Archive for the ‘authority’ Category

Allegation that directors lacked authority to commit corporate landlord

June 18, 2013

In Hong Kong Hai Zhou Tong Xiang Association Ltd v Ngai Shun Wah ([2013] HKEC 739, LT) T’s tenancy expired in 2012. L sought possession on the basis that the fixed term had expired and that T had sub-divided the property in breach of covenant. T’s defences were that he had been granted a new lease until July 2016 and that L had known all along of the sub-division and had acquiesced. L responded that the directors who had countersigned the company seal lacked authority and that the seal that had been used was a fake. T succeeded on both counts.

First, even if the countersignatories lacked actual authority (the Tribunal thought they probably had actual authority) they had apparent authority ([15]). As for the seal, even if it were a fake (and the Tribunal was not persuaded of this) T could rely on the rule in Turquand ([21]). Further, L had cured any possible procedural irregularity: its acceptance of rent amounted to a ratification of the lease  ([23]).

L had known of and acquiesced in the sub-division and could not complain of it. In any event, it had not served the notice required by section 58 of the Conveyancing and Property Ordinance.

Michael Lower


Representation: agent’s ostensible authority. When damages for purchaser’s repudiation to be assessed

January 4, 2013

In Montrio Ltd v Tse Ping Shun David ([2012] HKEC 1781, CA) P entered into provisional and formal agreements for the sale of property to D. D alleged that certain representations had been made to him by P’s agent concerning the size of the property and that these were false. P sought damages for D’s repudiatory breach and to forfeit the deposits he had received. D sought to rescind. P argued that damages should be measured by looking at the difference between the contract price and the market value at the time of breach. P succeeded.

It was accepted that P had not actually authorised the making of any representations as to the size of the property. He accepted that he had always known that it was likely that the agents would be taking some steps to market the property (even at times when he was not actively seeking to sell). D argued that the agents therefore had ostensible authority to make the relevant representations. This failed:

‘The mere expectation that an estate agent might try to market a property cannot be treated as any kind of permission or authority for the agent to do so. Nor was there any obligation on the owner’s part to stop or prevent an agent in attempting to find potential buyers as a broker …  In no way could the plaintiffs be regarded as having in some way instigated or permitted Ms Lam to make the Statement as their agent, nor had they put her in a position where she appeared to be authorised to make the Statement as their agent.’ (Kwan JA at [31])

The normal rule for assessing the damages would be to look at the difference between the contract price and the market value at the time of the breach ([58]). There was no reason to depart from that approach in the present case ([65]).

Exchanging contracts: solicitor’s authority

October 16, 2012

In Domb v Isoz ([1980] Ch. 548, CA (Eng)) S agreed to sell her house to P. The form of the contract had been agreed and P’s solicitor sent the part of the contract signed by his clients to S’s solicitor together with a cheque for the deposit. S’s solicitor agreed to hold the contract to P’s solicitors order. S’s solicitor held his own client’s signed part of the contract. The two solicitors then spoke to each other and agreed that an exchange of contracts had been effected. Then S refused to complete. The question was whether there had been an effective exchange of contracts. The English Court of Appeal unanimously affirmed that there had been an effective exchange of contracts.

Conveyancing solicitors have implied and ostensible authority to effect an exchange of contracts by such method as they see fit (Templeman L.J. at 563):

‘Exchange by telephone, it seems to me, eliminates, or at any rate substantially reduces, the danger that any client will lose a bargain or be left without a home. Exchange by telephone can only take place after both vendor and purchaser sign contracts in identical form (subject to the question of rectification, which can apply to any contract) so that there is no doubt about the terms of the contract. Exchange by telephone can only take place when a contract signed by a client is in the physical possession of his own solicitor or in the possession of the solicitor on the other side who has agreed to hold that part to the order of the despatching solicitor … [I]f two solicitors exchange by telephone, they should then and there agree and record identical attendance notes.’ (Templeman LJ at 564)

The part of the contract signed by S had an extra clause (with the agreed apportionment of the price between the house and certain fittings). This did not prevent an exchange in this case since there was no doubt that the apportionment had been agreed and Buckley LJ would have been prepared to order rectification if need be (559).

Agent’s authority: limited to open contract?

December 2, 2011

In Wisecal Ltd v Conwell International Ltd ([2011] 4 HKLRD 275, CA) C was a company that owned a flat. C’s sole director and shareholder (its alter ego) gave F authority to sell the flat at an agreed price. C then refused to complete the sale. W (the purchaser) sought damages from C (or from F if F had acted without authority). At first instance, it was decided that F had had authority to sign a contract. F was nevertheless found to be liable because he had not been given specific authority to enter into a contract in the form used (containing, for example, the usual liquidated damages clauses). On appeal, F pointed out that C had not pleaded this point and it had been raised by the judge in the course of final submissions. If C had intended to argue that, were it to be held that F had authority, then that authority did not extend to those particular clauses then that should have been included in its pleadings. It was not. F’s appeal was allowed. C was ordered to pay the damages to W. The Court of Appeal seemed to doubt that C would have succeeded even had it pleaded that F had no authority to sign up to these standard contract terms.

No contract where the auctioneer’s authority has been revoked

March 9, 2011

An auctioneer can only create a binding contract for the sale of land where he has the actual authority of the seller.

In Hoie Sook Fong v Ismail Halima ([2008] HKEC 2213) the owner of a flat arranged for it to be sold at auction. She revoked the auctioneer’s authority before the auction. Despite that, the property was offered for sale and there was a successful bid. The flat owner refused to complete the sale. It was held that there was no binding contract since the auctioneer’s authority had been revoked and auctioneers need actual authority if they are to bind the principal. The auctioneers were liable to the successful bidder for breach of warranty of authority.