ZHU LI v. THE LAW SOCIETY OF HONG KONG

HCAL 8/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 8 OF 2014

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D E C I S I O N

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A.   INTRODUCTION

1. This is the respondent Law Society’s application for security for costs against the applicant in the sum of $450,000.

2. The applicant is a qualified lawyer in the Mainland.  She is presently resident in Beijing and gives a Beijing address in these judicial review proceedings.

3. She was formerly an employee of a major law firm (“the Law Firm”) in its Beijing offices from 2003 to 2010.  Thereafter, she was seconded to the Law Firm’s Hong Kong office from September 2010 until March 2012.  She is not qualified to practise as a solicitor in Hong Kong.

4. On 9 October 2011, the applicant made a complaint (“the Complaint”) to the Law Society against a partner (“the Partner”) of the Law Firm in Hong Kong, alleging four misconducts, namely:[1] the Partner conspired with his client’s Mainland lawyers to make illegal monies (“Misconduct 1”); the Partner practised PRC law with the Law Firm in Hong Kong when he was not qualified to do so (“Misconduct 2”); the Partner represented clients regardless of apparent conflict of interest in a criminal case in the Mainland (“Misconduct 3”); the Partner had private meetings with arbitrators in an arbitration case in Shenzhen (“Misconduct 4”).

5. On about 9 November 2012 (and as further clarified in a letter dated 13 September 2013), the Standing Committee of Compliance (“SCOC”) of the Law Society decided not to take any further action in the matter for the reasons of lack of jurisdiction (in relation to Misconducts 1, 3 and 4) and lack of evidence (in relation to Misconduct 2).

6. On 16 January 2014, the applicant acting in person applied for leave to apply for judicial review to challenge the lawfulness of the above said decision (“the Decision”).  On the court’s directions, the applicant served the leave application on the Law Society on 21 April 2014, and on 13 May 2014, the Law Society served its Initial Response.  On 17 May 2014, the applicant provided her “reply” to the Initial Response to the Law Society.

7. On 9 July 2014, I granted leave to the applicant to commence this judicial review.

8. Legal aid was subsequently granted to the applicant.

9. Then later, the Law Society (having reviewed the matter with a “fresh pair of eyes” and in light of its “frontline responsibility to ensure compliance by solicitors with the rules”)[2] decided to accept jurisdiction over the Complaint and to proceed to investigate it again.  In other words, the Law Society agreed and proceeded to reconsider the Complaint afresh through a new Investigation Counsel (a qualified solicitor) who has no prior involvement in the matter.[3]

10. Notwithstanding this, and the Law Society’s attempts to reach a settlement with the applicant in relation to this judicial review, the applicant has refused to settle and decided to proceed with the application.  The applicant’s legal aid was then later discharged on 11 February 2015 apparently on her then assigned solicitor’s advice.

11. This is now the Law Society’s application for security for costs.[4]  The principal bases of this application are that (a) the applicant is resident out of jurisdiction and has no property or fixed assets in Hong Kong; (b) her judicial review application is likely to have been rendered academic and would serve no useful purpose; and (c) there is no sufficient evidence to show that the grant of an order for security for costs will stifle the judicial review application.

12. The applicant’s main grounds of opposition are that (a) this is matter of public interest and the challenge has not been made academic by reason of the Law Society’s decision to reconsider the Complaint; and (b) it would at least make it much harder for her to pursue the judicial review if an order for security is granted.  For the interest of public interest, the court should refuse the application.

B.   BRIEF RELEVANT BACKGROUND

13. In order to properly deal with this leave application in light the parties’ contentions, I need to set out some relevant brief background as follows.

B1.  The relevant structure in relation to the handling of a complaint

14. Under section 9A(1) of the Legal Practitioners Ordinance (Cap 159) (“LPO”), upon the receipt of a complaint, the Law Society Council (“the Council”) shall refer the complaint to the Tribunal Convenor (“the Convenor”) of the Solicitors Disciplinary Tribunal (“SDT”) if it considers that the conduct of the complained solicitor should be inquired into or investigated.

15. The Law Society’s present evidence shows that:[5]

(1) The Council is the governing body of the Law Society and comprises of 20 members.

(2) The Council meets twice monthly and receives and considers reports from six Standing Committees.

