TAM YUEN FUN v. DAY & CHAN AND OTHERS

DCCJ 17040/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 17040 OF 2001

(Transferred from HCA4273 of 2000)

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JUDGMENT

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Introduction

1. This is an action for damages arising from an allegation of professional negligence against the Defendants in a conveyancing matter which took place in 1994.

2. The facts which give rise to the action can be shortly stated. In early 1994 the Plaintiff, Madam Tam, wished to purchase a flat, at Flat B, 23rd Floor, Grace Mansions, 374-376, Des Voeux Road West, Hong Kong ('the property'). She retained the 1st Defendant, a firm of solicitors to conduct the conveyancing on her behalf. The 2nd, 3rd and 4th Defendants were the partners who then constituted the 1st Defendant as a firm of solicitors. Today none of them is a partner of the 1st Defendant. They have all moved on and Mr Joseph Chan is now the sole proprietor. He has given evidence on behalf of all the Defendants.

The Material Facts

3. Under the sale and purchase agreement which was dated the 21st February 1994 the Plaintiff agreed to purchase the property from the vendor, a Mr Jacy Chan, for $1,980,000. The sale was completed by an assignment dated the 30th April 1994.

4. In 1999 she decided to sell the property and on the 6th May 1999 entered into a sale and purchase agreement with her purchaser to sell the property for $1,880,000. Completion of the conveyance was set for the 8th June 1999. On the 21st May 1999 the purchasers solicitors raised requisitions as to title which included a request for a sight of a certified copy of an Indenture to the original Crown Lease under which an additional lot of land had been added to the plot in question. The Plaintiff's solicitors then wrote to the Defendants in order that the position might be clarified. This caused a delay and the Plaintiff's solicitors were able to postpone completion until the 22nd June in order to give them more time to produce the document or at least a certified copy of it. Nothing came from the Defendants at that stage and the Plaintiff's solicitors also wrote to the Land Registry, the District Lands Office, the Building Department, the Legal Advisory and Conveyancing Office and a number of firms of solicitors who in their time had been or were still acting for developers or co-owners of neighbouring buildings erected on various other portions of the same Lot of land. Nothing came of these enquiries and completion was therefore further put back to the 28th June. The purchasers solicitor's continued to take a tough line on title contending that without a certified copy of the Crown Lease and the Indenture there was a real risk of a successful challenge to the title of the property. In the meantime the Lands Department wrote to the Plaintiff's solicitors on the 16th June informing them that they were unable to locate the Indenture. Faced with this state of affairs the Plaintiff's solicitors were obliged to obtain a further postponement of completion this time to the 2nd July 1999. In the meantime there were continued exchanges between the solicitors as they each tried to persuade the other that production of the Indenture was unnecessary or, as the purchasers solicitors insisted that it went to the root of title and they were therefore unwilling to proceed without it. Then on the 3rd and 5th July the purchasers solicitors wrote to say that in the absence of the Indenture they considered that the Plaintiff had repudiated the contract which repudiation they accepted and demanded the return of the deposits.

5. Following this the transaction revived itself because the Buildings Department was able to locate a copy of Indenture and the Plaintiff's solicitors wrote to the purchasers solicitors to enquire whether they would now accept the copy and complete the matter. The Lands Registrar indicated that he was not in a position to certify the copy of the Indenture.

6. With the Plaintiff now very much on the back foot and for her own personal and financial reasons anxious to secure a sale, the purchaser was able to take advantage of the situation and the sale was eventually completed at the reduced price of $1,730,000 ─ $150,000 less than the original agreed price.

The Allegations of Negligence

7. The pleaded case against the Defendants which is at paragraph 26 of the Statement of Claim puts the matter on the basis that the Defendants had failed to advise the Plaintiff that when she purchased the property in 1994 her vendors title might be defective or doubtful because he (through his solicitors) had failed to obtain the Indenture dated the 23rd March 1866 or a certified copy of it in respect of the extension of Marine Lot No. 186. In this regard further complaint is made of their failure to advise her of the probable consequences which might result from this ─ which in fact was what happened when she came to sell in 1999. In this vein it is said that they failed to advise her that she would have been entitled to withdraw from the conveyance in 1994 and/or insist, rather like her purchasers solicitors in 1999, that the Indenture or a certified copy should have been produced before completion. I do not propose to recite all of the particulars of negligence here ─ this summary will suffice for present purposes. It is then pleaded at paragraph 27 that by virtue of the absence of the Indenture (or a certified copy) the Plaintiff had not obtained good title in 1994.

8. I must return to the issues that need to be decided on these pleas in a moment but before I do so it is worth setting out the legal principles and what it is to that a Plaintiff needs to demonstrate in order to succeed in an action for professional negligence against a solicitor.

