NG WING HUNG v. THE COUNCIL OF THE LAW SOCIETY OF HONG KONG

HCAL 70/2021

[2021] HKCFI 379

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 70 OF 2021

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J U D G M E N T

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A. Introduction

1.  This is my Judgment following the hearing of the Applicant’s Notice of Application for Leave to Apply for Judicial Review (“Form 86”) dated 20 January 2021.

2.  These proceedings were commenced by the Applicant, who was the managing partner and sole equity partner of a firm of solicitors, Wong Fung & Co (“the Firm”).  The proceedings seek to challenge four decisions made by the putative respondent, the Council of the Law Society of Hong Kong (“Council” and “Law Society”), primarily flowing from the decision made on 23 December 2020 to intervene in the practice of the Firm (“Intervention Decision”), and the three subsequent decisions not to accede to the Applicant’s or the Firm’s request to deal with the concerns that the Council has expressed in some other way, perhaps some other less apparently Draconian way.

3.  The application for leave is supported by the two affirmations of the Applicant dated 20 January 2021.  For the purposes of the leave application, the Council has filed the affirmation of Ms Chu Kit Peng Heidi (“Ms Chu”), the Secretary General of the Law Society.

4.  I set the leave hearing date when, on 27 January 2021, I refused the Applicant’s application for ‘interim interim’ relief.  At the leave hearing, the Applicant did not press for any order for interim relief.  Therefore, leave is the single issue for determination.

5.  The main contest relating to the grant or refusal of leave to apply for judicial review was set up at that previous hearing, when Mr Abraham Chan SC, Counsel for the Council, trailed the argument that the statutory procedure under sections 2(4) and 7(8) of Schedule 2 to the Legal Practitioners Ordinance Cap 159 (“LPO”) constitutes an exclusive statutory regime setting the grounds and parameters of judicial oversight over regulatory interventions by the Council of the Law Society.  But there are also a number of other points which may fall for consideration.

6.  At the hearing, the Applicant was again represented by Mr Patrick Chong, together with Mr Terrence Tai of Counsel.  The Council was again represented by Mr Abraham Chan SC, leading this time both Mr Justin Ho and Ms Karen Tsang of Counsel.

7.  In my Decision refusing the ‘interim interim’ relief, I noted the interest of clients of the Firm and a letter handed up to me, signed by a significant number of clients who described themselves as being among the over 900 clients who have been devastated by the Law Society’s intervention in the Firm on 24 December 2020.  Those clients expressed concerns and frustrations, described their world as having been turned upside down, complained about what they see as an excessive use of power by the Law Society, a lack of transparency and a conflict of interest and, in particular, stated their concerns about the delay that the intervention is causing to their ordinary activity of buying and selling properties.

8.  At the leave hearing, I was given a further letter addressed to me (as well as a copy of a letter addressed to the Law Society) in which a group of 120 concerned clients of the Firm further expressed their views, which they asked me to take into account.  I also permitted Ms Jennifer Li, as a spokesperson for clients of the Firm, briefly to address me at the hearing – but I did so on the basis that, as there was no formal application to intervene or join in these proceedings, it might be that I could not specifically take her points into account.  Speaking eloquently and succinctly, Ms Li reiterated some of the points expressed in writing, and emphasised the interruption to their lives and the frustration that clients of the Firm felt from what they saw as a lack of any sense of urgency and real engagement with them from the Law Society or the solicitors acting as the intervening agents.

B.  Facts in Brief

9.  For the purposes of considering leave, only a relatively brief recitation of the underlying facts is required.

10.  The Applicant became the sole equity and managing partner of the Firm in 2017.  The Applicant says he inherited the accounting system then in place within the Firm.  There is one salaried partner of the Firm, Mr Yuen Kwong Keung (“Mr Yuen”).  The Firm is one of the biggest conveyancing firms in Hong Kong, being apparently only one of three firms handling conveyancing transactions with a total value in excess of HK$10 billion in 2019.  The Firm had four offices across Hong Kong.

11.  The Law Society has been investigating the accounts and affairs of the Firm since June 2020. The investigation was triggered by a series of anonymous complaints by an informer, the complaints being about a cover-up by the Firm’s partners of an alleged theft of client’s money committed by the Firm’s former clerk surnamed Wong (“Mr Wong”) in a conveyancing transaction and other alleged fraudulent activities, alleged sharing of profits between the Firm and the clerks, and disarray of the Firm’s books and accounts, leading to shortfall of and misuse of client’s monies.

12.  Originally, Monitoring Accountants (“MAs”) conducted visits to inspect the Firm’s books and accounts.  Subsequently, on 29 September 2020, the Council resolved to appoint Inspectors and to require the Applicant to produce for inspection various documents and information.  The Inspectors were appointed pursuant to section 8AA(1)(a) of the LPO.

13.  On the basis of materials provided by the Firm to the Law Society, including accounting documents provided to the MAs and the correspondence between the Firm and the Law Society, the Law Society says it has identified numerous breaches of the Solicitors Accounts Rules (“SAR”) by the Firm.

14.  By way of a few examples only, review of the Firm’s accounting documents provided for the period from 1 January 2019 to 12 June 2020 are said to identify:

  (1)   2,264 suspicious transfers of clients’ monies, ranging from sums of HK$0.03 to HK$9,350,760 recorded in clients’ cash books from numerous client files to files bearing different client names or different subject matters in the client reference book;

  (2)   files involving significant and frequent cash deposits, mostly broken up into fragmented small sums, into single/various client accounts over a short period of time;

  (3)   a shortfall of client’s money in the sum of HK$23,087,319.85 (“Shortfall”); and

  (4)   systemic failures properly to maintain books and accounts and to comply with the SAR and the Solicitors’ Practice Rules (“SPR”).

15.  The correspondence between the Firm and the Law Society continued into November and December 2020. On 24 November 2020, the Applicant and Mr Yuen were notified that the Council had resolved to request the Firm to make up the Shortfall by depositing the same amount into the Firm’s client account by no later than 5pm on 30 November 2020, and to provide the Law Society with documentary evidence, as well as to provide the outstanding documents and information listed in an attached schedule. Essentially, the schedule sought information relating to the 2,264 suspicious accounting items.  Also on 24 November 2020, the Council resolved to reject the Firm’s Accountant’s Report for 2019, and to request the Firm to deliver a fresh 2019 Accountant’s Report.

16.  The Applicant has sought to explain that the Shortfall does not actually exist, but is a perceived shortfall caused by defects in the Firm’s computer systems and erroneous accounting entries made by the accounting clerks of the Firm.  Nevertheless, at the request of the Law Society, the Firm’s partners have deposited the Shortfall amount into a fixed deposit account.  They have stated that they have done so from their own resources, but when pressed have identified that at least HK$20 million was borrowed by the Applicant and Mr Yuen from two finance companies at high rates of interest.

17.  On 14 December 2020, the Law Society enquired with the Firm regarding the action brought by the Applicant against Mr Wong in HCA 2070/2019.  On 18 December 2020, the Applicant informed the Law Society that Mr Wong had collected the sum of HK$6,108,800 (“Sum”), being the balance of the purchase price, from the Firm’s client.  The Applicant explained that the Sum had been replaced from the Firm’s own resources.  

