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Lee Chee Kiang Vs Johnson Tan Teck Seng, Messrs J.Tan Teoh Associates (A Firm), Wong Nyuk Yun, Teo Kok Kee [2011] MYSSHC 145 (14 March 2011)

Jurisdiction: MALAYSIA

IN THE HIGH COURT IN SABAH & SARAWAK AT KOTA KINABALU

Parties: Plaintiff : Lee Chee Kiang

1st Defendant : Johnson TanTeck Seng

2nd Defendant: Messrs J Tan Teoh Associates

(A Firm)

File Number: K22-129 OF 2007

Issues: Whether the plaintiff has the standing to pursue this case in view of the fact the consideration for the purchase of the Native Land was paid by a third party?

Whether the 1st defendant had breached the standard of care in his discharge of his professional duty as a solicitor in Sabah?

Hearing Dates: 29th April 2010

24 – 26 May 2010

6th August 2010 (Submission)

Date of Decision: 14th March 2011

Judge: HONOURABLE JUSTICE DATUK DAVID WONG DAK WAH

Representation: For Plaintiff : Ms. Tiong Jia Yi

Messrs Baldev Gan & Associates

Kota Kinabalu, Sabah

For 1st and 2nd: Ms. Joan Goh

Defendant Messrs Goh & Associates

Kota Kinabalu, Sabah

JUDGMENT

Proceeding:

The plaintiff’s claim is for loss and damage suffered in the sum of
RM631,300.00 on the ground that the 1st defendant had breached his duty of

care in contract and in tort, in respect of the purchase of a piece of land –

NT013022752 (Native Land). The claim is denied by the defendants on the
ground that the plaintiff had no standing to pursue this suit and even if he
9 had, the 1st defendant did not breach any duty of care, in tort or in contract as
he had complied with the practice accepted by the legal profession in Sabah.
The case against the 3rd defendant was withdrawn halfway through the trial
12 while the case against the 4th defendant was withdrawn at the start of the trial
as he was never served.

Background facts:

15 The plaintiff, after being asked by one Wong Nyuk Yun, the 3rd defendant in
this case, as to whether he was interested in purchasing the Native Land
sometime in 2006, decided to do so with the intention to convert the Native

Land at a later stage into a country lease. As the plaintiff did not have the

financial ability to implement his intention, he approached one Tee Hong
Wee (PW1) who is a director, shareholder of Chang Cheng Realty Sdn Bhd

(CC Realty) and a close friend. The plaintiff at that time also worked as a

general manager in CC Realty. It is undisputed that the purchase money for
the purchase of Native Land came from CC Realty or PW1.

The owners of the Native Land are natives and had given a power of

attorney to one Tuan Haji Bin Lambu (Lambu power of attorney) with the
power to dispose and charge the same to anyone he deems fit. Prior to the
9 purchase of the Native Land by the plaintiff, the Native Land was used as a security by the 3rd defendant for a loan from the 4th defendant. To secure that security, a caveat by one Peter Bin Soui was lodged against the Native Land.
12 When the plaintiff approached the 1st defendant about the purchase of the Native Land, PW1 and the plaintiff was informed by the 1st defendant that to complete the purchase of the Native Land, a sum of RM570,000.00 needs to
15 be paid to the 4th defendant plus a sum of RM200,000.00 to be paid to Tuan
Haji Lambu.
It is not disputed that the 1st defendant and the 2nd defendant were retained to

prepare the sale and purchase agreement and other relevant documents for

the purchase of the Native Land. What is in dispute is whether the 1st
defendant had breached his duty of care in the retainer.
3 It is also not disputed that the 1st defendant was involved in the loan transaction from the 4th defendant to the 3rd defendant, in that he was the solicitor involved in drawing out the relevant legal documents.

What had happened is that the plaintiff was not able to gain ownership of the

Native Land despite having paid the consideration of RM665,300.00 to Tuan
Haji Lambu and the 4th defendant, as the Central Land Officer Kota

Kinabalu refused to accept the relevant memorandum of transfer on the

ground that there was irregularity in the Lambu power of attorney.

Issues:

From the evidence and submissions made by counsel the determinative

issues, in my view, are these:

1. Whether the plaintiff had the standing to pursue this action?

2. Whether the defendants owed a duty of care to the plaintiff in

contract or tort?

3. If the answer to issue no. 2 is in the affirmative, have the
defendants breached that duty of care?

4. If the answer to issue no. 3 is in the affirmative, has the plaintiff
proved his damages?

Issue 1:

Whether the plaintiff has the standing to pursue this action?

It is the defendants’ contention that the plaintiff is not the actual purchaser of

the Native Land based on the followings:

. The consideration for the purchase was paid by CC Realty

and/or PW1.

. The plaintiff was used as a nominee to purchase the Native

Land as CC Realty is unqualified to purchase the Native Land

as it is not a ‘native’ company while the plaintiff is a native by

virtue of his Anak Negeri certificate.

. The legal fees charged by the 2nd defendant and the

disbursements incurred were fully paid by CC Realty.

. The plaintiff had executed a power of attorney and Trust Deed to CC Realty.

The plaintiff’s contention on this point is the power of attorney and Trust

Deed executed by him was ‘to comfort Mr Tee’ as he had lent the money to

purchase the Native Land. The evidence in respect of this contention was

9 objected to by the 1st defendant’s counsel on the ground that it contravenes

sec 91 of the Evidence Act 1950 which provides no oral evidence is

admissible to contradict any terms of agreement when the same has been

reduced into writing. With respect to counsel, her objection is misconceived

in that both the power of attorney and the Trust Deed were never executed

by anyone. In another word, they are not completed documents and since

the defendants are relying on those two documents to advance their case, the

court is entitled to know what the real intentions of those documents are.

Even if the court sustains the defendants’ objection to the evidence, the court

is of the view that the power of attorney and Trust Deed are invalid as they had not been executed by all the relevant parties.

