Lo Hung Biu v. Lo Shea Chung and Another
Read the full judgment text of CACV 258/1996 on BabelCite. This Court of Appeal judgment.
1. On 6th July, 1996, the Defendant vendors and the Plaintiff purchaser entered into a provisional agreement for the sale and purchase of Lot No. 281 in D.D. 106 in Yuen Long. A deposit of $288,000 has been paid. The purchaser raised requisitions as to title which the vendors refused to answer, taking the view that they were not obliged to do so having regard to the provisions of section 13 of the Conveyancing and Property Ordinance, Cap. 219. The purchaser applied by way of originating summons
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IN THE COURT OF APPEAL 1996, No. 258 _______________
_______________ Coram: Hon. Nazareth, V.-P., Ching, J.A. & Cheung, J. in Court Dates of hearing: 24 & 30 April, 1997 Date of handing down judgment: 4 June, 1997 _______________ J U D G M E N T _______________ Ching, J.A. : 1. On 6th July, 1996, the Defendant vendors and the Plaintiff purchaser entered into a provisional agreement for the sale and purchase of Lot No. 281 in D.D. 106 in Yuen Long. A deposit of $288,000 has been paid. The purchaser raised requisitions as to title which the vendors refused to answer, taking the view that they were not obliged to do so having regard to the provisions of section 13 of the Conveyancing and Property Ordinance, Cap. 219. The purchaser applied by way of originating summons for a declaration that his requisitions had not been properly answered, a declaration that the vendors had not shown good title to the property with the result that he was entitled to annul the provisional agreement, an order for the repayment of his deposit with interest and for his costs. In a judgment that was almost cursory, Deputy Judge W. Wong made the declarations sought, ordered the return of the deposit without interest and made no order as to costs. The vendors now appeal. 2. The property had been registered in the name of Sham Shun Tsing. He executed a power of attorney on 25th April, 1961, in Djakarta in which his name is given as "Sim Joen Sen also named Sham Shuen Ching". It gave powers over all his properties in Hong Kong to Sham Kwan Yiu whose address was given as being in a village in Yuen Long. It was registered in the Land Registry, the Memorial giving the donor's name as being "Sham Shun-Tsing (or spelt as Sham Shuen-Ching)" with an address in Djakarta and "of Yuen Kong" and the donee as being "Sham Kwan-yiu of Yuen Kong". The Memorial shows that it related to numerous properties including Lot No. 281 and Lot No. 282 in D.D. 106. There was an assignment of all of the properties on 11th August, 1961. The assignment has been lost but Memorial No. 145221 shows that it was registered as an assignment by way of gift by "Sham Shuen-tsing (or spelt as Sham Shun-ching) by his Attorney, Sham Kwan-yiu, of Yuen Kong, as Assignor" in favour of "Sham Sun-wing and Sham Cheung-shun with Ng Yuk-ying as Trustee, of Yuen Kong, as Assignee". This Memorial was signed by Sham Kwan-yiu and Ng Yuk-ying. It is probable that "Yuen Kong" is a misspelling of "Yuen Long" and that there is no beneficiary by the name of "Yuen Kong". It is not clear whether Sham Shun-wing and Sham Cheung-shun were beneficiaries or whether they were co-trustees with Ng Yuk-ying. In the circumstances of this case it does not matter. There was then another assignment of Lot No. 281 and Lot No. 282 in D.D. 106 on 27th November, 1969. Again, the assignment has been lost but Memorial No. 163823 shows that again it was an assignment by way of gift this time by "Sham Sun-wing and Sham Cheung-shun with Ng Yuk-ying as trustee of Yuen Kong, as Assignor" and "Sham Cheung-shun with Ng Yuk-ying as trustee of Yuen Kong, as Assignee". This Memorial was signed by Ng Yuk-ying alone, his identity card number being given. This assignment was not made pursuant to the power of attorney. The vendors, claiming to show their title in accordance with section 13, have produced to us a Memorial No. 170626 which shows registration of a Conveyance on Sale dated 14th April, 1972, being a conveyance for value by "Shum Cheong-shuen of Yuen Kong" as vendor and another party as purchaser. No point has been taken on the various spellings of any of the names. 3. Under cover of a letter dated 12th September, 1996, the vendors sent to the purchaser what they described as the relevant title deeds and documents. This included what was described as "Certified copy Conveyance on Sale Memorial No. 170626" which appears to have been the Memorial and not the actual Conveyance on Sale although this is not clear. On 16th September, 1996, the purchaser raised his requisitions by way of letter which, after referring to the documents received, was in the following terms,
The letter enclosed what was described as the relevant documents, presumably copies of the power of attorney and the two memorials. As already stated, the vendors stood upon Memorial No. 170626 as their root of title by reason of section 13. 