The Legal Principles

9. The authoritative test is set out in the 5th Edition of Jackson and Powell :-

"10-077... The solicitor, in common with other professional men is required to exercise reasonable care and skill".

At 10-078 the learned authors attempt to assist as to who is "the reasonably competent solicitor" as follows :

"Reasonable care and skill. A solicitor, in common with other professional men, is required to exercise reasonable care and skill.

The reasonably competent solicitor. The question whether the defendant solicitor made a mistake in any given case is usually capable of a definite answer. The question whether a particular mistake was negligent is a matter upon which (in borderline cases) the mere citation of authority is unlikely to be decisive. The judge applies what he perceives to be the standard of "the reasonably competent solicitor", a creature as mythical as the man on the Clapham omnibus. In Midland Bank v. Hett, Stubbs & Kemp Oliver J. emphasised that a solicitor should not be judged by the standard of a "particularly meticulous and conscientious practitioner... The test is what the reasonably competent practitioner would do having regard to the standards normally adopted in his profession..."

Content of the duty. The duty of care and skill can be expressed as a number of general obligations:

"The obligations of a lawyer are, I think, the following : (1) To be skilful and careful; (2) To advise his client on all matters relevant to his retainer, so far as may be reasonably necessary; (3) To protect the interest of his client; (4) To carry out his instructions by all proper means; (5) To consult with his client on all questions of doubt which do not fall within the express or implied discretion left to him; (6) To keep his client informed to such an extent as may be reasonably necessary, according to the same criteria."

The precise content of the duty of reasonable skill and care will depend on the circumstances of each case. In particular, the standard of care must be judged by the nature and scope of the retainer."

These passages, in my judgment, reflect the general position to which the facts of the particular case must be applied. Every case will provide through its particular facts peculiarities of its own which previous decided cases may not afford much assistance.

Application of the material facts to the relevant legal principles

10. The starting point to this is of course what happened in 1994 because it is by their conduct of this conveyance that the Defendants stand to be judged. Whilst this may appear obvious it needs to be stated because Mr Liu in the course of his helpful and well researched submissions on behalf of the Defendants places considerable emphasis on important conveyancing decisions to which I must refer which had been decided in July 1999 just as the Plaintiff was being pressed over production of the Indenture by her prospective purchaser.

11. With this in mind it is important to refer to the 1994 correspondence to see precisely what the Defendants did about getting the Plaintiff's vendor to produce the Indenture and the Crown Lease. This correspondence starts at page 250 of the Bundle. At page 252 they sent a letter, as one might expect, requiring the Crown Lease. This was sent by the vendors solicitors [page 254]. They undertook to send certified copies as soon as they became available. The Defendants observed in a letter at page 255 that there was a Crown Lease attached to the Crown Lease of Marine Lot 186 which provided a query as to the dates and whether this was the relevant Crown Lease? So far they were dealing with the matter perfectly competently. As a result of that enquiry the vendors solicitors looked into the matter further (see page 260) and discovered that the original endorsement on the lease had been cancelled and an Indenture had replaced it which was attached to the lease. Quite correctly (at page 263) the Defendants asked for a certified true copy of the Crown Lease with the Indenture which was annexed to it for their perusal. The matter then proceeded quickly to completion without production of the Lease or the Indenture. That was left on the basis of the "usual undertaking" that the vendors solicitors would send the certified copies of the title deeds ─ specifically the certified copy of the Crown Lease (see page 270 and 271) once they received it from the Land Registry.

12. That undertaking was never complied with because as we now know the lease had gone missing as had its annexed Indenture. The result was that neither the Plaintiff nor her solicitors (the Defendants) received the outstanding title documents which they had insisted on and on which they had completed the conveyance on an undertaking that these documents would be produced. Notwithstanding that, no steps were taken to pursue the matter further. The omission was allowed to remain uncorrected until it all came to light in 1999 when the Plaintiff came to sell the flat.

13. Mr. Jason Wong, who appears for the Plaintiff, submits that it was negligent of the Defendants to have let the matter go without more. The particulars of negligence point to a breach of duty by the Defendants in not pursuing the matter once it became clear that the vendors solicitors had not complied with their undertaking to produce the title deeds when they were to obtain a certified copy from the Land Registry. Having spotted the existence of the Indenture and the potential difficulties, by careful examination of what had originally been produced by the vendors solicitors, the Defendants then let the matter go by default.

The Result

14. Where does that take the Plaintiff? I say this because Mr Liu submits that this does not really matter because having regard to the Court of Appeal decision in Wu Wing Kuen & Ors. v Leung Kwai Lin & Another [1999] 3 HKLRD 738, in which it upheld Mr Recorder Tang QC, which decided that secondary evidence could be admitted to prove both the ultimate root of title, that is to say the Government Lease or conditions and the relation to the title documents falling within the chain of title, the Plaintiff was in a position to prove title in 1999 by use of abundant secondary evidence, with the result that her title was unimpeachable. She had a complete answer to her purchasers objections and should have taken out a vendor and purchaser summons if that is what was required in order to press her point home.