Furthermore the legal bill of the 2nd defendant dated 26th July 2006 for the

legal works in respect of the Native Land was issued to the plaintiff. And as

pointed by counsel for the plaintiff even if the plaintiff is a nominee, he sues

and can sue on behalf of CC Realty.

Accordingly I find that the defendants’ contention on this point to be of no

merit.

Issue 2:

9 Whether the 1st defendant owes a duty of care to the plaintiff in contract or in tort?

As there is no dispute by the 1st defendant that the plaintiff had retained him
12 for the purchase of the Native Land, the 1st defendant owes the plaintiff a
duty of care. What that duty of care is set out in these two cases. In Yong &

Co v Wee Hood Teck Development Corp [1984] 2 MLJ 39 the Court held:-

“The principle applicable in a case of this nature as rightly applied by the learned Judge is that while the duty of a solicitor is directly related to the confines of the retainer, it is the incident of that contractual duty that he

has to consult his client on all questions of doubt which do not fall within the express or implied discretion left to him. It is also his duty to keep his

client informed to such extent as may be necessary according to the same

criteria. (Midland Bank Trust and Groom v. Crocker (supra)).

“The liability of a solicitor may be viewed in two aspects. At common law the retainer imposes upon him an obligation to be skillful and careful and for failure to fulfill this obligation he may be made liable in contract for

negligence whether he is acting for reward or gratuitously. On the other hand, like any other individual, a solicitor is liable for his wrongful acts and if the circumstances justify the charge, he may be made liable to his

client in tort. (See Halsbury’s Laws of England, Third Edition Volume 36 page 96, paragraph 131). He owes a duty not to injure his client by failing to do that which he had undertaken to do and which his client has relied

on him to do. (Midland Bank Trust Co. Ltd. (supra)).”

And in Saif Ali & Anor v Sydney Mitchell & Co (a firm) [1980] AC 198 at

231 Lord Salmon states as follows:-

“The normal rule applied by the law is that if anyone holding himself out as possessing reasonable competence in his avocation undertakes to

advise or to settle a document, he owes a duty to advise or settle the document with reasonable competence and care. This duty is owed to anyone he should foresee may suffer loss if the duty is breached.

If in breach of that duty, he fails to exercise reasonable competence or care and as a result the person to whom the duty was owed suffers damage he is liable to compensate that person for the damage he has suffered. The

law requires the damage to be borne by the person whose breach of duty

has caused it, rather than by the innocent person who has suffered it.”

Issue 3:

If the answer to issue no. 2 is in the affirmative, have the defendants

breached that duty of care?

The crux of the plaintiff’s claim is embodied in paragraph 6 of the statement

of claim and it is this:

“In accepting the said retainer, the 1st and 2nd Defendant held themselves out to the Plaintiff as having the adequate skill, care and knowledge to

successfully effect the proposed purchase of the said land or alternatively to alert/or warn the Plaintiff against any potential defect or defect of title of the said land or any defect or want of any of the rights of the purported

Attorney to sell the land on behalf of the registered owners of the said land.”

The defendants’ rebuttal is succinctly set out in paragraph 5(b) of the

defense and it is this:

“Even if (which is denied) the Defendants were retained by the Plaintiff as

18 his solicitors, the 1st and/or 2nd Defendant only held himself or themselves out to him as having adequate skill and knowledge properly to conduct the sale and purchase of the said Land and/or that his or their duty to him was

to exercise that reasonable degree of skill and care expected of a competent practitioner and reasonable experienced solicitor only and not on the terms or the other terms as alleged at paragraph 6 of the Amended

Statement of Claim.”

Before I deal with the factual matrix, I should set out the relevant law on the
standard of skill and care expected of legal practitioners in Sabah. In

Midland Bank v Hett Stubbs & Kemp (1979) Ch 384, Oliver J emphasized

that a solicitor should not be judged by the standard of a “particularly
meticulous and conscientious practitioner …. The test is what a reasonably

competent practitioner would do having regarded to the standards normally

adopted in his profession…” What that entails requires the court to find out
what the standard of the Sabah legal profession is in respect of the works
9 expected of the 1st defendant to perform and if he has acted in accordance to
that practice, he would not be negligent. This test is a restatement of what is
held in the Bolam v Friern Hospital Management Committee (1957) 2 All

ER 118 at page 121 as follows:

“The test is the standard of the ordinary skilled man exercising and professing to have that special skill. A man need not possess the highest

expert skill at the risk of being found negligent. It is well-established law that it is sufficient if he exercises the ordinary skill of an ordinary competent man exercising that particular art…in the case of a medical man,

negligence means failure to act in accordance with the standards of a reasonably competent medical men at the time… I myself would prefer to put in this way, that he is not guilty of negligence if he has acted in

accordance with the practice accepted as proper by a responsible body of medical men skilled in that particular art …Putting it the other way around, a man is not negligent if he is acting in accordance with such practice,

merely because there is a body of opinion who would take a contrary view…..…a mere personal belief that a particular technique is best is no

defence unless that belief is based on reasonable grounds.”

