Edward Wong Finance Co Ltd v. Pomay Investments Ltd and Others

HCA002401/1976

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: Penlington, J. in Court

Date of judgment: 13th August 1980

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JUDGMENT

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1. This matter raises some interesting points of law but, in the main, the facts are clear and not in dispute.

2. The plaintiff company is a licensed money-lender and the Managing Director, Mr. Edward Wong, has been acquainted with the 3rd defendant, Shum Ka-ching, for some years and they have had business dealings together. Mr. Shum was, in 1976, a Director of two companies, one of them being the Po Fung Finishing Works Ltd ("Po Fung") which occupied the ground floor of a factory building at 76 Hung To Road, Kwun Tong. The 2nd and 4th defendants were also directors of that company but Mr. Shum had the largest share and in subsequent events clearly controlled matters on behalf of them all.

3. In late January 1976 Mr. Shum was approached by one Chan Sun-ming who told him that he and the Kai Ming Investment Co. Ltd. ("Kai Ming") had agreed to buy the whole factory building from the existing owner and that he and Kai Ming would be prepared to sell the ground floor to Po Fung for $1,850,000. The existing owner at that time was one Ho Sau-ki who had agreed to sell the property to the Lucky Time Finance Co. Ltd. ("Lucky Time") for $3,800,000 by an agreement dated 17th December 1975 (Page 11 of the agreed bundle 2). Lucky Time by another agreement also dated 17th December 1975 (Page 17 of bundle 2) had in turn agreed to sell the building to Chan Sun-ming and Kai Ming for $5,250,000. Completion of that sale was to be on the 29th January 1976 at the offices of Danny Yiu, a solicitor, who had prepared both agreements.

4. There was another collateral agreement (Page 25 of bundle 2) which set out that in the purchase by Kai Ming and Chan Sun-ming, Kai Ming was purchasing the top floors for $3,510,000 and Chan Sun-ming the ground floor for $1,740,000. Chan Sun-ming therefore stood to make $110,000 on the proposed re-sale to Po Fung.

5. Shum Ka-ching accepted Chan Sun-ming1s offer and a document was signed (Page 22 of bundle 2) dated 30th December 1975. It contains a receipt for the deposit of $1,001,000 paid by Po Fung to Chan and which sets out the purchase price, that a further deposit of $85,000 was payable on the 15th January 1976 and that a formal agreement was to be signed at a solicitor's office before the end of January. These two latter documents were referred to in argument as "the Chinese agreements".

6. Shum Ka-ching then went to see Edward Wong on the 21st January, by which time the further deposit of $85,000 had been paid to Chan, and told him he wanted to borrow $1.3 or $1.4 million to complete the deal. This Mr. Wong agreed to do on the security of a debenture over the property to be purchased plus a personal guarantee by the 2nd, 3rd and 4th defendants. Mr. Wong had had other dealings with Po Fung and had known the Directors Personally for some years.

7. Mr. Wong and Shum Ka-ching then went to see Miss Leung, an assistant Solicitor with the 5th defendant, Johnson Stokes and Master ("J.S.M.") Miss Leung is, subject to the supervision of a partner, in charge of the conveyancing section of J.S.M.'s Kowloon office and has acted for Mr. Wong's companys on several previous occasions in connection with advances made on various securities. Shum Ka-ching, however, was not known to Miss Leung.

8. Mr. Wong said that he did most of the talking at this meeting and Miss Leung was told of the purchase made by Shum Ka-ching and the arrangement made for mortgaging the property to his Finance Co. Miss Leung was asked to complete the legal formalities for them. She was informed that the solicitor acting for the vendors was Danny Yiu.

9. Mr. Shum's evidence about this meeting was that before going to J.S.M. he had purchased a "shelf" company from his accountant to be the vehicle for the purchase. This company was called the North American Meat Packing Co. Ltd. ("N.A.M.P. Ltd") and when he went with Mr. Wong to see Miss Leung he took along a copy of the memorandum and articles. He also took along the two Chinese agreements.

