Ip Fung Yee v. The Norwegian Missionary Society

1997, No. M.P.1955

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS

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AND

1997, No. M.P. 1956

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Coram: Deputy Judge Whaley in Court

Dates of hearing: 2, 4 and 5 December 1997

Date of handing down judgment: 23 December 1997

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J U D G M E N T

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1. These two vendor and purchaser summonses were heard together, since they share certain common features and they raise certain common points for decision.

MP No. 1955 of 1997

2. By a written agreement dated 6 March 1997, the Defendant agreed to convey to the Plaintiff the property in question in consideration of the sum of $1,000,000. The agreed completion date was 31 May 1997.

3. Clauses 10 and 11 of the agreement provided as follows :

"10. Such of the documents of title as related exclusively to the Property the subject of this Agreement and are in the possession of the Vendor shall be delivered to the Purchaser. All other documents of title in the possession of the Vendor, relating to the Property and other property retained by the Vendor, shall be retained by the Vendor who shall, if so required on completion of the sale, give to the Purchaser a covenant for safe custody thereof and for production and delivery of copies thereof, such covenant to be prepared by the Purchaser.

11. The Vendor shall give good title to the Property. The Vendor shall prove his title to the Property at the Vendor's own expense and shall at the like expense make and furnish to the Purchaser such certified copies of any deeds or documents of title, wills and matters of public record as may be necessary to prove such title, pursuant to section 13 of the Conveyancing and Property Ordinance provided that the Purchaser shall accept copy of the title deeds obtained from the Tsuen Wan New Territories Land Registry together with and undertake (sic) from the Vendor's solicitors to forthwith apply for and deliver certified copy thereof from the Tsuen Wan New Territories Land Registry within seven days upon receipt as sufficient proof of title (save and except those title deeds and documents which relate exclusively to the Property....."

Was the Defendant entitled to furnish certified copies?

4. By a letter dated 25 March 1997 the Plaintiff's solicitors raised various requisitions, including a request to be provided with the "originals of the following title deeds", specifying eight Memorials of various agreements and assignments which were links in establishing the chain of the Defendant's title. The last paragraph of the letter reads as follows :

" We reserve our right to raise further requisitions after our receipt of your answer to our above requisitions and the above documents from you. If you are unable to provide us with the original or certified copies of the documents which are requested by us, we are prepared to accept further copies thereof as proof of title subject to your personal undertaking to let us have certified copies thereof upon completion."

5. The Defendant's solicitors replied that they were unable to provide the documents requested since they had been lost, and they furnished a Statutory Declaration sworn by the duly authorised representative in Hong Kong of the Defendant, explaining that the documents had been lost in circumstances unknown to the Defendant and could not be found. The solicitors undertook to provide certified copies of the documents, which in due course they duly furnished to the Plaintiff's solicitors.

6. The Plaintiffs allege that their requisitions have not been satisfactorily answered, and they are seeking the following relief :

(1) Declarations that :

(i) the title of the Defendant to the property is defective;

(ii) the Defendant has failed to prove good title to the property in accordance with the agreement for sale and purchase, and to satisfactorily answer the requisitions raised in relation to its title to the property;

(iii) the Plaintiff is not obliged to complete the purchase of the property pursuant to the agreement;

(iv) the Defendant has wrongfully repudiated the agreement.

(2) The return of the deposit which it paid, and damages.

7. Mr Hung submitted on behalf of the Plaintiff that the Defendant's response to the Plaintiff's requisition for the originals of the documents was inadequate and in breach of its obligation to prove good title. He did not concede that the Defendants were entitled to furnish certified copies of the documents notwithstanding that the originals had been lost, and in this connection he relied on the decision of Deputy Judge Findlay Q.C. (as he then was) in Chan Kam Sing v. Lam Ping Grace [1990] 1 HKC 373. The ratio of that decision was to the effect that :

(i) under common law where original documents have been lost, the vendor may show good title by producing clear and cogent evidence of the contents, execution and stamping of the lost deeds : Re Helifen Commercial Banking Co. and Wood (1898) 79 LT 536;

(ii) however where the parties' agreement or a fortiori the law entitles the purchaser to require the vendor to produce the original title deeds, there was no authority to support the suggestion that the Court may permit the vendor to dispense with the requirement of producing the original documents.

That decision was subsequently confirmed and acted upon by Patrick Chan J (as he then was) in Wong Wai Ming v. Tang Tak Chi [1993] 1 HKC 341 at 345 F-G.

8. Clause 11 of the Agreement expressly requires the vendor to furnish to the purchaser "such certified copies of any deeds or documents of title ..... as may be necessary to prove such title pursuant to s.13 of the Conveyancing and Property Ordinance ....."

9. Section 13 of the Ordinance provides as follows :

"13. Proof of title and recitals -

(1) Unless the contrary intention is expressed, a purchaser of land shall be entitled to require from the vendor, as proof of title to that land ........

(2) Where this section requires the production of any document, it shall be sufficient to produce a copy -

(a) ...

(b) certified by a public officer or a solicitor, to be a true copy."

10. The section expressly provides that the parties may vary the statutory position by expressing a contrary intention in their agreement. An examination of the terms of the Agreement in this case however makes it clear that there is no contrary intention expressed which derogates from or modifies the statutory position that the vendor may prove his title by producing certified copies of the relevant deeds and documents of title. Indeed Clause 11 of the Agreement specifically and expressly confirms that position; while Clause 10 requires the vendor to deliver to the purchaser "such of the documents of title as related exclusively to the Property the subject of this Agreement and are in the possession of the vendor." The documents in question are not in the possession of the vendor, since they have been lost, and the vendor is therefore not obliged by Clause 10 of the Agreement to produce them.

