1990 No. A3759
IN THE SUPREME COURT OF HONG KONG
HIGH COURT
____________
BETWEEN
YEUNG SHU
(suing on his own behalf and on behalf
of the estate of KEH PICK HA) Plaintiff
and
ALFRED LAU & CO. Defendant
(a firm)
and
CHANG PAO CHING Third Party
____________
Before: The Hon. Mr. Justice Keith in Court
Dates of Hearing: 31st January, 1st and 2nd February 1996
Date of Handing Down of Judgment: 16th February 1996
[(1) A solicitor's duty to register an agreement in the Land Registry does not continue until the date when effective registration becomes impossible. The fact that the solicitor could have remedied an initial breach of his retainer by subsequently registering the agreement merely meant that it was in his power to mitigate the consequences of the breach which had already occurred. Dicta in Midland Bank Trust Co. Ltd. v. Hett, Stubbs & Kemp [1979] Ch. 384 as to when a breach of the retainer occurs for the purpose of determining whether a cause of action in contract is time-barred disapproved.
(2) Loss sustained as a result of a solicitor's failure to register an agreement in the Land Registry does not arise until the Plaintiff's interest in the land has been extinguished by the lack of registration, since until then the failure was capable of being remedied at minimal or no cost. Dicta in Bell v. Peter Browne & Co. [1990] 2 Q.B. 495 as to when loss arises for the purpose of determining whether a cause of action in tort is time-barred disapproved.]
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J U D G M E N T
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INTRODUCTION
In this action, the Plaintiff claims damages against the Defendant for breach of contract and negligence. The Defendant defends the action on two grounds: first, that the Plaintiff's claim is time-barred; secondly, that such loss as the Plaintiff sustained was not caused by the Defendant's breach of contract or negligence. In addition, there are third party proceedings in which the Defendant claims an indemnity from the Third Party in respect of the Plaintiff's claim if it is found to be liable to the Plaintiff. For reasons which it is not necessary to set out in this judgment, I decided to try the question as to whether the Plaintiff's claim is time-barred first. It is upon that issue that I hand down this judgment. The Third Party took no part in the trial of that issue. His counsel did not wish to call any evidence or make any representations on it, and the Third Party is content to be bound by my decision on it.
The Plaintiffs in this action were originally Yeung Shu and his wife, Keh Pick Ha. However, Madam Keh died on 8th February 1991, and on 27th June 1995 Master Jones permitted Yeung Shu to carry on the proceedings on his own behalf and on behalf of his late wife's estate. I shall refer to Yeung Shu throughout as the Plaintiff.
I was originally intending to hand down this judgment on 12th February. However, the issues which arose in the present case are similar to those which arose in another case which I tried after I had reserved judgment in the present case. That case is Ko Ming Bor v. Lo & Lo (HCA 11879/95). I therefore decided to defer handing down this judgment, and I am now handing it down on the same day as I am handing down judgment in that case. Although much of the reasoning in each judgment is applicable to the other, each of the judgments are free-standing and independent of each other because (a) counsel's arguments were not identical, and (b) counsel in each case did not hear the arguments of counsel in the other.
THE FACTS
No evidence was called on the limitation issue. That was because the facts are not in dispute. I take them from the chronology of facts agreed by the Plaintiff and the Defendant, and from the documents contained in the agreed bundle of documents.
In 1979, the Third Party, Chang Pao Ching, was planning to develop a site on Ap Lei Chau. He was proposing to build a block of flats at 55 Ap Lei Chau Main Street. The Plaintiff and his wife decided to buy one of the proposed flats. Accordingly, by a sale and purchase agreement dated 13th November 1979, between the Plaintiff and his wife on the one hand and Mr. Chang on the other, Mr. Chang agreed to sell to the Plaintiff and his wife a share of the land on which the block of flats was to be built, together with the exclusive right to occupy the flat which was going to be at the front of the 3rd floor of the building. The purchase price was $84,000.00, and the Plaintiff and his wife paid Mr. Chang a deposit of $33,600.00. The sale was to be completed within seven days of the Plaintiff and his wife being notified of the issue of an occupation certificate for the building. By a supplemental agreement executed on the same date, the time for the completion of the construction of the building was extended to 360 days from that date, and Mr. Chang paid the Plaintiff and his wife the sum of $4,000.00 as agreed compensation for the delay.
The Defendant, Messrs. Alfred Lau & Co., is a firm of solicitors. It acted for the Plaintiff and his wife on the transaction. It submitted a bill for its services which was dated 13th November 1979. The bill was for $729.00. It was paid by the Plaintiff and his wife. It included the solicitors' fees of $75.00 for registering the sale and purchase agreement, and a disbursement of $30.00 being the fee payable on registration. Neither the fee of $75.00 nor the disbursement of $30.00 should have been charged, because the Defendant admits that the sale and purchase agreement was not registered in the Land Registry at all.
In the early 1980s, Mr. Chang left Hong Kong for Taiwan. The construction of the building was never completed, and no occupation certificate was ever issued. Accordingly, the sale to the Plaintiff and his wife of the share in the land which they were buying was never completed either.
Towards the end of the 1980s, Mr. Chang executed a number of documents which related to the land on which he had been proposing to build the block of flats:
On 26th March 1987, he executed a mortgage under which he granted a charge over the land in favour of Vucan Co. Ltd. ("Vucan") as security for a sum in the region of $3.2m. which the mortgage deed recorded Mr. Chang as owing to Vucan. That mortgage was registered in the Land Registry on the same date.
On 1st June 1988, Mr. Chang executed a sale and purchase agreement under which he sold the land to Harvest Step Development Ltd. ("Harvest Step"). The land was being sold to Harvest Step under this agreement along with adjoining land at 49, 51 and 53 Ap Lei Chau Main Street. The purchase price of all the land to which the sale and purchase agreement related was $16.8m. That sale and purchase agreement was registered in the Land Registry on 13th August 1988.
On 9th September 1988, Mr. Chang executed an assignment under which he assigned the land to Harvest Step. Again, the land was assigned to Harvest Step under the assignment along with the adjoining land at 49, 51 and 53 Ap Lei Chau Main Street. Clause 1 of the assignment showed that Mr. Chang's share of the purchase price of $16.8m. (i.e. the share attributable to the sale of the land at 55 Ap Lei Chau Main Street) was $4.2m., i.e. one-quarter of $16.8m. This assignment was registered in the Land Registry on 8th October 1988.
Clauses 25 and 27 of the sale and purchase agreement under which the land was sold to Harvest Step are important. They provide as follows:
"25. It is acknowledged by [Harvest Step] that there are a number of Sale and Purchase Agreements registered against the [land] (or parts thereof) which have not been completed by the execution of Assignments to the purchasers thereunder. It is understood by [Harvest Step] that the Vendors [including Mr. Chang] are negotiating for the cancellation of these Sale and Purchase Agreements and that in the event of the Vendors failing to complete the sale of the [land] in consequence of their failure to procure prior to completion the cancellation of all such Sale and Purchase Agreements registered against the [land] (or any part or parts thereof) prior to completion hereunder [Harvest Step] shall be entitled to the return of its deposit together with interest accrued thereon but without compensation to [Harvest Step] by the Vendors and without any other right or remedy against the Vendors in consequences of their failure to complete and the parties hereto shall execute an Agreement cancelling the sale of the [land] to [Harvest Step] hereunder and shall cause a Memorial of the same to be registered in the Land Office.
