Anwar Patrick Adrian v Ng Chong & Hue LLC

• Court: Court of Appeal (Singapore)
• Judgment Date: 29 May 2014
• Docket Number: Civil Appeal No 138 of 2013
• Date: 29 May 2014

Anwar Patrick Adrian and another

Plaintiff

and

Ng Chong & Hue LLC and another

Defendant

[2014] SGCA 34

Chao Hick Tin JA

,

Andrew Phang Boon Leong JA

and

V K Rajah JA

Civil Appeal No 138 of 2013

Court of Appeal

Contract—Implied contract—Whether implied retainer existing between solicitor and third-party associates of solicitor's client—Whether solicitor breaching terms of implied retainer

Damages—Quantum—Whether benevolence principle applicable—Whether settlement with other parties reasonable—Whether settlement sum might be claimed from party in breach of duties

Tort—Duty of care—Whether solicitor owing third parties duty to exercise care in course of advising client

The appellants (‘the Appellants’) were the sons of one Agus Anwar (‘Agus’) who in the aftermath of the 2008 financial turmoil ended up owing a bank, Société Générale Bank&Trust (‘SGBT’), a huge amount of money under a credit facility. After several rounds of negotiations, SGBT agreed to forebear from suing Agus provided that he procured, amongst other things, further collateral including mortgages of properties owned by the Appellants. The terms of this forbearance agreement was recorded in writing (‘the Forbearance Agreement’). Documents to perfect the security (‘the Security Documents’) were then provided to Agus and the Appellants for their execution. The second respondent (‘Ng’) (and consequently his law firm, the first respondent (‘NCH’)), was retained by Agus to assist him in the negotiations with SGBT and was involved substantially in the negotiations with SGBT and the latter's solicitors.

In the course of the negotiations, SGBT initially demanded, as part of the additional security, a term requiring that the Appellants bear personal liability as well for Agus' loans but this was ultimately dropped from the terms of the Forbearance Agreement after Agus made known to SGBT that he would not agree to such a demand. However, in the Security Documents was a term which provided that the Appellants as mortgagors of the properties covered under the terms of the Forbearance Agreement covenanted to pay SGBT ‘on demand all sums of money now due and owing ... and such sums of money which are now or shall from time to time or at any time hereafter be owing or remain unpaid’ (‘the Personal Guarantee Clause’). Ng did not point this out to Agus or the Appellants who executed the Security Documents as per the Forbearance Agreement.

Despite the provision of additional security, Agus still could not meet his obligations under the credit facility to SGBT. This led to a suit in April 2009 by SGBT against, amongst others, Agus and the Appellants. SGBT's claim against the Appellants was premised on the Personal Guarantee Clause. After settling the action with SGBT for a sum of US$1 m, the Appellants sued the respondents (‘the Respondents’) to recover the settlement sum and their legal fees incurred in having to defend the suit which amounted to $325,287.71. They claimed that the Respondents' conduct amounted to a breach of an implied retainer or, in the alternative, a breach of a duty of care to take steps to protect their (the Appellants') interests.

The High Court held that there was no solicitor-client relationship between the Appellants and the Respondents and consequently there was no breach of any retainer. The Appellants' claim in tort for breach of a duty of care was also dismissed.

Held, allowing the appeal in part:

(1) A retainer might be implied where, on an objective consideration of all the circumstances, an intention to enter into such a contractual relationship ought fairly and properly to be imputed to all the parties. Although it was undisputed that Ng did not directly advise the Appellants, the inquiry did not end there. The absence of giving of advice, or even the absence of any meaningful contact, might in many cases be helpful in enabling the court to infer that no implied retainer had arisen on those facts, but that fact alone was not decisive:at [49] to [53] .

(2) There was an implied retainer as Ng had signed off as the ‘solicitor for the mortgagors’ on the ‘Certificate of Correctness’ which formed part of the Security Documents. The Certificate of Correctness was an official document of paramount importance because the Registrar of Titles and the public placed enormous faith on it. Ng, a seasoned solicitor, had to be taken to have known of the importance of his signing the Certificate of Correctness for the purposes of the mortgage of the properties held by the Appellants. In the circumstances that they found themselves in, the Appellants would also have legitimately considered Ng to be their solicitor:at [54] to [59] .

