A SOLICITOR OF THE SUPREME COURT OF HONG KONG v. THE LAW SOCIETY OF HONG KONG

IN THE COURT OF APPEAL

1994, No. 213
(Civil)

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J U D G M E N T

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Bokhary, J.A.:

1. This is an appeal by a solicitor against an order made against him by the Solicitors Disciplinary Tribunal on November 4 last year. He contends that he was dealt with too severely.

2. Four disciplinary complaints were laid against the appellant solicitor. Two properties were involved. The tribunal referred to them as "property A" and "property B" respectively. So will I.

3. Property A comprises one unit in a building in Tsimshatsui known as Grand Right Centre. Property B comprises two units in that building.

4. The first complaint was of acting for both the vendor and the purchaser in the sale of property A, contrary to rule 5C of the Solicitors' Practice Rules, Cap. 159. The third complaint was of so acting in the sale of property B, contrary to that rule.

5. The appellant admitted the first and third complaints. And the tribunal found them proved on his admissions. The second and fourth complaints, which were in the alternative to the first and third complaints respectively, were dropped.

6. Having found the first and third complaints proved, the tribunal made an order dealing with the appellant thus: (1) he was suspended from practice for six months; but (2) such suspension was deferred for two years to lapse if no further disciplinary complaint is proved against him during that period; additionally (3) he was ordered to pay a penalty of $250,000 into the general revenue; and finally (4) costs to be taxed on a full indemnity basis if not agreed were ordered against him.

7. Publication of its findings and orders was stayed by the tribunal pending this appeal.

8. The facts of this matter may be outlined as follows. The appellant was admitted as a solicitor in early 1982. At all material times, he was a partner in a firm. In late 1991, his firm acted for a company named Grand Right Enterprises Limited in the purchase by it of the then uncompleted development which became Grand Right Centre.

9. Such purchase was handled under the appellant's supervision by a consultant in his firm. In early 1992, that consultant established his own firm as a sole practitioner. He took all the Grand Right Centre work with him. And the newly-established firm acted for Grand Right Enterprises in the sale by it of various units in that building. But he remained a consultant in the appellant's firm. Those two solicitors, it is common ground, were at all material times solicitors practising in association within the meaning of rule 5C.

10. As is well-known, sub-rule (1) of that rule provides that:-

"Subject to sub-rules (2), (3), (4) and (5), a solicitor, or 2 or more solicitors practising in partnership or association, shall not act for both the vendor and the purchaser on a sale or other disposition of land for value".

11. I will refer to the two firms as "the appellant's firm" and "the other firm" respectively. And I will refer to the two solicitors practising in association as "the appellant" and "the other solicitor" respectively.

12. Inserting such nomenclature, this is how the tribunal's summary of the property A transactions reads:-

"(e) On 12th March 1992 Grand Right represented by [the other solicitor] in his capacity as sole practitioner of [the other firm] entered into an agreement for sub-sale and sub-purchase with Madam Yeung Pik Ling ("Madam Yeung") represented by [the appellant's firm] through [the other solicitor] in respect of Property "A". [The appellant's firm] entrusted the actual handling of the matters to [the other solicitor] in his capacity as the consultant of [the appellant's firm].

(f) On or before 12th June 1992 Madam Yeung agreed to transfer her interest in Property "A" to Liao Tso Lu ("Mr Liao"). The said transfer was to be effected by Madam Yeung cancelling her agreement with Grand Right to enable Grand Right to sell Property "A" to Mr Liao.

(g) On 12th June 1992 Madam Yeung represented by [the appellant's firm] through [the other solicitor] in his capacity as consultant of [the appellant's firm] entered into a Cancellation Agreement with Grand Right represented by [the other solicitor] in his capacity as sole practitioner of [the other firm] to cancel her interest in Property "A".

(h) On 12th June 1992 Grand Right Enterprises represented by [the other solicitor] in his capacity as sole practitioner of [the other firm] entered into an agreement for sub-sale and sub-purchase with Mr Liao represented by [the appellant's firm] through [the other solicitor] in his capacity as consultant of [the appellant's firm] in respect of Property "A"."

13. Continuing, this is how the tribunal's summary of the property B transactions reads:-

"(i) On 6th March 1992 Grand Right represented by [the other solicitor] in his capacity as sole practitioner of [the other firm] entered into an agreement ("the First Contract") for sub-sale and sub-purchase with Ip Hing Industrial Chemicals Ltd. ("Ip Hing") represented by [the appellant's firm] through [the other solicitor] in his capacity as consultant of [the appellant's firm] in respect of Property "B".

(j) On 24th August 1992 Grand Right represented by [the other solicitor] in his capacity as sole practitioner of [the other firm] entered into an agreement for sub-sale and sub-purchase with Galaxy Win Development Limited ("Galaxy Win") represented by [the appellant's firm] through [the other solicitor] in his capacity as consultant of [the appellant's firm] in respect of Property "B" ("the Second Contract") at the offices of [the other firm].

(k) By letter of 4th November 1992 Galaxy Win made a complaint to the Law Society about their right to separate legal representation."