11. Mr Hung referred to Halsbury's Laws of England, 4^th Edn, Vol.17, paragraph 140 :

" Where a document has been lost or destroyed, and cannot be found after due search, secondary evidence of its contents is admissible. The Court must be satisfied that the document existed, that the lost or destruction has in fact taken place, and that a reasonable explanation of this has been given. Thus, a diligent search must have been made in good faith in the place where the instrument would most probably be found, but not necessarily every possible place........

The question of the sufficiency of the search is for the judge......"

He launched a two-fold attack upon the alleged inadequacy of the secondary evidence which had been furnished by the Defendant in substitution for the lost documents, namely that :

(i) the Defendant had failed to provide a reasonable explanation for the loss of the documents; and

(ii) in any event the certified copies which had been furnished had not in fact been properly or sufficiently certified.

12. The explanation for the loss of the documents is contained in the Statutory Declaration sworn by the duly authorised representative in Hong Kong of the Defendant, the relevant parts of which read as follow :

"(3) It is now discovered all the relevant title deeds and documents relating to the above premises are missing.

(4) The Society has made exhaustive searches for the said title deeds and documents.

(5) Notwithstanding such exhaustive searches made by the Society the said title deeds and documents cannot be found and I verily believe that the same have been lost in circumstances unknown to the Society and cannot be found.

(6) The Society has not sold mortgaged or otherwise dealt with the said premises."

The Plaintiff's solicitors complained that the Statutory Declaration should state, inter alia, what was done with the title deeds after completion in 1977 and by whom : when the documents were last seen and whether they were examined and found to be complete; when it was first learned that they were missing and what was done to locate them, or the circumstances in which they were destroyed. Mr Hung submitted that in addition the Declaration should specifically state whether the lawyers who had handled the documents had returned them to any staff or agent of the Defendant, and if so, the identity of such persons, and also explain where the documents were supposed to be stored.

13. The Defendant's solicitors responded that it was sufficient for the Statutory Declaration to confirm that the title deeds had been lost and that the vendor had not charged the property to anybody else, and that the further particulars required by the purchaser were not necessary.

14. While the additional information which the Plaintiff's solicitors requested to be included in the Statutory Declaration could not fairly be described as unreasonable, in my view the Statutory Declaration did provide a reasonable explanation for the loss of the documents, since there is no reason to doubt from its contents that a diligent search for the documents had been made in good faith.

15. In any event this is not a case where the vendor has to establish its right to produce secondary evidence of the documents in question, in the light of my finding that under the Ordinance and the Agreement the vendor was all along only required to furnish certified copies of such documents in order to discharge his obligation to prove good title.

16. I should add that I reject Mr Hung's submission that the words "(save and except those title deeds and documents which relate exclusively to the property)", apply to s.11 of the Agreement as a whole, namely as an exception to the provision that the vendor may furnish "such certified copies of any deeds or documents of title .... as may by necessary to prove such title". In my view the saving in parentheses clearly applies only within the framework of the Rider, namely as an exception to the provision that the purchaser shall accept copies of the title deeds from the Tsuen Wan, New Territories Land Registry together with an undertaking from the vendor's solicitors to forthwith apply for and deliver certified copies thereof within seven days.

17. Similarly there is no merit at all in Mr Hung's submission that s.13(2) of the Ordinance must be read subject to an implied qualification that a vendor may produce a certified copy of a document only if a cogent explanation has been provided by him for why the original cannot be produced. If the Legislature had intended such qualification it would have been expressly incorporated in the section.

Were the certified copies properly certified?

18. The certified copies provided by the vendor's solicitors in each instance consisted of documents obtained from the Land Registry, more particularly in each instance a copy of the Memorial which was required to be registered in the Land Office according to the provisions of the Land Registration Ordinance, Cap 128, together with the relevant Deed annexed to it.

(I note in passing that such Memorials have long been accepted in Hong Kong as providing good secondary evidence as to the contents of the Deed to which it referred :

Kok Yun Kuen v. Au Yeung Bik Tai [1991] 2 HKC 522, per Godfrey J (as he then was).

Each Memorial contains a recital of all the essential information in relation to the underlying instrument, namely the nature and object of the instrument to which the Memorial relates, the date of the instrument, names and additions of the parties, names and additions of witnesses, premises affected by the instrument and the signature of the parties signing the Memorial.)

19. The Plaintiff's first complaint in relation to these documents is that in each instance the certification ("certified true copy") by the Land Registrar has been endorsed and signed only upon the face of the Memorial; the copy of the Instrument annexed to it is not similarly certified. The second complaint was that the copy of the Deed annexed to the Memorial could not in any event be described as a true copy since it was only a carbon copy which did not contain a copy of the parties' signatures thereon.

20. In respect of the first complaint, I am not without some sympathy for the Plaintiff since the better practice in my view would be for the Land Registrar to certify both the Memorial and the accompanying Instrument as true copies.

21. I was referred to the contents of Law Society Circular No. 81 of 1985, sub-titled "Conveyancing Practice", which provides inter alia that : "Copies of title deeds need not be certified on each and every page; a copy of an entire title deed need be certified only once". This does not address the purchaser's complaint in the instant case which is that the deed which was annexed to the Memorial was not certified at all.

