Archive for the ‘execution’ Category

Execution of deed on behalf of mainland company: presumption of due execution

May 3, 2013

In Liu Xiaodong v Chase Eagle Development Limited ([2013] 1 HKLRD 933, CFI) a mainland company (C) gave W a power of attorney to sign a deed on its behalf. The attestation clause read:

‘SEALED with the Transferor and SIGNED and DELIVERED by [W] the person(s) duly authorised by the governing body of the Transferor.’

W alone signed on behalf of C. There was an opinion from a mainland lawyer. This was to the effect that the person giving the opinion was a mainland lawyer applying mainland law and that the execution was valid. The court held that this would ordinarily be sufficient proof that the document had been properly executed ([36] – [45]).

This was not the end of the matter, however. The transaction was of such a size as to fall outside the scope of the authority conferred by C on W. This defect was fatal and could not be cured by the production of the opinion of the mainland lawyer.

Nor could it be cured by section 23 of the Conveyancing and Property Ordinance. The mere fact that the attestation clause included the ‘magic phrase’ duly authorised by the governing body’ was not enough to bring the execution within section 23.

Requisition as to due execution of assignment by corporate vendor

July 13, 2012

In Jones v Bohmann International Ltd ([2012] HKEC 919, CFI) a purchaser refused to complete a purchase on the grounds that his requisitions had not been properly answered and the seller had failed to show a good title. The first requisition concerned the assignment to the seller by a corporation.

The corporation’s articles required the authority of the board to the execution of a deed. It also required that the seal should be affixed in the presence of a director who was then to sign the deed. The corporation had a corporate director which had affixed its seal and the corporate director’s seal had been countersigned by an individual, Z. In response to a requisition, the seller produced evidence that Z was the sole director of the corporate director.

The court found that the requirements of the article had been complied with. The article was unlike that encountered in other cases where the articles required the company seal to be countersigned by  director who had been specifically authorised to do so. Here there was no requirement for a director to be specifically authorised and it was enough for the execution clause to record that the seal had been countersigned by a director.

If it had been necessary, it was not, the seller could have relied on section 23 of the Conveyancing and Property Ordinance.

A second requisition concerned the stamp duty certificate. The court thought that there was no merit to the requisition but that, in any event, stamp duty was not a matter of title.

Guarantee procured by misrepresentation can be void because of undue influence

January 6, 2012

In Beardsley Theobalds Retirement Scheme Trustees v Yardley ([2011] EWHC 1380), Y had been a director of B Ltd. M was another director and controlling shareholder and he was trusted by Y. Y left the board at M’s request but continued as an employee. B Ltd was due to take a new lease of a shop but the landlord (L) insisted on a guarantee because of B Ltd’s precarious financial position. M asked Y to join in the lease as guarantor. Y signed as a result of M’s skillful misrepresentation; he made it appear that Y was simply witnessing M’s signature as he often did. B Ltd went into administration and L sought to enforce the guarantee. It failed: the guarantee was void as against Y for an impressive range of reasons.

First, in the circumstances, M’s misrepresentation amounted to undue influence. L was affected by it since it knew of B Ltd’s precarious position and it ought to have realised that Y was not a director of B Ltd. It should have ensured that Y was independently advised as to the nature of the document and the financial risk he was running. Y should have confirmed in writing that he was signing with the benefit of full knowledge of the nature of the document and the risk. A solicitor should have been asked to certify that independent advice had been given. None of this had happened so L had constructive notice of the undue influence. The court would also have found the guarantee to be unenforceable on the grounds of non est factum and that Y had not given authority for the guarantee to be delivered in escrow.

Execution of assignment by PRC Company

May 28, 2011

If a company has a metallic common seal, the corporate name must be clearly engraved on it. The Court cannot take judicial notice of mainland law and practice concerning the execution of assignments.

Wang Zhidun v Tsoi Ming Pui ([2011] HKEC 611, DC) concerned requisitions raised on the sale of a property. One of the assignments in the chain of title was by a Hong Kong company. The corporate name was not legible on the common seal used on the assignment. Wang Zhidun asked for a confirmatory assignment but the defendants did not procure this. The Court held that the purchaser’s objection was valid. On Hong Trading Company Ltd v Bank of Communications  was authority for the proposition that execution is defective when a company uses a metallic seal and the corporate name is not clearly engraved on it.

Another relevant assignment was by a PRC company that had used a rubber chop instead of a common seal. The purchaser had asked for a legal opinion by a qualified PRC lawyer to confirm that this was a valid mode of execution by a PRC company. The seller refused to comply. Again, the Court agreed that this requisition had been valid and had not been properly answered. The Court cannot take judicial notice of PRC law concerning the mode of execution of documents by PRC companies.