The only nexus between the plaintiff and the third and fourth defendants is the plaintiff’s interest in the land, which does not create legal proximity where the plaintiff was never the third and fourth defendants’ client, and the plaintiff never relied on the third and fourth defendants who had no knowledge of the plaintiff’s existence (citing Chu Said Thong and another v Vision Law LLC (supra), Burmeister v O’Brien (supra), Scott v Valentine (supra), P&P Property Ltd v Owen White & Catlin LLP and Anor (supra)). [77] In resisting the appeal, learned counsel for the plaintiff put forward an argument that the Court of Appeal in the present case was correct in holding that the third and fourth defendants were liable in negligence. Learned counsel submitted that a solicitor, in 36 certain circumstances, owes a duty of care to third parties (other than his client) and accordingly can be liable in negligence (citing, among others, Ross v Caunters [1980] 1 Ch. 297, White v Jones (supra), Penn v Bristol & West Building Society [1995] 2 F.L.R. 938, AI-Sabah v Ali (supra), David Graham v Kaylene Joyce Hall & Anor [2006] NSWCA 208). [78] It is important to highlight that the Court of Appeal in the present case relied on Ross v Caunters (supra), Penn v Bristol & West Building Society (supra) and AI-Sabah v Ali (supra) in holding that the third and fourth defendants were liable in negligence to the plaintiff. The Court of Appeal in this regard said: “[88] We consider these authorities to be good law on liability in negligence by advocates and solicitors to third parties in circumstances peculiar to the facts and circumstances of the present case. With due respect to the learned JC, he was wrong in holding that he was bound by the dictum in Yap Ham Seow. We agree with learned counsel for the plaintiff that the case is not authority for the blanket proposition that a solicitor never owes a duty of care to a third party. Whether a solicitor is to be held liable to a third party must depend on the facts and circumstances of each case.” 37 [79] The following important question then arises: whether the English court’s decisions in the three cases relied on by the Court of Appeal in the present appeal are authorities for the proposition that a solicitor who acted for a fraudster owner of land who sold the said land owes a duty of care to the real owner of the land? We have read thoroughly and give our consideration of the cases to point the difference of that cases from the present case. [80] In Ross v Caunters (supra), a beneficiary of a will sued the solicitor who prepared the will for negligence. The English High Court held that a solicitor who was instructed by his client to carry out a transaction to confer a benefit on an identified third party owed a duty to that third party to use proper care in carrying out the instructions because (i) it was not inconsistent with the solicitor’s liability to his client for him to be held liable in tort to the third party, having regard to the fact that the solicitor could be liable for negligence to his client both in contract and in tort, (ii) there was a sufficient degree of proximity between a solicitor and an identified third party for whose benefit the solicitor was instructed to carry out a transaction for it to be within the solicitor’s reasonable contemplation that his acts or omissions in carrying out the instructions would be likely to injure the third party, and (iii) there 38 were no reasons of policy for holding that a solicitor should not be liable in negligence to the third party, for the limited duty owed to him of using proper care in carrying out the client’s instructions differed from the wider duty owed to the client of doing for the client all that the solicitor could properly do, and far from conflicting with or diluting the duty to the client was likely to strengthen it. Hence, Ross v Caunters (supra) only extended the duty of care of solicitors to third parties to a very specific category of cases i.e. disappointed beneficiaries of wills. It does not apply in our case as the plaintiff is not a disappointed beneficiary. [81] In Penn v Bristol (supra), the English High Court had held that the solicitor owed a duty of care to the co-owner wife in the land fraud perpetrated by her co-owner husband because she was within the reasonable contemplation of the solicitor. The solicitor had known that he was acting not just for the husband but also the co-owner wife whose instructions he had not verified. Penn v Bristol (supra) can clearly be distinguished because the solicitor was aware at all material times that he was also acting for another co-owner i.e. the wife whose instructions he had not verified. Therefore, there was foreseeability and proximity between the solicitor and the wife in Penn v Bristol (supra). However, in our 39 present case the third and fourth defendants did not know of the plaintiff’s existence or her interest in the land. [82] The last case relied on by the Court of Appeal to support its finding that the third and fourth defendants owed a duty of care to the plaintiff is the case of Al-Sabah v Ali (supra). But that case was decided on the