LI FOOK CHU v. H H LAU & CO (a firm)

HCA 247/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 247 OF 2003

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Dates of Hearing: 4-6 July 2005

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J U D G M E N T

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I.  Introduction

1.  Mr. Li sues his former solicitors (HHL) for failing to advise him at the outset that a 1998 action by Mr. Li against a Mr. Chung was time-barred and doomed to fail.  Mr. Li says that had he been properly advised he would never have sued Mr. Chung.  He claims all the monies spent by him in connection with the 1998 action.

2.  Mr. Li’s action sought repayment of a loan of $700,000 from Mr. Chung.  In 1998 when the action was commenced, the claim was characterised solely as monies due under a promissory note.  In 2002 it was sought to amend the claim as monies due under an oral contract whereby principal was only to be repaid on demand. 

3.  HHL is the proprietorship of Mr. H. H. Lau.  HHL admits that it failed to advise Mr. Li that the claim was time-barred in the absence of any express indication that the loan was only repayable upon demand.  HHL also admits that it failed to advise Mr. Li in 1998 to plead the alternative claim of an oral contract of loan repayable upon demand.

4.  By way of defence, HHL first contends that the promissory note claim was not actually time-barred when the Writ was issued.  Secondly, HHL submits that Mr. Li would have failed in any event because Mr. Chung had already repaid the $700,000.  HHL reasons that Mr. Li would have lost all the monies spent by him in the 1998 action in any case.  Third, HHL points out that by 13 July 2000 Mr. Li had been advised by Mr. Leo Remedios of counsel that the promissory note claim was time-barred.  It follows that, if liable, HHL should only have to repay Mr. Li's litigation costs up to around 13 July 2000.  Finally, HHL argues that it should not be responsible for Mr. Li's costs in connection with Mr. Chung's application to strike-out the Statement of Claim and Mr. Li's application to amend the latter pleading, both made in July 2002.

5.  The question is whether there is substance to the 4 limbs of HHL's defence.  Depending on my conclusions on those 4 limbs, there would be a further issue of quantum.

II.  Background

6.  Mr. Li first approached HHL in May 1998.  Through Mr. Raymond Lum (a mutual friend of Mr. Li and Mr. H. H. Lau) Mr. Li passed on papers relating to his proposed action against Mr. Chung.

7.  The papers included a promissory note dated 1 March 1989 in the following terms:-

"I, Chung Shau Ching ... hereby acknowledge to have borrowed from you the sum of DOLLARS SEVEN HUNDRED THOUSAND ONLY ($700,000) Hong Kong Currency and I undertake to repay the said sum to you on your demand.

I further undertake that until repayment of the said sum to you in full I will pay to you interest on the said sum or so much thereof as shall for the time being owing to you at the rate of 9% per annum, the interest to be offset by the rentals to be received from the Saferairo Ltd. (18-24 St. Oswald's Road, Gloucester, England.)."

8.  Following Mr. Li's approach, Mr. Verdi Kwan (an assistant solicitor at HHL) considered whether the claim on the promissory note was time-barred.  He prepared a note dated 11 May 1998 for Mr. H. H. Lau as follows:-

"Limitation Period

• 6 years from the cause of action accrued.

• The Promissory Note dated 1.3.1989 stated that Chung had to pay Li the sum of HK$700,000.00 on demand.

• Solicitors for Li issued a letter dated 23.9.1992 (i.e. less than 6 years from now) to Chung to serve as formal demand for repayment.

• Therefore the case is not time barred for the HK$700,000.00."

9.  On 26 May 1998 Mr. Li issued a writ against Mr. Chung in HCA No.8549 of 1998.  Mr. Li's Statement of Claim alleged that $700,000 was due on the promissory note.  Mr. Chung's then solicitors put in a Defence but did not plead limitation.  Mr. Chung simply said that the $700,000 claimed had been paid. 

10.  On 27 May 1999 Mr. Li obtained judgment in default of Mr. Chung complying with an unless order for the filing of a list of documents. 

11.  In May 2000 Mr. Chung applied to set aside the default judgment.

12.  On 12 May 2000 Mr. Chung's new solicitors wrote to HHL to point out that Mr. Li's action was statute barred.  They invited Mr. Li not to oppose the setting aside application in consequence.

13.  On 22 May 2000 HHL instructed Mr. Leo Remedios of counsel to advise on the merits of Chung's setting aside application (including the limitation defence) in conference. 

