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HCA 1511/2020
[2026] HKCFI 122
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 1511 OF 2020
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| BETWEEN |
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TAM YUK CHING |
1st Plaintiff |
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TAKE POINT INVESTMENT HOLDINGS LIMITED (得邦投資控股有限公司) |
2nd Plaintiff |
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BLISSFUL VOICE LIMITED |
3rd Plaintiff |
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and |
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HOOSENALLY & NEO (a firm) |
1st Defendant |
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WONG & POON SOLICITORS (a firm) |
2nd Defendant |
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(discontinued) |
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| Before: |
Deputy High Court Judge Gary CC Lam in Court |
| Dates of Hearing: |
12, 13 and 24 November 2025 |
| Date of Judgment: |
6 January 2026 |
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J U D G M E N T
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I. INTRODUCTION
1.This is a trial of the Plaintiffs’ action against the 1st Defendant (“HN”). The dispute between the Plaintiffs and the 2nd Defendant has been settled before the trial commenced.
II. BACKGROUND
2.The 1st Plaintiff (“Madam Tam”) is a lay person with no legal training. She formed various corporate vehicles including the 2nd Plaintiff (“Take Point”) and the 3rd Plaintiff (“Blissful Voice”). Her husband is Ho Kang Wing (“Mr Ho”). The 2nd Plaintiff’s claim was limited to claim against the 2nd Defendant, which has been discontinued. So, in the trial, the focus is on the claim of Madam Tam and Blissful Voice against HN.
3.Take Point was formed for acquiring a shop known as Shop No. C68, 1/F Commercial Development of Locwood Court, Kingswood Villas, No. 1 Tin Wu Road, Tin Shui Wai, Yuen Long, Hong Kong (the “KV Property”) in 2014.
4.Blissful Voice was formed for acquiring Flats A and B, 9/F, Ka Ming Court, Nos. 688-690 Castle Peak Road, Kowloon, Hong Kong (the “KM Properties”) under the sale and purchase agreement dated 23 December 2014. From 22 December 2014 to 17 March 2015, Madam Tam held 85% of the shareholding and Ngai Lok Kei (“Mr Ngai”) held the remaining 15%. They both were directors. After 17 March 2015, Mr Ngai ceased to be a shareholder and a director, leaving Madam Tam the sole shareholder and director of Blissful Voice. Blissful Voice was to acquire the KM Properties by acquiring the issued shares and loans (the “Shares and Loans”) of and in the two companies known as Manysense Limited (“Manysense”) and Uniline Trading Limited (“Uniline”) which were the registered owners of the KM Properties. It was the first time Madam Tam (and her companies) had ever acquired property by way of acquiring shares and loans of a company.
5.At the material times, Mr Ngai had at least two estate agencies, one being Wealth Trustful Property Agency Limited (“WT Agency”) and the other being Grand Vision Property Limited (“Grand Vision”). Prior to the sale and purchase of the KM Properties, he had introduced a number of other properties to Madam Tam.
6.HN is a solicitors firm. It had a few roles.
(1) It acted for Cheerful Joy Investments Limited (“Cheerful Joy”) to purchase the KV Property from its registered owners, namely, Law Oi Ying and Chi Wing (collectively, the “KV Registered Owners”) and then to sub-sell it to Take Point.
(2) It acted for Hailey Ventures Limited (“Hailey”) to purchase the Shares and Loans from the registered owner Finewick International Limited (“Finewick”) and then sub-sell it to Blissful Voice.
(3) It acted for Madam Tam in her purchase of the Shares and Loans from Hailey via Blissful Voice.
7.The 2nd Defendant (“Wong Poon”) is also a solicitors firm. It acted for Madam Tam in relation to her purchaser of the KV Property from Cheerful Joy via Take Point. It was subsequently replaced by Messrs Lau, Chan & Ko (“LCK”) in early February 2015, and LCK was replaced by Messrs Kok & Ha (“KH”) since March 2015.
8.The sale and purchase transactions related to the KV Property and the KM Properties were not the first time the 1st and 2nd Defendants (collectively, the “Defendants”) had acted for Madam Tam. Prior to the transactions, the Defendants had already acted as legal representatives for Madam Tam’s corporate vehicles in a number of other property transactions introduced by Mr Ngai to Madam Tam. For HN, the first of such transactions took place in early 2013, and for Wong Poon, the first took place in November 2012.
9.The sale and purchase transactions related to the KV Property and the KM Properties were the subject matters in HCA 1289 of 2015 (the “Take Point Action”) and HCA 2759 of 2015 (the “Blissful Voice Action”) (collectively, the “Previous Actions”). Take Point, Madam Tam and Mr Ho commenced the Take Point Action, and Blissful Voice, Madam Tam and Mr Ho commenced the Blissful Voice Action. On 22 July 2020, the trial of the Previous Actions took place together before Coleman J in the absence of the defendants therein, and on 31 July 2020, his Lordship handed down the Judgment (the “Judgment”).
10.As an overview of Judgment, his Lordship found that:-
(1) Mr Ngai and his estate agency, WT Agency made fraudulent misrepresentations in relation to the Properties;
(2) WT Agency had breached its common law, contractual, statutory and fiduciary duties towards the plaintiffs therein;
(3) All the defendants therein including Mr Ngai, his other estate agency Grand Vision and Poon Lai Shan (“Madam Poon”) but excluding WT Agency dishonestly assisted WT’s Agency’s breach of fiduciary duty; and
(4) All the defendants conspired to defraud the plaintiffs.
11.In relation to the KV Property transaction, Mr Ngai and WT Agency’s fraudulent misrepresentations were made in the following circumstances:-
(1) In or about early October 2014, Mr Ngai approached Madam Tam and Mr Ho, representing to them that KV Property were two units, and the vendor’s asking price was HK$32,000,000 for both and that a nearby shop had made a competitive bid for the KV Property at HK$28,000,000 for both; and
(2) The market value was actually nowhere near HK$32,000,000 as represented by Mr Ngai.
12.As to how the KV Property transaction took place, according to the Plaintiffs:-
(1) Without Madam Tam and Mr Ho’s knowledge, Mr Ngai procured Cheerful Joy to enter into a provisional sale and purchase agreement with KV Registered Owners to purchase the KV Property (the “KV Principal Sale PSPA”) for HK$19,000,000, with Grand Vision as the estate agent to the KV Principal Sale PSPA;
(2) Since at least October 2014, HN was the legal representatives for Cheerful Joy as the purchaser in the transaction, and Lai Chu Kuen William (“William Lai”) of HN was the partner representing Cheerful Joy;
(3) Madam Tam had no knowledge of the existence of the KV Principal Sale PSPA, let alone its terms, at the material times.
(4) Meanwhile, Madam Tam and Mr Ho informed Mr Ngai of their intention to purchase the KV Property, and on or about 21 October 2014, they delivered two cheques of HK$500,000 each (relying on Mr Ngai’s misrepresentation that the KV Property was two separate units) with HN stated as the payee.
(5) In the discussions in October 2014 among Mr Ngai, Madam Tam and Mr Ho, Mr Ngai told them that he would continue to represent them in negotiation with the vendor with respect to the sale and purchase of the KV Property. Mr Ngai also sought Madam Tam’s authority to sign the relevant documents on behalf of Take Point.
(6) Without prior notice to Madam Tam or Mr Ho, Mr Ngai entered on behalf of Take Point into a provisional sale and purchase agreement with Cheerful Joy dated 29 October 2014 (the “KV Sub-Sale PSPA”) containing the following terms:-
(a) The price was HK$28,560,000;
(b) Grand Vision was a party to the KV Sub-Sale PSPA as estate agent;
(c) HN was the legal representative for Cheerful Joy and William Lai of HN was the partner representing Cheerful Joy;
(d) The completion date was 31 March 2015 3pm; and
(e) Take Point had already paid to HN (for payment to Cheerful Joy) an initial deposit of HK$1,000,000 by way of the cheques mentioned above;
(7) In early November 2014, Wong Poon represented Madam Tam to handle Take Point’s purchase of the KV Property from Cheerful Joy. Mr Lee Fung Lun (“Terry”), a clerk of Wong Poon, who had been responsible for a number of Madam Tam’s previous property transactions, handled the transaction in relation to the KV Property;
(8) On 7 November 2014, the KV Registered Owners entered into a formal agreement with Cheerful Joy with respect to its principal purchase of the KV Property (the “KV Principal Sale Formal Agreement”);
(9) Around the same time, Terry asked Madam Tam to transfer further deposits in the sum of HK$4,712,000 to HN for payment to Cheerful Joy. Madam Tam did so by way of a cheque dated 11 November 2014. Together with the previous HK$1,000,000, Madam Tam had paid a total of deposit of HK$5,712,000 (the “KV Deposits”);
(10) On 17 November 2014, without Madam Tams’ knowledge and consent, HN transferred HK$3,287,000 of the KV Deposits to Wealth Trustful Secretaries & Nominees Limited (“WT Nominees”), a limited company of which Mr Ngai was the sole director and sole shareholder;
(11) On 21 November 2014, Terry brought a formal sub-sale agreement between Cheerful Joy and Take Point (the “KV Sub-Sale Formal Agreement”) to Madam Tam’s office for her to sign. Terry did not explain any details of the agreement; nor did he draw to Madam Tam’s attention that the transaction was a sub-sale transaction or a confirmor transaction. Madam Tam signed it without reading the contents, and Terry did not leave any copy of the KV Sub-Sale Formal Agreement to Madam Tam.