27. The Vendors shall, within 7 days from the date of signing of this Agreement, deliver to [Harvest Step's] Solicitors a list of the Sale and Purchase Agreements referred to in Clause 25 hereof and shall at the end of each calendar month inform [Harvest Step's] Solicitors the progress as to the execution and registration of the Cancellation Agreements in respect of such Sale and Purchase Agreements."
There can have been only one reason for the inclusion of these clauses in the sale and purchase agreement. Harvest Step wanted to ensure that it took the land free from encumbrances. Accordingly, in the event of any registered but uncompleted sale and purchase agreement not being cancelled, Harvest Step's purchase of the land would not go ahead. Thus, if the sale and purchase agreement which the Plaintiff and his wife had entered into on 13th November 1979 had been registered, Harvest Step's purchase of the land could not have gone ahead unless Mr. Chang had been able to procure the cancellation of the agreement which he had concluded with the Plaintiff and his wife.
THE LIMITATION PERIOD
The Plaintiff's causes of action against the Defendant are in contract for breach of the Defendant's retainer and in tort for negligence. The only conduct of the Defendant relied upon was its failure to register the sale and purchase agreement of 13th November 1979 in the Land Registry. The limitation period for such causes of action is six years: section 4(1)(a) of the Limitation Ordinance (Cap. 347). The writ in the action was issued on 8th June 1990. Accordingly, if the Plaintiff's causes of action arose prior to 8th June 1984, the action is time-barred. The issue which separates the parties is when the Plaintiff's causes of action arose.
THE CAUSE OF ACTION IN CONTRACT
In claims for breach of contract, the cause of action accrues when the breach of contract occurs, whether or not loss is sustained at that time. Accordingly, where solicitors do something contrary to the terms of their retainer, the time for bringing proceedings for the claim for breach of contract begins to run on the date of that act. However, where solicitors omit to do something which is required by their retainer (as in the present case), the authorities do not speak with one voice as to when the breach of contract occurred.
In Midland Bank Trust Co. Ltd. v. Hett, Stubbs & Kemp [1979] Ch. 384, the Plaintiffs, as executors of a Mr. Green, claimed damages against Mr. Green's solicitors for failing to register an option to purchase a farm granted to Mr. Green by his father in March 1961. In August 1967, the father conveyed the farm to his wife in order to defeat the option. Oliver J. (as he then was) held that the solicitors' obligation to register the option continued until the date when effective registration became impossible. An action for breach of contract against the solicitors could therefore be begun up to six years from the date when the obligation lapsed.
Oliver J.'s view that the solicitors' obligation to register was a continuing one until the date when effective registration became impossible was based on two important considerations:
He regarded it as part of the solicitors' duty "to take such steps as were necessary and practicable to ensure that [the option] was binding on the land into whosesoever hands it might come before any third party acquired a legal estate" (p. 435B).
He regarded it as important that over the years the solicitors continued to have dealings with Mr. Green. "[The solicitors] kept the document on [Mr. Green's] behalf in their strongroom. They opened a file relating to the matter. They were consulted about it at intervals over the next 6-1/2 years" (p. 438D-E).
Mr. Jat Sew Tong for the Plaintiff relied heavily on Midland Bank. He argued that if the solicitors' obligation to register the option in that case continued until effective registration became impossible, the Defendant's obligation in the current case continued until the sale and purchase agreement of 13th November 1979 became incapable of effective registration in 1988.
I do not think that Mr. Jat can derive any support from the judgment of Oliver J. in Midland Bank. To the extent that the solicitors continued to act for Mr. Green over the whole of the 6-1/2 years, that case is wholly distinguishable from the present. It is not suggested that the Defendant continued to act for the Plaintiff and his wife after November 1979 when the sale and purchase agreement of 13th November 1979 should have been registered. However, I go further. On the footing that there was a duty on the Defendant similar to that which Oliver J. found was assumed by the solicitors in that case, and assuming that the Defendant had continued to have dealings with the Plaintiff and his wife over the years, I do not believe that that duty was a continuing one. That was the view of the Court of Appeal in England in Bell v. Peter Browne & Co. [1990] 2 Q.B. 495.
In that case, the Plaintiff transferred his former matrimonial home to his wife in 1978, on the understanding that whenever it was sold he would receive one-sixth of the proceeds. The solicitors who were acting for him failed to protect his interest by a declaration of trust or mortgage or by entering a caution on the Land Register. In 1986 his former wife sold the matrimonial home and spent the proceeds. The husband started proceedings against the solicitors in 1987. It was held that the contractual claim accrued in 1978 and was therefore time-barred.
In deference to Oliver J., Nicholls L.J. (as he then was) ostensibly distinguished Midland Bank on the footing that there was "no suggestion that the [solicitors] had any further contact with the [husband] or his affairs after the conclusion of the divorce proceedings [in 1979]" (p. 501F G). However, all the members of the Court took the view that the fact that the solicitors could have remedied their breach at any time before the wife sold the house did not mean that there was a continuing breach right up to 1986: see the judgments of Nicholls L.J. at p. 501B-C, Beldam L.J. at p. 509C-F and Mustill L.J. (as he then was) at pp. 512G - 513B. I regard the reasoning in these passages as compelling, and I adopt it. The breach occurred when the solicitors failed to do that which they had been engaged to do. The fact that they could thereafter have remedied that breach merely meant that it was in their power to mitigate the consequences of the breach which had already occurred. I therefore find that the duty on the Defendant to register the sale and purchase agreement of 13th November 1979 was not a continuing one which continued over the years until at least 8th June 1984. For these reasons, the Plaintiff's claim for damages for breach of contract is time-barred.
THE CAUSE OF ACTION IN TORT
In claims based on the tort of negligence, the cause of action accrues when the plaintiff sustains loss - actual loss as opposed to prospective or potential loss. Where the plaintiff is unaware that he has sustained loss until many years after the event, the traditional rules of limitation would effectively prevent him from recovering a remedy. Accordingly, the legislature has intervened to relieve the injustice which this causes. Thus, section 31 of the Limitation Ordinance provides an alternative limitation period in cases of loss not known to the plaintiff not involving personal injuries. However, section 31 had not come into force when the Plaintiff's writ was issued, and it is therefore necessary in the present case to consider when the Plaintiff actually sustained loss.