14.  The conference took place in June 2000.  Mr. Remedios thought that Chung would fail in his application to set aside the default judgment.  This was because (in Mr. Remedios' view) Mr. Chung had deliberately flouted the unless order. At the end of the conference, Mr. Remedios observed in passing that it was just as well that Mr. Li had a strong case on the flouting of the unless order, because otherwise the claim on the promissory note was statute-barred.

15.  Concerned by Mr. Remedios' comment on limitation, HHL (with Mr. Li's approval) asked him to reduce his opinion on time-bar into writing.  Mr. Remedios did so on 13 July 2000.  Mr. Remedios thought that limitation was a complete defence to Mr. Li's claim.  Although it is unclear whether Mr. Li ever saw Mr. Remedios’ written advice, Mr. Li was aware of Mr. Remedios’ conclusion on limitation.

16.  Mr. Chung failed in his setting aside application before the Master and Tong J, but succeeded before the Court of Appeal on 21 June 2001.  The Court of Appeal observed obiter that it was likely that limitation was a complete answer to Mr. Li's claim on the promissory note.

17.  On 20 June 2001 HHL approached Mr. K M Chong for his views on time bar.  Those views were communicated to HHL by Mr. Chong's pupil, Ms. Amy Chan, in a letter dated 5 July 2001.  Mr. Chong believed that the promissory note was time-barred.  He suggested amending the Statement of Claim to plead "breach of the oral contract of loan".  If that could be done, "[t]hen there will not be any question of time bar".  Mr. Chong did not charge for his advice which was provided to Mr. H. H. Lau on a friendly basis.

18.  On 26 June 2001 Mr. Wong Yan Lung was instructed to give his view on limitation.  He wrote on 15 September 2001 to say that he agreed with Mr. Remedios. 

19.  Mr. Li sought leave to appeal against the setting aside to the Court of Final Appeal.  Mr. Peter Sheridan QC and Mr. Warren Chan SC were instructed to research and settle the leave application.  The Court of Final Appeal refused leave on 24 December 2001.

20.  Mr. Chung then went on the attack.  On 12 July 2002 his solicitors took out a summons to strike out Mr. Li's claim as time-barred.  In response, Mr. Li applied on 25 July 2002 to amend his claim by characterising the $700,000 as monies due under an oral contract of loan, rather than debt due on a promissory note.  Mr. Li alleged that it was a term of the oral agreement that the principal loaned was only payable upon demand.

21.  In April 2002 Ms. Gladys Li SC was approached on the question of time bar.  She declined to act as Mr. Li was a relative.

22.  On 3 May 2002 Mr. Jose Maurellet was asked to advise on limitation.  He wrote on 18 May 2002 that, in his opinion, the pleading of a promissory note would fail.   But he thought that it was:-

"on a balance arguable that [the note dated 1 March 1989 signed by Mr. Chung] in fact constitutes an acknowledgment of payment/debt with evidence of the terms of the [oral] loan contract".

23.  Mr. Maurellet said that he was:-

"not too hopeful in the chances of the Plaintiff ultimately succeeding in this action, although it is reasonably arguable that an application for leave to amend the statement of claim [to plead an oral contract repayable upon demand] could possibly succeed."

While saying that the amendment "could possibly succeed", Mr. Maurellet warned that such result could not be a foregone conclusion because Mr. Chung could easily point to prejudice due to the effluxion of time.

24.  Master De Souza refused Mr. Li's amendment and struck out his claim on 17 October 2002.  At the hearing before Master De Souza, Mr. Li was represented by Mr. Lawrence Ng of counsel.

25.  Master De Souza's decision could hardly have been surprising.

26.  As will be seen below, the law is clear that, in the absence of any contrary indication, limitation runs from the date of the promissory note.  There was no contrary indication in Mr. Li's notes.  Any claim under the note had to be prosecuted by March 1995, 6 years after the note was issued.

27.  As for the proposed amendment to save the Statement of Claim, that amounted to pleading a new cause of action.  To succeed the allegation would have to rely on material facts not already in the original Writ and Statement of Claim.  Mr. Li had indisputably demanded payment of the $700,000 from Mr. Chung on 23 September 1992, if not earlier.  Thus, even if the underlying oral loan was not already time-barred in May 1998 when the Writ was issued, it was certainly barred in 2002.  A claim on any underlying oral loan would have become stale by September 1998 at the latest.