4. Astonishingly, neither the power of attorney nor any of the Memorials referred to above was produced to the Judge below. They have been shown to us by consent. Alarmingly and in defiance of the best evidence rule the Judge nevertheless admitted and acted upon evidence from the purchaser's solicitor as to their contents. Of the power of attorney, the judgment reads,
This is an accurate quotation of one of the groups of powers given by the power of attorney but how the Judge came by it is unknown. He concluded this part by saying,
The only "evidence" of this was from the purchaser's solicitor. 5. Section 13(1) provides, in part, that,
The provisional agreement was silent as to any of the matters contained in section 13. The Judge said,
It is not apparent whether the Judge considered that the section applied. Both parties understood him to mean that it did not. Certainly he did not go on to consider what effect the section may have had. The section does not provide that it is to have no application unless it is incorporated. To the contrary, it provides in express and clear terms that it is to apply unless it is excluded. Having regard to the wording of the provisional agreement it clearly applied and the Judge below was wrong if he thought it did not. 6. In another passage the Judge below said,
A Memorial conveys or assigns nothing. It is the Conveyance on Sale or the assignment which conveys. It was not the trustee alone who conveyed. The Memorial names the assignors as Sham Sun-wing and Sham Cheung-shun with Ng Yuk-ying as trustee. The Memorial was signed by Ng Yuk-ying alone but that does not mean or indicate that he was the only assignor, for the First Schedule of the Land Registration Ordinance, Cap. 128, requires only that some or one of the parties should sign it. Nor was there any "evidence", save for that of the purchaser's solicitor, that the other beneficiary had not consented. Before us, Mr. Albert K.C. Yau who appeared for the vendors but who did not appear in the Court below, effectively did not really pursue the point. I am quite sure that it is unsustainable. The actual assignment being lost, the Memorial is good secondary evidence of its contents and shows an assignment by all three assignors. Requisition (b) as couched, was mistaken and called for no answer. So far as it is concerned, therefore, the appeal would succeed. 7. Upon requisition (a) both counsel addressed to us arguments on numerous points with which I do not intend to deal. The basis of the application by the purchaser was that the vendors were required to answer the requisitions that were made. So far as requisition (a) was concerned he argued that the power of attorney gave no authority to the donee to assign the property by way of gift. The only two issues properly before the Judge below and before us were, first, whether the power of attorney did give such authority and, secondly, even if it did then whether the vendors were obliged to show a good title beyond the 15 years required by section 13. 8. The power of attorney begins the list of the powers given with the words,
There follows a list of powers of which one was that cited by the Judge below and of which the last was,
There was no specific power to make a gift. None of the specific powers necessarily includes such a power and if a power to make a gift is to be found it must be on the basis of general words. 9. Inevitably I was referred to the dicta of Russell, J., as he then was, in Reckitt v. Barnett, Pembroke and Slater, Ltd., (1928) 2 KB 244 approved in the House of Lords at (1929) AC 176, that,
We were also shown three decisions in Hong Kong, namely Li Ming-on v. Lucky Apple, Ltd., (1994) 2 HKLR 111, Very Cheer Development, Ltd., v. Bring All, Ltd., (1994) 1 HKC 769 and Sham Wing Tai v. Ng Ting Biu (Unreported, 1994 No. MP 524) to like effect. Mr. Horace C.Y. Wong, who appeared before us for the purchaser but not in the Court below, pointed out to us that in each of these decisions the assets of the donor were used for or went to the benefit of the donee. If that be correct, then the words "or to others" in the judgment of Russell, J., were obiter dicta. The argument has a superficial attraction but I am convinced that it is wrong. The judgment in Reckitt v. Barnett (supra) has never been questioned. On the facts of that case the donee had used the donor's property by paying the money to the bank for his own purposes so that in fact the property was given to others. I agree that the primary purpose of a power of attorney is to enable the donee to manage the donor's property and that it would need very clear words to authorise him to make a gift of it or part of it to himself or to others. The general words in this present power of attorney were neither sufficiently unambiguous nor irresistible to cause such a meaning to be given to them. Subject to the other arguments advanced there was, therefore, on the face of the documents a defect in the vendors' title. 