18.  Neither the Firm, nor either partner of the Firm, nor the particular client had reported the matter to the Police or to the Law Society, notwithstanding that it was a criminal offence involving dishonesty.  The litigation taken against Mr Wong involved a convoluted way of the Applicant suing in his personal name, rather than the Firm’s name.  The failure to report the matter, and the way of litigation, both appeared designed to avoid attracting investigations into the operation of the Firm, such as might lead to uncovering other matters.

19.  On 18 December 2020, the Law Society informed the Applicant that it was not in a position to issue a 2021 practising certificate to him unless the Council was satisfied that the Firm’s 2019 Accountant’s Report was in compliance with the reporting rules.  As a 2021 practising certificate may not be issued, the Law Society suggested the Applicant to commence proper arrangements to prepare for the closure of the Firm’s practice on or before 1 January 2021, such as informing vendors, purchasers, mortgagees, banks, stakeholders, trustees, law firms and/or clients on whose behalves client funds were held or to be handled after 1 January 2021.

20.  By letter dated 21 December 2020, the Applicant did not mention whether he had made any proper arrangements to prepare for the closure of the Firm’s practice.  Instead, the Applicant proposed that: (a) he would step down as managing partner and Mr Yuen would take on that role; (b) two former consultants of the Firm would become assistant solicitors stationed at the Kowloon (Prince Edward) and Yuen Long offices respectively; (c) a former assistant solicitor would be stationed at the Tsuen Wan office; and (d) the Firm would recruit at least one additional assistant solicitor or partner to join the Firm.  The Applicant suggested that if his proposals could not be completed before 30 June 2021, the Firm would close the Kowloon office, and if the recruitment was not successful before 31 December 2020, the Firm would close the Tsuen Wan office.

21.  At meetings on 22 and 23 December 2020, the Council reviewed the overall operation of the Firm, and the various concerns identified.  Ms Chu says the Counsel also carefully considered the particular situation of the Firm including its scale of operation and the potential impact an intervention into its practice could have on the clients of the Firm and the property market as a whole.  In the overall circumstances, on 23 December 2020, the Council resolved (“Intervention Decision”) to exercise its powers to intervene in the practice of the Firm (“Intervention”), pursuant to sections 26A(1)(a)(ii) and 26A(1)(c) of the LPO.

22.  On 24 December 2020, the Council issued a letter to the Applicant notifying him of the Intervention Decision, and the exercise of the powers conferred by Schedule 2 to the LPO.  Express reference was made in the letter that (1) pursuant to section 2(3) of Schedule 2, the Applicant was prohibited from making payment of any sums of money held by him, or on his or the Firm’s behalf, in connection with his practice or with any trust of which he was a trustee, and (2) pursuant to section 7(1) of Schedule 2, he was required to produce to the Council’s appointed intervention agent all documents in his or the Firm’s possession in connection with his practice or any controlled trust.

23.  The 24 December 2020 letter, notifying the Applicant of the Intervention Decision, specifically drew the Applicant’s attention to sections 2(4) and 7(8) of Schedule 2 to the LPO, permitting him to make application to the Court within an 8-day period (see below).  The Applicant made no such application to the Court within that period.

24.  A firm of solicitors was appointed as the Intervention Agent, and five assisting law firms were also appointed for the actual operation of the Firm.  The reports provided to the Law Society by the Intervention Agent and the assisting firms have reinforced the Council’s view that its decision to intervene was the correct decision.  Ms Chu says that if the Council were to reconsider its decision to intervene afresh, it would still arrive at the same decision.

25.  Ms Chu also says that since service of the Intervention Decision on the Applicant, he has provided only limited or minimal assistance to the Intervention Agent in identifying and prioritising urgent clients’ files to facilitate the Intervention Agent to return these files to clients.  Further, the task facing the Intervention Agent has been rendered particularly difficult because the Firm did not have a systematic method for keeping files and documents, resulting in deeds and other title documents for conveyancing transactions often being separated from the associated correspondence files.

26.  The Intervention is the largest intervention ever undertaken by the Law Society.  Substantial time and resources have been committed to the Intervention, making it now extremely difficult and inefficient to reverse it.  Ms Chu has summarised in her affirmation the steps taken and progress made by the Intervention Agent.  One of the steps required is to permit all clients to lodge claims to the Intervention Agent.  Notice has been published that all such claims should be made by 31 May 2021.

27.  By letter dated 28 December 2020, the Applicant wrote to the Law Society stating that the decision to intervene and the freezing of the Firm’s client accounts has caused and will cause irreparable harm to the Firm’s clients.  He requested the Law Society to consider allowing him to operate the Firm’s client and office account under the strict supervision of the Law Society.  The Law Society did not respond to the Applicant’s request, and the decision of the Council to reject or ignore the letter is said to comprise the second decision (“2^nd Decision”) for which the Applicant seeks leave to apply for judicial review.

28.  By letter dated 12 January 2020, the Applicant wrote to the Law Society setting out his proposal that a different solicitor, Mr Simon Lee Po Wing (“Mr Lee”) of Messrs Paul Kwong & Co, step in to take over the Firm with a view to complete the pending transactions of the Firm’s existing clients and close down the practice of the Firm with all payments to be vetted by an independent certified public accountant.  The Law Society did not respond to that letter, and the decision of the Council to reject or ignore the letter is said to comprise the third decision (“3^rd Decision”) for which the Applicant seeks leave to apply for judicial review.

29.  By letter dated 15 January 2021, the Applicant made another similar proposal and suggested, amongst other things, that the Council should exercise its powers under Schedule 2 of the LPO to enable Mr Lee to complete the pending transactions of the Firm’s existing clients and to close down the practice of the Firm.  The Law Society again did not respond to that letter, and the decision of the Council to reject or ignore the letter is said to comprise the fourth decision (“4^th Decision”) for which the Applicant seeks leave to apply for judicial review.

C.  Grounds for Intended Review

30.  The Form 86 sets out the following intended grounds of judicial review:

  (1)     Ground 1: Abuse of Discretion.  This Ground has been divided into two sub-grounds, being:

  (a)     failure to take into account relevant factors, and taking into account irrelevant factors – in particular failing to consider (i) the hardship that the clients of the Firm will face as a result of the Intervention, (ii) the length of time needed for clients to recover their funds, (iii) the circumstances of the case did not justify the view that clients’ monies are in jeopardy, (iv) possible alternatives to intervention, and (v) there was no risk of dissipation, no risk of destroying documents and no risk of absconding; and

   (b)     fettering of discretion – in that the Council fettered its discretion when deciding to intervene and in rejecting all other options raised by the Applicant which were proposed by him to help the Firm’s clients to complete their pending conveyancing transactions.

   (2)     Ground 2: Irrationality (in the public law sense) and Wednesbury Unreasonableness. Broadly, it is said that the Intervention Decision simply fails to “add up – in which, in other words, there is an error of reasoning which robs the decision of logic”, that the Intervention was irrational against the particular and historic concerns, when the dishonesty of Mr Wong could not affect current clients, and the breaches of the SAR could not affect current clients since there is either no actual Shortfall or the same amount has been deposited to address concerns regarding the Shortfall.

(3)     Ground 3: Breach of Substantive Legitimate Expectation.  This Ground is based on the suggestion that the Law Society’s letters gave rise to a substantive legitimate expectation on the part of the Applicant that he would be allowed by the Council to continue to practice and to manage the Firm if he could (a) deliver a fresh 2019 Accountant’s Report to the Council, and (b) deposit the Sum to make up the alleged Shortfall.  The Applicant complied with both requirements, but by the Intervention the Council is said to have frustrated his legitimate expectation.