13.In relation to the KM Properties transaction, the Judgment found at §§52-68 that Mr Ngai and WT Agency’s fraudulent misrepresentations were made in the following circumstances:-
(1) In November and December 2014, Mr Ngai introduced the KM Properties to Madam Tam and Mr Ho, representing to Madam Tam that it had become popular to partition units (especially those in factories) and then to sell or rent them out.
(2) On 19 December 2014, Mr Ngai brought Madam Tam and Mr Ho to view Ka Ming Court (where the KM Properties were). Mr Ngai represented to them that the asking price for the KM Properties was sold at around HK$4,000 per square foot, that is, HK$32,000,000 in total. Mr Ngai also represented that similar properties in the neighbourhood were of much higher prices.
(3) Mr Ngai offered to Madam Tam and Mr Ho that he would himself take up 15% of the shareholding of the BVI company (Blissful Voice) formed to acquire the KM Properties, while Madam Tam and Mr Ho would hold the remaining 85%.
(4) Without Madam Tam and Mr Ho’s knowledge, on or about 19 December 2014, Mr Ngai procured Hailey to purchase the KM Properties via acquisition of the Shares and Loans from Finewick under two provisional sale and purchase agreements (the “KM Principal Sale PSPAs”), one for HK$14,400,000 and the other for HK$11,520,000, totaling HK$25,920,000. The estate agent and witness in the KM Principal Sale PSPAs was Grand Vision.
(5) Since at least December 2014, HN was the legal representative acting for Hailey and William Lai of HN was the partner representing Hailey.
(6) On 23 December 2014, Hailey and Mr Ngai on behalf of Blissful Voice entered into two provisional sale and purchase agreements (the “KM Sub-Sale PSPAs”), whereby:-
(a) Hailey, stated therein as “準合法人” and “確認人身份, that is, confimor, agreed to sell to Blissful Voice the Shares and Loans for HK$17,460,000 and HK$13,968,000 respectively, totaling HK$31,428,000;
(b) WT Agency was the estate agent for the KM Sub-Sale PSPAs;
(c) The completion date shall be 18 March 2015; and
(d) HN was the legal representative for both Hailey and Blissful Voice, and William Lai of HN was the partner representing them, and Mr Lee Shu Wing (“Mr Lee”) was HN’s legal representative assisting and advising Madam Tam in the Shares and Loans transaction. It happened that Mr Lee was Terry’s brother.
(7) By 6 January 2015, Madam Tam had paid deposits to HN totaling HK$9,428,400 (the “KM Deposits”) pursuant to the KM Sub-Sale PSPAs.
(8) On 12 and 21 January 2015, without Madam Tam and Blissful Voice’s knowledge and consent, HN transferred respectively HK$4,543,600 and HK$90,000 of the KM Deposits to WT Nominees;
(9) On 5 February 2015, Finewick and Hailey entered into two formal agreements for sale and purchase, whereby Finewick agreed to sell to Hailey the Shares and Loans for HK$25,920,000 (the “KM Principal Sale Formal Agreements”).
(10) No formal sub-sale agreements were entered into pursuant to the KM Sub-Sale PSPAs.
(11) In the event of 16 March 2015 (shortly before the completion date of the KM Properties transaction being 18 March 2015), Mr Lee of HN visited Madam Tam’s office and delivered to her certain documents for her to sign, including those related to the Shares and Loans transaction. During the visit, Mr Lee mentioned to Madam Tam that he was not sure if she could sign everything for and on behalf of Blissful Voice without the consent of Mr Ngai, who was a director and 15% shareholder.
(12) On 17 March 2015, Mr Lee telephoned Madam Tam informing her that Mr Ngai’s signature was required on the completion documents. However, Mr Ngai was not willing to pay up his 15% shares, and so Madam Tam was forced to buy up his 15% shares to become the sole director and shareholder of Blissful Vice on 17 March 2015. The Judgment found at §123 that Madam Tam was under economic duress in this purchase of Mr Ngai’s 15% shares.
(13) On 17 March 2015, Blissful Voice paid to HN (for payment to Hailey) the balance of the purchase price being HK$21,999,600 pursuant to the KM Sub-Sale PSPAs.
III. THE PLAINTIFFS’ CLAIM
14.The Plaintiffs claimed against Wong Poon in respect of the KV Property transactions, but the claim has been settled. So, the remaining dispute is between Madam Tam (the 1st Plaintiff) and Blissful Voice (the 3rd Plaintiff) against HN. KV Property transactions should therefore be largely irrelevant, but I set out in the above the KV Property transactions as background only. For convenience, in the claim against HN, I should still refer to Madam Tam and Blissful Voice collectively as the “Plaintiffs”, but it should be understood in context to refer to Madam Tam and Blissful Voice only.
15.The Plaintiffs’ claim against HN is that HN, as the legal representative of Madam Tam and Blissful Voice, owed to them the following duties:-
(1) A contractual duty to exercise skill and care;
(2) A duty to exercise a reasonable degree of skill and care expected of a competent and reasonably experienced solicitor;
(3) A duty to advise beyond the strict limits of his retainer and call attention to and advise upon risks where, in the course of taking instructions, he learns of the existence of such obvious risks;
(4) A duty to advise on matters outside of what he is strictly asked to advise upon, where the connection of such matters is close and it is obvious that the client has placed reliance on the solicitor to provide such advise;
(5) A duty to act in good faith and in the client’s best interests;
(6) A duty to disclose information of relevance and concern to the client;
(7) A duty to act for proper purposes;
(8) A duty not to place himself in actual or potential conflict of interest;
(9) Similar duties under principles 6.01, 6.04, 7.01, 7.02, 8.03, 9.01, 9.02, 9.03 of the Hong Kong Solicitors’ Guide to Professional Conduct (Volume 1);
(10) A duty as set out in Law Society Circular 05-123(PA) to advise client of the problems and risks associated with confirmor or sub-purchasers transactions; and
(11) A contractual duty implied by section 5 of the Supply of Services (Implied Terms) Ordinance (Cap. 457) to exercise reasonable care and skill in the provision of services as solicitors.
16.In relation to the Shares and Loans transaction, the Plaintiffs aver that HN knew or ought to have known the following information (the “KM Material Information”):-
(1) Hailey was not the true owner of the Shares and Loans;
(2) Finewick sold the Shares and Loans to Hailey at HK$25,920,000, but only 4 days later, Hailey sub-sold the Shares and Loans at HK$31,428,000;
(3) The terms of the KM Principal Sale Formal Agreements afforded more protection to Hailey as purchaser;
(4) Hailey would have received from Madam Tam funds for about 36% of the principal sale and purchase price of the Shares and Loans, during a period when it was only obliged to pay a 10% deposit to Finewick before completion;
(5) Hailey’s obligation to pay Finewick under the principal sale and purchase was entirely covered by the funds to be provided by Madam Tam (via Blissful Voice);
(6) Grand Vision and WT Agency were the estate agents in the KV Principal Sale PSPA and KV Sub-Sale PSPA, and WT Agency was the estate agent for Madam Tam in the Shares and Loans transaction. The same estate agents were similarly featured in the KV Property principal sale and sub-sale transactions;
(7) Madam Poon was behind Cheerful Joy and Hailey;
(8) Madam Tam was successively “deceived into” two unusually over-valued sub-sale property transactions involving similar patter, setup and confirmor parties; and
(9) HK$4,600,000 of the KM Deposits were actually transferred to WT nominees, and not to Hailey direct.
17.The Plaintiffs aver that HN breached its duties by:-
(1) Failing to disclose the KM Material Information to Madam Tam;
(2) Failing to inquire with Madam Tam directly regarding whether she was aware of any of the KM Material Information;
(3) Failing to advise and/or inform Madam Tam of the risks of entering into the sub-sale transactions in respect of the KM Properties;
(4) Failing to make arrangements to ensure that the usual completion of documents in respect of the Shares and Loans transaction were executed by Finewick directly in favour of Blissful Voice as the sub-purchaser;
(5) Failing to make necessary inquiries as to Mr Ngai and Madam Poon’s roles in the transactions and disclose the results of such inquiries to Madam Tam; and
(6) Failing to cease to act for the Plaintiffs and advise the Plaintiffs to take independent legal advice without delay.
18.The Plaintiffs aver that as a result of the breach of HN’s duties, the Plaintiffs have suffered loss and damage of HK$5,508,000. This sum is difference between the price in sub-sale of the Shares and Loans and the price in the principal sale of the Shares and Loans earned by Hailey. According to the Plaintiffs, Blissful Voice would not have paid this difference had HN informed them of the KM Material Information and/or had HN ceased to act and advised them to take independent legal advice promptly.
