LEE TSAN SUM v. DAVID WONG PUI HON AND OTHERS

HCA308/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 308 OF 2004

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J U D G M E N T

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Introduction

1. In this action, the plaintiff, Mr Lee Tsan Sum (“Mr Lee”), is suing his former solicitors for negligence and breach of duty in respect of their handling of the original purchase, and the subsequent abortive sale, of a property on his behalf.

2. The original purchase was effected in 1991, under what has been referred to as the first retainer of the defendant by the plaintiff, and the abortive sale of the property fell through in January 1998, under what has been referred to as the second retainer.  The writ in this action was not, however, issued until 17 February 2004 and the defendant solicitors, Messrs Wong Hui & Co. have pleaded a limitation defence to the plaintiff’s claims.

3. On 3 March 2006, Master Au Yeung ordered that the following issues be tried as preliminary issues in this action and, pending their determination, stayed all further proceedings in the action.  The preliminary issues in question are :

(1) Whether the plaintiff’s causes of action in respect of the first retainer as referred to in the Statement of Claim have become barred by operation of the Limitation Ordinance, Cap.347 (“the Ordinance”); and

(2) Whether the plaintiff’s causes of action in respect of the second retainer as referred to in the Statement of Claim have become barred by reason of the Ordinance.

Background facts

4. The property with which this action is concerned is 1^st Floor, Block J, Lot No.174-176 in DD28, Tai Po, New Territories (“the Property”).  The Property is part of a larger development on Lots 172, 174 to 178 in DD28 which was developed by a Mr Wong Wai Wing in 1990.

5. In 1991, Mr Lee retained Messrs Wong Hui & Co. to act for him when he purchased the property from the developer and Mr David Wong Pui Hon (“Mr David Wong”) was the partner in charge of the matter.  This has been referred to as the first retainer.  Messrs Wong Hui & Co. also acted for the developer as vendor.  The purchase of the property by Mr Lee from the developer was completed on 19 March 1991.

6. At the time of the first retainer, the developer had not obtained Certificates of Exemption in respect of the building works at the development.  Prior to the coming into effect of the Buildings Ordinance (Application to New Territories) Ordinance (Cap.121) (“Cap.121”) on 16 October 1987, this would not have been relevant since lots such as those on which the development was built were exempt from certain provisions of the Buildings Ordinance, Cap.123.  After the coming into effect of Cap.121, a certificate of exemption was required in order to exempt the building of a house in the New Territories from the provisions of the Building Ordinance, Cap.123, and, without such a certificate of exemption, there was a risk of enforcement action.

7. For reasons that I will have to return to later in this judgment, Mr David Wong did not inform Mr Lee of the absence of Certificates of Exemption in respect of the Property at the time he acted in relation to the first retainer.  In short, Mr David Wong formed the view that the Certificates of Exemption were not necessary in order for good title to the Property to be given by the developer to Mr Lee and so he did not advise Mr Lee that there was any risk in proceeding with the purchase without them.

8. In November 1991, it was held in Lo Chun Tak v Chan Foon Tai [1991] 1 HKC 650 that a certificate of exemption was required to prove title for buildings in the New Territories to which Cap.121 applied.  This was contrary to the view held by Mr David Wong and, notwithstanding the decision in Lo Chun Tak, he maintained his contrary view.

9. In August 1993, a solicitor acting for another purchaser of a property within the development forwarded to the defendant a copy of a letter from the District Lands Office Tai Po (“DLO”) dated 12 August 1993 which stated that there was no certificate of exemption for the redevelopment on the lots, which constituted a breach of the lease conditions, and that enforcement action with a view to re-entry would be taken.

10. This letter prompted the defendant to enter into correspondence with the DLO in which the defendant argued that the issuance of the Certificates of Exemption was overlooked and there was no cause for enforcement.  In a letter to the defendant dated 3 August 1994, the DLO stated that the developer had been asked not to commence building works after he submitted his application for redevelopment and that he had been warned twice in writing in 1989 not to commence building works without Certificates of Exemption.

11. Further correspondence ensued between the defendant and the DLO on the question of whether retrospective approval might be granted. 

12. This correspondence led to the defendant sending a letter dated 25 June 1996 to the owners of units in the development, including Mr Lee.  In that letter, the defendant stated, amongst other things, that :

“… the formal approval for redevelopment under the lease conditions and the Certificates of Exemption in respect of building works, site formation works and drainage works respectively have not been issued …”.

By a proforma reply slip, the letter sought details of a contact person and telephone number for the purposes of facilitating an inspection by the DLO.

13. On 11 July 1996, Mr Lee returned the reply slip giving his name and telephone number as the requested details in respect of the Property.

14. On 14 October 1997, Mr Lee entered into a Provisional Sale and Purchase Agreement with a Mr Ma Hon Ming (“Mr Ma”) to sell the Property with completion scheduled to take place on 14 January 1998.  In about November 1997, Mr Lee retained the defendant firm to act for him in relation to this sale and Mr Allen Che Wai Hang (“Mr Che”) was the partner in charge of the matter.  This has been referred to as the second retainer.

15. Mr Ma’s solicitors raised various requisitions in the course of the transaction, including requisitions as to the absence of the Certificates of Exemption.  On 14 January 1998, when Mr Ma failed to pay the balance of the purchase price, Mr Che advised Mr Lee to accept Mr Ma’s repudiatory breach and forfeit his deposits.  On 16 January 1998, Mr Che met with Mr Lee and his wife and explained the requisitions raised by Mr Ma and also explained that completion of the sale had not taken place because Mr Ma’s solicitors considered that the requisitions had not been satisfactorily answered.

16. On 4 February 1998, Mr Ma commenced proceedings in HCA1620/1998 against Mr Lee for the return of the deposits paid in respect of his intended purchase of the Property and other relief.  Although the defendant firm initially acted for Mr Lee in that action, Mr Lee disputed his responsibility for any legal costs.  The defendant firm was then replaced by Messrs Peter Kimpton Wong & Co. as solicitors for Mr Lee in that litigation and a Notice of Change of Solicitors to this effect was filed on 14 March 1998.  In the meantime, on 25 February 1998, Mr Lee made a complaint to the Law Society concerning the defendant firm because of the falling through of his sale of the Property to Mr Ma.

17. On 21 February 2000, Recorder E. Chan SC gave judgment in HCA1620/1998 ruling that the absence of the Certificates of Exemption gave rise to a real possibility of the risk of enforcement action by the Building Authority so that the requisitions raised by Mr Ma’s solicitors had not been satisfactorily answered and Mr Lee had failed to show a good title to the Property.

18. On 22 February 2000, Mr Lee and his wife met with Mr Che of the defendant to give him a copy of the judgment in HCA1620/1998 and to hear his view as to the defendant’s responsibility.  A scene ensued, the police were summoned and Mr Lee’s wife, who was pregnant at the time, was required to be taken to hospital by ambulance.  Mr Lee pursued his complaints against the defendant firm to the Law Society by letters dated 22 and 26 March 2000.

19. The writ in this action was issued on 17 February 2004.

Summary of the issues in the action

20. The plaintiff claims that the defendant firm acted negligently and in breach of duty and/or contract in the performance of the first retainer and the second retainer in various respects.  The plaintiff also claims that the defendant firm owed him a continuing duty, in substance to rectify any defect in his title to the Property, and that it was in breach of this continuing duty in various respects. 

21. The various allegations of negligence and breach are denied by the defendant firm.  However, the defendant pleads that in any event, by virtue of the Ordinance, the plaintiff’s right to bring an action against it, whether under contract or tort, had expired prior to the date of commencement of the proceedings, and that this would be the case even if the limitation period were extended by virtue of section 31 of the Ordinance.

