YEUNG SHU v. ALFRED LAU & CO

HCA3759/90

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3759 OF 1990

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D E C I S I O N

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1. This is a review of the tax bill after a review by the learned master, Master Kwan, on 20 November 1998, but this appeal only concerns with several items after the aforesaid review.

2. In respect of items 2 and 21 they concerned with the preparation and work done in the issue of a writ of subpoena against Mr Cullen, the plaintiff's own expert. It has been submitted by the first defendant that since Mr Cullen was the plaintiff's own expert the writ of subpoena was neither necessary nor proper.

3. I must say the submissions on both sides are quite evenly balanced on this item. Whilst it might be said that the expert would voluntarily attend the court, yet it is a common experience of litigants or litigants' lawyers that a voluntary witness may for other reason fail to attend courts - for example, he was otherwise engaged elsewhere - a litigant would understandably like to ensure any witness would attend court on time without any accidental excuse. I must say that on balance I accept Mr LO's submission that the attendance of this expert, fortified by the force of a court subpoena, would assist not only the plaintiff but all litigants in the case, otherwise the trial might have to be adjourned for this reason.

4. It is quite unanswerable if the expert failed to attend and the court asked the plaintiff why the plaintiff did not subpoena even its own expert in order to make sure that he would realise the necessity and the importance of attending court on time. I therefore accept the learned Master's reason as stated in the appeal in respect of items 2 and 21.

5. In respect of items 4 and 6, they concerned with the plaintiffs' attendance on their own clients for taking instructions to negotiate settlement. Mr LAU for the 1st defendant submitted that according to Butterworth Costs Services, 5th Edition, page B122 paragraph 333, there is a general rule against the allowance of abortive negotiation for settlement on a party and party taxation. However, the aforesaid paragraph only stated that:

"Where negotiations between the parties result in a compromise of the proceedings, thus obviating the need for a trial the costs of the negotiations will usually be allowed."

6. It did not state the general principle in the negative. In other words, there is no rule against the allowance of abortive negotiation and there is no rule which says that the allowance of aborted negotiation must be of some unusual circumstances; each case should decide on its own facts.

7. Here the offer was made by the first defendant's side, and naturally the plaintiffs' solicitor would have to attend on their own client for taking instructions to negotiate for a settlement. Even though the offer was not accepted, the negotiation, in my view, is a necessary and proper item on a party and party taxation. I agree with the learned Master on items 4 and 6.

8. In respect of items 14 to 15, it concerned with five pieces of advice given by Miss Gladys LI for the plaintiffs. The learned Master had perused those advice and came to the conclusion that each and every one of them were necessary and proper. There is no principle involved in the appeal of these five items. It was not urged on me to peruse those advices again by the first defendant's side. I cannot see any error in principle or law is involved. I therefore also allow these items to stand.

9. In respect of items 16 to 19, they concerned with various pieces of work done by counsel Mr JAT for the plaintiff at the hearing of the trial. I think both sides agreed on principle that counsel's brief fee should include a number of items like perusal of papers, preparation for trial. Here counsel itemised his work. The brief fee of $60,000 included two full days' preparation and appearance on the first day of the trial, that is, 9 October 1996. In addition to that, he charged separately under item 16 (B3.8): "Per perusal of papers, research and drafting affidavit and notes." The affidavit was never used. The original item was $27,000, they were taxed-off by $9,000. The learned Master only allowed $18,000 in addition to the brief fee of Mr JAT.

10. The second item is 17 (B3.9) which is advice by letter and drafting chronology. The original item was $6,600, it was taxed-off by $1,600. The drafting of chronology should be included in the brief fee. The taxing-off amount of $1,600, in my view, at least reflected the master's treatment of drafting chronology which should be included in the brief fee.

11. The next item 18 under B3.13 which the original description was "Pay fee to counsel JAT Siu Tong for advice over telephone on 24 April 1996." The original item of $2,500 was taxed-off by $500 leaving $2,000.

12. The last item, item 19 (B3.14) concerned with an advice by fax on 28 August 1996 and perusal of expert reports which was taxed-off from $2,500 by $700 to $1,800. It was a separate item for written advice by fax and also perusal, and I think it is upon perusal of expert report i.e., the perusal itself and upon such perusal there was an advice by fax in August 1996.

13. Items B3.9 and B3.14 are separate items chargeable by themselves. This is also the case for B3.13. I agree with Mr LO that itemising each and every piece of work would help the taxation instead of lumping them up to the brief fee.

14. The only item outstanding is item B3.8 for "Perusal of papers and Research" which is $18,000. The "drafting of affidavit and note" which has never been used was already taxed-off by $1,600. For Mr JAT in 1996 a counsel of his seniority, he could easily attract a brief fee of $80,000, and he itemised them by $60,000 for the first day appearance and two full-day preparation, together with $18,000 as a separate item for perusal of papers. I do not find that excessive at all. On principle if the brief fee of $78,000 or $80,000 is an allowable item for Mr JAT I do not find on principle the learned Master erred in law at all.

15. The last item is item 20, "consideration of evidence for this case of three and a half hours by solicitors." This was taxed down from seven hours. In my view, this was a reasonable length of time. I do not find any error in law at all.

16. The result is I do not feel persuaded by the appeal of the first defendant. The review has to be dismissed, I think, with costs to the plaintiff, to be taxed if not agreed.

MR LO: My Lord, maybe it assists the matter. My year of admission was in 1994 and my hourly rate is $3,000, and I intend to charge totally, including today's attendance, preparation, research, all the case studies and I totally charge four hours.

COURT: I don't think you dispute them, Mr LAU, four hours' preparation and court attendance?

MR LAU: I agree with them, my Lord.

COURT: Appeal dismissed with costs to the plaintiff, taxed at $3,000 per hour for 4 hours in the sum of $12,000. Although I dismiss the appeal, I find the preparation from Mr LAU is very helpful and I can follow the arguments easily because of the written submissions, and I thank both parties in preparing this appeal. I hope you will put an end to this lengthy case for nearly 10 years.

17. Good day to all of you.

Representation:

Mr Joseph LO instructed by Legal Aid Department for Plaintiffs

Mr Alfred LAU of Alfred Lau & Co. for 1st Defendant

CHANG Pao Ching, Third Party (Absent)

Remarks: On appeal by the Defendant to the Court of Appeal: Appeal dismissed with costs. Please refer to CACV000253/1999.

1990 No. A3759

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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INTRODUCTION

1. In this action, the Plaintiff claims damages against the Defendant for breach of contract and negligence. The Defendant defends the action on two grounds: first, that the Plaintiff's claim is time-barred; secondly, that such loss as the Plaintiff sustained was not caused by the Defendant's breach of contract or negligence. In addition, there are third party proceedings in which the Defendant claims an indemnity from the Third Party in respect of the Plaintiff's claim if it is found to be liable to the Plaintiff. I decided to try the question as to whether the Plaintiff's claim is time-barred first. I gave judgment on that issue on 16th February 1996. My judgment is reported in [1996] 1 HKC 562. I held that the Plaintiff's claim for damages for breach of contract was time-barred, but that his claim for damages in tort was not. The judgment which I am handing down today relates to the other issues in the action.

2. There were originally two Plaintiffs in the action: Yeung Shu and his wife, Keh Pick Ha. However, Madam Keh died on 8th February 1991, and on 27th June 1995 Master Jones permitted Yeung Shu to carry on the proceedings on his own behalf and on behalf of his late wife's estate. Accordingly, when I refer in this judgment to the Plaintiff, I am referring to Yeung Shu alone.