The Bolam test has not been followed in the jurisdiction of Australia. King

Chief Justice in Fv R (1982) 33 SASR 189 held as follows:

‘…professions may adopt unreasonable practices ….The court has an obligation to scrutinize professional practices to ensure that they accord

with the standard of reasonableness imposed by the law….the ultimate question, however, is not whether the defendant’s conduct accords with the practices of his profession or some part of it, but whether it conforms to the

standard of care demanded by the law. That is a question for the court and the duty of deciding it cannot be delegated to any profession or group in the

community’

This view has been confirmed by the High Court of Australia in Rogers v

Whitaker (1992) 175 CLR 479 where it was held that opinions of medical

witnesses are not decisive but merely guidelines for the court who will be

the final arbiter on what that standard of care should be.
In the context of Malaysia, we have the celebrated case of Foo Fio Na v Dr

Soo Fook Mun & Anor (2002) 2 MLJ 129 where the Federal Court departed

from the Bolam principle and adopted the principle stated in the Rogers case. The Federal Court said this:

‘…the Bolam test has no relevance to the duty and standard of care of a medical practitioner in providing advice to a patient on the inherent and

material risks of the proposed treatment. The practitioner is duty bound by law to inform his patient who is capable of understanding and appreciating such information of the risks involved in any proposed treatment so as to

enable the patient to make an election of whether to proceed with the proposed treatment with knowledge of the risks involved or decline to be

subjected to such treatment’ (paragraph 36 MLJ)

It is the contention of counsel for the defendants that the Bolam test still applies to the legal profession as the question posed to the Federal Court was

very specific in that the decision relates purely to medical negligence. For

completeness the posed question is this:

‘Whether the Bolam test as enunciated in Bolam v Friern Hospital

Management Committee (1957) 2 All ER in the area of medical negligence should apply in relation to all aspects of medical negligence’

With respect to counsel, her approach is inappropriate. The Federal Court

was dealing with the duty of care of a professional body and whatever
principles distilled from that judgment in my view are applicable to other

professions. In fact the Federal Court had referred to other profession and

this can be seen from this paragraph of the judgment:

‘….there is a need for members of the medical profession to stand up for

the wrong doings, if any, as is the case of professionals in other

professions. In so doing, people involved in medical negligence cases would be able to obtain better professional advice and that the courts would be

appraised with evidence that would assist them in deliberations’ (paragraph

MLJ)(emphasis added)

Accordingly it is my view that the Bolam principle is no longer applicable

and the applicable principle is as stated in the Federal Court. With that I will

now apply the principle to the factual matrix at hand.

Plaintiff’s complaints:

This can be seen from paragraph 7 of the statement of claim and it is this:

Particulars of duty of Care:

15 (i) The 1st and 2nd defendant ought to have taken special caution where the intended transfer of land is to be executed by person or persons purporting to act as the Attorney of the registered landowners vide to

ensure that the registered owners are in fact the parties who had executed the instrument granting power to sell the land.

(ii) The 1st and 2nd defendant ought to have carefully and properly verified

with the registered owners personally to ensure the authenticity of the purported POWER OF ATTORNEY and to confirm that the landowners had in fact executed the same.

24 (iii) The 1st and 2nd defendant ought to have advised and acted cautiously

and prudently by retaining or withholding a substantial part of the purchase price and only paying out of the same, until and upon the

successful transfer of the said land to the Plaintiff.

The plaintiff’s evidence is that the 1st defendant is his lawyer and as such it
is his duty to ensure that the purchase of the Native Land would be
3 successful and his interests would be protected at all times. He of course relies on the assurance by the 1st defendant that there would be ‘no problem’
to the transaction.

Defendants’ case:

Counsel in her submission had listed the reasons why the 1st defendant had

not breached his duty of care and they can be summarized as follows:

1. There is no system of checking of power of attorney in Sabah
as testified by PW3, hence the defendants should not be
12 expected to conduct any check that is non-existent, in short there is no duty of care on the part of the 1st defendant to check
the authenticity of the Lambu power of attorney.

2. The complaint of the plaintiff is not that he was not advised by the 1st defendant that there were risks involved in the use of

power of attorney in the purchase of the Native Land but the

fact that the 1st defendant had advised that the deal was
legitimate. Counsel refers to this part of PW1’s evidence:

3 “I am blaming the 1st Defendant because since the outset of this deal Mr.

Lee and I repeatedly asked Johnson Tan if this transaction is legitimate and can be carried through”

3. Whether to proceed with the purchase of Native Land was in fact a business decision by the plaintiff and PW1. This,

according to the counsel for the defendants, can be gleaned

from the context and circumstances which are summarized by
counsel for the defendants in her submission as this:-

‘Here, the 1st Defendant was involved in the conveyance for the

land for the 4th Defendant initially. Halfway through the Plaintiff

15 and CC Realty got involved somewhere in July 2006 through the introduction of the 3rd Defendant because he (the 3rd Defendant) could not proceed with the sales agreement hence he approached

18 the Plaintiff. When the Plaintiff approached the 1st Defendant

pertaining to this matter, the 1st Defendant then explained and showed the Plaintiff and PW1 everything that he has in his file

21 pertaining to the said land. After hearing the explanation and after looking at the documents shown to them by the 1st Defendant, CC Realty through PW1 went ahead with the purchase due to the fact

that the land was cheap. It was a risk which CC Realty and the

Plaintiff took. The 1st Defendant cannot be held to be negligent for

a decision that was made by CC Realty and the Plaintiff

themselves.’

4. The plaintiff and PW1 are experienced developers and as such are fully aware of what a power of attorney is and further the

risk that comes with it. The plaintiff and PW1 knew very well

how the normal purchase price is to be paid in sale of land
transactions and the payments made by the plaintiff in the
9 manner that it was done was due to the fact that the time of payment between the 3rd defendant and 4th defendant was about to expire and the plaintiff did not want to lose the good deal in

that the Native Land was cheap. In short the plaintiff knew the

risks and made a business decision to proceed with the purchase
of the Native Land.
15 To complete the defendants’ case, I should set out what the 1st defendant
said in cross examination:

Q: Refer to paragraph 9 of the witness statement. Put: It was your negligent

assumption that the plaintiff, Mr Tee and CC Realty had the necessary knowledge and experience in conveyancing matters in relation to Native Titles and power of attorney?

A: I don’t agree because they are developers and it was not wrong for me to assume that they have such knowledge. Most developers have knowledge

of land transaction.

Put: That because of your assumption you did not think that it is necessary to advice the plaintiff or Mr Tee on any legal issues and risk.