22. The unchallenged evidence of Julian Y.F. Ho, a partner of Messrs Tsang Chan & Wong, the Defendant's solicitors, was to the effect that the method of certification by the Land Office in the present case was the standard practice of the Land Registry at the material time. He set out the practice so clearly in his affidavit that I can do no better than to quote from it :

"12(4) Although in each of the said copied instruments and accompanying memorials, the certification clause appears only once on the face of the memorial, the certification applies to both the memorial and the annexed instrument and the whole is certified by the Land Registrar as being a true copy. From previous experience, I can say that whenever the Land Registry is asked to provide a certified true copy of an instrument duly registered at the Land Registry, it is the practice of the Land Registry to provide the copied instrument together with the relevant memorial and that the certification clause only appears on the face or the back of the memorial. In other words it is not the practice of the Land Registry to separately certify the instrument in question.

(5) Each of the memorials is certified by a solicitor that it contains a just and true account of the particulars of the instrument in question pursuant to section 7 of the Land Registration Ordinance (then in force)."

23. He further explained the practise in relation to the provision of carbon copies of the relevant documents :

"15. As can be seen from the certified true copies of the lost instruments provided by the Tsuen Wan District Land Registry, they are not exact copies of the actual instruments executed by the parties thereto, in that the signatures of the parties or the witnesses thereto are not there.

(1) The reason is that the practice of the New Territories Land Registries to make and keep copies of the actual instruments lodged with it for registration by means of what is called the 'Land Registry document imaging system' only commenced on 1 July 1996...

(2) In the 1970s, including the period between 1971 and 1977 when the lost instruments were made, it was a common, though not invariable, conveyancing practice in Hong Kong that when a solicitor or his clerk prepared a conveyancing instrument, he would also prepare two carbon copies.

(3) Only the original would be executed by the parties. Since the carbon copies were not actually signed by the parties or the witnesses, the solicitor or his clerk would put down words such as 'sd' (name of the party or witness) 'ls or common seal' at the appropriate place to indicate that the original had been executed in the manner as stated. By way of clarification, I should add that -

(a) 'sd' means signed;

(b) 'ls' means legal seal, for use where the party executing the instrument was an individual.

(4) when a solicitor wished to lodge an instrument with the Land Office or District Land Office for registration, he would also lodge a carbon copy of the instrument and, as required by section 6 of the Land Registration Ordinance (then in force), a memorial of the instrument. The other carbon copy would be kept in the relevant conveyancing file.

(5) By section 6 of the Land Registration Ordinance (then in force), the memorial had to be signed, in the case of a deed, conveyance, or other instrument in writing except a will, by some or one of the parties to the original instrument, or, if such parties were dead or absent from Hong Kong, then by one or more of the witnesses to such instrument.

(6) Further, by section 7 of the Land Registration Ordinance (then in force), the memorial must contain a just and true account of the several particulars of the instrument in question therein set forth and must be verified by, inter alia, the certificate of a person admitted and enrolled as a solicitor in Hong Kong.

(7) Finally, by virtue of section 8 of the Land Registration Ordinance (then in force), the memorial of a deed, conveyance or other instrument in writing must contain the particulars set out in the Schedule to the Ordinance, that is to say -

(a) the date of the instrument;

(b) the nature and object thereof;

(c) the names and additions of the parties;

(d) the names and additions of the witnesses thereto;

(e) a description of the land or premises conveyed in or affected by the instrument;

(f) the name and description of the place where situate;

(g) the consideration and to whom and how paid;

(h) any other particulars which the case might require.

(8) After the Land Office or District Land Office had checked the original instrument against the carbon copy and the contents of the memorial and found everything to be in order, it would assign a memorial number to the instrument and return the original instrument to the solicitor who lodged it for registration.

(9) The Land Office or District Land Office would keep the carbon copy and the memorial, and they would become the certified true copy of the instrument which it would provide upon application, as happened in the present case.

(10) In the later part of the 1970s, photocopying became more and more common progressively. Sometimes, the solicitor or his clerk would lodge a photocopy, instead of a carbon copy, of the instrument together with the original and the memorial for registration. In such a case, the certified true copy of a duly registered instrument provided by the Land Registry or District Land Registry would be a photocopy, instead of a carbon copy, of the original instrument."

(Mr Ho wrote to the Tsuen Wan New Territories Land Registry, setting out the aforesaid matters and asking them to confirm whether they truly reflected the practice of the Land Registry at the relevant time : the Land Registry confirmed that it did.)

24. Mr Hung submitted that it was not good enough for the vendor's solicitors to simply rely on the practice of the Land Registry at the relevant time in relation to certification : since the onus was squarely on the vendor to prove good title, it's solicitors should have requested the Lands Registry to certify, in addition to the Memorial, the title documents annexed thereto separately and individually, which they clearly failed to do in this case.

25. It is clear that the certified copies of the documents which were furnished by the vendor in this case were certified precisely according to the practice of the Land Registry at that time. In my view they were quite entitled to rely upon the practise of the Land Registry at the time and to rely upon such certification as being good certification; they were not obliged to attempt to improve upon it by requesting the Land Officer to certify the memorial and its accompanying instrument separately and individually.

26. I find that the certified copies of the lost documents which were furnished by the Defendant fully complied with its obligations under the Agreement and s.13 of the Ordinance; that the Defendant did adequately answer the requisitions raised by the purchaser; and that the Defendant did discharge its obligation to prove good title.

