Yau Chong-sin v. Tsang Chak-kai

HCA002767/1980

Headnote

Bankruptcy - annulment - effect of condition that payment should be made to Official Receiver - Powers of Bankrupt to dispose of property while Bankrupt - Power to dispose of after acquired property - Circumstances when power of Attorney is revocable - Construction of power of Attorney.

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Coram: Mayo, J.

Date of Judgment: 27th October, 1981.

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JUDGMENT

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1. The Plaintiff is seeking a declaration in respect of land he claims to have purchased at Yuen Long in the New Territories being the remaining portion of Sec. B of Lot No. 850 in Demarcation District 125 (the said land). The land was conveyed to him by the 3rd party Mr. TANG Chung-kwai (Mr. Tang) by a conveyance dated the 27th November, 1978 and a confirmatory conveyance dated the 17th May, 1979.

2. Mr. Tang, who was the original owner of the said land was adjudicated bankrupt on the 24th February, 1978.

3. On the 20th July, 1978, Mr. Justice Leonard made an order rescinding the receiving order which had been made on certain terms and conditions.

4. The operative part of the order reads as follows:-

"It is ordered that the Adjudication Order made against the debtor on the 24th day of February, 1978 on the petition of Tang Chiu Man and Michael Sher Kar Wai be annulled and the receiving Order made thereunder on the 9th day of January, 1978 rescinded on the condition upon the payment of $125,584.50 and payment of the costs of the circulation and advertisement of this order to the Official Receiver by the debtor herein."

5. The plaintiff claims that the condition relating to the payment of the monies referred to in the order was not complied with until the 15th March, 1979.

6. In August 1978 Mr. Tang signed a document under seal which has been described as an irrevocable Power of Attorney whereby he constituted a Mr. WAN Sau On (Mr. Wan) as Donee of the Power of Attorney and authorised him to sell the said land after it had been developed. The document also contained a general power of sale.

7. Mr. Wan entered into a sale of Purchase Agreement on 17th November 1978 with the defendant and thereafter a conveyance dated the 8th December, 1978 whereby he sold him the said land and thereafter registered the said transactions at the District Office at Yuen Long. The Plaintiff is seeking a declaration that these transactions were null and void.

8. The defendant maintained that the said Power of Attorney was irrevocable and that the power of sale had been properly exercised and took priority over the interest claimed by the Plaintiff. He joined Mr. Tang as a third party to the proceedings. He also counterclaimed for a declaration in like terms. Both the Plaintiff and the Defendant claim damages against each other.

9. The Plaintiff who is a businessman gave evidence that he contacted a friend of his Mr. HO Lin Leung who, together with his son HO Keung Sun, ran an Estate Agents Office under the name Lai Sun or Honesty Agency. He said that he was interested in purchasing either flats or land. If it was land he was either interested in selling it again at a profit or developing it. It was apparent that the Plaintiff did not have much idea about land values in the New Territories and placed a large measure of reliance upon the Lai Sun Agency. He said that Mr. Ho had telephoned him advising him that he had some land to sell and that it represented good value. He received this information on either the 4th or 5th November 1978 and on the 7th he visited the land with Mr. Ho and could see that it was undeveloped. Arrangements were then made for a Chinese Agreement to be signed on the 9th November and the price agreed for the purchase of the said land was $12 per square foot and as the area of the land was almost 30,000 sq. feet the consideration for the purchase was $352,440.00. The Plaintiff was able to identify his signature and the signature of Mr. Tang on the sale and purchase agreement. On the 9th November he paid a deposit of $90,000.00. The completion of the transaction was effected on the 27th November at the offices of Wong Hui & Souza who were solicitors acting for him. He had taken $50,000.00 with him as purchase monies but as this had not been enough he had to pay the balance of the purchase monies the next day. This consisted of a cashiers order for $200,000.00 and a cheque for $24,132.00. This included payment of legal fees and stamp duties. He was insistent that he had no knowledge of any defects in the title of the vendor at the time of this transaction. In cross-examination he admitted that he had borrowed $270,000 from a Mr. HO Ming Yeung who was a friend of his. This Mr. Ho was in no way related to the Ho family running the Lai Sun Agency. He also admitted that Mr. Ho had lent him the money on the basis that he would participate in any profit derived from selling the said land at a profit. So far as legal formalities were concerned he was happy to leave the matter in the hands of his solicitors.