The Plaintiff's case is that the loss which he and his wife sustained as a result of the Defendant's failure to register the sale and purchase agreement of 13th November 1979 took two forms:
Section 3(2) of the Land Registration Ordinance (Cap. 128) ("the LRO") provides that all instruments affecting land which are not registered "shall, as against any subsequent bona fide purchaser or mortgagee for valuable consideration of the same [land] ... , be absolutely null and void to all intents and purposes". If Vucan had been a bona fide mortgagee for value, the execution of the mortgage by Mr. Chang in favour of Vucan on 26th March 1987 would have meant that, as a result of the non-registration of the agreement, the agreement was null and void as against Vucan. Likewise, if Harvest Step had been a bone fide purchaser for value, the execution of the assignment by Mr. Chang in favour of Harvest Step on 9th September 1988 would have meant that, as a result of the non-registration of the agreement, the agreement was null and void as against Harvest Step. Accordingly, what the Plaintiff and his wife were said to have lost, as a result of the non-registration of the agreement, is their interest in the land itself, and that loss crystallized on 26th March 1987 and 9th September 1988 respectively.
If the agreement had been registered, Mr. Chang would have had to persuade the Plaintiff and his wife to consent to a cancellation of the agreement to prevent the sale of the land to Harvest Step being called off. Their consent to the cancellation of the agreement would have come at a price. Accordingly, another aspect of the loss which the Plaintiff and his wife suffered as a result of the agreement not having been registered was the opportunity to negotiate a cancellation charge from Mr. Chang. That opportunity was lost forever on 9th September 1988 when the sale and purchase agreement between Mr. Chang and Harvest Step was completed.
For present purposes, I have had to assume that the sale and purchase agreement of 13th November 1979 was still an instrument affecting land in 1988, and was therefore an instrument to which the LRO continued to apply. That is very much in issue, since the question as to whether the Defendant caused the losses which the Plaintiff alleges he and his wife suffered is said to turn on it.
Mr. Wilson Chan for the Defendant, in a succinct and attractive submission, accepted that if the Plaintiff and his wife had sustained these losses, they were sustained within the limitation period. He contended that the Plaintiff and his wife had sustained other losses in November 1979. Those losses are alleged to have taken two forms. I propose to deal with each of them in turn.
First, the Plaintiff and his wife had got nothing to show for the $105.00 which they paid to the Defendant. Mr. Chan contends that they had therefore lost the cost of putting themselves into the position in which they would have been if the agreement had been registered when it should have been. He argues that this approach is consistent with a passage in the judgment of Nicholls L.J. in Peter Browne at p. 503F-G:
"In considering whether damage was suffered in 1978 one can test the matter by considering what would have happened if in, say, 1980 the [husband] had learned of his solicitors' default and brought an action for damages. Of course, he would have taken steps to remedy the default. But he would have been entitled at least to recover from the defendants the cost incurred in going to other solicitors for advice on what should be done and for their assistance in lodging the appropriate caution. The cost would have been modest, but not negligible."
I reject that argument. The loss of $105.00 was not attributable to the Defendant's negligence in failing to register the sale and purchase agreement. It was attributable to the fact that the Defendant had wrongly charged the Plaintiff and his wife for work which it did not do and for a disbursement which it had not expended. The Plaintiff and his wife paid the Defendant the $105.00, despite the non-registration of the agreement, because the bill which they received from the Defendant led them to assume that the work to which the charge of $75.00 related had been carried out and the disbursement to which the $30.00 related had been paid. If the loss of $105.00 was attributable to a tort committed by the Defendant, it was the tort of negligent misstatement or deceit. That is what distinguishes Mr. Chan's argument from the example given by Nicholls L.J. in the passage relied on by Mr. Chan. The legal costs which the Plaintiff and his wife would have incurred in engaging other solicitors to advise them how the Defendant's failure to register the sale and purchase agreement should be remedied would have been attributable to that failure.
Secondly, Mr. Chan argues that the interest in the land which the Plaintiff and his wife were buying under the sale and purchase agreement had diminished in value once the agreement had not been registered. That was because from then on, if the agreement remained unregistered, there was the possibility that such interest in the land which the sale and purchase agreement had given them would be defeated by a bona fide purchaser or mortgagee for value by the operation of section 3(2) of the LRO. That diminution in value constituted a loss which the Plaintiff and his wife first sustained in November 1979.
An argument along these lines was advanced in Peter Browne. The failure of the husband's solicitors to enter a caution on the Land Register meant that the husband, to use the words of Nicholls L.J. at p. 503C, "was at risk, from the outset. His interest was vulnerable." That was because, as Beldam L.J. said at p. 510F, his interest in the house was "[u]nprotected against the interests of third parties by registration of a charge or of a caution." But - and this is the crucial question - did the vulnerability of the husband's interest in the house make that interest less valuable? It had been argued on the husband's behalf that the failure of the husband's solicitors to enter a caution on the Land Register could not have made the husband's interest in the house less valuable at the time because that failure was capable of being remedied at minimal or no cost at any time before the wife sold the house and spent the proceeds. I read Beldam L.J. as saying that the remediability of the failure to enter the caution did not prevent the husband's interest in the house being less valuable, but he did not say why. Mustill L.J. agreed, but he was content simply to say (p. 513C) that the husband "was actually, and not just potentially, worse off than if the solicitors had performed their task competently".
It was only Nicholls L.J. who analysed the argument on remediability. He said (p. 503D-F):
"The solicitors' breach of duty in 1978 was remediable by the [husband], but that was only possible after he became aware that there had been a breach of duty. Apart from any other consideration, to treat the [husband's] ability to remedy the breach himself without the concurrence of his former wife as a ground of distinction between this case and [other] cases ... would be to disregard the unlikelihood in practice of the [husband] ever being in a position to remedy the breach. Once the solicitors closed their file, it was unlikely that [the] failure [to enter a caution on the Land Register] would come to the notice of the [husband] or the [solicitors], until the house was sold and it was too late. That, on the pleaded facts, is exactly what happened. The first the [husband] knew that his one-sixth share was not properly protected was after it had gone beyond recall. So his ability to remedy the breach before the house was sold was a matter of more theoretical interest than practical importance."
I find myself in respectful disagreement with Nicholls L.J. In treating remediability as of little practical importance because of the unlikelihood of anyone discovering, until it was too late, that there had been an omission capable of being remedied, I regard Nicholls L.J. as importing into the law the doctrine of discoverability which the common law had laid to rest in Pirelli General Cable Works Ltd. v. Oscar Faber & Partners [1983] 2 A.C. 1. That case confirmed that a loss occurred when it arose, not when it was discovered. It resulted in the passing of the Latent Damage Act 1986 in England, and the subsequent inclusion of section 31 in the Limitation Ordinance. However, the point is that if delay in the discovery of loss is not, under the common law, a relevant consideration in determining when loss arises, the unlikelihood of discovering that the loss can be remedied should likewise be regarded as an immaterial factor. For this reason, I respectfully decline to follow Nicholls L.J.'s view that the remediability of the loss was not capable of preventing the husband's interest in the house being less valuable.