MP No. 1956 of 1997

27. By an agreement in writing dated 6 March 1997 ("the Agreement") the Defendant agreed to convey the property to the Plaintiff in consideration of the sum of $720,000. The agreed completion date was 31 May 1997.

28. Clauses 10 and 11 of the Agreement are in identical terms to the agreement in MP No. 1955 of 1997.

29. One of the requisitions raised by the Plaintiffs was a request that the vendor furnish the original of the 1976 assignment of the property to the vendor, which was its root of title. The vendor's solicitors replied in due course that the assignment and memorial of the 1976 assignment were missing and could not be found despite exhaustive searches having been made by the Defendant. They also furnished for the approval of the Plaintiffs' solicitors a draft of a Statutory Declaration sworn by a Hong Kong director of the Defendant, explaining the loss of the documents in very similar terms to the Statutory Declaration which was sworn by the Defendant in MP 1955 of 1997, which after being approved would be duly sworn.

30. In this respect the Plaintiffs in this case seek precisely the same relief against the Defendant as was sought in MP 1955 of 1997, alleging that the Defendant has failed to comply with its obligation to prove good title by failing to provide the original of the 1976 Assignment as was requested of it. The arguments in this respect were precisely the same as were advanced in relation to MP 1955 of 1997, which I have recited above. For the same reasons which I indicated in relation to that case, I find that on a proper construction of the parties' agreement in this case, the Defendant was never obliged to furnish anything more than a certified copy of the original of the said Assignment.

31. The Plaintiffs have also taken the same point in relation to the alleged inadequacy of the certification by the Land Office of the certified true copy furnished, namely that the certification appears only on the face of the Memorial and not on the annexed Instrument. For the reasons given above in relation to MP 1955 of 1997, I find such complaint to be unfounded.

32. The point in relation to unsigned carbon copies did not arise on the facts of this case, since in this instance a photocopy of the original assignment was annexed including a photocopy of the parties' signatures.

Was the attorney authorised to make a gift of the Society's property?

33. A further requisition raised in relation to this application was of more substance. Memorial No. 775061, which was furnished by the vendor's solicitors along with other relevant documents under its duty to show good title, showed that on 6 September 1991, the Norwegian Missionary Society assigned the property by way of a deed of gift to the Defendant. The Norwegian Missionary Society executed the assignment by its attorney, one Einar Braadland; a certified copy of the relevant Power of Attorney in favour of the latter was also furnished by the vendor's solicitors.

34. By its letter dated 23 March 1997 the purchaser's solicitors raised the following requisitions in relation to this assignment :

"3.

(c) The Norwegian Missionary Society was incorporated under the laws of Norway. Please let us have a legal opinion from a lawyer practising under the laws of Norway to confirm that the said power of attorney was properly executed under the laws of Norway. (d) The power of attorney in favour of the attorney dated 4 June 1991..... does not contain any power for the attorney to dispose the landed property by way of gift. We take the view that the attorney acted ultra vires in executing the said Assignment .....

In view of the above defects, we require a Confirmatory Assignment be executed by the parties thereto......"

35. The Defendant's solicitor responded on 24 March 1997 as follows :

" To avoid argument on the Assignment, we are taking our client's instructions as to whether a Confirmatory Assignment will be executed. However we would like to add that since both organisations are charitable, we do not agree that the Power of Attorney does not contain power for disposition of land by way of gift".

36. On 12 April 1997, the Defendant's solicitors followed the matter up as follows :

" We are taking our client's instruction as to whether a confirmatory assignment would be signed so as to resolve the trouble relating to production of the legal opinion by previous attorney. However, nothing herein shall be construed as admission that there is any title defect in respect of the property."

37. The next development was a letter dated 16 May 1997 from the Plaintiffs' solicitors in the following terms :

" Regarding the Assignment Memorial No. 775061, we take the view that it is defective for the reasons set out in our letter to you dated 25^th March 1997. The most important reason is that the attorney appointed under the power of attorney dated 4^th June 1991 had no power to execute the said Assignment to the Evangelical Lutheran Church of Hong Kong because an attorney could not, in the absence of a clear power to do so, make gift to others of the principal's property. Hence the said power of attorney did not contain such express power to make a gift of the above property to the Purchaser.......

Please confirm by return whether your client would execute a Confirmatory Assignment forthwith."

38. On 22 May 1997 the Defendant's solicitors wrote as follows :

" We refer to your requisition on the above matter. Enclosed please find copy legal opinion by lawyers in Norway relating to execution of Assignment Memorial No. 775061. Accordingly, we are of the view that there is no need for any confirmatory assignment to be executed.

We trust we have answered all your requisitions."

39. The legal opinion from lawyers in Norway which was enclosed with this letter is dated 14 May 1997 and reads as follows :

"Concerning the Norwegian Missionary Society-Power of Attorney

We refer to the Assignment Memorial No. 775061, operating as a deed of gift.

As a Norwegian lawyer, competent to practise law in Norway, I hereby confirm that the Power of Attorney issued by the Norwegian Missionary Society for the use of Kaare Smith Heggland has been duly executed in accordance with the laws of Norway and the constitution of the Norwegian Missionary Society and according to the constitution of Norwegian Missionary Society and under Norwegian law, the attorney is given the power to execute the deed of gift to the Evangelical Lutheran Church of Hong Kong."

