HANG SENG FINANCE LTD. v. CHAN KWOK YIM AND OTHERS

HCA 995, 996, 997, 998, 999, 1000/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 995, 996, 997, 998, 999, 1000 OF 2000

____________

____________

__________________________________

R E A S O N S F O R D E C I S I O N

__________________________________

Background

1. This is an appeal from Master C.B. Chan's decision in grating summary judgment in favour of the Plaintiff against the 2nd Defendant in all 6 actions. The issues in these actions are identical. The only reason why there are altogether 6 actions is that there were 6 properties involved.

2. By these actions, the Plaintiff, a bank, sued the Defendants, all partners of a firm of solicitors ("the Firm") for breach of duty in contract and in tort. The Firm ceased to practise in November 1998 after the causes of action had arisen.

3. The Plaintiff did not take advantage of the provisions of Order 81 of the Rules of The High Court but proceeded against the Defendants individually. This the Plaintiff was entitled to do under section 5 of the Civil Liability (Contribution) Ordinance, Cap. 377. However, if Order 81 was properly utilised, there would have been a judgment against the Firm and these proceedings would have been rendered unnecessary.

4. On 5th December 2000, Master De Souza granted summary judgment against the 1st Defendant. Damages were ordered to be assessed. The 1st Defendant's appeal against that judgment was dismissed by consent.

Liability Of Co-Partner

5. That being the case, the only issue appears to be whether the 2nd Defendant should also be liable for the wrongful act of the 1st Defendant. I say this because it is trite law that the liability of partners in this respect is joint and several.

6. Section 7 of the Partnership Ordinance, Cap. 38 ("the Ordinance") provides:-

"Every partner is an agent of the firm and his other partners for the purpose of the business of the partnership, and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners ......"

7. Section 11 of the Ordinance provides:-

"Every partner in a firm is liable jointly with the other partners for all debts and obligations of the Firm incurred while he is a partner ....."

8. Section 12 of the Ordinance says:-

"Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the firm or with the authority of his co-partners, loss or injury is caused to any person not being a partner in the firm, ...... the firm is liable therefor to the same extent as the partner so acting or omitting to act."

9. Finally, section 14 of the Ordinance also provides:-

"Every partner is liable jointly with his co-partners and also severally for everything for which the firm while he is a partner therein becomes liable under section 12 or 13."

10. Thus, while the partners of a firm are jointly liable for the firm's debts and obligations, they are jointly and severally liable for the wrongful act of any partner acting in the ordinary course of the business of the firm. This liability is not a primary liability of the partner not directly at fault but a "secondary liability as the liability of one person for the act of another who is acting in the course of his employment or as agent for him ....... it equates the position of a partner in those respects with that of an employer or a principal." See Meekins v Henson [1964] 1 QB 472, per Winn J. at p. 477.

11. Here, the liability of the 1st Defendant has been established by a final judgment of this Court. That liability arose from conveyancing work which he did in the ordinary course of business of the Firm. It follows that the 2nd Defendant must be vicariously liable for the same liability on the basis that he was a partner of the Firm at the time unless he could show that the 1st Defendant in fact had no authority to act in the name of the Firm and the Plaintiff knew that he had no such authority. There is no suggestion on the evidence that that was the case.

12. Indeed, the 2nd Defendant admitted on affidavit that:-

"[The 1st Defendant] conducted and/or had responsibility for all the conveyancing matters in which [the Firm] were instructed to act. [The 3rd Defendant] and I conducted and were responsible for all the litigation matters in which [the Firm] were instructed to act. I also conducted some company and commercial matters on behalf of [the Firm]."

13. What was agreed amongst the Defendants was therefore a division of labour as regards the Firm's work. It follows that in agreeing to act for the Plaintiff in the conveyancing work in question, the 1st Defendant was acting in the ordinary course of business of the Firm with the full consent and authority of the other Defendants.

14. Not surprisingly, Mr Au-Yeung, on behalf of the 2nd Defendant, did not seek to defend this action on the ground that the wrongful act of the 1st Defendant was not binding on the Firm. Instead, Mr Au-Yeung took only two pleading points.