D.  Relief Sought

31.  In the Form 86, the specific relief sought is as follows:

  (1)   an order of certiorari to bring up and quash the Intervention Decision;

  (2)   orders of certiorari to bring up and quash the 2^nd Decision, the 3^rd Decision and the 4^th Decision, with an order to remit them to the Council for reconsideration with directions from the Court if and when necessary;

  (3)   an expedited hearing of the leave application if leave is not granted on paper;

  (4)   an interim order that (a) the Council and its agents be restrained from taking any steps pursuant to the Intervention Decision, and (b) the Council and its agents should take all necessary steps to enable the partners of the Firm and/or Mr Lee to continue the operations of the Firm to complete the conveyancing files of the Firm with a view to wind down the Firm’s practice on such terms as the Court deems fit;

  (5)   such further or other remedy, relief or other as the Court may provide.

32.  The leave hearing was expedited by me.  Also, as already indicated, following the refusal of the application for ‘interim interim’ relief, the application for an interim order was not further pursued by the Applicant.

33.  However, at the leave hearing, the Applicant sought permission to amend the Form 86 so as to add a further form of relief being an order of mandamus requiring the Council forthwith to release the client funds of the Firm which had vested in the Council (a) to Mr Lee so that he may release the same to those clients entitled to the funds, or (b) to the clients entitled to the funds.

34.  The relief sought by the Applicant is obviously relevant to the consideration of whether or not to grant him leave to apply for judicial review.  As can be seen, the relief sought essentially seeks the quashing of the Intervention Decision, and the undoing of the exercise of powers flowing from that decision.  Put another way, the relief seeks orders in effect directing the Law Society to withdraw from the Intervention, and to hand the monies and documents back to a person or persons designated by the Applicant.

E.  The Statutory Regime

35.  The circumstances in which the Council can intervene in a solicitor’s practice are set out in section 26A of the LPO.  The Council may exercise certain powers specified in Schedule 2 of the LPO.  Those powers include, but are not limited to, taking control of the Firm’s bank accounts (money) and also the documents in the Firm’s possession (documents).

36.  Insofar as is material for present purposes, the specific statutory provisions are as follows:

Part IIA

Circumstances in which Law Society may intervene

26A.    Circumstances in which powers conferred by Schedule 2 exercisable

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

(a)   the Council has reason to suspect dishonesty on the part of—

(i)    a solicitor or foreign lawyer; or

(ii)   an employee or a trainee solicitor of a solicitor or foreign lawyer; or

(iii)  the personal representatives of a deceased solicitor or foreign lawyer, in connection with that solicitor’s or foreign lawyer’s practice or in connection with any trust of which that solicitor or foreign lawyer immediately before the date of his death or formerly was a trustee,

and the Council considers the exercise of those powers is in the interests of the public or the clients of the solicitor or foreign lawyer;

(b)   the Council considers that there has been undue delay on the part of the personal representatives of a deceased solicitor or foreign lawyer who immediately before his death was practising as a solicitor in his own name or as a sole solicitor or foreign lawyer under a firm name in connection with that solicitor’s or foreign lawyer’s practice or in connection with any controlled trust;

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

…

(2)   The powers conferred by Schedule 2 shall only be exercisable under subsection (1)(c), (j), (k), (l) and (m) 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 or any later time) notice that the powers conferred by Schedule 2 are accordingly exercisable in his case.

(3)   In this Part and Schedule 2—

controlled trust (受控制信託), in relation to a solicitor or foreign lawyer, means a trust of which he is a sole trustee or co-trustee only with one or more of his partners, employees or trainee solicitors;

trust (信託) includes an implied or constructive trust and a trust where the trustee has a beneficial interest in the trust property, and also includes the duties incidental to the office of a personal representative, and trustee (受託人) shall be construed accordingly.

Schedule 2

Money

2.    (1)   Without prejudice to section 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 (whether they were received by the person holding them before or after the Council’s resolution) 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 or the foreign lawyer or his firm in connection with his practice or with any trust of which he is or formerly was a trustee;

(b)   where they are exercisable by virtue of section 26B of this Ordinance, to all sums of money in any client account; and

(c)   where they are exercisable by virtue of section 26C of this Ordinance, to all sums of money held by or on behalf of the solicitor or his firm or the foreign lawyer or his firm in connection with the trust or other matter to which the complaint relates.

(3)   Except where section 4 applies, the Council shall serve on the solicitor or his firm or the foreign lawyer 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 sums of money.

(4)   Within 8 days of the 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.

(5)   If the Court makes such an order, it shall have power also to make such other order with respect to the matter as it may think fit.

(6)   If any person on whom a notice has been served under subsection (3) pays out sums of money at a time when such payment is prohibited by the notice—

(a)   he shall be guilty of an offence and liable on summary conviction to a fine at level 5; and

(b)   the Court of First Instance may, on the application of the Council, order that person to comply with the requirements of the notice within such time as may be specified in the order.

Documents

7.    (1)   The Council may give notice to the solicitor or his firm or the foreign lawyer or his firm requiring the production or delivery to any person appointed by the Council at a time and place to be fixed by the Council—

(a)   where the powers conferred by this Schedule are exercisable by virtue of section 26A of this Ordinance, of all documents in the possession of the solicitor or his firm or the foreign lawyer or his firm in connection with his practice or with any controlled trust; and

(b)   where they are exercisable by virtue of section 26C of this Ordinance, of all documents in the possession of the solicitor or his firm or the foreign lawyer or his firm in connection with the trust or other matters to which the complaint relates (whether or not they relate also to other matters).

(2)   The person appointed by the Council may take possession of any such documents on behalf of the Council.

(3)   Except in a case where an application has been made to the Court of First Instance under subsection (4), if any person having possession of any such documents refuses, neglects or otherwise fails to comply with a requirement under subsection (1), he shall be guilty of an offence and liable on summary conviction to a fine at level 5.

(4)   The Court of First Instance, on the application of the Council, may order a person required to produce or deliver documents under subsection (1) to produce or deliver them to any person appointed by the Council at such time and place as may be specified in the order, and authorize him to take possession of them on behalf of the Council.

(5)   If on an application by the Council the Court of First Instance is satisfied that there is reason to suspect that documents in relation to which the powers conferred by subsection (1) are exercisable have come into the possession of some person other than the solicitor or his firm or the foreign lawyer or his firm, the Court may order that person to produce or deliver the documents to any person appointed by the Council at such time and place as may be specified in the order and authorize him to take possession of them on behalf of the Council.

(6)   On making an order under this section, or at any later time, the Court, on the application of the Council, may authorize a person appointed by the Council to enter any premises (using such force as is reasonably necessary) to search for and take possession of any documents to which the order relates.

(7)   Upon taking possession of any such documents, the Council shall serve upon the solicitor or foreign lawyer and every person from whom those documents were received, or from whose premises they were taken by virtue of an order made under this section, a notice giving particulars and the date of taking possession thereof.

(8)   Subject to subsection (9) a person upon whom a notice under subsection (7) is served, on giving not less than 48 hours’ notice to the Council and (if the notice under subsection (7) 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 deliver the documents to such person as the applicant may require.

(9)   A notice under subsection (8) shall be given within 8 days of the service of the Council’s notice under subsection (7).