40. The Plaintiff's solicitors responded on 26 May 1997 :

" The requisition on the authority of the donee under the relevant power of attorney to execute the Assignment Memorial No. 775061 had not been sufficiently answered. The issue is one of pure construction - whether the power of attorney authorised the donee to make a gift to or otherwise benefit the purchaser. Hence the legal opinion by lawyers in Norway dated 14^th May 1997 is of no assistance to you .........

Since your client is unable to give good title, please confirm by return whether your client agrees to cancel the agreement for sale herein and refund the deposit to our client forthwith."

41. The Defendant's solicitors responded on 27 May 1997 :

" With due respect we disagree with your view. Whether the attorney has power to execute the Deed of Gift under the power of attorney is a matter of the law applicable under the power of attorney. Since there is a legal opinion provided confirming that under Norway laws an attorney is authorised to make a gift, we disagree that there is any doubt whether the attorney has power to execute the Deed of Gift."

42. By letter dated 29 May 1997 (two days before the completion date) the Plaintiff's solicitors wrote :

" Without prejudice to our view that the said power of attorney is invalid in making the gift under the Assignment Memorial No. 775061, please confirm by return whether you would provide a legible copy of the certified copy power of attorney."

43. On 29 May 1997 the Defendant's solicitors wrote :

" We are instructed that the complete certified copy of the power of attorney will be sent to you before completion.

In the meantime, we are also further instructed that if you are not prepared to accept the legal opinion relating to the Assignment operating as the Deed of Gift, our client is prepared to execute a Confirmatory Assignment executed by the Norwegian Missionary Society.

We are prepared to let you have the duly executed Confirmatory Assignment within 30 days from the date of completion. We trust by virtue of such proposal, the requisition you have in respect of the property is therefore resolved."

44. On the same day, 30 May 1997, the Plaintiffs' solicitors responded :

" Since the requisitions were raised by us on 25^th March 1997, i.e. over two months ago, our client is not prepared to complete the purchase subject to any undertaking for provision of duly executed confirmatory assignment by 30 days thereafter. We demand your client to provide such duly executed confirmatory assignment (subject to your undertaking to be responsible for duly adjudicated for stamping) before completion.

In the meantime, we shall take our client's instructions on whether they agree to postpone the completion scheduled on 31^st May 1997. We hereby reserve our client's right to rescind the Agreement if the requisitions are not complied with on 31^st May 1997."

45. On the same day, 30 May 1997, the Defendant's solicitors sent to the Plaintiffs' solicitors a certified copy of the relevant Power of Attorney, as also a copy of the draft Confirmatory Assignment. They wrote :

" We enclose herewith the draft Confirmatory Assignment for your approval. Please confirm whether you have any amendments on the same on or before Monday. Our client will despatch the same to Norway for execution by the vendor. Unless we hear from you on or before Monday, we trust you have no further amendment on the Confirmatory Assignment.

In the meantime our client is agreeable to postpone the completion date to within seven days upon receipt by you of the said Confirmatory Assignment but in no event after 27^th June 1997. Please confirm."

(The draft Confirmatory Assignment which was enclosed with the letter is a very detailed document running to 4 1/2 pages; suffice to say that in terms of it the Norwegian Missionary Society as the assignor under Assignment Memorial No.775061, fully confirmed and ratified the said Assignment.)

46. The Plaintiffs' solicitors responded on the same day, 30 May 1997 :

" We are taking our clients' instructions on whether they agree to your client's request for extension of time of completion to 27^th June 1997. We shall approve the draft Confirmatory Assignment only if our clients agree to such postponement of the completion.

We stress that nothing herein will construe our clients' acceptance of your client's title nor waiver of their rights under the Agreement dated 8^th April 1997 to rescind the sale and purchase herein."

47. On 31 May 1997, the date fixed for completion, the Plaintiffs' solicitors wrote :

" We refer to the above matter and inform you that since your client is unable to prove good title pursuant to the Agreement dated 8^th April 1997 on or before completion scheduled on 31^st May 1997, we are instructed to rescind the Agreement herein.

Please confirm by return that your client agrees to cancel the sale and return the deposit to our client forthwith."

48. On 17 June 1997, the Defendant's solicitors wrote :

".... Our client has still not received the balance of purchase price. In such circumstances, in accordance with Clause 16 of the said Agreement, we hereby serve notice on you and in view your client's breach of the Agreement, our client has forfeited the deposit in the sum of $72,000 as the genuine pre-estimate of loss."

49. The Plaintiffs then issued the Vendor and Purchaser Summons which initiated these proceedings.

Construction of the power of attorney

50. The first and most important task is to determine whether the Norwegian Missionary Society did, in the Power of Attorney which it executed in favour of Kaare Smith Heggland, confer upon him the power to assign the property by gift on its behalf, as he subsequently did do by the Assignment in question. The matter is indeed one of "pure construction" of the terms of the Power of Attorney, as the Plaintiffs' solicitors rightly indicated in their letter of 26 May 1997. It will be recalled that they had requested the Defendant's solicitors to provide a legal opinion from a lawyer in Norway in order to confirm that the Power of Attorney had been duly and properly executed according to the laws of Norway, where it had been executed. This was an entirely proper request, and the legal opinion did duly confirm that the Power of Attorney had been properly executed according to the laws of Norway; no point is taken in that respect.