10. Mr. Shum is a native of Shanghai and speaks Cantonese with an accent. Both he and Mr. Wong speak fluent Shanghaiese and on occasion used that dialect to speak to each other. Miss Leung does not speak Shanghaiese.

11. Shum Ka-ching said he showed Miss Leung the memorandum and articles of N.A.M.P. Ltd and said he wanted to use it to purchase the property and that he would also use it for any future such purchase. Miss Leung however said that it was not an appropriate name for a land-holding company and it was agreed, and I am satisfied it was at Miss Leung's suggestion, that Shum purchase another shelf company from J.S.M. Miss Leung made inquiries from her Hong Kong office and was told a company called Bovill Investments Bovill was available. Shum agreed to buy it and was told that if he wanted, to change the company's name at any time he could do so. In fact it has been changed since these proceedings were commenced.

12. Mr. Wong said in evidence that at this meeting the question of what form the security would take was discussed and it was agreed that it should be a debenture given by the new company. Mr. Wong also said that at first this was to be a floating debenture over all the company's assets but later on, at Miss Leung's suggestion, that clause was removed. Mr. Shum said it was in fact at his request and I think that is more likely.

13. Miss Leung made some rough notes at this meeting of the 21st of January (bundle 3 page22), in which she had recorded that the principal was to be repaid over 7 years with interest at 1% on the reducing balance. This was, however, crossed out and the debenture was drafted to provide for payment on demand. It does seem that nevertheless the parties did intend to have payment made by instalments and in fact debit notes for this were sent out by Mr. Wong's company for some months after the loan was made.

14. The completion date for the sale was to be the 26th January and it seems clear that both Shum and Wong wanted it done before Chinese New Year, which was the 30th. As there was an intervening week-end Miss Leung said she could not do it by the 26th but could manage the 27th. I do not believe however, that either Wong or Shum were putting strong pressure on Miss Leung to complete the matter urgently. Certainly neither had any real reason for demanding speed. Wong would get interest when the money was lent but would in turn be paying interest to his bank and Shum Ka-ching already occupied the premises as a tenant.

15. Some 4½ years have passed since the meeting on the 21st January in Miss Leung's office and none of the parties can be expected to accurately recall exactly what was said. I am, however, satisfied that at this meeting both Mr. Shum and Mr. Wong thought Miss Leung was acting as their solicitor in connection with the whole transaction, i.e. the purchase, the mortgage and the shelf company. Mr. Shum referred to "the solicitors for the other side" and I am sure he considered that his and Mr. Wong's interests were very much the same, as indeed they were in getting a good title, and he believed, and in my opinion had every reason to believe, that Miss Leung was representing him in the purchase. I am also satisfied that nothing was said or done until Danny Yiu had fled Hong Kong to remove that impression.

16. There seems to have been some confusion as to what the amount of the loan was to be. Miss Leung's note refers to $1.3 m. Mr. Wong said he agreed to $1.335 m, Mr. Shum says he wanted 70% of the sale price i.e. $1,095,000. I think in fact the actual amount was not decided at the meeting but it was agreed it would be about $1.3 m, Miss Leung to be advised later of the exact amount.

17. Mr. Shum went back later to J.S.M. with his co-directors, the 2nd and 4th defendants and his wife who was to be a director of the new company. They were seen by Mrs. Cecelia Tsu of J.S.M.'s companies section who explained various papers to them in connection with the company and they signed. She prepared a note of this attendance (Bundle 4 page 86) From this it seems clear that these papers were in fact signed on the 28th January and were back-dated to the 26th.

