Conveyancer's Duty of Care — Looking for Boundaries

The decision of the Court of Appeal in Yeo Yoke Mui v Ng Liang Poh [1999] 3 SLR 529 has raised concerns over the extent of the duty of care owed by conveyancing lawyers to their clients. Hairani Saban voices these concerns and suggests a dual approach of absolute duty and shared responsibility in viewing the conveyancer's duty. She proposes how to better define this duty of care and, in the process, moderate or alleviate the increasingly onerous burdens on conveyancers.

A Question of Law or Fact?

Once in a while, we have a decision like the one in Yeo Yoke Mui v Ng Liang Poh [1999] 3 SLR 529 and conveyancers are reminded that the solicitor's duty in a given situation is not necessarily a question of practice but a question of law. In Yeo Yoke Mui v Ng Liang Poh, LP Thean JA, delivering the judgment of the Court of Appeal, quoted this observation of Karthigesu JA delivering the judgment of the Court of Appeal in Fong Maun Yee v Yoong Weng Ho Robert [1997] 2 SLR 297 at page 313:

The question is not really what the practice is or what a particular solicitor would have done in a particular situation, but the extent of the legal duty in a given situation, which is a question of law.

Yet in the Privy Council case of Mutual Life and Citizens' Association Co Ltd and Anor v Evatt [1971]1 All ER 150, Lord Diplock deliberating on the standard of care states at page 156:

In the law of negligence, standards of care are always objective ... All that he is required to do is to conform to that standard of skill and competence and diligence which is generally shown by persons who carry on the business of providing references of that kind.

At page 161, his Lordship continued:

The categories of negligence are never closed and their Lordships' opinion in the instant appeal, like all judicial reasoning must be understood secundum subjectam materiam.

In Singapore, the conveyancer's duties have traditionally been referable to the practices or practice rules issued by the Law Society of Singapore Council Rulings On Conveyancing Matters. The Legal Profession (Professional Conduct) Rules 1998 now codifies in general terms a solicitor's legal duties. Rule 21(1) clearly sets out the advocate and solicitor's duty to explain to his client any position taken by other parties in a matter handled by him. This rule states:

An advocate and solicitor shall explain in a clear manner, proposals of settlement, other offers or positions taken by other parties which affect the client.

In relation to conveyancing matters, this rule remains broad in its application.

Generally, it would appear that the rules for establishing an objective standard do not rule out, but support the 'law fact' of a situation as propounded long ago by Friedman in his book Legal Theory (Stevens & Sons Ltd, London), which is nonetheless still valid and relevant today. Once again, the dichotomy of the question of law and question of fact debate brings up yet another question as to whether this doctrine (which renders a divide between law and fact) serves as an adequate legal tool in today's context.

Case Law

It is observed that, generally, the local judiciary is cautious in relying on the practices of conveyancers so as to confer on these practices the force of duty. The decision in Yeo Yoke Mui v Ng Liang Poh has, however, raised some concerns in the profession that prima facie it imposes on the conveyancer a duty of care under circumstances which practitioners perceive would normally call for a less exacting standard of care.

Digests of relevant issues dealt with in recent cases leading up to the Yeo Yoke Mui v Ng Liang Poh decision are set out below. They illustrate how the judiciary views solicitors' responsibilities in conveyancing matters. The observations in the case of ERA Realty Network Pte Ltd v Puspha Rajaram Lakhiani [1999] 1 SLR 190 are included to highlight estate agents' more specific duties.

See Bee Hoon v Quah Poh Hoe [1989] 3 MLJ 6

Here, the court held the view that solicitors who laboured under the mistaken view of the law and made unsustainable demands so as to cause a delay in the completion of the sale must take responsibility for damages incurred for late completion.

Challenger Technologies Pte Ltd v Sheares Edwin Charles Hingwee & Ors (Wuan Real Estate, third party) [1999] 1 SLR 245

It is observed in this case that the fact that the contract for the sale and purchase was silent as to the incidence of GST payment did not render the contract ambiguous in relation to the sale of the property. As the option was signed before the solicitor was instructed, there was no duty on the part of the solicitor to advise on the GST implications at the option stage. Any loss incurred by the plaintiffs was a consequence of the option settled by negotiations between the plaintiffs, the buyer's representative and (to some extent) by the third party. The court, therefore, held the view that the solicitor had no duty to explain to the client the omission of the GST clause in the option, although it was admitted by the solicitor that she was aware of this omission.