THE FACTS

3. Save for evidence from a surveyor relating to the extent to which the value of residential property has fluctuated in Hong Kong, no evidence was called before me. That was because there is a chronology of the relevant events agreed between the Plaintiff and the Defendant, a large number of facts have been agreed by all parties, and most if not all of the other relevant facts can be discerned from the documents contained in the agreed bundle of documents. My findings of fact are set out below. There are some differences between the facts set out in this judgment and those set out in the judgment I handed down on 16th February 1996 because some of the facts have been clarified, and others are relevant now for the first time.

4. In 1979, the Third Party, Chang Pao Ching, was planning to develop a site on Ap Lei Chau. He was proposing to build a block of flats at 55 Ap Lei Chau Main Street. The Plaintiff and his wife decided to buy one of the proposed flats. Accordingly, by a sale and purchase agreement dated 13th November 1979 ("the sale and purchase agreement"), between the Plaintiff and his wife on the one hand and Mr. Chang on the other, Mr. Chang agreed to sell to the Plaintiff and his wife a share of the land on which the block of flats was to be built, together with the exclusive right to occupy the flat which was going to be at the front of the 3rd floor of the building. The purchase price was $84,000.00, and the sale and purchase agreement acknowledged that the Plaintiff and his wife had paid Mr. Chang a deposit of $33,600.00. However, the Plaintiff and his wife were not the first people to have been interested in purchasing the flat from Mr. Chang. Mr. Chang had previously agreed to sell the flat to Lee Shui Wai. But that agreement was cancelled, and the Plaintiff and his wife paid the sum of $56,000.00 to Mr. Lee in return for its cancellation and for the right to buy the flat themselves.

5. The sale and purchase agreement provided that the sale itself was to be completed within 7 days of the Plaintiff and his wife being notified of the issue of an occupation certificate for the building. However, a supplemental agreement was executed on the same day as the sale and purchase agreement. It provided for the date for the completion of the construction of the building to be extended. Moreover, the Plaintiff and his wife were obliged to pay an additional sum of $4,000.00 to Mr. Chang as "compensation". The agreement did not record what this was compensation for: perhaps the cost of constructing the building was more than Mr. Chang had anticipated, and he wanted the Plaintiff and his wife to contribute to the additional expenditure.

6. The Defendant, Messrs. Alfred Lau & Co., is a firm of solicitors. It acted for the Plaintiff and his wife on the transaction. It submitted a bill for its services which was dated 13th November 1979. The bill was for $729.00. It was paid by the Plaintiff and his wife. It included the solicitors' fees of $75.00 for registering the sale and purchase agreement, and a disbursement of $30.00 being the fee payable on registration. Neither the fee of $75.00 nor the disbursement of $30.00 should have been charged, because the Defendant admits that the sale and purchase agreement was not registered in the Land Registry at all.

7. Mr. Chang subsequently left Hong Kong for Taiwan. The construction of the building was never completed, and no occupation certificate was ever issued. Accordingly, the sale to the Plaintiff and his wife of the share in the land which they were buying was never completed either. By the early 1980s, the Plaintiff knew that Mr. Chang had gone to live in Taiwan. He was informed by Siu Chun Wing (to whom Mr. Chang subsequently gave a power of attorney) that Mr. Siu would try to contact Mr. Chang, but Mr. Chang never contacted him.

8. In 1988, Mr. Siu executed two documents on Mr. Chang's behalf which related to the land on which Mr. Chang had been proposing to build the block of flats:

(i) On 1st June 1988, Mr Siu executed a sale and purchase agreement under which Mr. Chang sold the land to Harvest Step Development Ltd. ("Harvest Step"). The land was being sold to Harvest Step under this agreement along with adjoining land at 49, 51 and 53 Ap Lei Chau Main Street. The purchase price of all the land to which the sale and purchase agreement related was $16.8m.

(ii) On 9th September 1988, Mr. Siu executed an assignment under which Mr. Chang assigned the land to Harvest Step. Again, the land was assigned to Harvest Step under the assignment along with the adjoining land at 49, 51 and 53 Ap Lei Chau Main Street. Clause 1 of the assignment showed that Mr. Chang's share of the purchase price of $16.8m. (i.e. the share attributable to the sale of the land at 55 Ap Lei Chau Main Street) was $4.2m., i.e. one-quarter of $16.8m.

9. Clauses 25 and 27 of the sale and purchase agreement under which the land was sold to Harvest Step are important. They provide as follows:

"25. It is acknowledged by [Harvest Step] that there are a number of Sale and Purchase Agreements registered against the [land] (or parts thereof) which have not been completed by the execution of Assignments to the purchasers thereunder. It is understood by [Harvest Step] that the Vendors [including Mr. Chang] are negotiating for the cancellation of these Sale and Purchase Agreements and that in the event of the Vendors failing to complete the sale of the [land] in consequence of their failure to procure prior to completion the cancellation of all Sale and Purchase Agreements registered against the [land] (or any part or parts thereof) prior to completion hereunder [Harvest Step] shall be entitled to the return of its deposit together with interest accrued thereon but without compensation to [Harvest Step] by the Vendors and without any other right or remedy against the Vendors in consequences of their failure to complete and the parties hereto shall execute an Agreement cancelling the sale of the [land] to [Harvest Step] hereunder and shall cause a Memorial of the same to be registered in the Land Office.

27. The Vendors shall, within 7 days from the date of signing of this Agreement, deliver to [Harvest Step's] Solicitors a list of the Sale and Purchase Agreements referred to in Clause 25 hereof and shall at the end of each calendar month inform [Harvest Step's] Solicitors the progress as to the execution and registration of the Cancellation Agreements in respect of such Sale and Purchase Agreements."

There can have been only one reason for the inclusion of these clauses in the sale and purchase agreement of 1st June 1988. Harvest Step wanted to ensure that it took the land free from encumbrances. Accordingly, in the event of any registered but uncompleted sale and purchase agreement not being cancelled, Harvest Step would be entitled to pull out of its purchase of the land. Thus, if the sale and purchase agreement which the Plaintiff and his wife had entered into on 13th November 1979 had been registered, Harvest Step would have been entitled to pull out of the purchase of the land unless Mr. Chang had been able to procure the cancellation of the agreement which he had concluded with the Plaintiff and his wife.

10. Although the sale and purchase agreement which the Plaintiff and his wife had entered into on 13th November 1979 had not been registered, Mr. Chang attempted to procure its cancellation. He instructed his solicitors to offer the Plaintiff and his wife the sum of $35,000.00 in return for their agreement to its cancellation. That sum was said to represent the return of the deposit of $30,000.00 which the Plaintiff and his wife had paid (which was wrong because they had in fact paid an initial deposit of $33,600.00) and a "compensatory payment" of $5,000.00. It did not take into account the sum of $56,000.00 paid by the Plaintiff and his wife to Mr. Lee or the additional sum of $4,000.00 paid to Mr. Chang. The Plaintiff and his wife refused the offer.

11. Similar offers were made to other people who entered into sale and purchase agreements with Mr. Chang for a purchase of a share of the land on which the block of flats was to be built, together with the exclusive right to occupy one of those flats. One such offer is relevant. In 1977, Madam Man Sau Lan had agreed to buy one of the flats for $92,000.00. She had paid Mr. Chang a deposit of $10,000.00. In 1988, she agreed to the cancellation of the agreement, and was paid the sum of $80,000.00 for agreeing to do so.