28.  At a lunch meeting with Mr. Lawrence Ng and Ms. Emy Ng (an assistant solicitor at HHL) following the hearing before Master De Souza, Mr. Li expressed his dissatisfaction with the Master's decision.  Mr. Lawrence Ng thought that the decision was wrong.  Mr. Li appears then and there to have decided to appeal.  Ms. Emy Ng was asked to draft a Notice of Appeal for settlement by Mr. Lawrence Ng.

29.  On 24 October 2002 Mr. Li issued a Notice of Appeal against Master De Souza's decision.

30.  On 5 December 2002, as a result of advice from Mr. Jat Sew Tong SC (including advice that HHL may have been negligent in informing Mr. Li adequately about time bar), Mr. Li discontinued his appeal.

31.  Mr. Jat specifically advised Mr. Li that there was no way that his application to amend could succeed.  This was because by 2002 when the application to amend the Statement of Claim was made, a cause of action based on any underlying oral loan with repayment conditional upon demand, would itself have expired.  The 1998 Writ could not be amended to plead a new cause of action based on material facts not previously pleaded in the Writ.

32.  There is an issue between the parties on whether Mr. H. H. Lau argued with Mr. Jat, seeking to persuade Mr. Jat that amendment was still viable.  I do not believe that much rides on whether there was an argument.  But, insofar as relevant, I find that Mr. H. H. Lau did argue with Mr. Jat.  It seems to me that Mr. H. H. Lau did not simply put forward a contrary view as devil's advocate, but actually sought to persuade Mr. Jat that an amendment could be effected.  I think that it is likely that at the time Mr. H. H. Lau believed an amendment to the Statement of Claim was feasible and not time-barred.

III.  Discussion

A.  Issue 1: Was the claim on the promissory note time-barred?

33.  In Re Brown's Estate [1893] 2 Ch 300 Chitty J stated (at p.304):-

"The law is quite settled that, with regard to the promissory note payable of demand, no demand is necessary before bringing an action; and indeed the Statute of Limitations begins to run from the making of the note."

34.  The view is echoed in Chitty on Contracts (29th ed.) I, §§28-036:-

"Money lent.  At common law [which remains the position in Hong Kong], where no time for repayment was specified in a contract of loan, or where the loan was expressed simply to be repayable 'on demand,' the lender's cause of action in general, accrued when the loan was made and time began to run from that moment.  As a result, once the loan was outstanding for more than six years (which not infrequently happens in the case of loans between friends or members of a family) the lender's right to recover the money lent became barred notwithstanding that no demand for repayment had been made....

Where the contract of loan does provide for repayment of the debt on or before a fixed or determinable date, or does effectively make the obligation to repay conditional upon a demand for repayment or any other matter, it is a question of construction when the lender's cause of action accrues...."

35.  Mr. Verdi Kwan was wrong to conclude that a claim on the promissory note was not barred.  At common law the mere fact that Mr. Li's loan was payable "on demand" would not be enough to make Mr. Chung's obligation conditional upon a demand for repayment.  Mr. Li's cause of action for $700,000 must have accrued on the date of the promissory note (1 March 1989), not the date of formal demand (23 September 1992 at the latest).

36.  There was no evidence on how Mr. Verdi Kwan came to his conclusion.  It is not apparent from his note to Mr. H. H. Lau what (if any) textbooks or cases he consulted.  Nor is it clear what (if any) textbooks or cases Mr. H. H. Lau considered when Mr. Verdi Kwan reported his view. 

37.  Mr. H. H. Lau had overall supervision of Mr. Li's case.  Mr. H. H. Lau claims to have had "misgivings" when informed of Mr. Verdi Kwan's conclusion.  But nothing appears to have been done by M. H. H. Lau to clarify such doubts.  Nor did HHL attempt at the outset, by way of fallback, to explore with Mr. Li the possibility that the March 1989 note was merely evidence of an underlying oral loan with repayment conditional upon demand.

38.  Instead HHL issued a writ on the assumption that the promissory note was valid and time did not expire until September 1998.  Not having been properly informed of any insurmountable limitation, Mr. Li concurred in the steps taken by HHL on his behalf.

39.  Everyone can make a mistake.  Mr. Mak (appearing for HHL) stressed that not every mistake by a solicitor is a negligent one.  That may be correct but, in my judgment, HHL were negligent in failing to ascertain the true position as to the promissory note's validity and in not informing Mr. Li accordingly. 