The Legal Profession (Professional Conduct) Rules 1998 were not operative at the time that this decision was given, although evidence was submitted that it was standard practice for solicitors to explain the terms of the option to the client. It is the writer's view that the duty to explain the contents and implications of the terms in the option is a fundamental duty notwithstanding the absence or presence of any written rules. Advice on subjective issues and substantive aspects of the operation of any specific law arising under or ancillary to the option are matters for further consultations.

ERA Realty Network Pte Ltd v Puspha Rajaram Lakhiani [1999] 1 SLR 190

In this case, it was held that the estate agent had no other duty except to match the seller to the purchaser. The court made the observation that in Singapore, an estate agent is not an agent in the common usage of the term, but a canvasser or an introducing representative. The scope of duty is defined by the terms of the contract and there is no general duty to advise or disclose all material matters. There is, therefore, no duty on the part of the agent to disclose the identity of the real purchaser nor the potential plans for the property.

On a comparative note, estate agents in Australia and New Zealand do negotiate terms and conditions on their clients' behalf. The prescribed terms and conditions for the sale of property are used. The deployment of such standard forms effectively reduces the responsibility of the solicitor in private sale transactions. In Singapore, the prescribed statutory Agreement for Sale and Purchase deals with sales of commercial properties and housing projects under the Sale of Commercial Properties Rules and the Housing Developers Rules respectively. Standard terms for transactions in property are prescribed in The Law Society of Singapore's Conditions of Sale 1999, which parties may adopt on a contractual basis.

Yeo Yoke Mui v Ng Liang Poh (supra)

This case concerns the standard of care, or as stated in the judgment delivered by the Court of Appeal, the 'extent of care' required of the conveyancer with regard to the legal duty to explain to the client matters which will affect his case or position. The legal 'duty to explain' was not exactly in issue; neither was it reported if this duty to explain is one to be applied in the context of the Legal Profession (Professional Conduct) Rules or a fundamental duty arising under the peculiar circumstances of the case.

The relevant facts of that case are that the purchaser (an estate agent) had brought the Agreement for Sale and Purchase to Ng Liang Poh, her solicitor, and requested to be advised on the 'Category 5 road line reserve which was known to her' when she negotiated for the contract. Ng Liang Poh wrote to her to say that he would only be able to advise her on this issue after he had made the relevant searches. He subsequently sent to the client the copy of the Road Interpretation Plan (RIP) together with a copy of the explanation provided by the Land Transport Authority. The purchaser subsequently sued Ng Liang Poh for negligence in not advising her of the effect of the road line and therefore depriving her of the chance to make an informed decision as to whether or not she should have proceeded with the purchase.

Given the circumstances of the case, the ramifications of the decision are significant. These questions are relevant:

Is the objective standard of care of a conveyancer based on the practice of his peers in the given circumstances to be rejected in preference of the legal test of the reasonable man in the context of the case? (Or is the distinction between these two rules non-existent?)
Given the factual situation in Yeo Yoke Mui v Ng Liang Poh:

What is the extent of the solicitor's 'duty to explain' in the context where a client has expressly requested to be advised on a specific matter? (A question of law)

What constitutes adequate explanation? (A question of fact)

Does the judicial reasoning and the circumstances in Yeo Yoke Mui v Ng Liang Poh justify the opening up of an area of negligence premised on a duty to explain as understood within the particular context of that case scenario in that the conveyancer is duty-bound to explain and interpret in writing to his client where in the course of his searches and investigations he establishes that the Road Interpretation Plan shows a line of road reserve? The Court of Appeal ruled in Yeo Yoke Mui v Ng Liang Poh that this exacting duty went beyond the rendering by the solicitor to the client of a copyof the Road Interpretation Plan with the explanatory notes of the Land Transport Authority duly annexed.
Can there be justification for implying that this duty of care should be extended to:

replies, plans and information received from the other government departments forming the repertoire of searches and 'requisitions' routinely carried out by conveyancers? In this regard, must conveyancers 'explain and interpret' as part of their conveyancing services such matters on or relating to GST, property tax, insurance, structural defects, statutory board restrictions and statutory obligations/restrictions of ownership and zoning implications? Or would such duty arise only when these specific issues (not touching strictly on matters affecting title) are raised by the client as it was in Yeo Yoke Mui v Ng Liang Poh?

will third parties have a duty towards the purchaser where the drafting of such an option was undertaken by third parties? This was the scenario in Challenger Technologies Pte Ltd v Sheares Edwin Charles Hingwee & Ors.