IV. HN’S DEFENCE
19.HN, represented by Mr Edward Tang leading Mr Ryan Chan, does not dispute that Mr Ngai perpetrated frauds, as found by Coleman J in the Previous Actions, in the KM Properties transaction (as well as the KV Property transaction). HN’s defence can be summarised as follows:-
(1) Madam Tam was not HN’s client;
(2) The scope of duties HN had to Blissful Voice (and Madam Tam as the case may be) was limited. It had no duty to disclose the KM Material Information and no duty to make enquiries as the Plaintiffs alleged;
(3) Even if HN had conducted the enquiries, HN would not have discovered the KM Material Information;
(4) Blissful Voice was aware of the KM Material Information in any event via Mr Ngai as the other director of the 3rd Plaintiff; and
(5) There was no causation of the breaches of duties (if proved) to the losses claimed by the Plaintiffs, and in any event, the losses were too remote.
V. ISSUES
20.The issues are, as agreed between the parties:-
(1) Was Madam Tam HN’s client in relation to the KM Properties transaction?
(2) What were the duties owed by HN to Madam Tam and/or Blissful Voice?
(3) Did HN breach any of the duties?
(4) Were there any losses caused by the breach(es)?
(5) Were the losses too remote?
21.For convenience, I shall refer to the above issues as “Issue (1)”, “Issue (2)” and so on. During the closing submission, there seemed to be some dispute over which Issues I should resolve first, but I see no impact on the order of the determination of the Issues. For convenience, I would simply go along the Issues sequentially.
VI. WITNESSES
22.For the Plaintiffs, Madam Tam is the only witness. For HN, William Lai, partner of HN, and Wilbert Neo, the then associate and later a partner of HN (who left HN and now has his own firm), are the witnesses.
VII. ISSUE (1) – WAS MADAM TAM HN’S CLIENT IN RELATION TO THE KM PROPERTIES TRANSACTION?
23.To determine the question of whether Madam Tam was HN’s client in the KM Properties transaction, the relevant legal principles are set out in Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79 and NDH Properties Ltd v Lupton Fawcett LLP [2021] P.N.L.R. 8:-
(1) The test is an objective one (Shanghai Tongji Science & Technology Industrial Co Ltd, supra at §§36-37);
(2) The burden lies upon the one who alleges the contract (Shanghai Tongji Science & Technology Industrial Co Ltd, supra at §38);
(3) It is necessary to imply such a contract to give business reality of the transaction (NDH, supra at §81);
(4) The Court has to consider all relevant circumstances to determine whether an intention to enter into such a contractual relationship could be imputed to the parties (NDH, supra at §80); and
(5) The circumstances include (a) whether the party in question is liable to pay the solicitors fees; (b) whether the party in question directly instruct the solicitors; (c) whether such a contractual relationship existed in the past; (d) where there was such a contractual relationship in the past, the Court would be readier to assume such a relationship in the instant case; (e) all the more when the solicitors failed to advise the party in question to obtain independent legal advice despite the past relationship; (f) whether the parties have acted in a way consistent only with an intention to enter into such a contract (NDH, supra at §§80 and 81).
24.I add that it is a mixed question of fact and law. The circumstances for consideration listed in §(5) are not exhaustive and cannot be taken as a checklist. There may well be other relevant circumstances in a particular case and/or in particular context.
25.In the present case:-
(1) There is no dispute that Madam Tam had instructed HN in the past in respect of acquisition of properties and partitioning thereof via her other limited company Choice Win Inc Ltd (“Choice Win”); however, even on Madam Tam’s own evidence, the first and sole point of contact was Mr Ngai engaging Wong & Poon, which then passed the case to HN due to Wong & Poon’s incapacity to handle the matter.
(2) There is no dispute that there was no written retainer in the instant case.
(3) There is no dispute that the acquisition of the KM Properties was intended until 17 March 2015 to be a joint investment by Madam Tam and Mr Ngai via a BVI company, with Madam Tam owning 85% of the company and Mr Ngai owning the remaining 15%.
(4) Madam Tam and Mr Ngai agreed that Mr Ngai would handle all the logistics in respect of purchasing the KM Properties through the BVI company (turned out to be Blissful Voice). In cross-examination, Madam Tam explained that when she agreed that Mr Ngai would handle all the logistics, she meant that Mr Ngai would do so as an estate agent, and all the legal matters would still be handled by the solicitors who should take care of her interest as the majority shareholder. I am unable to accept such evidence (or more accurately, an opinion) because (a) objectively and even to Madam Tam herself, Mr Ngai was not a mere estate agent but was a co-investor, being a 15% shareholder and director of Blissful Voice as a corporate entity to purchase the KM Properties; and (b) Mr Ngai was supposed also to contribute to the purchaser price and as a matter of fact, even on Madam Tam’s own evidence, part of the deposits paid for the KM Properties transaction were from Mr Ngai’s own pocket, although Madam Tam does not remember the proportion. Thus, in no way could Mr Ngai be taken as a mere estate agent and objectively, when she told Mr Ngai that she would agree that Mr Ngai would be responsible for the logistics, it must include instructing solicitors on behalf of Blissful Voice. In respect of Madam Tam’s evidence (or opinion) that legal matters should be left to HN, this must be true as a general proposition but still begs the question of what this would mean especially in terms of duties, a question I shall return in Issue (2) below.
(5) There is no dispute that when Blissful Voice engaged HN in December 2014, it was Mr Ngai, but not Madam Tam, who approached HN to confirm Blissful Voice’s engagement of HN, and subject to subparagraph (6) below, that Madam Tam approached direct HN (via Mr Lee) for the first time only in March 2015 when the KM Properties transaction was to complete soon.
(6) The first time Madam Tam contacted HN in respect of the KM Properties transaction was in January 2015, and that contact was limited to Mr Lee asking Madam Tam to transfer funds to a certain account for the transaction. In this regard, in cross-examination, for the first time, Madam Tam alleged that back on about 26 December 2014, when Mr Lee came to her office in Fotan to ask her to sign documents in respect of the transaction entered into by Choice Win, she had already told Mr Lee that for the KM Properties transaction, HN should do it properly (“做好佢”). I reject this evidence as incredible because:-
(b) such evidence, if true, would bear much significance on the matter given that clearly, if Madam Tam had contacted HN earlier, it would tend to support her proposition that she was also HN’s client, and so such evidence, if true, would have been mentioned earlier (when Madam Tam had even filed her supplemental witness statement);
(c) when Madam Tam mentioned in her witness statement that she agreed to leave the logistics to Mr Ngai to arrange, she never mentioned that she herself also engaged in contact with HN except until January 2015;
(d) she provided no reason at all as to why she now only during cross-examination found fit to mention such important piece of evidence; and
(e) she did not have Mr Lee’s contact number and had to ask Mr Ngai via WhatsApp on 9 February 2015. In this aspect, Madam Tam alleged that she herself had Mr Lee’s contact number and still had to ask Mr Ngai just because she herself did not want to take the trouble to find out Mr Lee’s contact number. I reject such allegation as inherently improbable because when she was asking Mr Ngai for a contact number, she was asking for whom of HN she could contact, and then Mr Ngai gave her Mr Lee’s contact:-
“香港置業張佣金單我未收到,差餉管理费点对, 有冇何梁律師 [that is, HN] 電話, 揾边个, 我自己問…
….
何梁 – 李生 [Mr Lee’s contact number]”
If Madam Tam had contacted Mr Lee in the past as she alleged in the witness stand, it would not make sense at all that she would still ask Mr Ngai about whom of HN she could contact. She could simply have asked Mr Ngai for Mr Lee’s contact number if she really did not want to take the trouble to find the number herself (as she alleges), although I do not see how troublesome it would be in this day and age to find out a telephone number of a person already in contact, and thus, even her explanation that she would not want to take the trouble to find out Mr Lee’s contact is incredible.
(f) Insofar as there is any suggestion that adverse inference should be drawn in favour of the Plaintiffs from HN’s failure to summons Mr Lee to give evidence, I would reject the same because in the first place, the Plaintiffs had not adduced any evidence until Madam Tam’s oral evidence in the witness stand that she had contact with Mr Lee in relation to the KM Properties transaction as early as December 2014. On the evidence that the first contact in relation to the KM Properties transaction appeared to be January 2015 as explained above, there was every reason why HN did not see the need to summons Mr Lee. In his oral closing submissions, Mr Jacky Lam, counsel for the Plaintiffs, also suggests that I should draw an adverse inference that Mr Lee did represent HN. With respect, I do not have to draw such inference, because it is HN’s case that Mr Lee did represent HN.