basis that the solicitors conceded that they had assumed responsibility to the plaintiff. Further, the solicitors’ known client was the plaintiff whom they had never met, and whose instructions they never verified. Further, Al-Sabah v Ali (supra) can be distinguished on the basis that the plaintiff was not a third party, but the firm’s client from the outset. The solicitors in Al-Sabah v Ali (supra) are therefore put on notice to verify their client’s instructions, but they never met the client. In the present case, the third and fourth defendant’s solicitors had met their client personally (the fraudster) and had been at all material times under no impression that they were dealing with only a representative. The third and fourth defendants’ client was the fraudster not the plaintiff. [83] It will be recalled that in his submission, learned counsel for the plaintiff also relied on White v Jones (supra) and David Graham v Kaylene Joyce Hall & Anor (supra) to support his 40 contention that the third and fourth defendants owed a duty of care to the plaintiff. We have read the two cases. In our opinion there are crucial differences between the present case and the two cases cited by learned counsel. [84] White v Jones (supra) is a case pertaining solicitors’ liability to third party beneficiaries in wills. Our present case is not a disappointed beneficiaries case. In that case the House of Lords discussed the extension of solicitors’ liability to third party beneficiaries in wills cases. The House of Lords imposed a duty by solicitors towards third party beneficiaries solely in order to address a lacuna in the law and to do “practical justice”. [85] In the New South Wales Court of Appeal decision in David Graham v Kaylene Joyce Hall & Anor (supra), one Mr. Hall had “instructed…a solicitor, to act for both him and Mrs Hall” without his wife’s knowledge. The solicitor attested the wife’s signature on a registered mortgage that had been forged by her husband. The court held that the solicitor (Mr Graham) owed a duty of care to the wife (Mrs Hall). The Court held: “In my opinion Mr Graham owed Mrs Hall a duty of care in attesting the signature on the mortgage, and in representing that the signature purporting to be that of Mrs Hall was placed on the 41 mortgage in his presence and that Mrs Hall was personally known to him.” [86] The important point in that case is that the solicitor was attesting the signature of his own client. We therefore agree with the arguments of learned counsel for the third and fourth defendants, that the case does not stand for the general proposition that a solicitor owes a duty of care to a third party. [87] It can be seen from the foregoing analysis that the cases relied on by the Court of Appeal in the present case and by learned counsel for the plaintiff do not support the broad proposition that the third and fourth defendants owed a duty of care to the plaintiff. [88] One final point remains regarding the judgment of the Court of Appeal on this issue. It is noteworthy that the Court of Appeal expressed its conclusion that the third and fourth defendants were also liable in negligence to the plaintiff in the following passages of its judgment: “[90] On the facts of the present case it is clear to us that the third and fourth defendants were negligent in failing to take all necessary steps to verify the true identity and status of the imposter, the bogus Rajamani. When the bogus Rajamani produced an Indian passport bearing No. F4495077, which did 42 not match with the real Rajamani/plaintiff’s passport which bears No. X205536, and gave a self-serving declaration in the ‘Surat Akuan’ at p 2857 of the appeal record to link the two passports, the third defendant was put to notice of the need to make further enquiries. [91] But she chose not to, despite the glaring disparity in the passport numbers staring her in the eyes. It was a red flag that should have aroused her suspicion as to the true identity of the person who appeared before her and claiming to be the landowner. ……… [92] Had the third defendant carried out further investigation as a prudent and reasonably competent solicitor would under the circumstances, instead of blindly accepting what was claimed by the ‘vendor’ as correct and genuine, she would have discovered that the Rajamani that she was dealing with was not Rajamani the real landowner. [94] Careless conveyancing lawyers must bear the natural and probable consequences of their acts or omissions. The truth is, the learned JC himself acknowledged, albeit reluctantly that the third defendant was negligent…… [95] That effectively was a finding that the third defendant, and by extension the fourth defendant, had breached their duty of care to the plaintiff. Nevertheless, being guided by his view that a solicitor only owes a duty of care to his client and not to third 43 parties, it was inevitable that the learned JC would find the third and fourth defendants not liable in negligence to the plaintiff.” [89] The above passages are not free from difficulties. The Court of Appeal seemed to hold that the third and fourth defendants owed the plaintiff a duty of care because of their