A SOLICITOR v. THE LAW SOCIETY OF HONG KONG

cacv 246/2004

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 246 of 2004

(on appeal from the findings and order of the solicitors
disciplinary tribunal dated 26 july 2004)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  This was an appeal under section 13 of the Legal Practitioners Ordinance, Cap. 159 (“the Ordinance”) from a decision of the Solicitors Disciplinary Tribunal dated 26 July 2004.  The solicitor had been found guilty of breaching section 8AA of the Ordinance in failing to produce or deliver to inspectors appointed by the Council of the Law Society various documents in his firm’s possession.  The Tribunal ordered that the solicitor should be censured and fined $100,000.  The Tribunal also ordered that the solicitor should be suspended from practising as a solicitor if he failed to comply with the notice under section 8AA within 28 days of the order such suspension to continue for a period of four months or until the notice had been complied with.  At the conclusion of the hearing of this appeal, this court dismissed the appeal with reasons to be handed down in writing.

Background

2.  The matter before the Tribunal arose out of a complaint forwarded by another firm of solicitors in Hong Kong on behalf of Mr Li Ruigen, a lawyer in the firm of Pan Asia Law Offices of Shanghai.  The complaint was that the solicitor had not paid Mr Li his professional fees, when the solicitor had received them on Mr Li’s behalf from the lay client.  It seems that the lay client was a Hong Kong company which was a subsidiary of a Macanese company.

3.  The complaint was forwarded to the solicitor.  After sometime the solicitor responded on the basis that the arrangement which Mr Li sought to enforce was an illegal arrangement under the laws of the Mainland.  The solicitor refused to disclose any further information or materials to the Law Society on a number of grounds; in particular he relied upon the legal professional privilege of the client and also on the footing that there was a possibility of legal proceedings being launched on behalf of Mr Li and that the Law Society would be taking sides in that legal dispute.

4.  The Law Society’s position was made clear in succinct terms.  The Law Society maintained that they were entitled to be given copies of the relevant payment vouchers, receipts and bills as well as the account ledger and also information which was relevant to the complaint which had been made.  The Law Society indicated that should any legal proceedings be instituted which were closely related to the complaint, it would withhold investigation pending the conclusion of the relevant proceedings. 

5.  In the event nothing was disclosed by the solicitor and the Conduct Section of the Law Society made a report to the Investigation Committee on 4 October 2002.  That report concluded with a recommendation, which was endorsed by the Investigation Committee, that authorisation should be sought from the Council to inspect all documents and papers together with the relevant account records in the solicitor’s Firm’s (“the Firm’s”) files in connection with their file (reference number) and the Shanghai High Court (case number) and the Shanghai First Intermediate Court (case number) (the relevant numbers were set out.)  There were Minutes of the Council Meeting of the Law Society dated 18 October 2002 in which it is recorded:

“…it was AGREED that the duly appointed inspectors LUI NGAI DAN, LUI KAM FAI and SHUM TIN NGAI be directed pursuant to Section 8AA (2)(b)(i)-(ii) and (3) of the Legal Practitioners Ordinance to require the production and delivery by the solicitor’s firm (‘the Firm’), at a time and place to be specified by the said inspectors, of the following:
(a)	all file reference books (or similar records recording the files reference numbers, nature of matters, etc.) relating to all files opened by the Firm between the period of 1st January 1997 and 31st December 1997 and 1st January 2002 and 30th June 2001;
(b)	all documents and papers in the Firm’s file(s) in connection with reference number 970901;
(c)	all documents and papers in the Firm’s file(s) in connection with Shanghai High Court Case No. 23 of 1997 and Shanghai First Intermediate Court Case No. 257 of 2000; and
(d)	all the Firm’s accounting records relating to the file(s) mentioned in (b) and (c) above.”

6.  Despite adequate time to comply with the notice which was duly served on the solicitor, the solicitor failed to comply with that request.

7.  The position of the lay client was expressed in a letter to the Law Society dated 3 January 2003.  In that letter the solicitors acting on behalf of the lay client informed the Law Society that they had requested the Firm to tell them what information was required and the reasons for the service of the notice on the Firm.  It was made clear that the Firm had never informed those solicitors or their lay client of those matters and as a result the client had no knowledge of what documents had been requested.  It was made clear that the lay client might well have been prepared to waive any solicitor-client privilege if it knew what was involved.  The letter concluded with the statement:

“However, it is quite disingenuous of the Firm to suggest it has been trying to persuade our clients to permit the release of documents to the Law Society for review.  Indeed, on the contrary, the Firm has made every attempt to obfuscate and delay that it can.”