THE DEFENDANT'S NEGLIGENCE

12. The conduct of the Defendant which is said to be negligent was its failure to register the sale and purchase agreement of 13th November 1979 in the Land Registry. The effect of that failure is apparent from section 3(2) of the Land Registration Ordinance (Cap. 128). That provides that instruments affecting land which are not registered "shall, as against any subsequent bona fide purchaser ... for valuable consideration of the same [land] ... , be absolutely null and void to all intents and purposes". Accordingly, non-registration of the sale and purchase agreement by the Defendant meant that the interest in the land which the sale and purchase agreement had given to the Plaintiff and his wife would be defeated by a bona fide purchaser of the land for value.

13. The Defendant does not formally admit that its failure to register the agreement amounted to a breach of its duty of care to the Plaintiff and his wife, but realistically Mr. Wilson Chan for the Defendant did not seek to argue otherwise. In the circumstances, I have no difficulty in finding that the Defendant's failure to register the sale and purchase agreement of 13th November 1979 amounted to a breach of its duty of care to the Plaintiff and his wife.

THE PLAINTIFF'S LOSS

14. The Plaintiff's case is that since Harvest Step had been a bona fide purchaser for value, the assignment of the land to Harvest Step on 9th September 1988 meant that, as a result of the non-registration of the sale and purchase agreement, the sale and purchase agreement was null and void as against Harvest Step. Accordingly, the non-registration of the sale and purchase agreement meant that the interest of the Plaintiff and his wife in the land had been extinguished as against Harvest Step, and they therefore could not prevent the assignment of the land to Harvest Step. It is not now disputed that that is the loss which the Plaintiff and his wife suffered. The only issue is whether that loss was caused by the Defendant's failure to register the sale and purchase agreement.

CAUSATION OF THE PLAINTIFF'S LOSS

15. Mr. Chan developed at some length an interesting and well-structured argument as to why the non-registration of the sale and purchase agreement was not causally connected to the Plaintiff's loss. But stripped to its essentials, his argument was that by the time that the land was assigned to Harvest Step on 9th September 1988, the Plaintiff and his wife had already lost their interest in the land in its entirety. Accordingly, it was not the non-registration of the sale and purchase agreement which enabled Harvest Step to acquire a good title to the land and to override such interest as the Plaintiff and his wife had in the land. That interest in the land had already been lost because they could no longer obtain an order for specific performance of the sale and purchase agreement. They are said to have lost that right by reason of their failure to commence proceedings against Mr. Chang for specific performance of the sale and purchase agreement.

16. There is no doubt that if the Plaintiff and his wife had already lost their right to obtain an order for specific performance of the sale and purchase agreement, they could not have prevented the assignment of the land to Harvest Step even if the sale and purchase agreement had been registered. The assignment would have taken effect subject to such beneficial interest which the Plaintiff and his wife may still have had in the land; but even if they continued to have an interest in the land, that interest would have been incapable of enforcement once specific performance of the sale and purchase agreement was no longer available to them. However, in my judgment, it cannot be said that the Plaintiff and his wife had already lost their right to obtain specific performance of the sale and purchase agreement. Although the sale and purchase agreement was an agreement which was capable of enforcement by specific performance, the conditions entitling the Plaintiff and his wife to an order for specific performance had not arisen. I reach that conclusion by the following route:

(i) The sale and purchase agreement was an agreement for the sale and purchase of land. The remedy of specific performance was therefore available to the Plaintiff and his wife to compel Mr. Chang to complete the sale of the land.

(ii) However, the time for Mr. Chang to complete the sale of the land was dependent on when the construction of the building itself was completed.

(iii) Accordingly, the remedy of specific performance to compel Mr. Chang to complete the sale of the land to the Plaintiff and his wife was not available until the construction of the building had been completed. It is common ground that the remedy of specific performance was not available to the Plaintiff and his wife in order to compel Mr. Chang to complete the construction of the building.

(iv) Since the construction of the building was never completed, the circumstances in which the Plaintiff and his wife would be entitled to an order for specific performance compelling Mr. Chang to complete the sale of the land had not arisen.

I recognise that it was open to the Plaintiff and his wife to commence proceedings for an order for specific performance compelling Mr. Chang to complete the sale of the land. The issue of such proceedings prior to the completion of the construction of the building would not have been premature (see Hasham v. Zenab [1960] AC 316), even though no order for specific performance could have been made in the proceedings until after the time for performance by Mr. Chang of his obligation to complete the sale of land to the Plaintiff and his wife. But since it must have been apparent to the Plaintiff and his wife that there was little chance of Mr. Chang completing the construction of the building, it would have been absurd to expect the Plaintiff and his wife to have commenced proceedings for specific performance.

17. For these reasons, the Plaintiff and his wife had not lost their right to obtain specific performance of the sale and purchase agreement by the date of the assignment of the land to Harvest Step. It follows that it was the Defendant's failure to register the sale and purchase agreement which resulted in the extinction of the interest of the Plaintiff and his wife in the land as against Harvest Step, and therefore stopped the Plaintiff and his wife from preventing the assignment of the land to Harvest Step.

THE MEASURE OF THE PLAINTIFF'S LOSS

18. Two alternative methods of calculating the Plaintiff's loss have been suggested:

(i) Since the Plaintiff and his wife lost their interest in the land as against Harvest Step, the measure of their loss is the value of that interest. The value of that interest is the market value of the flat on the date on which they lost that interest, i.e. on 9th September 1988 when the land was assigned to Harvest Step, less the unpaid balance of the purchase price.

(ii) Alternatively, if the sale and purchase agreement had been registered, Mr. Chang would have had to persuade the Plaintiff and his wife to consent to a cancellation of the sale and purchase agreement to prevent Harvest Step being entitled to call off its purchase of the land. Their consent to the cancellation of the sale and purchase agreement would have come at a price. Accordingly, the alternative loss which the Plaintiff and his wife suffered as a result of the sale and purchase agreement not having been registered was the opportunity to negotiate a cancellation charge from Mr. Chang from a position of strength. The non-registration of the sale and purchase agreement meant that they had no bargaining power whatever.

19. I do not think that the market value of the flat on the date of the assignment to Harvest Step is an accurate reflection of the loss which was caused to the Plaintiff and his wife by the non-registration of the sale and purchase agreement. It assumes that the construction of the building was in fact completed, because only then would their interest in the flat have been commensurate to the market value of the flat. Since the construction of the building was never completed, the premise on which this measure of loss was based disappears. It would have been a much more accurate reflection of the loss which was caused to the Plaintiff and his wife by Mr. Chang's breach of the sale and purchase agreement in not completing the construction of the building and in not completing the sale of the land. Accordingly, I have no doubt that the correct measure of the Plaintiff's loss as against the Defendant is the loss of the opportunity to negotiate a cancellation charge from Mr. Chang.

THE QUANTUM OF THAT LOSS

20. Valuing the loss of the opportunity to negotiate a cancellation charge from Mr. Chang is not an exact science. It depends on what the result of the negotiations is likely to have been. That depends on (a) what Mr. Chang would have been prepared to offer, and (b) what the Plaintiff and his wife would have been prepared to accept.