51. Where the Defendant's solicitors went wrong was in their view that the Norwegian lawyer's opinion upon the construction of the Power of Attorney (to the effect that it did indeed confer upon the attorney the power to make the gift in question) was conclusive. This attitude was clearly misconceived : the construction of the terms of the instrument was in the first place a matter for the parties and thereafter, in the event of disagreement, for the Court. The Plaintiffs' solicitors rightly pointed out that the opinion of the Norwegian lawyer on this aspect was of little relevance, and it was the error of the Defendant's solicitors in thereafter insisting on relying upon such opinion which apparently led to their failure to follow up the suggestion of the Plaintiffs' solicitors to obtain a confirmatory assignment - at least until 29 May 1997, only two days before the date for completion.

52. The locus classicus in relation to this issue is the dissenting judgment of Russell J. in the Court of Appeal in Reckitt v. Barnett, Pembroke and Slater Ltd. [1928] 2 KB 244 at 268-269 :

"It is said that the Plaintiff's statements to the bank that he wishes the power of attorney to cover the drawing of cheques upon them by Mr Woodhouse 'without restriction', operates to enlarge the powers conferred by the power of attorney, and to such a sweeping extent that Lord Terrington became authorized to do what he liked with the Plaintiff's moneys, even to the extent of applying them in payment of his own personal debts. It would need words unambiguous and irresistible to enable me to attribute such a meaning and intention to a power of attorney. The primary object of a power of attorney is to enable the attorney to act in the management of his principal's affairs. An attorney cannot, in the absence of a clear power so to do, make presents to himself or to others of his principal's property ...... Powers of attorney are to be construed strictly; and where authority to do an act purporting to be done under a power of attorney is challenged, it is necessary to show that on a fair construction of the whole instrument, the authority in question is to be found within the four corners of the instrument either in express terms or by necessary implication : Bryant's case."

The pedigree and authority of these dicta were most recently confirmed by the Hong Kong Court of Appeal in Lo Hung Biu v. Lo Shea Chung and another [1997] HKLRD 721, which also dealt with a question, inter alia, whether a power of attorney had conferred upon the attorney the authority to assign the principal's property by way of a gift.

53. Mr Chan focused his arguments on the provisions in the power of attorney to the effect that the Society appointed the attorney :

"....to do all such acts and things and to execute all such deeds and instruments as, in the opinion of the Attorney, may be necessary or convenient for carrying on and transacting the business of the Society in Hong Kong.

AND IT IS HEREBY EXPRESSLY DECLARED that, the Attorney shall have power for and in the name of and on behalf of the Society to do or execute all or any of the acts and things hereinafter mentioned that is to say : ....."

54. There follow 11 paragraphs, each one of which describes specific powers conferred upon the attorney, of which paragraph 3 reads as follows :

"To sell and absolutely dispose of any real or personal property or any part or parts thereof or any interest therein for such price or other consideration as the Attorney shall think proper and to enter into agreement to do the same and to receive or accept from such purchaser the purchase money payable or other consideration for or in respect of the property and upon such receipt to give good and sufficient discharge for such purchase money or consideration."

55. There is no doubt that the aforesaid provisions are couched in the very widest terms : the words "to do all such acts and things .... as in the opinion of the Attorney may be necessary or convenient for carrying on and transacting the business of the Society in Hong Kong" appear to confer an unfettered discretion upon the Attorney.

56. The specific powers which are thereafter listed are not expressly declared to be without derogation from the broad general discretion conferred upon the Attorney by the preceding paragraph, however they should be so construed in my view, since to read them otherwise would render nugatory the very broad words used in the preceding paragraph.

57. Mr Chan argued that the words "to sell and absolutely dispose of any real or personal property ...." in paragraph 3, are in themselves wide enough to include the power to assign property by way of a gift. He referred me to numerous authorities in which similar words have been construed in different statutory and other contexts, some of which certainly appear to support a construction that the words include the power to assign property by way of a gift.

58. It is, however, fundamentally important to construe the words in their context : different contexts often call for different constructions of the same words. I derive little assistance from the various authorities referred to by Mr Chan, bearing in mind the different contexts in which the words were being construed.

59. Paragraph 3 of this power of attorney cannot in my view be construed to include the power to make a gift of the principal's property, since the words that follow ("to sell .....") must be interpreted eiusdem generis, with "sell .....", which construction is fortified by the fact that the paragraph refers only to dispositions made for "..... such price or other consideration as the Attorney shall think proper...." (my underlining), which would in terms exclude a disposition by way of gift.

60. Mr Chan submitted that bearing in mind that both the donor (the Norwegian Missionary Society) and the assignee (the Evangelical Lutheran Church of Hong Kong) are religious and charitable organisations, the words "or other consideration" in paragraph 3 are wide enough to include "the Grace of God", bearing in mind that the assignment in question opens with the words : "for the Grace of God and in consideration of the premises, the Assignor as donor assigns unto the Assignee the land described ....".

61. Beguiling though it may be, I do not accept this submission : the "consideration" contemplated in paragraph 3, it seems to me, is clearly consideration of a material kind.

62. Mr Chan next referred me to the textbook, Powers of Attorney, by Trevor M. Aldridge, 8th Edition, in which the learned author states the following propositions :

63. At p.13 :

"An attorney under an ordinary power of attorney can make gifts out of the donors' estate, to the extent that he honestly considers that in doing so he is implementing the purposes for which the power was granted. However, that does not mean that he can make gifts in his own favour, unless the donor expressly authorizes it. An attorney's position is in some ways fiduciary, and there is a general rule that a trustee may not benefit from his trust....."