10. Section 13(4) was mentioned to us. This provides that,
This does not assist the vendors. The relevant assignment was not available. The Memorial was not a document of title. It showed only that that assignment was by way of gift purportedly made under the power of attorney. The power of attorney, as already seen, does not contain anything empowering an assignment by gift. 11. Section 13(4A) then provides that,
No question was raised under (i). Some argument was addressed to us under (ii) in that it was asserted that there was no evidence that the two assignments by gift had been executed pursuant to this particular power of attorney. There is nothing in this. The power of attorney was dated 25th April, 1961. It was registered against, inter alia, the property in question. The first assignment by gift was on 11th August, 1961. There is no evidence that any other power of attorney ever existed. It is the provision under (iii), that the power of attorney is to be conclusively presumed to have validly authorised the execution of the document, that needs to be addressed. 12. Mr. Albert K.C. Yau submitted to us that section 13(4A) had no application because the document that was produced was the Memorial and not the actual assignment. I agree with him and therefore the section has no application. In addition neither of the Memorials in question was produced by the vendors as proof of their title. Indeed, section 13(1) begins with the words,
However, when a purchaser himself is in possession of pre-intermediate root documents there is nothing to prevent him raising proper requisitions upon them. That is what occurred in the present case. Requisition (a) was a proper one. It pointed out a possible defect in the pre-intermediate root of title. The defect consisted of the fact that the power of attorney gave no power to the donee to make a gift of the property. 13. Mr. Horace Y.L. Wong addressed to us an interesting argument on the burden of proof. He conceded that the vendors were obliged to show a good title but he argued that so far as pre-intermediate root title was concerned the burden was on the purchaser to prove that there was a defect before the vendors had a duty to comply with the requisition. I reject this argument. If the purchaser were required to prove the defect first there would hardly be any point to a requisition. It is the duty of the vendors to show good title. 14. I find that the power of attorney gave no power to the donee to assign the property by way of gift. I find that requisition (a) was a proper one and that it has not been answered properly or at all. In these circumstances this appeal must be dismissed. Since the order as to costs in the Court below was by consent I would not disturb it but would make an order nisi that the costs of the appeal are to be paid by the vendors to the purchaser. Cheung J. : The appeal 15. The Appellants were the vendors ("the Vendors") of a property in the New Territories known as Lot No.281 in D.D.101 ("the Property"). By a Provisional Agreement dated 6th September 1996 ("the Agreement"), the Vendors agreed to sell the Property to the Respondent purchaser ("the Purchaser"). 16. The Purchaser raised requisitions as to title of the Property and later issued a Vendor and Purchaser summons seeking a declaration that the Vendors had not answered the requisitions and that good title had not been shown on the Property. Deputy Judge Wong, upon hearing the summons, granted the declarations. The Vendors now appeal. Vendors' duty to show good title 17. The Agreement was silent as to the obligation of the Vendors to prove title. However, the decision of the Court of Appeal in Active Keen Industries Ltd. v. Fok Chi Keong [1993] HKLR 396, clearly established that there was an obligation on the Vendors to show and make a good title. In the absence of contrary provisions, title was proved by s.13(1) of the Conveyancing and Property Ordinance ("the Ordinance"), namely the Vendors were required to produce to the Purchaser, first, the Crown