AU SIU WING JACKY v. CHOY KA LEE

HCMP 3901/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3901 OF 1997

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J U D G M E N T

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1. This is a vendor and purchaser summons which raises again a question concerning a power of attorney. At issue is the proper construction of section 5 of the Powers of Attorney Ordinance (the Ordinance), the relevant parts of which read:

"5. Protection of donee and third person where power of attorney is revoked

(2) Where a power of attorney has been revoked and a person, without knowledge of the revocation, deals with donee of the power, the transaction between them shall, in favour of that person, be as valid as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

(6) In this section -

"purchaser" (購買人) 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" (有值代價) includes marriage but not a nominal consideration in money."

2. The property concerned was previously owned by Yu Kin Yee (the donor) and Yu Sing Yee (the donee). On 9th December 1991, the donor conferred on the donee a power of attorney. On 28th December 1993, the property was assigned to Yu Kai Wo (the statutory person) by the donee. On 13th April 1994, the statutory person assigned the property to Chan Chiu Yee (Mr. Chan).

3. On 14th May 1996, the statutory person made a statutory declaration to the effect that he had no notice or knowledge that the power of attorney had been cancelled or revoked at the time of the assignment to him on 28th December 1993.

4. On 14th August 1996, Mr. Chan agreed to sell the property to the defendant. An assignment was executed on 9th October 1996. On 4th September 1997, the defendant by formal sale and purchase agreement agreed to sell the property to the plaintiff.

5. The plaintiff's solicitors took the view that the title might be rendered defective because the statutory declaration had not been made in accordance with the provisions of the Ordinance. The defendant's solicitors made a simple response to the effect that it was in accordance with the Ordinance. After a further exchange of correspondence, the defendant's solicitors asserted that although the statutory declaration had not been made within three months from the date of the assignment to Mr. Chan, "it still serves the purpose that the purchaser did not at any material time has (sic) notice or knowledge of any cancellation or revocation of the power of attorney ...". It appeared and it has been confirmed that the defendant was there, if necessary, relying upon section 5(2).

6. It was not in dispute that "the purchase" which appears in subsection (4)(b) is not confined to the sale by the statutory person to his purchaser. It may be any purchase subsequent thereto. Authority for this may be found in Xiamen International Finance Co. Ltd. v. Tsui Tai Yan (1987) 2 HKC 422: Sonatina International Ltd v. Y.F. International Ltd. (1989) 2 HKLR 189 and Kung Wing Chuen Francis & Yuo Woon Ling v. Antony Louis Marden (MP2523/89) an unreported decision of Bokhary J. (as he then was) given on 8th November 1989. Those decisions do not, however, address the question of what is meant by "before or within three months after the completion of the purchase".

7. For the plaintiff, Mr. Chong contended that the use of the word "completion" in subsection (4)(b) is important. Its importance is that it signifies that there must be contractual relations between the parties to that particular purchase. Therefore, if the statutory declaration is to be effective, it has to be made between the date of the agreement giving rise to contractual relations and the expiry of three months after completion of the purchase. Mr. Chong said that a statutory declaration made outside of this time span can have no effect, at least for the purpose of subsection (4)(b). He submitted that if the statutory declaration was ineffective for the purpose of the subsection in connection with a previous purchase, ie, because it was too late, it cannot logically cure the defect in title when there is a subsequent sale.

8. Mr. Chong said that the time limit laid down in section 5(4) is to provide a balance between the competing interests of the purchaser for the time being and of the donor. The interest of the purchaser will be protected although the power might have been cancelled or revoked. On the other hand, the interest of the donor or possibly the donor's creditors will be protected if the purchaser fails to take advantage of the opportunity to obtain protection offered to him, albeit that opportunity is limited in time.

9. For the defendant, Mr. Hui drew my attention to section 5(6) which he suggested gives a wide meaning to "purchaser". Because of this broad approach by the legislature, a similarly broad approach should be adopted in relation to section 5(4). He contended that a statutory declaration made at any time before a subsequent purchase is effective in curing the defect in title. The three-month time limit provided after completion of a purchase is to cater for the position where the statutory person is not available before completion, but it is known or hoped that he will be able to provide a statutory declaration within the three-month period. This will avoid the necessity of the parties to that particular purchase waiting indefinitely for the statutory person or his statutory declaration to appear.

10. I confess to having some difficulty with the broad approach. If such a broad approach was intended, then it could easily have been expressed. Provision to the effect that a statutory declaration by the statutory person made at any time will create a conclusive presumption in favour of a subsequent purchaser would not have been difficult to fashion.

11. I am wholly persuaded that Mr. Chong is right. A statutory declaration wholly unattached to a purchase in time dictated by contract is not what is contemplated by subsection (4). It is plain to me that what is offered is a window of opportunity for a vendor, if he thinks it necessary or he is required to do so by the purchaser, to remedy the defect in his title by obtaining a declaration from the statutory person. In case there is any difficulty about this, the purchaser can be comforted by the statutory guarantee that the title will be good provided the statutory declaration is made within three months of completion.

12. I am satisfied, therefore, that the statutory declaration in this case was not made as required by section 5(4) and did not cure the defect in title through that avenue.

13. The defendant, therefore, had resort to subsection (2) on the basis that it is evidence that the statutory person did not have knowledge of any revocation. It is certainly evidence, but it is not conclusive evidence. There is, as Mr. Chong said, always the possibility that that evidence might be challenged by or on behalf of the donor. There is no conclusive presumption as provided under subsection (4).

14. Subsections (2) and (4) are inextricably linked. If a statutory person makes a statutory declaration that complies with the requirements of subsection (4), the purchaser can safely accept the title offered by the vendor. If, however, the statutory declaration does not meet the requirements, the purchaser merely has evidence which he is not obliged to accept. Subsection (4) provides the appropriate machinery for taking advantage of subsection (2). If, for some reason, the machinery breaks down then, in my view, a defective part of that machinery cannot sustain the title.

15. In the circumstance, the plaintiff is entitled to the relief sought. I grant declarations that the requisition has not been sufficiently answered by the defendant; that a good title to the property has not been shown and that the plaintiff was entitled to rescind the sale and purchase agreement.

16. I also order that the defendant do return the total deposit of $408,000 to the plaintiff. I make an order nisi that there should be interest on that deposit from 31st October 1997, the date for completion, at the rate of 10% until the date of this judgment and thereafter at the rate prescribed by the Chief Justice.

17. I order that the defendant do pay the plaintiff the costs and disbursements incurred in investigating title and the cost of the estate agent's commission in the sum of $20,400.00.

18. The defendant is also to indemnify the plaintiff in the sum of $88,100.00 for stamp duty paid.

19. The defendant's counterclaim is dismissed.

20. The plaintiff is to have the costs of the proceedings.