The net result of this analysis is that, to the extent that Peter Browne supports Mr. Chan's proposition that the Defendant's failure to register the sale and purchase agreement of 13th November 1979 diminished the value of the Plaintiff's and his wife's interest in the land, I decline to follow it. I regard the fact that the Defendant's failure was capable of being remedied at any time prior to 26th March 1987 as extremely significant. It seems to me to be obvious that although the non-registration of the sale and purchase agreement meant that the Plaintiff's and his wife's interest in the land would be extinguished if a bona fide purchaser acquired the land for value or if the land was charged to a bona fide mortgagee for value, the Plaintiff and his wife would only sustain actual loss when that interest was extinguished. There was, of course, the potentiality for such loss from the time when the Defendant failed to register the agreement, but the circumstances which might cause the possibility of that loss to become "any detriment, liability or loss capable of assessment in money terms" (which was the phrase used by Saville L.J. in First National Commercial Bank PLC v. Humberts [1995] 2 All E.R. 673 at p. 676b) might never arise. The loss which flowed from the Defendant's failure to register the agreement, i.e. the extinguishment of the Plaintiff's and his wife's interest in the land, would not occur if the agreement was registered in the meantime.
In urging me to take this view, Mr. Jat relied on the view reached by Oliver J. on the topic in Midland Bank. Oliver J. held that Mr. Green did not suffer any loss as a result of his solicitors' failure to register the option until August 1967 when the option was lost by the sale of the farm (p. 417C). I am not persuaded that I should place any reliance on this view of Oliver J. He did not give any reason for his view, almost certainly because leading counsel for the solicitors did not seek to argue against the proposition of leading counsel for Mr. Green's executors (p. 389B) that Mr. Green did not suffer any loss until August 1967.
In an ingenious development of his argument, Mr. Chan pointed to one particular factor which would specifically have caused the Plaintiff's and his wife's interest in the land to be less valuable than it would have been had the sale and purchase agreement been registered. Section 3(2) of the LRO does not require a subsequent purchaser to have his sale and purchase agreement or assignment registered in order to acquire title to the land free of a prior but unregistered instrument. Thus, since the sale and purchase agreement of 13th November 1979 had not been registered, Harvest Step would have acquired the land to which the sale and purchase agreement of 13th November 1979 related even if the sale and purchase agreement of 1st June 1988 and the assignment of 9th September 1988 had not been registered. Mr. Chan argues that that would have had a serious impact on the ability of the Plaintiff and his wife themselves to dispose of the land from November 1979. Once a possible sub-purchaser of the land discovered that the instrument by which the Plaintiff and his wife had acquired their interest in the land had not been registered, he would have realised (assuming that he was properly advised) that his sub-purchase would be defeated if the person who had sold the land to the Plaintiff and his wife had subsequently sold the land to someone else who had not registered the instrument by which his acquisition of the land had been effected. Since a possible sub-purchaser might be deterred by this possibility from acquiring the Plaintiff's and his wife's interest in the land, their interest in the land was less valuable, and actual loss for that reason had been sustained in November 1979.
Moreover, there was no guarantee that the Plaintiff and his wife could have avoided this problem (once they became aware of the non-registration of the sale and purchase agreement of 13th November 1979) by causing the agreement to be registered then. That was because there was no decided case in Hong Kong as to whether that subsequent registration would improve their position against a subsequent purchaser: see Nield, Hong Kong Land Law, p. 62, and Bramwell, Conveyancing in Hong Kong, p. 211.
In my judgment, this elaborate and subtle argument is fundamentally flawed. It may be that the first purchaser cannot defeat the interest which the second purchaser acquires on this scenario, but a sub purchaser of the first purchaser can - by the simply expedient of registering the instrument by which he acquires the interest of the first purchaser in the land. If the sub-purchaser had been advised that the law did not prevent the first purchaser's unregistered interest being defeated by a second purchaser's unregistered interest, he would also have been advised of the way in which he could have defeated the second purchaser's unregistered interest.
MR. JAT'S RELIANCE ON HENDERSON V. MERRETT SYNDICATES LTD.
In this judgment, I have not felt able to go along with the view expressed by Oliver J. in Midland Bank on whether a solicitor's duty to register an instrument was a continuing duty. Moreover, I have not felt able to place any reliance on his view that no actual loss is sustained as a result of the failure to register the instrument until the instrument was no longer effective (even though his view is one with which I agree). In urging me to place reliance on Oliver J.'s views, however, Mr. Jat drew my attention to various passages in the speech of Lord Goff in Henderson v. Merrett Syndicates Ltd. [1995] 2 A.C. 145 in which Lord Goff expressly approved various passages in Oliver J.'s judgment in Midland Bank.
In my view, Mr. Jat's reliance on Henderson was misplaced. The relevance of Midland Bank to the issues which were considered in Henderson related to Oliver J.'s view on a defendant's concurrent liability in contract and tort. That was the view of Oliver J. which Lord Goff was approving. I have not been able to discern in Lord Goff's speech any support for what Oliver J. said in relation to the issues which arise in the present case.
CONCLUSION
For these reasons, I rule that although the Plaintiff's claim for damages for breach of contract is time-barred, the Plaintiff's claim for damages for negligence is not. The Plaintiff's cause of action in tort may therefore proceed. At present, I see no reason why the Defendant should not pay to the Plaintiff the costs of the trial of the issue on limitation to be taxed if not agreed, and I therefore make an order nisi to that effect, though the Plaintiff is not entitled to have those costs taxed and paid until his claim against the Defendant has been finally adjudicated upon.
All that remains is for me to decide what directions I should give for the determination of the other issues which arise on the Plaintiff's claim against the Defendant, and for the trial of the Defendant's third party claim against Mr. Chang. I shall give such directions on a date to be fixed after consultation with counsel's diaries, but my present view, subject to the representations of counsel, are as follows:
The only remaining issue on liability on the Plaintiff's claim against the Defendant, i.e. causation, should be tried together with the quantification of the Plaintiff's loss. I appreciate that that would involve a departure from para. 1 of the order of Mr. Registrar Betts of 11th January 1995, but in view of what Mr. Chan told me about one of the arguments which the Defendant has on causation, evidence as to the value of the land could be said to be relevant to both causation and quantum.
The Defendant's third party claim against Mr. Chang should be tried at the same time as the remainder of the Plaintiff's claim against the Defendant. I appreciate that that would involve a departure from the last three words of para. 4 of the order of Master O'Donnell of 27th January 1995, but I suspect that there may be some overlap between the issue of causation on the Plaintiff's claim against the Defendant and the issues which arise on the Defendant's third party claim against Mr. Chang.
The trial of all these issues should take place on a date to be fixed after consultation with counsel's diaries, but not before 1st May 1996 so as to ensure that the climate in Hong Kong does not affect Mr. Chang's ability to come to Hong Kong from Taiwan.
(Brian Keith)
Judge of the High Court
Mr. Jat Sew Tong, instructed by the Director of Legal Aid, for the Plaintiff.
Mr. Wilson Chan, instructed by Messrs. Joseph Poon & Woo, for the Defendant.
Mr. Danny Choi, instructed by Messrs. S.K. Wong & Lee, for the Third Party.