lease of the Property and secondly an assignment, mortgage by assignment or legal charge, extending not less than 15 years before the Agreement. In the present case, it was agreed that the title was found in a Conveyance on Sale dated 14th April 1972. This title is usually referred to as the intermediate title. The requisitions 18. The requisitions raised by the Purchaser were these : First, Sham Shun Tsing was the Owner of the Property. By a Power of Attorney dated 25th April 1961 ("the Power of Attorney"), Sham Shun Tsing appointed Sham Kwan Yiu ("the attorney") as his lawful attorney to deal with the Property and other properties. There was no provision in the Power of Attorney authorising Sham Kwan Yiu to assign the Property by way of gift. However in the Memorial of an Assignment dated 11th August 1961 ("the 1st Memorial"), it was recorded that Sham Kwan Yiu assigned the Property to Sham Sun Wing and Sham Cheong Shun with Ng Yuk Ying as trustee by way of gift. 19. The second requisition was that by another Memorial of an Assignment dated 27th November 1969 ("the 2nd Memorial"), it was recorded that Sham Sun Wing and Sham Cheong Shun with Ng Yuk Ying as trustee assigned, inter alia, the Property to Sham Cheong Shun. The requisition was that the assignment was defective because Sham Sun Wing and Sham Cheong Shun did not sign their names on the 2nd Memorial to signify their consent to the arrangement. 20. Sham Cheong Shun by the Conveyance of Sale dated 14th April 1972 sold the Property to Law Chuen Chau and the Vendors eventually became the registered owners of the Property. 21. The response of the Vendors was contained in the letter of 23rd September 1996 which stated that "The root of title of the Property is Conveyancing on Sale Memorial No.170626. Any deeds or documents before this is irrelevant. Therefore, we are not obliged to entertain your requisitions." This response was repeated in subsequent letters. Purchaser to show aliunde title defective 22. Counsel for the parties accepted that, notwithstanding s.13(1) of the Ordinance, the Purchaser was not precluded from showing aliunde (or in modern language, from another source) that the pre-intermediate title was defective. 23. In Re Cox and Neve's Contract [1891] 2 Ch. D.109 in which the conditions of sale provided that the title should commence with a mortgage executed in 1852. North J. held that the purchaser was not precluded from raising objection to title in relation to deeds executed prior to 1852. Mayo J. (as he then was) in Lam Lee v. Lui Yem Bun (HCMP No.3799 of 1993) likewise held that a purchaser was entitled to show that the earlier title was bad. 24. Although the parties agreed that the Purchaser might show aliunde that the title was defective, they differed as to whether the Purchaser was entitled to raise requisitions as to title. The Vendors said that the Purchaser was not entitled, whereas the Purchaser maintained that right was not in any way affected by s.13(1) of the Ordinance. 25. The principle is that the obligation to show a good title includes the obligation to answer requisitions satisfactorily. If requisitions are not answered satisfactorily, it does not matter whether in fact the vendor has a good title to the property and the purchaser is entitled to rescind : Kok Chong Ho and Another v. Double Value Developments Ltd. [1993] 2 HKLR 423. Active Keen Industries Ltd. is a case where the vendor had a good title but failed to show a good title by failing to answer requisitions satisfactorily. Vendors' argument 26. Mr Wong, Counsel for the Vendors, argued that if the Purchaser wished to go beyond the intermediate title which otherwise was good, then the burden was on the Purchaser to show that the pre-intermediate title was defective. Because of this burden, the Purchaser must show by positive evidence that the attorney was not properly authorised to execute the Assignment dated 11th August 1961. All that the Purchaser did was to point to the Power of Attorney to say that the instrument did not give the attorney express power to assign the Property by way of gift. Mr Wong argued that the value of s.13(1) was not confined merely to the production by the Vendors of the title deeds but productions of such deeds as proof of title. In view of this burden on the Purchaser, the Vendors were not obliged to answer the requisitions. He argued s.13(1) would be rendered meaningless if the Vendors were still required to answer the requisitions as to title by the Purchaser. Purchaser is still entitled to raise requisitions 27. In my view, although because of s.13(1), the Purchaser has to establish a defective title in respect of pre-intermediate matters, the right by the Purchaser to raise requisitions is not taken away except by legislation or by agreement between the parties. Caution must be exercised in relying on English cases because of the wording of the English legislation. Section 45(1) of the Law of Property Act 1925 precluded the purchaser from, inter alia, making requisitions or objections with respect to documents or title prior to the time prescribed by law or stipulated for the commencement of the title. 28. The section provided, inter alia, that :-