26.Before I would examine the circumstances listed out in §23(5) above, there is a fundamental matter in the present case I should mention. Blissful Voice was owned by Madam Tam (as to 85%) and Mr Ngai (as to 15%), both of whom were also directors throughout until the completion of the transaction. From the perspective of HN (which should have known the shareholding structure and the composition of the board of Blissful Voice upon the due diligence of clients required to be conducted by solicitors firms), there might or might not be internal dispute between the shareholders and directors, but it would be for them to resolve the dispute internally. From HN’s perspective, in relation to the acquisition of KM Properties by Blissful Voice, there would be conflict of interest if it acted for only one shareholder and director of the company and the company, leaving out the other shareholder and director. A fortiori, when the other director was the one who approached HN for engaging HN in the first place. This is the essence of the fundamental common law doctrine of separate legal entity, and in the light of this doctrine, I reject Mr Lam’s submissions that because it has been pleaded that Madam Tam’s interest in the KM Properties transaction was separate or distinct from that of Blissful Voice, HN should therefore somehow be regarded as owing some duties to Madam Tam separately or some duties to Blissful Voice to explain matters to or advise specifically Madam Tam. With respect, I disagree with Mr Lam’s submissions that HN should pay more regard to Madam Tam’s interests over Mr Ngai’s, and his submissions that Madam Tam should be HN’s client. In the absence of any evidence to the contrary, this fundamental matter points against a relationship between Madam Tam and HN.
27.Going along the circumstances listed out in §23(5) above, first, in terms of who was liable to pay. HN’s invoice dated 8 April 2015 (the “Invoice”) was issued and addressed to Blissful Voice alone. Mr Lam, for the Plaintiffs, relies on an entry of 28 April 2015 of the client ledger of Hailey prepared by HN in relation to the matter stated to be “Sale and Purchase of Shares in (1) Manysense Limited and (2) Uniline Trading Limited” to say that it supports that HN treated Madam Tam as its client. The description of the entry is in the following two lines:-
“Refund Balance of Money on Account to Client
Tam Yuk Ching”
28.The amount of the refund balance was HK$7,134. This amount is the exact amount of refund stated in the Invoice issued to Blissful Voice. Mr Lam submits that “Client” in the ledger described “Tam Yuk Ching”, and so Madam Tam was regarded as its client. With respect, I disagree:-
(1) In respect of this amount, the telephone conversation between William Lai (of HN) and Madam Tam on 24 April 2015 (by which time Madam Tam had already become Blissful Voice’s sole shareholder and director) is salient. In that conversation, in respect of this refund, the following conversation took place:-
“Lai: OK!…甘呢7000幾蚊個尾數呢…因為呢…因為…唔係…因為唔係開…因為要開俾某一個人呀馬要而家
Tam: 嗯嗯!
Lai: 係啦...我要…你要俾到個 Authorisation我…我先至開到啲票
Tam: 我已經簽左幾日架啦…不過李生冇去攞咋馬”
(2) The conversation clearly shows that William Lai was seeking Madam Tam’s approval that the money would be paid to Madam Tam. This would only make sense if understood to be William Lai seeking approval from Madam Tam as Blissful Voice’s then only director, meaning that the refund was regarded to be a refund to Blissful Voice but upon Blissful Voice’s instructions, to be paid to a person other than Blissful Voice. In cross-examination, Madam Tam’s explanation was that she was the sole shareholder and sole director of Blissful Voice and therefore, she was Blissful Voice and Blissful Voice was her. Her explanation goes contrary to the tenor of the recorded telephone conversation understood objectively and in any event, cannot stand any legal analysis in which I am now engaged to ascertain who was/were HN’s clients, bearing in mind the doctrine of separate legal entity.
(3) This understanding is supported by the remittance advice of a deposit of HK$6,285,600 from Madam Tam’s personal account to HN’s account on 6 January 2015. Although it was from Madam Tam’s personal account, HN handwrote against Madam Tam’s name printed on the remittance advice “Blissful Voice Limited”. Consistently, though the money came from Madam Tam’s account, the receipt issued for this sum was issued to Blissful Voice. There is no evidence from Madam Tam to query why the receipt was not issued to her and in her name.
(4) That money was all paid from Madam Tam’s personal accounts does not take Madam Tam anywhere. It is not unusual that directors/shareholders of private companies would pay out of their own pockets, which would be recorded in the directors/shareholders accounts as loans to the company.
29.Second, as pointed out above, there is no dispute that Madam Tam was not the one who approached and directly contacted HN. This points against a relationship between Madam Tam and HN.
30.Third, the past relationship. In support of Madam Tam’s position that she was HN’s client, first, Mr Lam, for the Plaintiffs, submits that there was past relationship between Madam Tam and HN in respect of the properties acquired and partitioned by Choice Win. Mr Lam submits that this past relationship was a relationship between Madam Tam personally and HN. With respect, I am unable to agree:-
(1) There is no evidence to suggest that in respect of the transaction by Choice Win, Madam Tam was or was also HN’s client.
(2) On the contrary, the feenote issued by HN in that relationship was issued to Choice Win, suggesting that the client in that relationship was Choice Win only.
(3) Moreover, unlike Choice Win, as pointed out above, Blissful Voice was a joint investment between Madam Tam and Mr Ngai.
(4) Insofar as Madam Tam would also rely on the KV Properties transaction where HN acted for Madam Tam (who was a co-purchaser), §(3) above also applies.
31.Therefore, the past relationship does not help Madam Tam. On the contrary, because the acquisition was a joint investment between Madam Tam and Mr Ngai via Blissful Voice, this, as explained in §(3) above, points against a relationship between Madam Tam and HN. Upon my finding that there was no past relationship between Madam Tam and HN, §§23(5)(d) and (e) above are irrelevant.
32.Fourth, as regards whether Madam Tam and HN acted in a way consistent only with an intention to enter into such a contract, in the light that the acquisition of KM Properties was by a company owned by two shareholders and that it was Mr Ngai who approached HN for engaging HN, I do not see any act which could be regarded as consistent only with an intention for Madam Tam and HN to enter into such a contract.
33.Mr Lam points out that there is no documentary evidence evidencing the relationship between HN and Blissful Voice. However, first, there is no dispute that there was a relationship between HN and Blissful Voice, and second, lack of such documentary evidence does not necessarily lead to that there was a relationship between Madam Tam as its majority shareholder and HN.
34.Mr Lam also submits that Mr Ngai could at most be the person authorised to engage HN, but HN should have known, through Mr Lee, that the contact person of Blissful Voice must be Madam Tam. Whoever was the contact point of Blissful Voice, in my view, does not mean that that contact person would be owed duties by the solicitors firm engaged by the company. Further, even if HN should have known that Mr Ngai was a real estate agent referring business to Mr Lee and that Mr Ngai was involved in the Principal Sale as a purchaser, I cannot see any basis to say therefore that Mr Ngai could no longer be regarded as a representative of Blissful Voice and therefore, somehow, HN knew that Madam Tam was the true representative (which knowledge is in any event not pleaded and so cannot be established) and would owe duties to Madam Tam or duties to explain matters to or advise Madam Tam. As I explained above, from HN’s perspective, it would be for Blissful Voice to resolve any internal dispute among shareholders themselves. The company’s legal representatives should in no way be dragged onto any side of any such dispute.
35.Mr Lam also points out that instructions since May 2015 came from Madam Tam. However, the KM Properties transaction was completed on 17 March 2015, and it was upon 17 March 2015 that Madam Tam became the sole shareholder and director. Therefore, instructions coming from Madam Tam since May 2015 gives no mileage to Madam Tam’s position. In any event, a limited company can only act through natural persons. That a natural person gives instructions on behalf of a limited company cannot itself be taken to mean that the solicitors act for that natural person as well.
36.In fact, when Kok & Ha, now solicitors for both Madam Tam and Blissful Voice, issued the first letter dated 21 May 2015 to HN raising queries over the KM Properties transaction, HN acted for Blissful Voice only, without in any way indicating Madam Tam as their client as well. Similarly, in the complaint to the Law Society about HN’s conduct, the complainant was Blissful Voice. Had Madam Tam herself thought that she was HN’s client, the letter and the complaint would have been issued in both Blissful Voice’s and her names. Although this was conduct subsequent, this does reflect how Madam Tam herself had been thinking, consistent with the above objective analysis.
37.Considering the above holistically, my finding on Issue (1) is that Madam Tam was not HN’s client.
38.Before I turn to Issue (2), I note that doing his best for Madam Tam, Mr Lam stresses time and again that from Madam Tam’s perspective, she would not know the significance of the doctrine of separate legal entity and from her perspective, HN was engaged by her being the majority shareholder having full control of Blissful Voice to advise on the KM Properties transaction. Mr Lam urges me to examine the case from a practical perspective and should therefore find that Madam Tam herself was also HN’s client. With respect, Mr Lam’s such effort is to no avail. From the Court’s perspective, I decide the matter on the facts found upon the evidence and apply the relevant legal principles to the facts as found. I emphasise that as a matter of contract law, whether Madam Tam was HN’s client, or put another way, whether there was any retainer or contractual relationship between HN and Madam Tam, is a matter to be determined objectively, and the doctrine of separate legal entity is a fundamental common law doctrine such that only in exceptional circumstances (which do not appear in the present case), the corporate veil could be pierced.