1990 No. A3759
IN THE SUPREME COURT OF HONG KONG
HIGH COURT
____________
BETWEEN
YEUNG SHU
(suing on his own behalf and on behalf
of the estate of KEH PICK HA) Plaintiff
and
ALFRED LAU & CO. Defendant
(a firm)
and
CHANG PAO CHING Third Party
____________
Before: The Hon. Mr. Justice Keith in Court
Dates of Hearing: 31st January, 1st and 2nd February 1996
Date of Handing Down of Judgment: 16th February 1996
[(1) A solicitor's duty to register an agreement in the Land Registry does not continue until the date when effective registration becomes impossible. The fact that the solicitor could have remedied an initial breach of his retainer by subsequently registering the agreement merely meant that it was in his power to mitigate the consequences of the breach which had already occurred. Dicta in Midland Bank Trust Co. Ltd. v. Hett, Stubbs & Kemp [1979] Ch. 384 as to when a breach of the retainer occurs for the purpose of determining whether a cause of action in contract is time-barred disapproved.
(2) Loss sustained as a result of a solicitor's failure to register an agreement in the Land Registry does not arise until the Plaintiff's interest in the land has been extinguished by the lack of registration, since until then the failure was capable of being remedied at minimal or no cost. Dicta in Bell v. Peter Browne & Co. [1990] 2 Q.B. 495 as to when loss arises for the purpose of determining whether a cause of action in tort is time-barred disapproved.]
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J U D G M E N T
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INTRODUCTION
In this action, the Plaintiff claims damages against the Defendant for breach of contract and negligence. The Defendant defends the action on two grounds: first, that the Plaintiff's claim is time-barred; secondly, that such loss as the Plaintiff sustained was not caused by the Defendant's breach of contract or negligence. In addition, there are third party proceedings in which the Defendant claims an indemnity from the Third Party in respect of the Plaintiff's claim if it is found to be liable to the Plaintiff. For reasons which it is not necessary to set out in this judgment, I decided to try the question as to whether the Plaintiff's claim is time-barred first. It is upon that issue that I hand down this judgment. The Third Party took no part in the trial of that issue. His counsel did not wish to call any evidence or make any representations on it, and the Third Party is content to be bound by my decision on it.
The Plaintiffs in this action were originally Yeung Shu and his wife, Keh Pick Ha. However, Madam Keh died on 8th February 1991, and on 27th June 1995 Master Jones permitted Yeung Shu to carry on the proceedings on his own behalf and on behalf of his late wife's estate. I shall refer to Yeung Shu throughout as the Plaintiff.
I was originally intending to hand down this judgment on 12th February. However, the issues which arose in the present case are similar to those which arose in another case which I tried after I had reserved judgment in the present case. That case is Ko Ming Bor v. Lo & Lo (HCA 11879/95). I therefore decided to defer handing down this judgment, and I am now handing it down on the same day as I am handing down judgment in that case. Although much of the reasoning in each judgment is applicable to the other, each of the judgments are free-standing and independent of each other because (a) counsel's arguments were not identical, and (b) counsel in each case did not hear the arguments of counsel in the other.
THE FACTS
No evidence was called on the limitation issue. That was because the facts are not in dispute. I take them from the chronology of facts agreed by the Plaintiff and the Defendant, and from the documents contained in the agreed bundle of documents.
In 1979, the Third Party, Chang Pao Ching, was planning to develop a site on Ap Lei Chau. He was proposing to build a block of flats at 55 Ap Lei Chau Main Street. The Plaintiff and his wife decided to buy one of the proposed flats. Accordingly, by a sale and purchase agreement dated 13th November 1979, between the Plaintiff and his wife on the one hand and Mr. Chang on the other, Mr. Chang agreed to sell to the Plaintiff and his wife a share of the land on which the block of flats was to be built, together with the exclusive right to occupy the flat which was going to be at the front of the 3rd floor of the building. The purchase price was $84,000.00, and the Plaintiff and his wife paid Mr. Chang a deposit of $33,600.00. The sale was to be completed within seven days of the Plaintiff and his wife being notified of the issue of an occupation certificate for the building. By a supplemental agreement executed on the same date, the time for the completion of the construction of the building was extended to 360 days from that date, and Mr. Chang paid the Plaintiff and his wife the sum of $4,000.00 as agreed compensation for the delay.
The Defendant, Messrs. Alfred Lau & Co., is a firm of solicitors. It acted for the Plaintiff and his wife on the transaction. It submitted a bill for its services which was dated 13th November 1979. The bill was for $729.00. It was paid by the Plaintiff and his wife. It included the solicitors' fees of $75.00 for registering the sale and purchase agreement, and a disbursement of $30.00 being the fee payable on registration. Neither the fee of $75.00 nor the disbursement of $30.00 should have been charged, because the Defendant admits that the sale and purchase agreement was not registered in the Land Registry at all.
In the early 1980s, Mr. Chang left Hong Kong for Taiwan. The construction of the building was never completed, and no occupation certificate was ever issued. Accordingly, the sale to the Plaintiff and his wife of the share in the land which they were buying was never completed either.
Towards the end of the 1980s, Mr. Chang executed a number of documents which related to the land on which he had been proposing to build the block of flats:
On 26th March 1987, he executed a mortgage under which he granted a charge over the land in favour of Vucan Co. Ltd. ("Vucan") as security for a sum in the region of $3.2m. which the mortgage deed recorded Mr. Chang as owing to Vucan. That mortgage was registered in the Land Registry on the same date.
On 1st June 1988, Mr. Chang executed a sale and purchase agreement under which he sold the land to Harvest Step Development Ltd. ("Harvest Step"). The land was being sold to Harvest Step under this agreement along with adjoining land at 49, 51 and 53 Ap Lei Chau Main Street. The purchase price of all the land to which the sale and purchase agreement related was $16.8m. That sale and purchase agreement was registered in the Land Registry on 13th August 1988.
On 9th September 1988, Mr. Chang executed an assignment under which he assigned the land to Harvest Step. Again, the land was assigned to Harvest Step under the assignment along with the adjoining land at 49, 51 and 53 Ap Lei Chau Main Street. Clause 1 of the assignment showed that Mr. Chang's share of the purchase price of $16.8m. (i.e. the share attributable to the sale of the land at 55 Ap Lei Chau Main Street) was $4.2m., i.e. one-quarter of $16.8m. This assignment was registered in the Land Registry on 8th October 1988.
Clauses 25 and 27 of the sale and purchase agreement under which the land was sold to Harvest Step are important. They provide as follows:
"25. It is acknowledged by [Harvest Step] that there are a number of Sale and Purchase Agreements registered against the [land] (or parts thereof) which have not been completed by the execution of Assignments to the purchasers thereunder. It is understood by [Harvest Step] that the Vendors [including Mr. Chang] are negotiating for the cancellation of these Sale and Purchase Agreements and that in the event of the Vendors failing to complete the sale of the [land] in consequence of their failure to procure prior to completion the cancellation of all such Sale and Purchase Agreements registered against the [land] (or any part or parts thereof) prior to completion hereunder [Harvest Step] shall be entitled to the return of its deposit together with interest accrued thereon but without compensation to [Harvest Step] by the Vendors and without any other right or remedy against the Vendors in consequences of their failure to complete and the parties hereto shall execute an Agreement cancelling the sale of the [land] to [Harvest Step] hereunder and shall cause a Memorial of the same to be registered in the Land Office.
