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[1984] Part 1 Case 6 [FCM] |
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www.ipsofactoJ.com/archive/index.htm
[1984] Part 1 Case 6 [FCM] |
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FEDERAL COURT OF MALAYSIA |
Yong & Co
- vs -
Wee Hood Teck Development Corporation
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Corum HH LEE CJ (BORNEO) MOHAMED AZMI J SYED AGIL BARAKBAH J |
24 FEBRUARY 1984 |
Judgment
Syed Agil Barakbah J
(delivering the Judgment of the Court)
This is an appeal against the decision of Mohamed Yusoff, J in the High Court, Kuching, delivered on 7 June 1983 giving judgment for the Respondents/Plaintiffs for loss of money lent and awarding damages in the sum of $136,898.12 made up of $66,900 being principal sum lent plus interest at 8% per mensem as from 30 September 1977, interest on $66,900 at 8% per mensem from 1 October 1977 and from date of judgment to date of settlement and costs.
The Appellants are a firm of Advocates and Solicitors having their registered office in Kuching and the Respondents are a finance corporation having their registered office in the same town.
The Respondents’ claim in the court below was for damages for loss and expenses caused by the negligence and breach of contract of the Appellants as the Respondents’ solicitors/advocates in failing to act in accordance with the assurance given by the Appellants to the Respondents in a letter dated 15 August 1966. (AB12).
It is common ground that in the latter part of 1966, Penghulu Francis Umpau (the Purchaser) wanted to build a dwelling house and decided to buy two lots of land Nos 1244 and 1248 Block 10 Kuching Town Land District (the said land) from Messrs Ong Construction Co (the Developers). The Respondents agreed to lend him a sum of $70,000 for the purpose on condition that the said land would be charged to them. At the Respondents’ request the Appellants prepared an agreement relating to the proposed loan in which the Respondents referred to as the Financier, the Developers and the Purchaser were parties. The agreement was executed on 25 July 1966 and contained inter alia the following express terms:—
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(2) |
The Developers shall build on the said land a dwelling house according to the drawing and plan prepared by the Purchaser.......... |
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(3) |
The price of the said land and the completed dwelling house shall be $62,000, payment of which shall be in accordance with the Schedule of Payment as hereinafter stated. |
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(4) |
The Financier shall lend the Purchaser a sum of $70,000 (Dollars Seventy thousand only) of which a sum of $62,000 shall be assigned by the Purchaser to the Developers and the Financier shall release the same to the Developers’ bankers the Bian Chiang Bank Ltd from time to time according to the said Schedule of Payment. The said loan shall bear an interest of 0.8% per mensem and repayable by the Purchaser within 20 years that is to say on or before 25 July 1986. |
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(5) |
As soon as the Developers shall have obtained the issue documents of title to the said land the Developers shall execute a memorandum of transfer of the said land to the Purchaser and simultaneous therewith the Purchaser shall execute a memorandum of charge on the said land in favour of the Financier as security for the repayment of the said loan of $70,000 and for the said interest thereon. For bringing into effect of the above, the Financier shall secure for the Developers a discharge of charge created by the Developers in favour of Bian Chiang Bank Ltd. Provided that the moneys payable under the Schedule of Payment shall be paid to the said Bian Chiang Bank Ltd as creditors of the Developers. |
Thereafter the Appellants had the agreement registered in the Registrar-General Registry at Kuching on 15 August 1966 and wrote to the Respondents enclosing a registered copy of the same. The letter and the agreement are the documents referred to at the trial and are therefore of vital importance in deciding the central issue involved.
The letter (AB12) states as follows:—
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Loan to Penghulu Francis Umpau Re: Agreement dated 25 July 1966. We enclose herewith a copy of agreement duly registered for your file. According to the agreement a sum of $10,000 is payable to Messrs Bian Chiang Bank Ltd by you to the credit of Messrs Ong Construction Co and this sum shall constitute as an advance of the loan of $70,000 to the Penghulu. As soon as the issue document of title is ready we will prepare a memorandum of transfer to be signed by Messrs Ong Tiaw Kok and Ong Tiaw Sian in favour of the Penghulu and a memorandum of charge to be executed by the Penghulu in your favour. Yours faithfully, Yong & Co |
On 22 December 1966 as a result of a telephone inquiry by the senior partner of the Appellants Datuk Stephen Yong to the Respondents’ Operations Manager for clarification of the terms and conditions of the proposed loan to enable them to prepare a charge in favour of the Respondents, a letter was written by the latter setting out the required terms and conditions.