22. In answer to the limitation defence, the plaintiff contends that, by virtue of section 26(1)(b) of the Ordinance, the action is not time-barred by reason of the deliberate concealment of matters on the part of the defendant firm, which concealment was only revealed to the plaintiff by the delivery of judgment in HCA1620/1998 on 21 February 2000.  Additionally, the plaintiff contends that the defendant owed a continuing duty to him to rectify any defect in his title to the Property and this duty therefore continued, and the defendant was in breach of it, until 5 March 1998 when the defendant firm ceased to act for him in respect of the Property.

23. So far as the second retainer is concerned, the plaintiff relies on section 31 of the Ordinance as an additional or alternative answer to the defendant’s limitation defence.

Issues arising in respect of the preliminary issues

24. It is in these circumstances that Master Au Yeung stayed all further proceedings in the action pending the determination of the preliminary issues, the precise terms of which I have set out above.

25. The particular issues that arise in respect of preliminary issues are :

(1) When did the plaintiff’s causes of action arise under section 4(1)(a) of the Ordinance?

(2) Does section 26(1)(b) of the Ordinance operate so that the plaintiff’s causes of action in respect of the first retainer and the second retainer are not time-barred?

(3) Did the defendant firm owe a continuing duty to Mr Lee to perfect his title to the Property?

(4) Does section 31 of the Ordinance operate so that the plaintiff’s causes of action in respect of the second retainer are not time-barred?

26. For present purposes, the Court proceeds on the basis that the various causes of action pleaded by Mr Lee are established but it is important to note that this judgment is not concerned with determining whether the defendant firm was, or was not, guilty of negligence or breach of duty in any of the various respects alleged against it.

The period of limitation under section 4(1)(a) of the Ordinance

27. By virtue of section 4(1)(a) of the Ordinance, the prescribed period for a party to commence a cause of action in tort or contract is six years from the date on which the cause of action accrued.

28. It was common ground that the causes of action (whether in contract or tort) in respect of the first retainer accrued on 19 March 1991, being the date of the completion of the purchase of the Property by Mr Lee.

29. It was also common ground that the contractual cause of action in respect of the second retainer accrued on or by 14 January 1998, when, acting on the defendant’s advice, Mr Lee purported to accept Mr Ma’s repudiatory breach of contract and to forfeit his deposits.  That was the date when the contract was broken by Mr Che’s advice to Mr Lee (assuming, for present purposes, that advice to have been negligent) to accept Mr Ma’s repudiation and bring the contract of sale and purchase to an end : see Kensland Realty v Tai, Tang & Chong (2008) 11 HKCFAR 237 at §49 (per Ribeiro PJ).

30. This was also the date which Mr Bernard Man, counsel for the defendant, submitted was the date of accrual of any tortious cause of action in respect of the second retainer.  For his part, however, Mr Brian Wong, counsel for the plaintiff, submitted that the relevant date for the accrual of a cause of action in tort was 21 February 2000, when Mr Lee learned of the position as a result of HCA1620/1998.

31. As to this, I consider that the earlier date of 14 January 1998 is the date when any contractual or tortious causes of action in respect of the second retainer both accrued.

32. In the case of negligent advice, the cause of action generally accrues when the person giving the advice acts on it : see Kensland Realty v Tai, Tang & Chong at §8 (per Bokhary PJ and Sir Noel Power NPJ), §§52-53 (per Ribeiro PJ) and §§156-157 (per McHugh NPJ).  That is because, in tort, the cause of action accrues when damage is sustained (see ibid. per Riberio PJ at §51) and it is when negligent advice is acted upon that, generally speaking, a plaintiff will sustain relevant damage.

33. As Ribeiro PJ held in Kensland Realty v Tai, Tang & Chong at §51 :

“A cause of action in tort accrues when the damage which results from the tortious conduct is real, as distinct from minimal or negligible and is actual, as opposed to purely contingent.  The concept of ‘damage’ is given a broad meaning.  It encompasses damage consisting of ‘any detriment, liability or loss capable of assessment in money terms.’  Where economic loss is involved, it includes loss suffered ‘by payment of money, by transfer of property, by diminution in the value of an asset or by the incurring of a liability.’  Whether damage has been incurred in any particular case is a question of fact.  Its precise quantification may only be possible at a later date, by which time it may have become more serious, but that does not detract from the earlier accrual of the cause of action.  The damage must, however, be recoverable as falling within the measure of damages applicable to the defendant’s wrong in question.”

34. In the present case, Mr Lee acted on the defendant’s advice that he had a good title to the Property when he purported to accept Mr Ma’s repudiatory breach of contract and to forfeit his deposits.  It was at this date, 14 January 1998, that Mr Lee committed himself to a position which occasioned damage to him by exposing himself to a liability to Mr Ma, which liability was eventually quantified at the date of the judgment in HCA1620/1998.  In my judgment, the later quantification of the liability does not, however, affect the accrual of the cause of action on 14 January 1998.

35. The argument advanced on behalf of Mr Lee that the cause of action in tort only accrued on 21 February 2000 when Recorder E. Chan SC gave judgment in HCA1620/1998 was the same as that rejected by the Court of Final Appeal in Kensland Realty v Tai, Tang & Chong (see per Ribeiro PJ at §§52-53 and McHugh NPJ at §159) and, for the same reasons given there, I reject it in this case.

36. It is therefore clear that, leaving aside consideration of (a) section 26(1)(b) of the Ordinance, (b) the contention that there was a continuing duty on the part of the defendant firm to rectify any defect in Mr Lee’s title to the Property, and (c) section 31 of the Ordinance (as to which see below), the causes of action in respect of the first retainer and the second retainer would have accrued more than six years before the date of the issue of the writ in this action, namely 17 February 2004, and would therefore be time-barred.

The provisions of section 26(1)(b) of the Ordinance

37. Section 26(1) of the Ordinance provides as follows :

“(1)    Subject to subsection (4), where in the case of any action for which a period of limitation is prescribed by this Ordinance, either –

(a)    the action is based upon the fraud of the defendant;

(b)    any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant; or

(c)    the action is for relief from the consequences of a mistake,

the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.”

In the present case it has not been suggested that fraud or mistake, as referred to in sub-paragraphs (a) and (c) of section 26(1) of the Ordinance are relevant.

38. There is a reference in the plaintiff’s written opening submissions to section 26(3) of the Ordinance.  That provides as follows :

“(3)    For the purposes of subsection (1), deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.”

However, there is no plea of any deliberate breach of duty on the part of the defendant, nor was any case of this nature put to the defendant’s witnesses in cross-examination.  There is therefore no basis for the application of section 26(3) to this case.

39. A number of matters were common ground between the parties in respect of section 26(1)(b) of the Ordinance, namely :

(1) Concealment within the sub-section means a deliberate concealment of relevant facts and the six-year period provided in the section starts to run from the date on which the concealment is discovered : see Sheldon v Outhwaite [1996] 1 AC 102 at 145 (per Lord Browne-Wilkinson).

(2) The burden rests on a plaintiff to establish that there has been a relevant concealment : see Paragon Finance plc v DB Thakerar & Co. [1999] 1 All ER 400 at 418b (per Millett LJ).  Similarly, the burden is on a plaintiff to show that he could not have discovered the concealed facts without exceptional measures which he could not reasonably have been expected to take : ibid.

(3) A fact relevant to a plaintiff’s cause of action is an act without which the cause of action would be incomplete.  It is not relevant that a defendant may have concealed a fact which, if known, would merely go to strengthen an existing case : see Johnson v Chief Constable of Surrey, unrep., The Times, 23.11.92.