27. The Vendors shall, within 7 days from the date of signing of this Agreement, deliver to [Harvest Step's] Solicitors a list of the Sale and Purchase Agreements referred to in Clause 25 hereof and shall at the end of each calendar month inform [Harvest Step's] Solicitors the progress as to the execution and registration of the Cancellation Agreements in respect of such Sale and Purchase Agreements."
There can have been only one reason for the inclusion of these clauses in the sale and purchase agreement. Harvest Step wanted to ensure that it took the land free from encumbrances. Accordingly, in the event of any registered but uncompleted sale and purchase agreement not being cancelled, Harvest Step's purchase of the land would not go ahead. Thus, if the sale and purchase agreement which the Plaintiff and his wife had entered into on 13th November 1979 had been registered, Harvest Step's purchase of the land could not have gone ahead unless Mr. Chang had been able to procure the cancellation of the agreement which he had concluded with the Plaintiff and his wife.
THE LIMITATION PERIOD
The Plaintiff's causes of action against the Defendant are in contract for breach of the Defendant's retainer and in tort for negligence. The only conduct of the Defendant relied upon was its failure to register the sale and purchase agreement of 13th November 1979 in the Land Registry. The limitation period for such causes of action is six years: section 4(1)(a) of the Limitation Ordinance (Cap. 347). The writ in the action was issued on 8th June 1990. Accordingly, if the Plaintiff's causes of action arose prior to 8th June 1984, the action is time-barred. The issue which separates the parties is when the Plaintiff's causes of action arose.
THE CAUSE OF ACTION IN CONTRACT
In claims for breach of contract, the cause of action accrues when the breach of contract occurs, whether or not loss is sustained at that time. Accordingly, where solicitors do something contrary to the terms of their retainer, the time for bringing proceedings for the claim for breach of contract begins to run on the date of that act. However, where solicitors omit to do something which is required by their retainer (as in the present case), the authorities do not speak with one voice as to when the breach of contract occurred.
In Midland Bank Trust Co. Ltd. v. Hett, Stubbs & Kemp [1979] Ch. 384, the Plaintiffs, as executors of a Mr. Green, claimed damages against Mr. Green's solicitors for failing to register an option to purchase a farm granted to Mr. Green by his father in March 1961. In August 1967, the father conveyed the farm to his wife in order to defeat the option. Oliver J. (as he then was) held that the solicitors' obligation to register the option continued until the date when effective registration became impossible. An action for breach of contract against the solicitors could therefore be begun up to six years from the date when the obligation lapsed.
Oliver J.'s view that the solicitors' obligation to register was a continuing one until the date when effective registration became impossible was based on two important considerations:
He regarded it as part of the solicitors' duty "to take such steps as were necessary and practicable to ensure that [the option] was binding on the land into whosesoever hands it might come before any third party acquired a legal estate" (p. 435B).
He regarded it as important that over the years the solicitors continued to have dealings with Mr. Green. "[The solicitors] kept the document on [Mr. Green's] behalf in their strongroom. They opened a file relating to the matter. They were consulted about it at intervals over the next 6-1/2 years" (p. 438D-E).
Mr. Jat Sew Tong for the Plaintiff relied heavily on Midland Bank. He argued that if the solicitors' obligation to register the option in that case continued until effective registration became impossible, the Defendant's obligation in the current case continued until the sale and purchase agreement of 13th November 1979 became incapable of effective registration in 1988.
I do not think that Mr. Jat can derive any support from the judgment of Oliver J. in Midland Bank. To the extent that the solicitors continued to act for Mr. Green over the whole of the 6-1/2 years, that case is wholly distinguishable from the present. It is not suggested that the Defendant continued to act for the Plaintiff and his wife after November 1979 when the sale and purchase agreement of 13th November 1979 should have been registered. However, I go further. On the footing that there was a duty on the Defendant similar to that which Oliver J. found was assumed by the solicitors in that case, and assuming that the Defendant had continued to have dealings with the Plaintiff and his wife over the years, I do not believe that that duty was a continuing one. That was the view of the Court of Appeal in England in Bell v. Peter Browne & Co. [1990] 2 Q.B. 495.
In that case, the Plaintiff transferred his former matrimonial home to his wife in 1978, on the understanding that whenever it was sold he would receive one-sixth of the proceeds. The solicitors who were acting for him failed to protect his interest by a declaration of trust or mortgage or by entering a caution on the Land Register. In 1986 his former wife sold the matrimonial home and spent the proceeds. The husband started proceedings against the solicitors in 1987. It was held that the contractual claim accrued in 1978 and was therefore time-barred.
In deference to Oliver J., Nicholls L.J. (as he then was) ostensibly distinguished Midland Bank on the footing that there was "no suggestion that the [solicitors] had any further contact with the [husband] or his affairs after the conclusion of the divorce proceedings [in 1979]" (p. 501F G). However, all the members of the Court took the view that the fact that the solicitors could have remedied their breach at any time before the wife sold the house did not mean that there was a continuing breach right up to 1986: see the judgments of Nicholls L.J. at p. 501B-C, Beldam L.J. at p. 509C-F and Mustill L.J. (as he then was) at pp. 512G - 513B. I regard the reasoning in these passages as compelling, and I adopt it. The breach occurred when the solicitors failed to do that which they had been engaged to do. The fact that they could thereafter have remedied that breach merely meant that it was in their power to mitigate the consequences of the breach which had already occurred. I therefore find that the duty on the Defendant to register the sale and purchase agreement of 13th November 1979 was not a continuing one which continued over the years until at least 8th June 1984. For these reasons, the Plaintiff's claim for damages for breach of contract is time-barred.
THE CAUSE OF ACTION IN TORT
In claims based on the tort of negligence, the cause of action accrues when the plaintiff sustains loss - actual loss as opposed to prospective or potential loss. Where the plaintiff is unaware that he has sustained loss until many years after the event, the traditional rules of limitation would effectively prevent him from recovering a remedy. Accordingly, the legislature has intervened to relieve the injustice which this causes. Thus, section 31 of the Limitation Ordinance provides an alternative limitation period in cases of loss not known to the plaintiff not involving personal injuries. However, section 31 had not come into force when the Plaintiff's writ was issued, and it is therefore necessary in the present case to consider when the Plaintiff actually sustained loss.
