FEERNI DEVELOPMENT LTD. v. DANIEL WONG & PARTNERS (a firm)

HCA 15803/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 15803 OF 1998

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J U D G M E N T

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1. The defendant is a firm of solicitors instructed by the plaintiff to act for it in the purchase of a ground floor shop in Tsuen Wan and in a subsequent sale of it. The purchase proceeded to completion uneventfully. It is the plaintiff's case that since then it has tried twice to sell it without success. On each occasion agreements were entered into but the purchasers discovered a defect in the title document and requisitioned for rectification. The plaintiff was unable to rectify resulting in the cancellation of both sales. It is the plaintiff's complaint that when it purchased the shop the defendant did not alert it to the defect or raise the same requisition with which it, as subsequent vendor, was obliged to deal, or otherwise make proper enquiry, resulting in consequential loss.

2. By this action the plaintiff is suing the defendant for negligence in contract and tort to recover that loss. The defendant denies liability and quantum and otherwise puts the plaintiff to proof.

History

3. Mr Chan Chi Hin (Chan) for a number of years prior to the period in question had engaged in the buying and selling of real estate, of which the shop in Tsuen Wan was a typical example, for profit. The plaintiff was one of a number of companies of which he was a shareholder and director incorporated by him for the express purpose. Much - perhaps most - of his conveyancing he entrusted to a conveyancing clerk called Mr David So Hon Shing (So). So began working in this field in 1972. In 1994 he became employed by the defendant. By the end of that year he had 22 years' experience. Although not legally qualified he was well-versed in the procedures involved in a transaction and unless something untoward happened was able to deal with a purchase and sale with minimal supervision.

4. The property market in Hong Kong is to say the least volatile. In 1994 there had been something of a slump in values and activity. 1995 saw a period of gradual recovery. In 1996 that accelerated and there was a marked increase in values and transactions which persisted through the first three quarters of 1997. Then, sparked by the South-East Asian economic crisis, there was a spectacular downturn in the final quarter of 1997. By 1998 many properties were worth only half their value of a year earlier. Hong Kong is gradually recovering from that but prices are still well below their peak of 1997.

5. During the period 1995 to 1997 the defendant comprised three partners. They were the founder, Mr Daniel Wong Kwok Tung (Daniel Wong), Mr Dennis Wong Wang How (Dennis Wong) and Mr Gordon Lee (Gordon Lee). The firm almost exclusively was engaged in conveyancing. It was so structured that each partner was responsible for those transactions that came to the firm from existing clients of that partner. Any new client without previous allegiance came to the founder Daniel Wong. Each partner was in charge of his own team of conveyancing clerks and support staff. In theory each transaction was overseen by the so-called team leader and the conveyancing clerk handling the same was required to have each conveyancing step vetted and approved before it was actioned. This included the examination of title documents, the drafting of new documents, the approval of letters of requisition and other correspondence. In practice the supervision process was less structured. The partners were sometimes busy or otherwise unavailable in which case the clerk would be directed to or of his own volition take the file to another partner or other qualified staff member.

6. When So joined the defendant in 1994 he was put on Daniel Wong's team. Given his experience and seniority and level of activity he had an assistant, called Mr Joseph Lee Siu Hung (Joe Lee).

7. Daniel Wong was the busiest of the three partners. At some stage there were up to ten clerks in his team, while Dennis Wong had three and Gordon Lee two. Not only as founder member did he have most clients but he also held public office which occupied much of his time during a typical working day. And as work piled up he was to get even busier.

8. Against this background on 5 November 1994 the plaintiff through Chan entered into a provisional agreement to purchase the shop the subject of these proceedings, whose short address is Shop 2, No. 6, Shiu Wo Street, Tsuen Wan, from the owner as vendor called Empire Rich Development Limited (Empire Rich). As in the past Chan engaged the services of So; thus the provisional agreement came to him as employee of the defendant. In the usual way that was superseded by a formal agreement prepared by the solicitors for Empire Rich called Boris Lui & Co (Boris Lui) and the final draft was approved by the defendant before the parties signed.

9. The agreement was dated 5 December 1994. The price was $9.5m and the due date for completion 4 April 1995. In compliance with its terms and usual conveyancing practice Boris Lui by letter of 6 December 1994 sent what they described as all the relevant title deeds and documents to the defendant for perusal against the usual undertaking to hold the same returnable on demand.

10. By letter of 9 December 1994 over the signature of Daniel Wong the defendant raised a number of requisitions. This letter was to play an important part in these proceedings as I shall come to. The requisitions were answered satisfactorily or otherwise resolved. The sale came to be completed without incident on completion date.

11. The next development of consequence was the plaintiff's decision to sell the shop. By provisional agreement dated 20 August 1996 it agreed to sell it to a Mr Ng King Ming (Ng) for $11.4 m. Chan instructed the defendant to deal with the conveyancing. So opened a file. In the fullness of time the parties agreed the terms of the formal agreement and the same was signed and dated 3 September 1996. The due date for completion was 31 October 1996. Ng paid deposits totalling $1.14m. On 11 September the defendant sent to Ng's Solicitors, Messrs Siao Wen Leung (Siao Wen) the title documents for perusal. By letter of 18 September Siao Wen raised a number of requisitions, only one of which is relevant. I repeat it verbatim:-

"4. The assignment memorial No. 514441 is being held voidable pursuant to Section 55 of the Probate and Administration Ordinance. Please comment."