(4) The words “any fact relevant to a plaintiff’s cause of action” are to be given a narrower rather than wider interpretation: what must be concealed is something essential to complete the cause of action and it is not enough that evidence that might improve the claim is concealed, provided that the claim can be properly pleaded without it: see “The Kriti Palm” [2007] 1 Lloyd’s LR 555 at §323 (per Rix J), §384 (per Nourse LJ) and §453 (per Buxton LJ).

(5) The section does not provide that the right of action must have been concealed from a plaintiff: it provides only that a relevant fact should have been concealed : see Williams v Fanshaw Porter & Hazelhurst [2004] 1 WLR 3185 at §14 (per Park J).

(6) Although in most cases where the section applies, a defendant will have known the fact that he concealed was relevant, it is not essential to show the defendant must have known the fact was relevant to the right of action : ibid.

(7) The section requires only that any fact relevant to the right of action is concealed and does not require that all facts relevant to the right of action are concealed : ibid.

40. A number of questions arise for resolution in respect of the plaintiff’s reliance on section 26(1)(b) of the Ordinance :

(1) What facts are relevant to the plaintiff’s cause of action?

(2) Was one of those facts concealed from the plaintiff?

(3) Was that fact deliberately concealed from the plaintiff by the defendant?

(4) Was that fact discovered by the plaintiff before 17 February 1998 or could it with reasonable diligence have been so discovered?

What facts are relevant to the plaintiff’s cause of action?

41. It is convenient, at the start of this analysis, to set out the facts which it was contended on behalf of the plaintiff had been concealed.  These were set out in the Closing Submission of the Plaintiff (at pp.13-14) and were as follows (in summary) :

(1) that Certificates of Exemption had been applied for by the developer in 1988;

(2) that the developer was warned by the DLO in 1988 not to proceed with the works on the development because he did not have the requisite Certificates of Exemption;

(3) that there were no Certificates of Exemption in respect of the Property either at the date of completion of Mr Lee’s purchase of it on 19 March 1991 or at any time thereafter;

(4) that the DLO had written by letter dated 12 August 1993 to state a view that enforcement action with a view to re-entry would be taken;

(5) that the absence of the Certificates of Exemption gave rise to a possible defect in title of the Property and might have to be cured by a retrospective application for such certificates;

(6) that there was correspondence between 12 August 1993 and 29 October 1996 between the defendant and the DLO concerning a retrospective application for Certificates of Exemption;

(7) that the defendant was representing the plaintiff in the retrospective application (as disclosed in a letter dated 19 October 1996); and

(8) that the content of the Certificate of Completion prepared by Mr David Wong of the defendant and adopted by the architect of the development did not contain the relevant information prescribed under Part 1 of Cap.121 to show that the Property qualified for exemption.

So far as necessary, I shall refer below to these facts by reference to their numbers as enumerated above.

(a) The first retainer

42. The scope of the duty assumed by the defendant firm under the first and second retainers is relevant to the determination of what facts are relevant to the plaintiff’s cause of action.

43. In respect of the first retainer, Mr Lee’s basic complaint against the defendant firm is that, in 1991, instead of obtaining a good title to the Property, he obtained a defective title.  The defect in the title was that the Certificates of Exemption in respect of the building works had not been obtained giving rise to a real risk of enforcement action by the Building Authority.  The gravamen of the complaint against the defendant firm is that Mr David Wong’s opinion that Certificates of Exemption were not required in order to show a good title to the Property was wrong and that he was negligent in forming and holding that opinion.

44. I accept that the duty of a solicitor advising a purchaser in respect of title in the course of a conveyancing transaction is accurately summarised in Castle City Ltd v Choi Yue Development Ltd [1995] 2 HKC 593 at 597C-D per Keith J (as he then was) in the following terms :

“Solicitors advising purchasers are required to give proper advice as to the title of the property which their clients are buying.  If they identify a possible defect in the vendor’s title, they must advise whether the supposed defect is a real concern, or whether it is so theoretical that the chances of it ever being treated as a defect in the vendor’s title are so remote that they can be discounted for all practical purposes.”

45. Here, it is not in dispute that the defendant firm, and in particular Mr David Wong the partner of the firm acting for Mr Lee at the time of his purchase of the Property in 1991, did not advise Mr Lee that there was any defect in the vendor’s title.  It is also not in dispute that Mr Wong did not inform Mr Lee that there were no Certificates of Exemption in respect of the Property or that the absence of such Certificates gave rise to a risk of enforcement action and thus a possible defect in title.

46. I accept the submission of Mr Man for the defendant that the essential facts relevant to the causes of action under the first retainer are : (a) the retainer itself, (b) the absence of the Certificates of Exemption, and (c) the absence of advice by the defendant to Mr Lee that the title to the Property was defective.  On the basis that the view held by the defendant was negligent, these essential facts would enable Mr Lee to advance a claim for negligence or breach of duty on the part of the defendant.

47. Facts (a) and (c) above were clearly known to Mr Lee and there is no question of any concealment of these facts.  He was obviously aware of the retainer and he also knew what advice he received and what he was not advised about.  Mr Lee did not, however, know of fact (b) (which is fact (3) in the plaintiff’s list above) until sometime after his purchase of the Property was completed.  It will be necessary to return to the question of whether there was a concealment of that fact and, if so, whether that concealment was deliberate.

48. The facts relevant to the first retainer are facts in existence at the time the defendant acted under that retainer in 1991.  Thus, circumstances that arose subsequently, such as the letters from the DLO dated 12 August 1993 and 3 August 1994 could not, on any basis, be relevant to the question of whether the defendant breached any contractual or tortious duty in 1991.  Thus, facts (4) to (7) inclusive could not be relevant to any causes of action under the first retainer.

49. Although it occurred before the time of the first retainer, I do not consider fact (1) to have been relevant to any causes of action under the first retainer for the purposes of section 26(1)(b) of the Ordinance because it is not essential to those causes of action.  The fact of any application for Certificates of Exemption would be superseded by the fact no such Certificates were ever issued prior to the completion of the plaintiff’s purchase of the Property.  So far as fact (2) is concerned, there was no evidence that Mr David Wong of the defendant knew in 1991, rather than after receipt of the DLO’s letter dated 3 August 1994, that the developer had received the warnings in question and so this too is not, in my view, a relevant fact. 

50. Finally, as regards fact (8), Mr Man objected to this being advanced as a relevant concealed fact as it was not raised in the pleadings either as a concealed fact or as a particular of negligence.  This is correct (see the particulars of concealment in §3 of the Amended Reply and the particulars of negligence in §§45 and 46 of the Amended Statement of Claim).  Furthermore, it was not put to Mr David Wong in cross-examination that he did not think the architect’s certificate of completion was sufficient to show that the Property was qualified for exemption.  In the circumstances, I do not consider it is open to the plaintiff to rely on this fact as a relevant concealed fact.  In any event, it is not a fact necessary to be pleaded in support of a claim for negligence or breach of duty in respect of the first retainer.

(b) The second retainer

51. In respect of the second retainer, Mr Lee’s basic complaint is that the defendant firm, and in particular Mr Che the partner of the firm acting for Mr Lee at the time of his abortive sale of the Property in 1998, wrongly advised him that he had a good title to the Property and that he should, in the light of Mr Ma’s requisitions, accept his repudiation of the contract and forfeit his deposits.  Here, the crux of the complaint against the defendant firm is that Mr Che was wrong in giving his advice that the plaintiff had shown a good title to the Property notwithstanding the absence of the Certificates of Exemption and that he was negligent in giving that advice.