(3) One of the six Standing Committees is the SCOC, which deals with the regulatory and administrative aspects of the profession.

(4) The SCOC comprises of 18 practising solicitors, nine of whom are Council members, with the remaining nine being Non-Council members.  The composition of the SCOC and the members of the SCOC are identified in the Law Society’s website.

(5) The Investigation Committee (“IC”) is an ad hoc committee of the SCOC which consists of three members of the SCOC.  The role of the IC is to consider any report submitted by the Investigating Counsel and to consider and decide on the complaint.

(6) As a matter of policy, the Law Society does not disclose the identities of the three members of the IC to the complainant, the respondent or to the public.

16. From the evidence, apparently after the Council has received a complaint, it is the SCOC effectively through the IC (based on the report submitted by the Investigation Counsel) which decides as to whether that complaint should be further inquired into or investigated.  If it decides to be so, the Council would exercise its power under section 9A(1) of the LPO to refer the complaint to the Convenor.

B2.  The applicant’s present complaints in this judicial review

17. In this judicial review, the applicant asks for (a) an order that the Law Society do exercise its power/duty under section 9A(1) of the LPO to refer the Complaint to the Convenor; or (b) alternatively an order that the Law Society to investigate the Complaint afresh.

18. Other than challenging the Decision’s reasons (ie, that the Law Society did not have jurisdiction over the matters complained of) as unlawful as they are wrong in law, the applicant also says the Decision is unlawful as it is tainted by procedural unfairness and bias.  In relation to the grounds based on procedural irregularities, the applicant’s complaints are in gist these:[6]

(1) The Partner has been a Council member for more than 10 years.  He is one of the senior Council members and is still serving on the Council.

(2) All or some of the members of the IC might well be also Council members, but the applicant as the complainant was not made aware of its composition.

(3) The chairman of the SCOC at the time of the Decision was also a Council member.

(4) Members of the Council have been meeting closely and regularly for Council affairs.

(5) In the premises, there is actual conflict of interest for the SCOC in making the Decision relating to the complaints made against a senior Council member.  Alternatively, there is at least apparent bias since an objective and reasonable person in the position of the complainant such as the applicant would be of the view that there is a real risk of bias, in particular when it is not known what the composition of the relevant three-member IC is.

19. In particular, it is the applicant’s case that the following history of how the SCOC has been handling the Complaint supports her complaint of bias (actual or apparent):

(1) After the Complaint was first communicated to the Law Society in October 2011,[7] it had taken almost five months for the IC only to decide to withhold the investigations of the Complaint in light of the then ongoing investigation by the PRC authority and the Law Firm.  See the Law Society’s letter to the applicant dated 3 February 2012.

(2) The applicant then requested the Law Society to review that decision by an email dated 28 February 2012.

(3) On 26 April 2012, the Law Society informed the applicant that it would withhold the investigation given that the applicant had issued proceedings in the District Court claiming against the Law Firm for breach of the secondment contract as the Law Firm wrongly terminated that in March 2012.  The Law Society was of the view that “the Court should be a more appropriate forum to adjudicate on the matter”.

(4) In August 2012, the applicant wrote to the Chief Judge of the High Court asking the Chief Judge to exercise his power under section 9A(2) of the LPO to directly submit the Complaint to the Convenor.

(5) In October, the Law Society by a letter to the Chief Judge stating that it would resume its investigation of the Complaint, including the applicant’s aforesaid request for a review of the IC’s decision made on 28 February 2012.

(6) Then, on 11 December 2012, the Law Society informed the applicant that the SCOC, after considering the complaints afresh, resolved (apparently on 9 November 2012) that the matters complained of were not within the Law Society’s jurisdiction, and that the Law Society would not take any further action in the Complaint.

(7) Thereafter, the applicant wrote to the Chief Judge again stating the latest decision of the SCOC and once again asked the Chief Judge to exercise his power under section 9A(2) of the LPO.  See the applicant’s letters dated 17 December 2012 and 1 August 2013.

(8) The Chief Judge wrote a letter to the Law Society dated 30 August 2013.  Having referred to the SCOC’s decision as stated above, the Chief Judge pointed out that Misconduct 2 alleged that the Partner without proper qualification had been advising clients on the PRC law in Hong Kong.  The learned Chief Judge therefore asked the Law Society to elaborate on why Misconduct 2 was regarded as being “not within the scope of the jurisdiction of the Law Society and the complaint was unpursuable” as resolved by the SCOC.