Finally, and more importantly, what are the parameters of the conveyancer's duty/liability vis-a-vis his client?

Adjustment in Perception

No doubt the answers to the above questions are valid only in the context of a particular case as the facts of any given situation will moderate or emphasise the duty of care expected of a solicitor. Meanwhile, this writer proposes that the conveyancer's duty of care be examined by the two-step approach involving the conveyancer's absolute duty and the conveyancer's shared responsibility. These are elaborated below.

Areas where stringent duty is applicable

Under present practices, conveyancers are clearly duty-bound to attend to the following matters:

to advise his client on the title of the property and to ensure that a good or negotiable title is obtained as the case may be;
to establish the capacity of the client to deal with or to acquire the property and to attend to all compliance requirements as to contract and registration;
to attend to such statutory duties as are imposed on the conveyancer under the law — such as those imposed under the Income Tax Act where the solicitor is under a duty as an agent of the authorities to collect on their behalf withholding tax on certain prescribed sales of property; and
to attend to such duties as may operate as a matter of law or those undertaken under a contract.Areas of shared responsibility

The following areas of practice are some typical instances where both the solicitor's and client's responsibilities are not so clearly defined — either by practice or by written rules (or the lack of them).

Requisition replies

Solicitors routinely report to clients either in writing or verbally on the presence of road line reserves even in the case where the written contract already provides for certain categories of road line reserves to be acceptable to the purchaser. In the first instance, the solicitor's advice on the road lines should have been given and taken at the negotiation stage of the contract so that the rights and liabilities of the parties can be provided for under a conditional contract. At that stage, clients also have a corresponding duty to give sufficient and proper instructions. (It is noted that banks and some financial institutions give specific instructions to be advised on the implications of road line reserves and other replies to the Requisitions.) This is explicit in the questionnaires comprised in the Title Report and the Completion Report.

In cases involving development of land, rebuilding or renovations and where these facts are made known to the solicitors, advice on road lines, soil conditions, development charges and density ratios are matters on which clients will, on the advice of solicitors, require specialist consultations. In these areas, conveyancers are not qualified to give explanations beyond alerting the client that these areas require referrals for specialist attention whether within or outside the firm.

Negotiating special terms or specific requirements

Where specific but related issues such as estate duty, tax planning, withholding tax or GST liability are raised/covered by express instructions (whether incorporated in the contract or verbally conveyed), solicitors will deal with them on a consultancy basis or refer such matters to other consultants. Specific advice on specialist areas related to the conveyancing transactions undertaken or agreed to be undertaken by the solicitor are to be evidenced in writing. These are to be explained as part of the 'negotiation services' (such as those identified under the Solicitor's Remuneration Order on charges which are payable by the client for negotiating a loan or financing arrangements or when investigating a qualified title).1

Where a contract is undertaken by a third party

In these cases, it is suggested that liability be apportioned (where the drafting of the contract is undertaken by a third party) and where the omission by the solicitor to subsequently explain the contract terms results in losses or damages to clients. The rationale for the apportionment of liability is that clients may be deprived of the opportunity to make an informed decision as to whether the contract should be terminated rather than proceed to completion, where the loss may be greater.

Contracting out of statutory liability

This may be done within and outside the terms of the Law Society of Singapore's Conditions of Sale 1999. Under the said Conditions of Sale, for instance, these statutory liabilities have been avoided or modified:

restrictions against consolidations of mortgages (section 21 of the Conveyancing and Law of Property Act (Cap 61)(CLPA));
applicability of insurance coverage to purchasers (see condition 3(13) of the CLPA);
contractual avoidance of liability for solicitor's omission to collect GST (see condition 7.2.2 of the Law Society of Singapore Conditions of Sale 1999).2

The Proposal

Blueprint for a shared responsibility

The ever-expanding demands of society require that the responsibilities of the conveyancers be put in real-time perspective. As real estate has evolved into an investment commodity, the burden of ensuring compliance in general must be reviewed in the socio-economic context of the development of the law and practice in the areas of taxation, insurance, town planning, engineering and building compliance, to name a few. Since it is the conveyancer's duty to finally transfer the property, he has come to be looked upon by the public as being responsible for all the consequential ills that may be attendant on the acquisition of property. Is this public perception of the conveyancer's extended duties justifiable? If so, are they without boundaries? According to Ms Sarogenei of Alexander Forbes (Singapore) Pte Ltd (appointed brokers for the Law Society of Singapore's Professional Indemnity Scheme), statistics show that conveyancing transactions top the list for notification of negligence claims/potential negligence claims in the company. This area of legal practice requires immediate attention. What makes this practice so fraught with pitfalls?