VIII. ISSUE (2) – WHAT WERE THE DUTIES OWED BY HN TO MADAM TAM AND/OR BLISSFUL VOICE?
39.Mr Lam faintly suggests that since Madam Tam was the majority shareholder, HN owed duties to Madam Tam whether or not she was HN’s client. I reject this suggestion (if this was his suggestion) outright as contrary to the doctrine of separate corporate legal entity. Further and in any event, given that as explained above, from HN’s perspective, it would be for the shareholders and directors of a corporate client to resolve the internal dispute within the company and there would even be conflict of interest for the firm to pay more regard to one shareholder or director over the other, there cannot be any duty imposed on HN towards Madam Tam (client or not) in such circumstances.
40.Further, Mr Lam seems to suggest that a duty would be owed to the majority shareholder of a company essentially to take care of the interest of the majority shareholder. I reject this suggestion (if this was his suggestion) also outright. Such a duty would also be difficult to define. Is 50.1% shareholder also a majority shareholder for this purpose? Why would the other 49.9% shareholder be less significant? When there were shareholders who hold 40%, 30% and 30% respectively, to which of the shareholders the solicitors should explain the matter? Why would the 40% shareholder be regarded as the majority over the rest of the two shareholders holding 60% in total? Would solicitors rather owe such a duty to explain the matter to the two shareholders combined to be 60%? How would the solicitors ascertain whether they should be combined? How would the solicitors ascertain whether their interests would be aligned, when shareholders can have their own different agenda about how to exercise their proprietary rights even to the prejudice to the company or at least without bearing in mind the best interest of the company? One must not forget that it is often that a director or a senior manager would be authorised by a company to engage and instruct solicitors, and that director or the senior manager would not even hold any shares in the company. Such a duty would also impose an infeasible, heavy onus on solicitors in respect of public companies or companies which have many shareholders. Such a duty, in gist, simply does not stand up to scrutiny of common sense.
41.As regards what duties HN owed to Blissful Voice, Mr Lam puts forward a proposition that unless restricted in the written retainer, ordinarily, a solicitor should be judged by the standard of the reasonably competent practitioner specialising in whatever areas of law the solicitor may hold himself out as a specialist. He submits that this proposition is consistent with Jackson & Powell on Professional Liability (9th edition) §11-100. With respect, the passage does not support such a bold proposition. The passage reads:-
“Solicitors The defendant solicitor should be judged by the standard of the reasonably competent practitioner specialising in whatever areas of law the defendant holds himself out as a specialist. This approach is consistent with principle and with authority in other areas of professional negligence…”
42.This passage does not support the proposition that a solicitor’s duties could only be limited in writing.
43.Mr Lam seems also to rely upon Tse Chi Shing v Tang Wing Hong Andrew [2018] HKCFI 1403 for this proposition. However, that case only sets out the general duties owed by a solicitor to his client. It does not follow that a solicitor can only in writing limit his duties to his client.
44.In my view, logically, one must first determine what work the solicitors are retained to carry out before one can determine the contents of the duties they owe to the client.
45.To answer this question, I have to determine when Blissful Voice engaged HN.
46.Understandably, Madam Tam’s evidence in respect of when HN was engaged is vague because it was not her, but Mr Ngai, who approached and engaged HN. At §§50 and 51 of her 1st Witness Statement, she says:-
“50. I recall that Blissful had been using HN as its legal representatives to assist with the KM Properties purchase since around December 2014 or January 2015. I have never approached or spoken to HN to confirm its engagement as Blissful’s solicitors.
51. Ngai was the one who arranged for HN to be instructed as Blissful’s legal representative…”
47.On the contrary, William Lai’s evidence is more specific. In §17 of his Witness Statement:-
“17. On or about 23rd December 2014, the 1st Defendant received new instructions for the sub-sale of the KM Properties. Again, by the time the 1st Defendant received those instructions, two Provisional Agreement for Sale and Purchase both dated 23rd December 2014 (the “KM Properties Sub-Sale PSPA”) had already been entered into between Hailey as vendor and the 3rd Plaintiff as purchaser.”
48.During cross-examination, Madam Tam was taken to §10 of the KM Sub-sale PSPAs, which provided that the solicitors for the vendor and those for the purchasers were yet to be provided (“有待提供”), and she agreed that Mr Ngai would pass the KM Sub-Sale PSPAs to HN and engage HN only after the execution of the PSPAs. She, however, could not tell the exact date of the engagement. Consistently:-
(1) During cross-examination, William Lai explained that they would usually be instructed after the parties signed a provisional agreement.
(2) During cross-examination, Mr Wilbert Neo was taken to confirm §10 of his Witness Statement that “the majority of conveyancing transactions only reach the hands of [HN] after the prospective client has already entered into a preliminary or provisional agreement for sale and purchase, with the terms and conditions… having already been agreed”, and he was not challenged on this paragraph.
Therefore, I find that by the time Blissful Voice engaged NH, the KM Sub-Sale PSPA had already been signed.
49.There is no evidence as to what Mr Ngai told HN what to do when he approached and engaged HN. There is also no evidence to suggest that HN was part of the fraud perpetrated by Mr Ngai. Given that Mr Ngai was a fraudster (as found in the Previous Actions and not disputed by HN), it is inherently improbable that he would instruct HN to advise on the commercial merits and risks of the transaction, because such advice would likely expose the fraud. So, I find that there were no such instructions.
50.What was left was the KM Properties Sub-Sale PSPAs already entered into. There is no evidence to suggest that HN would think that the agreement would not be binding. The context where Blissful Voice engaged HN was, objectively, conveyancing context. Of course, there is no checklist for the contents of a solicitors engaged in a conveyancing context. Much would depend on the particular facts of the case. What would be useful is for me to go through the general legal principles first, and then proceed to consider the contents of the duties the Plaintiffs say HN owed to them.
51.In Foshan Hua Da Industrial Co v Johnson, Stokes & Master (a firm) [1999] 1 HKLRD 418 at 425, Stock J (as he then was) set out the following general principles in relation to solicitors’ duties in conveyancing context:-
“(1) A retained solicitor owes a duty to his client, both in contract and tort. There arises, when a solicitor is engaged for reward, a contractual duty to exercise skill and care on behalf of his client. A solicitor is not expected or bound to know all the law, nor is he to be judged according to the standard which might be demonstrated by ‘a particularly meticulous and conscientious practitioner’…
(2) The duty of a solicitor is ‘to exercise that reasonable degree of skill and care to be expected of a competent and reasonably experienced solicitor’ (Clerk and Lindsell on Torts, 17th ed.) para. 8-81). ‘The test is what a reasonably competent practitioner would do having regard to the standard normally adopted in his profession.’ …
(3) If in the course of taking instructions a professional man like a solicitor learns of facts which reveal to him as a professional man the existence of obvious risks then he should do more than merely advise within the strict limits of his retainer. He should call attention to and advise upon the risks…
(4) Where a solicitor is asked to advise upon one matter then, as a general rule, he is not obliged to advise on different points though related, unless the connection is so close and reliance placed in the solicitor to advise generally so obvious, that advice on related points may be required…
(5) The duty of a solicitor might be affected by the experience or inexperience of the client, in the sense that a client inexperienced in the field in which he seeks advice is ‘entitled to expect the solicitor to take a much broader view of the scope of his retainer and his duties than will be the case with an experienced client.’…
(6) The standard of care to be expected of a professional man must be based on events as they occur in prospect and not in retrospect…
(7) A solicitor is not, in the absence of unequivocal instructions and acceptance by him to do so, expected to advise upon the commercial good sense of a business proposition, whether he should or should not, as a matter of commercial advantage, proceed with a transaction, whether a transaction is or is not good business or prudent, although where it is evident that a client relies on the solicitor for more than legal advice, the solicitor may be under a duty to refer the client to an appropriate source or sources of information… Indeed, ‘it is in general the client’s privilege if he so wishes to mismanage his affairs. He is entitled ... to lend on insufficient security, or to enter an unwise bargain if he so chooses. The solicitor has a duty to advise on the legal hazards of the transaction, but no more…’
(8) The onus of proving professional negligence over and above errors of judgement is a heavy one…” (emphasis added)
52.As regards (7) above, the distinction between legal and business matter is a question of degree. Where the significance of the legal consequences lay in financial implications, the solicitors may have a duty to advice on the financial implications. But where the financial implications are obvious, the solicitors would not have such a duty: see Jackson & Powell, supra §11-180.
53.In Hondon Development Limited & Anor v Powerise Investments Limited & Ors, HCA 1208/1998, 1 September 2003, for solicitors acting for the purchaser in a conveyancing transaction, at §§76 and 77, DHCJ To listed out the following duties:-
(1) “…in order to understand the terms of his retainer and the purpose for which he was retained, a solicitor is under a duty to ascertain what is the subject matter of the sale and purchase in the mind of his client and, if in doubt, to seek clarification or instruction from his client…In case of doubt, he should consult with his client.”