The letter (AB23) reads as follows:—
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Lot 1244 & 1248 Dear Sir, Reference our telephone conversation (Yong/Shim) of this morning, the following are the terms and conditions of the housing loan to Penghulu Francis Umpau:—
I hope the above clarifies. Yours faithfully, For WEE HOOD TECK DEVELOPMENT CORP LTD Sgd Operations Manager. |
The Appellants did not take any further steps in relation to AB12 because the certificates of title in respect of the said land had not been issued. It was also not possible to secure the discharge of the charge with Bian Chiang Bank (BC Bank). On 20 July 1967 the certificates of title were registered. However the discharge of the said land was not secured in compliance with cl 5 of the agreement. Instead on 25 August 1967 the Developers executed a second charge in favour of BC Bank to secure advances of $440,000 as overdraft facilities. The charge was prepared by the Appellants and the common seal of the Bank was affixed in the presence of PW1 the Bank’s Managing Director and PW6 the Bank’s Secretary. This charge was registered in 14 September 1967 and further encumbered the said land.
About 12 days after on 26 September 1967 BC Bank through their solicitors Thomas & Co gave notice to the Developers demanding payment of the balance of money still unpaid and threatening legal action. On 8 February 1968 Thomas & Co filed Originating Summons No K2 of 1968 for an order of sale of 77 lots including the said land involved in the charges under s 148(2)(c) of the Land Code (Cap 81) Sarawak.
On 26 June 1968 the Developers paid the BC Bank’s claim in full. The memorandum of discharge of charge given by BC Bank was signed by PW1 and PW6. It was prepared by the Appellants. The discharge was made possible because the Developers executed a charge of the same lots including the said land to Hock Hua Bank (HH Bank) for the sum of $150,000. The memorandum of charge was prepared by the Appellants on 26 June 1968. On 14 January 1969, a second charge was executed by the Developers in favour of HH Bank for the sum of $70,000. Again the memorandum of charge was prepared by the Appellants.
On 19 July 1971 Ibrahim & Co acting on behalf of the Purchaser and the Respondents wrote to the Developers demanding the execution of the memorandum of transfer of the said land to the Purchaser. Since the demand was not complied with after some negotiations on 14 April 1974 both the Purchaser and the Respondents filed a writ in the High Court Kuching vide Civil Suit No K52 of 1974 against the Developers’ partners Ong Tiaw Kok and Ong Siaw Sian for specific performance of the agreement and for damages in lieu of or in addition thereto. It was only after some protracted correspondence that on 30 November 1974 Ong Tiaw Sian of the Developers informed the Respondents through Thomas & Co that HH Bank was the chargee of the said land. That was followed on 13 December 1975 by a letter from the Appellants enclosing copy of a letter from HH Bank dated 9 December 1975 addressed to the Appellants who appeared to have written to them on 1 December 1975 confirming the two charges and the amount thereof still outstanding and due from the Developers. They subsequently defaulted under the charges resulting in the sale by auction of the lots including the said land to a third party at the instance of HH Bank on 6 January 1979.
We have to trace the evidence stated above in its proper perspective as showing the sequence of events and the manner in which the two parties and the Developers became involved in what ought to be a straightforward land and housing loan transaction but which was rendered complicated. We realise the difficulty that the learned Judge had to face in arriving at his conclusions and we appreciate that he has prepared and written a comprehensive and detailed judgment. Bearing these in mind we have to tread carefully to consider the evidence and the points raised on appeal, the arguments proferred including the authorities cited by both Counsel for the Appellants and the Respondents, the former challenging the Judge’s conclusions and the latter supporting them. The amount claimed and adjudged may not be large but the findings of the learned Judge involved fraudulent concealment by negligence and breach of duty on the part of a firm of Advocates and Solicitors which obviously affect their reputation in the light of the seriousness of the allegations. Perhaps the Appellants had put their finger in more than one pie and found it difficult if not impossible to strike a proper balance in treating their clients without preferring one to the detriment of the other because they should be fully aware of the conflicts of interest and the risks involved in being a common solicitor for more than one client.