40.  A quick reference to a standard textbook (such as Chitty) would have readily revealed that time ran from March 1989.  This is not a specialised question of law.  An ordinary competent solicitor using reasonable skill ought to have realised that the promissory note was no longer enforceable in 1998.  HHL was too casual in its approach to whether time had lapsed on the promissory note.

41.  By a late amendment to the Defence and Counterclaim, Mr. Mak submits that, by reason of Mr. Chung's acknowledgment of debt, the promissory note was actually not time-barred after all. 

42.  For this proposition, Mr. Mak relies on a letter from Mr. Chung to Messrs. Gulbenkian Harris Andonian (GHA) (Mr. Li's London Solicitors).  GHA had written to Mr. Chung on 24 July 1992 asking for "sensible proposals" on the repayment of the $700,000 loan.  On 8 August 1992 Mr. Chung responded:-

"Thank you for your letter dated 24th July 1992.

I am sorry to inform you that I disagree the calculation that Mr. Li suggested in the letter dated 24th July 1992.

I insist that Mr. Li has already received the sum of monies from me as the followings:-

1) My severance payment was HK$650,000.  In 1988, £1 equalled $11.  Therefore, it was equivalent to £59090

2) A payment of HK$780,000 from my flat in June 1991 and at that time the exchange rate was £1 to HK$12.68.  So it was equivalent to £61514.

3) All the rental payments from Safeairo Ltd.

4) Seven thousand and two hundred pounds from Safeairo Ltd.

Furthermore, I insist that Mr. Li should list out all the details of the monies he has already paid and the amount of interest he deserves.

If the balance is owing on my part, I would settle the outstanding account as soon as possible.

With best wishes..."

43.  Mr. Mak argues that, in the penultimate paragraph quoted, Mr. Chung's response constituted an acknowledgement that money was due to Mr. Li.  Limitation on the promissory note accordingly ran not from the date of the note when it otherwise might, but ran instead from the August 1992 letter.  This means (Mr. Mak says) that Mr. Li's claim for $700,000 would not have been barred until 8 August 1998, 2 months after the Writ was issued.

44.  There is no merit in Mr. Mak's point.

45.  The August 1992 letter unequivocally denies that any money is payable by Mr. Chung to Mr. Li.  Mr. Chung alleges that he has more than repaid the loan of $700,000 as a result of certain events.  Read in context, I do not see how the penultimate paragraph can amount to an acknowledgment of existing debt, whether under a promissory note or any underlying oral loan.  By that paragraph Mr. Chung states that, if (which is denied) any money is somehow demonstrably still owing, he would gladly repay the same.  There is no admission of liability.

46.  Nevertheless, assume that Mr. Mak is right in his submission.  I do not see how that assists HHL's case.

47.  Mr. Mak accepts that no one in HHL appreciated the significance (if any) of the August 1992 letter until a few days prior to trial before me.  Mr. Mak himself only realised the alleged importance of the letter in the weekend before the present trial.  This is despite the fact that, on the evidence, the letter of 8 August 1992 was among the documents which were originally handed to HHL when Mr. Li asked it in May 1998 to proceed against Mr. Chung.

48.  If Mr. Mak is right about the August 1992 letter, HHL's failure to appreciate the letter’s purported significance and to advise accordingly in 1998 or any other time when Mr. Chung's strike out loomed, would only further evidence HHL's negligence.  The inference would be that HHL did not read the papers provided by Mr. Li closely enough.  Mr. Mak's contention has the consequence that HHL should have told Mr. Li to plead the underlying loan and the August 1992 letter from the start to avoid the imminent August 1998 limit.

B.  Issue 2: Was Mr. Li's action bound to fail anyway?

49.  In the 1998 action Mr. Chung alleged that he had transferred his Nelson Street flat to Mr. Li as security for the repayment of the $700,000 loan under the promissory note.  Mr. Chung contended that the promissory note had been fully repaid out of the proceeds from the sale of the flat in June 1991.  As evidence of this, Mr. Chung pointed to the transfer of $780,000 of the sale proceeds to Messrs. P. C. Woo & Co. (PCW), solicitors acting for Mr. Li.  Mr. Chung also relied on the fact that some of the proceeds from the flat's sale (the surplus after deduction of the loan and expenses) had been remitted to him.

