LI YUEN LING AND ANOTHER v. TANG KWONG WAI THOMAS AND ANOTHER

   HCMP673/2009

   IN THE HIGH COURT OF THE

   HONG KONG SPECIAL ADMINISTRATIVE REGION

   COURT OF FIRST INSTANCE

   MISCELLANEOUS PROCEEDINGS NO. 673 OF 2009

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BETWEEN

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D E C I S I O N

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BACKGROUND

1.  By a sale and purchase agreement dated 19 January 2009 (“the Agreement”) made between the defendants as the Vendor and the plaintiffs as the Purchaser, the defendants agreed to sell to the plaintiffs the property known as Flat E on the 18^th Floor of Block 3 of Royal Ascot, No. 1 Tsun King Road, Shatin, New Territories (“the Property”).

2.  The Agreement provides, inter alia, as follows :

(a)  the purchase price for the Property (“the Price”) is $8,800,000, of which $260,000 had been paid prior to the Agreement as initial deposit and $620,000 to be paid upon the signing of the Agreement as further deposit.  The balance of the Price shall be paid on completion [Clauses 2 and Part I of Schedule 3];

(b) the purchase shall be completed at the office of Messrs C.L. Chow & Macksion Chan (“CLCMC”), being the Vendor’s solicitors) on or before 6 April 2009 (“the Completion Date”) between the hours of 9:30 a.m. and 5:00 p.m. [Clause 3 and Part II of Schedule 3];

(c) any requisitions or objections in respect of the title or otherwise arising out of the Agreement shall be delivered in writing to the Vendor’s solicitors within seven working days after the date of receipt of the title deeds by the Purchaser’s solicitors and any further objection or requisition arising upon any reply to a former requisition shall be so delivered within seven working days from the date of receipt of such reply otherwise the same shall be considered as waived (in which respect time shall be of the essence of this Agreement [Clause 11];

(d) the Vendor shall give title to the Property in accordance with section 13A of the Conveyancing and Property Ordinance (“CPO”). The Vendor shall, in accordance with section 13 of that Ordinance, prove his title to the Property at the Vendor’s own expense [Clause 16]; and

(e) time shall in every respect be of the essence of the Agreement [Clause 17].

3.  On 4 February 2009, CLCMC delivered the title deeds and documents to the Purchaser’s solicitors, Messrs Lau Kwong & Hung (“LKH”).

4.  The title documents reveal that the defendants themselves originally purchased the Property from ABN Amro Bank N.V. (“the Bank”). The Bank sold the Property to the defendants pursuant to its power of sale under a Mortgage dated 26 August 1997. By an Assignment dated 28 October 2003 (“the Assignment”), the Bank assigned the Property to the defendants. The Bank is a company incorporated in the Kingdom of the Netherlands, with limited liability. The Assignment described the Bank as “having a Branch Office at 38^th Floor, Cheung Kong Center, No. 2 Queen’s Road Central, Hong Kong”.

5.  The Assignment was purportedly executed by a Mr Lau Ka Leung (“Mr Lau”) and a Mrs J. Yeung Lo Po San (“Mrs Yeung”) as the lawful attorneys of the Bank.

6.  Certified copies of two powers of attorney were supplied by CMCLC to LKH to prove the authority of Mr Lau and Mrs Yeung as the lawful attorneys of the Bank. The power of attorney relating to Mr Lau is dated 5 June 2000 (“Lau’s P.A.”) and the one relating to Mrs Yeung is dated 9 August 1995 (“Yeung’s P.A.”). Lau’s P.A. and Yeung’s P.A. will collectively referred to in this Decision as “the said Powers of Attorney”.

7.  In Lau’s P.A., it is recited that Mr Lau was nominated as Attorney-in-fact “B” of the Bank. Mr Lau is authorized to act as the agent of the Bank “for any and all offices located in Hong Kong and to exercise” various powers set out in 30 numbered articles. Amongst the powers set out in those articles is the power to “execute all instruments of transfer of immovable property”. The document bears the title “Power of Attorney ‘B’”.

8.  The last paragraph of Lau’s P.A. contains a proviso as follows :

“Provided always that as far as the powers mentioned in articles 1 up to and including 30 are concerned, [Mr Lau] can only bind the Bank if he is acting jointly with a holder of proxy A of the Bank.”