The Respondents contended that as a result they found themselves to be an unsecured Creditor with no means of enforcing their claim against the Purchaser who had no means to pay the debt. They expected the Appellants to act as their solicitors to carry out the undertakings as stated in AB12 with reasonable skill, care and diligence and at the same time to protect their interests in connection with the said loan having regard to the special relationship between them as solicitors and clients. Further, it was upon that belief the Respondents gave the loan in five progressive payments in compliance with the agreement.
The cause of action relied on was:—
negligence and breach of contract of the Appellants as their solicitors;
that the Respondents did not discover (a) above until within three years next before the commencement of this action and
that the existence of such negligence and breach of duty was concealed by fraud of the Appellants until within such three years.
The particulars mentioned inter alia reliance by the Respondents on s 18 of the Limitation Ordinance (Cap 49) confined to the meaning of the word “fraud” mentioned therein.
In their pleadings the Appellants denied the allegations and raised triable issues which were dealt with by the learned Judge.
RETAINER
The main question was whether a contract came into being between the parties whereby the Appellants undertook to prepare the memorandum of charge and have it duly executed in favour of the Respondents. In other words, whether there was a retainer of the Appellants as solicitor for the Respondents. In his judgment the learned Judge drew a distinction between a retainer to prepare an agreement and a retainer to prepare a memorandum of charge on the ground that the former did not clearly establish that the retainer came into existence upon its execution. However, he expressed the view that para 2 of AB12 written subsequent to the agreement should be read with cl 5 of the agreement and provided that the Appellants were obliged by the terms of the retainer to prepare the memorandum of charge as envisaged by cl 5. AB12 in his opinion could be evidence of subsequent conduct showing a course of dealings which might give rise to legal obligations. He took into consideration PW1’s reliance on the letter in the belief that his interests were protected when he paid out the agreed sums in accordance with the terms and conditions of the agreement. He concluded that AB23 reinforced his view that the Appellants were retained to act for the Respondents on the basis of the clear and explicit instructions contained in AB12. In short his view was that the retainer arose by implication from the conduct of the parties showing that a relationship of solicitor and client had in fact been established.
Mr. Humphrey Ball for the Appellants argued on the premise that AB12 was an ordinary standard letter stating what the Appellants as solicitors for the Developers were going to do and it merely informed the Respondents what the Appellants would procure to be done by the Purchaser and the Developers pointing out the obligations of the two as stated at cl 5 of the agreement. The loan he submitted, advanced by the Respondents was in pursuance of the agreement and not under AB12. Further, there was no evidence of any specific instructions by the Respondents that the Appellants were to act for them in the preparation and completion of the agreement and thereafter to protect their interests through implementation of the agreement. Since the Appellants acted for the Developers, they could not have accepted such instructions. As regards AB23, he submitted that it merely stated the conditions of the loan to the Purchaser and raised no inference that the Appellants were receiving the information as solicitors for the Respondents in the absence of any words operating to that effect. It was as a result of information in AB23 that the Appellants drafted the memorandum of charge and served it on the Respondents.
Mr. Thomas for the Respondents conceded that the first paragraph of AB12 was an ordinary letter but not para 2 which clearly showed the Appellants offering their services as stated therein. As admitted by Datuk Stephen Yong in his testimony, the draft charge was prepared acting on AB23 which draft was sent to Mr. Shim of the Respondents who denied however, having received it. He also pointed out that prior to the event, there had been relationship between the Respondents and the Appellants who were responsible for preparing the Articles of Association for bringing the Respondents into being and also signed the Articles as witness in September 1965 as “KT Yong, Advocate, Kuching.” On numerous occasions during 1966, 1967 and 1968 the Appellants sent bills and receipts relating to other transactions to the Respondents who made payments by way of the Appellants’ professional charges and loans to borrowers. He disagreed that the Appellants acted only for the Developers in relation to the said land but also for the Respondents and Bian Chiang Bank (BC Bank).
