CHIU PUI WAN AND ANOTHER v. CHAN SAI WING t/a PHILIP S W CHAN & CO.

HCA 330/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 330 OF 2001

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J U D G M E N T

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1. The sale and purchase of Small House or 丁屋 in the New Territories has become prevalent with the development of rural areas. In the 1990's, before the collapse of the property market in October 1997, Small Houses were also popular for property speculators as well as investors. The Plaintiffs in this action were two purchasers of 6 Small Houses in Sai Kung. They entered into 6 Chinese Advance Sale and Purchase Agreements (預先認購協約書) ["the Agreements"] with six different vendors on 25 November 1996. The total purchase price for the 6 houses ["the Properties"] was $36,400,000. By way of first instalments, the Plaintiffs paid a total sum of $2,745,000 on 25 November 1996. The particulars of each transaction and the payments thereunder are as follows:

Property	Price	Payments	Purchasers
Lot 1000	$2,500,000.00	$250,000.00 (25.11.96)	P1
DD 220		$250,000.00 (31.12.96)
		$250,000.00 (19.01.98)
ss.1, S.A	$7,800,000.00	$390,000.00 (25.11.96)	P1 and P2
Lot 252, DD 213		$390,000.00 (25.01.97)
Lot 1001	$2,300,000.00	$115,000.00 (25.11.96)	P2
DD 220		$115,000.00 (25.01.97)
s.B Lot 52	$8,000,000.00	$800,000.00 (25.11.96)	P2
DD 213
s.A Lot 52	$8,000,000.00	$800,000.00 (25.11.96)	P1
DD213
ss.2 S.A	$7,800,000.00	$390,000.00 (25.11.96)	P2
Lot 252, DD 213		$390,000.00 (25.01.97)

The development at DD 213 was called Dragon Paradise (悦龍軒) at Lung

Mei whilst the one at DD 220 was called Nam Shan Village (南山村).

2. The Agreements were signed on behalf of the six vendors by their attorney, Mr Cheung Shek Kong ["Cheung"]. Cheung was the chairman of Fourion Group. According to a brochure in respect of the development, a company within the group Hanfull Properties Limited was the developer of Dragon Paradise. There is also no dispute that a company in the Fourion Group was the developer of Nam Shan Village. All six vendors were indigenous villagers and the Small Houses were built with the benefit of the Small House Policy of the Government.

3. The Small House Policy and conveyance of Small Houses in contravention such policy were considered by the Court of Appeal in two cases, Li Pui Wan v Wong Mei Yin [1998] 1 HKLRD 84 and Madam Chung Mui Teck v Hang Tak Buddhist Hall, CACV 20 of 2001, 22.5.2001. In the present context, the Government Grants in respect of four pieces of land on which these Small Houses were to be built contained the usual restriction against alienation, see Special Condition 5 in New Grant No. 8628 for Lot No. 1000 in DD 220, Special Condition 5 in New Grant No. 9134 for Lot No. 52 Section B, DD 213, Special Condition 5 in New Grant No. 9193 for Lot No. 52 Section A, DD 213, Special Condition 6 in New Grant No. 9367 for Lot No. 1001 Section A, DD 220. However, as at 25 November 1996, only New Grant No. 8628 has been issued. The other new grants were issued subsequently. Further, in respect of the other two properties, viz. those on Lot No. 252 of DD 213, according to land searches included in the trial bundles, the new grants were not yet issued in October 2000. The evidence seems to suggest that the new grants for these two properties have not yet been issued. Hence, of the 6 properties in question, only one property was subject to a Government Grant containing a covenant against alienation at the time when the Plaintiffs entered into the Agreements. Clause 6 of the Agreements envisaged compliance with the Small House Policy and payment of premium to the Government.

4. The Plaintiffs were introduced to these properties by one Ms Mabel Lam ["Lam"] who worked for a subsidiary in the Fourion Group called Mars Property Company Limited ["Mars"]. Mars was operated as an estate agency. During site visits prior to the signing of the Agreements, the Plaintiffs saw that the sites of Dragon Paradise were only vacant pieces of land whilst some construction works were under progress at Nam Shan Village. They were therefore aware that they were buying properties which were mostly to be built in the future. They were however optimistic enough to decide to purchase 6 properties. That was in 1996 when the property market was booming.

5. The Defendant was the sole proprietor of a solicitor firm. The Agreements were signed at the office of the Defendant. In 1996, the Defendant employed Mr Francis Chung ["Chung"] as a clerk. Chung was the husband of Lam but they were separated in 1996. Chung left the Defendant firm in 1998 and he became a trainee solicitor in June 2000 after passing his P C LL examination in that year. He was admitted as a solicitor on 29 December 2001. The 2nd Plaintiff, Choy Cho Wan ["Choy"] had previously engaged the services of Chung regarding conveyancing matters. The Plaintiffs' case was that the Defendant acted as their solicitors with regard to the conveyancing transactions under the Agreements. The Defendant denied. He said the Defendant firm only acted as a witness with regard to the signing of the Agreements.

6. As set out in Paragraph 1 above, after the making of the Agreements, the Plaintiffs made further payments to the vendors subsequently. Those payments were made directly to Cheung without the involvement of the Defendant. The progress in the construction of these properties was slower than expected and it was only in January 1998 that the first house was physically ready for occupation. That was Lot No. 1000, DD 220. Keys were given to the Plaintiffs and with the permission of the 1st Plaintiff (in whose name the property was purchased) the Choy moved into the house and lived there since March 1998 until she moved out in 1999.

7. Regarding the other property at Nam Shan Village, viz. Lot No. 1001 DD 220, the Grant was only issued on 19 October 1998 and construction works commenced in March 1999. Regarding the properties at Dragon Paradise, there was not much progress between 1997 and 1999. The development was at least partly delayed by reason of the Government's requirement for emergency vehicular access. From the evidence, the consultant of the developer was still seeking approval for the emergency vehicular access in September 2001.

8. In 1999, the Plaintiffs consulted another solicitor firm Messrs Ng & Co. and they were advised that there were problems with the Agreements. According to the evidence of the Plaintiffs, they were advised not to go ahead with the Agreements. They therefore decided not to continue with the purchase in April 1999 and Choy moved out from Lot No. 1000, DD 220.

9. In 6 letters dated 8 April 1999 addressed to the six vendors respectively, Messrs Ng & Co. on behalf of the Plaintiffs enquired generally about the progress of the development and sought production of relevant documents. In the last paragraph of each letter, it was written as follows:

" In view of the lapse of time in relate (sic.) to the above matter, our clients are now re-considering the whole matter including the terms and conditions of the said agreement in question, We shall nevertheless revert to you once our clients' decision is reached."

10. On 12 April 1999, that firm wrote to Cheung regarding the 6 properties. In the letter, demand was made on behalf of the Plaintiffs for information as to the progress of the transactions and regarding Lot No. 1000 DD 220, the solicitor asked on behalf of the 1st Plaintiff about completion date. It threatened to commence legal proceedings for recovery of deposit and all money that had been paid if no reply was given within 7 days. On 29 April 1999, that firm requested for specified documents from the solicitors for the vendors. Those documents were supplied on 31 May 1999 and 2 June 1999 respectively.