52. So far as the second retainer is concerned, the general duty of a vendor’s solicitor is to apply reasonable care and skill.  More specifically, his duty is that explained by Godfrey J (as he then was) in In the matter of Kwun Tong Inland Lot No.386 [1989] 1 HKC 411 at 412-413.  The part of that description of the duty material for present purposes is that set out at 412I-413D :

“… When the solicitor [acting for the vendor] looks into his client’s title, he discovers a defect, or what he thinks a solicitor for an intending purchaser would or might claim to be a defect, in the title. What is he to do?

  Firstly, of course, he must warn his client of the difficulty (and, if it was one which was created by some act or omission of his own, or of his own firm, when acting in the original purchase, he must inform his client of this fact and counsel him to take independent advice from another firm of solicitors).

  Secondly (assuming he continues to act for the intending vendor), he must consider what, if anything, can be done to resolve the difficulty. In particular, he must consider whether the difficulty can be resolved without the necessity of an application to the court. If, for example, the question arises (as in the present case) on an imperfectly worded passage in some document of title, it may be possible to get over the difficulty by a supplemental or confirmatory deed executed for the purpose by the original parties (or if there has been a death, by the personal representative of the party now dead). If there is nothing that can be done to get over the difficulty, then the solicitor’s correct course is to advise his client that there is a blot on the title. …”

53. Again, I accept the submission of Mr Man for the defendant that the essential facts relevant to the causes of action under the second retainer are : (a) the absence of the Certificates of Exemption and (b) the content of the advice given by the defendant to Mr Lee at the time of the retainer, including the absence of advice that the title to the Property was defective.

54. So far as the facts contended by the plaintiff to have been material, the fact of a prior application by the developer for Certificates of Exemption (fact (1)) would not have been relevant, in my opinion, since this fact would have been superseded by the fact no such Certificates were ever issued prior to the plaintiff’s abortive attempt to sell the Property.

55. I do not think that facts (2) or (4) are essential facts for the purposes of the plaintiff’s causes of action for negligence or breach of duty in respect of the second retainer.  The fact that the defendant might have been aware of the warning given to the developer not to proceed with the building works in the absence of the Certificates of Exemption or that the DLO expressed a view in 1993 that it might take enforcement action by re-entry might strengthen any claim that the defendant was negligent or in breach of duty in failing to advise that there was a real risk of enforcement action on the part of the Building Authority but the claim can be advanced without either of these facts.  Similarly, facts (6) (the correspondence with the DLO concerning the retrospective application) and (7) (that the defendant was representing the plaintiff in that application) are not, in my view, essential facts necessary to constitute any cause of action against the defendant for negligence or breach of duty in respect of the second retainer.  All that is necessary to plead the cause of action is the fact that Certificates of Exemption were not issued in respect of the Property (fact (3)) but, notwithstanding this, the defendant advised Mr Lee that he had a good title and that Mr Ma’s requisitions were satisfactorily answered so that he was in breach of contract in not completing the sale.

56. Fact (5) is not a relevant fact for the simple reason it is not a fact at all but rather an opinion or conclusion of law.

57. As to fact (8), for the same reasons I do not consider it to be relevant to the first retainer, I do not consider it relevant to the second retainer.

Was a relevant fact concealed from the plaintiff?

58. It will be seen from my conclusions on the preceding question that the only relevant fact of which the plaintiff was unaware was the fact that there were no Certificates of Exemption in respect of the Property either at the date of completion of Mr Lee’s purchase of it on 19 March 1991 or for a period of time thereafter.

59. There does not seem to be any dispute that the defendant firm, and Mr David Wong the partner acting for the plaintiff in respect of the first retainer, did not disclose this fact to Mr Lee at the time he completed his purchase of the Property.  That was for the reason that Mr David Wong did not believe that the Certificates of Exemption were necessary to demonstrate a good title to the Property.  I shall have to deal in the next section with whether that explanation is a credible one such that the non-disclosure was not deliberate.  (I use the term non-disclosure since I agree with the observation of Mr Man that the term concealment itself connotes some degree of deliberateness).

60. By the letter dated 25 June 1996 from the defendant to the various owners of properties within the development, including the plaintiff, however, the following, amongst other things, was clearly stated :

“… the formal approval for redevelopment under the lease conditions and the Certificates of Exemption in respect of building works, site formation works and drainage works respectively have not been issued notwithstanding due application having been made by the said former owner/developer …

  For the purpose of perfecting title to the above lot, Mr. Wong Wai Wing has instructed us to make application for such approval and Certificates of Exemption to be granted on a retrospective basis. …”

61. I shall deal below with whether receipt of this letter in June 1996 fixed the plaintiff with knowledge of the fact that the Certificates of Exemption had not been issued and that this was relevant to the question of the quality of his title to the Property.  For present purposes, however, the letter of 25 June 1996 is evidence of some weight against the plaintiff’s contention there was a deliberate non-disclosure of these facts.

62. In any event, as regards the second retainer, the evidence of Mr Che was that he explained to the plaintiff and his wife in January 1998 that there were no Certificates of Exemption and that Mr Ma was raising requisitions as to the title to the Property because of their absence.

63. Mr Che’s unchallenged evidence was that, after receiving a fax from Mr Ma’s solicitors dated 12 January 1998 in which they insisted on production of Certificates of Exemption in respect of the building works, site formation works and drainage works, he telephoned Mr Lee and informed him that the requisitions raised by Mr Ma had not been “cleared” and that there was some disagreement between the solicitors on whether or not Certificates of Exemption were required for the purpose of proving good title.  This evidence is supported by a telephone attendance record dated 12 January 1998 which records, amongst other things, “requisitions still not clear” and “dispute on C/E” (referring presumably to Certificates of Exemption).

64. Mr Che’s evidence was that on 14 January 1998, after receipt of a letter from Mr Ma’s solicitors stating that they had instructions to call off the deal if the outstanding title deeds and documents were not provided by 5:00 p.m. that day, he again telephoned the plaintiff and informed him of this.  Mr Che confirmed the plaintiff’s instructions, presumably given in reliance on his advice, to write to Mr Ma’s solicitors to elect to accept Mr Ma’s refusal to pay the balance of the purchase price as a repudiatory breach of contract and to forfeit his deposits.  That this advice was given and relied upon by Mr Lee is confirmed in his witness statement (see paragraph 26).

65. Finally, and in any event, Mr Che’s evidence was that on 16 January 1998, he met the plaintiff and his wife between 11:45 a.m. and 12:45 p.m. at which time he went through the correspondence between the defendant firm and Mr Ma’s solicitors.  He explained to Mr Lee that there was some disagreement between the solicitors “regarding the practical implications arising from absence of Certificate of Exemption in respect of building works”.  There is an attendance record dated 16 January 1998 in respect of this meeting which reflects the evidence in Mr Che’s witness statement.  This records, amongst other things, that Mr Che explained to Mr Lee and his wife “(1) progress of correspondence” and “(2) dispute as to absence of C/E”.  Although for his part, Mr Lee thought that the meeting took place on 15 January 1998 rather than 16 January 1998, his evidence was also that Mr Che explained that the reason the sale fell through was because “our side was unable to provide the certificates of exemption to satisfy the purchaser’s requisition”.  Mr Lee’s letter of complaint to the Law Society dated 25 February 1998 also refers to the fact that on 14 January 1998 he “received a notice from [the defendant firm] that problem has arisen regarding the title to the property”.

