YUEN YUNG FAI AND ANOTHER v. HUI TIN FOOK, DAVID

HCA 1662/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1662 OF 2008

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BETWEEN

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J U D G M E N T

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Introduction

1.  This is a professional negligence claim.

2.  The plaintiffs, husband and wife, sue their former conveyancing solicitor for (alleged) negligent advices, which led to their parting with the balance purchase price before completion. The sale and purchase, however, fell through, because the vendor was unable to redeem a mortgage over the property despite having pocketed the entire purchase price.

3.  The defence of the solicitor is straightforward – he has never given the alleged advices.

Evidence and factual disputes

4.  The plaintiffs, Mr and Mrs Yuen, had been residing at Flat G, 17^th Floor, Block 4, Hong Sing Garden, 1 Po Lam Road North, Tseung Kwan O, New Territories, Hong Kong, since 2004, as tenants of Ms Tsang Suet Fan, the registered owner and landlady of the property.

5.  On 4 March 2008, Ms Tsang as vendor and the plaintiffs as purchaser signed a provisional agreement for the sale and purchase of the property for $1.3 million. The provisional agreement provided that completion of the sale and purchase shall take place on 10 April 2008; an initial deposit of $50,000 shall be paid upon signing of the provisional agreement; a further deposit of $80,000 shall be paid on or before 14 March 2008 when the formal agreement for sale and purchase was to be signed; and the balance purchase price in the sum of $1.17 million shall be paid upon completion.

6.  On the same day the provisional agreement was signed, Mr Yuen gave Ms Tsang a cheque post-dated to 14 March 2008 for payment of the further deposit.

7.  Ms Tsang was a former client of the defendant, Mr Hui Tin Fook, David, a solicitor who had been practising as a sole proprietor under the name of David Hui & Co (“the firm”), since 1996. Mr Hui was essentially a conveyancing solicitor, and the firm had acted for Ms Tsang in 7 to 8 conveyancing transactions before[1]. Several days before the signing of the provisional agreement, at the introduction of Ms Tsang, Mr Yuen had by telephone contacted Mr Hui, asking for general advice on preparing and signing a provisional agreement for the purchase of the property – he and his wife had reached an oral agreement with Ms Tsang for the sale and purchase of the property towards the end of February 2008.

8.  Although the provisional agreement provided for the signing of a formal agreement for sale and purchase on or before 14 March 2008, it is apparent that neither side really insisted on that date. The draft formal agreement was only supplied by Kelvin Cheung & Co (“Kelvin Cheung”), Ms Tsang’s conveyancing solicitors in the transaction, on 14 March 2008. Although the terms were agreeable to the firm, acting as the plaintiffs’ solicitors in the transaction, Mr Yuen was not available for signing the agreement on 14 March, as he was then working on the Mainland. An appointment was made for the plaintiffs to sign the formal agreement on 25 March 2008.

9.  On 25 March 2008, Mr Yuen and his wife attended the firm’s office and met with Mr Hui for the first time, for the purposes of signing the formal agreement. According to the evidence, Mr Yuen had received education up to Form 5 level. He was 47 at the time. He had been working in an electronics company as an engineer for many years. His monthly salary was $13,000. Mrs Yuen worked as a baby-sitter, earning several thousand dollars per month. Mr Yuen accepted in evidence that he had purchased one property before with the assistance of his siblings, but had since transferred the property to his younger brother. In gist, Mr Yuen claimed that he and his wife had little experience in purchasing properties in Hong Kong, and they relied solely on Mr Hui’s legal advice.

10.  It was in those circumstances, according to Mr Yuen’s evidence, that he and his wife met with Mr Hui for the first time on 25 March 2008. On that occasion, apart from signing the formal agreement, nothing much was done. In particular, according to Mr Yuen, before signing the formal agreement, Mr Hui had only very casually and briefly explained to him the formal agreement. Importantly, Mr Hui did not inform them, as was the case, that the property was mortgaged to Citibank to secure banking facilities made available to Ms Tsang’s company, even though clause 17(a) of the formal agreement and the fifth schedule to the agreement clearly referred to the mortgage. Mr Yuen claimed in evidence that he does not read English. Furthermore, Mr Yuen said in evidence that Mr Hui never explained to him and his wife how an outstanding mortgage could affect payment of the balance purchase price, or how payment of the balance purchase price should be effected in view of the mortgage.

11.  Even more importantly, it is the plaintiffs’ case and Mr Yuen’s evidence in the box that on the following day, he was approached by Ms Tsang over the telephone for an advance part-payment of $1 million of the balance purchase price. Ms Tsang told him that she had cashflow problems with her factory on the Mainland. She claimed that she had already consulted Mr Hui about the proposed advance payment, and Mr Hui had advised her that provided that both sides were agreeable to the making of the advance payment, it could be done. Ms Tsang asked Mr Yuen to contact Mr Hui to confirm the same. Ms Tsang also proposed postponing the completion date to 30 April 2008.