21. As for what Mr. Chang would have been prepared to offer, I did not have the benefit of any evidence from Mr. Chang on the issue. Mr. Chan was, I think, content for the documents to speak for themselves. I note that on 2nd October 1986 Mr. Chang authorised Mr. Siu to negotiate cancellation charges with those persons (such as the Plaintiff and his wife) to whom he had already agreed to sell flats in the building, but that he had limited the compensation to $30,000.00 - $50,000.00 per flat. However, that was at the time when the price which he was prepared to accept for the land from a potential developer was $2m., and I do not believe that his position in 1986 was in any way a reliable guide as to compensation which he would have been prepared to pay in 1988. It is true that in his letter to his solicitors dated 14th November 1988 he was authorising them to offer relatively modest amounts of compensation to those of the original purchasers who had not yet signed cancellation agreements. However, I am sure that if the sale and purchase agreement of 13th November 1979 had been registered, and if the Plaintiff and his wife had held out for a large sum, Mr. Chang would have been prepared to pay a not inconsiderable sum to avoid the significant risk of Harvest Step pulling out of the agreement and thereby depriving him of the $4.2m. which he was to receive under that agreement. He had, after all, been prepared to pay a cancellation charge of $80,000.00 to Madam Man, when she had only paid him $10,000.00 by way of deposit. In view of what the Plaintiff and his wife had already paid for the flat, I think that Mr. Chang would have been prepared to pay them as much as $200,000.00 to ensure that his deal with Harvest Step was not lost.

22. As for what the Plaintiff and his wife would have been prepared to accept, I do not have the benefit of any evidence from the Plaintiff on this issue. Mr. Jat Sew Tong for the Plaintiff told me that his evidence would not have helped me. If he had said that he would have held out for a large sum, I would have been unlikely to place much weight on that because it would have been so obviously self-serving. On the other hand, if he had been persuaded to say in cross-examination that he would have accepted only a modest sum, I would have had to discount that in view of the difficulty of a man of the Plaintiff's age now being able to recall what his stance in negotiations in 1988 would have been. I am not persuaded that his evidence would have been as unhelpful as Mr. Jat suggests, but since he has not given evidence, I must do what I can without it. What I must not do is to speculate about what his evidence would have been, or to draw adverse inferences as to what he and his wife would have been prepared to accept from the fact that he was not called as a witness.

23. What I do know is that he and his wife refused the relatively paltry sum offered to them by Mr. Chang in 1988. I am sure that the very least which they would have been prepared to accept is what they had already paid out for the flat: the sum of $56,000.00 to Mr. Lee, and the sums of $33,600.00 and $4,000.00 to Mr. Chang - a total of $93,600.00 in all. I think it likely that they would have wanted interest on that sum to compensate them for being out of pocket during the 9 years since 1979, and I suspect that they would have wanted to be compensated for the loss of the bargain, in view of the way that the value of the flat would have increased over the years. If the construction of the building had been completed, the value of the flat which the Plaintiff and his wife would have got is agreed to have been $138,500.00 in November 1979 when the sale and purchase agreement was entered into and $340,000.00 in September 1988 when the land was assigned to Harvest Step. In all the circumstances, I do not believe that the Plaintiff and his wife would have settled for a cancellation charge of less than $150,000.00.

24. In the light of these considerations, the best estimate I can make as to the cancellation charge which the Plaintiff and his wife would in fact have agreed with Mr. Chang in the negotiations is a sum in the region of $175,000.00. Accordingly, it is the sum of $175,000.00 which I rule represents the loss of the opportunity to negotiate a cancellation charge from Mr. Chang, and the Plaintiff is entitled to judgment for that sum from the Defendant. He is entitled to interest on that amount. I was not addressed on the rate of interest or from when it should accrue, but instead of requiring the parties to return for further argument, I propose to make an order nisi relating to interest. Interest will be at the judgment rate determined from time to time by the Chief Justice, and will run from 1st January 1989, which is the date by which I find such cancellation charge as would have been negotiated would have been paid to the Plaintiff and his wife. I give the parties liberty to apply within 14 days of the handing down of this judgment if they disagree with this order nisi.

MR. CHANG'S LIABILITY UNDER THE THIRD PARTY NOTICE

25. Mr. Chang is liable to make a contribution to the Defendant for the damages which the Defendant is required to pay to the Plaintiff if he would have been liable to the Plaintiff for the same loss. That is the effect of section 3(1) of the Civil Liability (Contribution) Ordinance (Cap. 377) ("the CLCO"), which provides:

"... any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise)."

Provided that the loss for which the Defendant and Mr. Chang are liable to the Plaintiff is the same loss, it does not matter whether the legal basis for liability for that loss is different. That is the effect of section 2(3) of the CLCO, which provides:

"A person is liable in respect of any damage for the purposes of this Ordinance if the person who suffered it (or anyone representing his estate or dependants) is entitled to recover compensation from him in respect of that damage (whatever the legal basis of his liability, whether tort, breach of contract, breach of trust or otherwise)."

26. The loss which the Plaintiff and his wife suffered was the loss of their interest in the land as against Harvest Step. On a correct analysis of the facts, it is plain that Mr. Chang would have been liable to the Plaintiff for that loss just as the Defendant is, even though the acts complained of against the Defendant and Mr. Chang are different, and even though the loss of the Plaintiff and his wife only occurred as a result of the acts of both the Defendant and Mr. Chang:

(i) The Defendant. The act complained of against the Defendant was its failure to register the sale and purchase agreement. But for that failure, the assignment of the land to Harvest Step would not have defeated the interest of the Plaintiff and his wife in the land.

(ii) Mr. Chang. The act complained of against Mr. Chang was his assignment of the land to Harvest Step in breach of the sale and purchase agreement he had entered into with the Plaintiff and his wife. But for that breach, the interest of the Plaintiff and his wife in the land would have continued.

Accordingly, Mr. Chang is liable to make a contribution to the Defendant for the damages which I have ordered the Defendant to pay to the Plaintiff.

THE AMOUNT OF MR. CHANG'S CONTRIBUTION

27. Section 4(1) of the CLCO provides:

"... the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person's responsibility for the damage in question."

These words have been taken from section 2(1) of the Civil Liability (Contribution) Act 1978, and are the subject of discussion in Clerk and Lindsell on Torts, 17th ed., para. 4-63:

"There has been some controversy as to the proper basis of apportionment. In two cases Hilbery J. took 'responsibility' to refer to the extent to which each tortfeasor caused the damage, and not to their relative culpability. Hallett J., on the other hand, declined to follow this interpretation, and it is probably correct that neither element should be disregarded."

One of the two cases decided by Hilbery J. - Collins v. Hertfordshire County Council [1947] 1 KB 598 - was cited to me by Miss June Wee for Mr. Chang, whereas Mr. Chan referred me to a more recent case -Madden v. Quirke [1989] 1 WLR 702 - in which Simon Brown J. (as he then was) said at p.707E that responsibility "involves considerations both of blameworthiness and of causative potency".

