Read the full judgment text of CACV 001002/2000 on BabelCite. This Court of Appeal judgment was delivered on 26 July 2001 before Rogers VP, Le Pichon JA and Sakhrani J.
Property law – sale and purchase of land – vendor and purchaser summons – requisitions on title – due execution of deed by company – single director signing under company seal – whether deeming provision in articles of association deems execution proper – applicability of Table A article 114 of the Companies Ordinance (Cap 32) – Conveyancing and Property Ordinance (Cap 219) s.23 – presumption of due execution – rule in Turquand's case – indoor management rule – rule in Bain v Fothergill – applicability in Hong Kong – clause excluding warranty of legal estate – purchaser's lien. The underlying contract was for the sale and purchase of Flat A on the 17th Floor and Car Parking Space No. 26 of Bowen Place, 11A Bowen Road, between the defendant vendor and the plaintiff purchaser. Two assignments in the vendor's chain of title (a 1995 assignment by Manibest Investments Limited to Winkit Properties Limited, and a 1996 assignment by Winkit to the defendant) were sealed by the company and signed by only one director, with no board resolution produced. Each company's articles contained a deeming provision that a document requiring the seal was deemed properly executed if sealed and signed by the Chairman or a person authorised by the Board. The purchaser raised requisitions seeking proof of due execution, including a board resolution; the vendor refused, relying on Law Society Circular 105/90, section 23 of Cap 219, and the indoor management rule. On the issue of whether the requisition was properly raised, the court held that it was, given that no board resolution was produced. On the Table A point, the court held that Table A article 114 (requiring a director's signature and countersignature by a secretary or second director) was not excluded by the deeming provision; the deeming provision facilitated compliance with the mandatory requirements rather than dispensing with the need for a signature or board authorisation. The court preferred the reasoning in Li Ying Ching v Air-sprung (HK) Ltd and Ho So Yung v Lei Chon Un to the first-instance decisions in Chan Sai Hung and the HSBC case (Ho Sin Yi). On the first-instance propositions, the court rejected the view that the deeming provision was not mandatory (Woo Turhan v Taiwan Fuji Trading distinguished as not involving a deeming provision) and held that Peking Fur Stores did not establish that the legal estate necessarily passed where the seal was affixed outside the strict requirements of the articles; the Agar general rule was held to take effect subject to the express provisions as to execution in the articles. On section 23 of Cap 219, the court held that the presumption of due execution did not apply because the director did not sign with words indicating he was the person authorised by the board, distinguishing Tread East Ltd v Hillier Development Ltd. On the indoor management rule, the court held (applying Registrar General v Northside Developments) that the rule was of no assistance because on the face of the document, the requirements of the articles and the deeming provision were not met. The court further rejected the clause 15.02 argument that the vendor did not contract to sell a legal estate, holding that the clause was confined to the absence of a certificate of compliance. On the rule in Bain v Fothergill, the court agreed with Barnett J in Roseric Ltd v West River Development that the rule had no place in modern Hong Kong, given the system of land registration since 1844, and should not be followed; in any event, the Malhotra v Choudhury exception would have applied because the vendor had taken no steps to secure good title. The court allowed the appeal, set aside the judgment below, declared that good title had not been shown and that the defendant was in repudiatory breach, and ordered return of deposits totalling HK$1,380,000, indemnity for stamp duty of HK$517,500 and estate agent's commission of HK$140,000, reimbursement of conveyancing costs of HK$91,880, interest at 2% above prime, and a purchaser's lien, with costs to the plaintiff here and below.
Legal issues: Effect of deeming provision and Table A article 114 on due execution by single director · Application of section 23 of Cap 219 presumption of due execution · Application of the indoor management rule (rule in Turquand's case) · Applicability of the rule in Bain v Fothergill in Hong Kong · Effect of clause 15.02 excluding warranty of legal estate
Outcome: Appeal allowed; judgment of Chung J set aside. The court declared that good title had not been shown, that the requisitions had not been satisfactorily answered, and that the defendant was in repudiatory breach of the agreement. The plaintiff was entitled to a purchaser's lien.
Cited by 3 cases · Cites 1 case