8.  Very shortly before the hearing before the Tribunal, the solicitor produced what was referred to as a legal opinion.  Quite apart from the Law Society’s objections that it was not in a position either to test the accuracy of the opinion or the competency of the person giving the opinion, the effect of the opinion is that it would be an offence for a solicitor to disclose either national secrets or business secrets or personal private matters of a client “on his own accord”.  The Tribunal had dismissed the relevancy of that opinion on the basis that if the solicitor complied with the request of the Law Society he would not be doing so voluntarily.  As a result of the matters outlined above the Tribunal had no difficulty in finding the solicitor guilty as charged.

This appeal

9.  Mr Mumford SC, who appeared on behalf of the solicitor on this appeal, took a number of points many of which can be dealt with very shortly.  It was said, for example, that there had never been an appointment of inspectors.  That simply does not bear examination when the Minutes of the Council Meeting are considered.  It was then said that the appointment of three inspectors was not valid because section 8AA of the Ordinance only provided for the appointment of one investigator.  It seems to me quite clear that the fact that section 8AA of the Ordinance refers to an inspector cannot prevent the appointment of more than one inspector on any one case.  Indeed, it is highly desirable that if there is to be an inspection that there should be more than one person conducting that inspection as that would be a safeguard for the solicitor involved.

10.  Mr Mumford then sought to revive a point which had been abandoned in the course of argument before the Tribunal, as to the scope of paragraph (a) of the Notice.  The paragraph clearly relates to reference index files and not to all the files of the solicitors.  When the notice is properly understood, by a competent solicitor, there is no difficulty understanding what that means.  Neither is there any merit in the point that the Law Society was assisting an opponent in litigation.  In the first place the Law Society had made clear that if there was any possibility of litigation being pursued then the investigation would be suspended during the currency thereof.  In the second place there is a safeguard in relation to legal professional privilege which will be referred to below.

Legal Professional Privilege

11.  Mr Mumford raised the point that the provisions of the Ordinance relating to inspection breached the rules as to legal professional privilege which were preserved, inter alia, via Article 35 of the Basic Law.  Article 35 provides that:

“Hong Kong residents shall have the right to confidential legal advice, access to the courts, …” 

12.  The provisions of the Ordinance in so far as they relate to inspection are contained in the following sections:

“8AA  Appointment and powers of inspector
(1)	The Council may appoint a person as an inspector to assist the Council-
	(a)	in verifying compliance by a solicitor, a foreign lawyer, a trainee solicitor or an employee of a solicitor or foreign lawyer with the provisions of this Ordinance or any practice direction issued by the Society;
	(b)	in determining for the purpose of section 9A whether the conduct of any solicitor, foreign lawyer, trainee solicitor or employee of a solicitor or foreign lawyer should be inquired into or investigated; or
	(c)	in relation to an inquiry or investigation under section 9B.
(2)	For the purposes of subsection (1), an inspector may-
	(a)	in relation to any person who acts or purports to act as an employee of a solicitor in the premises of any court or place of lawful detention-
		(i)	question there and then the person as to his name, identity card number, the identity of any client for whom he acts or purports to act on that occasion and the name of the firm of which he acts or purports to act as the employee; and
		(ii)	require the person to produce for inspection there and then all documents in his possession that the inspector reasonably suspects to be relevant to any matter referred to in subsection (1)(a), (b) or (c) and copy or seize any of the documents; and
	(b)	(i)	subject to subsection (3), require a solicitor, a foreign lawyer or an employee of a solicitor or foreign lawyer to produce or deliver to him for inspection, at a time and place specified by him, all documents in the possession of the solicitor, foreign lawyer or employee of a solicitor or foreign lawyer that the inspector reasonably suspects to be relevant to any matter referred to in subsection (1)(a), (b) or (c) and specifies particularly or generally; and
		(ii)	copy or seize any of the documents produced or delivered under subparagraph (i).
(3)	An inspector shall not exercise his power under subsection (2)(b)(i) except under a direction of the Council to do so.
8AAA  Additional powers of an inspector
(1)	In this section ‘inspector’ (調查員) means an inspector appointed under section 8AA.
(2)	The Council may direct an inspector to assist it in gathering evidence in respect of a matter the Council is considering for the purpose of deciding whether or not it should be submitted to the Tribunal Convenor of the Solicitors Disciplinary Tribunal Panel.
(3)	For the purposes of this section, an inspector may question-
	(a)	persons who are, or were at the material time, members or employees of any law firm; or
	(b)	where authorized by the Council, any other persons whom the inspector considers may be able to assist the Council.
8B  Document production and privilege
(1)	For the purpose of enforcing the production of documents required by the Council under section 8A, section 11 applies and references in section 11 to the Solicitors Disciplinary Tribunal and to the Chairman of the Solicitors Disciplinary Tribunal shall be deemed to be references respectively to the Council and to the President of the Society.
(2)	Documents required by the Council under section 8A or by an inspector under section 8AA shall be produced or delivered notwithstanding any claim of solicitor-client privilege but documents that are subject to a solicitor-client privilege may only be used for the purposes of an inquiry or investigation under this Ordinance.”