12. The defendant did not immediately respond to this requisition and when they did it was not back to Siao Wen. By letter of 11 October they referred the requisition to S Y Chu & Co. Solicitors (S Y Chu) which firm had prepared the assignment in question.

13. I come now to the history of assignment 514441.

14. In 1987 the then registered owner of the shop was one Mr Kwok Hung. In July of that year he died intestate, survived by a wife and four children. One of these, called Mr Kwok Chun Wai (C W Kwok) applied for and was granted Letters of Administration on 26 February 1988. He was to deal with the shop shortly afterwards. In his capacity as personal representative of the estate he entered into an agreement for the sale of the shop to Empire Rich, the company that was to become the plaintiff's vendor. But this was not an arm's length transaction. C W Kwok was also at the material time one of two directors and a 50% shareholder of Empire Rich. In fact he signed the agreement and the subsequent assignment which was to become designated assignment 514441 as both vendor and for and on behalf of the purchaser.

15. Section 55 of the Probate and Administration Ordinance (PAO) states:-

"55. Purchase by personal representative of deceased's property

If a personal representative purchases, either directly or indirectly, any of the property of the deceased, the sale shall be voidable at the instance of any other person interested in the property sold."

16. It was C W Kwok's dual role and the risk that Section 55 PAO rendered assignment 514441 voidable as a consequence that was troubling Siao Wien.

17. S Y Chu replied by letter of 16 October the text of which was as follows:-

"S. Y. CHU & CO.
SOLICITORS, Agents For Trade Marks & Patents

16th October 1996

Messrs. Daniel Wong & Partners,
Solicitors,
Hong Kong

Dear Sirs,

Re: Shop 2 on Ground Floor of Wo Shing Building,
6 Shiu Wo Street, Tsuen Wan, New Territories

We refer to your letter of 11th October 1996.

Under Section 55 of the Probate and Administration Ordinance, the assignment was not void but voidable. There is nothing to show there is any other person interested in the property sold. As the property had subsequently been assigned to Feerni Development Ltd.; the Solicitors for the subsequent purchaser had accepted title. Section 66 and Section 67 of the Probate and Administration Ordinance have no application to a purchaser.

	Yours faithfully,
	(signed)"

18. The defendant did not get back to Siao Wen until 24 October following a second request to do so of the day before. So had left Hong Kong for a short holiday on 23 October and was not due back at work until 3 November, after the due date for completion. In his absence his assistant Joe Lee handled the file. He handed it and this response to Dennis Wong, who wrote to Siao Wen on 24 October as follows:-

"DANIEL WONG & PARTNERS
SOLICITORS

24 October 1996

Messrs. Siao, Wen and Leung
Hong Kong.

Dear Sirs,

Re : Shop 2 on Ground Floor, Wo Shing
Building, NO.6 Shui Wo Street,
Tsuen Wan, New Territories.

Further to our letter of the 11th October 1996, we reply further to your requisition as follows :-

4. Assignment Memorial No.514441

Section 55 says that the said Assignment is (a) voidable in the instance of (b) any other person (c) interested in the property sold. We consider it would not affect our client's title because :-

(a) The transaction is merely voidable but not void. Hence an action has to be taken to have it declared void, and in this regard Section 20 of the Limitation Ordinance Cap.347 would apply, and more than 6 years having elapsed since the said Assignment any such action will be time-barred. Further, if you are doubtful as to whether Section 20 would apply to a case of fraudulent breach of trust, your worry can be relieved by the opinion of Mr. Justice Findlay in Yeung Kit Lam and Wong Fun V Lau Yiu Shing (M.P. No.3392 of 1994)[at Page 5 of Judgement enclosed] where the Judge said Section 20 could still apply and an action by the beneficiary (if any) under the Trust would be time-barred after 6 years against an innocent party acquiring the property.

(b) There is no evidence suggesting that there might be any other person who still has a subsisting claim against the estate.

(c) In any event, we take the view that if anyone were to make claim they must be the beneficiaries (if any) under the intestacy. However, it is trite law that where the estate's assets are still unadministered, a beneficiary has no legal or equitable proprietory interest in the unadministered property. The authority is Commissioner of Stamp Duties (Queensland) v. Livingston (1965) A.C. 694 (copy enclosed). This means the beneficiaries have no interest in land as such, but only interest in the proceeds of sale of the estate. As such they can no longer claim against the property once it has been assigned to a bona fide purchaser for valuable consideration, i.e. our client. This further means that such beneficiaries are no longer" person interested in the property sold", and Section 55 simply would not be available to them now.

(d) Finally, the property was at the time of the said Assignment held by the Administrator upon a statutory trust for sale:Section 62 of Probate & Administration Ordinance. This agains means that the interest of the beneficiaries (if any) were only in the proceeds and not in land, and any action for breach of trust or fiduciary duty of the administrator can only lie against the administrator personally and not the property sold.