11. Around the same time, the developer demanded further payments under the Agreements. In a letter dated 27 Mach 1999, Cheung wrote to Choy to demand the payment of $230,000.00 pursuant to clause 2.3 of the Agreement in respect of Lot No. 1001, DD 220. On 7 September 1999, Cheung wrote to Choy to demand payment of $800,000.00 regarding Lot No. 52 Section B, DD 213. Similar requests were made through solicitors on 17 September 1999 regarding Lot No. 52 Sections A and B, DD 213. On 26 September 2000, the solicitor for the vendor demanded the completion regarding Lot No. 1000 DD 220 that entailed the payment of balance of purchase price of $1,750,000.00 by the 1st Plaintiff ["Chiu"].

12. The Plaintiffs did not make the respective payments and the vendors through their solicitors terminated the Agreements and forfeited the payments previously made by the Plaintiffs regarding those four transactions. Particulars of the termination are as follows:

Property	Date of letter of forfeiture
Lot 1001 DD 220	24.6.1999
Lot 52 s.B DD 213	30.9.1999
Lot 52 s.A DD 213	30.9.1999
Lot 1000 DD 220	10.10.2000

13. In respect of the other two properties, viz. Lot No. 252 Section A subsection 1 and subsection 2 in DD 213, the Grants from the government were, as mentioned, delayed by the requirement as to emergency vehicular access. The vendors did not demand any further payments.

14. In 2000, the Plaintiffs instructed another solicitor firm Messrs Richard Tai & Co. to handle the matter. The focus of the Plaintiffs was directed to the Defendant instead of the vendors. Between 27 November 2000 and 13 December 2000, that firm wrote 6 letters to the Defendant alleging the latter to be negligent in acting as solicitors for the Plaintiff regarding the purchase of the Properties.

15. In a letter dated 22 December 2000, the Defendant replied stating that the Defendant firm only acted as witness as confirmed in writing by the Plaintiffs. In the letter, the Defendant said:

" Our firm was retained by your clients and Mr Cheung Shek Kong on 25 November 1996 merely to witness the signing of the said agreement. ... We have never been instructed by your clients to act on purchase of the above property as alleged. As such, we have no duty at law to advise your clients on the matters alleged ..."

16. The Plaintiffs had indeed signed documents at the same time as the signing of the Agreements confirming the capacity in which the Defendant was engaged. That documents were in Chinese. The agreed translation is as follows:

" Both parties now hereby engage Philip S W Chan & Co. as the witness of [the Agreements], witnessing the signing of the agreement by both parties.

Both parties agree that the deposits and payments made under Clause 2 of the agreement are to be dealt with by both parties themselves, and Philip S W Chan & Co. is not responsible for monitoring the use of the relevant funds and the construction of the Property.

As to the content and legal consequence of the agreement, both parties should clearly understand before signing."

There was one such document in respect of each transaction and each was signed by both the vendor by his attorney Cheung and the purchaser(s), viz. the Plaintiffs. I shall call these documents Engagement Letters.

17. The Plaintiffs claimed that the Defendant was in breach of duty in acting as their solicitor regarding the purchase. By an amendment made in the course of the trial, the Plaintiffs also added allegations of false representations against the Defendant.

The issues

18. On the breach of duty claim, the issues which I have to decide are as follows:

(a) in what capacity was the Defendant involved in respect of the signing of the Agreements;

(b) bearing in mind the answer to (a), what was the scope of duty owed by the Defendant to the Plaintiffs, if any;

(c) was the Defendant in breach of such duty;

(d) did the Plaintiffs suffer any loss as a result of that breach of duty;

(e) whether the Plaintiffs failed in mitigating their relevant losses.

19. On the false representation claim, the issues are:

(a) whether Chung made any false representation to the Plaintiffs;

(b) whether the Plaintiffs entered into the Agreements in reliance on the alleged representation;

(c) did the Plaintiffs suffer any loss as a result of that;

(e) whether the Plaintiffs failed in mitigating their relevant losses.

The capacity in which the Defendant was involved

20. The Plaintiffs said that they retained the Defendant as their solicitors in handling the purchase of the Properties. For reasons given below, regarding the factual disputes in the present case, I have reservations about evidence of the witnesses called by both the Plaintiffs and the Defendant. After considering all the evidence as a whole, I come to the regrettable conclusion that neither side has told me the whole truth and each has concealed matters from the court. In the light of the aforesaid, in resolving the conflicts in the evidence and arriving at the relevant finding of facts, I place more weight on the contemporaneous documents and the relevant undisputed conducts of the parties.

21. Choy gave evidence that prior to these transactions, the Plaintiffs had no experience in the purchase of small houses in the New Territories. When she discussed the matter with Chiu, Chiu asked about the risk involved. Choy told her that the matter would be handled by a solicitor. Hence, when Lam suggested initially that the Agreements could be executed at her own office, the Plaintiffs insisted on doing that at a solicitor's firm.

22. Chiu also gave evidence on their decision to engage a solicitor. She said she was advised by her friend, Mr Lai Ka Hing ["Lai"] that it would be better to sign the Agreements at a solicitor's firm. She accepted such advice and therefore told Choy that she wanted to engage a solicitor. Lai also gave evidence for the Plaintiffs and confirmed Chiu's evidence in this respect.

23. On the other hand, according to the evidence of Lam, the idea of engagement of solicitor came from her. I do not find the reasons given by Lam for engagement of solicitor in respect of the transactions credible. She said that the Plaintiffs were the first purchasers of houses in Dragon Paradise and the amounts involved were substantial. I fail to see how the Plaintiffs' positions as first purchasers have anything to do with the engagement of a solicitor as a witness. Whilst this might have some bearing if the engagement of a solicitor was for the purpose of checking the terms of the Agreements to ensure that there was nothing amiss in its contents, this was not the evidence of Lam. Lam said that the Defendant was only engaged as a witness and did not play any part in the preparation of the Agreements. She said she had been a conveyancing clerk and she was able to draft the Agreements herself without any input from the Defendant. For the same reasons, I do not see why the amount involved have anything to do with the engagement of a solicitor to act merely as a witness. After all, on the defence case, the payments were not made in the presence of anyone from the Defendant's firm.

24. Further, on Lam's own evidence, she was aware that the Properties could not be sold prior to the payment of premium. The developer was also aware that if the Government learnt of the disposal of the Properties prior to the payment of premium, that might jeopardize the application for New Grants and letters of compliance regarding the Properties. Under such circumstances, it was natural that the developer would wish to keep these transactions as secret as possible. The Agreements were called Advance Sale and Purchase Agreement and they were neither registered nor stamped. They were not prepared by solicitors. There was simply no good reason why the developer or Lam would want to have the documents witnessed by a solicitor.

