Wai Wing Properties Pte Ltd v Lim, Ganesh and Liu (sued as a firm)

• Jurisdiction: Singapore
• Judge: Chao Hick Tin J
• Judgment Date: 31 March 1994
• Neutral Citation: [1994] SGHC 84
• Docket Number: Suit No 874 of 1990
• Date: 31 March 1994
• Year: 1994
• Published date: 19 September 2003
• Plaintiff Counsel: KS Chung (Harry Elias & Partners)
• Citation: [1994] SGHC 84
• Defendant Counsel: Peter Madhavan and Ganesh Moorthy (Madhavan Louis & Partners)
• Court: High Court (Singapore)
• Subject Matter: Whether liable for resultant winding-up petition,Tort,Failure of solicitor to reply to statutory notices of demand,Causation,Legal Profession,Whether failure constituted professional negligence,Whether solicitors' failure to respond to statutory notice of demand caused issue of winding-up petition,Duties,Client,Negligence,Professional negligence

Cur Adv Vult

This is an action by a client against a firm of solicitors claiming damages on account of professional negligence. The action is only against those solicitors who were at the material times the partners of the defendant firm, namely, Liu Ming Yuen (Liu), B Ganeshamoorthy and Lim Hong Kan. It is Liu`s alleged negligent omission which formed the subject of this action. Liu has since 1 November 1989 ceased to practice in Singapore. On that date he assumed the office of a Senior Crown Counsel in Hong Kong. He is still holding that office.

Background and plaintiffs` case

The plaintiffs are property developers and were during the period 1982 to 1987 developing a project known as Rainbow Gardens on Lot 3660 of Mukim 5, off Toh Tuck Road.

On 29 April 1983 the plaintiffs entered into an agreement to sell unit #03-03 of Rainbow Gardens to one Lee Kok How (Lee) at a price of $480,000. On 17 May 1983 the plaintiffs entered into another agreement to sell unit #03-05 of the same development to one Neo Hiam Huat (Neo) at the same price. In both these sales and purchases M/s Chee & Teo acted for both the developers and the purchasers. For completeness I should add that at about the same period of time the plaintiffs had also sold three other units to three friends of Lee and Neo.

In 1985 recession hit Singapore. There was a significant downturn in the property market. Both Lee and Neo wanted to give up the purchase of the two units. So did their three friends. They were prepared to let the plaintiffs forfeit the 20% of the purchase price which they had already paid. Pursuant to discussions between Kwok Wai Hoi (Kwok), the managing director of the plaintiffs, and Lee, Neo and their three friends, the plaintiffs agreed to reduce the purchase price of each unit by $80,000, from $480,000 to $400,000. But `the reduction (was) to be applied only to the last progress instalment payable.` At that point in time, only the foundation for the construction of the units in question had been completed.

On 7 January 1986 Lee granted an option to three persons, Sim Loo Lee, Sim Baba and Tan Kim Lan, or their nominees (hereinafter referred to as `the three sub-purchasers`), to purchase unit #03-03 from him at the price of $290,000. The option was duly exercised. Following the sub-sale, by a letter dated 26 May 1986 Lee authorized and directed the plaintiffs to enter into a fresh agreement with the three sub-purchasers for the sale and purchase of unit #03-03, to rescind the agreement between the plaintiffs and Lee dated 29 April 1983 and to credit all moneys paid by Lee to the three sub-purchasers. Lee confirmed that henceforth he would have no claim or interest whatsoever in the unit. Accordingly, on the same day a fresh agreement was entered into between the plaintiffs and the three sub-purchasers. In the fresh agreement, the sale price remained at $480,000.

On 27 January 1986, Neo similarly gave an option to Wong Mun Choi Johnny and Lui Cheng Geok (hereinafter referred to as `the two sub-purchasers`) to purchase unit #03-05 at the price of $290,000. On 27 June 1986 Neo gave a similar letter of authorization and direction to the plaintiffs as that given by Lee. A fresh agreement was also entered into by the two sub-purchasers with the plaintiffs in respect of unit #03-05.

In the meantime on 10 May 1986, before the sub-sale by Lee to the three sub-purchasers was completed, M/s Chee & Teo, who were acting for both the plaintiffs and Lee, wrote to the plaintiffs (DB23) as follows:

... we are informed by the sub-purchasers` solicitors that they require your confirmation that you will accordingly not proceed against the sub-purchasers for the sum of $80,000.00. This is because in your sale of the abovenamed units to the original purchasers you have agreed to reduce the sale price of $480,000 to $400,000. In addition you have also further agreed to enter into a fresh sale and purchase agreement with the sub-purchasers at the price of $480,000.

In the premises, please let us have your confirmation that you will not claim from the sub-purchasers the sum of $80,000.

On 20 May 1986 the plaintiffs gave the following confirmation to M/s Chee & Teo (DB25):

We are pleased to confirm that we have agreed to give the purchasers of the abovementioned units a reduction in the sale price of $480,000 to $400,000. This reduction is also applicable to their subsequent sub-sales.