(2) “…his duty to protect his client’s interest is specifically extended to protect his client’s interest in the transaction and to protect his client against possible future hazards. Thus, a solicitor has to protect his client’s interest by duly registering the provisional sale and purchase agreement so that his client's interest will not be deferred to any later competing interest over the property. He has to ensure that the vendor can show a good legal title free from adverse interests of the property to be conveyed. For that purpose, he is obliged to make the customary enquiries and searches and to do so with care. He shall not hand over the purchase money unless satisfied that his client will acquire a good title.”
(3) “…he has a duty to warn his client of risks which are obvious to the solicitor but which are not so to the lay client. He has a duty to explain the documents which give effect to the transaction and make sure that his client understands their content before appending his signature to the documents.”
(4) “The standard of care in conveyancing is high, but it is not absolute. A solicitor is not expected to be faultless nor is he to be taken as his client’s insurer of any risk which the skill and care of a normally competent and careful practitioner cannot avoid.”
54.In addition, rule 5C(1) of the Solicitors’ Practice Rules (Cap. 159H) and §9.05 of The Hong Kong Solicitors’ Guide to Professional Conduct Volume 1 both provide that a solicitor, or 2 or more solicitors practicing in a partnership or association, shall not act for both the vendor and the purchaser on a sale or other disposition of land for value.
55.Further, in respect of a confirmor’s sale, Law Society Circular 05-123(PA) dated 28 February 2005 reminds solicitors of “their duty to advise clients of the problems and risks associated with transactions involving Confirmors”. In respect of the problems and risks for a sub-purchaser, the circular lists out the following:-
“1. Less rights and protection would be afforded to a Sub-Purchaser in a transaction involving a Confirmor as the Confirmor Vendor would inevitably be bound by what has been agreed with the Head Vendor in the Principal Sale and Purchase Agreement;
2. the Sub-Purchaser may have to pay a further deposit even though he has not had the opportunity to peruse the title of the subject property and the time limit for the Confirmor to raise requisitions against the Head Vendor under the Principal Agreement has already existed;
3. the Sub-Purchaser might not have the opportunity to inspect the property…
4. the Confirmor might fail to complete the principal transaction… The situation would leave the Sub-Purchaser without any direct legal redress against the subject property;
5. the risk mentioned in item B4 above would be heightened during a ‘falling market’…
6. while the Head Vendor and Sub-Purchaser do have contractual remedies against the Confirmor in law, in reality, the chance of recovering anything is slim;
7. the possibility of the Confirmor sub-selling the property several times without notice of the Sub-Purchaser…”
56.The general principles above are not in dispute. I do not have to hold whether the above general duties were somehow limited, as Mr Lam appears to be self-arguing with himself on this point (with no disrespect). What is in dispute and more relevant is what exactly in the circumstances of the present case HN had to do in discharge of these duties.
57.At §76 of his Opening Submissions, along §§64 – 67 of the Amended Statement of Claim, Mr Lam fleshes out the above duties as follows:-
(1) “HN ought to have informed and/or provided advice to [Madam Tam]/[Blissful Voice] related to the fact that Hailey was not the true owner of the Shares and Loans” and gave advice in accordance with the Law Society Circular mentioned above and recommended to Madam Tam various mechanism (such as irrevocable of power and stakeholder arrangement could be adopted to ensure that the transaction would be completed;
(2) “HN, having been privy to the KM Principal Sale and KM Sub-Sale documentation, would have detected some unusual terms, such as the fact that unlike typical confirmor transactions, there was a significant difference in the price at which the head vendor was willing to sell the Shares and Loans compared to what Hailey was willing to sell to [Blissful Voice], which would have offended normally acceptable standards of honest conduct. HN would have also detected that the KM Principal Sale documentation…were far more extensive and afforded more protection to Hailey (as the purchaser in the KM Principal Sale), compared to the more limited protection to [Blissful Voice] under the KM Sub-Sale PSPAs”;
(3) “HN would have also detected the unusual term where [Blissful Voice] would pay ~36% of the funds associated with the KM Principal Sale during a period when Hailey was only obliged to pay a 10% deposit to Finewick…”;
(4) “Yet, on the date of completion, the balance price to be paid by Hailey was HK$23,328,000, which was more than [Blissful Voice]’s balance price of HK$21,999,600. HN would have realized that, if Hailey did not apply [Blissful Voice’s] previous deposit monies towards the purchase of the Shares and Loans, Hailey would have had difficulty completing the transaction as Hailey’s financial obligation on the date of completion was larger than [Blissful Voice’s]…[Blissful Voice] faced a risk that Hailey would not be able to complete and [Blissful Voice] would have limited resources against either Hailey or Finwick”;
(5) “Similarly, it is unclear why HK$4.6 million of the deposits were transferred to a third party (WT Nominees) posing potential risk that such money may not be applied towards the purchase of the KM Properties or that [Madam Tam]/[Blissful Voice] would have difficulty recovering such deposits if the KM Sub-Sale was not completed due to [Madam Tam]/[Blissful Voice]’s fault”;
(6) “At the very least, HN ought to have conducted due diligence on WT Nominees (such as find out its shareholders and/or directors), or verify the relationship between WT Nominees and Hailey, to satisfy itself whether there was a risk of dissipation of money in the event that money given to WT Nominees would not be applied towards the KM Principal Sale. In doing so, HN would have discovered that WT Nominees was represented by Mr Ngai. With Mr Ngai being a minority shareholder of [Blissful Voice], HN would have considered it suspicious why one of [Blissful Voice]’s directors and minor shareholder would pocket deposits funded by [Blissful Voice ]’s major shareholder, Madam Tam, and ought to have informed and/or advised Madam Tam about such matter”;
(7) “The fact that Hailey was a corporate confirmor, with no bank account or other discernible assets in Hong Kong, HN ought to have advised and/or informed [Madam Tam]/[Blissful Voice] that if any redress is sought against Hailey or any misconduct on Hailey’s part, the chance of success would be slim…”;
(8) “HN would have realised that other than the initial deposit payment, Hailey’s payments to Finewick were all contingent on the funds to be provided by [Madam Tam]/[Blissful Voice] under the KM Sub-Sale, which meant that there was a risk Hailey could not complete the KM Principal Sale if the monies given transferred by Madam Tam to Hailey were not applied to the KM Principal Sale in accordance with the KM Principal Sale PSPAs/Formal Agreements”;
(9) “HN did not inform and/or advice [Madam Tam]/[Blissful Voice] on why no formal sub-sale agreement was signed between Hailey and [Blissful Voice], which could have afforded more protection to [Blissful Voice] similar to the wordings used in the KM Principal Formal Agreements”;
(10) “HN did not inform and/or advise [Madam Tam]/[Blissful Voice] regarding why there were two sets of completion documents (i.e. one set by Finewick in favour of Hailey, and another set by Hailey in favour of [Blissful Voice]) especially in circumstances where the KM Principal Sale and KM Sub-Sale were effectively consecutive to one another. As a result, stamp duties were paid twice. HN ought to have informed and/or advised [Madam Tam]/[Blissful Voice] of such arrangements, which were tantamount to a ‘re-sale’ rather than a ‘sub-sale’”;
(11) “HN did not make inquiries about Madam Tam’s interests or knowledge about the matters…” and did not make inquiries with Madam Tam whether she knew the matters set out in (1) – (10) above; and
(12) “HN ought to have realised that, in representing Hailey (in both the KM Principal Sale and KM Sub-Sale), and [Madam Tam]/[Blissful Voice] in the KM Sub-Sale, there could potentially be competing interests. In this regard, HN could have ceased to act for [Madam Tam] and/or [Blissful Voice] given the various risks involved and potentially competing interests between [Madam Tam]/[Blissful Voice] and Hailey, or at least urge [Madam Tam]/[Blissful Voice] to seek independent legal advice”.
For convenience, I shall refer to the above duties as “Duty (1)”, “Duty (2)” and so on.
58.In the present case, first, it must be pointed out that there is no allegation that HN was a party to the fraud perpetrated by Mr Ngai. Nor is there any allegation that HN had any knowledge of the fraud. Put to the highest, the Plaintiffs’ case is that there were suspicious circumstances which HN ought to have informed the Plaintiffs of.
59.Second, even on the Plaintiffs’ own case and evidence, it was Mr Ngai who on behalf of Blissful Voice dealt with HN until the completion of the transaction. Mr Ngai, to HN’s knowledge, was an estate agent. As mentioned in §51(5) above, the scope of duty would be affected by the experience or inexperience of the client. The question is whether Mr Ngai’s experience and knowledge of the matters should be imputed to Blissful Voice. In Sunni International Limited (in liquidation) v Kao Wai Ho Francis & Ors [2025] HKCFI 3398 at §267, Ng J adopted the principles expounded in Bilta (UK) Ltd (in liquidation) and others v Nazir and others (No 2) [2016] AC 1, and summarised the principles as follows:-
“When it comes to knowledge of a company, the question is whose knowledge or state of mind is to be attributed to the company in question. In Bilta (UK) Ltd v Nazir (No 2) [2016] AC 1, the UK Supreme Court explained:
(a) While there is a role for the concept of the ‘directing mind and will’ of a company, it is important to analyse that role and in particular to avoid the dangers of ascribing human attributes to a company [180].