25. Since Lam was an estate agent and had previously worked as a conveyancing clerk, I am sure that she was quite familiar as to the matters pertinent to the witnessing of the signing of agreements. She explained that she could not perform that function on this occasion because she was the agent and the developer was in the same group of companies. She testified that in respect of 8 or 9 houses at Dragon Paradise sold in 1997 through Mars Property (albeit by another agent), solicitor was not engaged to witness the agreements. She said by that time, Cheung did not want to spend money on lawyers. That was beside the point. In my view, this showed that the developer did not regard the service of solicitor in terms of witnessing as essential. I see no reason why Cheung would agree to spend $18,000.00 in 1996 for such services which he did not regard as essential. I reject Lam's evidence that she engaged the services of the Defendant without any requests from the Plaintiffs.

26. At the same time, I am not convinced that the Plaintiffs told me the whole truth regarding the events leading to the signing of the Agreements. Choy and Chiu professed to be completely ignorant about the nature of Small Houses and the Government's policy relating thereto. Yet they purchased 6 houses in one go and according to their evidence, they did not enquire with Chung meaningfully about the nature of their purchases. That seems to me to be incredible. If their purpose of engagement of the Defendant was to protect them against their professed ignorance, the first thing they would have done at the meeting of 25 November 1996 was to ask Chung about the risks pertaining to the purchase of Small Houses. In my judgment, the Plaintiffs knew on 25 November 1996 that they were purchasing Small Houses. It was Choy who took the initiative to consider the purchase of houses in the New Territories and she at first looked for such houses in Shatin. She must at least have some idea as to what these properties were even before she was re-introduced by Chung to Lam. It is also clear to me that the Plaintiffs were at least aware that the purchases of Small Houses might carry different considerations from the purchases of other properties. Choy said in her evidence in chief that when she asked Chiu whether she was interested in purchasing houses in the New Territories, Chiu asked her whether there were risks in purchasing these properties. Choy said she did not know because she had no experience in purchasing "these properties" but she said the matter would be handled by solicitors. This piece of evidence also showed that Chiu were also concerned about the risks pertaining to the purchase of these properties. If those concerns have not been addressed prior to the meeting of 25 November 1996, it is in my judgment unlikely that the Plaintiffs did not raise any questions regarding that at such meeting.

27. The Agreements clearly stated that the subject matters of their purchase were Small Houses. Yet, even on their evidence, the Plaintiffs did not ask Chung what the expression meant. This reinforced my view that they in fact knew that they were buying Small Houses. Moreover, it is significant to note that there was no provision in the Agreements stipulating the deadlines for the construction for these houses. This must be the concern of any purchasers. Chiu said at the meeting of 25 November 1996 one of her main concern was when would the construction of the houses be completed. Yet neither she nor Choy raised this issue with Chung. Mr Mullick stressed that Chiu and Choy must be very concerned about the possibility to resell these Properties since they expected to finance part of the purchases with resale proceeds. They must therefore be aware that the Properties would be built in stages or phases. They should also be concerned about the lack of contractual provisions as to the periods of construction. If the Plaintiffs were as ignorant about the nature of the transactions, I cannot understand why they did not raise the subject with Chung if they believed the Defendant was acting as their solicitors. Clause 4 of the Agreements referred to the purchasers' liability in respect of premium if it was in excess of a certain amount. Despite that, the Plaintiffs did not seek any advice from Chung or the Defendant as to the exact nature of such premium and how the same would be assessed and the likelihood of the same in excess of the limit set in that clause. Clause 6.3 referred to the possibility of the Government turning down the application for Certificate of Compliance. Again, the Plaintiffs did not seem to be concerned about that at the meeting of 25 November 1996. They said they relied on Chung and the Defendant to protect their interests. I do not regard that as a truthful explanation. They had to pay substantial sums of money and they did not appear to me to be so unsophisticated that they would commit to such transactions without asking any questions to satisfy themselves that their rights were safeguarded at a meeting that took, according to them, more than 2 hours. The 1st Plaintiff was a university graduate and had worked as an insurance broker and a clerk in an accountant firm in the United States. The 2nd Plaintiff had previous experience in sale and purchase of properties. Shortly after November 1996, the 2nd Plaintiff became an estate agent. The lack of questions from the Plaintiffs at the meeting of 25 November 1996 indicated that they already had knowledge about the Small House Policy. Although the Plaintiffs denied that Lam had explained to them about the nature of Small Houses, I do not accept that they were as ignorance as they professed to be. I find on the balance of probabilities that they knew they were purchasing Small Houses and were at least aware that premium had to be paid before the Properties could be properly assigned to them.

28. Even if the Plaintiffs did initially intend to engage a solicitor to act for them regarding the purchase of the Properties, for the reasons given below, I find that by the time when they signed the Agreements on 25 November 1996, given their knowledge as to the nature of the transactions under the Agreements, they were ready to sign the Agreements even if the Defendant only acted as a witness. The Defendant relied strongly on the Engagement Letters signed by the Plaintiffs referred to in Paragraph 16 above. Further, Chung gave evidence that at the meeting of 25 November 1996 when the Plaintiffs came to the Defendant's office to sign the Agreements, Chung explained to them that his duty was merely to witness the signing of the Agreements and the Defendant firm would not be responsible for the progress, the price and the contents of the Agreements. He told the Plaintiffs that if they agreed with the terms of the Agreements, they could sign. He did not explain the terms of the Agreements to the Plaintiffs nor did he give them any advice. According to Chung, the payment of monies on 25 November 1996, including the sum of $18,000.00 that the Plaintiffs said to be legal costs, were made by the Plaintiffs to Cheung in his absence. He did not check the powers of attorney granted by the vendors to Cheung. The legal costs, as far as the Defendant was concerned, was paid by Cheung although a receipt was issued in favour of Mars Property for annual retainer at the request of Cheung for accounting or tax purposes.

29. Chung said that although Choy had phoned him in October 1996 asking about the purchase of small houses, he told her that he did not have knowledge about the conveyance of small houses. He suggested her to contact Lam whom he knew to be involved in the development of small houses. A few days before 25 November 1996, Lam called him and asked whether the Defendant firm could act as a witness to some Advance Sale and Purchase agreements. Lam offered a fee of $3,000.00 per agreement. Chung consulted the Defendant and after a sample of the Agreements was perused by the Defendant, the Defendant agreed to act as witness provided that Engagement Letters were signed. The Defendant drafted the Engagement Letters and asked Lam to type them out. Chung denied that Choy had instructed the Defendant to act for the Plaintiffs in the purchase of the Properties.

30. In contrast, Choy testified that Chung referred her to Lam in July 1996. Subsequently, when she and Chiu decided to enter into agreements regarding the Properties, she contacted Chung again by phone. She told Chung that she would buy some properties in the New Territories and she wished to engage him regarding the signing of the sale and purchase agreements. Chung told her the legal costs would be $6,000.00 for each transaction and she agreed to pay. Choy understood that the Plaintiffs would be responsible for half whilst Cheung would pay for the other half. For reasons given later, whilst I accepted that Choy had called Chung regarding the purchase of properties in the New Territories, I do not believe her in respect of the alleged representation by Chung that the legal costs would be $6,000.00 to be shared between the Plaintiffs and Cheung. Under cross-examination, Choy said when she told Chung of her purchase of these Properties, she told Chung that she would call Lam to arrange appointment with Chung. In the light of the various unsatisfactory aspects of Choy's evidence mentioned in other parts of this judgment, I prefer Chung's evidence to her evidence. I find that although Choy initiated the idea of engagement of lawyers, she left it to Lam to make the arrangement with Chung.