12.  Mr Yuen said in evidence that he had no difficulty with the postponement, as he was already residing in the property. However, he was not sure about the proposed advance payment, and he consulted his friend (a Mr Chan), who had agreed to lend him $1 million to help him to buy the property, about the proposal. The friend advised him to consult his lawyer.

13.  Mr Yuen said in evidence that he therefore rang up Mr Hui in his office and sought advice. According to him, Mr Hui advised him that there was no problem with the proposed advance part-payment, provided that it was done by consent of both sides, and it was properly evidenced in writing.

14.  Trusting completely the advice so given by Mr Hui, Mr Yuen said in evidence, he advanced a sum of $1 million to Ms Tsang on 28 March 2008. At Ms Tsang’s request, the money was paid directly to Ms Tsang’s company, and the parties signed a Chinese document dated 28 March 2008 to record the advance part-payment. For some unexplained reasons, the document, prepared by Ms Tsang, was described in its caption as a “loan agreement” (“信貸協約”). In any event, Mr Yuen testified that he had telephoned Mr Hui to inform him of the payment on the same day.

15.  The case of the defendant is diametrically different from the plaintiffs’. Mr Hui said in evidence that he was aware that the property was subject to a mortgage almost from day one. The mortgage was clearly shown in a land search record which his firm obtained on 6 March 2008. Ms Tsang had also contacted Mr Hui for the introduction of a firm of solicitors to act for her in the discharge of the mortgage, as Kelvin Cheung was not on the approved solicitors’ list of Citibank for the preparation of a discharge. Mr Hui said he eventually introduced to Ms Tsang the firm of Ng, Lie, Lai & Chan, a firm which was on Citibank’s list. In fact, his firm wrote to Ng, Lie, Lai & Chan on behalf of Ms Tsang to make the introduction, and it led, apparently, to the latter firm mistaking Mr Hui’s firm as the firm acting for Ms Tsang in the conveyancing transaction. I will come back to this side matter in due course.

16.  In any event, according to Mr Hui, he was fully aware of the existence of the mortgage, references to which, he noted, were also contained in the formal agreement prepared by Kelvin Cheung.

17.  Importantly, he said that on 25 March 2008, he had clearly explained the terms of the formal agreement to the plaintiffs before asking them to sign it. Amongst other things, he pointed out to them the existence of the mortgage. Mr Hui added in evidence that in fact it was only on 25 March that he was told that Mr Yuen had by a post-dated cheque paid the further deposit of $80,000 to Ms Tsang, even before signing the formal agreement. He advised Mr Yuen that it was not a satisfactory mode of making payment, and all future payments should be done through his firm. Mr Hui said that in the meeting, he told the plaintiffs that completion was to be by way of solicitors’ cheques or cashier’s orders, and payments had to be made through lawyers.

18.  In this regard, Ms Denise Tang, who had been working as Mr Hui’s secretary and in reality, a head conveyancing clerk in his firm, since 1997, gave corroborative evidence. She confirmed that her firm was well aware of the existence of the mortgage, and Mr Hui had spent 20 odd to 30 minutes with the plaintiffs in their meeting of 25 March. Although she did not pay any particular attention to what they said in the meeting[2], her impression was that a substantial part of the meeting was spent on the explanation of the terms of the formal agreement by Mr Hui to the plaintiffs.

19.  Both Mr Hui and Ms Tang denied in the box any knowledge of the advance part-payment of $1 million by Mr Yuen to Ms Tsang on 28 March 2008. All the firm was aware was that the parties had agreed to postpone the completion date to 30 April 2008, which the firm by letter confirmed with Kelvin Cheung.

20.  However, no completion took place on 30 April. This was because several days before the new completion date, Ms Tsang again contacted Mr Yuen and told him for the first time, according to Mr Yuen, that the property was mortgaged to Citibank for “LC” and loan purposes, that she could not redeem the title deeds before 30 April, and that she wanted the plaintiffs to pay her the balance purchase price of $170,000 in early May so that she could redeem the title documents from the bank and complete the transaction. Ms Tsang requested that completion be postponed to 27 May 2008.

21.  Mr Yuen said in evidence that he was agreeable to the further postponement, but was not sure about the proposed payment of $170,000. He sought Mr Hui’s advice over the telephone again. According to him, Mr Hui told him on the telephone that it was normal for businesspeople to mortgage their title documents to banks for loans and “LC” purposes. As for the suggested payment of $170,000, so long as both parties were agreeable to it, Mr Hui (allegedly) advised Mr Yuen, and provided that there was clear documentary proof about the payment, it was all right.

22.  According to Mr Yuen in the box, as he trusted completely Mr Hui’s advice, he duly parted with the further sum of $170,000 to Ms Tsang on 6 May 2008. Hand-written endorsements were added to the bottom part of the Chinese “loan agreement” dated 28 March 2008 to evidence the further payment of $170,000. Mr Yuen informed Mr Hui over the telephone about the payment accordingly.