alleged negligent acts. That cannot be right. The Court of Appeal erred by taking an overly simplistic view. In our opinion the Court of Appeal had seriously misdirected itself on fact and law in failing to appreciate that the third and fourth defendants must owe a duty of care to the plaintiff before the court considers whether there has been a breach of the duty of care. The case of Esser v Brown (supra), which was cited by learned counsel for the third and fourth defendants illustrates this point very well. The Canadian Court of Appeal in this case who overturned the trial judge’s finding that a notary (Ms Luoma) who acted for a fraudulent co-owner owed duty of care to the defrauded co-owner (Ms Esser) held: “30 As I have already mentioned, the trial judge seemed to hold that Ms. Luoma owed the plaintiff a duty of care because of her finding that in the circumstances, Ms. Luoma was careless in ignoring the “red flags” described by the trial judge. With respect, the existence or non-existence of “red flags” seems related more closely to the question of carelessness or standard of care than to 44 the duty of care, which must be considered as a separate question of law. In other words, it is not correct, in my respectful opinion, to say that the notary owed a duty of care because there were “red flags”. This conflates the question of whether there was carelessness on the defendant’s part - i.e. a failure to comply with a reasonable standard of conduct - with the question of duty of care. Standard is generally considered after a duty of care has been found and involves determining whether there were any established rules of her profession, or customary practices, that she failed to follow; or whether the ‘warning signs’ adverted to by the trial judge should reasonably have aroused her suspicion. If on examination the court is satisfied that the defendant’s actions fell below that of a competent notary, then (assuming both a duty of care and a causal link between her conduct and the plaintiff’s loss), liability will be imposed…” [90] In Burmeister v O’Brien (supra), the New Zealand High Court held that the solicitor (Mr Henley-Smith) who acted for the fraudsters (O’Briens) did not owe a duty of care to the defrauded plaintiffs (Burmeisters). In this respect the High Court held: “[223] I have no doubt that Mr Henley-Smith did not act in accordance with good professional practice when he accepted the blank transfer signed by the Burmeisters, filled it in with their names on his purchaser client’s instructions without further inquiry, and then proceeded to sign the transfer correct as 45 solicitor for the O’Briens, and the discharge of mortgage correct as solicitor for the Burmeisters. Rather, he should have refused to take any steps and required the documentation to be referred back to the Burmeisters, for them or their solicitors to fill in the documents and provide him with the necessary details. [224] However, these errors cannot in themselves lead to the creation of a duty of care. The fact that Mr Henley-Smith may have breached the standards of proper professional conduct does not in itself create a cause of action in negligence.” [91] Reverting to the rival contentions of the parties, it must be emphasised that as against the third and fourth defendants, the plaintiff’s claim was based on the tort of negligence. In a claim based on the tort of negligence, it must first be shown that the defendant owed a duty of care, as a legal obligation, to the plaintiff and once the duty existed, the plaintiff must show that the defendant had breached it. [92] For the establishment of a duty of care in tort, the preferred test in Malaysia is the three-fold test of foreseeability, proximity and policy considerations (see Tenaga Nasional Malaysia v Batu Kemas Industri Sdn Bhd & Another Appeal [2018] 6 CLJ 683). We note that the Court of Appeal in the present case did not examine this point. In Lok Kok Beng & 49 Ors v Loh Chiak Eong 46 & Anor (supra), this Court set out the approach for imposing a duty of care as follows: “[34] To put it in a nutshell the preferred test is the three fold test, where the requirements of foreseeability, proximity and policy considerations must exist in any claim for negligence. The three fold test has been recognized by the House of Lords in Caparo Industries plc v Dickman [1990] 2 AC 605, as the elements giving rise to a duty of care. In the judgment of Lord Bridge in Caparo at pp 617-618, His Lordship said that: What emerges is that, in addition to the foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterized by the law as one of ‘proximity’ or ‘neighbourhood’ and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope on the one party for the benefit of the other. …….. [62] As a matter of interest it can be seen that as regards the proper approach that should be used in imposing a duty of care, legal thinking has been divided between the use of general principles as a test for duty, and the incremental approach which calls for the development of the law in incremental stages by 47 using precedents as the yardstick against which all claims in negligence should be measured. ……. [64] In