A: I disagree. Notwithstanding any assumption on the 26/7/2006 I brief Mr Tee and Mr Lee on all the legal liabilities and legal issues involved and they went through the file with me. In fact Mr Lee and Mr Tee asked me

whether the power of attorney allows the attorney to sell…..

Q: On 26/7/2006, in relation to the power of attorney what advice did you give to the client?

A: On 26/7/2006 I advice the client that the power of attorney gives the attorney the right to sell the land and the power of attorney is in the process of being registered with the Magistrates Court and upon return of

the power of attorney I will note it with the Land Office. At all material time Lee Chee Kiang and Mr Tee have knowledge that the power of attorney were still have to be registered with the Land Office.

Q: What else did you advice them about the power of attorney?

A: That is it.

PW3 evidence:

PW3, a senior practicing lawyer in the area of conveyancing in Kota
Kinabalu, is called by the plaintiff as the expert witness to establish the

general practice of the legal profession in Sabah. In essence his evidence is

this:

Q: Please tell the Court what is your practice when a client approaches you

to engage your services in respect of the sale and purchase of land to be executed by the Vendor through a Power of Attorney?

A: Normally by practice I do not accept Power of Attorney for the reason that there is no proper of registration of power of attorney in Sabah as compared to West Malaysia. There is no way I can check whether the PA

has been revoked. In West Malaysia we can check the system under the PA Act 1949 which is only applicable to West Malaysia. In respect of the PA once registered it has to be deposited with the Senior Assistant Registrar

in the Court in which it was deposited. Any subsequent revocation of the PA would have to be deposited in the same Court. In Sabah there is no such system in place. Speaking for myself my practice I do not accept PA.

Secondly, there could be many PA over the same subject matter. There is no registration system in Sabah to check whether the PA has been issued

before or has been donated before.

“The general practice is for the PA to be noted in the Land Registry for properties with titles. If there is a noting and a registration number and

there is a term of clause in the PA which provides for that particular power to be effected then generally speaking the practice is for the lawyer

in the conveyancing procedure to accept such PA.”

“By notation in the land registry there are safe guards that the PA has been registered and notice has been given to third parties. However

having said that it is my practice to be overly cautious even when the PA has been registered in the land and survey department. The reason is that the land survey department are merely performing an administrative act

when they register the PA. They are not under the legal duty to enquire into the validity of the PA. I highlight this matter in one of my law book under a decision by Datuk Clement Allan Skinner in the case of Pawa

Ajah. The lawyers can protect themselves by extracting the PA which has

been registered in the Land Office by extracting the copy of the PA and

studying its contents carefully.”

One can see that PW3’s view is that the use of power of attorney in land

transactions is not advisable. In cross examination, his testimony contains a
similar theme and this can be seen from this inter change:

Q Do you agree with me that since there is actually no system of PA in

Sabah as compared to West Malaysia, there is no standard practice except for notation at the Land Office and registration at the Magistrates Court?

A: I would just say that for practitioners who do not want to get into trouble get the registered owner to sign instead of the Attorney.

Q Is that your general practice?

A: I cannot say for others but from my conversation with fellow practitioners, generally this is the accepted practice in Sabah to get the registered owner

to sign instead of the Attorney.

With respect to PW3, his non acceptance of the use of power of attorney in

land transactions is not only impractical but would affect the flow of

business activity in the State economy. It, in effect, renders contractual law
relating to power of attorney redundant. Be that as it may, the Lands and

Surveys Department in Sabah, I am given to understand, now does not

accept documents executed pursuant to power of attorney. This shows the
severity of the abuse of the use of power of attorney in land transactions in

the State and I may add that is a sorry state of affair that we are in. It is also

my view that PW3’s evidence has not established what the general practice
of the local legal profession as far as the use of power of attorney is

concerned as his evidence contains his personal view and practice.

Findings of the Court:

Duty to investigate the authenticity of power of attorney:

The situation in Sabah as far as power of attorney is concerned is as what is
stated by PW3 and that is there is no proper system of registration as in West

Malaysia. Hence I agree with counsel for the defendants that the 1st

defendant does not have a duty to check on the authenticity of the power of
attorney for the simple reason that there is no way of checking short of

calling the donors and the commissioner of oaths to enquire whether the

power of attorney is genuine. It would be too onerous a duty to require a
solicitor to investigate a power of attorney which on the face of it is proper.

As stated earlier it would be impractical and slow down the process of doing

business in the State. Furthermore, commissioners of oath are appointed by
the Chief Justice of the Federal Court only after due consideration and hence

it can be reasonably assumed that they are people of high standing and

integrity. Accordingly it is my view that a properly executed power of
attorney should be accepted unless cogent reasons show otherwise and what
those reasons are depends on the circumstances of each case. Before I leave

this area of discussion, I should comment on the legal effect of registration

of power of attorney and it is this. Registration per se of a power of attorney
at the magistrate courts and Lands and Surveys Department do not give

legitimacy to it. Registration in the magistrate court is nothing but a practice

and provides nothing but comfort to the people relying on it. As for
registration or notation in the Central Land Office, Kota Kinabalu, it is

nothing but a procedural step which the Lands and Surveys Department

requires before they can process documents containing signatories executed
pursuant to a power of attorney. As rightly pointed out by PW3, the Lands

and Surveys Department is only performing an administrative act when

processing documents in their office and the registration and acceptance of
the use of the power of attorney by the Central Land Office, Kota Kinabalu

does not give legitimacy to the power of attorney if challenged later.