In our view, there was ample evidence on record for the learned Judge to conclude that a retainer came into existence by implication and as amplified by the conduct of the parties which showed a course of dealings giving rise to legal obligations and establishing the relationship of solicitor and client. (Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1978] 3 All ER 571). AB12 was a follow-up of the agreement indicating what the Appellants had undertaken to do with the ultimate purpose of ensuring security for the loan advanced by the Respondents. The contents of AB23 were in fact clear and specific instructions requiring the Appellants to prepare a charge and to lodge a caveat on the said land.
Acting in the belief that their interests would be served, the Respondents made progress payments towards the loan by releasing the money from time to time to the Developers’ bankers. By 3 May 1967 the fifth and sixth payments amounting to $12,900 for the credit of the Developers was duly acknowledged by BC Bank. The construction of the house had by then been fully completed and the Purchaser was subsequently given possession thereof. Only the last and final payment was still left to be made pursuant to the schedule to the agreement.
The question of legal fees was not brought up as an issue. We think it is because of the already established relationship between the Appellants and the Respondents as pointed out earlier by Mr. Thomas of the payments of legal fees by the latter to the former relating to other transactions in the course of the previous years. Clause 11 of the agreement makes payment of “other legal expenses relating only to the transfer of the said land to be borne equally between the Developers and the Purchaser.” It is therefore safe and reasonable to infer that the fees for the discharge and the intended charge of the said land to BC Bank in favour of the Respondents would be borne by the Respondents and payment of which would be made after the Appellants had submitted their bill.
We agree with the learned Judge that there was therefore a retainer which put into operation the normal terms of the contractual relationship including in particular the duty of the Appellants as solicitors to protect the interests of the Respondents as their clients in matters to which the retainer relates by all proper means. (Groom v Crooker [1938] 2 All ER 394, 413).
Their obligations as expressed in AB12 and AB23 were to obtain certificates of title for the said land, thereafter to prepare a memorandum of transfer and have it duly executed by the Developers in favour of the Purchaser, to prepare a memorandum of charge to be executed by the Purchaser in favour of the Respondents as the Financier and have it presented and registered in order to secure the loan, and to lodge a caveat on the said land on behalf of the Respondents for the duration of the loan.
The contractual duty of the Appellants as common solicitor
It is common ground that the said land was charged among other lots by the Developers to BC Bank and the Appellants also acted as solicitor for the Developers. The following factors are worthy of note:—
According to cl 5 of the agreement the Respondents as the Financier undertook to secure the discharge of the existing charge of the said land to enable a memorandum of charge to be prepared in their favour as security for the Penghulu’s loan. This in our view is condition precedent to the Appellants having to fulfil their obligations in the retainer.
Nevertheless in order to make the discharge possible the Appellants had to obtain the documents of title to the said land as solicitor for the Developers. The condition at (1) above is therefore dependent on (2).
The proviso to cl 5 of the agreement provides that all the moneys payable under the schedule of payment shall be paid to BC Bank as creditors of the Developers, although the bank was not a party to the agreement. That is because the Developers still owed the bank from their overdraft facilities. This fact is within the knowledge of both the Developers and the Appellants. It appeared in the circumstances that the Respondents’ obligation to secure the discharge would be subject to BC Bank agreeing to release the monies paid into the Developers’ account according to the schedule of payment for the purpose of the discharge of the said land.
What transpired after the issue and registration of the documents of title on 20 July 1967 was the execution of the second charge in favour of NC Bank by the Developers on 25 August 1967 to secure the advance of $440,000 and the said land instead of being retained in spite of the issue of the documents of title was further encumbered. The Appellants were instrumental in preparing the said charge on behalf of the Developers. No doubt the charge was made possible by the approval of BC Bank. That is because the bank had to look after its own interests and its officers had to follow the banking laws and regulations in order to keep the transactions and accounts of their clients in confidence. In our view, it was the Appellants’ duty to inform the Respondents of the issue of documents of title, the duty being incidental to the retainer. After the execution of the second charge there was still time to do so since the documents of title were in the custody of BC Bank which would not release them until the discharge was executed.