other words, the imposition of policy considerations require some measure of public policy to be infused in the establishment of a duty of care. In the present appeal, we agree with the Court of Appeal that the court must give consideration to the presence of a contractual matrix between the developer and purchasers which clearly define the rights and liabilities of parties and their relative bargaining positions. There can be no action against the architect if the remedy asked for is specifically provided for in the contract. Otherwise, it has the effect of rewriting the contractual terms. Such claims must be dismissed on grounds of policy. Nevertheless, we must reiterate that a claim for negligence must be brought within the scope of duty of care. The recoverability of claims for pure economic loss in negligence cases is dependent on the facts of individual cases. Some measure of public policy must be considered though it should not be the sole determinant of liability.” [93] On the threshold question of factual foreseeability, we ask ourselves the following question: was it factually foreseeable that the third and fourth defendants’ act or omission might cause the plaintiff to be deprived of her rights to her land? Viewed objectively, 48 we answer that question in the negative. The third and fourth defendants were retained as solicitors for the fraudster, whom they believed to be the owner of the land. In this context, they could not be expected to take into account the interests of the plaintiff (who they did not know existed) when acting for their client, the fraudster. As solicitors for the fraudster, they are mainly responsible for protecting the interests of their client, the fraudster in first land transaction. The expected scope of the third and fourth defendants’ duty only covered the carrying out of the fraudster’s instructions. In the circumstances it was not reasonable for them to further enquire whether their client was really whom she claimed to be, or whether her actions might cause harm to the plaintiff whom they had no idea existed in the first place. Given that they did not even know that the plaintiff existed, much less had any knowledge of her interest in the land, it is unrealistic to expect a solicitor to be able to guard the plaintiff’s interests under those circumstances. [94] The next important issue for determination is whether there is sufficient legal proximity between the plaintiff and the third and fourth for a duty of care to arise. In assessing whether there was sufficient legal proximity between the parties in a case where the plaintiff only suffered pure economic loss (as in the present case), 49 one of the factors that a court should consider is the principle of voluntary assumption of responsibility (by the defendant) and reliance (by the plaintiff). This Court in Lok Kok Beng & 49 Ors v Loh Chiak Eong explain this as follows: “[35] The most difficult ingredient to prove in establishing a duty of care is the requirement of sufficient proximity between the claimant and the defendant. The court would have to look at the closeness of the relationship between the parties and other factors to determine sufficient proximity based on the facts and circumstances of each case. These factors are likely to vary in different categories of cases. The fact that damages sought by the claimant is pure economic loss not flowing from personal injury or damage to the property is also a factor to be considered. As has often been acknowledged, a more restricted approach is preferable for cases of pure economic loss. As such, the concepts of voluntary assumption of responsibility and reliance are seen as important factors to be established for purposes of fulfilling the proximity requirement. The reason for a more stringent approach taken in the claims involving pure economic loss is because such loss might lead to an indeterminate liability being imposed on a particular class of defendants, thus leading to policy issues.” [95] It is against the above background, we now turn to the application of the principles of voluntary assumption of responsibility 50 and reliance to the facts of the present case. It is plain for us to see that the only nexus between the plaintiff and the third and fourth defendants is the plaintiff’s interest in the land, which does not create legal proximity where the plaintiff was never the third and fourth defendants’ client, and the plaintiff never relied on the third and fourth defendants who had no knowledge of the plaintiff’s existence. They never met each other prior to the commencement of the present action, nor knew of each other’s existence. The third and fourth defendants had dealt directly with their client the fraudster at all material times. The third and fourth defendants also never assumed responsibility for the plaintiff. The fact that the third and fourth defendants’ client was a fraudster does not create proximity between the plaintiff and the third and fourth defendants. Hence, it is clear to us that there is no legal proximity between the plaintiff and the third and fourth defendants. [96] In this regard, learned counsel for the third and