9.  Lau’s P.A. was signed by two persons, who however did not identify their names in the power of attorney. However, there is attached to Lau’s P.A. a notarial certificate which identified the two signatories as follows :

“Seen by me, Rudolf Jan Cornelis van Helden, notaris, residing in Amsterdam (the Netherlands), for legalization of the signatures of C.N. Vicars and G.G.M. Edkamp, Proxy holders of [the Bank], established at Amsterdam, and in said capacity together representing this company in accordance with its Articles of Association.”

The notarial certificate was issued on 15 June 2000 by a notary in Amsterdam, one Rudolf Jan Cornelis van Helden.

10.  Turning to Yeung’s P.A., I note that it bears the title “Power of Attorney ‘A’”, and recites that Mrs Yeung is nominated as Attorney-in-fact (“A”) of the Bank. Mrs Yeung is authorized to act as the agent of the Bank “for any and all offices located in Hong Kong and to exercise” various powers set out therein in 30 numbered articles. Amongst the powers set out in those articles is the power to “execute all instruments of transfer of immovable property”.

11.  The last paragraph of Yeung’s P.A. contains a proviso as follows :

“Provided always that as far as the powers mentioned in articles 1 up to and including 30 are concerned, [Mrs Yeung] can only bind the Bank if she is acting jointly with a holder of proxy A or with a holder of proxy B of the Bank.”

12.   Yeung’s P.A. was signed by two persons, whose names were not identified in the power of attorney. However, like the Lau’s P.A., there is attached to Yeung’s P.A. a notarial certificate which identified the two signatories as follows :

“Seen by me, Johannes Borren, notaris, residing in Amsterdam (the Netherlands), for legalization of the signatures of Mr J.J.W. Zweegers and Mr W.J.N. Hoek, Executive Presidents of [the Bank], established at Amsterdam, and in said capacity together representing this company in accordance with its Articles of Association.”

The notarial certificate was issued on 24 August 1995 by a notary in Amsterdam, one Johannes Borren.

13.  Five days after the title documents were sent by CLCMC to LKH, LKH raised requisitions by its letter dated 9 February 2009. Amongst the requisitions raised is a requisition in relation to the Assignment (“the Requisition”) in terms, inter alia, as follows :

“As the Bank is a company incorporated in the Kingdom of the Netherlands, kindly let us have the legal opinion to prove that (i) the said two power of attorneys were valid and (ii) Mr Lau and Mrs Yeung are entitled to execute Assignment Memorial No.1344107 in laws of Netherlands.”

14.  CLCMC replied to the Requisition by its letter dated 3 March 2009 as follows :

“According to the respective notarial certificates attached to the two Powers of Attorney, the notary certified that the execution of the said Powers of Attorney was in accordance with the Articles of Association of [the Bank]. As such,section 23 of [CPO] applies and the said Powers of Attorney were presumed to have been duly executed and no further legal opinion is required. We further refer you to the judgment laid down by the Court of Appeal in Sera Ltd. v Excelling Profit Investments Ltd [1992] 2 HKC 262 (CA).”

15.  LKH was not satisfied with the reply. By a letter dated 6 March 2009, LKH wrote to CLCMC to say, inter alia, as follows :

“ Firstly, we do not find that, in the respective certificates attached to the two Powers of Attorney, the notary certified that the execution of the said Powers of Attorney was in accordance with the Articles of Association of [the Bank]. The notary in his certificates only stated that the signatories on the said Power of Attorney were Executive Presidents of [the Bank] and in that capacity signed the said Powers of Attorney and failed to confirm that the said Power of Attorney are valid.

In fact, our requisition herein is whether the said Powers of Attorney are valid and, if the said Power of Attorneys are valid, whether [the] Assignment executed by Mr Lau and Mrs Yeung were bound [sic] on [the Bank]. There were provided in the said Powers of Attorney that so far as the powers mentioned in articles 1 up to and including 30 are concerned. Mr Lau/ Mrs Yeung can only bind [the Bank] if he/she is acting jointly with a holder of proxy A or with a holder of proxy B of [the Bank] …”

16.  I do not need to set out the ensuing correspondence between CLCMC and LKH in detail. By a letter dated 9 March 2009, CLCMC stated that “upon proper construction of the two Powers of Attorney … [Mrs Yeung] is a proxy A and [Mr Lau] is a proxy B.” This contention is not accepted by LKH who took the view that “there is no evidence to show that Mrs Yeung is a holder of proxy A and Mr Lau is a holder of proxy B” (see, LKH’s letter dated 12 March 2009). In further answer to the Requisition, under cover of its letter dated 12 March 2009, CLCMC sent to LKH “a certified copy Legal Opinion dated 10 August 2001” made by one Stephanie E.L. Leijten, who claimed herself to be the “Assistant Regional Counsel for the Asia pacific region” of the Bank (“the Legal Opinion”). In the Legal Opinion, Ms Leijten purportedly stated (inter alia) that “after having examined such documents and having made such enquiries as [she] think are appropriate”, she is of the opinion that :

“1. The Bank has the power and authority to establish, both in The Netherlands and in a foreign country, a branch and has power and authority to appoint the Attorneys to act as the attorneys of the Bank’s Hong Kong branch.