The bottom-line is that the conveyancer may be over-burdened with new and added responsibilities in an environment which has seen traditional property ownership evolve into a multi-faceted preoccupation. Problems arising from activities such as 'gazumping', securitisation and the phenomena of en bloc sales of real estate and multi-level financing have placed added pressure on the conveyancer who is expected to foresee or anticipate how these economic phenomena are to be dealt with as legal agendas. How are they to be provided for in the contract of sale and purchase in which all the rights and liabilities of his clients are to be documented?

The Law Society of Singapore

It is therefore urged that the platform of the Legal Profession (Professional Conduct) Rules be further explored to identify the parameters of the conveyancer's duties. A supplement to the said Rules or a separate Conveyancer's Practice Code may be necessary to address the pressing problems identified above. Perhaps this may be looked into by the Law Society Conveyancing Practice Committee. While Council rulings on conveyancing matters provide commendable ad hoc inhouse guidelines and solutions to practice, a Practice Code would serve a wider purpose in making accessible to concerned parties a reference to a uniform standard of practice in this given area. A Practice Code could serve the following purposes:

identify the overriding policies which would galvanise the minutiae of conveyancing practices under a more uniform perspective;
as a tangible guide, it would represent the referrable standard and resource material for the Council, the profession and the public;
as reference material, it would serve both the profession and clients as it would correspondingly identify and address the parameters of the clients' and third parties' responsibilities;
as a guideline on the preset rights and liabilities of parties, which would clarify and alleviate some of the difficulties involved in a situation where the solicitor and client silently relied on each other as to the boundaries of information assumed or presumed to be known by the parties;
as a regular formal review of conveyancing practices, it would set a realistic benchmark for acceptable standards in the profession and thereby provide the element of certainty in practice; and
as a continuing review, it would also keep the profession well informed of the standard of professionalism expected of them and thereby keep them aware and updated on the areas of practice pitfalls.

The judiciary

The profession also looks to the judiciary for its dynamic role in monitoring and forging the conduct and values of society. Case law sets the pace for the development of the practices of solicitors and the force of law conferred on such practices is the prelude to formal law-making processes. It is well understood that the impact of a judicial decision is more immediate and is, in effect, an instantaneous decree.

Summary

Underpinning the matters identified for the Conveyancer's Practice Code are the proposals for an adjustment of perception of the conveyancer's duty of care and recognition for shared responsibility, the blueprint for which are offered above. Considerations for prevailing socio-economic factors are realities which will of necessity be weighted in when real-time applications of legal doctrines are attempted. Hopefully, the recall and application of the doctrine of shared responsibility may moderate and alleviate the growing and onerous burdens on the conveyancer in our times.

At the macro level, the Legal Profession Act (Amendment) Bill submitted before Parliament in late November 1999 (www.egazette.com.sg) seeks to provide for legal practitioners to operate under the structure of law corporations. This is a strategic policy move towards containing the legal practitioner's liability. At the micro level, the Conveyancer's Practice Code will complement relevant legislation in the way that it deals with the more pragmatic day-to-day obligations. This move will, inter alia, set the practitioner's liability within an ascertainable framework of instructions received. This level of regulation must of necessity come from the presiding professional body.

Hairani Saban Hardjoe
M/s Hairani Saban

Endnotes

It is not the intention here to propose or recommend additional fees be chargeable to the client in a routine sale and purchase situation; this is merely an attempt to examine, for instance, if contracts which involve multi-level arrangements are to be viewed as one for which special attention is required and, therefore, would involve an extended duty of care requiring definitive parameters.
An area for which additional fees may be chargeable where more specific work is carried out by the conveyancer is where title investigations involve qualified title. In this instance, conveyancers are entitled to impose additional fees as provided under the Legal Profession Remumeration Order over and above the scale fees for the transaction.
This is considered to be a commendable move on the part of the committee involved in the updating of the Conditions. Solicitors have been burdened with added responsibilities beyond the traditional call of duty. A wider spread involving the sharing of these responsibilities — for example, with insurers and the public — must be spearheaded by the professional bodies themselves if they are to truly represent the interests and maintain the standard of practice of the fraternities. An overload of responsibilities wreaks havoc on productivity.