10. The Plaintiff called as a witness a search clerk from Messrs. Wong Hui & Souza who had acted for the Plaintiff when he bought the said land on the 27th November 1978. The search clerk said that he had conducted a search on that day and copied details of the entries he saw in the Registers at the District Office Yuen Long on to a form of blank search card used by his firm. He said that he was sure that he had also searched the day book which contained particulars of pending transactions and that there was no reference to any sale and purchase transaction having been entered into in the month before the date when he made his search. He did however admit in cross-examination that it was possible that he might have overlooked an entry which had been made.

11. The only other witness called by the Plaintiff was Mr. Tang. He gave evidence of giving a Power of Attorney to Mr. Wan authorising him to develop the said land but that he had verbally revoked the Power on the 9th November 1978 which was the date when he entered into the sale and purchase agreement with the Plaintiff for the sale of the said land. He also gave evidence that the title deeds of the said land were in H.H. Lau's custody and that they had been received from the Official Receiver when he had discharged his indebtedness relating to his bankruptcy.

12. He gave evidence that he received $90,000.00 from the Plaintiff as a deposit on the 9th November and that arrangements were made for the transaction to be completed on the 27th November 1978. He said that he attended upon the completion and was able to idientify his signature and the Plaintiff's signatures on the conveyance on sale.

13. He said that on the 6th December 1978 he had written to Messrs. H.H. Lau withdrawing the instructions he had given them to represent him in connection with his bandruptcy affairs. He wrote a similar letter on the same day to the Official Receiver. He followed this up with a further letter of the 21st December, 1978 repeating this and adding that he had revoked the Power of Attorney in favour of Mr. Wan and had sold the land to the Plaintiff.

14. Mr. Li, who was representing the defendant subjected Mr. Tang to a wide ranging cross-examination. His purpose was to endeavour to establish that Mr. Tang had received a loan of $210,000.00 from Mr. Wan and that the loan was the reason why Mr. Tang had given the Power of Attorney to Mr. Wan. He admitted that he had owed a Mr. Chee Kar Wah and a Mr. Tang Chun Man $50,000 each. He had entered into negotiations with the Official Receiver relating to various lots of land, excluding the Remaining Portion of Sec. B of Lot 850 in D.D. 125 which had been in his name, his mother's name and his brother's name. This land had been sold to discharge his indebtedness. Also the remaining portion of Sec. B of Lot 850 in D.D. 125 was sold to a Mr. Tang Shui Kwan on the 5th September 1977 and he in turn conveyed the land in question back to him (Mr. Tang Chung Kwai) on the 3rd August 1978.

15. A considerable amount of time was spent in cross-examining Mr. Tang in respect of these transactions and Mr. Li was endeavouring to establish that Mr. Wan had made a loan of $210,000.00 to Mr. Tang and that the Power of Attorney had been given by Mr. Tang to Mr. Wan to secure the loan.

16. However Mr. Tang persisted in his denial of ever having received a loan from Mr. Wan. He agreed that Mr. Wan had paid to his solicitors the sum of $210,000.00 but he claimed that these monies represented the purchase monies for the 9 other lots of land that he had referred to. He claimed that the monies in no way related to the Remaining Portion of Sec. B of Lot 850 in D.D. 125. He also denied that he had received either for himself or on his behalf the sum of $500,000 from Mr. Wan.

17. The Defendant Mr. Tsang Chak Kai gave evidence that he is the Manager of a store and that he resides in Yuen Long. He met Mr. Cheung Kee Cheung, a clerk in Messrs. H.H. Lau, solicitors as result of a previous conveyancing transaction he was involved in. Mr. Cheung drew his attention to the said land and informed him that it was for sale for $16 per square foot and that the land was being sold by Mr. Wan. He inspected the said land and agreed to buy it at that price. The total purchase price was $469,920.00 and an initial deposit of $150,000.00 was payable. He signed the sale and purchase agreement on the 17th November 1978 and the completion of the transaction was effected on the 8th December when he paid the balance of the purchase price payable. He denied any knowledge that Mr. Wan's Power of Attorney had been revoked.

18. In cross-examination he denied that he had previously known either Mr. Tang or Mr. Wan. He said that Mr. Wan had informed him that he was the owner of the said land. It was only when he attended at the offices of Messrs. H.H. Lau on the 17th November 1978 that he had learnt that Mr. Wan was acting under a Power of Attorney. This information had not disquieted him as he was prepared to accept his solicitors advice that everything was in order. In addition to his dealings with Mr. Cheung he had also received advice from Mr. Lau Yuen Hoi a solicitor. At first he admitted that the land was very cheap but later denied it.

