The Bank of Canton, Ltd v. Chalkland Co Ltd

HCMP002203/1982

Power of Trustees to delegate their authority in respect of overseas property prior to the enactment of the Trustee Ordinance - The operation of the Real Property Limitation Act 1833 - Effect of delay of an Executor in selling leasehold property comprising part of the Deceased's estate - Effect of recitals in a deed - Effect of failure to prove valid execution of a Deed of Reassignment of a mortgage.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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Coram: The Hon. Mr. Justice Mayo.

Date: 31 December 1982

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JUDGMENT

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1. On the 20th of May 1982 the plaintiff and the defendant entered into a sale and purchase agreement whereby the plaintiff agreed to sell and the defendant agreed to purchase a building known as No. 6, Des Voeux Road Central which building is on part of Marine Lots 102 and 103 for a sum in excess of HK$500 million. One of the terms of the said agreement is that the plaintiffs must deduce a good title to the land to the defendants. The defendants have raised various requisitions on the title which was proferred to them by the plaintiffs and the parties have drawn up an agreed statement of facts together with a number of questions which are posed for resolution by the court. Dependent upon the answers to the questions posed the plaintiff seeks a declaration to the effect that they have deduced a good title to the property.

2. Separate Crown Leases were granted in respect of each of the lots. They were granted to different persons but it is contended by the plaintiffs that the titles of section A of Marine Lot 102 and Section C of Marine Lot 103 which I will be referring to as the premises merged together and were vested in the plaintiff. This was by virtue of assignment dated the 28th of February 1919 which I will be referring to as the 1919 Assignment. The requisitions which have been raised relate to the titles to Marine Lots 102 and 103 and accordingly it will be necessary to consider the devolution of title for both of these lots. The fourth requisition which has been raised refers to the title to the premises as a whole and I will deal with that separately.

3. By an assignment dated the 20th of July 1886 for Marine Lot 102 and an assignment dated the 31st of May 1886 for Marine Lot 103 the lots were assigned to Catchick Paul Chater (Chater) and Frederick David Sassoon (Sassoon). Chater held a two-thirds interest in each lot and Sassoon held the remaining one-third. In 1895 Chater at the request of Hormusjee Nowrojee Mody (Mody) made a declaration of trust in which he declared that one-half share of his two-thirds interest in both of the Lots was held beneficially by him for Mody. Mody died on the 16th of June 1911 resident in Hong Kong and probate to his will and codicil was granted by the Hong Kong Courts to Chater. Probate was dated the 5th of December 1911. There was no express power of sale in the declaration of trust I have referred to. Accordingly any title Chater could obtain would be by virtue of the grant of probate.

4. Sassoon died in London on the 4th of May 1917. On the 3rd of July 1917 probate of his will was granted to Jeannette Sassoon, David Aaron Gubbey and Ronald Edward David Sassoon (The Sassoon Executors). All three executors were residing in England at this time. On the 24th of July 1917 The Sassoon Executors appointed Mr. Albert Henry Compton (Compton) as their attorney in Hong Kong amongst others. By an assignment dated the 31st of December 1918 the Sassoon Executors acting by Compton purported to assign Marine Lot 102 to Chater. By the 1919 Assignment which was between Chater as First Vendor, the Sassoon Executors acting by Compton as the Second Vendor, both vendors purported to assign the premises to the plaintiffs. It was stated that it had been intended by the previous assignment to also assign Marine Lot 103 to Chater but inadvertently this had been overlooked. However the 1919 Assignment attempted to rectify the situation. In addition to this there was nothing in the 1919 Assignment to indicate that Chater was disposing of Mody's one-third interest in the Lots as personal representative nor indeed was there any reference in the recitals to the declaration of trust I have referred to.

5. There was also a Statement in the agreed facts to the effect that the plaintiffs had entered into a mortgage on the 29th of April 1937 in favour of the Bank of China to secure advances. This mortgage had been re-assigned on the 31st day of October 1940 but no power of attorney had been produced by the plaintiffs to prove that the party who purported to execute the Deed of Re-assignment, Mr. Shou J Chen had been duly authorised by the Bank of China to execute the Deed. Correspondence was also exhibited which had been exchanged between the plaintiffs solicitors and the Bank of China which was inconclusive and indicated that it was unlikely that the power of attorney or any copy of it was likely to be made available to the parties.

6. At this stage it is convenient for me to set out verbatim the questions which have been posed by the parties in relation to the requisitions which have been raised on the titles.

