In Anwar Patrick Adrian v Ng Chong & Hue LLC  SGCA 34 the Court of Appeal (CA) addressed the issue of whether a solicitor owed a duty of care to a third party on whom his client wanted to confer a benefit. The CA had to relate the findings in the English case White v Jones  2 AC 2017 (White) to the Singapore framework of an overarching duty of care as set out in Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency  4 SLR(R) 100 (Spandeck).
In White, the House of Lords found that a solicitor can be sued by a third party beneficiary, though such a situation was said to be an exception rather than the norm. In Spandeck, the Court laid out a two-stage test for determining if a duty of care exists between two parties. The first stage involves examination of the preliminary matter of factual forseeability. A positive finding on this issue would lead to an examination of whether there is proximity and nexus between the parties. The second stage looks at whether there exist any policy considerations that would militate against the finding of a duty of care between those parties.
Ng Chong & Hue LLC (Respondents) had been retained by one Mr. Agus Anwar (Agus) to assist him on various financial transactions. Societe Generale Bank & Trust (SG), with whom Agus had a credit facility, demanded further collateral when the value of Agus’ existing collateral diminished. Agus had communicated through the Respondents that he was agreeable to all of SG’s terms save that which required his sons (Appellants) to provide personal guarantees.
After several rounds of discussion, SG’s counsel sent a mortgage document and deed of assignment (Security Documents) to the Respondents. The Security Documents required each Appellant to provide a personal guarantee. The Security Documents were sent to the Respondents who forwarded them to the Appellants who signed off without question. Unfortunately, as Agus was still unable to meet the requirements under the credit facility, SG commenced a suit against, inter alia, Agus and the Appellants. The suit was settled for S$1 million in 2011. The Appellants commenced the present action against the Respondents for failing to bring the personal guarantee clauses to their attention or advising them on it before they signed off.
Having found that there was an implied retainer between the Appellants and the Respondents, the CA next considered White and Spandeck to determine if there was a duty of care in tort and contract owed by the Respondents to the Appellants. The CA found that White confirmed that there was a duty of care in tort owed by a solicitor to a third party and that this fit into the legal position in Singapore as set out in Spandeck. On the threshold issue of the Spandeck test, the CA found that it was factually foreseeable that should the Respondents fail to take reasonable care in advising Agus of the personal guarantees, loss to the Appellants would occur.
The CA then found that the requirement of proximity was met either on its finding that there was an implied retainer, or on the fact that the Respondents’ assumption of responsibility to Agus to perform specific instructions set the stage and created the environment necessary to the incidental but direct and close relationship between the Respondents and Appellants. A duty of care thus arose between the two. As to the second stage, no policy considerations were found by the CA that would negate the duty of care. Instead, the CA opined that policy considerations advanced the imposition of a duty on solicitors to exercise reasonable care even towards third parties.
Turning to examine if there had been a breach of the standard of care and skill, the CA was of the opinion that the Respondents had failed to identify the relevant personal guarantee clauses, and had thus breached their duty toward Agus and the Appellants on account of the close proximity between them.
Whether the findings of the instant case will be extended to find duties of care owed to third parties in other commercial relationships between a person in a professional advisory role and their client is likely to be examined in the near future.