Please note, however, that the reduction of $80,000 can only be applied and deducted from the last progress payment.

Sometime in June/July 1987, after the project had been completed and the last instalment paid by the sub-purchasers, Lee and Neo asked the plaintiffs for the refund of the $80,000 reduction which the plaintiffs had agreed to give in respect of each of the two units. On 7 July 1987, the plaintiffs made a payment of $40,000 to Lee on the advice of their solicitor, Mr Patrick Chee. The plaintiffs also paid Neo a sum of $38,400 on 10 July 1987, though Kwok claimed that this payment was made by Patrick Chee without his direction. Subsequently, both Lee and Neo asked for the balance. Kwok told Lee that he was not going to refund the balance because Lee had sub-sold the property and was not entitled to the reduction which was only to be applied to the last instalment. Kwok also refused to pay the balance to Neo.

On 9 September 1987 the plaintiffs received two letters of demand under s 254(2) of the Companies Act written by M/s Tan Lee & Choo on behalf of Lee and Neo claiming the payment of $40,000 and $41,600 respectively, within 21 days. A week later, on 16 September 1987, Kwok went to consult Liu and wanted the latter to act for the plaintiffs on the two notices. Kwok gave to Liu an account of how the matter arose and asked for his advice. Liu said he needed the relevant files before he could advise.

The next day, Kwok despatched two files of the plaintiffs to Liu. He also, by way of a separate letter, requested M/s Chee & Teo to release the relevant solicitors` files to Liu. Kwok claimed that he saw Liu a second time on either 18 or 19 September 1987. It was at this second meeting that Liu gave the opinion that it would not be prudent for Lee or Neo to file a winding-up petition without first obtaining a judgment. He also advised Kwok that Lee and Neo did not have a clear case to obtain judgment; there was a fair case of dispute. As will be apparent later, Liu disputed that there was such a second meeting on either 18 or 19 September 1987.

Kwok also told the court that at the second meeting with Liu the latter expressed the view that the payments of $40,000 to Lee and $38,400 to Neo were made under a mistake of fact and law. This was because by virtue of the sub-sales, both Lee and Neo had lost the benefit of the reduction and that the plaintiffs could commence proceedings against Lee and Neo to recover the two sums paid by mistake. Liu further said that he would be writing to M/s Tan Lee & Choo to explain the nature of the dispute in order to prevent the presentation of a winding-up petition against the plaintiffs. Kwok agreed with Liu and instructed Liu to do the same. Liu promised to extend copies of his replies to M/s Tan Lee & Choo to the plaintiffs for information. There is a dispute as to whether Kwok had specifically instructed Liu to reply to the two notices.

Kwok said that after a few days, having failed to receive copies of Liu`s replies to M/s Tan Lee & Choo, he asked his secretary, one Jennifer, to call and remind Liu. Jennifer reported that Liu said he had written and would forward the copies to the plaintiffs.

Kwok was away in London from 26 September 1987 to 2 October 1987. He was accompanying his son who was going for further studies. He said that in a telephone conversation with Jennifer from London he did again enquire if copies of the replies to M/s Tan Lee & Choo had been received and Jennifer answered in the negative. As a result he again asked Jennifer to call Liu.

I should mention here that Kwok has explained to the court that he could not call Jennifer to testify because she is now living in Australia and as her application for permanent resident status is still under consideration, she could not leave Australia without jeopardising her application. Kwok tendered a fax letter which he said he received from Jennifer. Defence counsel objected to the admissibility of that letter which did not even have an address. However, I accept Kwok`s oral evidence that he spoke to Jennifer who told him why she could not come to Singapore to testify. As will be apparent later, this aspect of the matter is quite immaterial to the crux of this action.

In the meantime, on 25 September 1987 Chee & Teo forwarded some 11 documents to Liu. The documents were received by Liu on 28 September 1987. The covering letter was copied to the plaintiffs. Kwok did not call Liu to ascertain the position when he returned from London on or about 2 October 1987.

On 12 October 1987 the plaintiffs were served with a winding-up petition filed by Tan Lee & Choo on behalf of Lee. Kwok called Liu who answered that he had not sent out the letters to Tan Lee & Choo. In that conversation, Kwok did not ask Liu why he had not sent out the letters. Kwok`s explanation for that omission was that he was panicky. As requested, on either 13 or 14 October 1987, Kwok sent his office attendant to deliver the petition to Liu. Either on the same day or the next, Kwok himself also went to see Liu. When questioned by Kwok why he did not send the reply to Lee`s notice, Liu said that it was not necessary and would serve no purpose. When asked to send the letter then, Liu said it was too late and that he would prepare an application to have the petition dismissed. At that point Kwok`s main pre-occupation was to have the petition dismissed which Liu said he would do.

The petition appeared in T he Straits Times and the Gazette on 23 October 1987. It appeared in the Chinese press...