31. According to Choy and Chiu, at the meeting of 25 November 1996, Chung did not tell them that he was only acting as a witness. Chung read the Agreements to all the persons present and answered questions they raised. As there were six agreements containing similar terms, Chung went through the same with the Plaintiffs six times. Chung also assured the Plaintiffs that he would take care of the matter for them and promised to check the Powers of Attorney granted by the vendors in favour of Cheung. Chung had demonstrated by reference to one of the Power of Attorney that Cheung was properly authorized. At the request of Chung, Choy issued a cheque in the sum of $18,000.00 in favour of Cheung in respect of the legal costs payable by the Plaintiffs on the understanding that Cheung would issue a cheque of $36,000.00 in favour of the Defendant.

32. In respect of the Engagement Letters, Choy was unable to explain why she had signed those. She said she had to sign a lot of documents at that time and she did not read them. She just signed on the documents at places indicated by Chung.

33. Chiu said that when the documents were presented to her for signature, they were all stacked in a pile. Chung flipped through the pages and told her to sign at various places. She said Chung covered a large part of the documents so that she was unable to read the document signed by her. She believed she was only signing the Agreements. She demonstrated how that was done and her demonstration showed that Chung actually held onto a substantial part of the documents when he identified the places where she had to sign.

34. Two other persons present at that meeting gave evidence in corroboration of the evidence of the Plaintiffs. Lai was the cohabitee of Chiu. It is obvious to me that he had substantial interest in the transaction although he did not admit that. In fact, initially Choy visited the sites with him in the absence of Chiu. Chiu only joined in when they made a second visit. He gave Chiu a sum of about $800,000.00 to $1 million which he believed Chiu would use for the purchase of these Properties. The two of them were for all practical purposes husband and wife. They had 2 children and have been living together since 1996. He however testified that he was only present at the meeting as a friend. He denied making any contribution to the purchase price. Chiu also described him as her friend in her evidence in chief. These were, to say the least, understatements. Lai gave evidence to support Chiu's case as to how the documents were presented by Chung for signature.

35. The other person was Choy Hok Po, the brother of Choy. He also attended meetings between the Plaintiffs and Lam prior to their agreement to purchase the Properties. Although in general his evidence corroborated those of the Plaintiffs, on quite a number of matters regarding the meeting of 25 November 1996 he could not remember and hence could not give useful evidence. These included whether the Agreements contained references to Small Houses, whether the Agreements were signed by one person after another, whether the documents were stacked together when presented to the parties for signatures, what questions were raised by the Plaintiffs during the meeting. I do not find his evidence to be of great assistance.

36. I should perhaps mention the sequence in which the Plaintiffs' witnesses gave evidence, a matter on which Mr Ng placed some reliance. He drew attention to the fact that it was only after Chiu gave evidence about the concealment of the Engagement Letters, the other witnesses of the Plaintiffs told the same story. The first person who gave evidence was Choy. She was followed by Chiu. Then a neighbour Ms Christine Kwok was called to give evidence about the bad experience she had regarding her purchase of a unit in Nam Shan Village. She obviously had her axe to grind against the Fourion Group. She did not complete her purchase but continued to remain in occupation. She was being sued by the vendor of her unit for possession. She gave evidence on the absence of involvement of solicitor when she signed her agreement with the vendor. That was of limited relevance since the transaction was made in June 1994, before Lam became an employee of the Fourion Group.

37. Lai gave evidence after Christine Kwok. The last witness called on behalf of the Plaintiffs was Choy Hok Po. As mentioned, Choy was unable to explain how the Engagement Letters came to be signed by her. Nor was there any clue about the allegations of Chiu in Paragraph 33 above in the witness statements filed by the Plaintiffs. In her own witness statement, she said the following in Paragraph 15:

" After the explanation of the terms of [the Agreements], [Chung] asked us to sign some documents. We had the impression that those were agreements for sale and purchase because we were purchasing six properties all together. We had no idea that we also signed some memorandums [viz. the Engagement Letters], which purported to limit the scope of the retainer for the Defendant. We did not have any idea about the existence of these memorandums. Chung did not draw our attention to such memorandums at all. Chung did not give us any copy. We only discovered that we had also signed such memorandums when we demanded compensation from the Defendant through our present solicitors."

In Paragraph 18 of her witness statement, Choy said exactly the same thing. The witness statements of Lai and Choy Hok Po were even more general on this point.

38. Hence, the Defendant only came to know these specific allegations of Chiu (supported by Lai) in the course of her evidence. In the light of such allegations, the Defendant asked Lam to produce the original copies of the Agreements. The original copies of the Letters of Engagement and a set of copy Agreements endorsed with the original acknowledgments by the Plaintiffs as to the receipt of the same were also produced.

39. These exhibits showed that at the time when the Agreements were presented to the Plaintiffs for their signatures, each Agreement had already been bound separately. The Letters of Engagement were separate sheets of papers. It was put by Mr Mullick, counsel for the Plaintiffs, in the cross examination of Lam that the binding was done subsequently. It was also suggested by Mr Mullick presumably on the instructions of the Plaintiffs that when the Agreements were signed at the office of the Defendant, they were not yet bound and the set of Agreements retained by the Plaintiffs was not given to them on 25 November 1996. These were denied by Lam. Chung also testified that the Agreements were already in bound form when they were signed on 25 November 1996. In this connection, the acknowledgments signed by the Plaintiffs on 25 November 1996 put the matter beyond doubt. The copies on which the Plaintiffs signed the acknowledgment clearly showed the binding at the side of the Agreements.

40. Mr Mullick levelled criticism about the late production of the original Agreements and acknowledgments. In my judgment, such criticism was unfounded. The acknowledgments had been properly disclosed in the Defendant's List of Documents. The relevance as to the binding of the Agreements did not become apparent until Chiu gave her evidence in the witness box as stated in Paragraph 33 above. The original set of the Agreements was not retained by the Defendant. Rather, they were produced by Lam as they were in the possession and custody of the Fourion Group. They were supplied to the Defendant's solicitors on 29 May 2002 and were disclosed in a Second Supplemental List of Documents filed on behalf of the Defendant on 30 May 2002. The binding of the Agreements could not and should not take the Plaintiffs by surprise. One set of the Agreements was given to them. They disclosed the same in their list of documents. The binding could also be seen in their copies of the Agreements reproduced in the trial bundles, e.g. at p.50, 55 to 63, 70-73, 75-78.