28. I do not propose to add my own contribution to this interesting debate, because whether "responsibility" relates to causation alone or to culpability as well, I have reached the view that on both approaches the apportionment in this case should be the same, namely that the Defendant and Mr. Chang should be equally liable for the loss suffered by the Plaintiff and his wife. If causation was the only consideration, they can both be said to have caused the loss of the interest of the Plaintiff and his wife in the land as against Harvest Step. That loss would not have occurred without both the Defendant's failure to register the sale and purchase agreement and Mr. Chang's assignment of the land to Harvest Step. If blameworthiness is to be taken into account as well, the Defendant's failure to register the sale and purchase agreement was as serious an act of negligence as Mr. Chang's assignment of the land to Harvest Step was a serious breach of contract. I do not overlook Mr. Chan's point that anything less than a full indemnity from Mr. Chang will result in his benefiting from his breach of contract, but

(i) it was the Defendant's negligence which enabled him to do so, and

(ii) any contribution order made against Mr. Chang will result in the Defendant being relieved of its full responsibility for the consequences of its negligence.

29. For these reasons, I order Mr. Chang to pay the sum of $87,500.00 to the Defendant, together with one-half the interest which I have ordered the Defendant to pay to the Plaintiff.

COSTS

30. The orders nisi I make as to costs are as follows:

(i) the Defendant must pay to the Plaintiff his costs of the action, to be taxed if not agreed;

(ii) for the avoidance of doubt, the costs in (i) do not include the costs ordered to be paid by the Defendant by the order made on 16th February 1996;

(iii) Mr. Chang must indemnify the Defendant one-half of the costs in (i);

(iv) there be no order for costs in the third party proceedings; and

(v) the Plaintiff's costs be taxed in accordance with the Legal Aid Regulations.

In the light of the undertakings given to me at the conclusion of the hearing, I make no order as to the costs reserved on 11th April 1996.

Representation:

Mr. JAT Sew Tong, assigned by the Director of Legal Aid, for the Plaintiff.

Mr. Wilson CHAN, instructed by Messrs. Joseph W.K. Poon & Woo, for the Defendant.

Miss June WEE, instructed by Messrs. S.K. Wong & Lee, for the Third Party.

Headnote

[(1) A solicitor's duty to register an agreement in the Land Registry does not continue until the date when effective registration becomes impossible. The fact that the solicitor could have remedied an initial breach of his retainer by subsequently registering the agreement merely meant that it was in his power to mitigate the consequences of the breach which had already occurred. Dicta in Midland Bank Trust Co. Ltd. v. Hett, Stubbs & Kemp [1979] Ch 384 as to when a breach of the retainer occurs for the purpose of determining whether a cause of action in contract is time-barred disapproved.

(2) Loss sustained as a result of a solicitor's failure to register an agreement in the Land Registry does not arise until the Plaintiff's interest in the land has been extinguished by the lack of registration, since until then the failure was capable of being remedied at minimal or no cost. Dicta in Bell v. Peter Browne & Co. [1990] 2 QB 495 as to when loss arises for the purpose of determining whether a cause of action in tort is time-barred disapproved.]

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

Action No. A3759/1990

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Coram: The Hon. Mr. Justice Keith in Court

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J U D G M E N T

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Keith, J.:

INTRODUCTION

1. In this action, the Plaintiff claims damages against the Defendant for breach of contract and negligence. The Defendant defends the action on two grounds: first, that the Plaintiff's claim is time-barred; secondly, that such loss as the Plaintiff sustained was not caused by the Defendant's breach of contract or negligence. In addition, there are third party proceedings in which the Defendant claims an indemnity from the Third Party in respect of the Plaintiff's claim if it is found to be liable to the Plaintiff. For reasons which it is not necessary to set out in this judgment, I decided to try the question as to whether the Plaintiff's claim is time-barred first. It is upon that issue that I hand down this judgment. The Third Party took no part in the trial of that issue. His counsel did not wish to call any evidence or make any representations on it, and the Third Party is content to be bound by my decision on it.

2. The Plaintiffs in this action were originally Yeung Shu and his wife, Keh Pick Ha. However, Madam Keh died on 8th February 1991, and on 27th June 1995 Master Jones permitted Yeung Shu to carry on the proceedings on his own behalf and on behalf of his late wife's estate. I shall refer to Yeung Shu throughout as the Plaintiff.

3. I was originally intending to hand down this judgment on 12th February. However, the issues which arose in the present case are similar to those which arose in another case which I tried after I had reserved judgment in the present case. That case is Ko Ming Bor v. Lo & Lo (HCA 11879/95). I therefore decided to defer handing down this judgment, and I am now handing it down on the same day as I am handing down judgment in that case. Although much of the reasoning in each judgment is applicable to the other, each of the judgments are free-standing and independent of each other because (a) counsel's arguments were not identical, and (b) counsel in each case did not hear the arguments of counsel in the other.

THE FACTS

4. No evidence was called on the limitation issue. That was because the facts are not in dispute. I take them from the chronology of facts agreed by the Plaintiff and the Defendant, and from the documents contained in the agreed bundle of documents.

5. In 1979, the Third Party, Chang Pao Ching, was planning to develop a site on Ap Lei Chau. He was proposing to build a block of flats at 55 Ap Lei Chau Main Street. The Plaintiff and his wife decided to buy one of the proposed flats. Accordingly, by a sale and purchase agreement dated 13th November 1979, between the Plaintiff and his wife on the one hand and Mr. Chang on the other, Mr. Chang agreed to sell to the Plaintiff and his wife a share of the land on which the block of flats was to be built, together with the exclusive right to occupy the flat which was going to be at the front of the 3rd floor of the building. The purchase price was $84,000.00, and the Plaintiff and his wife paid Mr. Chang a deposit of $33,600.00. The sale was to be completed within seven days of the Plaintiff and his wife being notified of the issue of an occupation certificate for the building. By a supplemental agreement executed on the same date, the time for the completion of the construction of the building was extended to 360 days from that date, and Mr. Chang paid the Plaintiff and his wife the sum of $4,000.00 as agreed compensation for the delay.

6. The Defendant, Messrs. Alfred Lau & Co., is a firm of solicitors. It acted for the Plaintiff and his wife on the transaction. It submitted a bill for its services which was dated 13th November 1979. The bill was for $729.00. It was paid by the Plaintiff and his wife. It included the solicitors' fees of $75.00 for registering the sale and purchase agreement, and a disbursement of $30.00 being the fee payable on registration. Neither the fee of $75.00 nor the disbursement of $30.00 should have been charged, because the Defendant admits that the sale and purchase agreement was not registered in the Land Registry at all.

7. In the early 1980s, Mr. Chang left Hong Kong for Taiwan. The construction of the building was never completed, and no occupation certificate was ever issued. Accordingly, the sale to the Plaintiff and his wife of the share in the land which they were buying was never completed either.

8. Towards the end of the 1980s, Mr. Chang executed a number of documents which related to the land on which he had been proposing to build the block of flats:

(i) On 26th March 1987, he executed a mortgage under which he granted a charge over the land in favour of Vucan Co. Ltd. ("Vucan") as security for a sum in the region of $3.2m. which the mortgage deed recorded Mr. Chang as owing to Vucan. That mortgage was registered in the Land Registry on the same date.

(ii) On 1st June 1988, Mr. Chang executed a sale and purchase agreement under which he sold the land to Harvest Step Development Ltd. ("Harvest Step"). The land was being sold to Harvest Step under this agreement along with adjoining land at 49, 51 and 53 Ap Lei Chau Main Street. The purchase price of all the land to which the sale and purchase agreement related was $16.8m. That sale and purchase agreement was registered in the Land Registry on 13th August 1988.