	Yours faithfully,
	(signed)"

19. This was not accepted by Siao Wen. They responded on 25 October as follows:-

"SIAO, WEN AND LEUNG
SOLICITORS & NOTARIES

25th October 1996

Messrs. Daniel Wong & Partners, Solicitors, Hong Kong.	URGENT
Attn: Mr. So

Dear Sirs,

Re: Shop 2 on Ground Floor of Wo Shing Building,
No.6 Shui Wo Street, Tsuen Wan, New Territories
("the Property")

We refer to your letter of 24th October 1996.

(a) Section 55 states clearly that if a personal representative purchases directly or indirectly any of the property of the deceased, the sale shall be voidable at the instance of any other person interested in the property sold. Even the property has been sold, the sale can be re-opened by the beneficiary of the estate unless it can be shown that all the beneficiaries under the estate have consented to the sale of the property by the personal representative.

We do not agree that the case Yeung Kit Lam and Wong Sau Fun v Lau Yiu Shing MP No.3392 of 1994 applies given the fact that your client Feerni Development Limited ("Feerni") when purchasing the Property in around April 1995 had constructive notice that the sale to Empire Rich Development Limited ("Empire") under Assignment Memorial No.514441 is tainted with the possibility of the breach of trust by Kwok Chun Wai in that the said Kwok Chun Wai sold the Property to Empire in which he is interested. This constructive notice in so far as they are binding on Feerni is also binding on our client if our client is to complete the purchase of the Property. Therefore, Yeung Kit Lam does not apply when the successor in title is deemed to have constructive notice of the breach of trust by its predecessor in title.

(b) There is also no evidence showing that the beneficiaries who have the right to set aside the sale under Section 55 have all waived such right.

(c) It does not matter whether the beneficiaries have legal interest on the unadministered asset or not. In any event, Section 55 provides a right of action to the beneficiaries to set aside the sale which is in breach of the fiduciary duty of the personal representative.

(d) Our view as aforesaid would not be affected by the statutory power to sell the Property under Section 62 since a sale in breach of the fiduciary duty is still voidable under Section 55.

In view of the above, we fail to see that you have so far proved your client's title to the Property. In the meantime, we reserve all our client's rights to raise further requisitions on your client's title to the Property.

Yours faithfully,

(signed)"

20. Thus there was an impasse.

21. The upshot was that the parties agreed to postpone the completion date to 9 November and share the cost of a legal opinion from a barrister called Mr Paul Lam whom Siao Wen briefed.

22. In the meantime, notwithstanding the defendant's stance denying any defect in title, So had before going on leave on 23 October sought documentary evidence from S Y Chu that the Kwok estate beneficiaries had approved the sale to Empire Rich, and renewed his efforts upon his return on 3 November. But nothing was forthcoming by the deadline.

23. Mr Lam's advice of 1 November was that the sale was an indirect one to C W Kwok, and caught by Section 55 PAO. In his view the title could be defeated by a claim by a beneficiary of the late Mr Kwok's estate and thus the plaintiff had not shown good title.

24. The parties elected to cancel and executed a cancellation agreement. Ng received back his deposits. The circumstances surrounding Chan's election to cancel are disputed as I shall come to.

25. The next development was Chan's decision to rent the shop. Although on a single title the shop was in fact subdivided into two portions. Shop A was let first, for four years from 5 February 1997. So was engaged by the plaintiff to undertake the conveyancing and he did so, apparently under the supervision of Daniel Wong.

26. But after that the plaintiff's and Chan's relationships with the defendant came to an end. The plaintiff instructed another firm called Tang Wong & Cheung (Tang Wong) to write to the defendant alleging negligence in the performance of their duties when the plaintiff purchased the shop, threatening a suit if the plaintiff's consequent loss could not be settled. That letter was sent on 25 March 1998. The defendant responded by letter of 1 June 1998 emphatically denying negligence, and gave the reason for the cancellation which I repeat verbatim:-

"When your client subsequently sold the property in 1996, the sale was cancelled due to your client's own choice and preference. The said sale did not fall through by reason of any alleged failure to prove good title. Quite on the contrary, we have been given to understand that the sale was cancelled at your client's decision in view of a sharp increase of the price of the property at the material time. As such, we do strongly dispute and deny your allegation that your client has suffered any loss or damage, or that we ought to be liable in any way, whether as alleged or otherwise."

27. Daniel Wong signed this letter.

28. The allegation was immediately denied by Chan and Tang Wong responded to that effect. There was more correspondence but no resolution. Tang Wong issued the writ on 16 September 1998.

29. But in the meantime Daniel Wong had made contact with C W Kwok, and Kwok told him that at the time of the sale to Empire Rich the family had all approved the same. He then produced a copy of an agreement handwritten in Chinese characters, dated 18 May 1988, purportedly signed by all five beneficiaries, with one, the widow, C W Kwok's mother, having signed by a mark. Daniel Wong prepared a declaration for C W Kwok to sign and he did so. The copy agreement was attached to it, and the defendant then registered the declaration on 2 June 1998. When it was returned by the Land Registry he forwarded the same to Tang Wong, "without prejudice and without any admission".