7. The only other relevant evidence which was deduced for the purpose of this application was an affirmation by Mr. Huo Pao Tsai who was formerly a senior officer in the plaintiff company. Mr. Huo affirmed that he was aware of the business of the plaintiffs since 1936 until the present time. He was aware of the fact that the moneys which had been secured by a mortgage dated the 29th of April 1937 in favour of the Bank of China had been repaid by the plaintiff and that the mortgage had been re-assigned by the Bank of China on the 31st of October 1940. No out-standing claims had been made by the Bank of China since that date. He was also aware that Mr. Shou J Chen had been the General Manager of the Bank of China at that time and that he believed that he had been authorsed to execute the re-assignment of the said mortgage.

8. Mr. Price who was representing the plaintiffs initially dealt with the first question and the third question together as they both related to Chater's dealings with the Mody estate. He argued that it was a well established principle of the common law in England that personal representatives could by virtue of their office as such dispose of a leasehold interest. As authority for this proposition he referred to a passage appearing in the 16th edition of Williams Mortimer and Sunnucks on Executors, Administrators and Probate appearing on page 661 under the heading "Selling, Mortgaging and Leasing":

"Power to sell - common law

Mr. Price also referred to the 2nd, 5th and 13th editions of Williams which were published respectively in the years 1838, 1856 and 1953 where similar passages could be found. He also called in aid passages which appeared in the earlier editions of Williams on Real Property. Specifically he referred to a passage appearing on page 279 of the 1st edition of the work which was published in 1844 which stated as follows:

"When the will has been proved, it is the duty of the executor to pay the testator's debts out of the personal estate, to which such executor becomes entitled by virtue of his office. For this purpose the executor has reposed in him by the law the fullest powers of disposition over the personal estate of the deceased, whatever may be the manner in which it has been bequeathed by the will. And in the event of a sale of any such property by the executor, the purchaser is not bound to inquire whether there are any debts remaining unpaid; for in the absence of evidence to the contrary, the executor is presumed to be acting in the proper discharge of his office. Nor is the purchaser at all concerned with the application which the executor may make out of the purchase money; but the executor's receipt will be a sufficient discharge, and he along will be responsible to the creditors and legatees for its due application."

A passage of similar effect can be found on page 217 of the 20th edition of the work which was published in 1905.

9. Implicit within the first question is the question as to whether the absence of recitals in the 1919 Assignment of the 1895 Trust Deed and the Death and Probate of Mody constitute a defect of title. Mr. Price argued that recitals are included in a Deed as a matter of convenience and they are not a necessity. In support of this contention he referred to an extract appearing on page 472 of the 8th edition of Dart on Vendors and Purchasers 8th edition which reads:

"Recitals, though often expedient, are not essential to the operation of an assurance; every case resolves itself into a question of present or future convenience. Even in the case of a release of a doubtful right, though it is in the highest degree expedient to show upon the face of the assurance that the party executing it did so with a full knowledge of facts, and of the questions arising upon them, it would be sufficient in order to sustain the instrument, to show aliunde that such knowledge was actually possessed by the releasing party."

A similar passage appears on page 593 of the 6th edition of the work which was published in 1888.

10. Mr. Price then asked the rhetorical question whether the passage of time from the grant of probate of Mody's estate to the execution of the 1919 Assignment would enable any presumption to arise to the effect that Chater might have made an assent of the property and thereby ceased to be a personal representative. This question is relevant bearing in mind the terms of question 3B. The case of Tanqueray Williaume and Landau⁽¹⁾ is authority for the proposition that when executors sold real estate charged with debts under the power of sale so given by statute, the purchaser was not bound to inquire whether any debts remained unpaid, until 20 years had elapsed after the testator's death. It is evident however that this rule does not apply to leasehold property. This seems to be borne out by 2 cases. The first is the case of In re Whistler⁽²⁾ Kay J. has this to say at page 565 of the report:

"In the first place I am not aware of any authority (I asked for one in the course of the argument, and I have looked so far as time would allow me to see if I could find any) that the doctrine that after 20 years from the death of a testator the power of the executor to sell personal estate must be considered to be at an end, has ever been applied by the Court in any case. I am not aware that that rule in In re Tanqueray-Williaume and Landau⁽¹⁾ at all extends to the power of an executor to deal with the personal property of the testator. The exercise by trustees of a mere power of sale, and the exercise by an executor of the right which the law gives him as executor to deal with assets vested in him in that character are two very different things, and unless I could find it so laid down by express authority, I should be very slow to say that after twenty years the Court must assume that an executor has lost his right to deal with the personal property of his testator. The suggestion is made, with which I entirely agree, that it is not merely the debts of the testator which the executor has to pay; he may have incurred expenses of administration and he may have to raise money by pledge or mortgage of the personal property of the testator, and these are matters for which it is essential that he should retain the power of dealing with the assets of the testator. Therefore it seems to me that the reason of the rule of In re Tanqueray-Williaume and Landau⁽¹⁾, that a power given to trustee to sell freeholder estate for the payment of debts must be treated as prima facie non-existent when twenty years from the date of the death of the testator have expired, is one which it is not at all necessary to apply to the case of an executor."