(iii) On 9th September 1988, Mr. Chang executed an assignment under which he assigned the land to Harvest Step. Again, the land was assigned to Harvest Step under the assignment along with the adjoining land at 49, 51 and 53 Ap Lei Chau Main Street. Clause 1 of the assignment showed that Mr. Chang's share of the purchase price of $16.8m. (i.e. the share attributable to the sale of the land at 55 Ap Lei Chau Main Street) was $4.2m., i.e. one-quarter of $16.8m. This assignment was registered in the Land Registry on 8th October 1988.

9. Clauses 25 and 27 of the sale and purchase agreement under which the land was sold to Harvest Step are important. They provide as follows:

"25. It is acknowledged by [Harvest Step] that there are a number of Sale and Purchase Agreements registered against the [land] (or parts thereof) which have not been completed by the execution of Assignments to the purchasers thereunder. It is understood by [Harvest Step] that the Vendors [including Mr. Chang] are negotiating for the cancellation of these Sale and Purchase Agreements and that in the event of the Vendors failing to complete the sale of the [land] in consequence of their failure to procure prior to completion the cancellation of all such Sale and Purchase Agreements registered against the [land] (or any part or parts thereof) prior to completion hereunder [Harvest Step] shall be entitled to the return of its deposit together with interest accrued thereon but without compensation to [Harvest Step] by the Vendors and without any other right or remedy against the Vendors in consequences of their failure to complete and the parties hereto shall execute an Agreement cancelling the sale of the [land] to [Harvest Step] hereunder and shall cause a Memorial of the same to be registered in the Land Office.

27. The Vendors shall, within 7 days from the date of signing of this Agreement, deliver to [Harvest Step's] Solicitors a list of the Sale and Purchase Agreements referred to in Clause 25 hereof and shall at the end of each calendar month inform [Harvest Step's] Solicitors the progress as to the execution and registration of the Cancellation Agreements in respect of such Sale and Purchase Agreements."

There can have been only one reason for the inclusion of these clauses in the sale and purchase agreement. Harvest Step wanted to ensure that it took the land free from encumbrances. Accordingly, in the event of any registered but uncompleted sale and purchase agreement not being cancelled, Harvest Step's purchase of the land would not go ahead. Thus, if the sale and purchase agreement which the Plaintiff and his wife had entered into on 13th November 1979 had been registered, Harvest Step's purchase of the land could not have gone ahead unless Mr. Chang had been able to procure the cancellation of the agreement which he had concluded with the Plaintiff and his wife.

THE LIMITATION PERIOD

10. The Plaintiff's causes of action against the Defendant are in contract for breach of the Defendant's retainer and in tort for negligence. The only conduct of the Defendant relied upon was its failure to register the sale and purchase agreement of 13th November 1979 in the Land Registry. The limitation period for such causes of action is six years: section 4(1)(a) of the Limitation Ordinance (Cap. 347). The writ in the action was issued on 8th June 1990. Accordingly, if the Plaintiff's causes of action arose prior to 8th June 1984, the action is time-barred. The issue which separates the parties is when the Plaintiff's causes of action arose.

THE CAUSE OF ACTION IN CONTRACT

11. In claims for breach of contract, the cause of action accrues when the breach of contract occurs, whether or not loss is sustained at that time. Accordingly, where solicitors do something contrary to the terms of their retainer, the time for bringing proceedings for the claim for breach of contract begins to run on the date of that act. However, where solicitors omit to do something which is required by their retainer (as in the present case), the authorities do not speak with one voice as to when the breach of contract occurred.

12. In Midland Bank Trust Co. Ltd. v. Hett, Stubbs & Kemp [1979] Ch. 384, the Plaintiffs, as executors of a Mr. Green, claimed damages against Mr. Green's solicitors for failing to register an option to purchase a farm granted to Mr. Green by his father in March 1961. In August 1967, the father conveyed the farm to his wife in order to defeat the option. Oliver J. (as he then was) held that the solicitors' obligation to register the option continued until the date when effective registration became impossible. An action for breach of contract against the solicitors could therefore be begun up to six years from the date when the obligation lapsed.

13. Oliver J.'s view that the solicitors' obligation to register was a continuing one until the date when effective registration became impossible was based on two important considerations:

(i) He regarded it as part of the solicitors' duty "to take such steps as were necessary and practicable to ensure that [the option] was binding on the land into whosesoever hands it might come before any third party acquired a legal estate" (p. 435B).

(ii) He regarded it as important that over the years the solicitors continued to have dealings with Mr. Green. "[The solicitors] kept the document on [Mr. Green's] behalf in their strongroom. They opened a file relating to the matter. They were consulted about it at intervals over the next 6-1/2 years" (p. 438D-E).

14. Mr. Jat Sew Tong for the Plaintiff relied heavily on Midland Bank. He argued that if the solicitors' obligation to register the option in that case continued until effective registration became impossible, the Defendant's obligation in the current case continued until the sale and purchase agreement of 13th November 1979 became incapable of effective registration in 1988.

15. I do not think that Mr. Jat can derive any support from the judgment of Oliver J. in Midland Bank. To the extent that the solicitors continued to act for Mr. Green over the whole of the 6-1/2 years, that case is wholly distinguishable from the present. It is not suggested that the Defendant continued to act for the Plaintiff and his wife after November 1979 when the sale and purchase agreement of 13th November 1979 should have been registered. However, I go further. On the footing that there was a duty on the Defendant similar to that which Oliver J. found was assumed by the solicitors in that case, and assuming that the Defendant had continued to have dealings with the Plaintiff and his wife over the years, I do not believe that that duty was a continuing one. That was the view of the Court of Appeal in England in Bell v. Peter Browne & Co. [1990] 2 Q.B. 495.

16. In that case, the Plaintiff transferred his former matrimonial home to his wife in 1978, on the understanding that whenever it was sold he would receive one-sixth of the proceeds. The solicitors who were acting for him failed to protect his interest by a declaration of trust or mortgage or by entering a caution on the Land Register. In 1986 his former wife sold the matrimonial home and spent the proceeds. The husband started proceedings against the solicitors in 1987. It was held that the contractual claim accrued in 1978 and was therefore time-barred.

17. In deference to Oliver J., Nicholls L.J. (as he then was) ostensibly distinguished Midland Bank on the footing that there was "no suggestion that the [solicitors] had any further contact with the [husband] or his affairs after the conclusion of the divorce proceedings [in 1979]" (p. 501F-G). However, all the members of the Court took the view that the fact that the solicitors could have remedied their breach at any time before the wife sold the house did not mean that there was a continuing breach right up to 1986: see the judgments of Nicholls L.J. at p. 501B-C, Beldam L.J. at p. 509C-F and Mustill L.J. (as he then was) at pp. 512G - 513B. I regard the reasoning in these passages as compelling, and I adopt it. The breach occurred when the solicitors failed to do that which they had been engaged to do. The fact that they could thereafter have remedied that breach merely meant that it was in their power to mitigate the consequences of the breach which had already occurred. I therefore find that the duty on the Defendant to register the sale and purchase agreement of 13th November 1979 was not a continuing one which continued over the years until at least 8th June 1984. For these reasons, the Plaintiff's claim for damages for breach of contract is time-barred.