30. Next the plaintiff rented the second portion of the shop, shop B, for 34 months from 5 July 1998.

31. With the defect in title apparently made good, the plaintiff then put the shop back on the market, found a buyer and entered into a provisional agreement dated 5 November 1998 for completion on 19 July 1999. The price was $7.95m.

32. But this transaction was to go off also.

33. During the normal requisition process Tang Wong called for the original or in the alternative a certified true copy of the Chinese agreement. This was retrieved from S Y Chu. But it proved to be a different document from the copy exhibited to C W Kwok's declaration. In particular a crucial sentence was missing, translated to read "And agreed to sell the property to Empire Rich Development Limited", suggesting it may have been added subsequently. This discrepancy could not be satisfactorily answered so that agreement was cancelled also.

34. The last chapter in the history was written within the month preceding the date of trial. Daniel Wong prepared a document headed 'Confirmatory Assignment' to be executed by the Kwok family beneficiaries to rectify the assignment to Empire Rich, and then took it upon himself personally to trace the Kwok family members and have it signed. In fact he did manage to find all but the widow who had died. This document has now been signed and if not yet registered can be, and by all accounts now rectifies the title.

Dispute of Fact

35. Crucial to the outcome of this case is how I resolve the dispute as to the circumstances leading to Chan agreeing on behalf of the plaintiff to a cancellation of the Ng sale. To deal with this I recount the evidence of the parties where the conflict seems to arise.

36. I return to 25 October 1996.

37. Completion was due six days hence and Siao Wen on that date had written insisting that there was a defect in title. So was on leave. According to Joe Lee's account Chan asked him to arrange a meeting with a solicitor to discuss the problem and he arranged that with Dennis Wong. At the meeting Wong told him that in his view there was no defect and if Ng refused to complete he could forfeit the deposits. On the other hand that might result in litigation with inherent risks. Chan said he would think about it. The meeting then ended. Dennis Wong in evidence confirmed that there was a meeting, and that was what was said and how it was left.

38. Next came a telephone call of 31 October from Siao Wen which Joe Lee received, proposing a nine day extension of the completion date and that the parties share the cost of counsel's opinion on the disputed point. He referred the suggestion to Chan who told him to accept. That was passed on to Siao Wen which gave rise to their letter of 31 October confirming the arrangement.

39. By the time the opinion reached the defendant's office on 6 November to the effect that the title was defective So had returned from leave and the file was back with him. His evidence is that he telephoned Chan and explained its contents and they met in his office. I revert to his witness statement as to what he said took place:-

"I then telephoned Chan and briefly informed him of the Purchaser's Counsel advice. Chan told me that he would like to discuss the matter with me in my office. At the meeting, I told Chan that it was the advice of the Purchaser's counsel that evidence would be required to show that all beneficiaries had approved the sale. I explained to Chan that the counsel advice was not conclusive and therefore should not be taken as authority that good title had not been shown. In order to satisfy the query of the Purchaser, I would nevertheless contact SY Chu and KCW for the requested document and in any event there should be no difficulties in obtaining the confirmation of the beneficiaries of the estate that they approved the Empire Rich Assignment. Notwithstanding such advice, Chan informed me that the Plaintiff was not eager to complete the sale of the Property because there had been a sharp rise in the property market and thus a substantial increase in the market price of the Property in the region of HK$2-3 million. I advised Chan that if the Plaintiff preferred not to complete the sale of the Property, then the Plaintiff could ask the Purchaser to cancel the Formal Agreement. Chan eventually decided for the Plaintiff not to complete the sale of the Property and instructed me to proceed to procure the cancellation of the Formal Agreement."

40. The underlining is mine.

41. Chan has a different version of events.

42. I repeat verbatim that part of his witness statement which deals with the period:-

"9. About one week before the completion date, I attended So's office and enquired him of the progress. So told me that Ng's Solicitors had decided to seek a Counsel's opinion on whether the title was good and whether Ng could accept the title and proceed with the transaction but they wanted the Plaintiff to bear half of the fee. So further told me that the fee was around HK$D10,000.00. As I was eager to conclude the matter and wished that the transaction could be completed without more ado, I agreed to pay HK$5,000.00 being half of the Counsel's fee.

10. Shortly before the completion date on the 9th November 1996 (the exact date cannot be recalled), So asked me to attend his office in the morning. Upon my arrival, So led me to see a Mr. Wong Wang How ("Wong") who was the solicitor in charge of the transaction. During the meeting at Mr. Wong's room, I asked Wong whether the transaction could be proceeded as scheduled. Wong replied that according to the Counsel's advice, there was some problems with the title and the Purchaser would not complete. I then asked Wong whether the Plaintiff could forfeit the deposit if the Purchaser refused to complete but Wong advised me that I could not forfeit the deposit because the title was defective. Wong further proposed that a cancellation agreement should be made and the deposit be returned to Ng.

11. Although I felt frustrated, I followed the advice of Wong and entered into a cancellation agreement on or about 14th November 1996. I followed his advice because he was a solicitor and I had trust and confidence in him then.