41. By reason of the binding of the Agreements and the Engagement Letters being written on separate sheets of papers, it is in my judgment very difficult and highly unlikely that Chung could present the documents for the Plaintiffs' signatures in the manner as described by Chiu. In the Agreements, there were pages where Choy and Chiu had to put their initials at the upper part of the page at a space close to the binding. It was impossible for Chung to cover the documents in the manner demonstrated by Chiu when she was asked to affix such initials. It was also unlikely that Choy and Chiu did not notice that the Engagement Letters were separate documents from the Agreements. They were not bound and even on the assumption that they were presented to the Plaintiffs stacking together with the Agreements, the Plaintiff must have noticed that they were not part of the Agreements. With the binding in the Agreements, it was not possible for Chung to cover a substantial part of the documents even if he flipped through the pages when he invited the Plaintiff to sign. I also note that in respect of the Engagement Letter for Lot No. 52 Section B, DD 213, Choy had to initial underneath the signature of the vendor by reason of a correction of the name of the vendor.

42. Perhaps the Plaintiffs also recognized the implausibility of Chiu's explanation about the signing of the Engagement Letters. In view of the fact that these documents were produced in the course of the defence case, I gave an opportunity to Mr Mullick to recall any witnesses he wished. He however chose to recall Choy only. Choy did not give evidence in support of Chiu's explanation. She said she could not remember whether the Agreements were bound when she signed them on 25 November 1996. In view of Mr Mullick's decision not to recall Chiu, Mr Ng applied to have her recalled for the purpose of putting those documents to her to see if she could give any explanation. Mr Mullick had no objection to that course being taken. In my view, in fairness to Chiu, she should be given an opportunity to offer her explanation. She was therefore recalled and cross-examined by Mr Ng with regard to the binding of the Agreements. Although she maintained that she got the set of Agreements afterwards from Lam, she accepted that it was possible that the acknowledgments were signed on 25 November 1996 at the Defendant's office. She also accepted that it was possible that the Agreements were already in bound form on 25 November 1996¹ although she could not remember specifically. She insisted that she only signed at places where Chung told her to sign. She denied that she had accused Chung of covering the documents. In this aspect, I have listened to the recording of her evidence and I should point out that in her evidence in Chinese, it was clear that she said she did not mean to say that Chung had covered the documents. In the next sentence, she said Chung did not deliberately cover the documents². Because she gave her evidence in an excited manner and said a lot of things at the same time, the interpreter could only translate the latter part. However, with the benefit of the recording and my position as a bilingual judge, it is my duty to take into account of all her evidence. Her explanation was that it was natural for her to sign at the places as indicated by her solicitor and she signed all the documents in one go. In coming to my conclusions in Paragraph 41 above, I bear in mind the evidence of Chiu that there were changes made by Lam to the Agreements subsequently and plastic covers were added on top of the Agreements. Even assuming that on 25 November 1996 the Agreements were without the plastic covers and the hardcover at the back, I still come to the same conclusions.

43. The allegations of Chiu, as summarised in Paragraph 33 above, were serious allegations against Chung. Although he was only a clerk at the time of the incident, he is now a solicitor. At the material time, he already had the aspiration to become a solicitor and he studied under the Legal Executive programme of the University of Hong Kong between September 1995 and June 1997. He then studied for the Common Professional Examination from September 1997 to June 1999. As a clerk in November 1996, he derived no personal monetary gain out of these transactions. Chiu's allegations were that Chung fraudulently concealed the fact that the Defendant was only acting as witness in the transactions from the Plaintiffs and procured the Plaintiffs to sign the Engagement Letters by improper means. To sustain such allegations, the court requires very cogent evidence. Her allegations were adopted by Lai in his evidence. Such evidence formed the basis of the Plaintiffs' amendments to the Statement of Claim, in particular the new Paragraph 17(b) and (c). In view of the backtracking of Chiu in her evidence of 6 June 2002 and my conclusions in Paragraph 41 above, I am not satisfied that there was any concealment about the Engagement Letters at the meeting of 25 November 1996. The signing of these letters was obviously an important issue in this case and the Plaintiffs' lawyers should have explored this matter with them thoroughly in the course of preparation of the case. If these allegations were true, I find it incredible that not only were they omitted from the witness statements, but also that when Choy was cross-examined about how she came to sign the letters, she could not give the same explanation as Chiu. She was vague and uncertain in this aspect. I have no hesitation in rejecting the evidence of the Plaintiffs witnesses regarding how the Engagement Letters came to be signed by them. I find on the balance of probabilities that they were aware of the contents of the Engagement Letters when they signed the same at the meeting of 25 November 1996. Their signatures are evidence as to their agreements to the contents of those letters. I accept the evidence of Chung in Paragraph 28 above. I find on the balance of probabilities that he had told the Plaintiffs that the Defendant firm only acted as a witness in the transactions and would not be responsible for the contents thereof.

44. Mr Mullick stressed that the Engagement Letters showed that the Defendant was engaged by both the Plaintiffs and the vendors. This was also admitted by the Defendant in his letter of 22 December 2000. But that still begs the question: in what capacity was the Defendant engaged. These documents recorded that the Defendant was engaged as a witness. The Engagement Letters were in Chinese and there should not be any difficulties on the part of the Plaintiffs in understanding their contents. The first paragraph of those letters clearly stated that the Defendant was engaged to witness the signing of the Agreements. I reject the submission of Mr Mullick that the use of the word "retained" in the letter of 22 December 2000 showed that the Defendant acted as solicitors. The letter has to be read as a whole.

45. Further, even on the Plaintiffs' evidence, their conducts indicated that the Plaintiffs did not regard the Defendant as undertaking responsibilities as their solicitor in the transactions. If the Plaintiffs were concerned about the risks regarding the purchase of Small Houses and regarded the Defendant as their solicitors, I find it strange that not much questions were raised by them at the meeting on 25 November 1996 in respect of the transactions. Their evidence was that basically Chung just read the terms of one agreement after another without much explanation. There were terms and expressions in the Agreements which they did not understand and yet did not seem bother to find out by asking Chung. Despite the numerous references to "Small House" in the Agreements, Choy and Chiu said they had no idea what the expression meant although these were the subject matters of their purchase. Subsequent to 25 November 1996, further payments were made by the Plaintiffs and these were not paid through the Defendant. If the Plaintiffs regarded the Defendant as their solicitors and had no knowledge of the contents of the Engagement Letters, it is difficult to see why they did not make payments through the Defendants. Likewise, the handing over of the keys regarding Lot No. 1000, DD 220 was not conducted through the Defendant.

46. The Plaintiffs said they were also concerned about the Powers of Attorney granted by the vendors to Cheung. They said Chung promised to check the same. However, they did not contact Chung about the same after 26 November 1996. Choy said between November 1996 and March 1999 she only contacted Chung once or twice regarding the progress of the development in mid 1997. She raised query about no construction works being done at the sites and Chung just told her that he did not know. If she regarded the Defendant as her solicitor and if she did not have knowledge of the Engagement Letters, that would certainly be an unacceptable answer. I do not understand why she did not at least seek more specific advice from Chung or the Defendant with regard to her rights under the Agreements and urge them to take actions against the vendors on her behalf. When Choy was told by Lam that the documents were not ready, she did not take any steps to ask Chung or the Defendant to clarify for her regarding the same. Chiu did not contact Chung or the Defendant at all after 25 November 1996. She said she left the matter to Choy. When the delay became more serious, it is also inexplicable that neither Choy nor Chiu pressed the Defendant to do something for them if they believed that the Defendant was handling the purchase as their solicitors. Choy offered the explanation that she was advised by Christine Kwok in March or April 1998 that Lam and Chung were unreliable. If that explanation were true, one would expect the Plaintiffs to be alarmed and at least sought the Defendant to review the matter with them. Yet she did not take any action until about one year later in April 1999. I find these matters as highly indicative that the Plaintiffs knew that the Defendant did not act as their solicitor in the transactions. I further find the conducts of the Plaintiffs wholly consistent with the terms of the Engagement Letters.