66. There was thus no concealment from the plaintiff, in January 1998, of the fact that there were no Certificates of Exemption in respect of the Property and of the additional fact that this was the reason for the intended sale to Mr Ma falling through on the basis that Mr Ma’s solicitors took the view that, in the absence of those documents, the plaintiff had not shown good title to the Property.  Certainly by 16 January 1998, in my judgment, (two days after the accrual of the causes of action under the second retainer) Mr Lee had been so informed.

Was that fact deliberately concealed from the plaintiff by the defendant?

67. As I have found above, the only relevant fact which was not communicated to the plaintiff by the defendant at the time of the first retainer was the absence of the Certificates of Exemption.

68. In his Written Opening, Mr Wong contended that, for concealment of a fact to be deliberate, a defendant must have considered whether to inform the plaintiff of the fact and decided not to.  The fact that he decides not to disclose either must be one that it was his duty to disclose, or must at least be one that he would ordinarily have disclosed in the normal course of the relationship with the plaintiff, but in the case of which he consciously decided to depart from what he would normally have done and to keep quiet about it : Williams v Fanshaw Porter & Hazelhurst per Park J at §14.

69. In the Closing Submission of the Plaintiff, Mr Wong also referred to the analysis at §37 in Williams v Fanshaw Porter & Hazelhurst where Mance LJ explained the two possible interpretations of the mental element required under the English equivalent of section 26(1)(b).  The first is a slightly more limited reading requiring deliberate concealment of a fact in circumstances where the defendant realises that the fact has some relevance to an actual or potential claim against him (or is reckless as to whether or not it does).  On the wider reading, in Mance LJ’s analysis, any deliberate concealment would carry the consequence attributed by the equivalent of section 26(1)(b), even though the defendant did not realise that the fact concealed had any relevance to any actual or potential wrongdoing.  Mance LJ did not, however, express a view as to whether the narrower or wider meaning should be preferred since it was unnecessary to do so in that case (see §39).

70. As I understood his submissions, Mr Wong’s reliance on Mance LJ’s comments in §37 of Williams v Fanshaw Porter & Hazelhurst was for the purpose of supporting a submission that recklessness was sufficient to amount to deliberate concealment within section 26(1)(b) : see Closing Submission of the Plaintiff §42.

71. However, regardless of whether the more limited or wider reading of section 26(1)(b) is adopted, it remains necessary for a plaintiff to establish that the concealment of facts was a deliberate conscious decision, see per Lord Scott in Cave v Robinson Jarvis & Rolf [2003] 1 AC 348 at §60 :

“I agree that deliberate concealment for s.32(1)(b) [the English equivalent to s.26(1)(b)] purposes may be brought about by an act or an omission and that, in either case, the result of the act or omission, i.e., the concealment, must be an intended result … A claimant who proposes to invoke section 32(1)(b) in order to defeat a Limitation Act defence must prove the facts necessary to bring the case within the paragraph.  He can do so if he can show that some fact relevant to this right of action has been concealed from him either by a positive act of concealment or by any withholding of relevant information, but in either case, with the intention of concealing the fact or facts in question.  In many cases the requisite proof of intention might be quite difficult to provide.  The standard of proof would be the usual balance of probabilities of standard and inferences could of course be drawn from suitable primary facts, but, nonetheless, proof of intention, particularly where an omission rather than a positive act is relied on, is often very difficult.”  [Emphasis added]

72. Thus, although it was held in Williams v Fanshaw Porter & Hazelhurst that it is the fact of concealment, not the reason or motive for it that is relevant to the statutory provision (see ibid. per Park J at §16), it still remains necessary for a plaintiff to prove that there was a conscious decision to conceal or withhold the relevant information.  The difference between the more limited and wider readings of section 26(1)(b) lies in the mental element of knowledge that the concealed or withheld information is relevant to actual or potential wrongdoing on the part of the defendant.

73. It was Mr Wong’s submission, on behalf of the plaintiff, that the defendant had decided deliberately not to tell the plaintiff about (1) the absence of the Certificates of Exemptions, and (2) the failure of the developer to obtain those certificates despite his application made in 1988.  Mr Wong submitted that it was clear from the evidence of Mr David Wong in cross-examination that he was aware that the contents of the architect’s certificate of completion were inadequate to demonstrate that the Property qualified for exemption under Cap.121.  He also submitted that the view, held by Mr David Wong and Mr Che of the defendant firm, that the cases which decided that Certificates of Exemption were title documents and that, in their absence, there was a real risk of enforcement were wrong, was itself wrong and recklessly held.

74. It was the evidence of Mr David Wong that he believed that the developer was in a position to pass good title to Mr Lee in 1991 despite the absence of the Certificates of Exemption.  It was never put to Mr David Wong in cross-examination that he did not genuinely hold this belief.  In these circumstances, it would be difficult to conclude that Mr David Wong chose deliberately to conceal the absence of the Certificates of Exemption from the plaintiff or was reckless in holding the view he did.  For present purposes, it does not matter whether his view was right or wrong.  The judgment of Recorder E. Chan SC in HCA01620/1998 clearly suggests it was wrong.  But the material question for me is whether Mr David Wong genuinely believed that his view was right.  If so, I do not think it could be said that he deliberately concealed the absence of the Certificates of Exemption from the plaintiff.

75. Mr David Wong’s evidence was that he formed the view that there was no real risk that any enforcement action would be taken under the Buildings Ordinance against a building to which Cap.121 applied which, as built, conformed to all the specifications for exemption under Cap.121 but in respect of which no Certificate of Exemption in respect of building works had been issued.  This view was based on various factors.  It was, he said, commonplace that the DLO would be slow in issuing Certificates of Exemption in the first few years of the operation of Cap.121.  Given that, under the legislative scheme, the DLO was obliged by section 5 to issue the Certificate of Exemption if the building conformed to the specifications for exemption and that a retrospective application could be made under section 4, he considered that an architect’s certificate of completion showing the dimensions of the building as built to be within the specifications for exemption would be satisfactory conveyancing evidence that the building qualified for exemption under Cap.121.  He therefore drafted a proforma architect’s certificate in which the precise dimensions were left blank for the architect to fill in.  This certificate was duly completed and dated 9 June 1990.

76. The fact that the certificate stated that the height of the building was 7.63m was relied on by the plaintiff as showing that the certificate was plainly not adequate to show the Property conformed to the specifications for exemption under Cap.121.  That was because the maximum building height for exemption under the Schedule to Cap.121 was expressed in metric terms as 7.62m.  However, Mr David Wong explained that, at the time he saw the completed certificate, he used his calculator to check that 7.63m was equivalent to 25 feet, which was the old imperial measurement specified in the relevant regulations in the predecessor ordinance to Cap.121 (viz. the Buildings Ordinance (Application to the New Territories) Regulations, Cap.322) and he also noted that the total roofed over area of the two houses which were the subject of the certificate was 89.4 sq.m., which meant that the roofed over area of the house in which the Property was situated (the roof area of each house being shown in the plan to be of equal size) could not have exceeded the statutory maximum of 65.03 sq.m.  Notwithstanding that he may have been wrong in thinking that a certificate stating a height of 7.63m was compliant with the specifications for exemption, I accept Mr David Wong’s evidence that he did think the certificate was sufficient.  I also note that, although it was put to him that the certificate was not in fact adequate to prove the Property conformed to the specifications for exemption, it was not put to him that he did not think it was adequate for that purpose.