2. Each of the authorised directors of the bank had the power to act on behalf of the Bank at the time of execution of the Powers of Attorney, and each of the authorised directors of the Bank, at the time of the execution of each of the Powers of Attorney, had the legal power to execute such Power of Attorney on behalf of the Bank appointing the Attorneys as the attorneys of the Bank’s Hong Kong Branch.

3. At the time of the execution of the Powers of Attorney, the Bank had the power to execute the Powers of Attorney and the persons who executed the Powers of Attorney were the authorised directors of the Bank. The Powers of Attorney have been duly executed under the laws of The Netherlands. Therefore, the Powers of Attorney are legally binding and enforceable against the Bank in accordance with the terms and conditions stipulated in the Powers of Attorney.”

17.  It is not clear what documents have been examined and what enquires might have been made by Ms Leijten before she gave her opinion. The Legal Opinion has not set out the documents and enquiries that Ms Leijten had purportedly considered or made. Neither has Ms Leijten set out her qualifications. In particular, it is not known what legal qualifications Ms Leijten possessed to enable her to give the opinion that the said Powers of Attorney “have been duly executed under the laws of The Netherlands”.

18.  LKH did not accept that the Legal Opinion was sufficient to answer the Requisition, and insisted on the same. By letters dated 30 March 2009 and 3 April 2008, CLCMC stated that they had already “satisfactorily complied” with LKH’s requisitions.

19.  The plaintiffs refused to complete the sale and purchase on the Completion Date. By a letter dated 7 April 2009, CLCMC wrote to LKH and claimed that the plaintiff’s failure to complete was a breach of the Agreement. LKH was informed that the defendants had, purportedly in exercise of their rights under the Agreement, determined the Agreement and forfeited all the deposits paid by the plaintiffs.

THE APPLICATION BEFORE THE COURT

20.  By an Originating Summons filed on 6 April 2009 and issued pursuant to section 12 of CPO, the plaintiffs seek the Court’s determination of the following questions :

“(a) whether the defendants have shown and proved good title to the Property;

(b) whether the said Powers of Attorney were lawfully and validly executed by the Bank;

(c) if the answer to (b) is in the affirmative, whether the Assignment executed by Mrs Yeung and Mr Lau validly bound the Bank.”

21.  The plaintiffs also seek, inter alia, the following orders and reliefs :

(1) a declaration that a good title to the Property has not been shown in accordance with the Agreement;

(2) a declaration that the plaintiffs are entitled to rescind the Agreement; and

(3) an order that the defendants should return to the plaintiffs the deposit under the Agreement with interests.

WHETHER GOOD TITLE SHOWN

22.  At the hearing before me, Mr Dennis Sit act for the plaintiffs and Miss Elizabeth Cheung appears for the defendants.

23.  The Assignment in this case was executed on 28 October 2003. It was thus executed less than 15 years before the Agreement. The presumptions set out in section 13(4A) of CPO accordingly do not apply. In order to show good title, the defendants would have to show not only that the said Powers of Attorney were valid and properly executed, they would also have to show that the terms of the said Powers of Attorney validly authorised Mr Lau and Mrs Yeung to execute the Assignment as the attorneys of the Bank.

The validity of the said Powers of Attorney

24.  Mr Sit submits that the said Powers of Attorney were invalid and were therefore incapable of constituting Mr Lau and Mrs Yeung the lawful attorneys of the Bank. They were accordingly not entitled to execute the Assignment purportedly as attorneys of the Bank.

25.  As a general rule the formal validity of a power of attorney is governed by the law of the place where the power is to be used. As the said Powers of Attorney are to be used in Hong Kong (by Mr Lau and Mrs Yeung respectively as agent of the Bank “for any and all offices located in Hong Kong), their formal validity is governed by Hong Kong law. This is particularly so in the present case when the said Powers of Attorney were used or purportedly used by Mr Lau and Mrs Yeung to effect transfer of land in Hong Kong, the lex situs of which is Hong Kong law.