18. Following the meeting on the 21st Miss Leung sent a letter to Edward Wong. (Bundle 2 page 27) with a copy to the 2nd and 3rd defendants which acknowledges that J.S.M. had received instructions from Mr. Wong to act for him in relation to the debenture and for Mr. Shum and Mr. Ma in relation to the shelf company. Mr. Shum denies ever receiving this letter but, on a balance of probabilities I think he did, and the 5th defendant naturally says it shows that they were acting for Shum Ka-ching only in connection with the shelf company. I do not think it is enough to dispel Mr. Shum's understanding of their relationship. Miss Leung also wrote to Danny Yiu (Bundle 2 page 23) asking for the necessary deeds so as to prepare the mortgage. In reply she received a letter from him (Bundle 2 page 28) enclosing copies of various documents and the original assignment from Ho San-ki and Lucky Time Finance Co. Ltd. to Bovill. Miss Leung said that before receiving these documents she spoke to Danny Yiu on the phone and because he seemed to have difficulty with it, told him to leave the purchasers name blank in the assignment and she would fill it in. She also said that Danny Yiu, naturally enough, seemed keen to get full scale costs from the transaction, which he would do if either he was acting for both vendor and purchaser or if the purchaser was not represented. If the purchaser was represented by other solicitors he would get only half scale costs from the vendor. In fact he subsequently rendered a bill for $45,820, including stamp duty, which is full scale fee on the conveyance. Miss Leung said she was concerned when she received the assignment to see that only Lucky Time Finance Co. Ltd. was recited as a confirmor, but Chan Sun-ming was not. She spoke to Danny Yiu on the phone about this and he was reluctant to include Chan. It was therefore agreed that Chan should be regarded as a broker and the agreement between him and Shum Ka-ching was to be cancelled. This meant that the assignment would show a consideration of only $1,740,000 without the profit of $110,000 Chan was making. Miss Leung referred to this as "restructuring" and said it was quite normal. Mr. Edmond Cheung, President of the Hong Kong law Society did not, however, share that opinion. However the only issue to which it is relevant here is that it supports the view that Miss Yeung was doing work which would normally be done by the purchaser's, not the mortgagee's, solicitor.

19. It was arranged between Miss Leung and Danny Yiu that completion, in the manner which has been referred to in these proceedings as the "Hong Kong style", would take place on the 27th January and Miss Leung said that she told Shum Ka-ching that he should go to Danny Yiu's office to sign some documents and pay the balance of the purchase price plus Danny Yiu's costs. Mr. Shum says he was not so told, and it is clear he did not in fact do so before the 27th. As I have said I doubt whether any of the parties can now give an accurate account of what exactly was said on the various occasions in January 1976 when matters were discussed but it does seem strange if Mr. Shum was told to go to Danny Yiu's office to do something essential for completion that in fact he did not do so. On balance therefore I find that he was not so instructed.

20. Miss Leung then proceeded to draft the debenture and the personal guarantee, which Mr. Shum had not been told about but was apparently always required by the plaintiff if he was lending to a company. The actual preparation of these documents was done by a conveyancing clerk, David Leung,(who gave evidence), under Miss Leung's supervision. There was in fact a fairly serious, and one would have thought obvious, mistake made in the guarantee in that the interest rate was stated as 2.1% not 1% and it was not said what period that covered i.e. monthly or annually. This is perhaps some indication that matters were being done in a hurry but it also seems to show that when they were signed the documents were not read or explained to the signatories as such a mistake would have become apparent.