THE CAUSE OF ACTION IN TORT

18. In claims based on the tort of negligence, the cause of action accrues when the plaintiff sustains loss - actual loss as opposed to prospective or potential loss. Where the plaintiff is unaware that he has sustained loss until many years after the event, the traditional rules of limitation would effectively prevent him from recovering a remedy. Accordingly, the legislature has intervened to relieve the injustice which this causes. Thus, section 31 of the Limitation Ordinance provides an alternative limitation period in cases of loss not known to the plaintiff not involving personal injuries. However, section 31 had not come into force when the Plaintiff's writ was issued, and it is therefore necessary in the present case to consider when the Plaintiff actually sustained loss.

19. The Plaintiff's case is that the loss which he and his wife sustained as a result of the Defendant's failure to register the sale and purchase agreement of 13th November 1979 took two forms:

(i) Section 3(2) of the Land Registration Ordinance (Cap. 128) ("the LRO") provides that all instruments affecting land which are not registered "shall, as against any subsequent bona fide purchaser or mortgagee for valuable consideration of the same [land] ... , be absolutely null and void to all intents and purposes". If Vucan had been a bona fide mortgagee for value, the execution of the mortgage by Mr. Chang in favour of Vucan on 26th March 1987 would have meant that, as a result of the non-registration of the agreement, the agreement was null and void as against Vucan. Likewise, if Harvest Step had been a bone fide purchaser for value, the execution of the assignment by Mr. Chang in favour of Harvest Step on 9th September 1988 would have meant that, as a result of the non-registration of the agreement, the agreement was null and void as against Harvest Step. Accordingly, what the Plaintiff and his wife were said to have lost, as a result of the non-registration of the agreement, is their interest in the land itself, and that loss crystallized on 26th March 1987 and 9th September 1988 respectively.

(ii) If the agreement had been registered, Mr. Chang would have had to persuade the Plaintiff and his wife to consent to a cancellation of the agreement to prevent the sale of the land to Harvest Step being called off. Their consent to the cancellation of the agreement would have come at a price. Accordingly, another aspect of the loss which the Plaintiff and his wife suffered as a result of the agreement not having been registered was the opportunity to negotiate a cancellation charge from Mr. Chang. That opportunity was lost forever on 9th September 1988 when the sale and purchase agreement between Mr. Chang and Harvest Step was completed.

20. For present purposes, I have had to assume that the sale and purchase agreement of 13th November 1979 was still an instrument affecting land in 1988, and was therefore an instrument to which the LRO continued to apply. That is very much in issue, since the question as to whether the Defendant caused the losses which the Plaintiff alleges he and his wife suffered is said to turn on it.

21. Mr. Wilson Chan for the Defendant, in a succinct and attractive submission, accepted that if the Plaintiff and his wife had sustained these losses, they were sustained within the limitation period. He contended that the Plaintiff and his wife had sustained other losses in November 1979. Those losses are alleged to have taken two forms. I propose to deal with each of them in turn.

22. First, the Plaintiff and his wife had got nothing to show for the $105.00 which they paid to the Defendant. Mr. Chan contends that they had therefore lost the cost of putting themselves into the position in which they would have been if the agreement had been registered when it should have been. He argues that this approach is consistent with a passage in the judgment of Nicholls L.J. in Peter Browne at p. 503F-G:

"In considering whether damage was suffered in 1978 one can test the matter by considering what would have happened if in, say, 1980 the [husband] had learned of his solicitors' default and brought an action for damages. Of course, he would have taken steps to remedy the default. But he would have been entitled at least to recover from the defendants the cost incurred in going to other solicitors for advice on what should be done and for their assistance in lodging the appropriate caution. The cost would have been modest, but not negligible."

23. I reject that argument. The loss of $105.00 was not attributable to the Defendant's negligence in failing to register the sale and purchase agreement. It was attributable to the fact that the Defendant had wrongly charged the Plaintiff and his wife for work which it did not do and for a disbursement which it had not expended. The Plaintiff and his wife paid the Defendant the $105.00, despite the non-registration of the agreement, because the bill which they received from the Defendant led them to assume that the work to which the charge of $75.00 related had been carried out and the disbursement to which the $30.00 related had been paid. If the loss of $105.00 was attributable to a tort committed by the Defendant, it was the tort of negligent misstatement or deceit. That is what distinguishes Mr. Chan's argument from the example given by Nicholls L.J. in the passage relied on by Mr. Chan. The legal costs which the Plaintiff and his wife would have incurred in engaging other solicitors to advise them how the Defendant's failure to register the sale and purchase agreement should be remedied would have been attributable to that failure.

24. Secondly, Mr. Chan argues that the interest in the land which the Plaintiff and his wife were buying under the sale and purchase agreement had diminished in value once the agreement had not been registered. That was because from then on, if the agreement remained unregistered, there was the possibility that such interest in the land which the sale and purchase agreement had given them would be defeated by a bona fide purchaser or mortgagee for value by the operation of section 3(2) of the LRO. That diminution in value constituted a loss which the Plaintiff and his wife first sustained in November 1979.

25. An argument along these lines was advanced in Peter Browne. The failure of the husband's solicitors to enter a caution on the Land Register meant that the husband, to use the words of Nicholls L.J. at p. 503C, "was at risk, from the outset. His interest was vulnerable." That was because, as Beldam L.J. said at p. 510F, his interest in the house was "[u]nprotected against the interests of third parties by registration of a charge or of a caution." But - and this is the crucial question - did the vulnerability of the husband's interest in the house make that interest less valuable? It had been argued on the husband's behalf that the failure of the husband's solicitors to enter a caution on the Land Register could not have made the husband's interest in the house less valuable at the time because that failure was capable of being remedied at minimal or no cost at any time before the wife sold the house and spent the proceeds. I read Beldam L.J. as saying that the remediability of the failure to enter the caution did not prevent the husband's interest in the house being less valuable, but he did not say why. Mustill L.J. agreed, but he was content simply to say (p. 513C) that the husband "was actually, and not just potentially, worse off than if the solicitors had performed their task competently".

26. It was only Nicholls L.J. who analysed the argument on remediability. He said (p. 503D-F):

"The solicitors' breach of duty in 1978 was remediable by the [husband], but that was only possible after he became aware that there had been a breach of duty. Apart from any other consideration, to treat the [husband's] ability to remedy the breach himself without the concurrence of his former wife as a ground of distinction between this case and [other] cases ... would be to disregard the unlikelihood in practice of the [husband] ever being in a position to remedy the breach. Once the solicitors closed their file, it was unlikely that [the] failure [to enter a caution on the Land Register] would come to the notice of the [husband] or the [solicitors], until the house was sold and it was too late. That, on the pleaded facts, is exactly what happened. The first the [husband] knew that his one-sixth share was not properly protected was after it had gone beyond recall. So his ability to remedy the breach before the house was sold was a matter of more theoretical interest than practical importance."

27. I find myself in respectful disagreement with Nicholls L.J. In treating remediability as of little practical importance because of the unlikelihood of anyone discovering, until it was too late, that there had been an omission capable of being remedied, I regard Nicholls L.J. as importing into the law the doctrine of discoverability which the common law had laid to rest inPirelli General Cable Works Ltd. v. Oscar Faber & Partners [1983] 2 A.C. 1. That case confirmed that a loss occurred when it arose, not when it was discovered. It resulted in the passing of the Latent Damage Act 1986 in England, and the subsequent inclusion of section 31 in the Limitation Ordinance. However, the point is that if delay in the discovery of loss is not, under the common law, a relevant consideration in determining when loss arises, the unlikelihood of discovering that the loss can be remedied should likewise be regarded as an immaterial factor. For this reason, I respectfully decline to follow Nicholls L.J.'s view that the remediability of the loss was not capable of preventing the husband's interest in the house being less valuable.