13.  It was said that legal professional privilege, being one of the fundamental human rights, could not be whittled down by legislation. 

14.  So that there should be no doubt on the matter, it can be stated that it is unquestionable that legal professional privilege is absolute and is based not merely upon the general right to privacy but also the right of access to justice as was referred to them by Lord Hoffmann in R (Morgan Grenfell Ltd) v Special Commissioners of Income Tax and another [2000] 2 WLR 1299.  Furthermore, in his speech in that case Lord Hoffmann drew attention to the judgments of the Supreme Court of New Zealand in Commissioner of Inland Revenue v West-Walker [1954] NZLR 191.  Those judgments are indeed illuminating.  They illustrate the importance of legal professional privilege and, to a certain extent, the history of the privilege.  As was said by Fair J at page 208 line 9:

“In respect of matters other than crime or fraud, the common-law principle is not recognised for the personal protection of the client, but on the broad ground that it is to the public advantage that it should exist.  It is to encourage the public to seek independent professional assistance unimpeded by fear of disclosure.” 

Nothing that is said in this judgment should be read otherwise than emphasising the importance of the existence of legal professional privilege.

15.  The question which arises in this case is whether section 8B contravenes the Basic Law.  In my view it does not.  The Law Society is not entitled to use any document disclosed by the solicitor or otherwise obtained by the investigators for any purpose other than in respect of an inquiry or investigation.  In every other respect, the confidentiality of the client is clearly maintained.  In those circumstances the right to legal professional privilege is not breached, or, if such use is considered to be a breach, it is a technical breach which was authorised not only by the section in the Ordinance for a legitimate purpose, but the section sanctions the infringement of the privilege in a proportionate manner.  In so saying I adopt with respect what was said by Lord Hoffmann at paragraph 32 of the R (Morgan Grenfell) case.

16.  Legal professional privilege has always been subject to the principle that it is subject to the public policy that the privilege will not extend to transactions in furtherance of crime or fraud.  Likewise here, there must be a public interest in the proper regulation of the solicitors under the auspices of the Law Society.  If legal professional privilege could be prayed in aid to prevent investigations other than those sanctioned by lay clients, the investigation by the Law Society of complaints against solicitors would be hamstrung.  Therefore, the insertion into the Ordinance of a provision which allows investigations is clearly in the public interest provided that there are adequate safeguards which makes the relaxation of the fundamental rule proportional.  In my view the safeguard that the documents obtained on an investigation can only be used for the purposes of the investigation and an inquiry are in my view a sufficient safeguard.

17.  Mr Mumford took other points in relation to the finding of guilt.  In my view those points had no merit whatever.  He said that the charge of not complying with the notice was not an absolute offence but required mens rea.  He was clearly correct in that but there was also clearly sufficient deliberate intent on the part of the solicitor not to comply with the notice.  The fact that the solicitor might have been badly advised as to the law or might have otherwise misunderstood the law does not absolve him from complying with the notice nor prevent him from being found guilty of not doing so.  Likewise the protestations that he did not understand paragraph (a) cannot, even if true, prevent him from being guilty of not complying with the notice which he should have understood.

Hon Le Pichon JA:

18.  I agree.

Hon Sakhrani J:

19.  I also agree.