21. Miss leung then wrote a letter to Danny Yiu, (Bundle 2 page 32) which formed the basis of the settlement of this transaction. In that letter Miss Leung said that she would ask her client, the plaintiff, to put her in funds amounting to $1,355,000 and would forward to Danny Yiu a cheque for that amount on his undertaking to forward to her, within 10 days, all the relevant documents duly executed and he would also arrange for the premises to be re-assigned from the Hang Sang Bank, the existing mortgagees, so she could register the assignment to Bovill and the debenture to Mr. Wong. If he was not in a position to send the documents within that time he was not to release the money to his clients. Danny Yiu was to sign a copy of the letter as indicating he was prepared to give such an undertaking and in fact did so. On the 27th January other important documents were executed. One was a directive, prepared by Miss Leung, addressed to the plaintiff and signed by the 1st defendant, that on execution of the debenture, he was to forward the advance of $1,355.000 to Danny Yiu towards payment of the purchase price of the property. The others were letters to the plaintiff reporting that the debenture had been duly executed and asking for a cheque for the advance, which at that stage Miss Leung still thought was $1.355 m., and another letter to Danny Yiu sending, not $1.355 m but $1.665 m. This was because when Mr. Wong came to Miss Leung's office with the money it transpired that in addition to the $1.355 m secured by the debenture, he had also agreed with Mr. Shum to lend him a further $310,000 on the security of some post-dated cheques. This was something which had not been mentioned to Miss Leung at all but apparently Mr. Shum had seen Mr. Wong between the 21st and the 27th, told him he did not have enough money to complete the purchase even with Wong's $,.355 m and Mr. Wong agreed to a further personal advance, at a slightly higher interest rate as it was virtually unsecured. Miss Leung was naturally surprised at this and said she then realised that Mr. Shum had not been to Danny Yiu's office to pay the balance of the purchase price. However she rang Danny Yiu, confirmed what the balance required was and sent the letter enclosing three cashier orders for a total of $1.655 m which Wong had brought to her office himself. On the 27th the 2nd, 3rd, 4th defendants had come to Miss Leung's office and executed the debenture and guarantee. (These are in bundle 3 page 39 and 60). The provision in the debenture which would have brought any other land owned by Bovill into the security was deleted at the request of Mr. Shum and his fellow directors even though in fact Bovill did not then own any other land. These documents were executed and J.S.M.'s two bills of costs were presented to Mr. Shum for payment. These are at bundle 2 page, 43A and 43B, and considerable reliance is placed on them by the 5th defendants as showing that they were not acting for the 1st defendant in relation to the purchase of the property or as mortgagor of the property. They acted for Bovill, they say only in its purchase from them, plus doing certain secretarial work which was separately charged for. The first bill clearly states that it was for work done in the purchase of the shelf company and says nothing of the purchase of land. The second bill is in fact addressed to the plaintiff but the words "payable by Bovill Investments Ltd." have been added. This bill relates to the loan from the plaintiff secured by the debenture and guarantee. Miss Leung said that as she had acted for Bovill, or rather its directors, in the purchase of a shelf company there might be some confusion as to whether J.S.M. was acting for them in the purchase and she instructed her conveyancing clerk, David Leung, to explain to Messrs Shum, Ma and Tsang that that was not so -J.S.M., were not acting for them in the purchase or mortgage.

22. I accept the first part of that evidence but not the second. I cannot accept that if Miss Leung was anxious that Messrs Shum, Ma and Tsiang were aware that J.S.M. was not acting in the purchase she did not simply tell them so herself. David Leung says he followed his usual procedure but cannot remember actually telling Mr. Shum that J.S.M. were not acting for them in the purchase. Over four years have elapsed since these events but by mid-February 1976 it was clear that Danny Yiu had left Hong Kong and the conveyance had gone seriously wrong. It must have been very obvious that the question of who, if anybody, was acting for Bovill in the purchase had become very important and if such a conversation had taken place I think David Leung would have remembered it. I can well believe that his normal practice when presenting a mortgagor with a bill addressed to the mortgagee was to tell him that even though the mortgagee was their client, he must pay it and that may well have been done here. Everybody knew and there in no dispute that J.S.M. were Mr. Wong's solicitors but that is a long way from telling Mr. Shum they were not acting for him in the purchase. I accept Mr. Shum's evidence on that and am satisfied he was never told that until after the Chinese New Year holidays when Danny Yiu's departure had became known.

