YING HO CO. LTD. v. MAN KWOK LEUNG t/a DAVID K.L. MAN & CO. (a firm)

HCA 3070/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3070 OF 1998

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REASONS FOR DECISION

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1. This is an application by the Plaintiff Ying Ho Company Limited for summary judgment against the Defendant for the sum of just over $6m. The Plaintiff's claim against the Defendant arose out of the purchase of certain Letter A Land Exchange Entitlements ("Letter A").

2. In 1993, the Plaintiff agreed to purchase the Letter A from a vendor who represented himself as Poon Sik On, the registered owner of the Letter A. The Defendant, a firm of solicitor, is instructed to act for the vendor in the transaction.

3. A cashier order for $10,655,000 was delivered to the Defendant who then released the same to the vendor.

4. It is not disputed that the vendor was an impostor and not the Mr Poon Sik On who owned the Letter A. The real Mr Poon was completely unaware of the transaction in question. In fact, in connection with the aforesaid transaction, the vendor subsequently pleaded guilty and was sentenced to 3 1/2 years' imprisonment for fraud.

5. The Plaintiff subsequently took proceedings in HCA 11620 of 1993 against the vendor and other parties for the proceeds of the cashier order.

6. It is agreed that the Plaintiff managed to recover $4,911,194.93 leaving a balance of $5,743,805.07. The Plaintiff also alleged that it had incurred legal costs of $311,530, thus the total claim against the Defendant for $6,055,335.07.

7. The causes of action raised by the Plaintiff against the Defendant as set out in the Statement of Claim are threefold, namely, professional negligence, misrepresentation and breach of an undertaking.

8. For the purpose of the present proceedings, counsel for the Plaintiff only relies on the cause of action of a breach of the undertaking.

9. The undertaking was an undertaking given in exchange for the cashier order in question. It is evidenced in a letter dated 13 December 1993 addressed to the Defendant from the Plaintiff's then solicitor. The form of the letter followed closely with the draft in the Hong Kong Solicitors' Guide to Professional Conduct and it reads as follows:

"The said cheque/cashier order is sent to you against your firm's personal undertaking (subject to the usual Law Society qualification)

1) to send to us within 3 days from the date of your receipt of this letter:-

a) the enclosed Assignment together with the notification thereof duly executed (by) your client (who must be properly identified) and attested, assigning the above land exchange entitlement to our client free from all encumbrances; and ........."

10. Mr Reyes on behalf of the Defendant suggests that on a true construction of the undertaking in question, the Defendant's obligation was to take all reasonable care to ascertain the identity of the vendor as the registered owner Poon Sik On and that he would execute the assignment and the statutory declaration.

11. The suggestion is that on the undisputed evidence the Defendant had fulfilled the aforesaid undertaking.

12. Mr Reyes relied heavily on the case of Barclays Bank plc v. Weeks Legg & Dean and others [1999] QB 309.

13. The third action in that case involved an impostor of one of the owners of the property who purported to execute the assignment and hence the transfer of the interest of part of the property was not effective.

14. I have considered the facts of the case with some degree of care. There are in my view two distinguishing features in that case. One was that the wording of the undertaking in question was not entirely clear and secondly it was found as a fact that the obligee to the undertaking could have obtained what the obligor gave in accordance with the undertaking, namely acquiring a good marketable title to the property in question.

15. Millett LJ said at page 323:-

"Purpose and function of the undertaking

The undertaking is in a standard form designed for a common situation. Its effect in any particular case, however, depends upon the circumstances in which it is used and the manner in which it is completed. Subject to such variable factors by which it may be affected, the court should approach its construction with the situation for which it was designed in mind."

16. I also wish to echo what Fisher J said in the case Australian Guarantee Corporation (NZ) Ltd v East Brewster Urquhart & Partners [1990] 2 NZLR 167 at page 171:

"In construing the meaning of such an undertaking it will generally be assumed that the undertaking was intended to facilitate the successful completion of an essentially commercial dealing. It should not normally be construed in any technical or legalistic fashion but rather by reference to the evident substance and intention."

17. In construing the undertaking in question, I must look at the commercial reality of the transaction in question and to give it such business efficacy as it requires.

18. I must not ignore that the subject matter of the transaction was the Letter A. The only purpose for which the cashier order was delivered to the Defendant was for the assignment of the Letter A to the Plaintiff free from all encumbrances and the undertaking in question must be viewed in that regard.

19. In a Chinese society as indeed in other societies, it is very common for many people to have identical names. If the undertaking by a solicitor on receipt of the purchase money of a property from the purchaser was just to take reasonable care to ascertain that the name/identity of the vendor match that of the registered owner without ensuring that the vendor is the real registered owner who can assign the property to the purchaser, the business efficacy of the property transaction cannot be maintained.

20. In any event, if that was what the Defendant had intended as a solicitor, he should have spelt it out clearly and unequivocally in the undertaking.

21. I have considered carefully the wordings of the undertaking in question, I am not persuaded that I should read into it what was not there as suggested by Mr Reyes.

22. In my view, the undertaking as worded in the letter in question was clear and unequivocal. Bearing also in mind it was a voluntary and unqualified undertaking given by a solicitor to the purchaser in a property transaction, I agree with the submission of Mr Lee, SC that the undertaking by the Defendant was an undertaking to deliver an assignment executed by the registered owner of the Letter A passing title to the Plaintiff free from encumbrances.

23. On the undisputed evidence, in my view, the Defendant was in breach of the undertaking and must therefore be liable to the Plaintiff for the balance of $5,743,805.07.

24. I am satisfied to the required standard that the Defendant has not demonstrated an arguable defence to the Plaintiff's claim and it is a proper case for granting summary judgment.

25. As for the legal costs incurred in the earlier action, Mr Reyes has conceded and I also accept that the Plaintiff is entitled to recover such costs but only as damages and such damages must be properly assessed before judgment can be granted.

26. I will therefore grant judgment in favour of the Plaintiff against the Defendant in the sum of $5,743,805.07, with additional damages for breach of the undertaking to be assessed by the master. I shall now hear counsel on the question of costs and interest.