LO WING WAH AND ANOTHER v. CHUNG KAM WAH

HCMP No.3396/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. This is yet another Vendor and Purchaser Summons on the question of a company's execution of a deed.

2. The matter arises in this way. On 12 May 1987, a company called Great Leader Properties Limited ("the Company") assigned the subject property to the Plaintiffs. The Assignment was sealed with the Common Seal of the Company and was signed by Wong Chung Chuen, who was described in the Assignment as "one of its [the Company's] Directors".

3. Article 19 of the Company's Articles of Association provided that the Seal of the Company shall be kept by the Board of Directors and shall not be used except with their authority.

4. Article 20 provided that "every document required to be sealed with the Seal of the Company shall be deemed to be properly executed if sealed with the Seal of the Company and signed by the Chairman of the Board of Directors singly, or by any two directors jointly".

5. By an Agreement for Sale and Purchase dated 25 May 1998, the Plaintiffs agreed to sell the property to the Defendant. By a letter dated 26 June 1998, the Defendant's solicitors raised a number of requisitions, but it has been agreed between the parties that they are concerned with only one, viz.

"The extract of the Articles of Association of Great Leader Properties Limited expressly stated that the Common Seal of the Company must be affixed and signed by the Chairman or before two Directors. Please clarify with us with written evidence whether the signatory to Assignment Memorial No.3399347 Wong Chung Chuen was the Chairman of the Board of Directors at the material time".

6. Before I proceed to the answer provided, I should note that that requisition is not strictly accurate - the Articles do not state that the Common Seal of the Company must be affixed and "signed by the Chairman or before two directors".

7. Some articles no doubt do expressly provide that the Common Seal shall not be affixed to any instrument except in the presence of say, two directors, or the secretary and a director. In those cases, even the act of affixing the Seal would itself not be valid unless it was done in the presence of the required number of company officers.

8. In the present case however, Article 19 provides for the use of the Seal with the authority of the directors, but that is all. Article 20 is a deeming provision which deems a deed to be properly executed if sealed with the Seal of the Company and signed by the Chairman singly, or by two directors jointly.

9. So I take the view that the sealing of the deed in this case is not, in any case, invalidated, even if the signature part of Article 20 is not complied with. The legal estate of the property passed by the sealing (see Peking Fur Store Ltd v Bank of Communications [1993] 1 HKC 625).

10. I find that the signature of the Assignment by Wong singly was not in compliance with Article 20. Unlike Tread East Ltd v Hillier Development Ltd. (1992) HCA No.A907/91, there was no saving provision in the Articles providing that a deed could be signed in such manner as the directors determined.

11. There was no evidence provided by the Plaintiffs to the effect, or from which it could be presumed, that Wong Chung Chuen was the Chairman of the Board of Directors. And since Wong was not described as Chairman on the Assignment, s.23 of the Conveyancing and Property Ordinance does not help the Plaintiffs - because the deed does not "appear" to be duly executed (see Li Ying Ching v Air-Sprung (Hong Kong) Ltd [1996] 4 HKC 418).

12. However that is not the end of the line for the Plaintiffs. They have answered the requisition by providing evidence to the effect that the Company in question has been voluntarily wound-up in 1993, 6 years after the Assignment in question and 5 years prior to this agreement.

13. The evidence retrieved from the Companies Registry is that there was a members voluntary winding-up. Wong and Leung Chiu Pui were the only two members of the Company, they were the only two directors of the Company and they were also both joint liquidators of the Company. As directors and joint liquidators, both obviously had the opportunity to investigate the affairs of the Company and get in all its assets. They were clearly content that the Company had no assets other than those listed in the Statement of Assets and Liabilities, and the property in issue was not included by them in their list. Since there was a Declaration of Solvency, no creditors would have any interest in the property either.

14. In these circumstances, I would hold that even though the execution of the Assignment did not comply with Article 20, it is clear that the Company had no intention to assert any claim to the property and there is no risk that it would at some time in the future issue proceedings to have the Assignment declared invalid (see Peking Fur Store Ltd v Bank of Communications)..

15. Since the agreement has not yet been terminated by either party, I would declare that the requisition relating to the Company's execution of the Assignment raised by the Defendant's solicitors' letter dated 26 June 1998 has been sufficiently answered, and that in this respect good title has been shown to the property and the Defendant is not entitled to rescind the agreement. I would also give an order nisi that the Defendant do pay the Plaintiffs their costs of the proceedings to be taxed if not agreed.