1st defendant’s duty and standard of care:

As there is no dispute (and in fact conceded by counsel for the defendants)

that there is a retainer in respect of the purchase of the Native Land between
the plaintiff and 2nd defendant, the 1st defendant thus has a duty of care to the
plaintiff. What is in dispute is what that duty is and the standard thereof?
3 Before I discuss that, the following should be noted. The 1st defendant prior to being retained by the plaintiff had acted for the 3rd and 4th defendant where the 4th defendant extended a loan to the 3rd defendant on the security
6 of the Native Land. To crystallize that security, the 3rd defendant relied on
the Lambu power of attorney and the original title deed to the Native Land.
In order for the plaintiff to crystallize his purchase of the Native Land, the
9 plaintiff was advised by the 1st defendant that he had to pay off both the 4th
defendant and Tuan Haji Lambu as representative of the land owners. And
hence the use of the Lambu power of attorney is pivotal to the plaintiff in his

purchase of the Native Land. There is no legal impediment for a practitioner

in Sabah to act as a common solicitor to parties in a transaction and hence in this purchase of the Native Land, the 1st defendant had acted for four parties,
15 namely, the plaintiff, 3rd and 4th defendant and the owners of the Native
Land represented by Tuan Haji Lambu by virtue of the power of attorney.
Be that as it may, the 1st defendant’s duty of care to the plaintiff is no less

burdensome to that of the other parties in the transaction. In another word,

the interests of all the parties must be protected even though they may
conflict with each other. How that is possible remains a mystery to the court.
As far as the plaintiff is concerned and in normal circumstances, his basic
3 interest, in plain language, is simply for the 1st defendant to ensure that his
purchase of the Native Land is immune from any loss as has happened in
this case where the plaintiff has paid a substantial amount of money to the
6 4th defendant and Tuan Haji Lambu without the benefit of becoming the
registered owner of the Native Land. Of course the defense is that the
circumstance in this case is not normal and this case must be determined in

accordance with the peculiar facts herein.

However it is my view that the plaintiff has, on the evidence presented, established a prima facie case of requiring the 1st defendant to protect this
12 basic interest and it is incumbent on the 1st defendant to rebut that.
Having carefully considered the evidence of the 1st defendant, there appears
to be two lines of defenses which are these:

1. The plaintiff and CC Realty are experienced developers and knew the

full intricacy of how a power of attorney works and the risks involved.
That being the case, plus the fact that they did not want to lose a ‘good

deal’, they took the risks involved in the use of a power of attorney in

proceeding with the purchase and did not need the advice of the 1st
defendant.
3 2. The 1st defendant had explained ‘all the legal liabilities and legal
issues’ involved.
The two defenses in my view contradict each other because one says that the
6 plaintiff and CC Realty did not need the 1st defendant’s advice, while the other says the 1st defendant had explained all the legal matters to the plaintiff. With such a contradictory stance, the 1st defendant’s defense
9 appears to be shadowy. Even if the court accepts that the 1st defendant had
explained all legal matters to the plaintiff and CC Realty, there is lacking in
details what are the legal liabilities and legal issues. In fact there is no detail

before the court. Again it is trite law when a defense is short in detail; the

court regards it nothing more than a bare assertion. Furthermore it is
unlikely that the 1st defendant had explained ‘all the legal liabilities and legal
15 issues’ to the plaintiff except to assure all will be okay and the reasons are these. The 1st defendant had acted for the 3rd and 4th defendant in respect of a loan using the power of attorney to Tuan Haji Lambu and Native Land as
18 security and one can assume that he had informed the 3rd and 4th defendant
that the use of the Lambu power of attorney for the loan transaction was
proper. Hence upon being approached by the plaintiff for the purchase the
Native Land, the 1st defendant would have no doubt told the plaintiff that

there should be ‘no problem’ as he had already given a similar advice to the

3rd and 4th defendant. But as to how the 1st defendant arrived at that ‘advice’
to the 3rd and 4th defendant the court is not aware. Accordingly I accept the
6 version of the plaintiff that he had been assured by the 1st defendant that
there will ‘no problem’ with the purchase of Native Land and there was no
explanation of any legal liability and legal issues to the plaintiff.
9 As for the contention that the plaintiff and PW1 are not ordinary lay person and hence implying that the 1st defendant’s duty of care is lighter, I, with respect, find it untenable. The law should be (and I am sure it is) that a

solicitor’s standard of care remains the same whatever their client’s

education background is. This proposition requires no supporting authority.
In any event the 1st defendant is an experienced and senior member of the
15 local Bar and prudence would have dictated him to obtain a letter of declaimer from the plaintiff stating that the 2nd defendant would not be liable for any loss or damage if he wants to release any part of the consideration

before the lodgment of the memorandum of transfer with the Lands and

Surveys Department Central Land Office, Kota Kinabalu and the issuance of
the memorial number of the lodgment by the same. I have no doubt that the
prevailing conveyance practice in Sabah in a sale and purchase cum

redemption of loan transaction is this. No money from the purchaser would

be released by the solicitor until he or she obtains a memorial number from
the Central Land Office Kota Kinabalu for the lodgment of the transfer with

the title to the Native Land.

In my deliberation as to which version of events is more credible I was
guided by what was stated in the judgment in Tindok Besar Estates Sdn Bhd

v Tinjar Co [1979] 2 MLJ 229 which stated:

“For myself, I rely on the acts and deeds of a witness which are

contemporaneous with the event and to draw the reasonable inferences from them than to believe his subsequent recollection or version of it, particularly if he is a witness with a purpose of his own to serve and if it did not account

for the statements in his documents and writings. Judicial perception of the evidence requires that the oral evidence be critically tested against the

whole of the other evidence and the circumstances of the case.”

Also in Grace Shipping Inc & Anor v CF Sharp & Co (Malaysia) Pte Ltd

[1987] 1 MLJ 25, the court expressed similar sentiments:

“And it is not to be forgotten that, in the present case, the judge was faced with the task of assessing the evidence of witnesses about telephone

conversations which had taken place over five years before. In such a case,

memories may very well be unreliable; and it is of crucial importance for the judge to have regard to the contemporary documents and to the overall

possibilities. In this connection, their Lordships wish to endorse a passage from a judgment of one of their number in The Ocean Frost; Armagas Ltd v

Mundogas SA [1985] 1 Lloyd’s Rep 1 when he said at p 57:

“Speaking from experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by

reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is

frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses’

motives, and to the overall probabilities, can be of very great assistance to a judge in ascertaining the truth.