23. There was a conflict in evidence as to whether Miss Leung told Messrs Shum, Ma and Tsang to rush over to Danny Yiu's office on the 27th to pay his costs and sign his documents - she says she cannot remember doing so but Mr. Shum says she did. In any event that is in fact what they did and if anything turns on it I accept their evidence. There is no evidence of Mr. Shum being told by anybody at any time why he had to pay Danny Yiu's costs or in what capacity and indeed in its defence the 5th defendant says that Bovill was either represented by Danny Yiu or was unrepresented in the sale. I accept Shum's evidence that he was simply told he had to pay Danny Yiu's costs and did so without questioning why.

24. As to events after the Chinese New Year holidays there is a conflict in some of the evidence. It is clear that rumours were spreading that Danny Yiu had fled Hong Kong and certainly he could not be contacted.

25. Mr. Shum said that about 14 days after he had been to Danny Yiu's office - he had never been there before or met Danny Yiu before - he rang Miss Leung to find out what was the position in relation to the conveyance and asked if Danny Yiu had forwarded the title deeds. He said that Miss Leung told him not to worry and completion would take place. However he said he was still worried and went to see the Mr. Wong and they went together to see Miss Leung.

26. Miss Leung said that Mr. Shum in face phoned her about not being able to collect rent from a tenant and as a result she wrote to Danny Yiu asking if there was a tenant in part of the premises and she wrote to Danny Yiu asking if that was the case. Mr. Shum in cross-examination says that was not so - in fact he rang because somebody had come to collect rent from him. I am sure this was simply a misunderstanding but it does seem to again indicate that whatever Miss Leung's understanding of the position was, Shum looked to her when legal problems arose.

27. I think it is also clear from the evidence of Mr. Shum and Mr. Wong that they knew that the formal final completion of the matter had not taken place and they were relying on Danny Yiu to deliver the title deeds to Miss Leung. If they had been told that that was the only way the matter could be dealt with - to rely on Danny Yiu's undertaking being honoured -both would probably have gone ahead. What they were not told was that there was a much safer way of completing the matter which would, however, involve some delay. That was to follow the system used in England and other parts of the Commonwealth of only delivering cash in exchange for completed documents.

28. It is not in dispute that Danny Yiu in fact fled Hong Kong without honouring the undertaking he had given and taking with him the money received from the plaintiff.

29. The 1st, 2nd, 3rd and 4th defendants resist the plaintiff's claim on the grounds that Danny Yiu was a stokeholder and, on the authority of Sorrell and ors. v. Finch (1977) A.C. 728 payment to him was not payment of the balance of the purchase price of the property, as set out in the authorisation (2/38) of 27th January. I do not accept that argument. I think the facts here are very different than in Sorrell v. Finch, which was payment of a deposit to an estate agent "subject to contract". Here the payment was not a deposit but a final instalment, it was on the basis of a concluded contract and was made to the purchasers solicitor. I am satisfied that payment to a vendors solicitor in those circumstances is the equivalent to payment to the purchaser. If the property had not been assigned by mortgage to the Hang Sang Bank I have no doubt that, if in fact Danny Yiu was acting as their solicitor in the matter, He San-ki and Lucky Tim Finance Co. Ltd. would have been obliged to assign the property to the 1st defendant as they had been paid.

30. The plaintiff did exactly what he was told to do by the 1st defendant - he sent the mortgage money to Danny Yiu in payment of the balance of the purchase price and I do not see that he was required to do further. It is not in dispute that he has, in terms of the debenture and guarantee, demanded payment of his principal and interest but apart from the sum of $60,000 nothing has in fact been paid to him by the 1st, 2nd, 3rd or 4th defendants.

31. The plaintiff further claims against the 5th defendant for damages for breach of contract and for indemnity in the event of it not being able to recover from the 1st, 2nd, 3rd or 4th defendants. They in turn have joined the 5th defendants as a third party.