47. The Plaintiffs said they paid $18,000.00 as legal costs in respect of the Agreements. That sum was paid to Cheung but the Plaintiffs and their witnesses said this was done at the request of Chung. There is no dispute that the Defendant did receive $18,000.00 regarding the firm's services on 25 November 1996. However, the Defendant said the sum was paid by Cheung. As mentioned, the receipt was issued in favour of Mars. Regarding the payment of $18,000.00 by the Plaintiffs to Cheung, Lam said the sum was for contract fees in consideration of the services rendered by her in the preparation of the Agreements. That was on top of a commission charged by Mars as agent for these transactions in the sum of $121,331.00.

48. I have no difficulty in rejecting Lam's account as to the payment of $18,000.00 by the Plaintiffs as contract fees. It is unheard of that an agent would charge a contract fee on top of commission. Lam could not produce any invoice for such charges. Unlike the commission, the cheque was issued to Cheung instead of Mars. The quantum was exactly the same as the amount paid by Cheung to the Defendant. I cannot accept the suggestion that there was no relationship between these two payments although Cheung made the payment before the cheque of Choy was cleared.

49. On the other hand, given the lack of credibility of the Plaintiffs and their witnesses in other aspects of their evidence as stated above and below, I cannot accept their allegations that Chung represented to them that the total fee would be $36,000.00 and half of it would be paid by them by issuing a cheque to Cheung, who would in turn issue a cheque of $36,000.00 to the Defendant. Such allegations, if sustained, again amount to fraud and dishonesty on the part of Chung. Given the unsatisfactory state of the evidence of the Plaintiffs and their witnesses, I am not satisfied that Chung made such representations.

50. Chung said he was not present when the cheques were issued. The Plaintiffs and their witnesses said otherwise. The Plaintiffs referred to a name card of Chung on which it is alleged that Chung wrote down the figure for the commission. The Plaintiffs said this showed that Chung was present when cheques were issued. Chung denied that the figure was written by him. I do not find the evidence of the name card to be of much assistance. The figure could have been written down by any person. It does not prove the presence of Chung when the cheques were drawn by Choy.

51. There is no doubt in my mind that the $18,000.00 paid by the Plaintiffs was intended to be used by Cheung for payment to the Defendant as legal costs. The only issue is whether the Defendant knew that their services were paid by the Plaintiffs instead of Cheung. Choy gave evidence that she was given a copy of the receipt issued by the Defendant to Mars when she asked for a copy of receipt for the transactions on 25 November 1996 from the Defendant in 1999. If that were true, it would tend to show that the Defendant knew that the money was paid by the Plaintiffs. However such evidence has shown to be incorrect because the copy receipt has not been included in the Plaintiff's lists of documents. The receipt was disclosed by the Defendant as his documents in discovery. Moreover, the list complied by Chung at the request of Choy (at p.2 of Trial Bundles) did not include this receipt. Hence the receipts Chung asked the Defendant to photocopy for Choy did not include the Mars receipt. It is incredible that Choy could just ask a staff in the Defendant's firm to photocopy the Mars receipt for her since she was not the client for these transactions on the Defendant's records. This reflected adversely on the credibility of Choy's evidence.

52. Whilst I find the evidence adduced by the Plaintiffs to be unreliable, I also have difficulties with regard to some aspects in the evidence of the Defendant. The Defendant was aware that there were restrictions against alienation for Small Houses. He had asked for a copy of the sample of the Agreements before 25 November 1996. He therefore knew that there could be problems with these transactions. He said he did not pay attention to that. I do not think that was true. He took the precaution by drafting the Engagement Letters, no doubt with a view to protect his firm. Although his firm was paid a generous fee to act as a witness to the transactions, he asked Chung to perform that function. I confess that I am skeptical about the evidence that he was busily engaged in other matters on 25 November 1996. It seems to me that it was more likely that he wished to distance himself away from these transactions. Likewise, I am skeptical as to the evidence as to the reason why the receipt was made to Mars for annual retainer instead of Cheung for witnessing the Agreements. Regarding Chung's evidence, I have the same reservation regarding his explanation as to the Mars receipt. But such reservations were not sufficient to lead me to disbelieve Chung regarding his evidence on what happened at the meeting of 25 November 1996.

53. Once I reject the allegations of the Plaintiffs and their witnesses about Chung's representation that Cheung would be paying the whole of the legal fee in the sum of $36,000.00 as the reason for the cheque of Choy being made to Cheung instead of the Defendant, it is difficult to see why the Plaintiffs should draw a cheque in favour of Cheung instead of the Defendant unless they were aware that the Defendant did not act as their solicitors in these transactions.

54. The Plaintiffs did not demand a receipt in respect of the $18,000.00 from the Defendant. Viewed in the light of their acceptance of the terms in the Engagement Letters, such omission on the part of the Plaintiffs tends to reinforce the conclusion in the above paragraph. Hence, I do not find the payment of the $18,000.00 by the Plaintiff in any way further their case against the Defendant albeit that it was probably used by Cheung to pay the Defendant.

55. Although $18,000.00 was a generous fee for merely witnessing the Agreements, I do not find that to be impossible bearing in mind the state of the property market at that time. The Plaintiffs were very keen to invest in these Properties as demonstrated by their willingness, on their own case, to pay the commission of $121,331.00 to Mars even though that had not been mentioned to them prior to the meeting. Cheung was happy to pay the same since the burden ultimately fell upon the Plaintiffs. I certainly do not regard this as sufficient to override the terms of the Engagement Letters.

56. As I said, I am not satisfied that the meetings took place in the manner as described by the Plaintiffs and their witnesses. It would be most unlikely that all of them sat in the conference room basically listening to Chung reading over the same terms 6 times and no question was raised about the risk of purchasing Small Houses by the Plaintiffs despite their ignorance of the same. I also reject their evidence that Chung agreed to check the Powers of Attorney for them. If they were so concerned about that matter, it is unbelievable that they did nothing to follow-up the same when Chung did not report to them about it.

57. At the end of the day, the burden rests on the Plaintiffs to establish that the Defendant acted as their solicitors in the transactions. Given the unsatisfactory state of their evidence, and in the light of my conclusions as to the Engagement Letters, I find that they fail to discharge such burden. Mr Mullick argued that the Engagement Letters did not exempt the Defendant from performing his duties as a solicitor. He said these letters did not confine the Defendant's functions to being a witness. I think, with respect, he misunderstood the effect of these letters. They did not purport to exempt the duty of the Defendant firm in acting as solicitors for the Plaintiffs, they served as evidence that the Defendant did not act as the Plaintiffs' solicitors. By signing these letters, the Plaintiffs agreed that the Defendant firm was only a witness in the transactions, not solicitors acting for any party.