23.  The evidence given by Mr Hui and Ms Tang is completely different from that given by Mr Yuen. Accordingly to Mr Hui and Ms Tang, the firm was completely ignorant of the further payment of the sum of $170,000. Ms Tang pointed out in evidence that in the conveyancing documents she prepared for the scheduled completion of the transaction on 30 April 2008, there was a draft letter of undertakings in which it was clearly stated that payment of the balance purchase price of $1.17 million was to be effected by split cheques. The precise manner of splitting up the balance payment would have to await Kelvin Cheung’s instructions, as per normal conveyancing practice. That plainly showed, according to Ms Tang, that up to that time, she and her firm were ignorant of the advance part-payment of $1 million.

24.  As mentioned, completion was then postponed to 27 May 2008. On 21 May 2008, the parties agreed to postpone it by 2 days to 29 May 2008. According to Ms Tang, when she contacted Mr Yuen one or two days prior to the postponed completion date of 29 May 2008 in respect of the forthcoming completion, she was told by Mr Yuen over the telephone that he had agreed with Ms Tsang to postpone completion to 28 June 2008. More importantly, Mr Yuen told her for the first time, that he had already made full payment of the balance purchase price to Ms Tsang. Ms Tang described in the box that she was shocked by what she was told, as she was aware that there was still an outstanding mortgage with Citibank for Ms Tsang to discharge. With her experience, she could sense that this was a potentially disastrous situation. According to Ms Tang, she immediately informed Mr Hui of the news, who was as shocked by it as Ms Tang was. The two of them immediately contacted Mr Yuen over the telephone, and in the presence of Ms Tang, Mr Hui told Mr Yuen that what he had done was very risky, and there could be problems with redemption of the mortgage. Mr Hui asked the plaintiffs to attend his office as soon as possible for further advice. Mr Hui also advised Mr Yuen to complete the transaction as soon as possible, but Mr Yuen replied that he had already agreed to postpone completion to 28 June 2008.

25.  Pausing here, it should be added that Mr Yuen insisted in the box throughout that he had had no (known) contact with Ms Tang, whom he had not known. All his contacts with the firm were with Mr Hui. He certainly denied the telephone conversation between him and Ms Tang which has just been described.

26.  In any event, there is no dispute that the plaintiffs did attend Mr Hui’s office on 2 June. According to Mr Yuen, in late May 2008, he enquired with Mr Hui about completion. Mr Hui advised him that more time was required for completion and proposed to him to postpone completion to 28 June 2008. Mr Yuen said he agreed to the proposal. Mr Hui then invited him to attend his office to sign the deed of assignment in advance, and that was why on 2 June 2008 he attended Mr Hui’s office. According to Mr Yuen, Mr Hui reconfirmed at the meeting that there was no problem with the direct payment of the balance purchase price by the plaintiffs to Ms Tsang and that he had prepared a standard letter for them to sign to record the direct payment. Mr Hui also confirmed that there was no problem with the title of the property and he therefore asked the plaintiffs to execute the assignment deed in advance. It should be noted that Ms Tsang was also present at that meeting and she also signed the so-called standard letter to confirm the receipt of the total balance purchase price of $1.17 million.

27.  Mr Hui gave evidence on the meeting of 2 June. He said that at his request and insistence, the plaintiffs came to his office. The purpose of the meeting was many-fold. He wanted to give more detailed advice to the plaintiffs on how risky their position had become by the full payment of the balance purchase price. He also wanted to urge them not to agree to any further postponement but to complete the sale and purchase as soon as possible to minimise the risk. Finally, he also required the plaintiffs to sign a document in favour of his firm – a sort of disclaimer document to protect his firm’s interest in the matter. However, when the plaintiffs arrived, they came together with Ms Tsang, whom Mr Hui had not invited to attend the meeting. He immediately asked Ms Tsang if she would like to consult Kelvin Cheung first, but she said there was no need to do so. Mr Hui said in evidence that he then explained to the plaintiffs that it was risky for them to part with the balance purchase price as there was a risk that the mortgage could not be redeemed and completion could not take place. He said that Ms Tsang then interjected to assure the plaintiffs that there was no risk at all as she would definitely complete the sale and purchase. She repeatedly reassured the plaintiffs that there was going to be no problem, and she offered to co-sign the document which Mr Hui had originally only intended to ask the plaintiffs to sign to protect his firm’s position. That was why, eventually, all three of them signed on a Chinese document dated 2 June 2008. The document was a sort of letter addressed to the firm. It confirmed that at the request of the vendor, the purchasers had agreed to postpone completion to 28 June 2008. Importantly, it further confirmed that the vendor and purchasers had between themselves paid and received the balance purchase price of $1.17 million and there was no need to effect payment through the firm. The document ended by stating that if the parties should have any future dispute regarding the purchase price of the property, it should have nothing to do with the firm.

28.  Mr Hui explained in the box that in the meeting, he urged the parties to complete the transaction as soon as possible, and because Mr Yuen had to spend time on the Mainland quite often, he asked the plaintiffs to sign the assignment deed in advance.