(9) Then by a letter dated 13 September 2013, the Law Society wrote to the Chief Judge clarifying to him the SCOC’s resolution made on 9 November 2012 was for the entire Complaint covering the four misconduct allegations.  It then further stated that: for allegations relating to Misconduct 1, 3 and 4, they were unpursuable because they were not within the scope of the Law Society’s jurisdiction, while Misconduct 2 was unpursuable because the applicant had not provided evidence to support the allegation.

(10) The Chief Judge by a letter dated 11 October 2013 informed the applicant of the Law Society’s above latest letter.  The Chief Judge stated that generally speaking, he would only make a submission under section 9A(2) of the LPO if the Law Society had decided not to make a submission after considering the complaint on merits but the Chief Judge disagreed on that decision.  As the Law Society did not consider the Complaint on merits in the present case but decided not to make a submission based on other reasons, the Chief Judge did not think this was an appropriate case for him to consider exercising the statutory power.

(11) The applicant then in January 2014 took out the leave application to apply for judicial review to challenge the Decision.

20. After leave was granted to the applicant in July 2014, as I mentioned above, the Law Society decided to reconsider the Complaint afresh and has appointed an Investigation Counsel who has no previous involvement in this matter to carry out the investigation and make a report to the IC.

C.   THIS SECURITY FOR COSTS APPLICATION

21. It is not disputed that the court has a discretion to grant an order for security for costs in judicial review proceedings.  See: Order 53, rule 3(9) of the Rules of the High Court; R v Westminster City Council, ex p Residents Association of Mayfair [1991] COD 182 (QBD); also Order 23, rule 1(1) of the Rules of the High Court.

22. As in other private law cases, the court has a wide discretion whether to order security, and will act in the light of all the relevant circumstances.  It is a balancing exercise to assess the injustice that may be caused to the claimant if security for costs is granted (including factor such as whether the claim would be stifled by such an order as the claimant is unlikely to be able to meet it), and the injustice that may be caused to the respondent if the claimant fails eventually in the claim and the respondent cannot recover its costs from the claimant: Wing Hing Provision, Wine & Spirits Trading Co Ltd v Hanjin Shipping Co Ltd [1998] 4 HKC 461 at 463I – F, per Godfrey JA.  The fact that the claimant is resident outside jurisdiction is generally regarded as one of the matters tipping in favour of exercising the discretion as it may be difficult for the successful respondent to enforce any costs order.  But this is not an inflexible rule and this is but one of the factors that the court should take into account to decide whether it is just in all the circumstances to order security: Hong Kong White Book 2016, paragraph 23/3/4 (pp 533 - 534).

23. At the same time, in relation to judicial review proceedings which are public law litigations, the court must also have regard to public interest in the balancing exercise in deciding whether it is just in all the circumstances to order security.  This has been fairly and rightly accepted by Mr Karas, solicitor advocate for the Law Society.

24. In this application, Mr Karas submits (in his skeleton and at the hearing) that security for costs should be ordered in light of the following factors:

(1) The applicant is a resident out of jurisdiction with no evidence of any fixed assets or property in Hong Kong.  This would make enforcement of any costs order against her difficult.

(2) Given that the Law Society has already agreed and in fact proceeded to reconsider the Complaint afresh (see above), which is a principal relief sought in this judicial review, it is very likely that the applicant would not succeed in the judicial review (even if it proceeds to the end) as the court would not in the exercise of discretion grant any such relief.  The application has therefore been rendered academic.  This also makes it very likely that the Law Society would have a costs order made in its favour in the judicial review.

(3) The applicant has not provided adequate and credible evidence to show that her judicial review would be stifled if security is ordered.  In particular, she has not adduced any evidence on her own income and assets, let alone evidence on whether she could find support from other resources.  In the premises, there is no evidence to show that an order of security would stifle the application.

(4) There is also no or not much public interest involved in this judicial review, as this application is facts sensitive and involves only the circumstances of the present case.  It is (Mr Karas further submits) also doubtful as to what personal interest the applicant may have in the Complaint since the alleged misconducts of the Partner (even if established for the sake of argument) simply do not affect her in any material way.