58. I therefore resolve the first question against the Plaintiffs. In this connection, Mr Ng referred to the limitation on a plea of non est factum. In the leading case on this topic, Gallie v Lee [1971] AC 1004, Lord Reid said at p.1016 B to F regarding a person who came to court to making a plea that he should not bound by documents signed by him:

" So there must be a heavy burden of proof on the person who seeks to invoke this remedy. He must prove all the circumstances necessary to justify its being granted to him, and that necessarily involves his proving that he took all reasonable precautions in the circumstances. I do not say that the remedy can never be available to a man of full capacity. But that could only be in very exceptional circumstances: certainly not where his reason for not scrutinizing the document before signing it was that he was too busy or too lazy. In general I do not think he can be heard to say that he signed in reliance on someone he trusted. ...

The plea cannot be available to anyone who was content to sign without taking the trouble to try to find out at least the general effect of the document. Many people do frequently sign documents put before them for signature by their solicitor or other trusted advisers without making any inquiry as to their purpose or effect. But the essence of the plea non est factum is that the person signing believed that the document he signed had one character or one effect whereas in fact its character or effect was quite different. He could not have such belief unless he had taken steps of been given information which gave him some grounds for his belief. The amount of information he must have and the sufficiency of the particularity of his belief must depend on the circumstances of each case."

59. That principle could not be relied upon by the Defendant if he knew of the mistake of the Plaintiffs or if Chung, his employee, induced the same. On my findings set out above, I do not think the Plaintiffs come within this exception. They are therefore bound by their signatures in the Engagement Letters. In any event, I have found that they were fully aware of the contents of the Engagement Letters and their legal implications when they signed the same.

Scope of duty

60. The scope of duty of a solicitor acting as a witness has been considered by the Court of Appeal in Law Wan-lan v Well-Built Development Co. [1988] 2 HKLR 435. At p.442, Fuad VP said the following in relation to a solicitor witnessing a confirmatory assignment:

" If he had any duty at all it was to ensure that [the signatory] signed before him. He was not acting for her ... He was not bound to explain the document to her or to correct [the representation of another person] or to advise [the signatory] to seek legal advice. There was no special relationship between them of the kind recognized in Hedley Byrne or Junior Books v Veitchi [1983] AC 520 and no voluntary assumption of responsibility as in Cornish v Midland Bank."

61. Although the facts of the present case are different from Law Wan-lan, I do not think there is any justification to impose a wider duty on the Defendant here. Given my acceptance of Chung's evidence that the role of the Defendant had been explained to the Plaintiffs and the findings about the awareness of the Plaintiffs as to the contents and effects of the Engagement Letters, there is no basis to hold that the Defendant assumed a greater responsibility than a witness in the transactions. The Defendant firm's duty was to ensure that the persons who purported to sign the Agreements actually signed before the witness Chung. There was no duty on the part of Chung or the Defendant to explain the terms of the Agreements to the Plaintiffs or to make sure that they understood their legal implications.

62. Mr Mullick submitted that the Defendant was obliged to check the Powers of Attorney before permitting Cheung to sign as the attorney of the vendors. That might be so if the Defendant was acting as the solicitor for the Plaintiffs or acting as a notary public. But the Defendant was not a notary public at the material time and I found that the firm did not act as a solicitor for the Plaintiffs. Mr Mullick has not referred to any authority to support the proposition that a solicitor who acted as a witness undertook a more onerous duty than an ordinary person and was obliged to check the authority of the person who executed the documents. In any event, the claims of the Plaintiffs were not based on any breach of duty on the part of the Defendant in respect of the checking of the Powers of Attorney.

63. The Defendant therefore did not owe the Plaintiffs any duty to advise them about the transactions embodied in the Agreements.

Breach of duty

64. Given my conclusions as to the capacity in which the Plaintiffs was involved on 25 November1996 and the scope of duty thereunder, it cannot be seriously suggested that there was any breach of duty on the part of the Defendant. The Agreements were signed by Cheung and the Plaintiffs in front of Chung. This is sufficient to dispose of the Plaintiffs' claim for breach of contract or duty.

Loss of the Plaintiffs attributable to the Defendant's breach of duty

65. This question does not arise on my findings above. However, for the sake of completeness, I have also considered the same on the assumption that the Defendant did act as solicitor for the Plaintiffs and were in breach of duty as such in conducting the matter. This would only be relevant if I were wrong in my aforesaid findings and conclusions as to capacity and scope of duty.

66. On the basis that the Defendant acted as solicitor for the Plaintiffs, the Amended Statement of Claim pleaded several heads of breaches of contract and/or duty of care in Paragraphs 7(ix), 8(vi), 10, 12, 14 and 15(vi). I paraphrase the specific complaints of the Plaintiffs as follows:

(a) Failure to advise the Plaintiffs as to the restriction against alienation under the Small House Policy;

(b) Failure to advise the Plaintiffs that the execution of the Agreements would render the title of the Properties defective and the Properties would become unsaleable by reason of the possibility of Government's exercise of its right of re-entry;

(c) Failure to advise the Plaintiffs that the Defendant firm was also acting for the vendor;

(d) Failure to advise the Plaintiffs of the risk that no completion dates were stated in the Agreements;

(e) Failure to advise the Plaintiffs not to proceed with signing the Agreements;

(f) Failure to discover that the original Grant for Lot No. 252, S.A ss.1 and ss.2 in DD 213 was missing and to advise the Plaintiffs as to the implications thereof;

(g) Failure to advise the Plaintiffs as to the risks of not registering the Agreements.

67. Even if those breaches were established, Mr Ng submitted that the Plaintiffs' claim would still fail because of lack of causation and the application of the SAAMCO principle. In respect of causation, Mr Ng submitted that the Plaintiffs failed to establish that had the Defendant warned them about all these matters, the Plaintiffs would not go ahead with signing the Agreements. He submitted that on the evidence, it was clear that the Plaintiffs' loss in these transactions was caused by their decision not to proceed further in 1999 due to the collapse of the property market. Even if there were no problem as to title in terms of restriction against alienation and the missing Grant, the Plaintiffs would have suffered the same loss.

68. On the facts, I agree with Mr Ng that the Plaintiffs chose not proceed with the transactions due to the collapse of the property market after 1997 although they denied the same. From the summary in Paragraph 1, it can be seen that the last payment made by the Plaintiffs regarding these transaction was made on 19 January 1998. I have referred to the history of the transactions after 25 November 1996 in Paragraphs 6 to 13 above. In addition, by five letters dated 3 June 2002, written by the Plaintiffs' solicitors in the course of this trial, the Plaintiffs purported to accept the breach of the Agreements by the vendors in failing to complete construction of the houses within a reasonable time and demanded repayments of monies paid by the Plaintiffs in respect of the Properties except Lot 1000 in DD220. Regarding the latter, the Plaintiffs had commenced an action in High Court Action No. 10658 of 2000. The Plaintiffs have not given discovery of the papers in that action although I was told by Mr Mullick that pleadings has not yet been closed.

