Kung Wing Chuen, Francis and Another v. Antony Louis Marden

HCMP002523/1989

1989, MP No.2523

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H E A D N O T E

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In subsection (4) of section 5 of the Powers of Attorney Ordinance, Cap.31, the "purchase" referred to in paragraph (b) means the one by the "purchaser" mentioned in the opening words of the subsection; it does not mean the "transaction between the donee of a power of attorney and another person".

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS NO. 2523 OF 1989

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BETWEEN

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Coram: Bokhary J. in Chambers

Date of hearing: November 8, 1989

Date of delivery of judgment: November 8, 1989

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J U D G M E N T

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1. This is a vendor and purchaser summons. It pertains to a sale and purchase agreement dated August 7, 1989, between the plaintiffs (who are husband and wife) and the defendant in respect of premises described as Unit 2, Third Floor, Block 30, Heng Fa Chuen, Chaiwan, Hong Kong.

2. The premises had been purchased from the developer, the Mass Transit Railway Corporation, by someone whom, for reasons which will become obvious, I will call "the donor". Through her attorney, the donor on March 2, 1988, agreed to sell the premises to the plaintiffs. On May 7, 1988, the donor, still acting through her attorney, conveyed the premises to the plaintiffs. As is clear from what I have already said, the plaintiffs agreed by an agreement dated August 7, 1989, to sell the premises to the defendant.

3. The matter comes before me as a result of certain requisitions on title raised by the solicitors for the defendant. The originating Summons seeks two declarations. The declarations which I am invited to make if I accept the plaintiffs' argument are as follow :-

"1. That the requisitions or objections contained in letters dated respectively 8th August and 16th August 1989 from the Defendant's solicitors to the Plaintiffs' solicitors in respect of the title to the above-mentioned property have been sufficiently answered by the Plaintiffs' solicitors.

2. That the joint statutory declaration made by the Plaintiffs on 14th September 1989 is conclusive evidence within section 5(4)(b) of the Powers of Attorney Ordinance (Cap. 31) that the Plaintiffs did not at the material time know of the revocation of the general Power of Attorney given by Lee Xiao Mei to Lee Kai Tak dated 3rd November 1986."

Madam Lee Xiao Mei is the donor of whom I have been speaking. Mr Lee Kai Tak is the attorney of whom I have been speaking - in other words the donee of the power of attorney.

4. This matter turns upon the proper interpretation of section 5 of the Powers of Attorney Ordinance, Cap. 31, subsections (1), (2), and (4) of which read :-

"(1) A donee of a power of attorney who acts in pursuance of the power at a time when it has been revoked shall not, by reason of the revocation, incur any liability (either to the donor or to any other person) if at that time he did not know that the power had been revoked.

(2) Where a power of attorney has been revoked and a person, without knowledge of the revocation, deals with the 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.

(3) ...

(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."

5. The statutory declaration in the present case would fall within section 5(4)(b) if the "purchase" referred to therein means the one by the "purchaser" mentioned at the beginning of subsection (4). If, however, it means the "transaction" between the "donee" and the other "person" - in the present case the plaintiffs - then the statutory declaration would not come within section 5(4)(b). This is because the statutory declaration was not made before or within three months after the completion of the purchase by the plaintiffs from the attorney, which purchase is - in the language of subsection (4) - "a transaction between the donee of a power of attorney and another person". Of course, since the purchase by the defendant from the plaintiffs has not been completed yet, the statutory declaration is one made before the completion of such purchase.

6. Simply looking at the wording of the section, I have no doubt whatsoever that the construction advanced by Mrs Clough on behalf of the plaintiffs is correct. The "purchase" referred to in paragraph (b) is the one by the "purchaser" mentioned in the opening words of subsection (4). One sees that when it comes to what passes between the donee of the power of attorney and the other person, the subsections speaks not of a purchase but of a "transaction". As Mrs Clough pointed out in the course of her helpful submission, the transaction between the donee and the other person may not be a sale and purchase at all. It could be some other transaction. But subsection (4) deals with the "interest of a purchaser" (albeit an interest which depends on the validity of a transaction between the donee of a power of attorney and another person).

7. It would appear that academic opinion is wholly in support of the construction advanced by Mrs Clough. Mr Wong, who appears on behalf of the defendant, accepts that that is the state of academic opinion. It might be worth adding that that also appears to be the view of no less a body than the Law Society of Hong Kong.

8. Why then do the defendant's legal advisors harbour the doubts which underlie the defendant's requisitions. Such doubts would appear to stem from the way in which they read two judgments of Mr Justice Godfrey. The first is Xiamen International Finance Co Ltd v. Tsui Tai-yan [1987] HKLR 977. I turn at once to what the learned judge said at p.980 D - E. He said:-

"In particular, where the transaction for the purposes of which the power of attorney was used was not completed within 12 months of the date on which the power came into operation, or where the purchaser taking under the instrument executed in reliance of the power of attorney has not made a statutory declaration, before or within 3 months after the completion of his purchase, that he did not at the material time know of the revocation of the power, any subsequent purchaser is always at risk in theory that his title to the property may be successfully challenged, on the ground that the power of attorney on which the title depends had been revoked, remote though the risk in practice may be."

9. Mr Wong suggests that this statement by Mr Justice Godfrey supports the construction for which he contends. Mrs Clough, while pointing out that what Mr Justice Godfrey said was obiter, does not for one minute challenge the correctness of what he is getting at. Her point is quite simply that what he said has been misunderstood by the defendant. I agree.