19. The defence called Mr. Wan to give evidence. He is a pork butcher who lives and works at Yuen Long. He was introduced to Mr. Tang by a Mr. Chan Fun, a property broker in about March 1978. He had originally intended building some houses and Mr. Chan had put him on to Mr. Tang. After some negotiations Mr. Tang agreed to sell the said land to Mr. Wan for $6 per sq. ft. He then went to Mr. Cheung Kee Cheung of H.H. Lau & Co. and asked him how his intention of building houses could be secured. About a week later Mr. Cheung had informed him that the said land was "under distraint" and that Mr. Tang was a bankrupt. He added that if he, Mr. Wan, paid $216,000 the distraint could be lifted. Apparently the Official Receiver was owed $120,000, and Mr. Tang owed $90,000 and interest to Mr. Tang Shui Kwan. Mr. Cheung said that if Mr. Tang entered into a permanent Power of Attorney in his favour Mr. Tang would give the land to him and Mr. Tang would build houses on the land and assist him in applying to the District Office for permission to erect the houses.

20. He denied that Mr. Tang had ever been to him at his shop and verbally revoked the Power of Attorney. In cross-examination he said the first he knew about any intention to revoke the Power was when he received the letter from Messrs. Wong Hui & Souza dated 1st December 1978 notifying him of such revocation. He had immediately taken this letter to H.H. Lau & Co.

21. He said that he first met the Defendant through the introduction of Cheung Kee Cheung. He had decided to sell the said land because he was short of money. He negotiated a price for the sale of the property with the Defendant and had thereafter gone to H.H. Lau & Co. for the sale and purchase agreement and 3 weeks later the completion of the transaction. Completion had been effected on the 8th December 1978. He also had other transactions with members of Mr. Tang's family. He paid a total of $500,000 in respect of those transactions including the one he had been giving evidence in respect of. Also he had entered into a sale and purchase contract in respect of the said land with Mr. Tang.

22. Mr. Wan did not fare at all well on cross-examination by Mr. R. Tong who represented the Plaintiff. He denied having any knowledge of any dispute concerning the said land until May 1981. He denied that H.H. Lau solicitors had ever discussed the problems with him in 1978. Eventually he admitted that H.H. Lau & Co. had commenced litigation on his behalf for the recovery of $482,000 in April, 1979. He was unable to give any satisfactory explanation as to what the payment of $216,000.00 he had referred to represented. He did however agree that he had not made any loan to Mr. Tang in respect of the said property either as consideration for the granting of the Power of Attorney or representing a security in respect thereof. Mr. R. Tong specifically drew his attention to the sums of $210,000 and $25,000 referred to in the further and better particulars which had been supplied by the Defendant. He agreed that these monies had not been loans to Mr. Tang.

23. He also denied that he had any knowledge of the written revocation of the Power of Attorney. He said that he had passed the letter he had received from Messrs. Wong Hui & Souza to H.H. Lau & Co. but they had not explained to him the contents of the letter.

24. Mr. Wan was also cross-examined at some length by Mr. Chaine who represented Mr. Tang the 3rd party. He agreed that he had had no previous experience of transactions in land and that he had not had any satisfactory yardstick to measure whether the price he claimed to have paid for the said land of $6 per sq. ft. was a good price. He just said that he placed reliance upon Mr. Chan Fun and Mr. Cheung Kee Cheung in advising him. I do not think that it would be unfair to say that the replies Mr. Wan made to questions put to him in cross-examination indicated a large measure of confusion and contradiction as to what was actually agreed or concluded by Mr. Wan at the time of the transactions he referred to.

25. It was strongly my impression that I could place little or no reliance upon his testimony.

26. Mr. M.E. Brown a solicitor in the Official Receiver's Office gave evidence that he represented the interests of the Official Receiver when he was appointed Receiver under the Receiving Order made by Mr. Justice Li in the 9th January 1978. After the order was made he made arrangements for various investigations to be undertaken in relation to Mr. Tang's affairs but these investigations were not proceeded with as the debtor had placed before him various proposals which had led to the Order being made for the annulment of the Adjudication Order. Apart from registering the Court Order with the District Office he had not taken any other action relating to the said land. He also said that to the best of his knowledge the Receiving Order had been based upon the alleged fraudulent preferences referred to in the bankruptcy petition.