(3) The assumption of responsibility principle established in Hedley Byrne&Co Ltd v Heller&Partners Ltd[1964] AC 465 was inapplicable to the present facts and indeed to similar fact patterns generally. It would be pushing the boundaries of sensible argument to suggest that a solicitor in advising his client, with such advice potentially being of benefit to a third-party associate of the client, had undertaken to that third party a responsibility to take care in the giving of his advice. Similarly, it would strain the realm of reasonableness to argue that such a third party who might have been ignorant of the solicitor's existence had in fact relied on the solicitor's exercise of due care and skill in advising his client:at [71] .

(4) The parties accepted that White v Jones[1995] 2 AC 207 (‘White’) stood for the proposition that a duty of care might be owed by the solicitor to a third party directly even if there was no retainer between them. Ng's only contention was that the requisite proximity or nexus between him (and, consequently, NCH) and the Appellants was not made out. Crucially, Ng conceded that whether a duty of care and liability for a breach of that duty was visited upon him fell to be determined by the principles and framework established bySpandeck Engineering (S) Pte Ltd v Defence Science&Technology Agency[2007] 4 SLR (R) 100 (‘Spandeck’). Indeed, White could be accommodated within the two-stage Spandeck framework of proximity and policy considerations, even if the reasoning of the principles in White was different from the governing principles in Spandeck:at [83] , [114] and [189] .

(5) Thus, a solicitor owed a third party a duty to take care as long as the requirements under the Spandeck test were satisfied. The content of the duty of care owed by the solicitor to the third party, if there was one, would be to take reasonable care to ensure that the client's instructions were carried into effect. This duty of care was the same as that owed to the client:at [118] and [119] .

(6) It was necessary then to first ascertain the scope of Ng's duties to Agus as the latter's solicitor. In a typical solicitor-client relationship, the duty to explain documents was basic, and all the more so whenever the transaction involved the client signing documents. There was, however, no requirement that a solicitor had to hold his client's hand and walk him through every line. For some cases that might be necessary, but for others it might not. The scope depended on the circumstances of each case. It was the solicitor's duty to ensure that his client understood the document that he was committing his name to:at [134] to [137] .

(7) Ng was retained to and did provide advice to Agus in relation to his dispute with SGBT. His duties entailed explaining to Agus the contents of correspondence and proposals from SGBT and its lawyers and advising Agus generally on the consequences of the contents. This duty necessarily encompassed advising on the contents and effects of the terms in the Security Documents:at [139] .

(8) Applying the Spandeck test, on the threshold requirement of factual foreseeability, it was patently foreseeable that a solicitor's failure to take reasonable care in performing instructions under a retainer which, if performed properly would provide a benefit or negative a detriment to a third party, would result in harm to the third party. There was no doubt that it was factually foreseeable that should Ng fail to take reasonable care in advising Agus of the contents of the Security Documents, in particular the existence and effect of the Personal Guarantee Clause, loss to the Appellants would be occasioned:at [142] and [143] .

(9) On the first-stage requirement of proximity, the emphasis was on the ‘closeness’ and ‘directness’ of the relationship between the parties. There would generally be proximity in the case of an implied retainer such as that which existed between Ng and the Appellants. But even if there was no implied retainer, there was still proximity in this case in the form of relational or circumstantial proximity as well as causal proximity. Where a solicitor's instructions from a client included or had as its effect the conferment of a benefit or negativing of a detriment to a third party, and the solicitor undertook to the client to fulfil that instruction, he would have brought himself into a direct relationship with the third party, even if the latter might not have had personal knowledge of the transaction or the solicitor. Although this was not an issue on the facts, the terms of the retainer between the solicitor and the client might be relevant to the question of the imposition of a duty of care vis-à-vis the third party:at [145] to [150] and [163] .

(10) There were no policy considerations which negated the specific duty of care in question. Indeed, if there were any relevant policy factors, they pointed in the direction favouring the imposition of a duty of care. Upholding high standards of competence and diligence should be an ambition that a noble profession such as the law should strive towards and be proud of. The imposition of a duty on solicitors to exercise reasonable care even towards third parties in particular situations such...