29. In the earlier Vendor and Purchaser Act 1874, it provided that, inter alia :-
30. On the other hand, there are no similar restrictions in s.13(1) of the Ordinance. Section 13(1) is as follows :-
31. The view that requisitions can only be excluded by express provisions is supported by Fry on Specific Performance 6th Edn. (1920) at page 614 :-
32. The burden of the Purchaser to show a defective pre-intermediate title and his entitlement to raise requisition on the pre-intermediate title are not mutually exclusive. The raising of requisitions may enable the Vendors to remedy any defects in title. In Re Cox and Neve's Contract is a case in which requisitions were raised on pre-intermediate title when the agreement provided that the title was to commence with a deed of a later date. The nature of the application appeared at page 110 of the judgment :-
Requisition proper 33. Whether a purchaser can establish that the vendor's title is defective is a matter that can only be determined when the matter is before the court. However, if the objections are properly formulated and they show that the pre-intermediate title is defective, the vendor must respond to the requisitions. 34. In In re Scott and Alvarez's Contract [1895] 1 Ch. D.596, the condition of sale provided that :-
35. The Court of Appeal held that the condition cast upon the purchaser the burden of proving a defective title, and that, to relieve him from his contract, it was not enough for him to shew merely that the title was doubtful or open to suspicion; and, therefore, that the vendor was entitled to a declaration that a good title had been shewn "according to the terms of the contract". 36. In the present case, the requisition regarding the Power of Attorney goes straight to the validity of the title of the Vendors and not merely showing that the title was doubtful or open to suspicion. In Reckitt v. Barnett, Pembroke and Slater Ltd. [1928] KBD 244 Russell J. held at p.268 and p.269 that :-
The judgment was expressly approved in the House of Lords [1929] AC 176 by Lord Hailsham L. C. and Lord Warrington. The dicta of Russell J. was expressly followed in subsequent Hong Kong decisions such as Overseas Trust Bank Ltd. v. Tang Che Ching and others (Civil Appeal No.47 of 1989), Li Ming On v. Lucky Apple Ltd. and Lo Sai Cheong [1994] 2 HKLR 111 and Very Cheer Development Ltd. and another v. Bring All Ltd. [1995] 1 HKLR 213 and Sham Wing Tai and others v. Ng Ting Biu and others 37. In my view, the principle set out in Reckitt is too well established to be disturbed. Although the case itself is concerned with an attorney benefitting himself, the principle that the primary object of a power of attorney is to enable the attorney to act in the management of his principal's affairs forms the corner stone of the rule that an attorney cannot in the absence of a clear power so to do make presents to others of his principal's property. The Power of Attorney in this case was no doubt in very wide terms, but there was no specific provision enabling the attorney to assign by way of gift to others of the donor's property. The Power of Attorney provided that :-
38. True that the Purchaser had not said in the requisition that the title was defective but in my view that must be the basis of the requisition because if the attorney had no power to make gift to others, then the person who received the gift could not pass a good title to subsequent assignees of the Property. Other arguments 39. Mr Wong argued that it was not shown that the Power of Attorney was the very same instrument which was relied upon by the attorney. This argument has no merits. The Power of Attorney was the only such document registered in the New Territories District Office in respect of the Property. The Assignment of 11th August 1961 was executed shortly after the Power of Attorney. In all probability, that was the very document which the attorney derived his authority. 