10. In this case, as it happened, there was no difficulty in getting a statutory declaration from the persons who dealt with the donee. They are selling. In other cases, however, there may be that difficulty. If the sale is not by the person who dealt with the donee and no statutory declaration had been made by him at the time of such dealing, then if some purchaser several times removed down the line raises a requisition it might not be possible to meet it because by that time the person who dealt with the donee had disappeared and is not available to make a statutory declaration. That is the sort of situation which I think Mr Justice Godfrey had in mind.

11. So I accept Mrs Clough's argument, which I have been unable to repeat in the concise way in which she put it in the course of her submission.. Mr Justice Godfrey was pointing out a problem that could arise but which has not arisen in the present case. It is, of course, good conveyancing practice to have such statutory declaration made at the earliest possible stage.

12. The other judgment of Mr Justice Godfrey upon which the defendant relies is a judgment which is - as yet anyway - unreported. It is the judgment of the learned judge given on February 27, 1989, in Sonatina International Ltd v. Y.F. International Ltd, the reference to the record whereof is 1989, M.P. No. 421. In the penultimate paragraph of that judgment, the learned Judge said this:-

"For these reasons, I propose to declare that the requisition raised by the purchaser has been satisfactorily answered. I would only add, in case of any doubt about the matter, that, in my opinion, the statutory declaration which has to be made to satisfy the provisions of section 5(4)(b) must be made by that person ('that person') who originally dealt with the donee of the power of attorney. It does not matter when or how late the statutory declaration was made provided that it is made before or within three months after the completion of the purchase in question. But it must be made by that person and not by somebody else."

13. The defendant thinks (or fears) that by the expression the "purchase in question" the learned Judge meant the transaction between the donee and the person who originally dealt with him. I do not think that that is what the learned Judge meant at all. What he meant was the purchase called into question by a requisition.

14. There is no need for me to repeat what I have already said by reference to the contrasting uses of the words "purchase" and "transaction" and so on. But there is another thing about what Mr Justice Godfrey says that makes what he says perfectly clear. He says that it does not matter when or how late the statutory declaration is made provided that it is made before or within three months after the completion of the purchase in question. If he had in mind the original transaction, he would hardly have used the expression "when or how late". Plainly, he was saying that it did not matter when or how late in relation to the original transaction a statutory declaration is made provided that it is one made before or within three months after the completion of the purchase called into question. If any doubt arose out of what Mr Justice Godfrey said in 1987, then what he said this year has removed it.

15. What I have said thus for is sufficient to dispose of the application in favour of the plaintiff. But there is one more point which I should deal with. It is a point described graphically and accurately by Mrs Clough as a "belt and braces" point. The point has to do with subsection (2) which I have already read out. The plaintiffs have made and filed affirmations stating that at no time during the course of their dealings with the donee in connection with the sale of the premises did they have knowledge that the power of attorney had been revoked, nor did they have knowlege of the occurrence of any event (such as the death, mental incapacity or bankruptcy of the donor) which would have had the effect of revoking that power.

16. Having drawn my attention to those affirmations, Mrs Clough then cited the decision of the Court of Appeal in Kan Wing-yau v. Hong Kong Housing Society [1988] 2 HKLR 187. I need not deal with the facts of that case. I will simply read out this passage from the judgment of Mr Justice Clough, which is the leading judgment in the case and with which the other two members of the Court agreed. The passage begins at the bottom of p. 196. The learned Justice of Appeal said :-

"In many cases it would be a simple matter to obtain and adduce evidence of lack of knowledge of revocation on the part of a person who has dealt with the donee of a power for the purposes of s. 5(2). The difficulty that faced Mr Yu was that those instructing him had evidently never considered obtaining evidence on this point from the company which was the purchaser under the 1973 assignment. There was no evidence at all from or on behalf of the company itself. How then could there be any evidence, one way or the other, regarding its knowlege when it dealt with Madam Tsoi?"

I do not think that the Court of Appeal would have said that unless they took the view that evidence such as that contained in the affirmations to which I have just made reference would suffice a vendor if the vendor were driven to rely on such evidence. Therefore, I am of the view that had the plaintiffs in this case not been able to rely on the conclusive presumption contained in subsection (4), they would have been able to rely on subsection (2). In the result they do not have to.

17. For these reasons, I make the declarations which I am invited to make and which I rehearsed earlier on in this judgment. They represent, in my judgment, the position arrived at by applying the law as I hold it to be to the facts (in respect of which there is no dispute). This leaves the question of costs on which I will hear the parties. I will also hear them on any ancilliary matters which may arise. Before I invite counsel to address me on costs, I wish to express my indebtedness to both of them for their arguments in this matter, which arguments have made it much simpler than I would have found it left to my own devices.

[Submissions on Costs]

18. Mrs Clough asks me to order the costs in favour of the plaintiffs. Mr Wong invites me to make no order as to costs. I think that the costs should follow the event. In so saying, I do not of course question the defendant's good faith. Nor do I wish to characterise his conduct as unreasonable. But the point seems to me to be obvious once analysed. In all the circumstances, I think that the costs should, as I have said, follow the event; and I order that the costs of the application, to be taxed if not agreed, be paid by the defendant to the plaintiffs.

Representation:

Mrs M. Clough (instructed by Denton Hall Burgin & Warrens) for the plaintiffs.

Mr H.Y. Wong (instructed by Wilkinson & Grist) for the defendant.