Consideration

15. First, Mr Au-Yeung sought to argue that the Plaintiff's claim as pleaded was defective in that no consideration had been pleaded. This is a bad point. The Plaintiff pleaded in paragraph 8 the retainer given to the Firm. There was obviously consideration in that the Plaintiff had agreed to retain the Firm and the Firm had agreed to act as the Plaintiff's solicitors to prepare the mortgage in question. Such mutual promise is sufficient consideration for the enforcement of a contract; see: Chitty, 28th edn., vol. 1, para.3.011. In any event, it was plainly an implied term that as solicitors acting on behalf of the Plaintiff, the Firm was entitled to fees to be paid by the Plaintiff.

16. It is also significant to note that the retainer was in fact admitted. In paragraph 11 of the Defendants' joint Defence, the Defendants admitted that:-

(a) the 1st Defendant had the conduct of the Firm's retainer;

(b) the Plaintiff had sent a letter dated 23rd October 1997 to the Firm setting out the terms of the retainer;

(c) the terms of that letter were to the effect that the Firm were to prepare a first legal charge/mortgage in favour of the Plaintiff upon satisfactory title investigation; and

(d) after the Firm received the said letter, the 1st Defendant purported to act for the Plaintiff.

17. Such a retainer is not unknown to the law and I have no difficulty in rejecting the 2nd Defendant's first argument.

Loss

18. Mr Au-Yeung's second point is that no loss had been alleged and thus the cause of action in negligence was not complete. The main prank of his argument was based on paragraph 20 of the Amended Statement of Claim which reads:-

"By a letter dated 15th January 1999, ....... the solicitors acting for [the first mortgagee] advised [the solicitors of the Plaintiff] that [the first mortgagee] was not optimistic that there would be any surplus available to the Plaintiff after realization of the security under the [first mortgage]."

19. Mr Au-Yeung, of course, is right in saying that whether the first mortgagee was optimistic about there being surplus or not was neither here nor there. A pleading should only contain material facts and not opinion unless the holding of that opinion itself is a material fact. Paragraph 20 perhaps should never have been pleaded in the first place and if that was the only paragraph alleging loss and damage then Mr. Au-Yeung might have a good ground of complaint. But that is not the case.

20. I am satisfied that the Amended Statement of Claim as a whole does disclose a sufficient plea of loss and damage. There is, first of all, a plea under paragraph 9 of the Amended Statement of Claim that it was an express term of the retainer that the Defendants were required to ascertain that vacant possession of the mortgaged property was to be delivered up upon the execution of the legal charge/mortgage. This was admitted in paragraph 12 of the Defence.

21. There is then the claim that the Defendants had failed and still fail to ascertain that vacant possession of the mortgaged property was to be delivered up upon execution of the legal charge/mortgage.

22. There is also the plea that by reason of the Defendants' negligence, there were title defects to the mortgaged property and/or the mortgage was not effective as a first legal charge/mortgage in that there was a prior mortgage which the Defendants failed to obtain a discharge or release.

23. There is the plea that the purchaser had defaulted in the repayment of the mortgage loan and a judgment obtained against the purchaser had remained wholly unsatisfied.

24. There is then the plea that by reason of the matters aforesaid and in particular the loss of the mortgage as an effective security, the Plaintiff had suffered loss and damage.

25. Furthermore, the facts alleged in these allegations were all set out in paragraphs 1 to 20 of the skeleton submissions of the Plaintiff which Mr Au-Yeung expressly agreed and admitted.

26. In any event, the Plaintiff is suing both in tort and in contract. In fact, the Firm's duties in both were coterminous; see: Midland Bank Trust Co. Ltd v Hett, Stubbs & Kemp [1979] Ch. 384. It follows that even if Mr. Au-Yeung's argument were right, there was no answer to the contract claim.

Appeal Dismissed

27. In these circumstances, I cannot see any merit in the 2nd Defendant's appeal at all. The appeal is thus dismissed with costs.