27. The final witness to give evidence for the defence was Mr. LAU Chok-kang the District Officer in charge of the Land Registry at the Yuen Long District Office. He explained the procedures adopted for receiving Deeds in the District Office and recording particulars in the day book and thereafter registering them in the Deeds Register. He produced a copy of the entries in the Registry relating to the said land and also produced a copy of day book which showed the relevant entries in November 1978. He conceeded that when a large number of deeds were lodged for registration memorial numbers may be allocated to deeds without particulars of them being described in the day book. He insisted however that this situation would only be permitted to continue for a matter of hours rather than days. Also anyone making a search of the day book would be given access to deeds which were on the counter particulars of which had not yet been entered in the day book. He said that he personally supervised the staff who maintained these records and he was satisfied that the system, which he had described was generally adhered to. In particular November 1978 had not been a busy month and he could think of no reason why there should have been any significant delays at that time. This evidence strongly indicates that particulars of the 17th November Sale and Purchase were recorded in the day book at the Registry.

28. With the conspicuous exceptions of Mr. Brown the solicitor in the Official Receiver's Office and Mr. Lau the District Office at Yuen Long, I have the greatest reservations in accepting the evidence of the witnesses who gave evidence during the trial. I do not believe for one moment that I have heard more than a small fraction of the truth as to what transpired.

29. I find it significant that Mr. Y.H. Lau, the solicitor in H.H. Lau's Office and his clerk Mr. Cheung Kee Cheung did not give evidence. Perhaps more than anyone else these two men could have thrown light upon these transactions.

30. I have reservations over accepting the evidence of the Plaintiff. It is difficult to believe that a man with so little knowledge of land transactions in the New Territories would have been prepared to commit himself to the purchase of such a valuable piece of land without having a much more detailed knowledge of land values in the area. He said that he was simply prepared to accept the advice of his friend Mr. Ho. I find difficulty in believing this. I do however accept that he did enter into the conveyance on the 27th November 1978 of the land as purchaser of the property and that he entered into the confirmatory conveyance dated the 17th May 1979. No satisfactory explanation however was forthcoming as to how or why the completion of the transaction was effected without any examination of the title deeds to the property.

31. I am prepared to accept that the search clerk of Messrs. Wong Hui & Souza was basically a truthful witness. He admitted that it was possible that he had overlooked the entries which appeared in the day book at the Yuen Long District Registry prior to his search on the 27th November 1978, notwithstanding the fact that he was at that time a fairly experienced search clerk. Having heard the evidence of Mr. Lau I have no hesitation in finding that the entries were indeed recorded in the day book and Mr. Yau inadvertantly overlooked them.

32. I did not find Mr. Tang to be a convincing witness. However where his evidence conflicts with that of Mr. Wan I prefer Mr. Tang's version of events. In particular I find as a fact that he did attend upon Mr. Wan on the 9th November 1978 and purport to make a verbal revocation of the Power of Attorney. I also believe Mr. Tang when he gave evidence that he had never received any loan from Mr. Wan.

33. The Defendant was definately a more reliable witness. I am prepared to accept that he did enter into a sale and purchase agreement on the 17th November 1978 and that he did complete the transaction on the 8th December 1978 at the offices of Messrs. H.H. Lau & Co. As I have indicated previously I am prepared to attach very little weight to Mr. Wan's evidence. I do however accept that he was the donee of Mr. Tang's Power of Attorney. I am not though prepared to accept that the Power of Attorney was coupled with a proprietory interest. I am certainly not prepared to accept that he made a loan to Mr. Tang or that the Power of Attorney was made in consideration of any loan he made to Mr. Tang.

34. After considering the evidence in this case I accept that the legal issues which have to be resolved are as follows:-

Order dated 20th July, 1978

35. As regards the bankruptcy of Mr. Tang Mr. Chaine agreed with the submissions put forward by Mr. R. Tong when he opened the case for the Plaintiff that the condition for payment of the amount stated in the order and costs was a condition precedent and not a condition subsequent. This was clear from the wording of the order and was in accordance with the principles laid down in Sec. 33 of the Bankruptcy Ordinance Cap. 6.