(b) In most circumstances, the acts and state of mind of its directors and agents can be attributed to a company by applying the law on agency [181].
(c) Whether an act or a state of mind is to be attributed to a company depends on the context in which the question arises [181].
(d) Where a third party makes a claim against the company, the rules of agency will normally suffice to attribute to the company not only the act of the director or employee but also his or her state of mind where relevant [205].”
60.In respect of §(c) above, in Zhang Kan v SPH (Hong Kong) International Trading Co Ltd [2023] 4 HKLRD 544, G Lam JA (with whom Chu VP and Chow JA agreed) said at §33:-
“It is by now well established that the question of attribution has to be approached having regard to the content, purpose and policy of the relevant substantive rule, and the context and purpose in and for which attribution is invoked…The context, in particular, includes not only the factual and legal background, but also the nature of the proceedings in which the question of attribution arises…”
61.In the present case:-
(1) The question of attribution arises from whether HN should take Mr Ngai’s experience and knowledge imputed to Blissful Voice. There is no substantive rule involved like in Zhang Kan’s case where the rule of change of position in good faith was being applied.
(2) There is no allegation that HN had any knowledge of the fraud.
(3) Even on Madam Tam’s own evidence, she agreed to Mr Ngai’s proposal that he would arrange for the logistics for the transaction on behalf of Blissful Voice, and she did leave the matter to Mr Ngai without any involvement of her own.
(4) Therefore, from HN’s perspective, Mr Ngai was the agent properly authorised to act on behalf of Blissful Voice.
(5) §§(3) and (4) above are pertinent in the sense that assuming that Mr Ngai’s experience and knowledge would not be imputed, HN would still have to come back to Mr Ngai as the contact point to inform Blissful Voice of the relevant matters – HN simply did not have any other contact point, and there was no reason for HN to think that it should have contacted the other shareholder and director, as this was purely an internal matter of Blissful Voice, and HN would have no reason to doubt that any conflicting interest among shareholders and directors would not have been resolved internally before Mr Ngai caused Blissful Voice to enter into the transaction and Mr Ngai would be authorised to engage HN.
(6) In such circumstances, informing Mr Ngai of the matters of which he had knowledge but HN was said to have the obligation still to inform him, simply because of the non-attribution as a matter of law, would be absurd.
(7) Therefore, in my view, bearing in mind the context and purpose, Mr Ngai’s experience and knowledge should be attributed to Blissful Voice here vis-à-vis HN.
62.In other words, from HN’s perspective, the experience of Mr Ngai, being a director and shareholder authorised to instruct HN, equated to Blissful Voice’s experience.
63.Given that the KM Sub-Sale PSPAs clearly stated that it was a confirmor sale, HN would not have to state the potential risks of a confirmor sale, which would be obvious to Blissful Voice through Mr Ngai. Therefore, in my view:-
(1) Duty (1) was not necessary;
(2) Duties (1) (to the extent of recommendation of mechanism to ensure the completion of transaction), (4), (5) and (8) were also not necessary because the risk that the confirmor would not be able to complete the transaction was obvious to Mr Ngai, and in any event, the transaction in the present case was completed; and
(3) Duty (7) was also not necessary because the risk that obtaining redress against Hailey would be slim was obvious to Mr Ngai, and in any event, the transaction in the present case was completed and there was no suggestion that Blissful Voice would otherwise seek remedy against Hailey for failure to complete the transaction.
64.Insofar as there is any suggestion that such risks were obvious only to Mr Ngai but not Madam Tam, and/or that the fact that Mr Ngai would still cause Blissful Voice to enter into the transaction despite such obvious risks shows that such transactions were suspiciously against Madam Tam would carry the Plaintiffs nowhere, given my finding above that HN owed no duty to Madam Tam.
65.In relation to Duties (2) and (3), whether the price difference and the deposit difference were substantial, and even so substantial as to amount to “dishonesty”, was, in my view a commercial judgment. As stated in §51(7), solicitors are in normal circumstances not expected to advice on commercial matters. Taking this as a starting point, in the present case, not only that I see no reason to depart from this starting point, on the contrary, for the following reasons, I see that this starting point is reinforced:-
(1) To HN, Mr Ngai, being an estate agent himself, would be the adviser to Blissful Voice on the commercial matters of the property transaction;
(2) Even on Madam Tam’s own evidence, she agreed to the acquisition of the KM Properties upon Mr Ngai’s suggestion. In this regard, even on Madam Tam’s evidence, she said that after Mr Ngai’s advice to her that the KM Properties transaction would be a good bargain, she agreed to enter into the transaction without herself doing any research on the market. This shows that she did rely significantly, if not solely, on Mr Ngai on whether the transaction would be a good bargain or not;
(3) As found above, by the time when Blissful Voice engaged HN, the KM Sub-Sale PSPAs had already been entered into and were binding on Blissful Voice, and therefore, one would expect, objectively, that HN was there to advise on the legal matters rather than the commerciality of the transaction; and
(4) The fact that these commercial matters were close or even inherent in the transaction does not necessarily mean that HN as solicitors would have the duty to advise upon. Such commercial matters did not, in my view, lie in or arise from any legal consequence but purely commercial on its own. Any advice on drafting of the agreements and/or on legal matters could not have any effect on the prices and the sums of the deposits.
66.As regards Duty (6), there is no dispute that HN transferred the sums to WT Nominees upon Hailey’s instructions given through its director Madam Poon. When the vendor gives express instructions that the sums should be transferred to persons designated by the vendor, there is nothing suspicious in itself that would oblige HN to conduct due diligence on the persons so designated or verify the relationship between the vendor and the persons designated by it. Further and in any event, in the present case, even if due diligence was conducted as suggested and HN would have therefore discovered that WT Nominees was represented by Mr Ngai, in the absence of any duty owed by HN to Madam Tam, I see no reason why HN would have to inform Blissful Voice (probably through its contact point Mr Ngai) that Mr Ngai represented the person designed by the vendor to receive the deposits. If the discovery of Mr Ngai’s involvement in this matter would be relevant, in my view, this would only further reinforce the position that HN would not have to inform Blissful Voice about the same, given that Mr Ngai was a shareholder and director authorised on behalf of Blissful Voice to engage HN.
67.In respect of Duty (9), no particulars have been given as to what wordings should have been used and what more protection would be necessary, especially when the transaction was completed as agreed. In any event, I accept Mr Lai’s explanation that the KM Sub-Sale PSPAs were more detailed than a usual provisional agreement and contained all the essential terms that it was unnecessary to have a formal agreement.
68.With regard to Duty (10), with respect, even if I assume that there was such a duty, I do not see how this could sustain the Plaintiffs’ claim for damages. I stress that the transaction was completed as agreed, and point out that the Plaintiffs’ claim is unrelated to any or any extra stamp duty which seems to be the essence of this duty.
69.Duty (11), if it would exist, would be a duty owed by HN to Madam Tam. I have already found above that there was no such duty, irrespective of whether Madam Tam was HN’s client or not. Mr Lam submits that there was also a duty owed by HN to Blissful Voice to explain to, or inform, or make inquiries with, the majority shareholder of the relevant matters. With respect, I reject such submissions because such a duty, even said to be owed to the company but not the majority shareholder, would still be difficult to define for the same reasons set out in §40 above. Mr Lam also submits that after Mr Ngai engaged HN, it was not clear to HN who had the authority to continue to represent Blissful Voice, and therefore, HN should advise the majority shareholder and director. With respect, I also reject such submissions because (1) the Plaintiffs never plead that Mr Ngai did not have any authority to represent Blissful Voice after engaging HN on behalf of Blissful Voice, and had this been pleaded, HN may reply by plea of apparent authority and other relevant factual matters; (2) I do not see from the evidence how Mr Ngai’s authority to engage HN would suddenly cease right after the engagement (for example, with Madam Tam’s agreement to leave the logistics to Mr Ngai, there is no evidence or even suggestion from Madam Tam that she then told anyone Mr Ngai should not have any authority to contact HN anymore); and (3) in any event, even assuming that Mr Ngai would suddenly lose the authority, for the same reasons stated in §40, from HN’s perspective, HN would still contact Mr Ngai being the first point of contact, or in any event HN could not be obliged to contact Madam Tam instead.
70.As regards Duty (12):-
(1) There was no competing interest in respect of title checking. From HN’s perspective in relation to title checking, both Hailey and Blissful Voice were the purchasers, and both of them would like to make sure that the title was proper.
(2) The only competing interest was that Hailey would like to default in the KM Principal Sale and Blissful Voice would still like to proceed to completion in the KM Sub-Sale. However, this did not happen. On the contrary, in the present case, the transaction was completed.
(3) Mr Lam, in his Closing Submissions, raised an unpleaded point that there should have been written consent for HN to act in such circumstances. Even if I would allow him to run this unpleaded point, again, for the same reason as set out in §(2), the transaction was completed, and such written consent or the lack of it is irrelevant for the present purpose.