29.  But there was to be no completion. According to Mr Hui, on 26 June, Mr Yuen contacted Ms Tang and told her that Ms Tsang had apparently left or fled Hong Kong. Thereafter, there were contacts between Mr Yuen and Mr Hui in an attempt to work out possible ways to resolve the difficulty, as obviously without discharging the mortgage, there was no chance of completing the sale and purchase (free from the mortgage). At one stage, one Mr Chung, a brother-in-law of Ms Tsang, came into the picture, and actually gave Mr Yuen $300,000. According to Mr Yuen, it was paid to him as a sort of guarantee money that the transaction would be completed, so that Mr Yuen would not report the matter to the police. If the transaction should eventually fall through, Mr Yuen could use the sum in litigation. Mr Hui was not privy to what had been agreed between Mr Yuen and Mr Chung. However, Mr Hui said in evidence that as one of the options, he had mentioned to Mr Yuen reporting the matter to the police. He also said that he had advised Mr Yuen, as another possible alternative, to raise about $400,000 to discharge the outstanding mortgage, so as to complete the sale and purchase. At that time, the outstanding indebtedness under the mortgage was slightly over $700,000, and with Mr Chung’s $300,000, all Mr Yuen needed to do was to raise another $400,000, so as to have the mortgage discharged and transaction completed first. In that event, he could limit his loss to $400,000, and seek recovery of the money from Ms Tsang later.

30.  Mr Yuen said in evidence that he had no resources to raise the money and the transaction could not be completed. According to Mr Yuen, he learned of Ms Tsang’s absconding through Mr Hui over the telephone on 30 June 2008.

31.  To cut a long story short (and many of the things that happened since were evidenced by the correspondence), Mr Yuen and Mr Hui eventually fell out with each other. By July 2008, the plaintiffs had already been receiving advice from another lawyer, and eventually through the help of the lawyer, they wrote a long letter of complaint (in English) to the firm, alleging that Mr Hui had negligently failed to advise them of the risk of making payment of the balance purchase price. That letter of 17 July 2008 crossed with a Chinese letter dated 18 July 2008 to the plaintiffs (which was drafted by Mr Hui himself in the evening of 17 July), in which the firm asserted that it only came to learn about the payment of the balance purchase price of $1.17 million in late May.

32.  Despite the change of solicitors, the transaction could never be completed due to the outstanding mortgage. Eventually the bank commenced proceedings (DCMP 2191/2008) against Ms Tsang under the mortgage and exercised its power of sale after obtaining the necessary court order. The property was sold for $1.15 million on 10 March 2009.

33.  The present action was commenced on 4 September 2008, shortly after the plaintiffs commenced another action against Ms Tsang (HCA 1619/2008) (on 29 August 2008).

34.  Through his new lawyer’s help, Mr Yuen also made a complaint to the Law Society. However, after hearing from the firm, the Law Society took no further action against Mr Hui or his firm. It should be added that Mr Hui has a clear disciplinary record with the Law Society, and has never been sued for professional negligence before.

35.  The above gives a description of the essential evidence and main disputes between the parties. There are details and minor disputes, which will be mentioned if necessary in the paragraphs below. Many of the matters are in fact evidenced by the contemporaneous letters written, which are not in dispute. They will not be repeated here unless strictly necessary.

Crucial factual issues

36.  The main factual issues in the present case relate to whether Mr Yuen had consulted Mr Hui before he made the two part payments of $1 million and $170,000 respectively. Both sides accept that if the alleged advices were really given by Mr Hui to Mr Yuen, it would be a clear case of gross negligence on Mr Hui’s part. The property was clearly subject to an outstanding mortgage. Parting with the balance purchase price in those circumstances was plainly risky. Moreover, at the time of the payment of $1 million, the firm had not even received the title documents to the property. Further, it was still within the one-month period for the registration of any prior encumbrances or agreements for the sale of the property, which if registered within that one-month period, would have defeated the provisional agreement between the plaintiffs and Ms Tsang in terms of priority. For all those reasons, it would be wholly unacceptable for Mr Hui to give the alleged advices.

37.  However, the all-important question is whether Mr Hui did give the alleged advices.

Discussion

38.  Bearing in mind the general warning given by the Court of Final Appeal in the recent case of Tradepowder (Holdings) Ltd (in liq) v Tradepowder (Hong Kong) Ltd [2010] 1 HKC 380, para 140, against undue reliance on the demeanour of witnesses isolated from the inherent probabilities of the case in deciding factual disputes, the Court pays particular attention to the incontrovertible or uncontroverted facts and circumstances, the inherent probabilities and improbabilities as well as the contemporaneous documents, in resolving the crucial factual disputes in the present case.

39.  In this regard, it must be noted that if the plaintiffs’ case is true, Mr Hui must have been grossly negligent in giving the advices. As Mr Raymond Lau for the plaintiffs has observed, unfortunately, cases of gross negligence do occur from time to time. I fully accept that. I further note that in the present case, Mr Lau has expressly and repeatedly disavowed any suggestion, whether expressed or implied, of bad faith on the part of Mr Hui or of collusion between Ms Tsang and Mr Hui. The fact that Ms Tsang was a former client of Mr Hui is therefore neither here nor there in this regard. Mr Lau submitted, however, that the fact that Ms Tsang was the vendor on the other side had had the effect of lowering the care and attention that Mr Hui would otherwise have paid to the transaction in question.