36. Mr. Li argued that the order for the annulment of the Adjudication of Bankruptcy, made by Mr. Justice Leonard in the 20th July, 1978 dated from that day notwithstanding the condition contained in the order that payment of $125,584.50 and costs be effected. Normally an order became effective as at the date of the order. This was the position usually provided for in Order 42 rule 3 of the Rules of The Supreme Court. If the position were to be otherwise third parties dealing with a bankrupt would not have any degree of certainty whether or not the annulment was effective. I do not see any merit in this argument as it would always be possible to make independent inquiry as to whether any particular condition had been complied with. More important than this, it is possible, indeed likely, that Mr. Justice Leonard only made the order for the annulment of the adjudication in bankruptcy on the basis that the payment would be effected. If the payment was not effected the requirements of Sec. 33 of the Bankruptcy Ordinance may not have been complied with thus rendering the order a nullity. It is significant to note that under Sec. 33(2) of the Bankruptcy Ordinance Cap. 6 the Court can impose whatever conditions it sees fit to impose. This is also borne out by a passage appearing on p. 149 of the 19th Edition of Williams & Muir in Bankruptcy. The passage reads as follows :-

"Subsection (2) : Consequences of annulling

One can go further and state that as it would appear that there is no difficulty in imposing such conditions it is rather unrealistic to argue that any conditions which are imposed should revert back to the date when the order was originally made. After considering the terms of the order carefully I have no hesitation in finding that the learned Judge intended to and did impose a condition precedent. Until that condition had been complied with Mr. Tang remained a bankrupt.

Effect of Bankruptcy

37. The next question upon which Mr. Li addressed me was the effect of bankruptcy upon Mr. Tang. He argued that it was not open to the Plaintiff to plead the effects of Mr. Tang's bankruptcy in view of the contents of para. 1 of the Statement of Claim. This paragraph reads as follows:-

38. By stating that Mr. Tang was the Legal and Registered Owner of the said land he was precluded from now advancing an argument to the effect that Mr. Tang was no longer the legal and registered owner of the said land.

39. Mr. Li went further and suggested that if the plaintiff was permitted to advance such an argument it would be open to the defendant to modify his pleadings to enable him to advance an argument that the said land had been conveyed by Mr. Tang to his uncle Mr. Tang Shiu Kwan and accordingly when the land had been conveyed back to Mr. Tang it was after-acquired property received by a bankrupt assuming that Mr. Tang was still a bankrupt at the relevant time. In this event the provisions of Sec. 52 of the Banduptcy Ordinance Cap. 6 would be applicable.

40. This provides in simple terms that if the Trustee in Bankruptcy i.e. the Official Receiver in the present case, does not intervene the bankrupt may dispose of after-acquired property. Sec. 52(1) reads as follows:

41. This principle is also set out in some detail in Vol. 3 of 4th Edition of Halbury's Laws of England. Paragraph 625 deals with the position:

42. Mr. Li submitted that when Mr. Brown had given evidence in relation to the administration of the bankruptcy he had not referred to any intervention in the affairs of the bankrupt in relation to the said land. In putting forward this argument he was prepared to concede that when Mr. Tang originally conveyed the said land to Mr. Tang Shun Kwan on the 5th September 1977 the transaction had constituted a fraudulent preference.

43. However as the defendant was a bona fide purchaser for value he was entitled to the protection afforded by S. 52 of the Bankruptcy Ordinance. At the most he had only had constructive notice of the bankruptcy by virtue of the orders having been registered at the District Office.

44. Mr. R. Tong submitted that the Statement of Claim had been correctly drafted and accurately described the proper position concerning Mr. Tang's ownership of the said land. It was a fundamental principle of bankruptcy law that an adjudication of bankruptcy does not involve a conveyance of property or affect the legal title or registration of property. What happens is that various statutory provisions come into operation. This can be seen by a perusal of Sec. 22(1) of the Bankruptcy Ordinance:-

"22(1) Where a receiving order is made against a debtor, then if the creditors at the first meeting or any adjournment thereof by ordinary resolution resolve that the debtor be adjudged bankrupt or pass no resolution, or if the creditirs do not meet, or if a composition or scheme is not approved in pursuance of this Ordinance within 14 days after the conclusion of the examination of the debtor or such further time as the court may allow, the court shall adjudge the debtor bankrupt; and thereupon the property of the bankrupt shall become divisible among his creditors and shall vest in a trustee."

45. In this connection it was also pertinent to observe that the defendant had, in his defence, admitted the contents of para. 1 of the Statement of Claim.

46. Certainly the manner in which the Statement of Claim had been drafted did not provide the defendant with a licence to depart from his pleadings and attempt to argue that the said land was after acquired property and thereby enable him to endeavour to invoke assistance from Sec. 52 of the Bankruptcy Ordinance.