The other case is In re Venn & Furze's Contract⁽³⁾. Stirling J. followed Re Whistler⁽²⁾ and says at page 114:

"It appears to me that I have the high authority of Lord Cairns and Lord Cranworth for saying that where a person who fills the position of an executor is found selling or mortgaging part of his testator's estate, he is to be presumed to be acting in the discharge of the duties imposed on him as executor, unless there is something in the transaction which shews the contrary; and further, that the contrary is not made out merely from the circumstance that the conveyance or mortgage does not purport to be executed by him in that capacity. Beyond the lapse of time and the frame of the deed of the 7th of May 1878, there is nothing in the present case which gives rise to the suggestion or inference that Taylor was acting otherwise than in the discharge of his duty as executor. Neither the lapse of time nor the frame of the deed is sufficient, in my Judgment, to raise the presumption that he was acting otherwise."

It seems to me that Stirling J. took matters further than Kay J. and there can be little doubt that Chater must be regarded as having acted as a personal representative when he executed the 1919 Assignment. Clearly he was empowered so to act. It is pertinent to observe in this connection that the passage of time in the present case from the grant of probate to the sale of the property was in the order of 8 years and that the interest being disposed of was a leasehold interest. The reference to the manner in which the instrument is framed is also helpful in resolving any doubts which may arise from the drafting of the 1919 Assignment and in particular the form which was adopted for the covenants of title.

11. Mr. Price conceded that there was no power of sale contained in the 1895 Declaration of Trust. However he argued that on the basis of the proposition he had advanced on the first question and on question 3B, he had clearly established that Chater had a power to sell the property by virtue of the probate so that the absence of recitals concerning the Mody estate and his title could in no way constitute defects of title and that no adverse inferences could be drawn from the delay which had ensued in exercising the power of sale. Mr. Swaine who was representing the defendants did not seriously resist any of these contentions. I am entirely satisfied on the authorities which have been cited that Mr. Price has correctly stated the law and the propositions he has advanced are well founded.

12. I will now consider the problems which arise out of question 2. The main problem which arises is whether the Sassoon Executors were able to delegate their powers. They were all resident in London and appointed inter alia Compton to be their attorney. He was resident in Hong Kong. There is no direct evidence available as to whether Compton was merely performing a ministerial act in signing on behalf of the Sassoon Executors or whether he was exercising his own discretion. There is also nothing to indicate that Compton was professionally qualified and performing professional services. The form of the power of attorney is in the usual form for Resealing grants. It could perhaps be argued that it was in the nature of a ministerial act. In any event the Sassoon Executors did not subsequently take any action to call in question the exercise of the power. Mr. Price sought assistance from the case of Stuart v. Norton⁽⁴⁾. The headnote of that case reads:

"An executrix and devisee in trust resident in England, in whom other executors and devisees in trust resident in British Guiana, the management of a plantation in that Colony was vested, though appointed by the Will, 'without the powers of assumption, substitution and surrogation', may, notwithstanding, by the Roman Dutch law in force in that Colony, appoint an attorney to act there on her behalf in matters of discretion; as well as other matters connected with the trusts.

Semble. That a trustee resident in England, appointed under an English Will, can only by the English law appoint an attorney to act in matters of discretion connection with a trust in an English Colony or Foreign country."

He also placed reliance upon a passage in the Judgment of Knight Bruce L.J. which appears on page 33 of the report:

"It is said that, according to the English law, a trustee cannot delegate discretion, cannot act by another in a matter of discretion; but even in the English law that general rule may be open to exception, and their Lordships are not at present moment prepared to say, that a trustee in England under an English Will, may not effectually appoint an attorney to act in matters of discretion in connection with the trust in a Colony or any foreign country."

He contended that it was obviously good sense that a trustee should be able to delegate his powers when they were exercised abroad. Stuart v. Norton⁽⁴⁾ had been cited favourably in a number of authorities and it was certainly arguable that the principles which were laid down represented the law prior to the enactment of the Trustee Act 1925 Cap. 19 in England and the Trustee Ordinance Cap. 29 which was enacted in Hong Kong in 1934. Indeed this legislation had adopted this principle. In addition to this the case has specifically been followed by Longinnes J. Re Dunlop⁽⁵⁾. Mr. Swaine did not agree that Stuart v. Norton⁽⁴⁾ assisted the plaintiff in any way. He referred to the passage which I have earlier cited and to the fact that the principles upon which the case had been decided were those of Roman Dutch law. This is evident from the passage which follows the one cited.