50.  Mr. Li denied Mr. Chung's account.  Mr. Li says that flat belonged to him and that Mr. Chung lived there rent-free.  Mr. Li claims to have been fully entitled to the proceeds from the sale of the flat.  It is true that some of the sale proceeds from the flat were paid to Mr. Chung.  But Mr. Li says that this was because Mr. Chung requested further financial help from Mr. Li.

51.  The 1998 action having been struck out and the appeal against Master De Souza having been withdrawn, the Court never determined whether Mr. Li or Mr. Chung was right.

52.  Mr. Mak submits that, even if there had been no problem of limitation, Mr. Li would have failed anyway in the 1998 action.  The Court (Mr. Mak submits) would have found on the evidence at trial that Mr. Chung's account was right and that Mr. Li had been fully repaid.  Thus, Mr. Li would (Mr. Mak reasons) have lost all the monies expended by him in litigation and would have had to bear Mr. Chung's costs in any case.

53.  I do not understand Mr. Mak's argument.

54.  First, this is not a trial on whether the Nelson Street flat belonged to Mr. Chung or Mr. Li.  I cannot determine the ownership of the flat on the scant basis of written assertions by Mr. Chung or on letters from PCW on the disposition of the flat's proceeds.  I am unable to find that Mr. Li would inevitably have failed in his claim, even if without Mr. Chung's pleading of a limitation defence.

55.  Second, more fundamentally, even if Mr. Chung were right in his allegations, I do not see how that can affect Mr. Li's claim against HHL. 

56.  If, from the start, HHL had advised that Mr. Li's claim on the promissory note was bound to fail, Mr. Li says that he would not have instructed HHL to mount such a claim.  There would have been no point.  It would be throwing away good money in vain.  I accept that evidence from Mr. Li.  It accords with the balance of probability.

57.  Mr. Mak's case appears to be that, even if told that a claim on the promissory note was worthless, Mr. Li would still have proceeded because he passionately believed (wrongly according to Mr. Mak) that Mr. Chung had not fully repaid the promissory note.  That goes against commonsense.  Mr. Li's belief that the $700,000 was due, however misguided, would not have overridden the reality that the claim was time-barred.  Let us suppose that Mr. Li was driven by thoughts of "vendetta" (to use Mr. Mak's word).  I doubt that Mr. Li would have proceeded if he was told by solicitors that his claim had no hope of success because of time bar, that he would only inflict damage on himself rather than on Mr. Chung, and at the end of the day he would be the more embarrassed by abject failure.

58.  HHL should have advised on limitation to enable Mr. Li to come to an informed decision on whether to proceed.  The key consideration would have been the time bar, regardless of the merits of Mr. Chung's case on repayment.  Whether or not Mr. Li's claim was doomed on its independent substantive merits, cannot absolve HHL from failing to tell Mr. Li that there was no point in proceeding because of limitation.

59.  Mr. Mak cited occasional letters from HHL to Mr. Li, inviting Mr. Li to consider whether he had been fully repaid by Mr. Chung.  If he had been fully repaid, HHL advised that Mr. Li discontinue his case.  I do not see how such letters are relevant on the issue of HHL's failure to advise adequately on limitation.

C.  Issue 3: Should HHL only be liable up to 13 July 2000?

60.  Mr. Mak submitted that by 13 July 2000, the date of Mr. Remedios' advice on limitation, Mr. Li ought to have been fully apprised of the position on time bar.  The fact that he went ahead with eyes wide open would have been a fully informed decision on his part.  All costs incurred after 13 July 2000 cannot therefore be attributed to initial negligence by HHL in advising on limitation.  Mr. Remedios' advice was (Mr. Mak says) a "novus actus interveniens" that broke the chain of causation.

61.  However, the matter is not so straightforward.  Mr. Remedios gave 2 pieces of advice.  He believed that there was a time bar problem.  But he was bullish on being able to defend the default judgment against Mr. Chung's attack.  He did not think that the Court would consider the prospects of Mr. Li's claim, where (as Mr. Remedios discerned from the available evidence) Mr. Chung had deliberately ignored an unless order.

62.  In the face of such advice from counsel, Mr. Li was in an unenviable dilemma.  Under cross-examination, Mr. Li described himself as being at a "crossroads".  Should he, despite having obtained a default judgment, abandon his claim because of time bar considerations?  Or, should he press on to defend what he had obtained, in the face of counsel's bullish advice as to his chances of success?