(10)  If no application is made under subsection (8), or if the judge to whom any such application is made directs that the documents shall remain in the custody or control of the Council, the Council may make inquiries to ascertain the person to whom those documents belong and may deal with those documents in accordance with the directions of that person:

Provided that, before dealing with such documents, the Council may take copies of, or extracts from, any such documents.

(11)  Without prejudice to the provisions of Part IIA of this Ordinance and this Schedule, the Council may apply to the Court of First Instance for an order as to the disposal or destruction of any documents in its possession by virtue of this section or section 8.

(12)  On an application under subsection (8) or (11), the Court may make such order as it thinks fit.

(13)  Except so far as its right to do so may be restricted by an order on an application under subsection (8) or (11), the Council may take copies of or extracts from any documents in its possession by virtue of this section or section 8 and require any person to whom it is proposed that such documents shall be delivered, as a condition precedent to delivery, to give a reasonable undertaking to supply copies or extracts to the Council.

37.  Therefore, after the 24 December 2020 letter was issued to the Applicant notifying him of the Intervention Decision and the exercise of the powers conferred by sections 2(3) and 7(1) of Schedule 2 to the LPO, the legislation expressly provided to the Applicant the following:

  (1)   pursuant to section 2(4), within 8 days of service of a notice under section 2(3), the person served may apply to the Court of First Instance for an order directing the Council to withdraw the notice; and

  (2)   pursuant to section 7(8) and (9), within 8 days of the service of the Council’s notice under section 7(7), the person served may apply to the Court of First Instance for an order directing the Council to deliver the documents to such person as the applicant may require.

38.  Further, pursuant to sections 2(5) and 7(12), if the person served makes either such application, the Court is empowered to make such order with respect to the matters as it may think fit.

39.  In this case, the 8-day period within which the Applicant was entitled to apply to the Court seeking an order to withdraw the intervention notice and/or an order that the documents taken by the Council be delivered elsewhere expired on 4 January 2021 (or, even if one counts only working days, on 7 January 2021).

F.  Exclusive Regime?

40.  Mr Chan says that the procedures under sections 2(4) and 7(8) of Schedule 2 to the LPO constitute an available, effective and exclusive statutory remedy which the Applicant could have pursued, but did not pursue.

41.  This is a point which goes beyond merely requiring the exhaustion of alternative remedies; the legislation specifically provides the remedy for substantive judicial interference where the Court thinks it fit.  Indeed, Mr Chan submits that the Court’s supervision under the LPO scheme provides for potentially a fuller range of supervisory orders than might even be available on an application for judicial review under RHC Order 53.

42.  As it is put by Mr Chan, there is a strict 8-day time limit for engaging the jurisdiction, and once the window has opened any judicial challenge to the relevant intervention decision must be taken before the window closes.  This is not the typical case where the Court may be hesitant to read legislative provisions as excluding judicial supervision altogether – though it can also be noted that there are still cases where it has been held that there should be no judicial remedy.  Here, there is a tailored statutory scheme for supervision by the Court.  However, the Applicant has simply not availed himself of it.

43.  I accept that in determining the true meaning and intended ambit of a statutory scheme, the Court will closely consider the scheme’s context and purpose.  This is simply to apply the starting point in statutory interpretation: see, for example, Leung Chun Ying v Ho Chun Yan Albert (2013) 16 HKCFAR 735 at §12.

44.  Mr Chan refers to Lee Siu Hong v The Law Society of Hong Kong (unreported, HCA 2216/2013, 23 June 2014, DHCJ Seagroatt) at §17, upheld in the Court of Appeal (unreported, CACV 155/2014, 7 April 2016) at §§52-55.  At first instance, the Deputy Judge stated:

17.  Let me just put in context the categoric and uncontroversial judicial authority in relation to the powers of the regulating body of the profession.  The authorities are, in fact, all one way.  In Miller v The Law Society [2002] 4 All ER 312, Geoffrey Vos QC sitting as a Deputy High Court Judge held that:

“The procedures for application to the High Court [in Hong Kong under paragraph 2(4) of Schedule 2 to the Legal Practitioners Ordinance within eight days of the Notice of Intervention] formed part of a complete statutory scheme [laid down by Parliament] to protect the public from errant solicitors.”

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.

45.  In the Court of Appeal, it was argued that the intervention process went beyond what was reasonable and necessary, when the ground (in that case) of bankruptcy had been removed.  So, it was said, the statutory time limit of 8 days regarding an application to the court directing the Law Society to withdraw the notice given concerning the powers exercisable on intervention referred to in Miller is irrelevant. Kwan JA (as she then was) held that argument was unsound, reasoning as follows (citations of authorities omitted):

52.  … Granted that Miller was concerned with the challenge to the conduct of an investigation which led to an intervention, there are quite a number of authorities cited to us that supported the proposition that there should be no private law duty of care owed by the Law Society in respect of its conduct of the intervention.

53.  In any event, the distinction sought to be drawn by the plaintiff is of no significance.  As stated by the judge in Miller, Geoffrey Vos QC, solicitors quite frequently seek to challenge the Law Society’s decision to intervene or its conduct of the intervention process.  Nonetheless, without any significant exemption, the authorities speak with one voice in deciding that the procedures for application to the High Court under paras 6(4) and 9(8) of Schedule 1 to the Solicitors Act 1974 (the equivalent provisions in Hong Kong are sections 2(4) and 7(8) of Schedule 2 to LPO) form part of a complete statutory scheme to protect the public from errant solicitors. Hence, the scheme ensures that the intervention process is swift, and that any admissible challenge by the solicitor is undertaken pursuant to a very rapid timetable.

54.  The authorities, which speak with one voice, accord with the general principle that the claimant, who has a means of challenging the conduct of a public authority by way of a statutory appeal mechanism, specifically created for that purpose, will not be permitted to pursue a common law damages claim as an alternative.

55.  The only recourse of the plaintiff was to apply to court under section 2(4) of Schedule 2 to LPO to withdraw the notice served on him vesting money held by the Firm in the 1^st defendant within eight days of service of the notice, or to apply under section 7(8) of Schedule 2 for the delivery of [the documents] to him within eight days of the notice served by the 1^st defendant that it had taken possession of the documents.  The plaintiff did not take action within the time limits prescribed by statute.  There is no express or implied power to extend the time for such an application to the court.

46.  It is correct that the Lee Siu Hing case was concerned with the exclusion of a private law claim, but Mr Chan submits that the exclusion should apply even more strongly to a similar public law claim, as it is even closer in its fundamental nature.

47.  Mr Chan also referred to the decision of the English Court of Appeal in Giles v The Law Society (1996) 8 Admin LR 105.  At 116C-F, Ward LJ referred to the solicitors’ profession as an honourable one, where honour is the collective invaluable asset of the whole profession, compelling jealous respect of all members of the profession which must be vigilantly guarded by its governing body.  He referred to Buckley v The Law Society (No. 2) [1984] 3 All ER 313 at 317, where Sir Robert Megarry V-C pointed out that the Law Society was the guardian not only of the profession but also of the public in its relation with solicitors, recognising that the powers of intervention are intended to enable the Law Society to nip in the bud, so far as possible, cases of dishonesty by solicitors.  Ward LJ also recognised that intervention is a Draconian remedy, where it often strikes a mortal blow to the particular practice.  Therefore, protection of the public has to be held in the balance against hardship to the solicitor.  That balance is primarily held by Parliament, which has provided for the scheme of intervention and court application.