12. After the cancellation of the sale of the Property to Ng, I repeatedly asked So to remedy the defect for the obvious reason that if the defect was not remedied, the Plaintiff would be unable to sell the Property. Furthermore with a view to mitigate its loss, I then looked for a tenant and subsequently instructed the Defendant to prepare a tenancy agreement."

43. In the witness box he consistently denied that he had said the plaintiff was not eager to complete the sale because of the sharp rise in the property market. He said that this would have made no sense, because with the title apparently defective there would be no market for the shop at least not at market value. He said that shortly before the rescheduled completion date So took him to see Dennis Wong, who explained that the purchaser Ng was refusing to complete. Wong told him he could not forfeit the deposits because the title was defective. Wong proposed that the transaction be cancelled. He agreed because that was the only feasible option. In the months thereafter he persistently contacted So to get the title sorted. He wanted to sell but realised there would be no market unless this was done first. He resorted to letting the two parts of the shop when it seemed that this could not readily or quickly be dealt with.

44. Dennis Wong denied involvement in the file following So's return from leave; in particular he denied there was the meeting Chan referred to. But So confirmed that from November 1996 Chan did chase him along.

45. Though clearly there is a conflict as to who met whom in the run up to the completion date I do not propose to resolve that beyond the crucial aspect of whether Chan really did opt for cancellation with profit as the sole or primary motive. On this issue when he was under cross-examination So was much less forthright then in his witness statement. He admitted that after 10 years of looking after Chan's conveyancing it thereafter dried up. He said that was not surprising - "Mr Chan was more or less upset..........I knew Mr Chan well. In his eyes I had done something wrong..........I was the one who caused him trouble. So of course I would feel sorry."

46. And there was a telling exchange which I repeat verbatim:-

"Q. The sole reason for cancelling the sale and purchase agreement with Ng was because the title requisition could not be solved, why the Plaintiff had no choice but to accept a cancellation.

A. I agree.

Q. I suggest he made that decision not because he said to you he was not eager to sell because the shop had risen $2-3m.

A. For a small part.

Q. What do you mean by that?

A. He also put the question of price into consideration to decide whether he would sell it.

Q. He never told you that. It was only your guess work.

A. During our discussion that was the impression he gave me.

Q. He never said he didn't want to sell because of price rise.

A. I agree."

47. I come now to Chan's evidence under cross-examination.

48. When counsel was dealing with the proposition that he was motivated by a rise in the market to cancel he said:-

"A. The title was not a good one. The purchaser was attacking the title. How could we sell it? If we were to try to sell again the same thing would happen. We were still not able to sell in 1998. Only asking $7.95m. Still people attacked our title. Daniel Wong & Partners produced a letter of consent in Chinese. But then people found another that was different. To me this law firm is very dishonest. In order to defend this case they framed me, by saying I refused to sell it. Moreover when the transaction did not work out I kept pressing them to rectify. But they were unable to do it for me."

49. Only Chan and So gave evidence on this topic. Chan was forthright that he was not motivated to cancel to take advantage of a potential rise in profit. So appeared to concede that. There is no dispute that after cancellation Chan chased So to get the problem fixed. Common sense dictates that any perceived gain in value was dependent on the title being clear.

50. I am satisfied that Chan cancelled because, on advice or not, he was satisfied that he could not hold Ng to the bargain. He did not opt to insist on completion because his title was bad. There was, quite simply, no other choice.

51. I come now to the issues.

The Issues

(1) Did the defendant owe a duty of care in contract and tort to the plaintiff in the conveyancing when the shop was purchased, and thereafter?

(2) Was the defendant negligent in the performance of those duties?

(3) If so, is it liable in damages for loss suffered by the plaintiff?

(4) If so, to what extent?

Solicitor's Duty of Care

52. There is an implied term in any contract of service between a solicitor and his client that the solicitor should carry out the services with reasonable care and skill, a duty he owes his client in tort as well.

53. In the case of Foshan Hua Da Industrial Co. v. Johnson Stokes & Master [1999]1 HKLDR418 Stock J (as he then was) said at p. 425:-

"The law

The following principles of law are particularly germane:

(1) A retained solicitor owes a duty to his client, both in contract and tort. There arises, when a solicitor is engaged for reward, a contractual duty to exercise skill and care on behalf of his client. A solicitor is not expected or bound to know all the law, nor is he to be judged according to the standard which might be demonstrated by "a particularly meticulous and conscientious practitioner". (See Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp (a firm) [1979]Ch 384 at p.403.)

(2) The duty of a solicitor is "to exercise that reasonable degree of skill and care to be expected of a competent and reasonably experienced solicitor" (Clerk and Lindsell on Torts (17th ed.) para.8-81). "The test is what a reasonably competent practitioner would do having regard to the standard normally adopted in his profession." (See Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp (a firm) [1979]Ch 384 at p.403.)........