The Plaintiff's case is that the loss which he and his wife sustained as a result of the Defendant's failure to register the sale and purchase agreement of 13th November 1979 took two forms:
Section 3(2) of the Land Registration Ordinance (Cap. 128) ("the LRO") provides that all instruments affecting land which are not registered "shall, as against any subsequent bona fide purchaser or mortgagee for valuable consideration of the same [land] ... , be absolutely null and void to all intents and purposes". If Vucan had been a bona fide mortgagee for value, the execution of the mortgage by Mr. Chang in favour of Vucan on 26th March 1987 would have meant that, as a result of the non-registration of the agreement, the agreement was null and void as against Vucan. Likewise, if Harvest Step had been a bone fide purchaser for value, the execution of the assignment by Mr. Chang in favour of Harvest Step on 9th September 1988 would have meant that, as a result of the non-registration of the agreement, the agreement was null and void as against Harvest Step. Accordingly, what the Plaintiff and his wife were said to have lost, as a result of the non-registration of the agreement, is their interest in the land itself, and that loss crystallized on 26th March 1987 and 9th September 1988 respectively.
If the agreement had been registered, Mr. Chang would have had to persuade the Plaintiff and his wife to consent to a cancellation of the agreement to prevent the sale of the land to Harvest Step being called off. Their consent to the cancellation of the agreement would have come at a price. Accordingly, another aspect of the loss which the Plaintiff and his wife suffered as a result of the agreement not having been registered was the opportunity to negotiate a cancellation charge from Mr. Chang. That opportunity was lost forever on 9th September 1988 when the sale and purchase agreement between Mr. Chang and Harvest Step was completed.
For present purposes, I have had to assume that the sale and purchase agreement of 13th November 1979 was still an instrument affecting land in 1988, and was therefore an instrument to which the LRO continued to apply. That is very much in issue, since the question as to whether the Defendant caused the losses which the Plaintiff alleges he and his wife suffered is said to turn on it.
Mr. Wilson Chan for the Defendant, in a succinct and attractive submission, accepted that if the Plaintiff and his wife had sustained these losses, they were sustained within the limitation period. He contended that the Plaintiff and his wife had sustained other losses in November 1979. Those losses are alleged to have taken two forms. I propose to deal with each of them in turn.
First, the Plaintiff and his wife had got nothing to show for the $105.00 which they paid to the Defendant. Mr. Chan contends that they had therefore lost the cost of putting themselves into the position in which they would have been if the agreement had been registered when it should have been. He argues that this approach is consistent with a passage in the judgment of Nicholls L.J. in Peter Browne at p. 503F-G:
"In considering whether damage was suffered in 1978 one can test the matter by considering what would have happened if in, say, 1980 the [husband] had learned of his solicitors' default and brought an action for damages. Of course, he would have taken steps to remedy the default. But he would have been entitled at least to recover from the defendants the cost incurred in going to other solicitors for advice on what should be done and for their assistance in lodging the appropriate caution. The cost would have been modest, but not negligible."
I reject that argument. The loss of $105.00 was not attributable to the Defendant's negligence in failing to register the sale and purchase agreement. It was attributable to the fact that the Defendant had wrongly charged the Plaintiff and his wife for work which it did not do and for a disbursement which it had not expended. The Plaintiff and his wife paid the Defendant the $105.00, despite the non-registration of the agreement, because the bill which they received from the Defendant led them to assume that the work to which the charge of $75.00 related had been carried out and the disbursement to which the $30.00 related had been paid. If the loss of $105.00 was attributable to a tort committed by the Defendant, it was the tort of negligent misstatement or deceit. That is what distinguishes Mr. Chan's argument from the example given by Nicholls L.J. in the passage relied on by Mr. Chan. The legal costs which the Plaintiff and his wife would have incurred in engaging other solicitors to advise them how the Defendant's failure to register the sale and purchase agreement should be remedied would have been attributable to that failure.
Secondly, Mr. Chan argues that the interest in the land which the Plaintiff and his wife were buying under the sale and purchase agreement had diminished in value once the agreement had not been registered. That was because from then on, if the agreement remained unregistered, there was the possibility that such interest in the land which the sale and purchase agreement had given them would be defeated by a bona fide purchaser or mortgagee for value by the operation of section 3(2) of the LRO. That diminution in value constituted a loss which the Plaintiff and his wife first sustained in November 1979.
An argument along these lines was advanced in Peter Browne. The failure of the husband's solicitors to enter a caution on the Land Register meant that the husband, to use the words of Nicholls L.J. at p. 503C, "was at risk, from the outset. His interest was vulnerable." That was because, as Beldam L.J. said at p. 510F, his interest in the house was "[u]nprotected against the interests of third parties by registration of a charge or of a caution." But - and this is the crucial question - did the vulnerability of the husband's interest in the house make that interest less valuable? It had been argued on the husband's behalf that the failure of the husband's solicitors to enter a caution on the Land Register could not have made the husband's interest in the house less valuable at the time because that failure was capable of being remedied at minimal or no cost at any time before the wife sold the house and spent the proceeds. I read Beldam L.J. as saying that the remediability of the failure to enter the caution did not prevent the husband's interest in the house being less valuable, but he did not say why. Mustill L.J. agreed, but he was content simply to say (p. 513C) that the husband "was actually, and not just potentially, worse off than if the solicitors had performed their task competently".
It was only Nicholls L.J. who analysed the argument on remediability. He said (p. 503D-F):
"The solicitors' breach of duty in 1978 was remediable by the [husband], but that was only possible after he became aware that there had been a breach of duty. Apart from any other consideration, to treat the [husband's] ability to remedy the breach himself without the concurrence of his former wife as a ground of distinction between this case and [other] cases ... would be to disregard the unlikelihood in practice of the [husband] ever being in a position to remedy the breach. Once the solicitors closed their file, it was unlikely that [the] failure [to enter a caution on the Land Register] would come to the notice of the [husband] or the [solicitors], until the house was sold and it was too late. That, on the pleaded facts, is exactly what happened. The first the [husband] knew that his one-sixth share was not properly protected was after it had gone beyond recall. So his ability to remedy the breach before the house was sold was a matter of more theoretical interest than practical importance."
I find myself in respectful disagreement with Nicholls L.J. In treating remediability as of little practical importance because of the unlikelihood of anyone discovering, until it was too late, that there had been an omission capable of being remedied, I regard Nicholls L.J. as importing into the law the doctrine of discoverability which the common law had laid to rest in Pirelli General Cable Works Ltd. v. Oscar Faber & Partners [1983] 2 A.C. 1. That case confirmed that a loss occurred when it arose, not when it was discovered. It resulted in the passing of the Latent Damage Act 1986 in England, and the subsequent inclusion of section 31 in the Limitation Ordinance. However, the point is that if delay in the discovery of loss is not, under the common law, a relevant consideration in determining when loss arises, the unlikelihood of discovering that the loss can be remedied should likewise be regarded as an immaterial factor. For this reason, I respectfully decline to follow Nicholls L.J.'s view that the remediability of the loss was not capable of preventing the husband's interest in the house being less valuable.