40. Likewise, in view of the decision of Bokhary J. (as he then was) in Leung Woon Chau v. Gladeal Limited (HCMP No.597 of 1990), the Vendors cannot rely on the presumption in s.13(4A) of the Ordinance. The Vendors argued that as the Assignment dated 11th August 1961 was executed under a Power of Attorney, it was conclusively presumed by s.13(4A) that the Power of Attorney was validly executed, and in force at the time of the execution of the Assignment and validly authorised the execution of the Assignment. The presumption is not applicable because the Power of Attorney which was produced at this appeal did not confer on the attorney the express power of making gift of the Property to others. 41. In any event, the last two points were not relied upon by the Vendors when the Purchasers raised the requisitions. To the requisition, the Vendors' response was simply that they were not required to answer the requisitions because of s.13(1). This was clearly wrong. Based on the failure of the Vendors to answer the first requisition, the learned Judge was right to make the orders in the court below. Whether the Purchaser was entitled to raise the second requisition or not became irrelevant. Conclusion 42. The appeal should therefore be dismissed with costs nisi to the Purchaser. Nazareth V-P: 43. I agree with my Lords that the appeal must be dismissed for the reasons they have given. I would, however, add the following. 44. In the absence of any contrary intention being expressed in the provisional Sale and Purchase Agreement, by s.13(1)(a)(ii) of the Conveyancing and Property Ordinance, the purchaser is entitled to require from the vendor as proof of title only production of the Crown Lease and intermediate root of title extending to 15 years. 45. It is not suggested before us, even by Mr Horace Wong for the appellant vendors, that s.13(1) means that the purchaser has no right whatsoever to raise requisitions as to the pre-intermediate root of title. What he contended for, however, is that the purchaser had to first prove a defective title before the vendor's became subject to a duty to comply with a requisition. But that cannot be right, for, as Ching JA has pointed out in his judgment, there would then be hardly any point to a requisition. 46. At the other extreme, if a bare possibility of a defect in the title entitles the purchaser to raise requisitions (as in effect Mr Yau for the respondent purchaser suggests in contending that the standard, criteria and relevant duty to provide answers is the same in relation to intermediate title as to pre-intermediate root of title), then as Mr Wong complains, s.13(1) will become pointless. 47. Of necessity, the criteria must lie between the two extremes. The only formulation of possibly applicable criteria brought to our attention was that in In re Scott v Alvarez's Contract [1895]1 ChD 596, to which Cheung J has referred in his judgment. There, under a condition of sale (which is set out in my Lord's judgment), the purchaser agreed to take the property on the term that he would not make any objection in respect of the intermediate title. There had earlier been a change of title apparently by fraud. Nonetheless the vendor had a good possessory title. Lindley LJ held that the purchaser, having entered into that very special bargain, was bound by it. Lopes LJ acknowledged that the title was a somewhat curious one but pointed out that the effect of the condition was to cast upon the purchaser the burden of proving a defective title. He added:
Kay LJ said:
It seems to me therefore that In re Scott v Alvarez's Contract has no inherent applicability to the present circumstances in particular in the condition there requiring the purchaser to show that the title was defective. Nonetheless, the concept of it not being enough to show merely that the title is doubtful or open to suspicion, may prove of assistance in providing a formulation of that which is not sufficient to found an entitlement to raise a requisition as to pre-intermediate root of title. 48. However that may be, it does not seem to me this Court is in a position to formulate any sort of criteria, if indeed that is possible. Nonetheless, for myself, I am satisfied that having identified the deficiency in the power of attorney, which was an essential link in the chain of title, the purchaser was clearly entitled to raise the requisition he did. The vendors should have been far better placed than the purchaser to provide the answer. More to the point, without being able to comply with the requisition, they would be unlikely to be able to make good title. The requisition was certainly not founded on any bare possibility, doubt or suspicion.
Representation: Mr. Horace Wong (M/s. Baker & McKenzie) for Appellant/Defendant Mr. Albert K.C. Yau instructed by M/s. Leung Kin & Co. for Respondent |
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