Chu Said Thong v Vision Law LLC

Judgment Date14 August 2014
Date14 August 2014
Docket NumberSuit No 735 of 2011
CourtHigh Court (Singapore)
Chu Said Thong and another
Plaintiff
and
Vision Law LLC
Defendant

[2014] SGHC 160

Vinodh Coomaraswamy J

Suit No 735 of 2011

High Court

Agency—Agent's warranty of authority—Fraudster impersonating innocent third party and engaging defendant as agent—Defendant warranting to plaintiffs that it had authority from impersonated party to act as that party's agent—Plaintiffs relying on defendant's warranty of authority to transact with fraudster and thereby suffering financial loss—Whether defendant strictly liable to plaintiffs for breach of warranty of authority—Whether defendant could be said to have caused various heads of plaintiffs' financial loss

Tort—Misrepresentation—Fraud and deceit—Fraudster impersonating innocent third party and engaging defendant as conveyancing solicitors—Defendant making representations to plaintiffs as impersonated party's solicitors—Plaintiffs relying on representations to transact with fraudster and thereby suffering financial loss—Whether representations made fraudulently

Tort—Misrepresentation—Negligent misrepresentation—Fraudster impersonating innocent third party and engaging defendant as conveyancing solicitors—Defendant making representations to plaintiffs as impersonated party's solicitors—Plaintiffs alleging that defendant failing to take reasonable care in making these representations—Plaintiffs relying on representations to transact with fraudster and thereby suffering financial loss—Whether defendant owing plaintiffs duty of care in negligence

The plaintiffs were husband and wife. In September 2010, the plaintiffs came across an advertisement for the sale of a house at 13 AJalan Berjaya (‘the Property’) which met all their requirements. Unbeknownst to them, the advertisement had been placed by a fraudster, Victor Tan, who had no connection to the true owner of the Property, Lum Whye Hee. Victor Tan had fabricated in its entirety an option which purportedly gave him the right to buy the Property from Lum Whye Hee.

Impersonating Lum Whye Hee, Victor Tan engaged the defendant law firm and instructed it to act in the sale of the Property. He faxed a copy of the fabricated ‘option’ to one of the defendant's conveyancing secretaries, Susan Chua. Susan Chua verified that the name in the ‘option’ matched the owner of the Property on the land register. She also rang the number written on the ‘option’ and spoke to Victor Tan. Victor Tan fraudulently confirmed that he was ‘Mr Lum’. The defendant took no other steps to verify the identity of its putative client.

Victor Tan then defrauded the plaintiffs into agreeing to acquire from him his non-existent right to buy the Property under the fabricated ‘option’. Before agreeing to do so, the first plaintiff called the defendant and spoke to Susan Chua about the ‘option’. The plaintiffs alleged that in that conversation, Susan Chua represented that (a) the defendant acted for Lum Whye Hee; (b) Lum Whye Hee had issued the ‘option’ to Victor Tan; and (c) there would be no problems with the plaintiffs purchasing the ‘option’ from Victor Tan and paying him $35,200 for the ‘option’ and $70,000 as goodwill money. The plaintiffs claimed that on the strength of these three representations, they handed $105,200 to Victor Tan. The defendant denied that it was bound by any representations which Susan Chua might have made to the first plaintiff and, even if it were, denied that Susan Chua had made the third representation.

The plaintiffs exercised their ‘option’ on 23 September 2010 through their lawyers. They paid over to the defendant the sums due upon exercise, which the defendant agreed to hold as stakeholders. On 8 October 2010, Victor Tan's fraud was uncovered. The plaintiffs demanded that the defendant refund their stakeholding money and compensate them for $105,200 which they had paid to Victor Tan. The defendant eventually refunded the plaintiffs' stakeholding money on 15 June 2011 but rejected any liability to compensate the plaintiffs for the loss they had suffered.

In this action, the plaintiffs claimed compensation from the defendant for their loss and damage under two heads. First, they sought to recover from the defendant the sum of $105,200 which they had handed over to Victor Tan to acquire his right to buy the Property under the fabricated ‘option’. Second, they claimed that the ill-fated transaction with Victor Tan caused them to lose the opportunity to buy an alternative property in their desired area in September and October 2010. They claimed the difference in price between what they actually paid per square foot for the property they eventually bought in December 2011 and the average price per square foot of suitable properties in their desired area in September and October 2010.