(6) "The standard of care to be expected of a professional man must be based on events as they occur in prospect and not in retrospect." Per Simon Brown LJ in Boston & Co v Roberts (unrep., The Times, 17 March 1995), who then cited Duchess of Argyll v Beuselinck [1972]2 Lloyd's Rep 172 at p.185:

In this world there are few things that could not have been better done if done with hindsight. The advantages of hindsight include the benefit of having a sufficient indication of which of the many factors present are important and which are unimportant. But hindsight is no touchstone of negligence."

54. In Hong Kong there is a statutory obligation implied in any contract for the supply of a service under Section 5 of the Supply of Services (Implied Terms) Ordinance Cap.457. That states:-

"5. Implied term as to care and skill

In a contract for the supply of a service where the supplier is acting in the course of a business, there is an implied term that the supplier will carry out the service with reasonable care and skill."

55. Where the contract of service is as a conveyancer acting for and on behalf of a purchaser client there is a duty to ensure that the vendor can show and give good title.

56. In Jackson & Powell on Professional Negligence, fourth edition, the authors quote from Graybiar Industries Limited v. Davis & Co (1992)46 BCLR 164 per Thackray J at p.181:-

"A person who goes to a lawyer with respect to a land transaction is entitled to expect that lawyer to investigate the state of any title that is germane to the matter and to explain to the client exactly what it is that is portrayed by the state of the title."

57. Where a solicitor's client undertakes a course of conduct in reliance on the advice of the solicitor and thereby suffers loss, he may not recover that loss in damages just because the advice was wrong if based on an error of judgment and no more than that.

58. In Bannerman Brydone Folster & Co. v. Murray & another [1972] NZCR 411 North P said:-

"The standard of care to be expected of a solicitor on any particular occasion must of course be considered in relation to the circumstances of the moment and the nature of the problem the solicitor was confronted with. The relationship between solicitor and client clearly enough is a contractual one, see Groom v Crocker [1939]1 KB 194; [1938]2 All ER 394 per Sir Wilfrid Greene MR at p 205; 401, and Scott LJ at p 222; 413. The standard of conduct required of a solicitor is, I think, correctly stated in 36 Halsbury's Laws of England 3rd ed 99:

"A solicitor holds himself out to his clients as possessing adequate skill, knowledge, and learning for the purpose of properly conducting all business that he undertakes, whether contentious or non-contentious. If, therefore, he causes loss or damage to his client owing to want of such knowledge as he ought to possess or the want of such care as he ought to exercise, he is guilty of negligence giving rise to an action for damages by his client. Where an action is brought by the client against his solicitor for negligence, the client must prove that there was such a want of skill or care on the part of the solicitor as to amount to a breach of contract....A solicitor is not guilty of negligence if he has merely acted upon his client's instructions in the reasonable belief that they were correct, or if he has fully explained the position {422} to his client and is nevertheless instructed to proceed; or merely because he has committed an error in judgment, whether on matters of discretion or of law such as, for instance, on points of new occurrence or of doubtful construction."

One of the cases cited in Halsbury is Stevenson v Rowand(1830) 2 Dow and Clark 104; 6 ER 668, an appeal to the House of Lords from the Court of Session. In that case, the Lord Chancellor, Lord Lyndhurst said, p 119; 674:

"But then it was argued that the point of law was a new and delicate one, and that some of the Judges below were at first of opinion that as the precept of saisine made no reference to any manner of holding, the inferment might be construed as base, and that the Court arrived at a contrary conclusion after long discussion; and that it was hard on Mr Stevenson that he should be held responsible for a mistake upon a nice and delicate point of law. But the distinction is this: A solicitor is not liable for mistake in a nice and difficult point of law, for to such mistakes all lawyers must be liable; and if the question had been merely one of that description, I would say that Mr Stevenson was not responsible."

59. The law is clear. The defendant did owe a duty of care to the plaintiff whilst it carried out the plaintiff's conveyancing, within the standards dictated by the authorities and statute.

Was the Defendant Negligent?

60. I return again to November 1994 by which time the defendant had contracted to act for the plaintiff in the purchase of the shop. Assuming due compliance with the defendant's normal practice So carried out a preliminary search of the vendor's documents of title, before handing them to his supervising solicitor for a further check. The requisition letter was sent on 9 December 1994. I make this assumption because not surprisingly neither So nor Daniel Wong have any specific memory of this file, given the volume of conveyancing transactions passing through the office. But apart from So being in Daniel Wong's team the requisition letter in question was signed by Daniel Wong, which is a further pointer.

61. I have earlier mentioned this letter was a crucial one. It is Daniel Wong's evidence that he did not include in the list of requisitions reference to assignment 514441 (C W Kwok to Empire Rich) because it is his opinion now and would have been then that the transaction was not caught by Section 55 PAO. No requisition was made because none was necessary.

62. It has been argued on the defendant's behalf that this was a correct interpretation of Section 55 PAO, by virtue of the purchaser being a separate legal entity from the vendor. And the defendant could not be guilty of negligence if Daniel Wong was correctly applying the law. But even if Daniel Wong was wrong it was an error of judgment that a competent and careful solicitor could have made, falling well short of amounting to a breach of a duty to exhibit reasonable care and skill.