25. With great respect to Mr Karas’ above submissions, I have come to the conclusion that in the circumstances of the present case, it is just not to order security for costs.  My reasons are as follows.

26. As stated at paragraphs 18 - 20 above, one of the fundamental grounds the applicant raises in the judicial review is that there is procedural unfairness in the process of the investigation of the Complaint relating to the Partner who is also a senior member of the Council.  The critical elements in this ground are that (a) there is an appreciable chance for all or some of the three-member IC appointed to investigate a complaint relating to a Council member to be comprised of also Council members; (b) Council members share a close and regular work relationship; and (c) the complainant is not to be informed as to whether the IC comprises of any Council member.  This, says the applicant, can be seen as an inherent defect of the procedure of at the least apparent bias whenever a complaint is made against a solicitor who is also a member of the Council.

27. At this stage, when the Law Society has yet to file any substantive evidence and make any full submissions in response to these matters, I am of the view that this ground is reasonably arguable (as demonstrated by the leave granted).  In this respect, it is pertinent to note that under section 9(2) of the LPO, a Council member is not eligible to be appointed to or remain on the Solicitors Disciplinary Tribunal Panel[8] (the panel from which members of a SDT would be selected: see sections 9B(1) and (1A)).  In other words, by statute, generally no Council member could be a member of a SDT.  This is apparently to avoid any conflict of interest as the Council may be represented before the SDT: section 9B(1A)(3).

28. Given these allegations on procedural unfairness which is inherent in the process, the mere fact that the Law Society has decided to reconsider the Complaint afresh does not by itself remove the defects.  As the Law Society’s own evidence filed in this security for costs application shows, the three-member IC is the authority to consider any report submitted by the Investigating Counsel and to consider and decide on the complaint.  Thus, if the applicant’s above complaints of apparent bias in relation to the IC composition can be established, this voluntary reconsideration of the Complaint would again be tainted by at least apparent bias.

29. Therefore, at this stage, the judicial review cannot be said to have been rendered academic by the Law Society’s recent decision to reconsider the Complaint.  It must be noted that, although one of the reliefs sought by the applicant is to require the Law Society to reconsider the Complaint, this relief would be granted by the court with reference to its determination on procedural unfairness.  In other words, if the court eventually upholds the applicant’s challenge based on the procedural bias ground, any reconsideration by the Law Society as directed by the court would have to be made through a process without that defect.

30. Given the important professional roles played by solicitors in the society and the trust that the public has generally placed on the profession, it must be of public interest for the Law Society to properly and fairly discharge its statutory regulatory and disciplinary function and its (in its own words) “frontline responsibility to ensure compliance by solicitors with the rules”.

31. For these reasons, I think it is at this stage still useful and also of public interest for the applicant to pursue this judicial review.

32. I accept (as emphasised by Mr Karas) that the applicant has not adduced any direct evidence of personal wealth and income to support any allegations that her judicial review would be stifled if an order for security is granted.  The applicant has only deposed in her affidavit that an order for security for costs “could make [her] unable to pursue the judicial review application further, and certainly make it harder for [her]…”.[9]

33. However, this should be viewed together with the fact that the applicant was granted legal aid after leave was granted to her.  She has thus satisfied the means test under the legal aid scheme.  This can be regarded as prima facie evidence that her income and personal disposal assets are therefore limited.[10]

34. As such, I am satisfied that it would be at least difficult for the applicant to meet the security for costs (in the amount as asked for or in any reduced but meaningful amount) if ordered.  An order for security for costs would result in hardship on the applicant to continue to pursue the judicial review.

35. In the premises, coupled with my conclusion that at this stage (a) it is still of public interest to have the judicial review pursued; and (b)the judicial review has not been rendered academic and the grounds of judicial review are reasonably arguable, notwithstanding the Law Society’s potential difficulty in enforcing a potential costs order against the applicant in the Mainland, I do not think it is fair and just to order security for costs against the applicant in all the circumstances of the present case.

D.   CONCLUSION

36. For all the above reasons, I would refuse the Law Society’s application for security for costs.

37. I further make an order nisi that the applicant’s costs of this application be in the cause.