47. From the way in which the issues had been framed the Defendant was precluded from mounting an argument that the said land was after acquired property.

48. However even if he was allowed to do so it would not assist him. To obtain any assistance from Sec. 52 the defendant would have to establish 2 facts. The first that the property was after acquired and the second that the Official Receiver had not intervened in respect of the after acquired property.

49. Taking the second point first, Mr. Brown, when he gave evidence had not referred at any time to after acquired property. There was no evidence one way or the other as to whether there had been any intervention by the Official Receiver in respect of the said land.

50. As regards the first point the position was equivocal. There had been reference to fraudalent preferences including a reference to the said land and indeed the original Bankruptcy Petition which had been filed was founded upon allegations of fraudulent preferences. If there was substance to the prayers contained in the Petition the 1st conveyance from Mr. Tang to Mr. Tang Shun Kwan would have been void by virtue of the provisions contained in Sec. 49 of the Bankruptcy Ordinance.

51. In addition to this the defendant could not derive any advantage under Sec. 52 as the defendant was claiming title through Mr. Wan who in turn could not under any circumstances sustain a claim to be a bona fide purchaser for value.

52. Mr. Chaine also supported the arguments which had been advanced by Mr. R. Tong that it was not open to the Defendant, on his pleadings, to argue that the said property was after acquired property and could accordingly be disposed of by Mr. Tang, if the Official Receiver had not intervened. Such an argument raised issues which went beyond the four corners of the case pleaded.

53. In any event, even if I were to allow Mr. Li to advance such an argument it was bound to fail. The reason for this was that it was clear from Sec. 52 of Cap. 6 that after acquired property does not belong to the bankrupt. He also referred to the judgment of Fry, L.J. in Re Pascoe¹ at p. 225 which reads as follows:-

"Turning to the first point, a number of cases were referred to, of which Cohen v. Mitchell (I) is the leading modern authority. Those cases showed that transactions by an undischarged bankrupt with third persons had a measure of protection, and s. 47 of the Bankruptcy Act, 1914, merely put into statutory form, with some additions, what was the law before that Act. That protection operated in two ways. First, third persons who acquired property in a transaction of the kind described had a good title to it which could not be impugned by the trustee in bankruptcy. Secondly, a party to such a transaction with an undischarged bankrupt could not set up as against the undischarged bankrupt the title of the trustee unless, of course, the trustee had intervened. In other words, the bankrupt was entitled to deal with his after-acquired property by means of transactions with third persons of the kind specified, and as against him the person with whom he dealt could not dispute his title, but these cases clearly do not establish the proposition that, as between the bankrupt and the trustee, after-acquired property belongs to the bankrupt until the trustee claims it. I can find no support for that proposition. The precise relationship of the bankrupt to his after-acquired property has been described by various analogies. He has been likened to a factor or some other agent having authority to pass the title to the goods. He has been likened to a trustee. None of those analogies are really accurate and, of course, they cannot be pressed. He has certain powers to confer a title to, and certain rights in respect of, his after-acquired property. Thus, he has the right to protect it against wrongdoers, but the title of the trustee is only qualified by those rights given to the bankrupt by s. 47, which protect transactions with third parties but do not in any way qualify the title of the trustee, save in so far as that title is liable to be impaired in cases which fall under the section. The initial proposition on which the argument is based, namely, that the property is in the bankrupt until the trustee intervenes, not only does not find any authority but is quite contrary to the clear language of the statute. Section 38, para. (a) provides, in terms, that the property of the bankrupt which vests in the trustee is to comprise "All such "property as may belong to or be vested in the bankrupt at "the commencement of the bankruptcy, or may be acquired "by or devolve on him before his discharge." I see no ground whatsoever for writing into that a provision that the property is only to vest in the trustee if and when he intervenes. Again s. 47, sub-s. I, itself recognizes the estate of the trustee because it says "any estate or interest in such property which by virtue "of this Act is vested in the trustee shall determine and pass "in such manner and to such extent as may be required for "giving effect to any such transaction." The trustee's property is qualified, but is qualified only to the extent of protecting the specified transactions. Subject to that the property is in the trustee."

54. In addition to this he argued that any protection under Sec. 52 available to a bankrupt was personal to him and could not be delegated by a Power of Attorney. The burden of establishing that a benefit was available under Sec. 52 was placed upon the defendant and he must discharge it. In this case he had failed to do so.