48.  Also in Giles, at 118C-G, Sedley J – an experienced judicial review and administrative law judge – said as follows (emphasis added):

The manifest purpose of sch.1 to the Solicitors Act 1974, both in its original form and as amended, is to create an ex parte procedure leading where appropriate to intervention, the consequences of which are undoubtedly drastic and potentially terminal for a solicitor’s practice.  Where an intervention is persisted with para.6(4) of sch.1 provides for the solicitor to be heard on an application, made within eight days, to the court for an order directing the Law Society to withdraw the notice prohibiting payment out of money held by the solicitor save with leave of the court.  Since this is the key intervention power, at least in cases of suspected dishonesty, it is realistic to describe the sub-paragraph as conferring jurisdiction upon the court to direct the Law Society to withdraw from an intervention.  On such an application it is for the court to decide whether or not to direct withdrawal on the material then before it.

If it is demonstrated to the court that a notice given under Part II of the schedule is fundamentally flawed (for example, because it is based on an ultra vires resolution) it may well be that a direction for withdrawal should be made ex debito justitiae, leaving it to the Law Society to decide whether, in the light of what it then knows, it ought to pass a fresh resolution to intervene.  But while the para.6(4) procedure is manifestly provided in substitution for the ordinary recourse to judicial review (see [Buckley]), so that any point as to vires as might have been available under ord.53 of the Rules of the Supreme Court is equally available on originating summons under para.6(4) in the Chancery Division, the relationship of discretion to law will not necessarily be the same.

49.  Mr Chan relies in particular on the words I have underlined.  Those words were picked up by Geoffrey Vos QC in the Miller case, at §38 (see 321j), as part of his review of a number of previous authorities.  In the immediately preceding paragraphs, §§36-37, he had emphasised that the procedures for application to Court under the equivalent of our Schedule 2 form part of a complete statutory scheme, which ensures that the intervention process is swift, and that any admissible challenge by the solicitor is undertaken pursuant to a very rapid timescale, for which there is no express or implied power to extend time.  He also identified that there was some considerable doubt as to whether even the normal powers of judicial review are available to the solicitor in challenging the decision to intervene (as opposed to some other decision made in the course of the intervention).  Nevertheless, he went on to hold, at §§41-42, the legislation has given precedence to the interests of the public in being protected from solicitors, over the interests of the solicitor himself, and that though Mr Miller’s inability to challenge matters outside the time limit laid down might be unfortunate for him, that was a function of that statutory precedence given to the public interest.

50.  For his part, Mr Chong refers to the reference in Miller to the Buckley case, which emphasised that the statute had conferred a particular jurisdiction on the Court, where the Rules of the Supreme Court require that the jurisdiction is to be exercised by originating summons in the Chancery Division.  Mr Chong identifies that the (then) English rules to be found in RSC Order 106 – which specify the need to exercise the jurisdiction by originating summons in the Chancery Division – were not taken into, and are not to be found in, the Hong Kong RHC Order 106.  Mr Chong says this is a significant distinction, and explains why the English Courts might have held the statutory scheme to be a complete and exclusive code.  But, Mr Chong says, where those rules do not exist in the Hong Kong regime, the same logic does not follow.

51.  I see nothing in that submission.  It seems to me that the difference in the procedural rules is simply that, a difference of procedure rather than a difference of substance.  The difference in the rules also reflects the fact that the Court of First Instance in Hong Kong does not have Divisions as form the English High Court (the Queen’s Bench Division, Chancery Division, Family Division, etc).  In Hong Kong, there are separate Lists, but no Divisions.  There is, therefore, no need to have specified in the Hong Kong rules in which Division the statutorily permitted challenge must be made.  It simply falls to be made by a challenge in the Court of First Instance, and (it seems to me to be obvious) by way of an originating summons; indeed that is what Order 106 rule 5 says.

52.  Mr Chong has also referred to the case of Council of the Law Society of Hong Kong v Christopher Paul Erving [2015] 2 HKLRD 59, where at §§19 and 26 DHCJ Le Pichon stated:

19.  The first matter to note is that the Ordinance including Sch.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 s.2(3) of Sch.2 could not result in an intervention being held to be invalid.  Nothing in Sch.2 provides for that result.  Section 2(3) of Sch.2 does not state the consequences of non-compliance.

26.  If there had been any non-compliance with the twin requirements of s.2(3) of Sch.2, the only recourse available to the defendant would be under s.2(4) of Sch.2 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”.

53.  Mr Chong relies on these paragraphs to submit that the mechanism under Schedule 2 of the LPO is not an adequate alternative remedy, let alone an exclusive one.  Therefore, he says, it remains open to the Applicant to challenge the validity of the intervention by way of judicial review.  However, I do not think those paragraphs lead to such a conclusion.

54.  It might first be noted that, although the Deputy Judge elsewhere referred to the Miller case, that reference was only for the point that there was no possibility of obtaining a time extension to make the application under section 2(4).  Miller was not referred to for the points relating to the complete statutory scheme.  Secondly, the particular case involved proceedings brought by the Council against the solicitor, not the other way round, where the Council sought directions for the distribution of money in the Firm’s client and office accounts and disposal of old files and accounting documents.  The solicitor made what was held to be a wholly misconceived challenge, devoid of merit.  It was in that context that the Deputy Judge held that Schedule 2 does not provide any mechanism to challenge the validity of an intervention.

55.  In any event, it seems clear that the Deputy Judge was not being asked to decide, and did not decide, whether judicial review proceedings to challenge an intervention are excluded.  If I am wrong about that, and the Deputy Judge was intending to decide (without full argument) that judicial review proceedings are not excluded by the statutory scheme to be found in Schedule 2, I would respectfully disagree.  Whilst the Deputy Judge is correct that “withdrawal” of the intervention notice does not necessarily translate into “invalidity” of the intervention, plainly the possible reasons for ordering withdrawal of the notice would include that the decision to intervene was somehow invalid.  This was what was, in my view correctly, specifically identified by Sedley J in the Giles case.  It was also apparently the view of Zervos J in Ho Pak Wa v The Council of the Law Society of Hong Kong (unreported, HCAL 129/2016, 24 August 2016) at §§50-52, 96.  Further still, the Erving case was decided before the Court of Appeal decision in the Lee Siu Hung case, which clearly endorsed the view that Schedule 2 provides a complete statutory scheme.

56.  I do not think Mr Chong’s reference to R v Wiltshire County Council, ex p Nettlecombe Ltd (1998) 96 LTR 38 supports his primary submission either.  That was a case in which the local authority resolved to amend a map to show a byway on the applicant’s land, and on the application for judicial review the question arose whether the statutory review procedure provided for – being a review by an inspector, leading to an order itself subject to High Court review in accordance with the scheme, not by judicial review – deprived the court of jurisdiction.  It was held that the local authority’s resolution as to the status of a route was amenable to judicial review despite the existence of the statutory review procedure which only applied once an order had been made by the inspector.  I think the core reasoning is to be found in the decision of Dyson J (as he then was) at 394f:

Prima facie, a party is entitled to have recourse to the courts.  It seems to me that the existence of the statutory remedy of public enquiry by an inspector and statutory appeal thereafter is relevant to the question of whether I should refuse relief in the exercise of my discretion.  I do not consider that it goes to jurisdiction.