40.  There are many matters that suggest that the plaintiffs’ case is, on balance, less probable.

41.  To start with, Mr Hui was an experienced conveyancer at the time. Ms Tang was also an experienced conveyancing secretary. They knew almost from the outset that the property was mortgaged to Citibank. Absent any suggestion of bad faith, there was no reason for them to hide that fact from the plaintiffs.

42.  Mr Hui testified that in the meeting of 25 March 2008, he had clearly explained to the plaintiffs that there was an outstanding mortgage, and all future payments had to be done through lawyers. Ms Tang confirmed that the meeting had lasted 20 odd to 30 minutes.

43.  I have fully borne in mind the long employment relationship between Mr Hui and Ms Tang in approaching their evidence. But I find nothing exceptional in this part of their evidence.

44.  On the other hand, I am surprised that Mrs Yuen has not given evidence at trial. She was present at the crucial meeting of 25 March 2008 as well as the meeting of 2 June. According to her husband, in the first meeting, there was no mention of the mortgage. The formal agreement was only briefly explained to the couple. According to her husband, in the second meeting of 2 June, Mr Hui still maintained that there was nothing wrong with the plaintiffs’ having made full payment of the balance purchase price to Ms Tsang and title was not a problem. These are obviously crucial matters to establish the plaintiffs’ case. Yet, no explanation whatsoever has been offered for Mrs Yuen’s not giving evidence at trial.

45.  The alleged negligence of Mr Hui, in relation to the first payment of $1 million, was so gross that it begs the very question of whether he did give the advice at all. Absent any suggestion of bad faith, Mr Lau could only submit that Mr Hui must have momentarily forgotten about the transaction altogether and that was why he gave the grossly negligent advice to Mr Yuen over the telephone on 26 March.

46.  Mr Lau submitted that this was the most probable explanation for Mr Hui’s negligent advice.

47.  I do not find this suggestion probable at all. Mr Hui had just met the couple the day before for the signing of the formal agreement. Memory of details of the transaction must still have been fresh in his mind on 26 March when allegedly he was contacted by Mr Yuen. In any event, the only detail relevant in the circumstances of the case was the fact that the property was subject to an outstanding mortgage. In relation to that, it should also be remembered that it was Mr Hui who introduced Ms Tsang to Ng, Lie, Lai & Chan to act as Ms Tsang’s solicitors for the discharge of the mortgage. In any event, even if one were to assume that Mr Hui had totally forgotten all that, and he had thought that the property was free from mortgage, it would still be quite improbable, given Mr Hui’s general experience in conveyancing matters, that he would have given the alleged advice. The hard fact remains that at that time, title documents had not even been received, and the one-month registration period had still not lapsed. Moreover, it is simply improbable for a conveyancing solicitor to give general advice to his purchaser client to the effect that he may safely part with a substantial portion of the balance purchase price as he pleases two weeks before the scheduled completion date. Furthermore, in the present case, payment was effected privately between the parties, without the involvement of lawyers. It was not, for instance, evidenced by a confirmation letter written by the firm to Kelvin Cheung. By comparison, the further deposit directly paid by Mr Yuen to Ms Tsang contrary to the provisions in the provisional agreement and the formal agreement, was duly confirmed by a letter written by Ms Tang on behalf of the firm to Kelvin Cheung, once the firm learned about it on 25 March 2008. It also contrasts sharply with how the repeated postponements were handled in the correspondence between the solicitors. Every time the clients agreed on a new completion date, a letter would be sent by one side to the other to confirm the same. Nor, quite significantly, were the plaintiffs required by Mr Hui to sign in favour of his firm a disclaimer letter like the Chinese letter of 2 June 2008, despite the substantial amount involved (until more than two months afterwards).

48.  Ms Tang’s evidence corroborates Mr Hui’s version of the events. In particular, as mentioned, the draft letter of undertakings prepared by her on 24 April 2008 is a clear contemporaneous document to evidence that as at that time, she was totally unaware of the advance part-payment of $1 million. Of course, there is, strictly speaking, a distinction between her knowledge and that of Mr Hui’s. After all, it was Mr Hui who had allegedly given the grossly negligent advice on 26 March. However, if Mr Hui had really given the advice, and if he had really been informed by Mr Yuen subsequently that payment had been made accordingly, there was no reason why he would have kept that fact from Ms Tang, his head conveyancing secretary/clerk, who was responsible for preparing routine conveyancing letters and documents.

49.  Mr Lau submitted that it is equally improbable for Mr Yuen to have parted with $1 million without first seeking and obtaining advice from his lawyer. I accept the force of this argument so far as it goes.