64. At p.17 :

"If a power is ambiguous, the donor is bound when the attorney bona fide places a reasonable interpretation on it and acts accordingly. However, if he acts in a way that does not comply with either possible interpretation, the donor is not bound by the attorney's acts. (Weigall & Co. v. Runciman & Co. [1916] 115 LT 61)."

65. In my view there is an ambiguity as to the full extent of the powers conferred by this Instrument, more particularly in the apparent contradiction between the very wide words "..... to do all such acts and things ... as in the opinion of the attorney may be necessary", which appear to confer an unfettered discretion upon the Attorney, and the limitations necessarily imposed by the description of the specific powers which follow - unless the latter are read subject to the implication of words such as "without derogating in any way from the general powers aforesaid conferred upon the Attorney", as I have suggested above.

66. Furthermore there is every reason to believe that the attorney in the present instance honestly considered that in making the assignment of property in question on behalf of the Norwegian Missionary Society by way of gift to the Defendant, he was implementing the purposes for which the Society had conferred his powers upon him, especially bearing in mind the religious and charitable nature of both the Society and the Defendant.

Void Ab Initio or voidable at the instance of the donor?

67. Mr Chan submitted that in any event even if, contrary to his submissions, the Attorney was acting ultra vires his powers in making, on behalf of the Society, the 1991 Assignment of the property by way of a gift in favour of the Defendant, such disposition of the property was not void ab initio, but voidable at the instance of the donor (the Society).

See the decision of Stone, J. in Lo Tai Yam v. Hu Mu Simon [1997] HKLRD 588.

68. That case also concerned a vendor and purchaser summons, and a requisition which had been raised as to the authority of the donee of a power of attorney to execute a mortgage on behalf of the grantee in circumstances where, it was alleged, the disposition directly benefited the attorney himself. Stone, J. held that assuming that, in executing the mortgage, the donee under the power of attorney was benefiting himself in excess of his power, the initial disposition of the property via the mortgage would have been voidable only at the instance of the donor and not void.

69. I respectfully adopt that as a correct statement of the law; it applies a fortiori in the present case where the questioned disposition was not one which in any way benefited the attorney.

70. In the present case there has never been any suggestion indicating that the donor at any time intended to avoid the 1991 Assignment in question; all the indications were to the contrary. In particular, the fact that the Defendant's solicitors made it clear that the Society was prepared to execute a confirmatory assignment was the best assurance that the purchaser could have asked for, that, far from having any intention to set aside the 1991 Assignment, the Society expressly affirmed it.

(It will be recalled that it was in fact the Plaintiffs' solicitors who initially requested a Confirmatory Assignment. The Defendant's solicitors sought instructions on whether to execute such a confirmatory assignment, but owing to their (misconceived) view that the legal opinion from Norway was conclusive as to the fact that the attorney did have the power to execute the deed of gift, it was only at a very late stage, namely on 29 May 1997, that they indicated that if the Plaintiffs were not prepared to accept the legal opinion from the Norwegian lawyer, the Defendant was prepared to provide the Confirmatory Assignment executed by the Norwegian Missionary Society, and would provide it within 30 days of the date of completion. The Plaintiffs refused to delay the date of completion beyond the agreed date of 31 May 1997, and in the absence of the confirmatory assignment by the completion date they purported to rescind the agreement.)

71. The parties' Agreement was silent as to the date by which the Defendant was obliged to make good title. It seems clear on the authorities that in the absence of any express term its obligation was to make good title, which included answering all requisitions and objections, within a reasonable time to enable the purchaser to satisfy himself on the matter, get his money ready and complete on the day fixed for completion.

See Litton, J.A. (as he then was) in Active Keen Industries Ltd. v. Fok Chi-Keong [1994] 1 HKLR 396.

See also Hong Kong Conveyancing Law and Practice, Sihombing and Wilkinson, Vol.1, VI [301] - [302].

72. The decision as to whether a vendor has complied with its obligation in that respect can only be made on the facts and in the context peculiar to the case on hand. While it is true that the Defendant had not provided the confirmatory assignment requested by the Plaintiffs' solicitors by the completion date, the offer by the Defendant's solicitors on 30 May 1997 to procure a duly executed confirmatory assignment from the Norwegian Missionary Society and to furnish such within 30 days from the date of completion, when taken in conjunction with the very detailed draft Confirmatory Assignment which they furnished on the same day for the approval of the Plaintiffs' solicitors, and the offer that the Defendant was agreeable to postponing the completion date to within 7 days of the receipt by the Plaintiffs' solicitors of the said Confirmatory Assignment, was in my view a reasonable and adequate answer to the requisition raised by the Plaintiffs' solicitors. In the light of such answer the Plaintiffs had no further reason to question the validity of the 1991 Assignment.

73. This was a case, in my view, where the parties contemplated completion by way of undertaking, and there could be no suggestion that the undertaking offered by the Defendant was in any way inadequate as an undertaking; by setting their faces against such undertaking, the Plaintiffs were acting contrary to the normal conveyancing practice between solicitors, and "also at variance with the way in which the two sides gave each other to believe that they were to behave".

Chu Wing Yip v. Leung Siu Yuk [1997] HKLRD 29 at 34 (C.A.) per Bokhary, J. A.

I agree with Mr Chan that in the light of such undertaking, "the risk of the purchaser 'purchasing a litigation' (arising from a claim by the Norwegian Missionary Society) or facing a successful assertion of the alleged blot on title was non-existent".