The net result of this analysis is that, to the extent that Peter Browne supports Mr. Chan's proposition that the Defendant's failure to register the sale and purchase agreement of 13th November 1979 diminished the value of the Plaintiff's and his wife's interest in the land, I decline to follow it. I regard the fact that the Defendant's failure was capable of being remedied at any time prior to 26th March 1987 as extremely significant. It seems to me to be obvious that although the non-registration of the sale and purchase agreement meant that the Plaintiff's and his wife's interest in the land would be extinguished if a bona fide purchaser acquired the land for value or if the land was charged to a bona fide mortgagee for value, the Plaintiff and his wife would only sustain actual loss when that interest was extinguished. There was, of course, the potentiality for such loss from the time when the Defendant failed to register the agreement, but the circumstances which might cause the possibility of that loss to become "any detriment, liability or loss capable of assessment in money terms" (which was the phrase used by Saville L.J. in First National Commercial Bank PLC v. Humberts [1995] 2 All E.R. 673 at p. 676b) might never arise. The loss which flowed from the Defendant's failure to register the agreement, i.e. the extinguishment of the Plaintiff's and his wife's interest in the land, would not occur if the agreement was registered in the meantime.
In urging me to take this view, Mr. Jat relied on the view reached by Oliver J. on the topic in Midland Bank. Oliver J. held that Mr. Green did not suffer any loss as a result of his solicitors' failure to register the option until August 1967 when the option was lost by the sale of the farm (p. 417C). I am not persuaded that I should place any reliance on this view of Oliver J. He did not give any reason for his view, almost certainly because leading counsel for the solicitors did not seek to argue against the proposition of leading counsel for Mr. Green's executors (p. 389B) that Mr. Green did not suffer any loss until August 1967.
In an ingenious development of his argument, Mr. Chan pointed to one particular factor which would specifically have caused the Plaintiff's and his wife's interest in the land to be less valuable than it would have been had the sale and purchase agreement been registered. Section 3(2) of the LRO does not require a subsequent purchaser to have his sale and purchase agreement or assignment registered in order to acquire title to the land free of a prior but unregistered instrument. Thus, since the sale and purchase agreement of 13th November 1979 had not been registered, Harvest Step would have acquired the land to which the sale and purchase agreement of 13th November 1979 related even if the sale and purchase agreement of 1st June 1988 and the assignment of 9th September 1988 had not been registered. Mr. Chan argues that that would have had a serious impact on the ability of the Plaintiff and his wife themselves to dispose of the land from November 1979. Once a possible sub-purchaser of the land discovered that the instrument by which the Plaintiff and his wife had acquired their interest in the land had not been registered, he would have realised (assuming that he was properly advised) that his sub-purchase would be defeated if the person who had sold the land to the Plaintiff and his wife had subsequently sold the land to someone else who had not registered the instrument by which his acquisition of the land had been effected. Since a possible sub-purchaser might be deterred by this possibility from acquiring the Plaintiff's and his wife's interest in the land, their interest in the land was less valuable, and actual loss for that reason had been sustained in November 1979.
Moreover, there was no guarantee that the Plaintiff and his wife could have avoided this problem (once they became aware of the non-registration of the sale and purchase agreement of 13th November 1979) by causing the agreement to be registered then. That was because there was no decided case in Hong Kong as to whether that subsequent registration would improve their position against a subsequent purchaser: see Nield, Hong Kong Land Law, p. 62, and Bramwell, Conveyancing in Hong Kong, p. 211.
In my judgment, this elaborate and subtle argument is fundamentally flawed. It may be that the first purchaser cannot defeat the interest which the second purchaser acquires on this scenario, but a sub purchaser of the first purchaser can - by the simply expedient of registering the instrument by which he acquires the interest of the first purchaser in the land. If the sub-purchaser had been advised that the law did not prevent the first purchaser's unregistered interest being defeated by a second purchaser's unregistered interest, he would also have been advised of the way in which he could have defeated the second purchaser's unregistered interest.
MR. JAT'S RELIANCE ON HENDERSON V. MERRETT SYNDICATES LTD.
In this judgment, I have not felt able to go along with the view expressed by Oliver J. in Midland Bank on whether a solicitor's duty to register an instrument was a continuing duty. Moreover, I have not felt able to place any reliance on his view that no actual loss is sustained as a result of the failure to register the instrument until the instrument was no longer effective (even though his view is one with which I agree). In urging me to place reliance on Oliver J.'s views, however, Mr. Jat drew my attention to various passages in the speech of Lord Goff in Henderson v. Merrett Syndicates Ltd. [1995] 2 A.C. 145 in which Lord Goff expressly approved various passages in Oliver J.'s judgment in Midland Bank.
In my view, Mr. Jat's reliance on Henderson was misplaced. The relevance of Midland Bank to the issues which were considered in Henderson related to Oliver J.'s view on a defendant's concurrent liability in contract and tort. That was the view of Oliver J. which Lord Goff was approving. I have not been able to discern in Lord Goff's speech any support for what Oliver J. said in relation to the issues which arise in the present case.
CONCLUSION
For these reasons, I rule that although the Plaintiff's claim for damages for breach of contract is time-barred, the Plaintiff's claim for damages for negligence is not. The Plaintiff's cause of action in tort may therefore proceed. At present, I see no reason why the Defendant should not pay to the Plaintiff the costs of the trial of the issue on limitation to be taxed if not agreed, and I therefore make an order nisi to that effect, though the Plaintiff is not entitled to have those costs taxed and paid until his claim against the Defendant has been finally adjudicated upon.
All that remains is for me to decide what directions I should give for the determination of the other issues which arise on the Plaintiff's claim against the Defendant, and for the trial of the Defendant's third party claim against Mr. Chang. I shall give such directions on a date to be fixed after consultation with counsel's diaries, but my present view, subject to the representations of counsel, are as follows:
The only remaining issue on liability on the Plaintiff's claim against the Defendant, i.e. causation, should be tried together with the quantification of the Plaintiff's loss. I appreciate that that would involve a departure from para. 1 of the order of Mr. Registrar Betts of 11th January 1995, but in view of what Mr. Chan told me about one of the arguments which the Defendant has on causation, evidence as to the value of the land could be said to be relevant to both causation and quantum.
The Defendant's third party claim against Mr. Chang should be tried at the same time as the remainder of the Plaintiff's claim against the Defendant. I appreciate that that would involve a departure from the last three words of para. 4 of the order of Master O'Donnell of 27th January 1995, but I suspect that there may be some overlap between the issue of causation on the Plaintiff's claim against the Defendant and the issues which arise on the Defendant's third party claim against Mr. Chang.
The trial of all these issues should take place on a date to be fixed after consultation with counsel's diaries, but not before 1st May 1996 so as to ensure that the climate in Hong Kong does not affect Mr. Chang's ability to come to Hong Kong from Taiwan.
(Brian Keith)
Judge of the High Court
Mr. Jat Sew Tong, instructed by the Director of Legal Aid, for the Plaintiff.
Mr. Wilson Chan, instructed by Messrs. Joseph Poon & Woo, for the Defendant.
Mr. Danny Choi, instructed by Messrs. S.K. Wong & Lee, for the Third Party.
HCA3759/1990 YEUNG SHU v. ALFRED LAU & CO AND ANOTHER - LawHero