THE COUNCIL OF THE LAW SOCIETY OF HONG KONG v. CHRISTOPHER PAUL ERVING previously practising as ERVING BRETTELL

HCMP 2402/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2402 OF 2014

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DECISION
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1. This was the adjourned hearing of an originating summons filed on 26 September 2014 by the Council of the Law Society of Hong Kong (the “Council”) for directions in relation to various matters arising out of the Council’s intervention (the “Intervention”) in the practice of Irving Brettell (the “Firm”). Christopher Paul Irving, the sole proprietor of the Firm at the date of the Intervention, is the defendant.

Background facts

2. Since the Intervention commenced in late April 2012, the Council has carried out investigations.  The relief it now seeks relate to:

(1) Directions as to the distribution of money held in the office and client accounts of the Firm, including verification of claims against the Firm and the giving of relevant notices to potential claimants.

(2) Directions as to the disposal of the Firm’s old files and accounting documents.

3. The Council has identified three claimants but the funds in the client and office accounts stand at approximately $194,000 and are clearly insufficient to meet those claims.  By far the most significant of the claims is one due to a Mr Neill of approximately $1.58 million.  The other two claims are for small sums amounting to no more than $10,000 in total.

4. The matter first came before Chow J on 15 October 2014.  As the defendant opposed the application, directions were given for the filing of evidence. 

5. In its letter to the Council’s solicitors dated 26 January 2014, the defendant’s solicitors stated that “the only live issue now between the parties is the validity of the intervention” and would not agree to the inclusion of various affidavits (including affidavits filed since the date of the first hearing) in the hearing bundle.  This caused the Council to take out an ex parte summons for leave to admit such evidence which I granted at the hearing.

6. In his written submissions, Mr Blanchflower SC who appeared for the defendant set out his client’s position as follows:

“If the Court finds that the Council is authorised to exercise the powers of Schedule 2, then [the defendant] proposes that the three Claimants be paid as follows:

Upon [the defendant’s] payment of the amount due to Mr Neill less the balance of funds and now held in both office and client’s account, each claimant should be repaid in full.”

That would suggest that in the event of the court finding in the defendant’s favour, the defendant would not be making any payment out of his own funds.  The written submissions were directed at impugning the validity of the Intervention.

7. At the conclusion of the hearing, Mr Blanchflower clarified that the defendant would make a payment to Mr Neill in any event, ie whether or not his argument succeeds.  If that is the case, it would appear that the whole exercise was largely academic and a waste of time and resources.

8. Mr Hudson who appeared for the Council explained that there is a practical difference because the amount the defendant proposes to pay is an amount that is netted off against the current assets rather than replacing the amount that had been misappropriated from the client account which the defendant is required to do under Rule 9A of the Solicitors’ Accounts Rules.  That difference appears to be of the order of $184,000.  Further, the defendant has given no particulars or specifics of when such payment would be forthcoming. It remains to be seen if the defendant’s stated stance would be made good.

9. What is now clear is that the defendant neither disputes nor challenges the Council’s conclusions following the completion of its investigations.  Monies have been misappropriated from client accounts and sums are due and owing to the three claimants who were clients of the Firm.  In other words, the Intervention was entirely justified. 

10. As regards the relief sought in the originating summons, having read the evidence that has been filed, I was satisfied that the directions sought are justified and reasonable and, accordingly, an order in terms was made at the conclusion of the hearing.

11. I now turn to consider the merits of the defendant’s challenge to the validity of the Intervention, a matter that I reserved for decision. As earlier noted, the challenge has little practical consequences. The defendant’s objective could only be to embarrass the Council if he succeeds in showing the Council to be wrong in law and to cause the Council considerable inconvenience. Mr Blanchflower has made it clear that the defendant would require the Council to ‘rectify’ its error.

Validity of the Intervention

12. On 24 April 2012, pursuant to section 26A(1)(c) of the Legal Practitioners Ordinance, Cap 159 (the “Ordinance”) the Council resolved to intervene in the practice of the Firm the Council being satisfied that the defendant had failed to comply with the rules made by virtue of section 73(1) of the Ordinance, in particular, Rules 7, 7A, 9A, 10(1), 10A and 11 of the Solicitors’ Accounts Rules.  The Council further resolved that, inter alia, client accounts and any positive balance of the office accounts of the Firm be vested in the Council, that designated persons be appointed joint signatories to the client and office accounts and that all documents in the possession of the defendant or the Firm in connection with his practice be delivered to the plaintiff’s solicitors.

13. By letter dated 25 April 2012 (“the letter”), the then Secretary General of the Council wrote to the defendant.  In pertinent part, the letter read:

“On 24 April 2012, the Council … resolved that, pursuant to Section 26A (1) (c) of the [Ordinance], the powers conferred by Schedule 2 to the Ordinance be exercised to intervene in the practice of [the Firm].

A certified copy of the said resolution is annexed to this letter.

You are hereby notified that

(i) under section 2 (3) of Schedule 2 to the Ordinance (and this letter is such noticed) you are prohibited from making payment of any sums of money held by you, or on your behalf, or on behalf of your firm in connection with your practice or with any trust of which you are all formerly worked a trustee; and

…”

14. Enclosed with the letter was a document bearing the description “CERTIFICATE BY SECRETARY GENERAL OF THE LAW SOCIETY OF HONG KONG” and signed by the Secretary General (“the document”).  The document under the hand of the Secretary General certified that a meeting of the Council took place on 24 April 2012, that the Council was satisfied that the defendant had failed to comply with rules made by virtue of section 73(1)(b) of the Ordinance (identifying the Rules that had not been complied with) and set out the 10 resolutions passed at that meeting.

