KUALA LUMPUR: The High Court has ordered a law firm and its partners to pay £198,320 (about RM1.2 million) in damages to a retiree for professional negligence linked to a failed property investment scheme in the United Kingdom (UK).
Judge Ahmad Shahrir Mohd Salleh ruled in favour of Leelawathy PT Singam, finding that the defendants had failed in their duty of care, which led to her suffering significant financial losses.
The defendants named in the suit are Tang Ching Yee, Loong Caesar, David Soong Tshon Li and Cara Yasmin Kamaruddin.
All are partners at Messrs. Raslan Loong, Shen & Eow (MRLSE) except for Cara Yasmin who left the firm on Feb 21, 2017.
According to court documents, Leelawathy in 2016 had engaged the defendants and instructed Tang, who at the material time was a practising solicitor of the Supreme Court of England and Wales as well as an advocate and solicitor of the High Court of Malaya, to act on her behalf.
This is after the plaintiff (Leelawathy) became interested in participating in an investment scheme involving residential units located in a student accommodation development known as the Scholar’s Village along the Great Horton Road in Bradford, UK.
The structure of the investment scheme involved several interrelated companies which collectively formed what was referred to as the Alpha Group of Companies (Alpha Group).
The promotional materials presented to the plaintiff described the investment scheme as offering fixed rental returns of between eight per cent and 10 per cent per annum over a 10-year period.
Based on the legal advice by Tang, the plaintiff proceeded to purchase four residential units in the investment scheme amounted to £198,320. She received the rental returns as promised for two years.
However, in 2018, the rental payments began to decline and eventually ceased. Last year, the High Court of England and Wales ruled that the schemes marketed and sold by the Alpha Group constituted unregulated collective investment schemes (CIS).
The plaintiff alleged that the defendants acted negligently by failing to advise her that the investment scheme could potentially constitute a CIS.
She said the defendants failed to inform her that the guaranteed rental returns were not legally enforceable and that contractual arrangements involved significant legal risks.
The defendants argued that their retainer was limited in scope as it did not extend to advising the plaintiff on commercial, financial or other non-legal risks arising from the contemplated transaction.
The defendants submitted that Tang acted in the capacity of a conveyancing solicitor and her professional responsibility was confined solely to the legal process of acquiring title to the four units.
However, the court was not persuaded by the defendants’ arguments, noting that the scope of a solicitor’s duty cannot be determined in a vacuum.
The judge said the defendants failed to advise the plaintiff of the legal risk that the investment scheme could constitute an unregulated CIS under the FSMA.
“The defendants also failed to explain the true nature, legal effect and associated risks of the contractual documents executed by the plaintiff.
“I find that these breaches materially influenced the plaintiff’s decision to proceed with the investment. But for the defendants’ failures, the plaintiff would not have entered into the transaction.
“As a direct consequence, the plaintiff suffered substantial financial loss,” Ahmad Shahrir said in his ground of judgment dated May 22, this year.
The court said the four units have since depreciated in value to the point that they are now worth substantially less with no resale value.
He said the plaintiff continued to incur liabilities in the form of service charges and ground rent, despite the collapse of the investment and the cessation of any income stream.
© New Straits Times Press (M) Bhd