15. This issue requires further examination. It should be observed that by the time that the learned recorder came to decide Wu Wing Kuen and another identical case Ip Foo Kuen v Chan Pak Kui (1999) 3 HKC 326 the law in Hong Kong on the admissibility of secondary evidence was uncertain with honours evenly divided at six all. There were six decisions suggesting that secondary evidence could not be enlisted to prove title and six going the other way.

16. Mr. Liu ventures to suggest that as the recorder's decision was handed down on the 9th July 1999 the Plaintiff and her solicitors should have then relied on that decision, the score was now 7-6 in favour of secondary evidence, and using what Mr Liu submits was impressive secondary evidence that was available pressed her case, presumably to judgment, by vendor and purchaser summons. In this regard it is highly significant that the judgment of the learned recorder was not upheld in the Court of Appeal until the 23rd November 1999 ─ see [1999] 3HKLRD 738. The deadlock on the authorities was therefore not broken until some four months after the events of July 1999.

17. Attractive as Mr Liu's submissions are they really fail to face up the reality of the situation that the Plaintiff had been placed in by the Defendants failure to follow up the 1994 vendors solicitors failure to produce the Crown Lease together with the Indenture as they had undertaken to do. Its all very well to say that the Plaintiff could prove title by secondary evidence and should have gone on to litigation, if need be, but the fact remains that she did not have the Crown Lease and the Indenture. She was entitled to have expected the Defendants to have followed the matter up in 1994. In my judgment she should not have been allowed to be put in the position of completing without a sight of the Lease which went to the root of her title. I appreciate that when one reads the 1994 correspondence it does give the impression that the vendor solicitors would not have had any difficulty in producing the Crown Lease or certified copy of it but given the fundamental importance of the document the Defendants should have insisted on production before completion.

18. If I am wrong in that view ─ it being considered too onerous a demand on "the reasonably competent solicitor" in the circumstances, then it seems to me that the Defendants should at least have warned the Plaintiff of the risks of completing without a sight of the Crown Lease and the Indenture so that she could have made an informed decision about whether to go on or not. Even if that is considered too harsh then at the very least these documents should have been pursued in 1994 after completion when it was obvious that the vendors solicitors had not, as they had undertaken to, produced a certified copy. The search that was made for this document in 1999 ─ done under the pressure of postponed completion dates, faced with a difficult and well-advised purchaser, could and should have been done in 1994 when presumably the copy that was with the Building Department would have emerged and something effective could have been accomplished to regularise the position in 1994, or at least well before 1999, in circumstances of relative calm. This failure by the Defendants has put the Plaintiff in an untenable position. She was immediately put on the back foot in terms of her negotiating position and I reject the notion that it would have been reasonable for her to litigate her way out of the impasse. In July, notwithstanding that the learned recorder was to be upheld in November, the issue of whether secondary evidence was properly admissible was still highly arguable both ways. There was no certainty of success and one asks rhetorically, why should this lady have to go to such lengths as litigation when she was entitled to expect that the matter of her title would have been competently and properly resolved in 1994 in the way that I have suggested ─ before completion or at the very least once the vendors solicitors had not produced the lease, by raising the matter with them at that stage. It should also be remembered that in 1994 the question of whether secondary evidence was admissible was even more uncertain with the result that the Defendants should have been careful to ensure that this issue had been put on a proper footing at that time.

19. In these circumstances I am entirely satisfied that the Defendants were negligent in their conduct of the 1994 conveyance in not insisting on production of the lease before completion and when none was forthcoming to give the Plaintiff proper advice about the risks of going on without it. As I have already indicated even if I am held to have put the matter too high on this basis then in my judgment they should, at the very least, have pursued the matter after completion as I have already indicated. On any view by not approaching- these issues on any of these bases they fell below the standards of the reasonably competent solicitor in the circumstances of this case and they are therefore liable to the Plaintiff for damages.

Parties ─ Order 81

20. The question of whether the Plaintiff has sued the right parties has been raised as a preliminary issue but in view of fact that it is subsidiary to main issue of negligence I have left it over for consideration now.