The principle applicable in a case of this nature as rightly applied by the learned Judge is that while the duty of a solicitor is directly related to the confines of the retainer, it is the incident of that contractual duty that he has to consult his client on all questions of doubt which do not fall within the express or implied discretion left him. It is also his duty to keep his client informed to such extent as may be necessary according to the same criteria. (Midland Bank Trust and Groom v Crocker (supra)) The appellants had therefore failed to comply with the contractual duty as the Respondents’ solicitor to inform them of the issue and registration of the documents of title to the said land to enable the Respondents to secure the discharge of the Developers’ charge with BC Bank in accordance with the agreement.
CONFLICT OF INTERESTS
The Appellants however did not stop there. The evidence disclosed that they were instrumental in preparing a memorandum of discharge of all the lots including the said land after the Developers had settled their overdrafts with BC Bank in full. They were also responsible for preparing the memorandum of charge of the same lots with HH Bank to raise the required amount to pay off BC Bank and subsequently to execute a second charge.. Later on when the Developers received a letter from the Respondents’ solicitors demanding for the execution of the memorandum of transfer of the said land, the Appellants were naturally unable to do so for obvious reason. Still the Respondents were not informed of the charges by the Developers with HH Bank until a writ was filed by the Respondents and the Purchaser against the Developers and after protracted correspondence between them. Finally the Respondents were deprived of the opportunity of securing their loan which they had advanced to the Purchaser when the said land with other lots were put up for auction sale by HH Bank after the Developers had defaulted under the charges.
It is apparent therefore that the Appellants had acted in favour of the Developers whose instructions directly conflicted with those of the Respondents. Being a common solicitor for two different clients whose interests were directly in conflict, the Appellants acted at their own peril and the onus of showing that the conflicting interests did not prevent them from doing their duty to both clients rested firmly on them. As stated by Danckwerts LJ in Smith v Mansi [1962] 3 All ER 857, 859, 860—
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This a shocking example of the trouble and expense which can arise from the employment (under a mistaken idea of saving time and expense) by the two parties to a sale of a solicitor who is already a solicitor to one of the parties. The defendant vendor was a builder, whose regular solicitor in his transactions was the solicitor so employed. It seems to me impossible for a solicitor in such circumstances to act fairly for both of the parties. The plaintiff purchaser was obviously inexperienced in the matter of buying and selling land. The position in the present case was aggravated by the mistaken idea of the solicitor in question that it was legally possible for the process of “exchanging contracts” between two solicitors acting for the respective parties to be applied to a single document prepared by the only solicitor ....... I think in the present case the common solicitor paid undue attention to the directions which he received from his regular client (I am sure without any conscious bias), and the result is that the unfortunate purchaser found himself without the house which he thought that he was buying and the vendor was left free to sell the house at an advanced price — if the decision of the learned judge was right. |
In the present appeal, the Appellants as common solicitor having acted under the directions received from the Developers resulted in the Respondents finding themselves without any security for the $70,000 loan they had advanced to the Purchaser who was allowed to take possession and occupy the house constructed by the Developers at the expense of the Respondents.
It should be noted that the practice of having a common solicitor acting for both parties although legitimate and is recognised by the order governing non-contentious remuneration, has inherent dangers in it as illustrated in Goody v Baring [1956] 2 All ER 11 and Moody v Cox [1916–17] All ER Rep 548.
Turning to the present appeal, we agree with the learned Judge that the Appellants being in that invidious position and on discovering that they were unable to properly discharge their duties fairly should have inquired of the Respondents whether their obligation to prepare the memorandum of charge was superseded or had come to an end. That they failed to do.