Held, allowing the claim in part:

[Editorial note: The paragraphs indicated in parentheses in holding (1) are not reported. They can be found in the unreported version of the judgment ([2014] SGHC 160) on Law Net.]

(1) Susan Chua made the first two representations to the first plaintiff as he alleged, but did not make the third representation (at [53] to [71]).

(2) Susan Chua's representations were attributable to the defendant for the purpose of determining its liability. Unlike ordinary conveyancing secretaries, the defendant's conveyancing secretaries, including Susan Chua, carried out the defendant's professional work without the supervision of solicitors and communicated with members of the public, who were not actual or potential clients, about the defendant's professional work. This included communication with counterparties of the defendant's clients. In the circumstances, Susan Chua acted within the scope of her employment when she made the first two representations: at [73] , [75] , [83] , [84] to [86] , [89] and [95] .

(3) The fact that, objectively speaking, the defendant had no reasonable grounds to believe in the truth of the representations which it made did not make those representations fraudulent misrepresentations. The tort of deceit vindicated the innocent party's right not to be lied to. A lie required a specific, subjective state of mind. Therefore fraud always had to be determined subjectively, not objectively: at [112] , [116] and [117] .

(4) A person made a representation fraudulently if he made it (a) knowing that the representation was false; (b) without belief in its truth; or (c) recklessly, not caring whether it was true or false. The defendant did not make its representations fraudulently within the meaning of any of these three limbs: at [114] and [118] to [125] .

(5) In determining whether the defendant owed the plaintiffs a duty of care, the threshold question to be asked was whether a reasonable person, in the circumstances of that case with a reasonable attitude to risk and a reasonable capacity for foresight, ought to have foreseen that a plaintiff could suffer harm. It was reasonably foreseeable to the defendant that members of the public, such as the plaintiffs, would seek information from the defendant's conveyancing secretaries and that they could suffer loss if they received inaccurate information. The threshold question was thus satisfied: at [136] and [190] .

(6) Proximity in the universal test for a duty of care was a legal concept that involved a value judgment by the court about where the bounds of the law of negligence should be drawn. The concept of voluntary assumption of responsibility in Hedley Byrne Co Ltd v Heller & Partners Ltd[1964] AC 465 (‘Hedley Byrne’) was a proximity factor in ascertaining whether a duty of care existed for a defendant not to make misrepresentations negligently to a plaintiff: at [141] , [146] and [164] .

(7) The right protected by Hedley Byrne liability in tort was fundamentally the same as the right protected in the law of contract: a plaintiff's interest in a promise to him being kept. The key difference was that Hedley Byrne liability protected the plaintiff's interest only in a promise by the defendant to take care in the doing of an act, not the promise to do the act in itself. This proto-contractual nature of the Hedley Byrne liability was the reason (a) a defendant was able to escape this type of liability altogether by a unilateral and suitably-worded disclaimer; and (b) the liability did not arise if the negligent misrepresentation was made in a casual or perfunctory conversation, on a social or informal occasion or without deliberation: at [149] , [156] , [158] and [159] .

(8) The defendant did not voluntarily assume responsibility to the plaintiffs in the Hedley Byrne sense. To determine this question, the issue was whether the defendant had promised the plaintiffs to take care in making its representations. Susan Chua had not expressly or impliedly voluntarily assumed responsibility to take care in making her statements, nor were there circumstances from which such an assumption could be inferred. It was, any event, not reasonable in all the circumstances of this case for the plaintiffs to have relied on the defendant's representations: at [166] , [195] , [196] , [201] and [202] .

(9) Consideration of other proximity factors including relational proximity, knowledge, vulnerability and control also led to the conclusion that the defendant and the plaintiffs were not in a relationship of sufficient proximity for a duty of care to arise: at [208] to [212] .

(10) Even if proximity were taken to have been established, the existence of a conflicting duty arising from a solicitor's obligation to advance his client's interests zealously and without fear of liability in tort to his client's transactional counterparties, would have negated a duty of care at the policy stage of the universal test. The public's interest in upholding the high standards of conduct to which solicitors were held in their professional activities was vindicated by the enforcement of the profession's ethical and professional obligations and...

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