. It was described as being an undertaking by Caltex Oil Hong Kong Ltd in favour of the Director of Lands. It happened to be dated the same date as the date of the new grant. It is said that that date could have been obtained from a perusal of the Assignment to the Vendors in 1991.

30. Be that as it may, the Undertaking was registered as a document of title. Prima facie therefore, it was relevant. The Purchasers were entitled either to inspect a copy of the same or to an explanation that it could not in any event have effect on the title to the property because it was prior to the new grant. In respect of this, a simple explanation by the Vendors' solicitors would have sufficed. The obstinacy in refusing to provide any such explanation when they had put the difficulties of time pressure, which I have referred to above, on the Purchasers dictates, in my view, the conclusion that they have failed to answer the requisition properly.

Memorial No. 469325 - Statutory Declaration of Vincent T.K. Cheung, Solicitor

31. This Statutory Declaration of the 15th October 1987 was registered the following day. As with the previous document, it was registered as a document relating to title and therefore prima facie relevant as to title. Again, the Vendors' solicitors failed to provide sight of it or to provide the simple explanation that its contents had ceased to have relevance. In my view, similar considerations apply as in respect of the Caltex Oil Undertaking.

Conclusion

32. In the premises, therefore, I consider that the Deputy Judge reached the correct conclusion that the Vendors had failed to answer the requisitions adequately and that they were therefore not entitled to forfeit the deposit. I therefore consider that this appeal should be dismissed.

Liu, J.A.:

33. Save for the holding of the Deputy Judge on the exercise of the power of appointment in the Power of Attorney requisition, I agree with the conclusions of Rogers J.A. I, too, would dismiss this appeal. I also agree with the order nisi for costs the Vice-President proposes to make.

34. The characteristics of a substitute and those of a delegate are decidedly different. See Huth v. Clarke, 25 (1890) QBD 391 at p. 395. It is good sense and good law that a power of attorney must be strictly construed and its provisions meticulously followed. The fundamental difference in characteristics between a substitute and a delegate would not allow the 2nd Confirmors to appoint a delegate for the 1st Confirmors, where the former were merely authorised to appoint a substitute. The Deputy Judge is, in my view, right. No act unauthorised by a Power of Attorney should be lightly condoned, albeit that the execution of an assignment by either a delegate or a substitute in this case would have achieved the same effect.

Nazareth, V-P :

35. I agree with my Lords that the appeal should be dismissed.

36. There is only one matter upon which I wish to add, my Lords having both addressed it. This is the requisition relating to the Power of Attorney. At the end of the day, I am content to rely on the reasons given by Rogers JA for not disturbing the finding of the Deputy Judge. In other circumstances, a different view may be taken of the specific point, particularly if the vendor's solicitors could be seen not to have been unhelpful, to say the least. The conclusion does not detract from the principle that Powers of Attorney are to be strictly construed. It does not in the event affect the result at which we have all arrived. As to costs, it seems to me there should be an order nisi that the respondents are to have their costs of the appeal.

37. The appeal is accordingly dismissed, with an order nisi that the respondents are to have their costs of the appeal.