The learned Judge said on page 178:—
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In this case the Defendants chose not to clarify any doubts that they may have had as to whether their instructions to charge the two lots were superseded by the fact that the two lots were still subject to a charge to the Bank which had common officers with the Plaintiffs’ corporation and a final payment of $3,100 was still outstanding; and that before 23 September 1967 the Bank proceeded to obtain a further charge over these two titles, nor did they ascertain whether their instructions had come to an end. They just assumed it had. Nor did they bring to the notice of the Plaintiffs the fact that the land to be subsequently charged to Hock Hua Bank was the same land which they had undertaken to charge to the Plaintiffs as security for the loan given to the purchaser by the Plaintiffs. |
LIABILITY IN TORT
The liability of a solicitor may be viewed in two aspects. At common law the retainer imposes upon him an obligation to be skillful and careful and for failure to fulfil this obligation he may be made liable in contract for negligence whether he is acting for reward or gratuitously. On the other hand, like any other individual, a solicitor is liable for his wrongful acts and if the circumstances justify the charge, he may be made liable to his client in tort. (See Halsbury’s Laws of England, 3rd Ed vol 36 page 96, para 131). He owes a duty not to injure his client by failing to do that which he had undertaken to do and which his client has relied on him to do. (Midland Bank Trust Co Ltd (supra) Applying this principle, we are satisfied from the evidence on record, that the learned Judge was justified in concluding that the Appellants had not only failed to perform their obligations under the contract with the required skill and care but were also liable in tort for their wrongful act of depriving the Respondents from having security for the loan they have advanced. by failing to execute a memorandum of charge.
Knowledge of common officers of one company can be imputed to the other company. It was the Appellants’ contention that because PW1 was the managing director of BC Bank and also the chairman of the Respondents and PW6 was the secretary of the former as well as the latter, all knowledge and information acquired by BC Bank must be imputed to the knowledge of the Respondents. It was also submitted that PW1 by his office and financial interest, controlled both the Respondents and the Bank and as a managing director could not be allowed to escape responsibility by merely denying knowledge.
The principle in this regard is that knowledge acquired by the officer of one company will not be imputed to the other company unless the common officer had some duty imposed upon him to communicate the knowledge to the other company, and had some duty imposed on him by the company which is alleged to be affected by the notice to receive the notice (Re Hampshire Land Co [1896] 2 Ch 743, 748).
In that case the dispute was between two companies one giving a loan to the other to the knowledge of the common secretary whose duty was to affect notice sought by the company who employed him and to receive that notice as the secretary of the other company. In Gale v Lewis (1846) 9 QB 730; 115 ER 1455 the jury found as a fact that the common agent was authorised by the companies to affect and to receive such notice. Similar cases are found in Re Marseilles Extension Railway Co (1871–72 LR 7 Ch App 161 and Re David Payne & Co Ltd [1904] 2 Ch 608. The question of imputed knowledge of the common officers in these cases arose during the winding-up of the companies. It was applied except in cases where the common agent was found to be guilty of fraud, illegality or inducement for the purpose outside the scope of the borrowing company, then his knowledge of the transaction could not be imputed to the other company which had advanced the loan.
In the present appeal we think the Judge was right in holding that the principle did not apply. Both PW1 and PW6 might be common officers of the Respondents and BC Bank and had knowledge of the agreement but the loan advanced by the Respondents was to a third party i.e. the Purchaser and the money was paid to BC Bank in the account of the Developers pursuant to the housing agreement. There was no evidence to show any loan transaction between the Respondents and BC Bank. In fact the latter gave overdraft facilities to the Developers. Secondly there was no evidence that PW1 and PW6 had some duty imposed upon them to communicate their knowledge from BC Bank relating to the Developers’ overdraft account to the Respondents even though the security for such included the charge of the said land among other lots. On the contrary the bank has laws and regulations to be followed in order to keep confidential their clients’ accounts. The mere fact of the two companies having common directors does not affect each company by everything that is done in the other Re European Bank (1869–70) 5 Ch App 358).
Another point raised was that PW1 as chairman and the managing director of the Respondents and as the managing director of BC Bank and the alter ego of the companies had access to and was in fact controlling the affairs of the two companies. It was suggested that in such capacities which are united in one person he could have arranged for the discharge of the two lots comprising the said land. Reliance was made on Lennards Carrying Co v Asiatic Petroleum Co [1914–15] All ER Rep 280. First, the issue which arose in that case relates to the construction of s 502 of the Merchant Shipping Act, 1894 which states, inter alia, that the owner of a British sea-going ship is not liable to make good to any extent whatever “any loss or damage happening without his actual fault or privity” where any goods are lost or damaged by fire on board the ship.