57.  The position under the statutory scheme provided for in Schedule 2 to the LPO is fundamentally different.  Indeed, far from providing a different appeal process, it expressly caters to the entitlement of the relevant party to have recourse to the courts.

58.  That is why I also reject Mr Chong’s submission that, if I were to dismiss the Applicant’s leave application, the Applicant would not have any judicial recourse against the Intervention Decision, constituting a direct infringement of his constitutional right of access to the Courts.  Rather, the Applicant’s right of access was expressly built into the LPO Scheme relating to intervention.  However, despite being reminded of that right when he was notified of the Intervention Decision, the Applicant must be taken to have chosen not to exercise it.  As with Mr Miller, the failure to have exercised that right within the time limit set may be unfortunate for the Applicant, but that is simply the function of the statutory balance struck by the legislative scheme.

59.  Indeed, no good reason has been given by the Applicant as to why he did not exercise his right by making an application under either section 2(4) or section 7(8) of Schedule 2 of the LPO.

60.  Further, though it was not a point taken by Mr Chan, it also seems to me to be important to note that the LPO scheme affords to the person served with the relevant notice the considerable benefit of being able to apply to the Court as of right, without the need to seek leave as in judicial review proceedings.  But the balance includes requiring such an as-of-right challenge to be made within a strict timeframe which ensures speed and certainty.

61.  I accept the Intervention not only affects the interests of the Applicant and the Firm, but also the interests of clients of the Firm.  I can return to one aspect of that point below, but it does not seem to me to affect the proper interpretation of the statutory scheme provided for in Schedule 2 of the LPO.  Mr Chong refers to Tse Wai Chun Paul v Solicitors Disciplinary Tribunal (unreported, HCAL 636/2001, 27 August 2001) where Hartmann J pointed out that if the application in that case were entertained, it would require the resolution of a legal issue which not only affects the applicant but which has far-reaching implications for all future persons whose professional conduct is made the subject of a disciplinary tribunal enquiry.  Therefore, it may be said that the wider public interest, not merely the specific interests of the applicant, fell to be determined.  Hartmann J concluded that it would follow that a determination of the issue by the Court would have wide implications for both the solicitors’ profession and the public whose interests (manifestly) the legislature has sought to protect in the promulgation of the LPO.  But, I think that case was dealing with a different situation, essentially a fundamental challenge to the lawfulness of the holding of disciplinary tribunal hearings ‘in camera’, and certainly not with the specific statutory scheme with which this case is concerned.

62.  In conclusion, I accept that in Schedule 2 of the LPO the legislature has provided a complete statutory scheme or code, a specific and exclusive mechanism for judicial consideration of intervention decisions, permitting the Court a wide range of orders which include (in effect) to quash the relevant intervention decision or to make other orders – indeed, all such orders as it may think fit – in supervision of the process.  The judicial process includes the power to declare the validity or invalidity of the decisions to exercise any of the powers under Schedule 2, which collectively embody the power to intervene.  The judicial process is at least as wide, and the potential range of orders probably wider (including perhaps being potentially less blunt and more ‘creative’ or ‘bespoke’), than in an application for judicial review under Order 53. 

63.  The statutory scheme provides for an 8-day period within which that judicial process of consideration can be sought by the person served with the intervention notice, and there is no mechanism for any time extension.  To permit an alternative method of judicial intervention, perhaps as late as the ‘long-stop’ period provided for in Order 53 (which itself is open to potential extension), would improperly interfere with the clear legislative intent for speed, certainty and finality as regards the legal status of an intervention.

64.  I would add that, only at the leave hearing, Mr Chong floated a submission that he might wish to challenge the constitutionality of the LPO scheme, were I to hold that it provides an exclusive statutory regime to the exclusion of a judicial review by the solicitor in whose practice the intervention has taken place.  However, no such challenge is to be found in the Form 86, even as an alternative.  But, if such a difficult challenge were to be made, it would have required precise formulation and explication.  This late point cannot add to the merits of the application for leave to apply for judicial review.

65.  At the leave hearing, Mr Chong also submitted that the question whether the LPO scheme is exclusive is one which is sufficiently arguable for leave to be granted, so that the argument can be further explored at a substantive hearing.  But, I agree with Mr Chan that the leave hearing was specifically set so as to canvass this particular point (amongst others), and that the point is a legal point of statutory interpretation where no necessary or useful further materials could be deployed at a future hearing which are not available to have been deployed at the leave hearing.  Therefore, I think I can and I will determine this point now. 

66.  Because of the exclusivity of the complete statutory scheme to be found in Schedule 2 of the LPO, the intended challenge to the Intervention Decision (and/or the notification of the Intervention Decision) is unarguable.  I refuse leave to apply for judicial review of the Intervention Decision.  I shall deal below with the position as regards the 2^nd Decision, the 3^rd Decision and the 4^th Decision.

67.  Of course, at some point, whenever a scheme is said to be “exclusive”, it is likely to be relevant to ask who and/or what is excluded.  In the circumstances of the Intervention in the Firm, and the making of the Intervention Decision and the notice given of it and its progress, that question may take on some real practical importance. 

68.  As to who is excluded, it seems to me that the complete statutory scheme excludes any challenge made outside the provisions of the scheme by the person served with the notice or notices pursuant to sections 2(3) and 7(1) of Schedule 2 of the LPO.  In other words, the statutory scheme operates to prevent the solicitor (or likely his privies, such as partners in the relevant practice) from seeking judicial interference with the intervention decision and the triggered powers relating to money and documents, except by the right of access to the Court of First Instance provided for as part and parcel of that scheme.

69.  The corollary is that the statutory scheme does not necessarily act to exclude other persons from seeking assistance from the Court as regards an intervention in a solicitor’s practice.  Mr Chan suggested that such persons would be excluded, but I do not think the matter has been sufficiently fully argued for me to rule on the point.  Suffice it to say that (a) the statutory scheme refers expressly to the time limit within which the person served with the notice can apply to the Court, and (b) I can readily conceive of many factual situations where such an automatic exclusion of other persons with an appropriate interest would seem to be inappropriate and unjust.

70.  As to what is excluded, I have held that a challenge to the decision to intervene and the giving of notice to vest money (section 2) and to take possession of documents (section 7) must be made within the 8-day period provided for in the statutory scheme in Schedule 2, but is otherwise excluded.  However, I think it at least arguable that the Law Society’s decisions made during the course of the intervention could be subject to review on public law grounds.  In Re Ahmed & Co (2006) 9 ITELR 779 – a case involving interventions into solicitors’ practices and the exercise by the Law Society of the statutory power to determine who is entitled to the funds under the equivalent of section 2 of Schedule 2 of the LPO – Lawrence Collins J (as he then was) held at §120 that:

In taking steps to determine who is beneficially entitled, it must exercise the [discretionary] power in a way that is bona fide, rational, reasonable, takes into account relevant considerations and does not take into account irrelevant considerations.  The exercise of the power should be subject to review on public law grounds.  So also the statutory power to distribute must be exercised in accordance with public law principles.

71.  This point also seems to me to arise from simple matters of chronology.  The particular exercise of the statutory powers triggered by an intervention in a solicitor’s practice are unlikely to be exercised, or all exercised, within the period of 8 days following giving notice of intervention and the assumption of those powers.  I also note that in Miller the distinction was drawn between challenging the decision to intervene as opposed to some other decision made in the course of the intervention.