32. It is not in dispute that the 5th defendant acted throughout on behalf of the plaintiff, as his solicitors. They were, therefore, under a duty to exercise reasonable skill in the conduct of his affairs "a solicitor's duty is to use reasonable care and skill in giving such advice as the facts of the particular case demand". Per Salmon L.J. in Sykes v. Midland Bank Executor Co. (1971) 1 Q. B. 125. Counsel for the 5th defendant has emphasised that solicitors, like all other professional persons, do not guarantee the successful conclusion of any enterprise nor must they bring the highest possible" level of skill to bear. They must only use the degree of skill one would expect from a good competent member of the profession. In particular the 5th defendant says that a professional person is not negligent if he follows a general practice which is accepted by a substantial portion of that profession. I have been referred to cases in support of that proposition, which mainly have related to the medical profession who are I imagine, more vulnerable to such actions than other professions.

33. In Bolam v. Frien Hospital Management Committee (1957) 1 W.L.R. 582, it was held that a doctor was not negligent if he adopted a form of procedure which did not involve giving relaxant drugs to a patient about to receive electrical current treatment if there was a substantial and responsible body of professional opinion which said it was better not to do so, even if another such body was of the opposite opinion. In Vancouver General Hospital v. McDanial and anr. 56 Times Reports 56, there were two ways of treating patients who had small-pox and the Privy Council held that as the practice adopted by the appellants was almost universally accepted it was not negligent to follow it. Another case, which does involve conveyancing, is Simmons v. Pennington and Son (1955) 1 W.L.R. 183, were solicitors for the vendor had answered a requisition in a way that enabled the purchasers to rescind a contract. It was held that such requisitions had been answered in that way for many years by competent conveyancers and as Lord Denning says at P. 185 the resicion "was not something which could reasonably have been expected to flow from an answer in this form".

34. There has been evidence, which I accept, that conveyancing transactions in Hong Kong are almost inevitably done, not in accordance with the traditional way of an actual exchange of money for documents but by one solicitor forwarding cash against another solicitors undertaking to produce, within a reasonable time, registrable documents of title. Clearly this is a procedure which, particularly if there are several parties involved most of whom may have mortgages which have to be discharged, makes the task of the conveyancers much easier. It also, and I accept the evidence given by Mr. B.S.M. Elney on this point, results in that conveyancing being done more speedily and this is for the benefit of the public. Mr. Edmond Cheung, President of the Hong Kong Law Society, gave evidence for the plaintiff and he said that transactions that he had been involved in which an "English style" completion had been required formed a tiny minority, perhaps 1% of the total, and over many years he had only had about 12. He also said, and this seems to be uncontradicted, that while some solicitors had defrauded their own clients and made off with their money, this case was the first time a conveyancing transaction had not been completed due to a solicitor defaulting on his undertaking. However he also said that if he had been acting in this matter the fact that there appeared to be a very large mortgage on the property, possibly more than the price being paid to Ho San-ki would have "rung a warning bell". He would have made inquiries from the mortgagees solicitors to see how much in fact that mortgage was and, if the purchase money was not sufficient to satisfy it, would take precautions such as sending the purchase money direct to the mortgagee on his undertaking to re-assign the land, or portion of the land, being purchased. Another factor which would have influenced him towards caution was that the purchaser was to be a shelf company with no other assets (it is clear that in this case there would be personal guarantees, for whatever they were worth). Other factors should also be considered. Mr. McElney in his evidence said that obviously the size of the other solicitors firm would be very important; one would naturally rely on a firm with several partners, each of whom would be liable for default, and also the amount of money involved.

35. Mr. Cheung said that Danny Yiu had a reputation as a gambler but Miss Leung said she did not know that - and indeed she would hardly be expected to know, even if in fact that was so. I place no weight on that.

36. Mr. Price, in his very able and persuasive submissions said, and I readily accept, that it is all too easy to be wise after the event and the precautions taken by both Mr. Cheung and Mr. McElney are "post Danny Yiu" when the dangers became apparent.