26.  I have not overlooked the provision in Lau’s P.A. (but not in Yeung’s P.A.) which provides that the power of attorney is governed by and construed in accordance with the laws of The Netherlands. I do not think that the provision affects the general rule under our conflicts of law that the formal validity of a power of attorney is governed by the law of the place where the power is to be used. In any event, that provision is found only in Lau’s P.A. and not in Yeung’s P.A. There is also no evidence before me as to what the law of The Netherlands is regarding formal validity, and no such evidence has been provided by the defendants’ solicitors when they answered the Requisition. It is again well-settled that in the absence of evidence of foreign law, the foreign law is presumed to be the same as Hong Kong law (see, The Parchim [1918] AC 157, per Lord Parker at 161, Excelling Profit Investments Ltd v Sera Ltd [1992] 2 HKC 262 at 268H). Accordingly, if, contrary to my view, the laws of The Netherlands apply to govern the formal validity of the said Powers of Attorney, I would have to proceed on the basis that the laws of The Netherlands are the same as Hong Kong law.

27.  Section 2(1) of the Power of Attorney Ordinance (“PAO”) expressly provides that an instrument creating a power of attorney shall be signed and sealed by, or by direction and in the presence of, the donor of the power. It is plain from the copies of the said Powers of Attorney that neither of them is sealed. Accordingly, the formal requirements provided under section 2(1) have not been complied with. It follows that on the face of the instruments, they are not valid powers of attorney.

28.  Miss Cheung complained that the plaintiffs have never raised any requisition in respect of the lack of seal. She argued that it is too late for the plaintiffs to raise this as a requisition as the time for requisitions has long passed.

29.  I am unable to agree with Miss Cheung’s complaint. The Requisition was first raised by LKH on 9 February 2009. As raised, the Requisition required the defendants to prove that the said Powers of Attorney were valid. In its letter dated 6 March 2009, LKH reiterated to CLCMC that the Requisition “is whether the said Powers of Attorney are valid and, if the said Powers of Attorney are valid”. Hence it must have been clear to CLCMC, when they purported to answer the Requisition, that the objection raised by the plaintiffs to the title of the Property was that the said Powers of Attorney was invalid.

30.  That the said Powers of Attorney are not sealed is plain to the eyes. The formal requirements provided in section 2 of PAO are matters of law. It is not the purpose of requisitions for the parties to bandy propositions of law or to make arguments on points of law. LKH had made it clear that it was raising a requisition against the validity of the said Powers of Attorney. It was not incumbent on them to go on to explain to CLCMC that powers of attorney are required by law to be sealed. The law is as much known to the Vendor and the Purchaser, and their respective solicitors. The absence of sealing is obvious on the face of the documents. There is no duty on the part of the plaintiffs to remind the defendants of such an obvious fact.

31.  The above also disposes of the argument of the defendants that under section 23 of CPO, the said Powers of Attorney are presumed to be duly executed. The presumption of due execution under section 23 only applies to “an instrument appearing to be duly executed”. As Sir Anthony Mason pointed out in the case of Leung Kwai Lin Cindy v Wu Wing Kuen (2001) 4 HKCFAR 55 (at 67E–F), under section 23 :

“… a rebuttable presumption arises once evidence establishes that the instrument appears at any time on its face to have been duly executed. It is that fact and that fact alone which attracts the statutory presumption. Other circumstances may serve to reinforce the presumption or to rebut it.”

32.  As the said Powers of Attorney do not appear on their face to have been duly executed because of the lack of sealing, the rebuttable presumption under section 23 cannot arise. Neither can the common law maxim “omnia praesumuntur rite esse acta” assist in such a case.

33.  I therefore hold that the said Powers of Attorney are invalid.

34.  This makes it unnecessary for me to rule on the further point made by Mr Sit that there is no evidence to show that the said Powers of Attorney have been executed in accordance with the Articles of Association of the Bank. On that point, I am inclined to accept Miss Cheung’s submission that on the face of the notarial certificates, the signatories of the said Powers of Attorney appeared to have been duly authorised by the Bank to sign the same “in accordance with its articles of association”. In my view, Miss Cheung is right in submitting that the position is analogous to a statement in the execution clause of a deed that the signatories have been authorised by the company’s articles to execute the deed. If it appears that the signatories are properly authorised, the instrument does appear to be duly executed and section 23 of CPO applies to presume that the same as having been duly executed : see, Tread East Ltd v Hillier Development Limited (1992) HCA907/91 (23 November 1992). Accordingly, if I was required to decide on this further point, I would have held in favour of Miss Cheung’s submissions. However, since I hold that the said Powers of Attorney are invalid as they are not sealed by the Bank, it is not necessary to make a definite ruling on the further point.