50.  However, it must be viewed in context. To start with, irrespective of whether negligent advices had been given by Mr Hui as alleged, the entire transaction between the plaintiffs and Ms Tsang could hardly be described as a straightforward one. There were repeated postponements of the completion date (completion was postponed five times during the time when the firm represented the plaintiffs). The further deposit of $80,000, which was only payable upon signing the formal agreement, was paid in advance by a post-dated cheque. Importantly, it was paid by Mr Yuen to Ms Tsang without first consulting Mr Hui, even though by that time, the two gentlemen had already spoken with each other over the telephone and preliminary advice had already been sought and obtained regarding the entering into of the provisional agreement. Furthermore, leaving aside the alleged negligent advices, the fact remains that Mr Yuen was prepared to make an advance part-payment of $1 million to the vendor, two weeks before the original completion date and, in fact, more than a month before the postponed completion date. As Mr C W Ling submitted for the defendant, there was certain illogicality between the twin facts of accelerated payment and postponement of completion.

51.  Further, both the provisional agreement and the so-called “loan agreement” were homemade documents signed by Ms Tsang and Mr Yuen, without the direct involvement of lawyers. On his own case, Mr Yuen did not fax or otherwise send a copy of the so-called “loan agreement” of 28 March to the firm.

52.  As for the repeated postponements, again Mr Yuen was prepared to agree to them directly with Ms Tsang, without any prior consultation with Mr Hui, although absent any special agreement, the postponements would put him in a disadvantaged position – because he would still have to pay rent prior to completion, not to mention the fact that he had also agreed, at the same time, to accelerate the payment of the balance purchase price. There was no consultation with Mr Hui regarding his legal position on the requested postponements.

53.  All this casts doubts on Mr Yuen’s assertion in the box that he completely trusted and relied on Mr Hui for his advice, as he was inexperienced in conveyancing matters. Rather, the facts suggest that he had an independent mind of his own, and was prone to making private oral agreements with Ms Tsang, overriding the strict legal positions set out in the provisional agreement and in the formal agreement.

54.  The Court bears in mind that given the incomes of Mr Yuen and his wife, the amounts involved in the transaction were very substantial. It lends credence to their case that without legal advice, they would not have been prepared to part with the entire balance purchase price in the manner they did.

55.  However, from any perspective, Mr Yuen was and is a mature person and had had some experience in property transactions. He claimed that he knew next to nothing about mortgage and title, and the risk involved in making the part-payments that he did. Even if one were to accept what he said as true, the undeniable fact is that he was surrounded by his wife, who chose not to give evidence at trial, as well as his friend Mr Chan who was prepared to lend $1 million to him to help him buy the property, his boss who was prepared to make him a “gift” of $300,000 for the purchase, as well as his family members, who had helped him in relation to the earlier transaction.

56.  It is not for the Court to speculate what has happened between Mr Yuen and these individuals, or what has actually gone between Mr Yuen and Ms Tsang. Of course, Ms Tsang has apparently absconded and she was not available to give evidence at trial. That makes the case of the plaintiffs more difficult. However, it does not detract from the fact that in terms of probabilities and improbabilities, the plaintiffs’ case is not free from doubts.

57.  Absent any allegation of bad faith or collusion against Mr Hui, the attempts by the plaintiffs to gain some mileage out of the fact that at some stage, Ng, Lie, Lai & Chan mistook the firm as the solicitors acting for Ms Tsang in the conveyancing transaction, and sent to the firm the title deeds accordingly, are completely futile. Likewise, nothing can be gained by labouring on why Ms Tsang would turn up at the meeting of 2 June 2008 and co-sign the Chinese letter on that day.

58.  If, as Mr Lau has tried hard to suggest, the giving of the grossly negligent advice by Mr Hui on 26 March in relation to the first payment of $1 million was due to a momentary lapse of memory about details of the transaction, it would be the most improbable co-incidence for Mr Hui to suffer from the same momentary lapse of memory again in late April in relation to the alleged negligent advice he gave to Mr Yuen regarding the payment of $170,000. In fact, the suggested explanation for the grossly negligent advice given on that occasion cannot hold water on the facts. This is because on Mr Yuen’s own case, he had by then learnt from Ms Tsang that the property was subject to a mortgage and because of cashflow problems, Ms Tsang was unable to discharge the mortgage in time for completion. That was why she asked Mr Yuen to pay the remaining balance of $170,000 to her in advance so as to enable her to redeem the title deeds in early May to complete the transaction. Allegedly, he repeated all that to Mr Hui and asked for his advice. Assuming that all this was true, the first surprising thing is that Mr Yuen was still prepared to go along with the suggestion of Ms Tsang to consider making the further payment of $170,000 to her, in light of her admitted difficulties in discharging the mortgage. If he had really telephoned Mr Hui immediately after his telephone conversation with Ms Tsang, one would have expected him to query the wisdom of the advice Mr Hui had given to him on the previous occasion about the $1 million. After all, common sense would have told Mr Yuen that his position had become a potentially risky one given Ms Tsang’s admitted cashflow problems and inability to redeem the title documents for completion. Yet none of all this, according to Mr Yuen’s evidence, took place. Instead, he called Mr Hui to seek advice on whether he could still make a further payment of $170,000 in favour of Ms Tsang, despite her admitted difficulty in redeeming the title deeds. Equally if not more surprisingly, the advice he obtained from Mr Hui was that it was all right to do so, as business people very often mortgaged their properties for facilities. As a general statement, that is true; but in the given context, it would not have eased the mind of anybody exercising any common sense in the matter, regarding the ability of Ms Tsang to redeem the mortgage, the risk the purchasers had already been put to, and the additional risk that the purchasers would be assuming if the remaining balance payment was to be paid.