55. I am satisfied that Mr. R. Tong and Mr. Chaine have correctly stated the position concerning after acquired property.

56. The consequence of this is that the normal principals of bankruptcy apply to this case.

57. Paragraph 1 of the Plaintiff's Statement of Claim accurately described the position and it is only reasonable to read the paragraph in conjunction with the clauses that follow.

58. The effect of Mr. Tang's bankruptcy is to prevent him from validly giving to Mr. Wan the Power of Attorney and therefore Mr. Wan had no title to confer upon the Defendant.

The Power of Attorney etc.

59. Mr. Chaine submitted that the Power of Attorney was badly drafted and there were inconsistencies on the face of the document. However it was clear from Clause 7 of the Power that the property, if it was sold, had to be sold together with the building erected thereon. This was consistent with the recital at the commencement of the document that the Power was given for the purpose of developing the property. He argued that the land could not be sold unless it had been developed in accordance with the intentions of Mr. Tang.

60. Mr. Li argued that as a basic principle the clauses in the operative part of the Deed took precedence over the contents of any recital. He said that there was no inconsistency between the power of sale conferred by Clause 7 of the Deed and the recital which set out the objects of the Power of Attorney. The relevant recital to the Power of Attorney reads :-

"AND WHEREAS I am desirous of appointing an attorney to act for me in the development and management of the said land"

Clause 7 reads:-

"7. From time to time if and when my Attorney shall think fit to sell mortgage, charge exchange surrender give up or in any other ways dispose of the said land together with the new building erected thereon or any part or parts thereof and upon such terms and conditions as my Attorney shall think fit and to receive the consideration or purchase money for the same or any parts thereof and to give good receipts therefor which receipts shall exonerate the person or persons paying such money seeing to the application thereof or being responsible for the loss non-application or mis-application thereof."

61. Mr. Li agreed that the said land had not been developed and that there was no building or no new building erected thereon. However he argued that the power of sale exercisable by Clause 7 was a general power of sale and regard should be paid to the contents of that clause without any necessity of taking congnisance of the recital. Mr. Li also referred to the final part of the Deed where the donor had expressly declared that the powers enumerated should be given the widest interpretation and should not be construed as setting limits to the general authority conferred.

62. Mr. Li then went on to argue that the Power of Attorney had not been revoked before the conveyance to the defendant. He invited me to accept Mr. Wan's evidence to this effect rather than the evidence of Mr. Tang. As I have already commented in the earlier part of this judgment I have no hesitation in accepting the evidence of Mr. Tang where this conflicts with the evidence of Mr. Wan. I accordingly find as a fact that Mr. Tang did verbally revoke the Power on the 9th November 1978 at Mr. Wan's Pork Shop in Yuen Long.

63. However Mr. Li drew attention to the final part of the Power of Attorney where it is stated that the Power shall remain valid and be irrevocable from the date it was made until further notice in writing. This being the case it was only the written revocation which was communicated on a date subsequent to the conveyance to the defendant that was effectual.

64. Mr. Li then submitted that there was a lack of bona fides on the part of the Plaintiff. In particular knowledge of Mr. Tang's bankruptcy must be imputed to him. Also he had notice of the Power of Attorney. His solicitors, Messrs. Wong Hui & Souza had gone ahead with the transactions in question notwithstanding the registration of the sale and purchase agreement in favour of the defendant. A further significant matter was that these solicitors had completed the transaction although they had never had a sight of the original title deeds which had been in the custody of Messrs. H.H. Lau solicitors.

65. The arguments advanced by Mr. Li to the effect that the Plaintiff was not a bona fide purchaser for value do not really take matters much further. Both the Plaintiff and the Defendant at the time of the respective completions of their transactions had at least constructive notice of purportedly adverse dealings in the property. The question which has to be considered is whether the bankruptcy orders were effective at the dates of the transactions and whether any previous dealings including the granting of the Power of Attorney were or were not valid. In other words the issue is whether or not a good title could be conferred upon them.

66. In the same way I do not see how it assists Mr. Li's case to assert that the Plaintiff was not acting in a bona fide manner as he had not had the original title deeds in his or his solicitor's possession. As I have stated previously there are a number of unsatisfactory aspects to this case and in all probability t there are a number of important matters relating to this litigation which have not been placed before the Court. It is however necessary for the Court to confine itself to evidence which is before it and not to speculate upon what may have been the motives of the parties. All that can be done is to draw reasonable inferences from established facts. No firm evidence has been deduced to the Court from which inferences can be drawn that either the Plaintiff or the Defendant have been dishonest or that they have been guilty of mala fides.