77. In addition to the above evidence, there was also evidence from Mr David Wong that, even after the decision of the District Court was handed down on 5 November 1991 (Lo Chun Tak v Chan Foon Tai, DCCJ245/1991) ruling that a Certificate of Exemption was necessary to prove title for buildings in the New Territories, he genuinely continued to hold the view that a Certificate of Exemption was not a necessary title document.  This was supported by Mr David Wong’s unchallenged evidence that, on 30 September 1993, he gave a seminar on New Territories conveyancing at which he expressed the view that Lo Chun Tak’s case was flawed and that the absence of a Certificate of Exemption in respect of building works to which Cap.121 applied should not per se render the title defective if there was sufficient evidence that it in fact complied with the specifications for exemption.  He also stated that no contrary views were expressed by the audience at that seminar.

78. Furthermore, there was evidence that, before November 1991, other solicitors shared Mr David Wong’s views since, even in respect of the development of which the Property formed part, there were a further nine completed sales despite the absence of Certificates of Exemption with nine different solicitors’ firms acting for the purchasers in those transactions.  And from November 1991 to about mid-1997, there were a further eight completed sales in that development despite the absence of Certificates of Exemption with seven different solicitors’ firms acting for the purchasers in those transactions.

79. I therefore accept that Mr David Wong genuinely believed at the time of the completion of the purchase of the Property by the plaintiff that the Certificates of Exemption were not documents necessary to prove a good title to the Property.  I also accept that Mr David Wong continued to hold this belief at all times when he was dealing with the application to the DLO for the retrospective issue of the Certificates of Exemption in respect of the development in question.

80. That there was no intention on the part of Mr David Wong to conceal the fact of the absence of the Certificates of Exemption is also supported, in my opinion, by the terms of the letter dated 25 June 1996 sent by the defendant to the owners of properties in the development.  That letter clearly stated that Certificates of Exemption had not been issued and that an application had been made since about mid-1993 for them.  I accept the submission of Mr Man that, if Mr David Wong had intended deliberately to conceal the fact of the missing certificates, he would not have written in these terms.

81. It was contended on behalf of the plaintiff that the reference in that letter to the application for the Certificates of Exemption being for the purpose of “perfecting title” showed that Mr David Wong must have considered that the Certificates were necessary title documents.  In this regard, I accept Mr David Wong’s evidence that he wrote in these terms in order to cause the DLO to give attention to the application and that this reference did not mean that he then entertained any doubts that the plaintiff’s title to the Property was good.  His explanation, which I accept, was that he made the retrospective application for two reasons: first, in case he was wrong in his view as to title; and secondly, to avoid any difficulties in the future should requisitions be raised in respect of Certificates of Exemption.

82. I therefore conclude that there was no deliberate concealment of a relevant fact by Mr David Wong in respect of the first retainer.  This conclusion means that the plaintiff is unable to rely on section 26(1)(b) of the Ordinance in respect of any causes of action under the first retainer.  It does not, however, preclude reliance by the plaintiff on section 31 of the Ordinance, on the basis that, even though his causes of action in respect of the first retainer accrued on 19 March 1991, he did not have the knowledge required for bringing an action for damages in respect of the relevant damage until a later time.  I shall return to section 31 of the Ordinance below.

83. As to the second retainer, I have found above that there was no concealment of any relevant fact by Mr Che and, accordingly, no question of any deliberate concealment.

Was that fact discovered by the plaintiff before 17 February 1998 or could it with reasonable diligence have been so discovered?

84. As noted above, my finding that there was no deliberate concealment of a relevant fact leads to the conclusion that section 26(1)(b) of the Ordinance does not avail the plaintiff in the present case.  It is therefore not strictly necessary for me to deal with the question of whether Mr Lee discovered the relevant fact before 17 February 1998 or could with reasonable diligence have discovered it.  However, for the sake of completeness, I shall address this question briefly.

85. It was common ground that the fact of the absence of the Certificates of Exemption was not known to the plaintiff at the time of the completion of his purchase of the Property.

86. The earliest time that this fact was made known to the plaintiff was on his receipt of the letter dated 25 June 1996 from the defendant firm to the various owners of properties in the development, including the plaintiff.  It was the defendant’s case that, had the plaintiff read that letter, he would have discovered that : (1) the Certificates of Exemption had not been issued; (2) a retrospective application had been made to the DLO for those Certificates for the purpose of “perfecting title”; and (3) that application was not yet successful.

87. It was Mr Lee’s evidence that he did not understand English and had to rely on a neighbour to explain to him the purpose of the letter.  Although he signed the reply slip to consent to the Property being inspected, he only received a brief explanation from his neighbour of the nature of the contents of the letter.  He said his neighbour explained that the defendant was making some application for documents and that he knew that the documents related to the Property and that someone would be coming to inspect the Property.

88. I accept Mr Lee’s evidence that he did not fully understand the contents of the letter and that his neighbour only gave him a brief explanation of it.  I am also prepared to believe that he would not have been present at any inspection that might or might not have taken place (and there was no evidence as to this) since he would be working during the day.  I therefore find that the plaintiff did not discover the relevant fact of which he was unaware, namely that there were no Certificates of Exemption in respect of his Property. 

89. Even if he had appreciated this fact as a result of reading the letter, I do not consider that he did become aware of the fact that there was an issue as to whether he had good title to the Property because of the absence of the Certificates.  First, the letter does not state that there is anything wrong with the plaintiff’s title to the Property: it merely states that the application for the Certificates was for the purpose of “perfecting title” as opposed to curing a defect in title.  I do not think a layman would necessarily read “perfecting title” as implying that title was defective.  Secondly, had he understood the letter to be informing him that there was something wrong with his title to the Property, I would have expected Mr Lee to raise some form of complaint given that he would have assumed, after the first retainer, that he had a good title to the Property: the reaction of Mr Lee in complaining to the Law Society about the defendant firm when the intended sale of the Property to Mr Ma fell through is some indication that he would not simply have done nothing (as he did) if he fully understood the implications of the letter.  Thirdly, since I have found that Mr David Wong genuinely believed that the plaintiff’s title to the Property was good even without the Certificates of Exemption, it would be strange to read the letter as amounting to a notification of a contrary view and I do not so read it.

90. Having found that Mr Lee did not have actual knowledge of the relevant fact as a result of his receipt of the letter dated 25 June 1996, it falls to consider whether he could, with reasonable diligence, have discovered it.  This is the defendant’s alternative case.

91. I accept that a proper reading of the letter would have informed the reader of it that the Certificates of Exemption had not been issued.  I do not, however, accept that it would follow that a reader of the letter would assume that there was a problem with Mr Lee’s title to the Property in the absence of those Certificates.  As I have observed above, given that Mr David Wong genuinely believed that the plaintiff’s title to the Property was good even without the Certificates of Exemption, the letter does not expressly state there is anything wrong with Mr Lee’s title.  And given Mr David Wong’s belief that the Certificates were not necessary, I do not accept that, had Mr Lee telephoned the defendant, he would have been told that there was any defect in his title.  On the contrary, I consider it more likely that he would have been told that there was no problem with his title and that the retrospective application was simply being made out of an abundance of caution.  Since I think it would have been reasonable for the plaintiff to raise any query as to the meaning of the letter with the defendant firm in the first instance, I do not think any inquiries he might have made would have put him on a course of action that would have led him to discover he had, as a result of possible negligence or breach of duty on the part of the defendant, acquired a defective title to the Property in 1991.

92. I therefore do not find that Mr Lee discovered or ought, with reasonable diligence, to have discovered the relevant fact of which he was unaware by reason of the letter dated 25 June 1996.