That observation is, in their Lordship’s opinion, equally apposite in a case where the evidence of the witnesses is likely to be unreliable; and it is to be remembered that in commercial cases, such as the present, there is usually

a substantial body of contemporary documentary evidence.”

The question which confronts me now is this:
24 What did the 1st defendant mean by ‘no problem’?
There is no doubt in my mind that by ‘no problem’, the 1st defendant and the
plaintiff took it to mean that the purchase of the Native Land would present
27 no legal difficulty to implement and again my reason is that the 1st defendant
had acted as the solicitor for the 4th defendant and 3rd defendant in the loan
transaction prior to the purchase of the Native Land by the plaintiff. Of

course the purchase of the Native Land was not able to be implemented as

the legitimacy of the power of attorney was in doubt.
The following matters are undisputed:
6 1. The caveat of Peter Bin Soui who is a nominee of the 4th defendant
was only presented to the Lands and Surveys Department on June 2
2006 with no issuance of memorial number from Central Land Office,

Kota Kinabalu .

2. The memorandum of transfer supporting the caveat by Peter Bin Soui
does not contain any ‘CLO P/A No’ for Lambu power of attorney.

3. The Lambu power of attorney was only presented to the Central Land

Office, Kota Kinabalu for registration on the 7th August 2006.
4. The memorandum of transfer of the Native Land was lodged with
15 Central Land Office, Kota Kinabalu on 25th August 2006.

.

The Central Land Office on 4th September 2006 informed the 2nd defendant that the Lambu power of attorney could not be registered as one of the landowners had lodged a complaint to their office.

.

The 1st defendant did not investigate the September 2006 reply by the

Central Land Office, Kota Kinabalu and this is what he says in cross

examination:

Q: Did you attend at the Land Office to see anyone regarding this

letter?

A: I did not. What I did is I liaise with Mr Wong and ask him to solve

this matter with the Land Office.

12 7. The 2nd defendant again on 17 October 2006 lodged the memorandum
of transfer of the Native Land with Central Land Office, Kota
Kinabalu.
15 8. On 3 October 2007, the 2nd defendant wrote to the Central Land
Office, Kota Kinabalu enquiring the status of the transfer of Native
Land.
18 9. The Central Land Office, Kota Kinabalu on 22nd August 2008 informed the 2nd defendant that the memorandum of transfer could not
be processed because of two police reports, one by one of the owners
of the Native Land and the other by the plaintiff. The Lands and

Surveys Department had also registered a collector’s caveat on the

Native Land.
To recap, what we have at hand is the sale and purchase transaction of native
6 landed property encumbered with an equitable charge for a loan extended to the 3rd defendant by the 4th defendant. The duties of a solicitor would be these:

.

Conduct a search on the Native Land at the relevant office of the Lands and Surveys Department to ensure that there is no encumbrance attached to it.

.

Obtain the original title deed to the Native Land.

.

Ensure that the Lambu power of attorney has been properly executed and witnessed by the appropriate person and contains the power of disposal of the Native Land.

.

Ensure that the Lambu power of attorney has been registered with the magistrate court and with the Central Land Office Kota Kinabalu.

.

Advise the plaintiff that it is not his interest to release any money to

the owners or the 4th defendant who holds an equitable charge on the

Native Land until all the relevant documents have been executed and the memorandum of transfer together with the supporting documents had been successfully lodged to Central Land Office Kota Kinabalu and the issuance of the memorial number by the same.

.

Explain to the plaintiff all the risks involved in the use of a power of attorney in the purchase of the Native Land, the primary risk being that the owners may not have signed the power of attorney.

.

Inform the plaintiff that he acts as a common solicitor for four parties in the transaction and the risks related thereto.

.

Advice the plaintiff to engage another solicitor to act for him for the purchase of the Native Land to avoid any conflict of interests between the four parties.

From

the evidence which I have alluded to earlier, it shows quite

conclusively that the 1st defendant had, with respect, failed in his basic duty
in protecting the interests of the plaintiff. As stated by earlier, the prevailing

conveyance practice in Sabah would be to advice against releasing any

purchase consideration to the vendor and chargee until a memorial number is
obtained from the Central Land Office Kota Kinabalu by the solicitor for the

lodgment of the memorandum of transfer of the Native Land. The 1st

defendant has not given the court any credible reasons as to why he should
be exempted from that basic duty.

As for the sum claimed, the sum of RM631,300.00 in my view has been

proved by the plaintiff in the form of documentary evidence and they have
not been rebutted by the defendants.

Accordingly I dismiss the defendants’ defense and enter judgment for the

plaintiff in the sum of RM631,300.00 with interests at the rate of 8 % per
annum from the date of this judgment until final payment of the judgment

sum with costs.

As a closing remark, let me say that the time has come for the legal

profession to regulate the practice of a common solicitor for consumers in

land, loan and charge transactions. A good starting point would be for the
local Bar to look at the regulatory rules in England which I have attached as

Annexure A. Lord Millet in Bolkiah v KPMG (<<1999) 2 AC 222>> in my view

had made a pertinent remark and it is this:

“A [lawyer] cannot act at the same time both for and against the same client, and his firm is in no better position. A man cannot without the consent of both clients

act for one client while his partner is acting for another in the opposite interest. His disqualification has nothing to do with the confidentiality of client information. It is

based on the inescapable conflict of interest which is inherent in the situation.”