13. Having considered the matter carefully and in particular in the context of the circumstances laid down in the agreed facts I have come to the conclusion that I am by no means satisfied that Stuart v. Norton⁽⁴⁾ is authority for the proposition that the Sassoon Executors could have validly exercised the powers they did under the Sassoon Will. For the sake of this exercise I do not think that this is a matter of great importance. The reason for this lies in the issue which is raised in question 2C. Even if the execution of the assignment by Compton was defective the plaintiffs have nonetheless deduced a title to the defendants which they must accept in this regard. Authority for this can be found in the case of In re Atkinson and Horsell's Contract⁽⁶⁾. This was a slightly unusual case. The vendor of property contracted to deduce title from a root of title dated 1838. He delivered an abstract of title which showed the devolution of the property from the root of title to himself. The chain of title showed that the property had by mistake been vested in a person who it was subsequently agreed should not have been entitled to the property and accordingly title through this person could not be sustained. However, the vendor was able to at least prove a possessory title for a sufficient period of time to ensure that no adverse claim could succeed. The purchaser objected to this title. The Court of Appeal upheld the judge at first instance who ordered that the purchaser could be forced to take the title notwithstanding the irregularity I have referred to. Cozens Hardy M.R. delivered a strong judgment and I propose referring to it. At page 10 of the report it reads:

"Now I ask myself this: Supposing the abstract had been the identical abstract which had been delivered, and that it contained a statement that Lady Colquhoun had been in uninterrupted possession since 1874, would that or would it not have been a title which could be forced upon the purchaser under this contract? It seems to me that it would. The title begins as stipulated. Every document which is contained in the abstract does relate to the land in question. It shows facts which prove that the person who was then outsted was an sbsolute owner, and not under any disability, and that, therefore, there is nobody who can challenge the title of the vendor. I ask myself why is there any ground for holding that you must necessarily presuppose a title going through a number of documents without any intervening application of the Statute of Limitations. I know of no authority to justify such a contention. I think that it would have a starling effect, and it would be really inconsistent with Games v. Bonnor⁽⁷⁾ which is a very strong case, and one which I think has a great bearing upon the matter in question. In that case the vendor was the mortgagee in possession under a mortgage dated 21st of June 1859. That was the root of title, and the purchase was to be completed some day in 1880. It appeared that at the date of the contract, and at the date named for completion, he had not a good title. Having regard to the prior state of the title it was discovered after the date fixed for completion that the statutory period had run in his favour, and in an action brought after that date the difficulty was pointed out and a case laid before one of the conveyancing counsel, who said that in his opinion no title was shown on the abstract, but that a good title might be made under the Statute of Limitations; and the Court thought that was a title which the purchaser was bound to take, because the vendor had shown that at the date when the action was commenced he was in a position by reason of, and in virtue of, the Statute of Limitations to make a good title to the whole property. Any other view would, I think be very extraordinary. Let me assume an open contract. The vendor has been in possession, say, for twenty years; it may be, and I think it is true, that he would have to show an absolute title for forty years, that is to say, to show deeds and documents beginning before the period when he entered into possession. If he can do that (as the vendor in the present case can) by reason of possession under the deeds and documents, I do not see any reason why he should not be able to enforce specific performance, although in one sense of the word that which is the root of his title, namely, a document at least forty years old, will not have been one of the documents through which, and by virtue of which, he claims to be entitled to the property. He has satisfied the obligation to show that he has a good title, and he can say 'I show an abstract extending back forty years', that abstract being important, of course, as showing dealings with the property, and negativing the right of anybody to defeat the operation of the statute. ..... I think this is a case, therefore, in which there is no foundation for saying that the purchaser was entitled to assume that the title should begin in 1838 and go through a chain of deeds and documents. It is sufficient if, in fact, the vendor produced an abstract beginning at that date, and having regard to the Statute of Limitations he is in a position to say 'I have a good title and I have shown it from 1838' ".

If the reasoning of Cozens Hardy M.R. is applied to the present case there can be no doubt that any legal estate still vested in the Sassoon Executors would have become extinguished by virtue of the operation of the Real Property Limitation Act 1833. Atkinson and Horsell's Contract⁽⁶⁾ was followed in George Wimpey & Co. Ltd. v. Sohn and Another⁽⁸⁾. I am satisfied that the principles which were laid down in the case reflect a true and correct statement of the law at the present time.