37. The Hong Kong Law Society had itself apparently been aware of the possible dangers in the Hong Kong style of completion and in April 1965 circulated a report prepared by a sub-committee which, inter alia, stated that if a solicitor for any reason wished to have an English style completion, it would be unethical to refuse. The report refers to the Hong Kong style completion as one which had grown up as a matter of convenience but may leave a solicitor vulnerable.

38. In March 1966 this report was adopted and it was again stated that if for reasons of security a solicitor wished to have a formal completion it was unethical to refuse to comply.

39. Miss Leung stated that she had never seen these circulars and she had not been given any standing instructions about vetting other solicitors before accepting an undertaking to complete. I think she should have been given some guidance because, even ignoring these circulars, the dangers with the rapid growth of small solicitors firms in Hong Kong in the 1970s must have been obvious. If one is dealing with a large firm, each of whose partners is personally liable for default the risk of that taking place is minimal. Here however it seems to me all the relevant considerations pointed towards possible danger. Danny Yiu was a one man firm, recently established. The amount involved was substantial, even by Hong Kong's land values. The mortgage to the Hang Sang Bank was apparently very large in relation to the purchase price. The purchasers were small businessmen of no great wealth as they had to borrow almost all the purchase price, and their personal guarantees were of doubtful value.

40. Taking all those factors into account and avoiding looking at the position with hindsight, it seems to me that the transaction called for some precautions. These could have been such as were stated by Mr. Cheung and Mr. McElney - sending a cheque direct to the Hang Sang Bank or its solicitors on its undertaking to re-assign. I would have thought it called for even more and that was a proper English style settlement. If Miss Leung was being pressed to complete I am satisfied she should have informed both Mr. Wong and the directors of Bovill that although she did not know anything specific against Danny Yiu there was a risk in sending a large sum of money to him on the basis of his undertaking and that that risk could be greatly reduced by actual completion procedure. If they then said "we accept the risk, get on with it" Miss Leung would have done all she was obliged to do. Buckland v. Mackesy (1968) Sols. Journal 841. I am satisfied that the style of completion which was generally approved in 1976 was that, while in the great majority of cases an undertaking could be accepted, a solicitor should be aware of the damages and must give thought to the factors involved. If he did so and decided that he could safely accept the undertaking and, on scrutiny, that was a reasonable decision, he is not negligent. However in a small number of cases the solicitor should insist on a proper settlement and every case should be considered accordingly. Here there is no evidence of any such consideration and I hold therefore that the general approved practice in Hong Kong was not followed. This particular conveyance called for full consideration of the dangers involved and that consideration was not given.

41. That, however, is not an end to the matter as between the plaintiff and the 5th defendant. There is very high authority that even if there is a breach of a duty to explain possible dangers, the solicitors will not be liable if the client, although not informed, would have gone ahead anyway. The plaintiff is then entitled only to nominal damages. Sykes v. Midland Bank Executor Co. Ltd. (1971) 1 Q.B. 113. In that case there was strong evidence that the client would have entered into a lease agreement even if warned of the presence of an unusually restrictive clause in the lease. Mr. Wong was aware of the reliance on Danny Yiu though not told of ways to avoid such reliance. He says if he had been told there was a risk he would not have gone ahead on that undertaking. He was a mortgagee who had little to gain himself from early completion. I find it difficult to decide this point but on balance I accept his evidence even though obviously it must be tinged with self interest, and hold that, if properly advised of the risk and the alternatives available, Mr. Wong would not have sent his cashier orders to Danny Yiu in the way he did. Neither, I may say, would Mr. Shum have so directed him if he had been similarly advised.

42. I have, I may say, considered the question of negligence on the basis of the Hong Kong Law Society being a separate entity, even though the qualification of most of its members is admission in England, a qualification which has been jealously guarded. There is dicta in English cases that delivery of cash without documents is improper. Pape v. Westacott (1894) C.A. 272. Per Lindley L.J. at 278 Blumbery v. Life Interests etc. Corp. (1897) 1 Ch. 171.