93. However, as I have found above, by 16 January 1998 at the latest, Mr Che of the defendant had informed Mr Lee that there were no Certificates of Exemption in respect of the Property and that this was the reason Mr Ma was claiming he was entitled to rescind the sale and purchase agreement in respect of the Property on the basis that good title had not been shown.  As from that time, in my opinion, Mr Lee was in possession of all relevant information to enable him to instruct lawyers to plead the causes of action in respect of the second retainer.  It follows that, to the extent there was any need to do so, the causes of action in respect of the first retainer could also have been pleaded, subject to any issue of limitation (as to which see the discussion of section 31 of the Ordinance below).

94. It was submitted on behalf of the plaintiff that there would be no reason for Mr Lee to appreciate any problem until 18 February 1998 (which is within the six-year period before the issue of the writ in this action) when the writ in HCA1620/1998 was given to him by Mr Che.

95. In the first place, as a matter of fact, there is a telephone attendance note dated 13 February 1998 which records that Mr Che told Mr Lee that the writ had been received, so it is not the case that Mr Lee only found out about the writ on 18 February 1998.  But, more importantly, it must not be forgotten that, for the purposes of section 26(1)(b) of the Ordinance, what the plaintiff needs to know is the facts relevant to his cause of action, not that he has a right of action.  In my view, the submission made on behalf of the plaintiff that the relevant date when Mr Lee discovered the relevant facts of which he was unaware was on or after 18 February 1998 is erroneous because it seeks to equate knowledge of relevant facts (which is material) with knowledge of the existence of a right of action (which is not material).  For this reason, I do not consider that the plaintiff’s reliance on Peco Arts Inc v Hazlitt Gallery [1983] 3 All ER 193 and Baron v Hartford Fire Insurance Co. & Ors [1995] 1 HKC 149 dealing with reasonable diligence in the context of section 26(1)(b) of the Ordinance to be of assistance.  Similarly, I do not find the plaintiff’s reliance on Cottrell v Lock & Ors, CCRTF 96/0874/H, unrep., 4.6.97, a case very different to the present on its facts, supports a conclusion that it was only when Mr Lee gave voice to his dissatisfaction with the defendant firm, in a telephone conversation with Mr Che on 23 February 1998, by disputing his liability for the costs of defending HCA1620/1998 that it could be said he had knowledge of the relevant facts.

96. Finally, I would add, for the sake of completeness, that I do not think the alternative dates of 14 March 1998, when the defendant firm was replaced by Messrs Peter Kimpton Wong & Co. as solicitors for Mr Lee in respect of HCA1620/1998, or 21 February 2000, when Recorder E. Chan SC gave judgment in that action, or 5 August 2003, when the defendant firm wrote to the Director of Legal Aid, are appropriate dates for the accrual of the plaintiff’s causes of action under either the first of second retainers.  For the reasons I have given above, I find that the causes of action in respect of the first retainer accrued on 19 March 1991, subject to postponement by reason of section 31 of the Ordinance (as to which see below) and those in respect of the second retainer accrued on 14 January 1998.

Was there a continuing breach of duty on the part of the defendant firm?

97. This issue is important since the plaintiff contends that, arising out of the first retainer, there was a continuing duty on the part of the defendant to rectify any defect in title on the part of the plaintiff in respect of the Property.  The plaintiff alleges that this duty continued up to 5 March 1998, when the defendant firm no longer acted for Mr Lee in respect of the Property.  Since that date is within six years of the date of the writ in this action, it follows (says the plaintiff) that his claim is not time-barred.

98. The plaintiff relied on the decision of Oliver J (as he then was) in Midland Bank v Hett, Stubbs & Kemp [1979] 1 Ch 384 in support of this continuing duty.  In that case, solicitors had been retained by the claimant in 1961 to effect an option to purchase his father’s farm.  Having drawn up the option, the solicitors failed to register it.  The claimant continued to consult the solicitors over a number of years as to whether he should exercise the option.  In 1967, the father conveyed the farm to his wife, with a view to defeating the option.  The action was commenced in 1972. Oliver J held that the solicitors owed a duty in tort to the claimant and that the damage occurred only in 1967 when the father conveyed the farm to his wife.  Hence, the action was not time-barred.  As regards the cause of action in contract, it was submitted by the solicitors that the duty was to register the option within a reasonable time and that duty was broken once and for all when a reasonable time had elapsed.  On the other hand, the claimant contended that the breach of contract which gave rise to the action was the non-performance of the solicitors’ obligation to register the option before a third-party acquired an interest.

99. Oliver J accepted the claimant’s contention.  At p.435A-C, he held :

“It is, I think, important in the instant case to note that it is not a case of the giving of wrong and negligent advice – where the breach of contract necessarily occurs at a fixed point of time – but of simple non-feasance. If one were to seek to write out in long hand the obligations which Mr. Stubbs senior assumed when he engaged to act in the matter of the grant of the option, they were (1) to draw and have completed a proper and enforceable option agreement which would bind the parties; (2) to take such steps as when necessary and practicable to ensure that it was binding on the land into whosesoever hands it might come before any third party acquired a legal estate; and (3) to carry out his work with the care and skill which a normally competent practitioner would bring to it.

So far as the client is concerned, it is a matter of total indifference to him at what date the solicitor chooses to fulfil his contractual obligation under (2) above so long as it is effectively fulfilled. …”

100. Mr Man submitted that the passage above indicates that these conclusions of Oliver J do not apply to cases of misfeasance, where solicitors are instructed to do a specific act and had done it badly.  Otherwise solicitor’s would, practically in most cases, be deprived of limitation defences.

101. I agree and I also accept Mr Man’s submission that Bell v Peter Brown & Co. [1990] 2 QB 495 provides an illustration of a case in which the court concluded that the relevant relationship of solicitor and client did not give rise to a continuing retainer : see per Nicholls LJ at pp.500G-501C and per Mustill LJ at pp.512G-513B.  In that case, the husband in a matrimonial dispute consulted solicitors in relation to the breakdown of his marriage in 1977.  It was agreed that the husband would convey a jointly owned property into the wife’s sole name on the understanding that he would receive one-sixth of the proceeds of any subsequent sale.  The solicitors failed to execute a trust deed or register a caution against the property and in 1986 the wife sold the property and spent the proceeds.  The husband brought an action against the solicitors for negligence in 1987 and the Court of Appeal held that the husband’s cause of action against the solicitors was time-barred.  Further illustrations of such single breach, rather than continuing breach, cases cited by Mr Man were Morfoot v WF Smith & Co. [2001] Lloyd’s Rep PN 658 (per Judge Havelock-Allan QC at pp.666-667) and Yeung Shu v Alfred Lau & Co & Anor [1996] 1 HKLR 119 (per Keith J (as he then was) at pp.123I-124A).

102. No doubt, as Waller LJ held in Carlton v Fulchers [1997] PNLR 337 (at p.342), the passage I have cited above from Oliver J’s judgment in the Midland Bank case may continue to apply in a case where there is a continuous contractual obligation, such as the obligation to prosecute litigation diligently which may be breached by a want of prosecution by a solicitor.

103. In the present case, I accept the submission of Mr Man, on behalf on the defendant, that the first retainer was an orthodox retainer of the defendant firm as solicitors to complete the purchase of the Property on behalf of the plaintiff as purchaser.  This was a retainer to complete a single discrete transaction and, in my view, there is no reason to impose any continuing duty upon the defendant firm as contended for by the plaintiff.  As the plaintiff accepted in cross-examination, he considered it important that the defendant firm had satisfied itself that the developer had a good title to pass before he paid over the purchase price on the completion of his purchase of the Property on 19 March 1991.  That was the point in time at which, in my opinion, the defendant firm either performed its duties properly or acted negligently or in breach of duty.