15. The powers that are exercisable on intervention are contained in Schedule 2 of the Ordinance.  Section 26A, in pertinent part, provides:

“ (1) Subject to subsection (2), the powers conferred by Schedule 2 shall be exercisable where-

…

(c) the Council is satisfied that a solicitor or foreign lawyer has failed to comply with the rules made by virtue of section 73(1)(b) … ;

...

(2) The powers conferred by Schedule 2 shall only be exercisable under subsection (1)(c)…if the Council has given the solicitor notice in writing that the Council is satisfied that he has failed to comply with rules specified in the notice and also (at the same time or in any later time) notice that the powers conferred by Schedule 2 are accordingly exercisable in his case.

…”

16. There is no dispute and it is common ground that the letter of 25 April 2012 with enclosure complied with the requirements of section 26A.  That compliance rendered the commencement of this Intervention valid and the Schedule 2 powers exercisable.

17. The next relevant provisions are to be found in paragraph 2 of Schedule 2:

“(1) … if the Council passes a resolution to the effect that any sums of money to which this section applies, and the right to recover or receive them, shall vest in the Council, all such sums shall vest accordingly … and shall be held by the Council on trust to exercise in relation to them the powers conferred by this Schedule and subject thereto upon trust for the persons beneficially entitled to them.

(2) This section applies-

(a) where the powers conferred by this section are exercisable by virtue of section 26A of this Ordinance, to all sums of money held by or on behalf of the solicitor or his firm …

…

(3) … the Council shall serve on the solicitor or his firm … and on any other person having possession of sums of money to which this section applies a certified copy of the Council’s resolution and a notice prohibiting the payment out of any such sum.

(4)  Within 8 days after service of a notice under subsection (3), the person on whom it was served, on giving not less than 48 hours’ notice in writing to the Council and (if the notice under subsection (3) gives the name of the solicitor instructed by the Council) to that solicitor, may apply to the Court of First Instance for an order directing the Council to withdraw the notice.”

18. Mr Blanchflower submitted that the powers conferred by section 2 of Schedule 2 are conditional on compliance with the two requirements set out in section 2(3).  That required service of a certified copy of the Council’s resolution on the defendant and service of a notice prohibiting the payment out of monies (the “prohibition notice”). It was submitted that absent such service, the intervention powers could not be exercised. 

19. The first matter to note is that the Ordinance including Schedule 2 does not provide any mechanism for a party to challenge the validity of an intervention.  While judicial review proceedings are not excluded, that is another matter.  Non‑compliance with section 2(3) could not result in an intervention being held to be invalid.  Nothing in Schedule 2 provides for that result. Section 2(3) does not state the consequences of non-compliance.

20. Mr Blanchflower submitted that the document is not and cannot constitute a “certified copy of the Council’s resolution”.  It was said that a “certified copy” was never served on the defendant.  He cited examples of definitions of “certified copy” to be found in other ordinances such as section 775 of the Companies Ordinance (Cap 662) and section 22(2)(a) of the Births and Deaths Registration Ordinance  (Cap 174).  His submission was premised on there being a resolution in writing or alternatively, that a resolution must be in writing.

21. Mr Hudson explained that in fact there is no physical resolution of the Council.  The passing of a resolution by the Council on any particular matter is done orally.  The Secretary General present at the meeting would record the resolution.

22. In my view, a resolution is nothing more than a decision made or taken by the relevant person/entity in relation to the particular matter before it.  No authority has been cited to the effect that a resolution must be in writing.  The document issued by the Secretary General certified that the meeting of the Council took place on the date specified and that the resolutions set out therein were passed.  As such, it constitutes a copy of the resolutions passed by the Council. Further, such copy has been certified by the Secretary General.

23. While in other contexts, for example where the subject matter exists in written form (such as official documents recording birth, death, marriage or nationality), a “certified copy” may bear a different meaning or connotation, there is nothing in the Ordinance that requires the resolution to be in writing. In the circumstances, I am satisfied that the Council has complied with the requirements of section 2(3). 

24. Even if (contrary to my view) the document does not constitute a certified copy of the resolution, it would not follow that the Intervention would be rendered invalid.  In fact, as earlier noted, once the requirements of section 26A(1) and (2) have been complied with, the Schedule 2 powers are engaged and become exercisable.  Plainly, the Intervention was valid.

25. It is evident from the terms of the letter that the defendant was given notice of the prohibition in relation to the payment out of monies held by the defendant or his firm in connection with his practice.  It is also apparent from the face of the document that the Council had passed the resolutions stated therein.

26. If there had been any non‑compliance with the twin requirements of section 2(3), the only recourse available to the defendant would be under section 2(4) which enables the solicitor to make an application to the court within 8 days of the service of the notice for an order that the Council withdraw the notice.  It should be noted that “withdrawal” of the notice does not translate into “invalidity of the Intervention”. 

27. The defendant has not made such an application.  His challenge comes more than two years and nine months later and is out of time.  In that connection, I do not consider that the defendant has any prospect of obtaining a time extension.  I agree with the views expressed in Miller v Law Society [2002] 4 All ER 312 at §36:

“The scheme ensures that the intervention process is swift, and that any admissible challenge by the solicitor is undertaken pursuant to a very rapid timescale. There is no express or implied power to extend the time for application to the court.”

28. As the Ordinance followed the English provisions, the scheme applicable in Hong Kong is the same as the English scheme. 

Conclusion

29. For the reasons stated, the defendant’s challenge is wholly misconceived and devoid of merit.  It falls to be rejected with costs in favour of the Council.