67. The Plaintiff who is a relatively unsophisticated person utilised the services of solicitors, Messrs. Wong Hui & Souza and it might reasonably be assumed that he would have been prepared to accept that they would attend to the documentation of the transaction including satisfying themselves that the title was in order. So far as imputed knowledge is concerned Messrs. Wong Hui & Souza may well have been sufficiently confident of Mr. Tang's title that they were prepared to complete the transaction notwithstanding the fact that they did not at the date of completion have the title deeds. Obviously they were concerned about the title deeds as part of the relief which is being sought in this litigation is that the deeds should be delivered up to the Plaintiff.

68. Mr. Li also referred to the doctrine of estoppel. He argued that a person not having a title by virtue of bankruptcy could not challenge the validity of an agreement entered into by him or on his behalf. The defendant had placed reliance upon the representations of Mr. Tang through Mr. Wan.

69. Mr. Li did not address the Court at any length on the question of priorities as Mr. R. Tong conceeded that if Mr. Li's main submissions were successful the defendant would have priority in accordance with the entries recorded at the District Office.

70. Mr. R. Tong then addressed the Court on the Power of Attorney and its construction. While he accepted that the deed had not been felicitously drafted he maintained that it was clear from reading the deed as a whole that Mr. Tang conferred upon Mr. Wan a power to develop and manage the said property and that the power of sale was only incidental thereto. There was no ambiguity in this connection and no general power of sale was envisaged. The early clauses in the deed were all consistent with the parties' intention of developing the said land.

71. He argued that he could call in aid the recitals to the deed in explaining its operative part. He referred to Para. 1511, of Vol. 12 of the 4th Edition of Halsbury's Laws of England in support of this proposition. In addition to this he argued that a recital in a deed could have the effect of limiting the operative parts of the deed. This principle was clearly propounded by Kay, J. at p. 515 of Danby v. Coutts & Co.².

72. I have considered the arguments advanced by all Counsel in relation to the Power of Attorney. I have also carefully scrutinised the Power and I am satisfied that Mr. Wan, the donee of the power did not have a general power of sale of the said property until it had been developed. It is common ground that when the said land was purportedly sold by Mr. Wan to the Defendant it had not been developed and there was no "new building" erected upon it. I therefore hold that the purported sale to the defendant was without the authority of Mr. Tang.

73. At this point I informed the parties in brief terms of my findings so as to enable the defendant and the third party to satisfactorily prepare themselves for the third party proceedings which were to be proceeded with at the conclusion of the proceedings between the Plaintiff and the defendant.

74. This being the case Mr. R. Tong did not address the Court in any detail on the remaining issues, namely whether the Power of Attorney could have been revoked or assuming it was revocable that it had been revoked. Mr. R. Tong advised me that he had prepared submissions to the effect that the defendant could not avail himself of the provisions contained in Sec. 5(2) of the Power of Attorney Ordinance Cap. 31. The defendant had been seeking the wrong relief as he should not have completed the sale on the 8th December 1978 but have applied to the Court for Specific Performance of the Sale and Purchase Contract. His delay in doing so was fatal to a claim for an equitable remedy.

75. I do not propose expressing any opinion on the validity of these submissions.

76. To summarise the position I am satisfied that the order of Mr. Justice Leonard dated the 20th July 1978 did not become effective until payment of the monies referred to in the order namely the 15th March 1978.

77. This being the case Mr. Tang's bankruptcy was not annulled until that date.

78. I have further found that during his bankruptcy he could not validly enter into the transactions with the defendant and the Plaintiff.

79. In addition to this I have found that Mr. Wan did not have authority under the Power of Attorney to sell the said land to the defendant.

80. I am however satisfied that Mr. Tang did have title to sell the land to the plaintiff after the 15th March 1979 and accordingly the confirmatory conveyance he made to the Plaintiff dated the 17th May, 1979 was valid and effectual.

81. This being the case I enter judgment for the Plaintiff. He shall be entitled to the following relief:-

82. The defendant and the 3rd party by consent agreed that the 3rd party proceedings should be adjourned sine die with liberty to apply and I agreed to this.

Representation:

1. 1944 1 Ch. 219

2. Vol. 29 Chanc. Division p. 500