63.  It seems to me that in the situation that he found himself, given the strong advice from counsel, it was perfectly reasonable for Mr. Li to proceed.

64.  Further, it seems to me that Mr. Li was put in the position that he was in, precisely because of the inadequate advice on limitation given earlier by HHL.  Mr. Li had to extricate himself from a difficult position that he had been placed in due to bad advice from HHL.

65.  In my view Mr. Clifford Smith SC (appearing for Mr. Li) rightly characterised Mr. Li's position as akin to that of a would-be plaintiff under a duty to mitigate loss. 

66.  Consider (Mr. Smith argues) what would have happened if Mr. Li had elected to abandon his default judgment and merely sued HHL to recover his costs thrown away, including costs payable to Mr. Chung.  In such situation, HHL would reasonably retort that Mr. Li had failed to mitigate his loss.  In light of counsel's bullish advice, why (HHL would ask) did Mr. Li give up when he could have defeated the setting aside application, secured his default judgment and avoided litigation costs being wasted?  HHL would have a case for contending that, having failed to mitigate, Mr. Li should not be entitled to any damages against HHL.

67.  A would-be plaintiff who acts reasonably to mitigate loss may fail in the end to minimise that loss.  That does not mean (Mr. Smith points out) that he is penalised for acting to mitigate.  In fact, if he acted reasonably, the law will entitle him to recover the costs incurred in his unsuccessful attempt to mitigate.  Why then (Mr. Smith asks rhetorically) should Mr. Li be penalised for acting reasonably to secure his default judgment? 

68.  The Court (Mr. Smith concludes) should not put Mr. Li in the situation where:-

(1) if he failed to defend his default judgment, he is penalised for having failed to act reasonably to mitigate loss;

(2) but if he defends his default judgment, he is penalised by having to bear its abortive costs on the basis of a "break in the chain of causation".

69.  I accept Mr. Smith's analysis.  It is in effect another way of saying that Mr. Remedios' advice is not a "novus actus".  The defence of the default judgment was a reasonable attempt on Mr. Li's part to extricate himself from a difficulty that he would never have found himself in but for HHL’s negligence.

D.  Issue 4: What about the July 2002 applications?

70.  Mr. Mak submits that, after the default judgment was set aside and final leave to appeal denied, Mr. Li would have been fully aware of the limitation on the promissory note.  HHL (Mr. Mak says) cannot be held responsible for further loss to Mr. Li in continuing with his action beyond July 2002.  Whatever decision Mr. Li took at that stage must have been a fully informed one.

71.  Here I disagree with Mr. Mak for 2 reasons.

72.  First, I think that, in opting to continue by applying to amend his Statement of Claim to plead an underlying oral loan, Mr. Li was again acting to extricate himself from the difficult straits in which he had been placed by bad original advice from HHL.

73.  I believe that Mr. Li acted reasonably in attempting to defeat the strike-out application by an amendment in light of the information and advice he had received.  Mr. K. M. Chong, Mr. Maurellet and Mr. Lawrence Ng all thought that amendment was possible and had some chance of success.  It was not until Mr. Jat came along that Mr. Li was informed of the futility of the proposed amendment.

74.  Second, until Mr. Jat's advice, the decision by Mr. Li to amend and proceed with his claim in the face of the strike-out application was not a fully informed choice. 

75.  Mr. Li's evidence was that, before meeting Mr Jat, he had not been told by HHL that the proposed amendment was doomed to fail.  I accept that evidence. 

76.  The failure to inform Mr. Li of the futility of amendment seems to me another instance of HHL's lack of care in advising Mr. Li.

77.  RHC Order 20, Rule 5 provides as follows:-

"	(2)	Where an application to the Court for leave to make the amendment mentioned in paragraph ... (5) is made after any relevant period of limitation current at the date of issue of the writ has expired, the Court may nevertheless grant such leave in the circumstances mentioned in that paragraph if it thinks just to do so.
	....
	(5)	An amendment may be allowed under paragraph (2) notwithstanding that the effect of the amendment will be to add or substitute a new cause of action if the new cause of action arises out of the same facts or substantially the same facts as a cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment."