63. That is all well and good, but I do not accept Daniel Wong made this judgment call. The form in which assignment 514441 was presented cried out for an explanation. Although Section 55 PAO is not clearly drafted, a conveyancer of the experience of Daniel Wong would be well aware of the obligations the appointed administrator of an estate owes to the beneficiaries and the restrictions imposed on him while in office.

64. I quote from Williams Mortimer & Sunnuks on Executors Administrators and Probate, 17th edition at p. 703:-

"A representative is further bound to do everything in his power for the benefit of the estate, and is, therefore, absolutely precluded from buying the assets from himself or from his co-representatives, irrespective of undervalue or otherwise, for if he were allowed to buy he might thereby be induced to neglect his duty. This rule is for the protection of the executor. It stems from the rule that no one who has a duty to perform shall place himself in a situation to have his interests conflicting with that duty."

In Re Boles [1902] 1 Ch 244, Buckley J said at p.244:-

"The principle that lies at the root of this matter is that a trustee for sale owes a duty to his cestuis que trust to do everything in his power for their benefit, and is therefore absolutely precluded from buying the trust property, irrespective of questions of undervalue or otherwise, because he may be thus induced to neglect his duty. Beyond that, if he retires with a view to becoming a purchaser so as to put himself in a position to do what would otherwise be a breach of trust, that will not do."

65. The solicitor of experience would surely have raised a requisition, as solicitors for subsequent purchasers were to do.

66. Daniel Wong did not.

67. In the circumstances I am satisfied that Daniel Wong took no steps because neither So before him nor he spotted the potential defect. The letter of requisition was silent on assignment 514441 because the clerk and solicitor in the defendant responsible failed to inspect it and find that the person who signed as the vendor administrator and for and on behalf of the purchaser was one and the same. If any further pointers to this inevitable conclusion are necessary they include So's recognition he was blameworthy for the plaintiff's loss, and Daniel Wong's going to the expense and trouble of preparing and arranging execution of C W Kwok's declaration that exhibited the Chinese agreement and then the confirmatory assignment, so recently concluded.

68. What should have happened?

69. A solicitor possessing adequate skills and knowledge and the requisite experience would have in the conveyancing transaction of November 1994 noticed the irregularities revealed by assignment 514441 and related documents and raised a requisition. Whether or not the transaction would have proceeded would have depended upon the vendor's response. In the event that it might have chosen to reject the requisition there would in that case have been the need for careful analysis of the law, followed by advice to the client, whose instructions would then be called for in informed circumstances.

70. But of course none of this did happen.

71. Applying the tests I find that the plaintiff has satisfied the necessary burden of establishing that the defendant's Daniel Wong failed to exercise that reasonable degree of skill and care to be expected of a competent and reasonably experienced solicitor in acting for a client in the purchase of a shop and it was thereby guilty of negligence.

72. Before departing from the issue of liability I mention that the plaintiff has pleaded and it has been argued that the defendant was in further breach of its duty of care to the plaintiff because of its conduct in the aborted sales of August 1996 and November 1998.

73. With respect these are red herrings. The want of duty of care was in December 1994. The plaintiff's failure to pass good title in the subsequent transactions which caused the cancellation stemmed from that breach. The events that subsequently transpired go to the liability in damages I now come to.

Is the Defendant Liable to the Plaintiff in Damages?

74. I have found and stated earlier that the cancellation of the August 1996 sale to Ng was caused not by Chan's decision to hold out for a higher price, but because of the defect in the plaintiff's title gave it no option. The plaintiff's claim arises from the loss of profit that it would have won had the sale gone through. But is the defendant liable for this?

75. I have already found that the defendant was in breach of its duty of care when acting for the plaintiff in the purchase of the shop. Had it been otherwise the defect in title would have been discovered and a requisition letter been sent. Whether or not the vendor would have been able to make good the defect in time is a matter of speculation; given the difficulties subsequently encountered in tracing the Kwok family members it may well not have been. Chan in evidence said that he would not have completed at any price in such circumstances. So what would he have done? Would he have recovered the plaintiff's deposit and done nothing or have purchased an alternative shop of like value but with a good title? And would he have put it on the market in August 1996? All this is unknown. But I pay heed to Chan's field of endeavour and that of the plaintiff. He is an investor in real estate and the plaintiff was one of a number of companies incorporated by him for the purpose. This was what he did. And So said he undertook numerous conveyancing transactions on his behalf.

76. The burden is on the plaintiff to prove its loss. I quote from McGregor on Damages sixteenth edition at p.236:-

"1. THE PROBLEM OF CERTAINTY

A PLAINTIFF claiming damages must prove his case. To justify an award of substantial damages he must satisfy the court both as to the fact of damage and as to its amount. If he satisfies the court on neither, his action will fail, or at the most he will be awarded nominal damages where a right has been infringed. If the fact of damage is shown but no evidence is given as to its amount so that it is virtually impossible to assess damages, this will generally permit only an award of nominal damages; this situation is illustrated by Dixon v. Deveridge and Twyman v. Knowles.