21. The point is taken by the Defendants that the firm of Day and Chan should not be named as the 1st Defendant. Order 81 provides a convenient method by which partnerships may be sued. See the Editors comment on the Order at page 1093 of the current High Court Practice. Under Order 81/1/5 when the firm in question are defendants the firm may be sued in their firm's name without the need to find out the names of the individual partners. The note to the rule indicates that it must be remembered that the partners may be sued "in the name of the firm of which they were co-partners at the time of the accruing of the cause of action" which is what the Plaintiff's solicitors have done in this case. The firm's name is "merely a convenient method of expressing those persons". "A plaintiff who sues such partners in their firm name sues them individually just as much as if he had set out all of their names." (Western National Bank v. Perez Triana Co. (1891) 1 QB 304 C.V. per Lindley L.J. at 314). "The note then says this: Where therefore, there has been a change in the firm since the cause of action accrued it must be taken prima facie that the firm-name used to describe the defendant means those persons who constituted the firm at the time of the accrual of the cause of action and not at the time of the issue of the writ. Where there has been an entire change in the persons constituting the firm between accrual of the cause of action and the issue of the writ suing in the firm-name may cause difficulty." This being a reference to remarks made by James L.J. and Brett L.J. in Re Sawers, exp. Blain 1879 12 Ch D. 522 @ 533. Brett L.J. went so far as to suggest that under such circumstances "you could not sue the firm". It is plain from the report that those observations were obiter in a case which concerned the issue of whether the Bankruptcy Court could bankrupt a foreigner, domiciled and resident abroad who had never been in England even though he had been a member of an English firm which had traded and contracted debts in England.

22. Mr. Liu has taken this point because of course all the partners in the 1st Defendant in 1994 are no longer partners. Mr. Joseph Chan is now the sole proprietor and it would not be right the stigmatize the present firm of Day and Chan (1st Defendant) with the firm as constituted in 1994. He submits that where, as here, the individual 1994 partners have been sued individually it is a misconceived use of Order 81 to also sue the firm itself. The Order is there to enable a party to sue the firm as a "shorthand way" of suing the partners. This having been done the firm's name should now be struck out.

23. Whilst I see the force in that submission there is nothing in the Order that prevents this course being taken. The title to the action makes clear who the then partners were, given their position as Defendants, and no conceivable prejudice, procedural or substantive, can arise. I decline to strike the 1st Defendant's name from the writ. The judgment will therefore also go against them although execution will be against the individual defendants.

Quantum

24. The measure of damages is "that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation". That is the general rule established in Livingstone v. The Rawyards Coal Co. (1880) 5 App. Cases 25. "In claims of this type against solicitors arising from a defective investigation of title .... by which the property is less valuable to the buyer (the Plaintiff) than it should have been, the starting point for assessing the measure of.....loss is usually the diminution of value test, that is the difference between the market value of the property and the price paid". See Charlesworth & Percy on Negligence 10th Edition 8.251 page 560.

25. Under this head the claim is for $150,000, being the difference between the original agreed price and the final selling price negotiated down due to the absence of the Crown Lease. Mr. Liu submits that there is no evidence from a valuer that the final price was the market price for the property with a "debatable" title. That of course is right, as is Mr. Liu's comment that the Plaintiff was anxious to secure a sale urgently, which may have resulted in her accepting an even lower price. Nevertheless, it seems to me that she conducted herself perfectly reasonably in all the circumstances once a copy of the lease had been found. As a percentage, the reduction was a reasonable once to accept. Mr. Liu's other point is that she failed to properly mitigate her loss by offering the property for sale on the open market especially after the delivery of Mr. Recorder Tang's judgment on the 9th July. He submits that had she done so she might have got a better price. I don't accept that submission. Having been put into this position by the Defendant's negligence she appears to have proceeded in a reasonable manner by continuing to deal with the original purchaser, particularly where all the conveyancing enquiries and costs had already been expended in attempting to sell to him. In these circumstances the claim for $150,000 must succeed.

26. As to additional mortgage repayments the only allowable amount must be for interest for the additional delay from the 9th June to 27th August being two months and 19 days. The appropriate calculation will need to be done.

27. The claim for $16,800 for contributions to repair costs incurred after the original completion date must fail for want of documentary proof.

28. The claim for $21,906, as legal costs of $20,000 to her bank's solicitors and $1,906 as interest, in relation to her credit card debts which would have been cleared earlier had completion taken place on schedule is in my judgment too remote to be recoverable. This is a matter peculiar to her circumstances and can't possibly relate to the conveyancing matter at hand.

29. Finally, all the other matters claimed in the Amended - Statement of Claim are conceded (subject to liability) and there must be judgment for those.

30. Accordingly, there must be judgment to the Plaintiff against the Defendants in respect of all these amounts together with interest thereon at half the judgment rate from the date of the writ until judgment and thereafter at the judgment rate until payment. Costs I would have thought inevitably follow the event and should be to the Plaintiff. As I have not given the parties an opportunity to address me on interest and on costs these two orders will be orders nisi in the first instance and I will give liberty to apply in case there is any dispute on the calculation of some of the amounts of the heads damages that I have awarded.