72.  That this point may be arguable is relevant to the question of whether to grant leave to apply for judicial review in respect of the 2^nd, 3^rd and 4^th Decisions (see below).

G.  Alternative Remedy

73.  As a general statement of principle, a court would expect an alternative remedy, if available, to be sought before bringing judicial review proceedings, which is a remedy of last resort.  In consequence, a court would normally decline a remedy in judicial review if there is an effective alternative remedy.  Departure from this general position is only observed in exceptional circumstances: see Stock Exchange of Hong Kong Ltd v New World Development Co Ltd (2006) 9 HKCFAR 234, at §§114-117, 140.  Therefore, where a failure to exhaust all available effective alternative remedies is raised and evident even at the leave stage, leave would normally be refused, absent exceptional circumstances – which means in circumstances where the alternative procedure would not ensure the achievement of a just result.

74.  In this case, Mr Chan relies on the fact that it is the LPO itself which establishes the exclusive self-contained remedy, so that there is no residual discretion to entertain the application for leave to apply for judicial review.

75.  I agree.  However, had I not held that Schedule 2 of the LPO provides the complete statutory scheme or code, but rather only an alternative remedy, I probably would have given leave for the question to be dealt with at the substantive hearing, and for the point relating to an alternative remedy to be taken into account as part of the discretionary exercise.

76.  I accept that previous examples of challenges permitted, notwithstanding an alternative remedy, have involved important or discrete points of law, or where a large number of similar cases existed or were anticipated, pointing to a need for resolution of the point in the near future.  But, precisely because this case involves the largest intervention made by the Law Society in any solicitor’s practice in Hong Kong to date, and the large number of clients who are affected by the intervention (which has generated wide interest and public scrutiny), I think this would have been a case in which the grant of leave would otherwise have been appropriate.

H.  The 2^nd, 3^rd and 4^th Decisions

77.  Mr Chong submits that the Applicant is not only challenging the Law Society’s decision to intervene in the practice of the Firm, but is also challenging the way in which the Law Society has exercised its powers during the course of the intervention.  That, he says, is an independent challenge which can be raised irrespective of the challenge to the Intervention Decision itself.

78.  Mr Chong submits that the challenge of the 2^nd, 3^rd and 4^th Decisions are challenges to the Law Society’s failure and/or refusal to exercise its powers under Schedule 2 in a sensible manner during the course of the intervention. This includes, he says, the failure to release the funds to Mr Lee (to facilitate the completion of outstanding transactions or the return of funds to clients) or to the clients directly.  Even if shut out from challenging the decision to intervene, Mr Chong submits the only way to challenge decisions taken in the course of intervention is by way of judicial review.

79.  I have already held that it is sufficiently arguable that the Law Society’s decisions made during the course of the intervention could be subject to review on public law grounds.  But, in considering whether to grant leave to challenge the 2^nd, 3^rd and 4^th Decisions, it is necessary to analyse what those decisions really comprise: 

  (1)   The 2^nd Decision is said to be the Law Society’s failure to accede to the request to consider allowing the Applicant to operate the Firm’s client and office account under the strict supervision of the Law Society.

  (2)   The 3^rd Decision is said to be the Law Society’s failure to accede to the proposal that Mr Lee step in to take over the Firm with a view to complete the pending transactions of the Firm’s existing clients and close down the practice of the Firm with all payments to be vetted by an independent certified public accountant.

  (3)   The 4^th Decision is said to be the Law Society’s failure to accede to another similar proposal and suggestion that the Council should exercise its powers under Schedule 2 of the LPO to enable Mr Lee to complete the pending transactions of the Firm’s existing clients and to close down the practice of the Firm.

80.  In my view, the 2^nd Decision amounts to little more than the failure of the Law Society to accede to the Applicant’s request in effect to reverse the Intervention Decision.  In my view, even assuming that failure amounts to a “decision”, it was not an exercise of the powers under Schedule 2 as might be amenable to review on public law grounds.  In effect, the Applicant was asking the Council to reverse or withdraw its Intervention Decision, when he could have and should have asked the Court to order that.  His failure to have exercised the right given to him under the complete statutory code cannot be side-stepped by seeking to challenge the failure to accede to his request made directly to the Law Society.  It might also be noted that the request was made on 28 December 2020, and if not satisfactorily met the Applicant was still well within time to have brought an application to the Court of First Instance under the statutory scheme.

81.  I, therefore, refuse leave to apply for judicial review of the 2^nd Decision.

82.  It seems to me that the attempts to challenge the 3^rd Decision and the 4^th Decision logically fail for similar reasons.  By the Intervention Decision, and its notification to the Applicant, the Council had decided to intervene in the practice of the Firm and had appointed specific solicitors as the Intervention Agents (with further solicitors acting to assist).  The proposal leading to the 3^rd Decision, namely that Mr Lee step in to take over the Firm (so as to handle the funds and documents), was in essence also a proposal that the Council reverse its decision to intervene and/or its decision as to the appointment of the particular Intervention Agents, and to replace it with the appointment of the Applicant’s choice of agent/case handler.  Even assuming the failure to adopt that proposal amounts to a “decision”, it was not an exercise of the powers under Schedule 2 as might be amenable to review on public law grounds.  The repetition of the proposal leading to the 4^th Decision adds nothing.

83.  I, therefore, also refuse leave to apply for judicial review of the 3^rd Decision and the 4^th Decision.

84.  I would also add that there is force in Mr Chan’s submission that these additional challenges are probably little more than an attempt to get around the statutory intended finality as regards the legal status of the Intervention Decision, or an attempt to extend the time within which to make that challenge.

85.  As regards the proposed amendment to seek an order of mandamus – requiring the Council forthwith to release the client funds of the Firm which had vested in the Council (a) to Mr Lee so that he may release the same to those clients entitled to the funds, or (b) to the clients entitled to the funds – it can be seen that part (a) again puts forward Mr Lee, and part (b) simply begs the question as to which clients are entitled to which funds, which is something the Law Society will necessarily address and is addressing.

I.  Merits

86.  In the circumstances, I do not think there is any useful purpose in any lengthy review as to whether the merits of the proposed grounds of challenge are otherwise reasonably arguable.  As expected, Mr Chong says they are, and Mr Chan says they are not.

87.  Suffice it to say that – notwithstanding the force in many of the points made by Mr Chan, appropriately made briefly in the context of a leave application, including that all the points of challenge essentially boil down to a Wednesbury threshold, where a due margin of deference will be given to the judgment of the statutory regulator – I would not have shut out the whole of application, had I been persuaded that the Applicant was not excluded from the application he has made by the complete statutory scheme applicable to him as is to be found in Schedule 2 of the LPO. 

88.  I would have given leave on Ground 1 and Ground 2.  I would, however, have refused leave to apply for judicial review on the Ground 3 relating to legitimate expectation.  In my view, that ground clearly has no merit.

89.  I would also have refused leave on the new ground of challenge based on infringement of Articles 6 and 105 of the Basic Law, articulated for the first time only in Mr Chong’s written skeleton submissions (and not canvassed in the Form 86, and where no amendment application has been made).  I agree with Mr Chan that this constitutional point fails even to launch.