71.Insofar as reliance is placed upon County Personnel (Employment Agency) Ltd v Alan R. Pulver & Co. (A Firm) [1987] 1 W.L.R. 916 for any of the above Duties, such reliance, in my view, is misplaced. County Personnel (Employment Agency) Ltd v Alan R. Pulver & Co. (A Firm), supra is a case where the plaintiff took an underlease which had an unusual rent review clause providing for the rent to be increased on the same dates and by the same percentages as the increase of rent under the headlease and excluding the protection provided under the Landlord and Tenant Act 1954. In that case, the English Court of Appeal held that the clause was “a most unusual clause” (emphasis added) that the solicitor should have thought about this clause more carefully (923A), and that the risks arising from the clause “involve[d] no element of valuation, on which a solicitor is plainly unfitted to advise”, but risks that arose from the unusual clause against the background where the lessor would have every incentive to increase the rents to an extent that the rents could not have been investigated and found at open market levels (923F-G). In the present case, the price in the KM Sub-Sale was a purely valuation matter and Blissful Voice was in a position to make its own judgment on the price, and there was nothing unusual in the standard KM Sub-Sale PSPAs about the clauses setting out the prices.
72.Mr Lam also refers me to Hebei Enterprises Ltd v Livasiri & Co (2008) 11 HKCFAR 321 to support his submissions that HN had the above Duties. In that case, the solicitors were retained to advise the plaintiffs on the legal aspects of the project in question and the proper and necessary steps to be taken to implement the project, and thus as a matter of law the solicitors had a duty to protect the client’s interest (see §§58-59). The solicitors drafted the relevant shareholders agreement for the investment in the project, and the Court found that as solicitors for the plaintiff in the project, they included a duty to see to it that the protective measures devised under the shareholders agreement would be carried through and that the plaintiff’s investment capital would be protected. It was in that context that the Court of Final Appeal found that the solicitors should have been aware of the risks of the misapplication of the plaintiff’s capital fund and should have advised the plaintiff accordingly. This context is different from the present case, where, as I have found above, HN was engaged as conveyancing solicitors only. As conveyancing solicitors, at most, they were obliged to advise on risks arising from conveyancing (like title and risks related to a confirmor sale). However, the price, even unusually high, was not a matter arising from any legal matter and HN had not duty to advise on such a matter. In respect of transferring deposits to third parties under the control of Mr Ngai, the risks associated with this were (1) the transaction could not be completed because Hailey would not apply the deposit to the head vendor; (2) Madam Tam made a very bad investment with Mr Ngai; and (3) Madam Tam was defrauded by Mr Ngai. In my view, for (1), the transaction was completed and so it is academic. For (2), it would be a matter concerning Madam Tam personally if Madam Tam were HN’s client and in any event, it would be a commercial matter on which HN was not obliged to advise, as explained above. For (3), it would be a matter concerning Madam Tam personally if Madam Tam were HN’s client, and one cannot say that HN had a duty to advise Blissful Voice that Madam Tam may have been defrauded.
73.In the circumstances, I find that there were no duties owed by HN to Blissful Voice as the Plaintiffs allege.
IX. ISSUE (3) – DID HN BREACH ANY OF THE DUTIES?
74.From my finding above that there were no duties owed by HN to Blissful Voice as the Plaintiffs allege, it follows that there were no duties breached as the Plaintiffs allege. Mr Lam’s submissions that HN has not adduced any or any sufficient evidence to explain what they did to discharge the duties, and HN irresponsibly delegated the duties to Mr Lee, carry the Plaintiffs’ claim nowhere. In any event, the Plaintiffs’ pleading never raises any issue about the delegation of duties to Mr Lee.
X. ISSUES (4) AND (5) – WERE THERE ANY LOSSES CAUSED BY THE BREACH(ES) AND WERE THE LOSSES TOO REMOTE?
75.For the sake of completeness, I shall consider losses. I shall consider Issues (4) and (5) together.
76.The Plaintiffs divide the losses into two categories, namely: (1) direct loss; and (2) other losses.
77.In general, although the Plaintiffs were awarded damages in the Previous Actions, the relevant defendants in that case have not been able to pay. They have been wound up or bankrupted (as the case may be) upon petitions presented by the Plaintiffs in HCCW 45 of 2021, HCCW 46 of 2021, HCB 4715 of 2021 and HCB 5254 of 2021.
78.I shall discuss the direct loss first.
A. Direct loss
79.For direct loss, the Plaintiffs claim the price difference between the price under the KM Principal Sale (HK$25,920,000) and that under the KM Sub-Sale (HK$31,428,000), that is, HK$5,508,000.
80.In my view, this loss was the direct loss suffered by Blissful Voice. The loss would not be too remote. I would award this head in favour of Blissful Voice.
81.In respect of Madam Tam, even assuming that HN owed duties to Madam Tam personally, the loss was suffered by Blissful Voice alone, and the loss suffered by Madam Tam would be reflective loss not permitted at law. Therefore, no damages would be awarded to Madam Tam for this direct loss.
B. Other losses
82.The other losses are all losses to Madam Tam herself. According to §71A of the Amended Statement of Claim:-
“(1) Madam Tam incurred legal costs in the total sum of around HK$73,716, in relation to the legal consultation, advice and document preparation concerning her report to the [Estate Agent Authority] about Mr Ngai’s misconduct.
(2) Madam Tam incurred legal costs in the total sum of around HK$117,250, in relation to the legal consultation, advice and document preparation concerning her report to the ICAC about Mr Ngai’s misconduct.
(3) Madam Tam incurred legal costs in the total sum of around HK$85,000, in relation to the legal consultation, advice and document preparation for her complaint to the Law Society against HN.
(4) With respect to HCCW 45 of 2021, her legal costs and disbursements amounted to HK$44,602.
(5) With respect to HCCW 46 of 2021, her legal costs and disbursements amounted to HK$44,602.
(6) With respect to HCB 4715 of 2021, her legal costs and disbursements amounted to HK$139,975.
(7) With respect to HCB 5254 of 2021, her legal costs and disbursements amounted to HK$108,845.
(8) In considering whether to commence winding-up proceedings against Grand Vision, Cheerful Joy or Hailey, she incurred legal costs and expenses which amounted to HK$14,475.
(9) The legal costs outlined in sub-paragraphs (1) to (8) above, which Madam Tam incurred out of her own pocket, accumulate to HK$628,465.
(10) …
(11) In respect of the Blissful Voice action, Madam Tam incurred legal expenses in the sum of HK$1,114,301. ”
83.These costs and expenses were all incurred by Madam Tam herself, “out of her own pocket”. There is no allegation that these costs and expenses were incurred on behalf of Blissful Voice. Nor is there any evidence that these costs and expenses were treated as loans advanced by Madam Tam to Blissful Voice to be reimbursed. Given that there was no duty owed to Madam Tam, I would find that she would not be compensated for these costs and expenses.
84.Assuming that these were Blissful Voice’s costs and expenses, I would find that Items (1) – (3) are too remote because such costs and expenses were not necessary for Madam Tam and/or Blissful Voice to recover the loss suffered as a result of the fraud. Such complaints to the relevant authorities or institutions were not necessary for the legal proceedings taken to recover the loss. In respect of Items (4) – (8) and (11), I would find that these were within reasonable foreseeability and contemplation and not too remote – if the discharge of the duty, if any, would have alerted Madam Tam and Blissful Voice and thus would have prevented the fraud causing the loss, then recovering the loss by way of legal proceedings all the way to insolvency petitions would be some steps naturally to be taken.
XI. CONCLUSION
85.In the circumstances, I dismiss Madam Tam and Blissful Voice’s claim. I make a costs order nisi that Madam Tam and Blissful Voice shall jointly and severally pay HN the costs of this action (including any costs reserved), to be taxed if not agreed.
XII. POSTSCRIPTS
86.It remains to say that during the cross-examination of HN’s witnesses, especially Mr Lai, questions were asked which would be more relevant to the professional conduct of HN and/or Mr Lai rather than the issues in the present case (save and except those overlapping with the professional conduct). In order to ensure that the trial would go smoothly without too many interruptions from the bench, I just allowed the questions to be asked, with me raising queries at times as to the relevance and making it clear that some questions were not relevant but if such questions would be insisted upon, I would just allow them to save time rather than spending time discussing with counsel why such questions would be relevant or irrelevant. So, I make it clear here that while such questions were asked and answers were given, those answers given must be understood in context – HN or its witnesses were asked to give evidence on the issues in the present case, and presumably were not prepared to give evidence or answers relating to their professional conduct (save and except that overlapping with the issues in the present case). Therefore, in all fairness to HN and its witnesses, if the evidence would somehow be used for other purposes, such evidence must be understood in such context.
87.Lastly, I thank Mr Lam, counsel for the Plaintiffs, and Mr Tang and Mr Chan, counsel for HN, for their assistance.
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(Gary CC Lam)
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Deputy High Court Judge |
Mr Jacky Lam, instructed by Kok & Ha for the 1st to 3rd Plaintiffs
Mr Edward Tang and Mr Ryan Chan instructed by NEO Solicitors LLP for the 1st Defendant
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