The case before me is a classic example as to why the 1st defendant should not have acted for the plaintiff or at the very least should have advised him
9 to engage any other solicitor to act for him. He had to serve four masters, the plaintiff, the 3rd defendant, 4th defendant and the owners of the Native Land who all had different interests in the scheme of things. It is unimaginable as
12 to how the 1st defendant or for that matter any solicitor could have resolved
all the conflicting interests of the relevant parties. It must be noted that the
1st defendant has fiduciary duties to all his clients and that duty and standard

of care is the same for all his clients.

Order accordingly.

(JUSTICE DATUK DAVID WONG DAK WAH)

Judge

Notice: This copy of the Court's Reasons for Judgment is subject to formal revision.

ANNEXURE A

Rule

3.01 Duty not to act

• (1) You must not act if there is a conflict of interests (except in the limited circumstances dealt with in 3.02).

• (2) There is a conflict of interests if:

o (a) you owe, or your firm owes, separate duties to act in the best interests of two or more clients in relation to the same or related matters, and those duties conflict, or there

is a significant risk that those duties may conflict; or

o (b) your duty to act in the best interests of any client in relation to a matter conflicts, or there is a significant risk that it may conflict, with your own interests in relation to that

or a related matter.

• (3) For the purpose of 3.01(2), a related matter will always include any other matter which

involves the same asset or liability.

3.02 Exceptions to duty not to act

• (1) You or your firm may act for two or more clients in relation to a matter in situations of

conflict or possible conflict if:

o (a) the different clients have a substantially common interest in relation to that matter or a particular aspect of it; and

o (b) all the clients have given in writing their informed consent to you or your firm acting.

• (2) Your firm may act for two or more clients in relation to a matter in situations of conflict or possible

conflict if:

o (a) the clients are competing for the same asset which, if attained by one client, will make that asset unattainable to the other client(s);

o (b) there is no other conflict, or significant risk of conflict, between the interests of any of the clients in relation to that matter;

o (c) the clients have confirmed in writing that they want your firm to act in the

knowledge that your firm acts, or may act, for one or more other clients who are

competing for the same asset; and

o (d) unless the clients specifically agree, no individual acts for, or is responsible for the

supervision of, more than one of those clients.

• (3) When acting in accordance with 3.02(1) or (2) it must be reasonable in all the circumstances for you or your firm to act for all those clients.

• (4) If you are relying on the exceptions in 3.02(1) or (2), you must:

o (a) draw all the relevant issues to the attention of the clients before agreeing to act or, where already acting, when the conflict arises or as soon as is reasonably practicable,

and in such a way that the clients concerned can understand the issues and the risks

involved;

o (b) have a reasonable belief that the clients understand the relevant issues; and

o (c) be reasonably satisfied that those clients are of full capacity.

3.03 Conflict when already acting

If you act, or your firm acts, for more than one client in a matter and, during the course of the conduct of that matter, a conflict arises between the interests of two or more of those

clients, you, or your firm, may only continue to act for one of the clients (or a group of

clients between whom there is no conflict) provided that the duty of confidentiality to the other client(s) is not put at risk.

3.04 Accepting gifts from clients

Where a client proposes to make a lifetime gift or a gift on death to, or for the benefit of:

• (a) you;

• (b) any manager, owner or employee of your firm;

• (c) a family member of any of the above,

and the gift is of a significant amount, either in itself or having regard to the size of the client's estate and the reasonable expectations of the prospective beneficiaries, you must advise the client to take independent advice about the gift, unless the client is a member of

the beneficiary's family. If the client refuses, you must stop acting for the client in relation to the gift.

3.05 Public office or appointment leading to conflict

You must decline to act where you, a member of your family, or a manager, owner or employee of your firm holds some public office or appointment as a result of which:

• (a) a conflict of interests, or a significant risk of a conflict, arises;

• (b) the public might reasonably conclude that you, or your firm, had been able to make use of the office or appointment for the advantage of the client; or

• (c) your ability to advise the client properly and impartially is inhibited.

3.06 Alternative dispute resolution (ADR)

If you provide ADR services you must not:

•

•

o (a) is a company;

o (b) does not undertake conveyancing;

o (c) is owned jointly by at least four participating firms which are not associated firms;

o (d) has no participating firm with majority control;

o (e) has at least one participating firm which is a recognised body or recognised sole practitioner; and

o (f) is conducted from accommodation physically divided from, and clearly differentiated from that of any participating firm.

o

A "participating firm" means a recognised sole practitioner, recognised body or authorised non-SRA firm which is a manager or owner of the SEAL, or one or more of whose managers

or owners is a manager or owner of the SEAL.

3.13 Conditions for acting under 3.11

In order to act for seller and buyer under 3.11 above, the following conditions must be met:

.16 Acting for lender and borrower in conveyancing transactions

• (1) Rules 3.16 to 3.22 cover the grant of a mortgage of land and are intended to avoid conflicts of interests. "Mortgage" includes a remortgage. Both commercial and residential conveyancing transactions are covered. "You" is defined in 23.01, but is to be construed in 3.16 to 3.22 as including an associated firm (see rule 24 (Interpretation) for the meaning of "associated firms").

• (2) You must not act for both lender and borrower on the grant of a mortgage of land:

o (a) if a conflict of interests exists or arises;

o (b) on the grant of an individual mortgage of land at arm's length;

o (c) if, in the case of a standard mortgage of property to be used as the borrower's private residence only, the lender's mortgage instructions extend beyond the limitations contained in 3.19 and 3.21, or do not permit the use of the certificate of title required

by 3.20; or

o (d) if, in the case of any other standard mortgage, the lender's mortgage instructions extend beyond the limitations contained in 3.19 and 3.21.

.17 Standard and individual mortgages

• (1) A mortgage is a "standard mortgage" where:

o (a) it is provided in the normal course of the lender's activities;

o (b) a significant part of the lender's activities consists of lending; and

o (c) the mortgage is on standard terms.

An "individual mortgage" is any other mortgage.