90.  In passing, I would note that I would probably not have refused leave simply on the argument that there is futility in the relief sought.  I, of course, accept the general principle that relief in judicial review will be considered futile, and may not be granted, where the court is satisfied that had the alleged irregularity not occurred the outcome would not be different.  But, whilst I see some force in the submissions made by Mr Chan on the basis of the evidence in the affirmation of Ms Chu, I think the circumstances of this case are arguably such that any reconsideration which I might have ordered would potentially take place in light of any findings or comments of the sort which can be included in a decision on the substantive application for judicial review.

91.  For the sake of completeness, I also acknowledge the merit in the points that at this stage it would be very difficult to reverse or undo the intervention process, and that Mr Lee is almost certainly in no better position to do the necessary work than the Intervening Agents and the five assisting firms.

J.  Position of the Clients of the Firm

92.  Though the actual contest on the leave application is between the Applicant and the Council, I do not forget to look at the position of the clients of the Firm.

93.  The Applicant himself has sought to emphasise that he has brought these proceedings in recognition that the Intervention has caused immense hardship to the clients of the Firm, and his stated view (repeated by Mr Chong in submission) that it is absurd for the Law Society to refuse to return the relevant funds to the clients immediately given that there is no real evidence of the Shortfall, and the dishonesty by Mr Wong’s occurred more than 18 months ago.

94.  Irrespective of whether it is accepted that this altruistic motive is the true motive for the Applicant’s bringing these proceedings, it cannot be doubted that the Intervention has had a significant impact on a large number of clients of the Firm.  Understandably, clients will consider – as Ms Li said at the leave hearing – that, irrespective of the outcome of these proceedings, the Law Society still has responsibility towards the clients of the Firm.  That is hardly controversial; the Law Society identifies its motivation in the Intervention as seeking to protect the interests of the clients of the Firm, as well as the other and wider aspects of the public interest.

95.  Mr Chong pointed to the evidence of Ms Chu that there is apparently at least HK$375 million in the Firm’s client account.  Against the facts that the original investigation of the Firm appears to have been triggered by the anonymous complaint as to poor accounting and Mr Wong’s dishonesty and that investigation has been afoot for months, Mr Chong asked the question how long the intervention process has to “drag on” before that sum can be returned to the clients, who have done nothing except becoming innocently caught up in this matter.

96.  Mr Chong refers to the deadline set for even making claims, which is as far away as 31 May 2021 (more than 5 months after the Intervention, and around 3½ months from now).  I think there is some force in the suggestion that the date set does not speak of any great sense of urgency.  No wonder, Mr Chong says, the clients of the Firm are expressing frustration.  Mr Chong also expressed his understanding that the clients might themselves wish to bring review proceedings in relation to the Intervention.

97.  This was confirmed by Ms Li, though she also candidly acknowledged that the clients unlikely had the resources to bring such proceedings.  Ms Li stressed the urgency for many of the clients to get back their money, and that whilst the Law Society says it is trying to help the clients that has not been their actual experience.  Rather, enquiries have simply been met with advice to get a new lawyer, and potentially to be prepared to wait for even years to recover funds, perhaps not even the full amount.

98.  In recognition of the impact on the clients of the Firm and the frustration felt by them, Mr Chan spent some time in his oral submissions identifying why the criticisms raised by clients have perhaps been misdirected.  As he explained on the evidence from Ms Chu, the extent of time taken in the intervention process is simply the reflection of the extent of the problems within the Firm, and the necessity of dealing with those problems properly.  The problems within the Firm were not created by the Law Society, but by the operation of the Firm, including by the Applicant.  It would be at least potentially problematic to pay out monies on the basis of documents which are apparently not only inaccurate but are in disarray.  Not taking a correct, systemic and panoramic approach may cause greater problems in the long term. Mr Chan submits that any attempt at stepping in now carries with it at least as much risk of further harm and delay.  Interfering ‘mid-stream’ will not be the solution.  The Law Society’s good faith judgment is that the best way to resolve matters is through its experienced, well-established and respected individuals doing what they have been appointed to do.

99.  Mr Chan also pointed to the evidence given by Ms Chu as to the extensive activity on the part of the Intervening Agents and the assisting firms, and the steps taken to minimise the impact of the Intervention.  The priority has been to answer enquiries from clients, banks and other third parties, indexing and packing files, and locating the relevant files and title deeds to return those files with urgent deadlines to the corresponding clients or their new solicitors.  As at 1 February 2021, a total of 3,344 files had been returned to the Firm’s clients and/or their new solicitors.  The review of the Firm’s books and records is taking significant time because of their chaotic state.  Outstanding accounting documents are yet to be provided by the Applicant.  On the information available, the Firm apparently maintained 29 different client accounts with 19 banks, and probably a total of 4 office accounts with 2 banks.

100.  I take all of these points.  There can be no doubt that significant efforts have been made.  But it is also surely understandable from the individual client’s point of view that his or her immediate concern is to complete the interrupted conveyancing transaction and/or to obtain the return of his or her money provided to the Firm.  Whatever the origins or concerns giving rise to the Intervention, from the client’s point of view it will be seen that it is the Law Society currently standing in the way of completing the transaction or recovering the funds.

101.  It might even be said that there is something of an apparent mismatch between (a) the speed and certainty intended to be promoted by the operation of the legislative scheme, exemplified by the limited window of opportunity for the person served with the intervention notice to make application to the court, and (b) the lack of speed and certainty in the process triggered by the intervention.  Of course, it would be fair to note the difference between (a) establishing quickly and with finality whether the intervention should continue and (b) the process of the intervention, the timing of which will be wholly dependent on the particular circumstances.  But, I suspect most clients of the Firm will think they do not need until the end of May to lodge a claim, and will not understand why it should take many months (or even years) for the claim to be considered and met.

102.  Having said that, it must be accepted that it is the Law Society which is currently required to balance the rights, benefits and expectations of individual clients of the Firm as against the broader public interest of the clients as a whole body, and the wider public interest in the proper investigation and regulation of the Firm.

103.  Perhaps all that can properly be said at this stage is to repeat what I said at the earlier hearing, namely that recognising the identification of the interests of the clients as a group should not mean losing sight of the interests of the individual client members of that group. Further, in the circumstances of this unusually large intervention, there is clearly an opportunity to consider and implement tailor-made, perhaps innovative, solutions seeking at least to alleviate the harshness of the impact felt by clients of the Firm.  For example, at the leave hearing, the idea was raised as to making an early and significant interim pay-out to clients, leaving only a relatively small proportion of funds claimed to await further assessment or determination.  The Court will remain ready to provide such assistance and directions as may be sought.

104.  As a final comment, a further concern has been raised that the costs of the Intervention (namely, the expense of the Intervening Agent and the five assisting firms) might somehow come to be borne by the clients of the Firm.  As Mr Chan confirmed on behalf of the Council, any such concern is ill-founded.  No part of the clients’ monies will be used to pay any part of the costs incurred in the process of the Intervention.

K.  Conclusion

105.  The Applicant’s application for leave to apply for judicial review made by the Form 86 is refused.

106.  I shall make a costs order nisi that the costs shall follow the event, namely that the Council’s costs shall be paid by the Applicant, with certificate for two Counsel.  I shall also order on a nisi basis that those costs be subject to summary assessment on the papers (the Council to provide a Schedule of Costs claimed by 5pm on 8 March 2021, and the Applicant to provide a List of Objections by 5pm on 20 March 2021).  The nisi orders will become absolute, unless either party applies for variation by 5 March 2021.