fourth defendants drew our attention to the latest position in the United Kingdom that solicitors do not owe a duty of care to non-clients where reliance on the solicitor was not reasonable. In the recent UK Supreme Court case of Steel and another v NRAM Ltd [2018] UKSC 13, a solicitor (Ms Steel) acted for a borrower in negotiations 51 with the chargee (Northern Rock) to discharge certain properties in return for partial redemption of the loan. In the course of acting for the borrower, the solicitor made an inaccurate and grossly negligent misrepresentation to the chargee (Northern Rock), who proceeded to rely on the misrepresentation and suffered loss as a result. The Supreme Court (Lord Wilson, with whom Lady Hale, Lord Reed, Lord Hodge and Lady Black agreed) held that the solicitor (Ms Steel) owed no duty of care to the chargee (Northern Rock) as Northern Rock’s reliance on the solicitor was not reasonable. The Supreme Court explained: “[32] Perhaps it helps only slightly for us to have been reminded in the authorities cited above that Ms Steel and the firm are liable to Northern Rock only if it was a special case. Probably of greater assistance is the analysis in the Al-Kandari case that the solicitors owed a duty of care to the opposite party because they had stepped outside their normal role. But the six authorities cited above demonstrate in particular that the solicitor will not assume responsibility towards the opposite party unless it was reasonable for the latter to have relied on what the solicitor said and unless the solicitor should reasonably have foreseen that he would do so. These are, as I have shown, two ingredients of the general liability in tort for negligent misrepresentation; but they are particularly relevant to a claim against a solicitor by the opposite 52 party because the latter’s reliance in that situation is presumptively inappropriate. Thus the reasonableness of the claimant’s reliance and of the defendant’s foreseeability of it comprised the special feature which gave rise to the liability in the Allied Finance case and in the Dean case and to the arguable liability in the Connell case; and, although the claim in the Midland Bank case failed for other reasons, the fourth of the requirements valuably identified in Lord Jauncey’s judgment was that the solicitor should have been aware that the pursuer was likely to rely on what he had said. ……. [35]…Overarchingly, however, neither the general jurisprudence relating to liability in negligence for a misrepresentation leading to economic loss nor the focussed jurisprudence relating to a solicitor’s liability to the opposite party in that regard supports a conclusion that it is not always necessary for the representee to establish that it was reasonable for him to have relied on the representation. On the contrary, the reasonableness of his reliance on it is, as I have explained, central to the concept of an assumption of responsibility.” [97] From the irrefutable evidence, the point to be made here is that in our present case there was no reasonable reliance by the plaintiff. 53 [98] Having said that there is no legal proximity between the plaintiff and the third and fourth defendants, we also agree with the submissions of learned counsel for the third and fourth defendants that there are policy considerations against imposing a duty of care on the third and fourth defendants towards the plaintiff. Imposing such a duty require solicitors to assume that their clients are acting deceitfully and will put them in a position of potential conflict of interest. That would effectively make solicitors an insurer for all transactions, which would lead to increased costs that are passed on to the clients. Such a duty would apply not just to solicitors but also to agents for any person in any transaction, including accountants, bankers, insurers, stockbrokers or any other manifestation of an agent. In Burmeister v O’Brien (supra) the New Zealand High Court said: “[231] I do not accept that a duty of care can be imposed on lawyers who receive signed documents in otherwise unexceptional circumstances, to verify the signatures. It may be a breach of professional standards to fill in a blank transfer (as I have already indicated at [223] and [226] above). However, the absence of any relationship with the person who has signed militates against a duty of care to that person to investigate the validity of the signature. The policy implications of imposing such a duty would be considerable, as it would add to legal costs, and 54 place a practitioner in a position where he or she could not accept an assurance from a client. The fact that the transfer was signed in blank was not enough in my view to place a duty of care on Mr Henley-Smith to the Burmeisters (as distinct from a duty to observe professional standards) to follow up or refuse to act. …….. [234] I therefore conclude that there was not sufficient proximity between the Burmeisters and Mr Henley-Smith to give rise to a duty of care. Even if there were sufficient proximity, there would be policy reasons which would weigh against a finding of a duty. Caution must be exercised in imposing a duty