78.  Since the proposed amendment relied on the facts leading up to the alleged oral loan and since such facts had not previously been pleaded by Mr. Li, Order 20 Rule 5(5) would not have been operative.  The amendment could not have been allowed in 2002, some 10 years after the alleged demand in September 1992 for payment pursuant to the oral loan. 

79.  It is true that neither Mr. Chong, Mr. Maurellet, nor Mr. Lawrence Ng appear to have noticed the fatal impossibility of the amendment.  They realised that the amendment was late in the day and thought that Mr. Li's application might fail on the ground of prejudice to Mr. Chung.  But they did not expressly say that amendment was doomed because it was outside Order 20 Rule 5(5) altogether.  There may be good reasons why they advised as they did.  Such reasons are not an issue before this Court and are not relevant to my decision.

80.  But Mr. Mak submits that HHL should not be found negligent on this aspect of time-bar, when counsel themselves missed the point. 

81.  I disagree.  I do not think that HHL can be excused on the ground of counsel overlooking the difficulty with the proposed amendment.

82.  Hong Kong Solicitors' Guide to Professional Conduct states (at vol.I, §12.03): "A solicitor cannot abrogate his responsibility to client by instructing a barrister."  A client is reasonably entitled to expect an ordinary solicitor holding himself out as competent to conduct litigation, to be aware of Order 20 Rule 5.  The client can reasonably expect to be informed by his solicitor of the Order 20 Rule 5's implications.  In particular, a solicitor should not advise his client to embark on an amendment which was outside the scope of Order 20 Rule 5.  Where counsel have overlooked a limitation difficulty with an amendment, an ordinary competent solicitor considering their work should be able to spot the elementary mistake.

83.  In my judgment HHL cannot escape liability for the consequences of the abortive amendment application.

E.  Quantum

84.  In light of my conclusions on the 4 issues raised by these proceedings, HHL are liable to Mr. Li for the entire costs of the abortive 1998 action (including all costs paid to Mr. Chung). 

85.  As a matter of first impression, the measure of Mr. Li's damages must be the amounts paid out by him to HHL and Mr. Chung in connection with the 1998 action.

86.  Mr. Li's Statement of Claim in these proceedings gives detailed Particulars of Quantum.  These were revised in the course of submission to remove payments to HHL for unrelated proceedings instituted by Mr. Li.  The revised total (including costs paid to Mr. Chung in connection with the action) stands at $2,937,545.90.

87.  Mr. Mak submits that the only certain guide to quantum must be HHL's bills to Mr. Li.  He says that, insofar as they only plead cheques paid to HHL, Mr. Li's Particulars of Quantum are useless.  Mr. Mak suggests that the Particulars contain "double or even treble counting" with some items not even referable to the 1998 action.

88.  I do not accept Mr. Mak's submission.  Having perused the revised Particulars, I think that they reflect the amounts paid by Mr. Li in connection with the 1998 action.

89.  Mr. Mak submits that I should not include the costs of Mr. Li's attempt to enforce his default judgment against Mr. Chung in England.  Alternatively, if I were to include those costs, Mr. Mak suggests that I should not allow Mr. Li to recover the costs actually incurred.  The latter costs proved much higher than estimated.  Mr. Mak argues that I should only award the estimated costs quoted to Mr. Li before instructing a solicitor to enforce the default judgment.  I disagree.  I believe that the correct measure is the costs actually incurred, even though these proved significantly higher than originally anticipated.

90.  Mr. Li was awarded the costs of obtaining an unless order before Master Lok and a default judgment before Registrar Chan.  In setting aside the default judgment, the Court of Appeal did not alter those cost orders.  Mr. Mak submits that HHL should be credited for those costs.  Here I accept Mr. Smith's point that all taxation items between Mr. Li and Mr. Chung have been resolved and there is no outstanding taxation.  I reject Mr. Mak's submission.

91.  Finally, during closing submissions, I suggested the possibility of simply giving guidelines in this Judgment for the computation of quantum.  The parties could then take those guidelines and agree quantum.  If no agreement could be reached, the matter was to be restored before me for further consideration.  In the end, I have come to a firm view on quantum. It has proved unnecessary to seek further guidance from counsel.

IV.  Conclusion

92.  There will be judgment for Mr. Li against HHL in the amount of $2,937,545.90.  Interest will run at 1% over prime from the date of the Writ in this action until date of judgment and thereafter at the judgment rate.

93.  The Counterclaim is dismissed.

94.  I shall hear counsel on costs and any consequential orders.