59.  In terms of inherent probabilities and improbabilities, I find this part of Mr Yuen’s evidence most troubling.

60.  Again, Mr Lau made the same point that if Mr Yuen had not received positive advice from Mr Hui as alleged, he would not, as a layman, have been prepared to part with the last sum of $170,000. I would not repeat what I have already said about this line of argument.

61.  All I would add, in this regard, is the evidence given by Ms Tang on her reaction when she learned, towards late May 2008, in preparation for the completion of the transaction on 29 May, that the plaintiffs had already fully paid the purchase price. Insofar as demeanour is material, I find Ms Tang’s evidence in this regard to be most credible. She described to the Court her shock reaction when she learned of the full payment over the telephone. She also described to the Court how her boss (Mr Hui) was equally shocked by the news, and they immediately contacted Mr Yuen about the direct full payment. Her evidence tied in well with the Chinese letter of 2 June, which came into being several days after Mr Hui learned of the full payment. It also sat well with what was asserted in the firm’s letter of 18 July 2008 which set out its version of the events. That letter was written, as I have said, before Mr Hui received any allegations of negligent advice. The plaintiffs’ long complaint letter in English, obviously written on their behalf by their new lawyer, and dated 17 July 2008, actually crossed with the firm’s letter of 18 July.

62.  For similar reasons, I find Mr Hui’s evidence on what happened on 2 June 2008 and the purposes of the meeting to be more probable than that given by Mr Yuen about the same. Mr Yuen testified that even in that meeting, Mr Hui was still maintaining that there was no problem whatsoever with the direct full payment that had been made and title was all right. AllegedlyMr Hui also advised the plaintiffs that the Chinese letter signed by the plaintiffs and Ms Tsang was merely a standard letter.

63.  I find that this last assertion flies in the face of the Chinese letter. Regardless of its effectiveness at law to exempt the firm from liability, quite plainly, the intention of the letter was to put on record that the firm had nothing to do with the private and direct, full payment of the balance purchase price between the purchasers and vendor, and that any subsequent disputes arising out of it would have nothing to do with the firm. The letter was written in Chinese, and anyone reading the letter would have some difficulty in squaring its contents with the alleged advices that Mr Hui is supposed to have given to Mr Yuen prior to the two payments. Mr Yuen’s evidence that postponing completion to 28 June 2008 was Mr Hui’s idea was also inconsistent with what the Chinese letter said.

64.  With the benefit of hindsight, the Chinese letter of 2 June could have been worded more specifically to exempt the firm from liability. However, that is not the issue here. The significance of that letter lies in that it was clearly an attempt on the part of Mr Hui to ensure that his firm would not be subsequently held responsible for what the parties had done privately between themselves. That was made very clear in the letter of 18 July which Mr Hui wrote to Mr Yuen after learning that Mr Yuen was going to instruct another firm of solicitors in replacement of his firm in the conveyancing transaction. That letter was a contemporaneous letter which set out the firm’s version of the events very clearly. I have not forgotten that the plaintiffs have also written (with their new lawyer’s help) a long letter of complaint to the firm on the previous day, which crossed with the letter of 18 July. I have also borne in mind the inherent probabilities and improbabilities of the plaintiffs’ making false allegations against Mr Hui.

65.  I accept that valid criticisms can be made against Mr Hui’s and his firm’s practice as conveyancing solicitors, for instance, in terms of the keeping of attendance notes, or in terms of the firm’s handling of Ng, Lie, Lai & Chan’s misunderstanding that it was acting for Ms Tsang in the conveyancing transaction. Mr Hui may have taken a very robust approach to his practice. However, that is far from saying that he is incompetent, careless or negligent in relation to his practice. Rather, the Court’s impression is that Mr Hui is (and was at the material time) an experienced conveyancer and he knows his trade very well.

66.  I have taken into account the discrepancies between the witnesses’ evidence and their respective witness statements in assessing their evidence.

67.  Lastly, in terms of credibility, as I have mentioned, I have been most impressed by the evidence of Ms Tang. She has struck me as a credible witness. As for Mr Hui, he has also performed well in the box. Mr Yuen’s performance as a witness was also satisfactory. To the extent that reliance may be placed on the demeanour of the witnesses, I have given it the weight it deserves. However, the case must be decided upon a consideration of the entire circumstances, including, in particular, the inherent probabilities involved.