on solicitors to those who are not only not the solicitor’s clients, but who indeed have interests essentially in conflict with those of the solicitor’s direct client. …… [238] Mr Henley-Smith was not in the classic duty of care situation. He was giving no certificate at all to the Burmeisters. They were not in his contemplation as persons who might rely on any actions on his part. To impose a duty on solicitors involved in registering a transfer for a purchaser to look out for the interests of the other party to the conveyancing transaction runs the risk of placing solicitors in a possible conflict position. There are good 55 policy reasons why no duty of care should be extended to such a situation.” [99] So far we have deal with the issues pertaining to the key question of whether the third and fourth defendants owed a duty of care to the plaintiff. [100] We now turn to address briefly on the submissions of learned counsel for the third and fourth defendants that foreign cases show that solicitors do not owe a duty of care to non-clients except in very limited circumstances (i.e. disappointed beneficiaries cases and where there is reliance). We need not go through all the cases here. We would only draw attention to some of the decisions. A review of the cases in the United Kingdom and Canada, indicates that solicitors do not owe a duty of care to third parties. Courts have held that solicitors acting for a fraudster vendor do not owe a duty of care to a defrauded purchaser. The exceptions to the rule are disappointed beneficiaries cases and where there is reliance and assumption of responsibility (see P&P Property Ltd v Owen White & Catlin LLP and Anor (supra), White v Jones (supra), Al-Sabah v Ali and Ors (supra), Chief Land Registrar v Caffrey & Co. [2016] EWHC 161 (Ch), Scott v Valentine (supra), Esser v Brown (supra) and Kamahap Enterprises Ltd v Chu’s Central 56 Market Ltd [1989] B.C.J. No. 2108). The following point has already been made earlier but deserved to be reiterated. The present case is not a disappointed beneficiaries case and there was no reliance and assumption of responsibility. [101] Hence, based on all the above, we conclude that our Court should not impose a duty of care on solicitors who acted for a fraudster owner of land who sold the said land, towards the real owner of the land, as there is no foreseeability, no proximity, and there are policy considerations against imposing such a duty. [102] We will now turn to question 2, which is in relation to the first defendant’s appeal (Second Appeal). Question 2 [103] This question highlights some of the problems and difficulty in relation to the computerisation of land titles. In this regard, it will be recalled that despite having the original issue document of title (IDT1) and paying all quit rent, and despite not entering into any sale of the land, the plaintiff found herself dispossessed of the land. The land came to be transferred to the second defendant who then transferred it to the first defendant. The evidence disclosed that the 57 transfers were made by the use a computerised issue document of title. [104] As we have seen, the Court of Appeal decided that the first defendant’s title is defeasible, despite it being a subsequent purchaser in good faith and for valuable consideration, on the following grounds. The plaintiff’s title under IDT1 remains indefeasible; IDT4 is void because it cannot be issued during IDT1’s subsistence, relying on the case of Tan Chiw Thoo v. Tee Kim Kuay [1997] 2 MLJ 221; the first defendant cannot acquire indefeasibility of title by relying on a void title in IDT4; the second transfer by a fraudster, and not by the plaintiff herself, to the first defendant is ineffective; and in the contest for title between an innocent original owner and an innocent subsequent purchaser in good faith and for valuable consideration, the scales of justice tilt in favour of the innocent original owner. [105] As a starting point, it is necessary for contextual apprehension and appreciation to set out the governing statutory provision for the conversion of existing manual titles to computer printed titles. Section 5A(3)(a) of the NLC, expressly states the provisions of 14th schedule shall apply once the computerised land registration system comes into force in Malaysia. Section 8 of the 58 schedule sets out in some detail the process of the conversion. A registered proprietor may apply for conversion under paragraph 8(4) of the schedule. The Registrar can start the conversion on his own accord as provided for in paragraph 8(5). Paragraph 8(3) provides that the existing issue document of title shall continue to be in force and valid for all purposes until the relevant computer printed issue document of title is prepared and issued to the proprietor after the register document of title is converted. Paragraph 8(9) provides for the mandatory duties of the Registrar upon conversion of an existing document of title to a computer printed issue document of title as follows: “(9) Upon the conversion of an existing document of title to a computer printed document of title under the preceding sub-paragraphs, the Registrar shall-