14. Lastly I will consider the situation relating to the fourth question which is posed. This is the objection which is raised by the defendants to the absence of the power of attorney evidencing the authority of Shou J. Chen to execute the re-assignment of the 1937 mortgage in favour of the Bank of China. It is immediately apparent from the observations I have already made concerning Atkinson and Horsell's Contract⁽⁶⁾ that the principles propounded by the Court of Appeal would be highly relevant to this requisition on title bearing in mind the contents of Mr. Hou Pao Tsai's affirmation which I have already referred to. However it is possible to take matters further than this. Mr. Price referred me to the case of Sands to Thompson⁽⁹⁾ which concerned a similar situation to the one which arises in the present case. Fry J. who heard the case attempted to deal with the situation which arose with the legal relationship between a mortgagor and a mortgagee after the mortgage debt has been discharged but where there has been no re-assignment of property. It is necessary to consider this position because taking the least favourable view of the present case the absence of being able to prove the authority of Mr. Shou J. Chen to execute the re-assignment amounts to a situation where it can be stated that there is no valid-reassignment of the 1937 mortgage. Fry J. dealt with the problem in this way at page 618:

"The true relation of mortgagor and mortgagee was no longer subsisting between the parties. It appears to me equally, having regard to the two decisions of Doe v. Rock⁽¹⁰⁾ and Drummond v. Sant⁽¹¹⁾, that the mortgagee was not a trustee, and the mortgagor was not a cestui que trust within the meaning of that proviso, the Courts having put upon the word 'trustee' in that clause the meaning of a trustee under an actual express trust. It follows that in my Judgment the 7th section applies, and that the lessor at will, that is to say the mortgagee, had thirteen years from the commencement of the tenancy at will within which to bring his action - that at the end of that thirteen years his right was extinguish by the 34th section. More than thirteen years having expired the legal estate has been extinguished, and the fact that there was no reconveyance ceases to be any objection."

The sections referred to in this passage refer to the Statute of Limitations (3 and 4 will 4 Cap. 27) which would not have been applicable in Hong Kong at the relevant time. Accordingly one would need to substitute a period of 21 years for the period of 13 years referred to. This however, makes no practical difference as it is obvious that any adverse claim which could conceivably be made would be statute barred in the present case. Sands to Thompson⁽⁹⁾ has been cited with approval in various text books. I do not consider it to be necessary for me to consider the difficulties which were encountered in Re Copelin's Contract⁽¹²⁾. I say this because the agreement for sale and purchase concluded between the parties did not stipulate that the 1937 mortgage was to be the root of title to be deduced. This being the case I do not consider any of the problems arising in that case to be germane to the matters I have to presently decide. Mr. Swaine did not resist the arguments which were advanced by Mr. Price and with respect I think that he was right in adopting this approach. I am satisfied that the failure to satisfactorily prove the execution of the re-assignment to the mortgage does not constitute a defect of title and accordingly any requisition raised by the defendants in this connection has been adequately dealt with by the plaintiffs.

15. To summarise my judgment in these proceedings I think that it may be helpful to the parties if I address myself to giving specific replies to the questions which have been posed by the parties on the basis of the conclusions I have reached. My answers to the questions posed are as follows: Question 1 - No; Question 2 - No; Question 2A - for the reasons given in the answer to question 2C, it is not necessary for me to make a formal determination of this issue; Question 2B - the same answer as to 2A; Question 2C - Yes, any title or interest left outstanding in the Sassoon Executors is properly now regarded as having subsequently been extinguished by the lapse of time and the operation of the Real Property Limitation Act 1833; Question 3A - No; Question 3B - the 1919 Assignment effectively disposed of the Mody interest and gave good title to the plaintiffs. Question 4 - No. Having regard to the Order I made at the conclusion of the proceedings it is not now necessary for me to make any further order.

(1) (1882) 20 Ch.D. 465.

(2) 35 Ch.D. 561.

(3) (1894) 2 Ch, 101.

(4) 14 MOO PCC 17.

(5) (1925) 26 St. N.S.W. 126.

(6) (1912) 2 Ch. 1.

(7) 54 L.J. (Ch.) 517

(8) (1967) 1 Ch. 487.

(9) 22 Ch. 614.

(10) Car. & M. 549; 4 Man. & G. 30.

(11) Law Rep. 6 Q.B. 763.

(12) (1937) 4 A.E.R. 447.

Representation:

A. Price, Q.C. & D.A.L. Wright (J.S.M.) for Plaintiff.

J. Swaine, Q.C. & R. Kotewall (Deacons) for Defendant.