Conclusion on facts and liability

68.  Having considered the entire circumstances as a whole, I am unable to accept the version of events put forward by Mr Yuen, insofar as it differs from that testified to by Mr Hui and Ms Tang. I prefer their evidence to that of Mr Yuen. In other words, the plaintiffs have failed to prove their case on the balance of probabilities. Their claim against the defendant must fail for that reason.

Quantum and mitigation

69.  That being the case, I can be brief with the arguments on quantum and mitigation.

70.  I accept that if the plaintiffs had been successful on the facts and liability, they would have been entitled to claim damages for breach of contract and negligence. Plainly, the loss would include the sums of $1 million and $170,000. However, prima facie, credit would have to be given for the surplus proceeds of sale which were payable by Citibank to Ms Tsang upon the bank’s exercise of its power of sale. It is common ground that apart from the mortgage, there were no other encumbrances. Furthermore, according to the relevant court order dated 2 October 2008, the judgment debt due to the bank was $792,699.23 plus interest. Costs payable to the bank were assessed at $19,200. The property was sold by the bank on 10 March 2009 for $1.15 million. In those circumstances, there should be some surplus money left. If the plaintiffs had given notice to Citibank of their interest in the sale proceeds (under a purchaser’s lien), the bank would have been bound to pay over the surplus money to them, instead of to the vendor. However, no such notice was given, and in the action between the plaintiffs and Ms Tsang (HCA 1619/2008), no purchaser’s lien was claimed. Nor was the writ in that action registered in the Land Registry. Due to Ms Tsang’s failure to comply with an unless order, leave to enter judgment was granted by the court on 21 July 2009. However, the actual judgment was only drawn up and sealed on 5 February 2010. Yet the above matters have not been properly pleaded against the plaintiffs, and there has not been any application to amend. In those circumstances, I would not hold the surplus proceeds against the plaintiffs.

71.  As regards the $300,000 given by Mr Chung to the plaintiffs, I do not accept Mr Lau’s argument that credit should not be given for that sum on the ground that on the unchallenged evidence of Mr Yuen, that sum is only meant to be a loan; it is to be repaid to Mr Chung after Mr Yuen has obtained compensation for his loss. Either the plaintiffs are unable to recover compensation for their loss in which case they will keep the $300,000, or they are able to do so in which event they will have to return the $300,000 to Mr Chung precisely because they will have received compensation (of not less than $300,000) for their loss. In either case, they will have to give credit for $300,000.

72.  As regards the suggestion that the plaintiffs could have redeemed the mortgage (given that at the material time, Mr Yuen had received $300,000 from Mr Chung and the outstanding mortgage amount was only about $700,000), I accept on the evidence that the plaintiffs had no further means to finance the discharge of the mortgage. It has been vaguely suggested that he could have taken out a mortgage over the property. However, the evidence is very scanty on this point, and there simply is insufficient evidence for the Court to conclude that the plaintiffs could and should have reasonably taken out a mortgage or taken some other steps to raise the money required to redeem the mortgage.

73.  As regards enforcing the judgment obtained against Ms Tsang in HCA 1619/2008, on the evidence, Ms Tsang has simply disappeared, and I am not satisfied that the plaintiffs have failed to take reasonably practicable steps to enforce the judgment against Ms Tsang. For instance, there is no suggestion that Ms Tsang still has any fixed assets of any meaningful net value in Hong Kong available for execution.

74.  For those reasons, if I had been with the plaintiffs on liability, they would have been entitled to damages in the sum of $870,000 ($1.17 million less $300,000).

75.  The plaintiffs also claim the costs of HCA 1619/2008 in the untaxed sum of $212,500. I have great reservation about the amount. For instance, a 13-page witness statement in Chinese of Mr Yuen in that action was charged for $40,000. Ten hours are said to have been expended on the witness statement. Yet many hours are also said to have been spent on conferences and telephone discussion with Mr Yuen. Apparently, there must have been some overlap in the time spent. Moreover, a substantial part of that witness statement, dated 14 February 2009, is identical or similar in contents to the witness statement of Mr Yuen in the present action, which is dated 4 February 2009. Whilst that is not surprising, given the similar facts involved, I doubt very much whether the time and costs for preparing the witness statement in HCA 1619/2008 have been adjusted accordingly to avoid any double counting. Very little submission has been made on the amount claimed. Having gone through the very thin court file of documents in HCA 1619/2008, I take the view that even on a solicitor and own client basis, total costs should not exceed $140,000.

76.  A third sum claimed by the plaintiffs represents the abortive conveyancing costs (in the sum of $13,217) paid by the plaintiffs to the replacement firm of solicitors. Mr Ling has chosen not to make submission in relation to the same. On principle, the same should be recoverable in full.

77.  Those are my findings on quantum (and mitigation).

78.  However, given my views on the facts and on the question of liability, they are academic.

Outcome

79.  In conclusion, I order that the action be dismissed.

80.  I make an order nisi that the costs of the action, including all costs previously reserved, be paid by the plaintiffs to the defendant, to be taxed if not agreed. I further order legal aid taxation of the plaintiffs’ own costs. Any application to vary the costs order nisi will be dealt with on written submissions.