35.  In holding that the said Powers of Attorney are invalid, I have not forgotten that the Legal Opinion purportedly stated that the said Powers of Attorney were duly executed under the laws of The Netherlands. I do not think that the said Legal Opinion has any relevance at all to my Decision on this point. Firstly, as I have held above, I consider that it is Hong Kong law that is applicable in deciding the formal validity of the said Powers of Attorney. Secondly, in any event I do not consider that I should attach any weight at all to the Legal Opinion. As pointed out above, there is nothing in either the Legal Opinion itself, or in the other evidence before me, to show that the author of the legal Opinion was qualified to speak on the laws of The Netherlands. Certainly I do not consider that merely because she was the Assistant Regional Counsel of the Bank, she had the necessary expertise or qualification to give an opinion onthe laws of The Netherlands. In any event, she did not give any reason or basis for her purported opinion. She did not condescend to any particulars as regards the documents that she had examined or the enquiries that she had made before she formed the opinion that she gave. Such purported opinion is worthless to this Court and did not help in answering the Requisition.

Authority granted under the terms of the said Powers of Attorney

36.  Having held that the said Powers of Attorney are invalid, it is also not necessary for me to consider whether Mr Lau and Mrs Yeung are validly authorised by the same to execute the Assignment as attorneys of the Bank. However, in case I am wrong on the issue of validity, and for completeness’ sake, I would briefly set out my view on this issue.

37.  As pointed out above, under the Lau’s P.A., it is provided expressly that in exercising the powers mentioned in articles 1 to30 set our in the power of attorney, he “can only bind the Bank if he is acting jointly with a holder of proxy A of the Bank.” There is a similar provision in Yeung’s P.A. in that she can only bind the Bank if she “is acting jointly with a holder of proxy A or with a holder of proxy B”.

38.  There is no evidence before me what a holder of proxy A or proxy B is. In executing the Assignment, Mr Lau and Mrs Yeung acted together. Unless Mrs Yeung was a holder of proxy A and Mr Lau was a holder of proxy A or proxy B, their acts of execution would not bind the Bank.

39.  I am unable to assume or to infer that an Attorney-in-fact “A” or an Attorney-in-fact “B” (which Mrs Yeung and Mr Lau were respectively nominated to be under the Yeung’s P.A. and the Lau’s P.A.) are the equivalents of holders of proxy A and proxy B. If anything, the evidence before me suggests (and I put it no higher) otherwise. I note that in the notarial certificate attached to Lau’s P.A., the signatories were stated to be proxy holders representing the Bank in accordance with its Articles of Association. On its face, therefore, proxy holders are authorised to represent the Bank under the Articles of Association. One would have thought that the proxy holders were a class of persons duly authorised by the Bank’s Articles of Association to execute documents on its behalf. Accordingly, if Mrs Yeung and Mr Lau were already proxy holders, one would have thought that there would be no need to appoint them as attorneys. Of course, without a copy of the Articles of Association before me, I cannot form a definite view on this. What I can say, however, is that there is no basis, in the absence of evidence, to assume or infer that Mr Lau and Mrs Yeung were proxy holders. The duty is upon the defendants to show that they were. The defendants have not discharged this duty and accordingly they have not been able to show that Mr Lau and Mrs Yeung were validly authorised by the terms of the said Powers of Attorney to execute the Assignment binding on the Bank.

ORDER

40.  I would accordingly determine the questions raised in the Originating Summons as follows :

(1) the defendants have not shown good title to the Property;

(2) the said Powers of Attorney were not validly executed by the Bank; and

(3) Mr Lau and Mrs Yeung were not validly authorised by the said Powers of Attorney to execute the Assignment binding on the Bank.

41.  In his written submissions put before me, Mr Sit ask for an order in terms of paragraphs A(i)–(iv) of the Originating Summons. Having considered those paragraphs of the Originating Summons, I would make the following orders :

(1) it be declared that a good title has not been shown by the defendants to the Property in accordance with the Agreement;

(2) it be declared that the plaintiffs were entitled to rescind the Agreement; and

(3) an order be made that the defendants should return to the plaintiffs all deposits paid by the plaintiffs under the Agreement, with interests at savings rate from the date of issue of the Originating Summons to the date of judgment, and thereafter at judgment rate until payment;

42.  My decision herein effectively disposes the whole action. I would make an order nisi that the costs of this action be paid by the defendants to the plaintiffs, to be taxed if not agreed.