69. It is quite clear to me that even after the Plaintiffs had the benefit of the advice of another lawyer in April 1999 and learnt of the problems as to restriction against alienation, they did not decide to withdraw from the transactions immediately. There was no reference in the letters written by Messrs Ng & Co. on behalf of the Plaintiffs as to the problems arising from such restriction and that firm demanded for some documents instead. After those documents were supplied, there was no follow-up by that firm or the Plaintiffs. Even when the vendors' solicitors wrote to the Plaintiffs to press for payments, the Plaintiffs did not refute by raising the problems as to title. The Plaintiffs could not offer any satisfactory explanation as to these courses of correspondence written on their behalf.

70. I disbelieve the Plaintiffs with regard to their evidence that their decisions in not proceeding with the purchases had nothing to do with the collapse of the property market. Mr Mullick accepted that they acquired these Properties with an element of speculation and the collapse of the property market must have a significant impact on their decisions.

71. In view of Li Pui Wan v Wong Mei Yin [1998] 1 HKLRD 84 and Wu Wing Kuen v Leung Kwai Lin [1999] 4 HKC 565 and [2001] HKC 567, I am not prepared to hold that the title of the Properties must be bad and the Properties were unsaleable by reason of the defects pinpointed by the Plaintiffs in the Amended Statement of Claim. Such defects could be curable. It might take time and steps have to be taken. However, the Plaintiffs have never raised these problems with the vendors. Hence, the present case is different from Portman Building Society v Bevan Ashford [2000] PNLR 344 and The National Commercial Bank v Albert Hwang, David Chung & Co., HCA 1114 of 1999. I should mention that the Plaintiffs did not adduce any evidence regarding the allegation that the Grant for Lot No. 252, S.A ss.1 and ss.2 in DD 213 was missing.

72. The issue of causation and the SAAMCO point are two separate issues (see Bristol & West Building Society v Mothew [1998] Ch 1 at p.10). I have recently discussed the application of the SAAMCO principle in The National Commercial Bank v Albert Hwang, David Chung & Co., HCA 1114 of 1999 in the light of the House of Lords' decision in Aneco Reinsurance Underwriting v Johnson & Higgins [2002] 1 Ll Rep 157. As pointed out by me in Paragraphs 49 to 57 in Albert Hwang, two different approaches have been expressed and there are rooms for further development.

73. If one were to apply the law as stated by Lord Millett in Aneco (which seems to me to be in line with the approach of Lord Nicholls in Nykredit), the question is not whether the Plaintiffs would have entered into the transactions but for the advice given by the Defendant. The Defendant would not be responsible for loss which would have arisen even if what the Defendant represented to be the position were true. In the present context, even if there were no problem with the restriction against alienation and the missing Grant, the Plaintiffs would still incur the same loss because of their decision not to go ahead with the transactions in the light of the collapse in the property market. The same can be said regarding the registration of the Agreements.

74. On the other hand, the approach of the majority in Aneco called for the examination of the issue by reference to the scope of the defendant's duty. SAAMCO only applied when the duty of the defendant was confined to giving specific information. If the Defendant were acting as solicitor for the Plaintiffs, I think he must be taken to have assumed the responsibility in approving the terms of the Agreements and advising the Plaintiffs as to legal implications arising therefrom and whether the transactions were viable from a legal point of view. In my judgment, a solicitor acting for an intended purchaser regarding uncompleted Small Houses owed his client a duty to advise on the safe course of action to take. The solicitor should highlight all the risks pertaining to such a transaction and suggest proper safeguards to the purchaser. Even if, as in the present case, there were provisions in the agreement for the return of the money to the Plaintiffs if Government approval was not obtained, bearing in mind that the enforceability of an agreement of such a nature is open to doubt, the solicitor should at least suggest money payable by the purchaser to be stakeheld. It is more than a duty to give specific information. It is a duty to advise the Plaintiffs whether to enter into the transactions in the light of all the risks arising from the terms of the Agreements and the Small House Policy.

75. Mr Mullick submitted that if the Plaintiffs had been properly advised, they would not have entered into the Agreements. Although I have held that the Plaintiffs had not been truthful with regard to their knowledge as to the nature of the transactions and that the Plaintiffs were happy to enter into the Agreements without the service of a solicitor, it does not necessarily follow that they would still enter into the Agreements if they were properly advised. It is possible that if they received proper advice, they would have changed their minds. In this regard, it has to be remembered that, as explained in Paragraph 74 above, proper advice in this context encompass more than the risk relating to the Small House Policy. I think it is probable that if the Plaintiffs were properly advised, they would not enter into the transactions on the terms of the Agreements.

76. But this does not assist the Plaintiffs. On my finding, the loss of the Plaintiffs were not caused by the making of the Agreements. Nor were they caused by the illegality of the Agreements. The loss were caused by their decisions not to proceed further due to the collapse in the property market. But for such decisions, they might be able to acquire the Properties or recover the monies from the vendors or Cheung. It cannot be suggested and Mr Mullick has not suggested that it was within the scope of the duty of the Defendant (assuming that the firm acted as the solicitors for the Plaintiffs on 25 November 1996) to advise the Plaintiffs in 1999 about whether they should proceed with the transactions. No matter how one sees it, the Plaintiffs did not regard the Defendant as their solicitors in 1999. The Plaintiffs said these decisions were made on the advice of Messrs Ng & Co.

77. Hence, even if the Defendants were acting as solicitors for the Plaintiffs on 25 November 1996, the Plaintiff's claim cannot succeed.

Mitigation

78. I will only deal with this briefly. There is no evidence before me as to why the Plaintiffs did not actively pursue against the vendors or Cheung with regard to the return of the monies paid by them. As mentioned, I was not given any details with regard to High Court Action No. 10658 of 2000. It was also not explained to me why demand letters for return of the monies were only sent to the vendors in the course of this trial.

79. Mr Mullick submitted that the vendors might not be worth suing. I have no evidence as to that. In any event, I do not think the same could be said regarding Cheung. However, bearing in mind that Cheung only signed the Agreements and received the monies as attorney for the vendors and that the forfeiture occasioned by the Plaintiffs defaults, it is by no means a foregone conclusion that the Plaintiffs could recover the monies successfully from Cheung.

80. I therefore agree with Mr Mullick that on the authority of Pilkington v Wood [1953] 2 All ER 810 and on the facts of the present case, if the Plaintiffs were otherwise entitled to succeed in their claims, I should not dismiss the same on the basis of their failure or delay in pursuing against the vendors or Cheung.

The False Representation Claim

81. It follows from my finding of facts set out in my discussion on capacity of the Defendant that I am not satisfied that Chung made any false representations to the Plaintiffs. The false representation claim must therefore be dismissed.

Conclusions

82. For the reasons given above, the Plaintiffs' claims are dismissed. I make an order nisi that the Plaintiffs pay the Defendant's costs of this action, such costs to be taxed if not agreed. The Defendant's counsel asked for costs on a higher level than the normal party and party basis. Having considered the evidence in the case as a whole and the conducts of the parties, I do not think the case calls for such an award. My order nisi is therefore that the costs are to be taxed on the usual party and party basis.