104. I would add that I do not consider that the cases of Boyce v Rendells (1983) EG 268 or Castle City Ltd v Choi Yue Development Ltd [1995] 2 HKC 593, which Mr Wong relied upon, are authorities which require me to reach the conclusion that there was a continuing duty on the defendant firm as alleged.

105. For the sake of completeness, I would also add that, even if I considered that there was a continuing duty in the present case, I do not consider that the duty would have continued until 5 March 1998 when the defendant firm no longer acted for the plaintiff in HCA1620/1998.  If and insofar as there was a continuing duty to remedy any defect in the plaintiff’s title to the Property, I would have held that the duty continued only to the point in time at which the plaintiff was unable to complete the sale of the Property to Mr Ma on 14 January 1998 by reason of the absence of the Certificates of Exemption.  Until that date, the fulfilment of the continuing duty might have avoided loss to Mr Lee; after that date, Mr Lee sustained actionable loss by reason of his incurring a liability to Mr Ma arising from his wrongful repudiation of the sale and purchase agreement.

The provisions of section 31 of the Ordinance

106. In respect of his claim arising out of the second retainer, the plaintiff relies, as an alternative to section 26(1)(b), on the provisions of section 31 of the Ordinance, which extends the limitation period for negligence actions where facts relevant to a cause of action are not known at the date of accrual.  Reliance on section 31 is necessarily alternative to section 26(1)(b) since section 26(6) of the Ordinance provides that section 31 shall not apply to any action to which section 26(1)(b) applies.

107. Where section 31 of the Ordinance applies, the period of limitation prescribed by section 4(1) in respect of actions founded on tort does not apply (see section 31(2)).  Instead, the relevant limitation period is the later of either six years from the date on which the cause of action accrued, or three years from the date of knowledge.

108. As to the date of knowledge for the purposes of section 31 of the Ordinance, the section materially provides :

“(1)    This section applies to any action for damages for negligence, …, where the earliest date on which the plaintiff … first had both –

(a)    the knowledge required for bringing an action for damages in respect of the relevant damage; and

(b)    the right to bring such an action,

(referred to in this section as the ‘date of knowledge’) falls after the date on which the cause of action accrued.

…

(5) In subsection (1) ‘the knowledge required for bringing an action for damages in respect of the relevant damage’ means knowledge –

(a)    of such facts about the damage in respect of which damages are claimed as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment;

(b)    that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence;

(c)    of the identity of the defendant; and

(d)    if it is alleged that the act or omission was that of a person other than the defendant, of the identity of that person and the additional facts supporting the bringing of an action against the defendant.

…

(7) For the purposes of this section … a person’s knowledge includes knowledge which he might reasonably have been expected to acquire –

(a)    from facts observable or ascertainable by him; or

(b)    from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek,

but a person shall not be taken by virtue of this subsection … to have knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice.”

109. In respect of his alternative case under section 31 of the Ordinance, the plaintiff contends that it was only on 5 August 2003 that the plaintiff acquired knowledge of the fact that the defendant firm had known, in as early as 1991, about the missing Certificates of Exemption and the need for these documents.  On that basis, assuming section 31 applies, the relevant time limit for a negligence claim by the plaintiff in respect of the second retainer would not have expired until three years from the date of knowledge, i.e. until 5 August 2006, and, since the writ in this action was issued well before that date, it is not time-barred.

110. The date of 5 August 2003 refers to the date of a letter from the defendant firm to the Director of Legal Aid.  This letter was written by the defendant firm in response to a letter from the Director of Legal Aid requesting feedback from the defendant to enable the Director to assess the merits of an application made by Mr Lee for legal aid in respect of intended proceedings against defendant firm for professional negligence in respect of the first retainer.  The date on which the plaintiff learned of when the defendant firm had known about the absence of the Certificates of Exemption is not a relevant fact for the purposes of the plaintiff’s causes of action against the defendant firm arising out of the first retainer.  Instead, the relevant fact is the plaintiff’s knowledge of damage incurred.

111. As Ribeiro PJ held in Kensland Realty v Tai, Tang & Chong at §§73-74 :

“73.   … s.31 is concerned with the plaintiff’s knowledge relating to the damage incurred and not with the defendant’s liability. …

74. Postponement of the limitation period has nothing to do with whether the plaintiff knew that the defendant’s conduct amounted in law to negligence or that he had a good claim against the defendant. …”

And at §97 :

“97.   … the plaintiff’s knowledge is to be treated as sufficient for setting time running from the moment when a reasonable person would have regarded it as certain enough ‘to justify embarking upon the preliminaries to the making of a claim for compensation such as the taking of legal or other advice’. …”

112. In the present case, I have found that the plaintiff was made aware of the absence of the Certificates of Exemption and of the fact that this was being asserted by Mr Ma as the reason why he had not shown a good title to the Property by 16 January 1998 at the latest.  At that date, in my judgment, the plaintiff had a sufficient knowledge that he had sustained damage from the defendant firm’s performance of both the first retainer and the second retainer.  In any event, the judgment of Recorder E. Chan SC in HCA1620/1998 was handed down on 21 February 2000, at which time the plaintiff would have known of the Court’s conclusion that his title to the Property was defective, and that date is more than three years before the date of the issue of the writ in this action.  At that point in time at the latest, in my judgment, Mr Lee’s knowledge was sufficient to set time running for the purposes of section 31 of the Ordinance.  Plainly, Mr Lee’s knowledge at that point in time would have justified embarking on the preliminaries to the making of a claim for compensation against the defendant firm in respect of what by then had been established to be a defective title to the Property.

113. I do not therefore consider that the letter from the defendant firm to the Director of Legal Aid provides a relevant time from which the additional three-year period of limitation under section 31 of the Ordinance would apply, as contended for on behalf of the plaintiff.

Conclusions and costs

114. It follows from my conclusions above, that I would answer the questions posed in the preliminary issues in the affirmative.  In my judgment, the plaintiff’s causes of action in respect of the first retainer and the second retainer have become barred by operation of the Ordinance.

115. This is not a conclusion that I reach lightly because I recognise that this conclusion will mean that Mr Lee will be unable to pursue his claims for compensation against the defendant firm in respect of his acquisition of a defective title to the Property in 1991 and in respect of incorrect advice that he had a good title to the Property on 14 January 1998.  I have not, of course, been concerned in the trial of these preliminary issues with the questions of whether the defendant firm was negligent or in breach of duty in respect of either of these matters and I express no view on those questions.

116. On the other hand, it is right to observe that the failure of the plaintiff to establish a suspension of the limitation period by reason of section 26(1)(b) of the Ordinance (or a sufficient extension to it by reason of section 31 of the Ordinance) does not mean that he has not had the full benefit of the six-year limitation period afforded to him under the Ordinance.  It is not clear why a protective writ was not issued on behalf of the plaintiff against the defendant firm at some point within the six-year period from 14 January 1998 (the date of accrual of the causes of action under the second retainer), nor even within the additional three-year period from 21 February 2000 (the latest date to which I consider, on any view, the limitation periods for the causes of action arising out of the first or second retainers would be extended by operation of section 31 of the Ordinance).  However, it is not the place of this judgment to state any conclusions or offer any opinion as to the reasons why that was not done.

117. There is no reason, in my opinion, why the costs of the trial of these preliminary issues should not follow the event and I therefore make an order nisi that the plaintiff pay the defendant’s costs of the trial of the preliminary issues, to be taxed if not agreed.  I direct that the plaintiff’s own costs should be taxed in accordance with the Legal Aid Regulations.

118. I grant liberty to the parties to apply in respect of any further orders or directions that may be required in the action in the light of my judgment on the preliminary issues.