Ganesan Carlose & Partners v American Home Assurance Co

• Jurisdiction: Singapore
• Judge: Lai Siu Chiu JC
• Judgment Date: 31 January 1994
• Neutral Citation: [1994] SGHC 23
• Date: 31 January 1994
• Subject Matter: Representation made knowingly but with honest intentions,Liability insurance,Professional liability insurance,Fraudulent acts or omissions not covered,Professional conduct,Act held to be negligent by various forums,No intention to defraud,Applicability of Derek v Peek,Misrepresentation,Fraud and deceit,Indemnity claim,Professional indemnity,Insurance,False attestation by solicitor that he witnessed signatures,Representation made by person not party to contract,Fraudulent acts and omissions not covered,False attestation made by solicitor that he witnessed signatures,Exclusion clause,Whether act within exclusion clause,Breach,Representor himself a victim of fraud,Legal Profession,Tort
• Docket Number: Suit No 1680 of 1993
• Published date: 19 September 2003
• Defendant Counsel: David Mitchell (Donaldson & Burkinshaw) watching brief,Benedict Chan (Goh, Poh & Pnrs)
• Court: High Court (Singapore)
• Plaintiff Counsel: C Arul (C Arul & Pnrs)

Judgment:

LAI SIU CHIU JC

The background

The plaintiffs are a firm of solicitors and the defendants are their insurers under a policy numbered LPL 4891 dated 20 February 1987 (`the policy`) covering professional liability for the period 2 January 1987 to 2 January 1988 to a limit of $300,000. In Suit No 2961 of 1987 (`the suit`) the plaintiffs were sued (as the third defendants) by one Lee Siew Chun (`Lee`) on a mortgage dated 2 July 1984 (`the mortgage`) in which the plaintiffs had acted purportedly for Lee as mortgagor. The first defendant in the suit was Sourgrapes Packaging Products Trading Pte Ltd (`Sourgrapes`) and the second defendant was Oversea-Chinese Banking Corporation Ltd (`the bank`).

Lee`s claim in the suit arose from the following facts:

(a) She jointly owned with her husband, Hoh Sou Yen (`Hoh`), a property situated at No 64 Lorong 24A Geylang (`the property`). In June 1984, Hoh died. She took out the title deeds to the property from the parties` safe deposit box before he passed away and gave them to her son Hoh Weng Cheong (`the son`) to photocopy as a precaution. A day after Hoh`s death, the son requested Lee to sign a piece of paper, which was written in English and which he said was a testimonial to his good character, which Lee did.

(b) As it turned out, the piece of paper which Lee signed was not a testimonial for the son but the last two pages of a mortgage for the property, purportedly given by Lee and Hoh in favour of the bank as security for credit facilities granted by the bank to Sourgrapes, which company was controlled by the son`s brother-in-law and in which the son worked. Unknown to Lee, after she had signed the mortgage, the son forged Hoh`s signature thereon.

(c) It was later discovered that a legal assistant of the plaintiffs, one Gurdaib Singh (`Singh`), had purportedly witnessed the signatures of Lee and Hoh on the mortgage and signed an attestation clause to the effect that the signatories had appeared before him and they were known to him personally. The attestation was untrue as the mortgage had been presented to Singh by the son with Hoh`s forged signature and already signed by Lee. For the forgery, the son pleaded guilty and was sentenced to 18 months` imprisonment in July 1987 whilst his brother-in-law was acquitted.

(d) Lee sued the plaintiffs vicariously for Singh`s act alleging (in paras 7, 8 and 11(c) of the statement of claim) that Singh had unlawfully conspired to cheat and defraud her. The bank joined the plaintiffs and Singh as third parties to the suit alleging that Singh made representations to them which were fraudulent, reckless and negligent.

(e) In a judgment (`the judgment`) dated 17 December 1992 (reported at [1993] 2 SLR 297 ) the learned judicial commissioner Michael Hwang:

(i) rejected Lee`s plea of non est factum and dismissed her action against the bank;

(ii) found the plaintiffs vicariously liable for Singh`s negligent conduct and apportioned liability equally between Lee and the plaintiffs;

(iii) held that the plaintiffs were entitled to a full indemnity from Singh.

(f) In so far as it is relevant to this claim, Lee did not adduce any evidence to support her allegation of conspiracy against Singh and her counsel conceded that she had abandoned this aspect of her claim. Singh gave evidence on his own behalf and, on Singh`s conduct, the learned judicial commissioner made the following findings (at p 321)):

(i) he had allowed the son to take the mortgage away for his parents (Lee and Hoh) to sign and had then witnessed the parents` signatures and had also signed the attestation certificate in the form prescribed by s 12(6)(b) of the Registration of Deeds Act (Cap 281, 1970 Ed);

(ii) the two acts of Singh were negligent and fell short of the standard of reasonable care and skill expected from a reasonably competent solicitor however inexperienced; no attempt was made to defend his conduct on this score;

(iii) it was an unusual case of solicitor`s negligence as Singh`s statements to a third party (the bank) resulted in loss to Lee;

(iv) the negligent misstatements ought not to be analyzed in the context discussed in Hedley Byrne & Co Ltd v Heller & Partners but simply viewed as negligence in carrying out a solicitor`s professional duty because, unlike Hedley Byrne , the misstatements made in this case resulted in loss to the solicitor`s own client, not to a third party;

(v) in any event, Singh was negligent in not seeing Lee before witnessing her signature and attesting her acknowledgment, and this would not be a negligent misstatement, but a negligent act or omission; and

(vi) whichever way one looked at the facts, there was no difficulty in concluding that Singh was liable for negligence.

The O 14 application

Relying on the judgment (on which there was no appeal by any party), the plaintiffs brought this action claiming under the policy:

(i) a declaration that the plaintiffs are entitled to be indemnified by the defendants against their liability to Lee, including her costs;

(ii) a declaration that the plaintiffs are entitled to be indemnified by the defendants against their own costs of defending the suit;

(iii) interest; and

(iv) costs on a full indemnity basis.

Upon the defendants` solicitors entering an appearance to this suit, the plaintiffs applied for summary judgment supported by an affidavit of N Ganesan (`Ganesan`) who was a partner of the plaintiffs at the time this claim arose. In his affidavit, Ganesan, inter alia, stated:

(a) When Lee filed the suit against the plaintiffs, he instructed the plaintiffs` solicitors to inform the defendants and a claim was made under the policy.

(b) When the plaintiffs were served with the writ, the plaintiffs notified the defendants and requested the latter to take action in accordance with the cover provided under the policy.

(c) The defendants denied liability on the ground that the policy does not cover what gave rise to Lee`s claim, citing paras 7, 8 and 11 of the statement of claim.

(d) As Singh had clearly been vindicated in the judgment in respect of the allegations of fraud and conspiracy made against him and the plaintiffs, there was no basis for the defendants` continued repudiation of liability and they were obliged to indemnify the plaintiffs in full for damages payable to Lee and for the expenses incurred by the plaintiffs in defending the suit.

At the hearing before the learned assistant registrar on 17 November 1993, the defendants were granted unconditional leave to defend the plaintiffs` claim. The plaintiffs appealed against his decision and, when the appeal came up for hearing before me, I allowed the...