43. I turn now to consider the position of the 1st, 2nd, 3rd and 4th defendants against the 5th defendant, who they have joined as a 3rd party. If J.S.M. were also acting for them as solicitors in the conveyance then I think clearly they must be liable for the reasons I have given.

44. I agree with Mr. Price that there was no contractional relationship of solicitor and client between Bovill and J.S.M. as regards the conveyance but on the facts Mr. Shum and his fellow directors believed Miss Leung was acting for them on the conveyance and relied on her to advise them in relation to it. Mr. Shum went with Mr. Wong to see to the formalities of the sale and I am satisfied that he thought she would be acting both for Mr. Wong and the purchaser, which he then intended to be the N.A.M.P. Ltd. Miss Leung did not like his shelf company and sold him another one. She negotiated with Danny Yiu in their presence on details of the completion. She re-structured the parties, though Mr. Shum may not have known much about that. At no time did she tell him she was only acting for him in connection with the purchase of the shelf company. Even if he had been told that when presented with J.S.M.'s costs - which I do not accept - it was, in my opinion, too late. I consider that by her conduct Miss Leung had led. Mr. Shum to believe she was acting for him - she says herself he could easily have been confused - I would go further and say he almost certainly came to that conclusion. He regarded his and Mr. Wong's interests as almost identical - as indeed they were -and that Miss Leung was there to protect them. I do not consider the copy of the letter sent to Mr. Wong setting out the instructions was enough to remove that impression. That I consider she failed to do but I feel I should add that she was only doing what she and hundreds of other solicitors had done before on many occasions without loss. She was never instructed to do otherwise and one has a great deal of sympathy for her position.

45. Leading Counsel for the 5th defendant has submitted that the Court should be reluctant indeed to come to a finding which may reflect discredit on a member of a profession. I may say I accepted Miss Leung as a witness of truth. There were some points, over the years, I think her memory was incorrect but there is nothing whatever in the evidence in this case which in any way reflects ill on her personally.

46. I am therefore of the opinion that the third party is liable to indemnify the 1st, 2nd, 3rd and 4th defendants on the basis of the line of cases commencing with Headley Byre and Co. Ltd. v. Heller and Partners Ltd. (1964) A.C. 465 and including Midland Bank v. Hett, Stubbs and Kemp. [1979] 1 ch 384. Miss Leung should have realised that the directors of Bovill were relying on her advice and in fact did so, in particular in directing Mr. Wong to send the cashier orders to Danny Yiu in the way they did.

47. It was argued that even if liable to him the most the Plaintiff, Mr. Wong, can recover from the 5th Defendant is the amount of the loan plus statutory interest. I do not agree. If the 5th Defendant had not been negligent I have no doubt the matter would have been concluded and Mr. Wong would have had his mortgage with the interest payable thereunder, 1% per month.

48. The 1st, 2nd, 3rd and 4th defendants also claim against the third party for damages, being the sum of $310,000 which was the additional sum advanced by Mr. Wong, some of which it seems was given to him in the form of cheques and some was advanced on the security of post-dated cheques.

49. There will be judgment for the Plaintiff against the 1st, 2nd, 3rd and 4th and 5th defendants for $1,295,000 plus compound interest at 1% per month from the 22nd January 1976 to the 13th day of August 1980, within 14 days from the date hereof and costs to be taxed. The 1st, 2nd, 3rd, 4th and 5th defendants are entitled to be indemnified by the 3rd party against such judgment.

50. There will also be judgment for the 1st defendant against the 5th defendant for $310,000 plus interest at 10% from 27th January 1976 to date of payment. The 1st defendant to have costs to be taxed.

Representation:

Mr. Oswald Cheung, Q.C. & Patrick Fung (Deacons) for Plaintiff

Mr. R. Tang (P.K.H. Wong & Co.) for D1-4.

Mr. Leoline Price, Q.C. and Mr. Richard Mills-Owens, Q.C. (Slaughter and May) for D5 and 3rd party.