28. The net result of this analysis is that, to the extent that Peter Browne supports Mr. Chan's proposition that the Defendant's failure to register the sale and purchase agreement of 13th November 1979 diminished the value of the Plaintiff's and his wife's interest in the land, I decline to follow it. I regard the fact that the Defendant's failure was capable of being remedied at any time prior to 26th March 1987 as extremely significant. It seems to me to be obvious that although the non-registration of the sale and purchase agreement meant that the Plaintiff's and his wife's interest in the land would be extinguished if a bona fide purchaser acquired the land for value or if the land was charged to a bona fide mortgagee for value, the Plaintiff and his wife would only sustain actual loss when that interest was extinguished. There was, of course, the potentiality for such loss from the time when the Defendant failed to register the agreement, but the circumstances which might cause the possibility of that loss to become "any detriment, liability or loss capable of assessment in money terms" (which was the phrase used by Saville L.J. in First National Commercial Bank PLC v. Humberts [1995] 2 All E.R. 673 at p. 676b) might never arise. The loss which flowed from the Defendant's failure to register the agreement, i.e. the extinguishment of the Plaintiff's and his wife's interest in the land, would not occur if the agreement was registered in the meantime.

29. In urging me to take this view, Mr. Jat relied on the view reached by Oliver J. on the topic in Midland Bank. Oliver J. held that Mr. Green did not suffer any loss as a result of his solicitors' failure to register the option until August 1967 when the option was lost by the sale of the farm (p. 417C). I am not persuaded that I should place any reliance on this view of Oliver J. He did not give any reason for his view, almost certainly because leading counsel for the solicitors did not seek to argue against the proposition of leading counsel for Mr. Green's executors (p. 389B) that Mr. Green did not suffer any loss until August 1967.

30. In an ingenious development of his argument, Mr. Chan pointed to one particular factor which would specifically have caused the Plaintiff's and his wife's interest in the land to be less valuable than it would have been had the sale and purchase agreement been registered. Section 3(2) of the LRO does not require a subsequent purchaser to have his sale and purchase agreement or assignment registered in order to acquire title to the land free of a prior but unregistered instrument. Thus, since the sale and purchase agreement of 13th November 1979 had not been registered, Harvest Step would have acquired the land to which the sale and purchase agreement of 13th November 1979 related even if the sale and purchase agreement of 1st June 1988 and the assignment of 9th September 1988 had not been registered. Mr. Chan argues that that would have had a serious impact on the ability of the Plaintiff and his wife themselves to dispose of the land from November 1979. Once a possible sub-purchaser of the land discovered that the instrument by which the Plaintiff and his wife had acquired their interest in the land had not been registered, he would have realised (assuming that he was properly advised) that his sub-purchase would be defeated if the person who had sold the land to the Plaintiff and his wife had subsequently sold the land to someone else who had not registered the instrument by which his acquisition of the land had been effected. Since a possible sub-purchaser might be deterred by this possibility from acquiring the Plaintiff's and his wife's interest in the land, their interest in the land was less valuable, and actual loss for that reason had been sustained in November 1979.

31. Moreover, there was no guarantee that the Plaintiff and his wife could have avoided this problem (once they became aware of the non-registration of the sale and purchase agreement of 13th November 1979) by causing the agreement to be registered then. That was because there was no decided case in Hong Kong as to whether that subsequent registration would improve their position against a subsequent purchaser: see Nield, Hong Kong Land Law, p. 62, and Bramwell, Conveyancing in Hong Kong, p. 211.

32. In my judgment, this elaborate and subtle argument is fundamentally flawed. It may be that the first purchaser cannot defeat the interest which the second purchaser acquires on this scenario, but a sub-purchaser of the first purchaser can - by the simply expedient of registering the instrument by which he acquires the interest of the first purchaser in the land. If the sub-purchaser had been advised that the law did not prevent the first purchaser's unregistered interest being defeated by a second purchaser's unregistered interest, he would also have been advised of the way in which he could have defeated the second purchaser's unregistered interest.

MR. JAT'S RELIANCE ON HENDERSON V. MERRETT SYNDICATES LTD.

33. In this judgment, I have not felt able to go along with the view expressed by Oliver J. in Midland Bank on whether a solicitor's duty to register an instrument was a continuing duty. Moreover, I have not felt able to place any reliance on his view that no actual loss is sustained as a result of the failure to register the instrument until the instrument was no longer effective (even though his view is one with which I agree). In urging me to place reliance on Oliver J.'s views, however, Mr. Jat drew my attention to various passages in the speech of Lord Goff in Henderson v. Merrett Syndicates Ltd. [1995] 2 A.C. 145 in which Lord Goff expressly approved various passages in Oliver J.'s judgment in Midland Bank.

34. In my view, Mr. Jat's reliance on Henderson was misplaced. The relevance of Midland Bank to the issues which were considered in Henderson related to Oliver J.'s view on a defendant's concurrent liability in contract and tort. That was the view of Oliver J. which Lord Goff was approving. I have not been able to discern in Lord Goff's speech any support for what Oliver J. said in relation to the issues which arise in the present case.

CONCLUSION

35. For these reasons, I rule that although the Plaintiff's claim for damages for breach of contract is time-barred, the Plaintiff's claim for damages for negligence is not. The Plaintiff's cause of action in tort may therefore proceed. At present, I see no reason why the Defendant should not pay to the Plaintiff the costs of the trial of the issue on limitation to be taxed if not agreed, and I therefore make an order nisi to that effect, though the Plaintiff is not entitled to have those costs taxed and paid until his claim against the Defendant has been finally adjudicated upon.

36. All that remains is for me to decide what directions I should give for the determination of the other issues which arise on the Plaintiff's claim against the Defendant, and for the trial of the Defendant's third party claim against Mr. Chang. I shall give such directions on a date to be fixed after consultation with counsel's diaries, but my present view, subject to the representations of counsel, are as follows:

(i) The only remaining issue on liability on the Plaintiff's claim against the Defendant, i.e. causation, should be tried together with the quantification of the Plaintiff's loss. I appreciate that that would involve a departure from para. 1 of the order of Mr. Registrar Betts of 11th January 1995, but in view of what Mr. Chan told me about one of the arguments which the Defendant has on causation, evidence as to the value of the land could be said to be relevant to both causation and quantum.

(ii) The Defendant's third party claim against Mr. Chang should be tried at the same time as the remainder of the Plaintiff's claim against the Defendant. I appreciate that that would involve a departure from the last three words of para. 4 of the order of Master O'Donnell of 27th January 1995, but I suspect that there may be some overlap between the issue of causation on the Plaintiff's claim against the Defendant and the issues which arise on the Defendant's third party claim against Mr. Chang.

(iii) The trial of all these issues should take place on a date to be fixed after consultation with counsel's diaries, but not before 1st May 1996 so as to ensure that the climate in Hong Kong does not affect Mr. Chang's ability to come to Hong Kong from Taiwan.

Representation:

Mr. Jat Sew Tong, instructed by the Director of Legal Aid, for the Plaintiff.

Mr. Wilson Chan, instructed by Messrs. Joseph Poon & Woo, for the Defendant.

Mr. Danny Choi, instructed by Messrs. S.K. Wong & Lee, for the Third Party.