On the other hand, where it is clear that some substantial loss has been incurred, the fact that an assessment is difficult because of the nature of the damage is no reason for awarding no damages or merely nominal damages. As Vaughan Williams L.J. put it in Chaplin v. Hicks, the leading case on the issue of certainty: "The fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages." Indeed if absolute certainty were required as to the precise amount of loss that the plaintiff had suffered, no damages would be recovered at all in the great number of cases."

77. In the circumstances of this case and as a matter of fact I am satisfied that the plaintiff if forced to withdraw from the sale of the shop would have entered into a similar transaction with similar expectations of profit at the same time. According I find the defendant liable for the consequential loss suffered by the plaintiff when the August 1996 sale went off which is the profit it would have gained after the sale or a similar profit won on a like investment.

78. So, what would that amount to?

The Assessment of Damages

79. The overriding rule in assessing damages is to ascertain the sum that would place the injured party in the same position as he would have been if he had not sustained the wrong. Accordingly, no basis for assessing damages for negligent advice would be applied automatically so as to defeat that rule and, in applying that rule, it is necessary to select a date that would reflect accurately the loss sustained which was usually but not necessarily the date of the breach of duty.

80. In County Personnel Ltd. v. Alan R. Pulver & Co. [1987]1 WLR 916 Bingham L.J. said at p.925:-

"The principles to be applied in assessing damages in this case are, in my judgment, these:

(1) The overriding rule was stated by Lord Blackburn in Livingstone v. Rawyards Coal Co. (1880)5 App.Cas. 25, 39, and has been repeated on countless occasions since: 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 or reparation."

(4) While the general rule undoubtedly is that damages for tort or breach of contract are assessed as at the date of the breach (see, for example, Miliangos v. George Frank (Textiles) Ltd. [1976] A.C. 443, 468, per Lord Wilberforce), this rule also should not be mechanistically applied in circumstances where assessment at another date may more accurately reflect the overriding compensatory rule. The Dodd Properties case[1980]1 W.L.R. 433, both affirms this principle and illustrates its application."

81. In McElroy Milne v. Commercial Electronics Ltd. [1993]1 NZLR 39 it was held that the negligent solicitor of the plaintiff vendor has to take the state of the market at the date when in fact it became possible for the plaintiff to offer the property for sale free from dispute. In this case where the respondent property developer (CEL) lost the opportunity to enjoy the benefit of a buoyant market which had collapsed by the time it was clear to sell because of negligence by its solicitors the appellant, Cooke P. said at p.44:-

"The remaining exercise is quantification. This is not necessarily restricted by foresight or contemplation. In principle it is prima facie an eggshell skull type of case, in that the contract breaker has to take the state of the market at the date when in fact it became possible for CEL to offer the property for sale free from dispute. That was not before May 1989, by which stage the market had fallen still further from its declining level in 1988. Possibly there may be some cases where a depressed market could not be said to be sufficiently clearly and strongly or naturally related to the breach of duty to warrant imposing liability. But in this case it is not enough in my opinion to say that the market fell to an extent never expected by the appellant. Part of the very purpose of a guarantee is to protect against market deterioration. The more serious the deterioration, the more important the guarantee. Like others disadvantaged by the crash the appellant has to accept the consequences of failure to carry out its responsibilities. All factors relevant in considering remoteness appear to me to point to its liability."

82. In this case Daniel Wong rectified the title defect, but not until just before the trial date.

83. In all the circumstances of this case I propose to establish the plaintiff's loss that it may recover by taking the contract price in the Ng sale, less costs of sale, plus conveyancing costs thrown away, less net rentals earned meantime, less the present value of the shop, plus interest.

The Measure of Damages

84. First it is necessary to establish the current worth of the shop.

85. In this respect I have had the benefit of their reports and live evidence from the two valuers employed by the parties for the purpose; Mr Raymond Hui for the plaintiff and Mr Ian Cullen for the defendant. Both are registered professional surveyors with the qualifications and expertise to undertake such reports and give evidence.

86. Mr Hui was put at something of a disadvantage because he was only briefed on 16 October 2000, the first day of trial. The plaintiff's advisers were in all respects prepared and ready for trial on time save that, curiously, no steps had been taken to value the shop. There was an early application for a spilt trial but the defendant opposed that course, and I declined the request. With no disrespect or criticism attaching to Mr Hui, for he had an onerous task which he completed in just three days, I prefer the methodology, calculations and comparables in Mr Cullen's report. He valued the shop at $7.5m. I discount that by a modest amount to recognize a discount in rent agreed after he had prepared his figures. I assess its current worth at $7.45m.

The measure of damages is as follows:-

Sale price to Ng	11,400,000
less real estate commission	114,000
		11,286,000
Conveyancing costs thrown away		43,830
		11,329,830
Deduct - present worth of shop	7,450,000
Net rents received	2,578,450
		10,028,450
		1,301,380

together with interest at prime rate plus 2% from 31 October 1996 to date of judgment.

The Orders

87. There shall be judgment in favour of the plaintiff in the sum of $1,301,380 together with interest thereon at prime plus 2% from 31 October 1996 to this date and thereafter at judgment rate until payment.

88. Liberty to apply.

89. Costs shall be to the plaintiff taxed if not agreed. This order as to costs shall be nisi at first instance.