• (2) A mortgage will not be on standard terms if material terms in any of the documents relating to the mortgage transaction are negotiated between the lender's and borrower's lawyers

contemporaneously with effecting the mortgage. In commercial transactions, the element of

negotiation will often relate to the facility letter or facility agreement rather than the mortgage deed itself.

• (3) Provided there has been no contemporaneous negotiation of material terms between the parties' lawyers, a mortgage will be on standard terms where the lender uses a prescribed form of mortgage deed. Minor variations, such as the usual clause limiting the liability of trustee

mortgagors, are not regarded as material and do not alter the nature of these terms as standard.

• (4) In addition to its normal standard terms, a lender may have a different set or sets of standard terms applicable to specialised types of borrower, such as registered social landlords. Provided

these terms are applied by the lender to all equivalent specialist borrowers or have been agreed between the lender and a specialist borrower as applicable to all transactions between them, they will constitute standard terms for the purposes of 3.16 to 3.22.

• (5) The lender and the borrower must be separately represented on the grant of an individual mortgage at arm's length (see 3.16(2)(b)). Rules 3.16 to 3.22 are not then applicable.

• (6) You may act for both lender and borrower in a standard mortgage (see 3.16(2)(c) to (d)),

provided:

o (a) there is no conflict of interests;

o (b) the mortgage instructions do not go beyond the limits set out in 3.19; and

•

o (a)

· (i) taking reasonable steps to check the identity of the borrower (and anyone else required to sign the mortgage deed or other document connected with the

mortgage) by reference to a document or documents, such as a passport, precisely specified in writing by the lender;

· (ii) following the guidance given by the Law Society or the Solicitors

Regulation Authority on property fraud and on money laundering;

· (iii) checking that the seller's conveyancers (if unknown to you) appear in a current legal directory or hold practising certificates issued by their

professional body; and

· (iv) in the case of a lender with no branch office within reasonable proximity of the borrower, carrying out the money laundering checks precisely specified

in writing by the lender;

o (b) making appropriate searches relating to the property in public registers (for example, local searches, commons registration searches, mining searches), and reporting any

results specified by the lender or which you consider may adversely affect the lender; or effecting search insurance;

o (c) making enquiries on legal matters relating to the property reasonably specified by

the lender, and reporting the replies;

o (d) reporting the purchase price stated in the transfer and on how the borrower says that the purchase money (other than the mortgage advance) is to be provided; and reporting

if you will not have control over the payment of all the purchase money (other than a deposit paid to an estate agent or a reservation fee paid to a builder or developer);

o (e) reporting if the seller or the borrower (if the property is already owned by the

borrower) has not owned or been the registered owner of the property for at least six

months;

o (f) if the lender does not arrange insurance, confirming receipt of satisfactory evidence

that the buildings insurance is in place for at least the sum required by the lender and

covers the risks specified by the lender; giving notice to the insurer of the lender's interest and requesting confirmation that the insurer will notify the lender if the policy is

not renewed or is cancelled; and supplying particulars of the insurance and the last premium receipt to the lender;

o (g) investigating title to the property and appurtenant rights; reporting any defects

revealed, advising on the need for any consequential statutory declarations or indemnity

insurance, and approving and effecting indemnity cover if required by the lender; and reporting if you are aware of any rights needed for the use or enjoyment of the property

over other land;

o (h) reporting on any financial charges (for example, improvement or repair grants or

Housing Act discounts) secured on the property revealed by your searches and enquiries

which will affect the property after completion of the mortgage;

o (i) in the case of a leasehold property:

· (i) confirming that the lease contains the terms stipulated by the lender and

does not include any terms specified by the lender as unacceptable;

· (ii) obtaining a suitable deed of variation or indemnity insurance if the terms of the lease are unsatisfactory;

· (iii) enquiring of the seller or the borrower (if the property is already owned by

the borrower) as to any known breaches of covenant by the landlord or any superior landlord and reporting any such breaches to the lender;

· (iv) reporting if you become aware of the landlord's absence or insolvency;

· (v) making a company search and checking the last three years' published accounts of any management company with responsibilities under the lease;

· (vi) if the borrower is required to be a shareholder in the management

company, obtaining the share certificate, a blank stock transfer form signed by the borrower and a copy of the memorandum and articles of association;

· (vii) obtaining any necessary consent to or prior approval of the assignment and mortgage;

· (viii) obtaining a clear receipt for the last payment of rent and service charge;

and

· (ix) serving notice of the assignment and mortgage on the landlord;

•

o (a) you must use the certificate of title set out in the annex to rule 3 (below) ("the approved certificate"); and

o (b) unless the lender has certified that its mortgage instructions are subject to the limitations contained in 3.19 above and 3.21 below, you must notify the lender on receipt of instructions that the approved certificate will be used, and that your duties to the lender are limited to the matters contained in the approved certificate.

.21 Terms of rule to prevail

The terms of 3.16 to 3.20 above will prevail in the event of any ambiguity in the lender's instructions, or discrepancy between the instructions and 3.19 above or the approved certificate.

.22 Anti-avoidance

• (1) Subject to (2) below, if acting only for the borrower in a standard mortgage of property you must not accept or act upon any requirements by way of undertaking, warranty, guarantee or otherwise of the lender, the lender's lawyer or other agent which extend beyond the limitations contained in 3.19.

• (2) Provided the property is not to be used solely as the borrower's private residence, (1) above does not prevent you from giving any form of certificate of title recognised from time to time by the Solicitors Regulation Authority Board (a "recognised certificate"). Additions or amendments which arise from the individual transaction may be made to the text of a recognised certificate

but, to the extent to which they create an increased or additional obligation, must not extend beyond the limitations contained in 3.19.

3.23 Waivers

In spite of 22.01(1) (Waivers), the Solicitors Regulation Authority Board shall not have

6 power to waive any of the provisions of 3.01 to 3.05.

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