Secondly the principle laid down is that where the active director of the appellant company which owned a ship also took an active part in the management of another company which managed the ship in which he was entrusted and had his name registered in the ship’s register, his knowledge of the defects which manifested themselves in the condition of the ship amounting to unseaworthiness coupled with him being the directing mind and will of the appellant company, rendered his action to be the action of the company itself under s 502. As a result the company was liable in damages for the cargo belonging to the respondent being destroyed by fire when the ship became stranded in a gale and caught fire due to the bad condition of its boilers. He cannot successfully deny knowledge or excuse himself for not having known of the defects.
We do not think the principle applies to the instant case. The facts in the above case are not similar while the evidence in the present case is insufficient to justify the notion that PW1 is the alter ego of BC Bank or the Respondents. Similarly the contention that his knowledge of the bank’s transactions with regard to the said land can be imputed to the knowledge of the Respondents so that his action in the former was the action of the latter cannot in the circumstances be accepted.
FRAUDULENT CONCEALMENT
From the facts the learned Judge’s findings were that when the documents of title in respect of the said land were sent to the Appellants by BC Bank on 26 June 1968 (Ex D2) the Appellants were instrumental in charging the said land to HH Bank on 4 July 1968 (AB36–38) without informing the Respondents. It was not until 30 November 1974 that the Respondents came to know about it from a letter sent by Ong Tiaw Kok to Ibrahim & Co (AB61). The Appellants did not inform the Respondents of the dealings until 13 December 1975 (AB66) after an inquiry by the Respondents’ then solicitors.
The learned Judge had this to say:—
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On the facts and contrary to their obligations the Defendants had not done anything to execute the memorandum of charge in favour of the Plaintiffs on the documents of title of the two lots of lands. If they were mindful of their duties, it was their obligation to consult the Plaintiffs and keep the Plaintiffs informed on all matters relating to the charge. Yet they made no effort and instead surreptitiously charged the two lots to Hock Hua Bank. This, in my opinion, amounted to fraudulent concealment of the cause of action by the Defendants by keeping the Plaintiffs in ignorance of the wrong they had committed in charging the two lots of the lands to a third party. This was an unconscionable conduct on their part ... |
In our view, fraud in this case is not limited to the common law fraud in which the action being one of deceit and it is necessary to prove actual fraud by showing that the false representation has been made knowingly or without belief in its truth or recklessly without caring whether it is true or false. (Nocton v Ashburton [1914] AC 932, 946. It relates to “fraud” as stated in s 18 of the Limitation Ordinance (Cap 49). It extends to equitable or constructive fraud in which the concealment does not involve any dishonesty and no degree of moral turpitude is necessary to establish fraud within the section. The phrase covers conduct which having regard to some special relationship between the two parties concerned, is an unconscionable thing for the one to do towards the other. (Kitchen v RAF Assocn [1958] 2 All ER 241, 249 and Beaman v ARTS [1949] 1 All ER 465.)
It is clear therefore as stated by the learned Judge that the Appellants not only neglected to notify the Respondents of the charge of the said land to HH Bank until more than five years later but were also instrumental in placing the securities out of the Respondents’ reach. We agree with respect with the Judge that there was a fraudulent concealment of the right of action on the part of the Appellants.
