Dear Mrs.

Wolf,

I refer to our meeting on Friday, 11th April 2008. In the course of that meeting, I repeated my
firm's previous advice that you should attempt to settle this case before trial. We discussed why it
is advisable for you to settle and the terms upon which you would be prepared to settle.

In the course of the above meeting, you asked why this firm had not previously advised you
against proceeding to trial, and why it was suggesting settlement after expending legal costs.

At the commencement of this action, we were instructed by you to prepare a Defence to the
Plaintiffs' claim and to prepare Counterclaim in relation to structures on the Plaintiffs' property.
Whether your structures and the Plaintiffs' structures were illegal structures were crucial issues
which we advised could only be determined by expert evidence. The Defence and Counterclaim
could only be prepared on the basis that your structures were legal; and that the Plaintiffs'
structures were illegal and had caused damage to the car-park.

As part of the Summary Judgment application against you, advice was sought from your expert,
Sammy Wong of Wong & Cheng. His initial advice was that alterations to your property were not
structural (and were therefore not illegal structures). On the basis of that advice, you successfully
opposed the Summary Judgment application. In due course, we sought a more detailed expert
opinion from Wong & Cheng. That report contains an opinion that the structures on your property
are illegal.

We considered the likely evidence that the parties would give from the evidence filed in the
Summary Judgment application, the documents obtained from discovery, the intervention of the
Buildings Department and the likely expert evidence that Wong & Cheng will give, in order to
advise on the merits of the parties' claims, which we did in our Advice on Merits sent to you on
26th February 2008.

With respect to the Plaintiffs' claim, we have been advised by Wong & Cheng that there is little
doubt your structures are illegal structures. At trial, Wong & Cheng will not give evidence that
your structures are legal. The Court will find at trial that your structures are illegal unless we
locate a different expert who is prepared to give evidence that the structures are legal.

The main defence available to you at trial is estoppel. Whether this defence will succeed depends
heavily on the witnesses' performance and the Court's assessment of the credibility of the
witnesses. The Court will heavily rely on the contemporaneous documents available, but those
documents do not support your evidence that there have been meetings where the Plaintiffs
agreed that the removal of certain structures as sufficient to satisfy them.

Whether you will or will not succeed in your defence of estoppel will be of little relevance if the
Buildings Department issue a demolition notice. You have told us that officers from the
Buildings Department indicated that your building works have low priority in their enforcement
policy, and on that basis the Buildings Department may not decide to issue a demolition notice.
We have no expertise to comment on the Buildings Department's policy, but we consider it very
unlikely that the Buildings Department will not to issue a demolition order having inspected the
structures of your house.

In light of your expert's advice (that your building works are illegal), the difficulties you face to
establish a defence of estoppel, and the fact that the Buildings Department may issue a demolition
notice in the near future, it is very likely that you will be required to demolish your building
works. For these reasons, we have recommended that you negotiate a settlement as soon as
possible to prevent incurring further costs and to avoid liability for an advise costs order.

You also indicated that you do not know what building works to remove, given that the structures
the Plaintiffs' are demanding be removed may be different to what the Buildings Department will
require you to remove. Your obligation to remove building works is separately owed to the
Buildings Department; and the Plaintiffs (if you reach a settlement agreement) or the Court (if the
Court makes an order for the removal of your building works). We understand that you are
concerned that if you comply with some, or all of the Plaintiffs' requests to remove the Building
Works, you may at a later stage be required to remove further structures if the Buildings
Department issue a notice. While we appreciate that there is a risk that you may be required to
remove your structures in two separate renovations, if you wait for the Buildings Department to
issue a notice before you attempt to settle these proceedings, you will have a weak bargaining
position, and you may have to bear further legal costs in the process.

With respect to your counterclaim, the Plaintiffs' structures that you described to be the cause of
the cracks in the ceiling of the car park have been removed. While the withdrawal of all your
counterclaim will not decide how the car park should be fixed, given that the cracks in the ceiling
of the car park should not be recurring now that the Plaintiffs have removed their structures, and
that the costs of repairing the cracks in the car park will be insignificant in comparison with the
legal costs of the parties, your priority should be to obtain a favourable settlement on the costs of
the proceedings.

You have instructed us to withhold from negotiating a settlement with the Plaintiffs based on the
risk that you may be required to remove different structures by the Court and the Buildings
Department. We will therefore withhold from commencing negotiations with the Plaintiffs. If at
any time you wish to explore settlement in light of the above, please let us know. At the present
time, the merits of your Defence are weak and if you proceed to trial, your risk an advise costs
order (in addition to

Best regards,
Jamie Yuen