74. Mr Chan also drew my attention to the final paragraph of the Power of Attorney, which reads as follows :

"AND IT IS HEREBY DECLARED that the attorney in exercising the powers hereby conferred on him shall conform to the regulations and directions for the time being imposed on or given to him by the Society .....

PROVIDED ALWAYS that no person dealing with the Attorney or his sub-delegates or any of them shall be concerned to see or inquire whether he is or is not acting in accordance with such regulations or directions and notwithstanding any breach of such regulations or directions committed by the Attorney or his sub-delegates or any of them in regard to any act, deed or instrument, the same shall as between the Society and the person or persons dealing with the Attorney or his sub-delegates or any of them be valid and binding on the Society to all intents and purposes."

75. He submitted that the 1991 Assignment was therefore "valid and binding on the society to all intents and purposes", irrespective of whether the attorney had acted ultra vires his powers. While that may well have been the intention of the donor in framing the final paragraph of the power of attorney as aforesaid, the difficulty in the way of such construction is that the proviso refers to a breach of the regulations or directions committed by the attorney, and does not specifically provide that notwithstanding anything done by the attorney in excess of the aforesaid powers conferred upon him, the instruments effected by him shall remain valid and binding on the Society.

Conclusion

76. The last point as to the construction of the final Proviso of the power of attorney aside, for the reasons given above I find that the power of attorney is ambiguous as to the precise scope of the powers conferred upon the attorney; that the attorney bona fide and reasonably interpreted the instrument as conferring upon him the power to assign the Property in 1991 by way of gift to the Defendant, and that in doing so he honestly considered that he was implementing the purposes for which his powers had been granted; that in any event, even if he did act ultra vires his powers in making the 1991 Assignment in favour of the Defendant, the disposition was not thereby void but voidable at the instance of the donor; and that far from there being any indication that the Society ever intended to avoid the disposition, it should have been clear to the Plaintiffs from all the circumstances that the Society had in fact adopted and ratified such disposition.

77. In the circumstances I am satisfied that the responses of the Defendant's solicitors, culminating in the responses of 30 May 1997, constituted a reasonable and adequate answer to the requisition which had been raised by the Plaintiffs and that in all these premises the Defendant did satisfactorily answer the requisition raised by the Plaintiffs in relation to the capacity of the Society's attorney to effect the 1991 conveyance of the property by deed a gift to the Defendant.

Section 13(4A) conveyancing and Property Ordinance, Cap.219

78. Although for the reasons given above it is not necessary to my decision in this matter, I wish to make it clear that I consider that the provisions of s.13 (4A) of the Conveyancing and Property Ordinance, Chapter 219, would in any event be decisive of this issue :

"13 (4A) Where any document is or has been produced by a vendor as proof of title to any land and that document purports to have been executed, not less than 15 years before the contract of sale of that land, under a power of attorney, it shall for the purposes of any question as to the title to that land be conclusively presumed -

(a) as between the parties to that contract; and

(b) in favour of the purchaser under that contract as against any other person,

that the power of attorney -

(i) was validly executed;

(ii) was in force at the time of the execution of that document; and

(iii) validly authorized the execution of that document.

(5) This section affects only the rights and obligations of the parties to a contract for the sale of land entered into after the commencement of this section."

79. Section 13 commenced in 1988, and since the parties' agreement was dated 8 April 1997, the provisions of s.13 (4A) do apply to it. In terms of sub-paragraph (iii), for the purposes of any question as to the title to the property, a conclusive presumption arises as between the parties to the contract and in favour of the Plaintiffs as against any other person, that the power of attorney in this matter validly authorised the execution of the 1991 Assignment. The clear effect of those provisions in the present context is that the Plaintiffs had no good reason in law to question whether the assignment by the attorney was one within his powers, nor to raise any requisition in that regard.

80. I should add that I have not overlooked the judgments of the Court of Appeal in Lo Hung Biu v. Lo Shea Chung and another (loc. cit.), the facts of which are, in my view, distinguishable from those in the present case.

81. In the present case, the actual assignment has been produced in addition to the Memorial (compare the facts of that case, as per the judgment of Ching, J.A., as he then was, at 727H).

82. Furthermore the finding of Cheung, J. that the presumption was not applicable in that case because the power of attorney did not confer on the attorney the express power of making a gift of the property to others is not, in my view, binding upon me on the facts of the present case, since this is a question to be judged on the facts peculiar to each individual case. Although the power of attorney in the present case likewise did not expressly confer upon the attorney the power of making gifts of his principal's property to others, it was very differently worded from the power of attorney under consideration by the Court of Appeal in Lo Hung Biu, thus giving rise to the various additional considerations in relation to the construction of the instrument in the present case which I have indicated above.

83. In my view it was precisely in order to preclude the sort of difficulty that has arisen on the facts of the present case in relation to the capacity of the Attorney in executing the 1991 transaction that s.13 (4A) of the Ordinance was introduced.

84. It follows from my findings aforesaid that the Plaintiffs are not entitled to any of the declarations which they seek. I find that the Defendant has duly discharged its obligations under the parties' Agreement and at law to prove good title to the property. I dismiss the Plaintiffs' claims, and make an order nisi that the Plaintiffs are to pay the Defendant's costs of these proceedings.

Representation:

Mr Andy Hung, inst's by M/s Knight & Ho, for the Plaintiffs in MP No.1955/97 and MP No.1956/97

Mr Samuel Chan, inst'd by M/s Tsang, Chan & Wong, for the Defendants in MP No.1955/97 and MP No.1956/97