LIMITATION PERIOD
Section 18 of the Limitation Ordinance (Sarawak) states as follows: —
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18. |
When any person having a right to institute a suit has, by means of fraud, been kept from the knowledge of such right or of the title on which it is founded, or where any document necessary to establish such right has been fraudulently concealed from him, the time limited for instituting a suit—
shall be computed from the time when the fraud first became known to the person injuriously affected thereby or, in the case of the concealed document, when he first had the means of producing it or compelling its production. |
Section 18 is in pari materia with s 18 of the Indian Limitation Act, 1908 prior to the amendment in 1963 by the new s 17 of the Indian Limitation Act, 1963 which is recast on the lines of s 26 of the Limitation Act, 1939 of England. It says that the period of limitation prescribed by the Act does not begin to run in certain cases of fraud until the plaintiff has discovered the fraud or could with reasonable diligence have discovered it. The words emphasised or words to the effect do not appear in s 18 of our Limitation Ordinance. As in the relevant section of the 1908 Indian Act, s 18 of our Ordinance says that where a person is kept from the knowledge of the fraud of another person, limitation is computed from the time when the fraud became known to the person injuriously affected thereby. The difference in the language is significant in that mere suspicion or hearsay knowledge is not enough. There is no requirement to put a prudent man or diligent man into enquiry as is required in the new Indian or the English Act on which the former is modelled. (See BB Mitra on the Limitation Act, 1963, 17th Ed p215). The requirement has therefore no application in Sarawak.
The limitation period under item 76 of the Schedule to the Ordinance is three years computed from the time when the fraud became known to the party wronged. We agree with the learned Judge that the Respondents discovered the fraud in 30 November 1974 according to the facts disclosed. They filed the writ on 29 September 1977 i.e. within the three year limit from the time of discovery. The Respondents were well within time and are therefore not barred by limitation.
It was submitted that s 18 refers to a person and not a firm and since fraud is personal to an individual the Appellants cannot seek protection under the section. We are satisfied that although the Appellants are a firm of solicitors the claim was directed against all the three partners for whom appearance was entered on 13 October 1977 naming the individual partners of the company as the defendants therein. That is in line with Ord. 48A r 7 of RSC (Ord. 77 r 4 of RHC 1980) which requires appearance to be made in the names of the partners but the action shall continue in the name of the firm. Since the names of the partners are specified it is competent to sue a firm for damages on ground of fraud (Thomson & Co v Pattison Elder & Co (1895) 22 R (Ct of Sess) 432). In the light of the above, we are of the view that each and every one of the three individual partners fall within the ambit of the word “person” in s 18.
DAMAGES
There was no serious argument on the quantum of damages. The Respondents’ loss was purely financial. They had lost the security for the loan that they had advanced and were unable to recover it due to the Appellants’ breach of retainer and negligence. As for authority that a claim for purely financial loss without injury to the person or property is no bar to liability for negligence we refer, as did the learned Judge, to Ross v Caunters (a firm) [1979] 3 All ER 580 with which we agree.
We hereby confirm the judgment of the learned Judge and the award of damages stated therein with interest and costs to be taxed.
The appeal is hereby dismissed with costs. The deposit should be paid to the Respondents. Appeal dismissed.
Cases
Midland Bank Trust Co Ltd v Hett, Stubbs and Kemp [1978] 3 All ER 571; Groom v Crocker [1938] 2 All ER 394; Smith v Mansi [1962] 3 All ER 857; Goody v Baring [1956] 2 All ER 11; Moody v Cox [1916-17] ALL ER Rep 548; Re Hampshire Land Co [1896] 2 Ch 743; Gale v Lewis (1846) 9 QB 730; 115 ER 1455; Re Marseilles Extension Railway Co [1871] 7 Ch App 161; Re David Payne & Co Ltd [1904] 2 Ch 608; Re European Bank [1869] 5 Ch App 358; Lennards Carrying Co v Asiatic Petroleum Co [1914-15] All ER Rep 280; Nocton v Ashburton [1914] 932 AC; Kitchen v RAF Association [1958] 2 All ER 241; Beaman v ARTS [1949] 1 All ER 465; Thomson & Co v Pattison Elder & Co [1895] 22 R 432; Ross v Caunters (a firm) [1979] 3 All ER 580
Legislations
Limitation Ordinance (Sarawak), s 18.
Authors and other references
Halsbury’s Laws of England, 3rd Ed vol 36
BB Mitra on the Limitation Act, 1963, 17th Ed
Representation
Humphrey Ball (Goh Leng Chua with him) for the appellants.
TO Thomas (Mohamed Asfar Nassar with him) for the respondents.
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