14. In respect of both sets of transactions, the tribunal found that the appellant permitted:-

"(1) [The other solicitor] to act for sub-purchasers under [the appellant's firm's] name while he also acted for the vendor in the same transaction under his own sole proprietorship's name.

(2) A law clerk of [the appellant's firm] in [the appellant's firm's] name to work at [the other solicitor's] office to assist in these transactions.

(3) The letterheads and other stationery bearing [the appellant's firm's] name to be utilised at [the other solicitor's] office.

(4) Completion of these transactions to take place at [the other solicitor's] office."

15. The tribunal then concluded that the appellant:-

"knew and allowed [the other solicitor] to act while in association with him in a dual capacity as a consultant of [the appellant's firm] and as a sole practitioner of [the other firm] in breach of Rule 5C".

16. And the tribunal took the view that the appellant was:-

"at the very least grossly reckless to allow these admitted breaches of Rule 5C to occur, if not actively and consciously participating in such [so that] his breach was not merely a technical breach of a regulatory rule".

In saying that, the tribunal was rejecting the submission made on the appellant's behalf that the breaches were technical because all it took was a statutory declaration under sub-rule (3) for everything to be in order.

17. Sub-rule (3) reads:-

" (3) A solicitor, or 2 or more solicitors practising in partnership or association, may act for both the vendor and the purchaser in the sale and purchase of a unit or other interest in an uncompleted development in respect of which the consent of the Director of Lands is not required and also in the completion of such sale and purchase if and only if-

(a) he, or one of them, has deposited in the Land Registry or a District Land Registry a statutory declaration-

(i) in such form, and setting forth such facts, as the Council may, subject to the prior approval of the Chief Justice, from time to time specify; and

(ii) annexed to which are such documents as the Council may, subject to the prior approval of the Chief Justice, from time to time specify as documents be so annexed; and

(b) the agreement for sale and purchase to be entered into by the vendor and the purchaser contains such clauses as the Council may, subject to the prior approval of the Chief Justice, from time to time specify for mandatory inclusion in the agreement."

18. Before us, Mr Sakhrani leading for the appellant concedes that no recourse to sub-rule (3) would have been possible as far as the property B transactions are concerned. But he submits that recourse to that sub-rule was or might have been available as far as the property A transactions are concerned.

19. The well-established rule, as I expressed it in Re A Solicitor, Civil Appeal No. 2 of 1993, May 7, 1993, an unreported decision of this Court, at p. 21 is that:-

"Each professional body entrusted with responsibility for professional discipline is in a uniquely advantageous position to discharge its duty: first, to set and maintain professional standards; secondly, to view each offence against discipline in its proper context from time to time as times change; thirdly, to gauge the effect of each offence on the profession and the public; and, fourthly, to assess the penalty required to mark professional disapproval, restore public confidence and provide effective deterrence. That is why they are entrusted with such responsibility in the first place."

20. So if the tribunal had stopped at a rejection of the submission that the appellant had not been guilty of any breach which was other than merely technical, but had suspended him even though he was merely careless and incompetent, it would, I think, still have been very difficult to upset its decision to suspend him.

21. But that was not the tribunal's approach here. And it is impossible to tell whether it would have favoured suspension if it had not concluded that the appellant's conduct was worse than merely careless and incompetent. For, as we have seen, it went further and concluded that the appellant was "at the very least grossly reckless" to allow the breaches to occur "if not actively and consciously participating" in them.

22. So it is necessary to see if that finding can stand. And there are three difficulties with that finding. One is that it is doubtful that there was sufficient evidence to make it.

23. But even if that were not so, there is a second difficulty, which is this. The second and fourth complaints were each that the appellant in the course of his practice knowingly permitted a consultant of his firm to act in a manner which compromised or impaired or was likely to compromise or impair the reputation of the profession by way of a conflict of interests.

24. Those alternative complaints carry an express proposition as to the appellant's state of mind. And they were dropped. The scope for finding a similar state of mind under other complaints is doubtful. Possibly, scope for doing so might have survived the dropping of the second and fourth complaints if they had been dropped in such a way as to make it clear that such proposition itself was not dropped and would be pursued under the first and third complaints.

25. That brings us to the third difficulty, which is this. Nothing of that kind was made clear. At no stage of the hearing before the tribunal was it ever put by anybody to the appellant or the solicitor then representing him that the tribunal might not only reject the submission that the breaches were merely technical but might go on to find that the appellant had committed such breaches recklessly if not as a conscious participant.

26. It seems to me that, even from a neutral starting point, some such indication was, as a matter of fairness, required. And, in the light of the dropping of the second and fourth complaints, it became crucial that some such indication be made before any such finding could properly be reached.

27. Lest I forget, I would emphasize at once that I am sure that the tribunal had every intention of being entirely fair. But even the best of tribunals sometimes fail in achieving fairness.

28. In my view, the finding that the appellant committed the breaches recklessly if not as a conscious participant cannot stand.

29. What should the penalty be in the absence of that finding? On any view, the breaches, even though no more than merely careless and incompetent, were serious ones. They cannot be regarded as trivial. I have no hesitation in rejecting Mr Sakhrani's submission that a reprimand would be sufficient. The interests of the public and of the profession alike demands more.

30. In my judgment, the order for suspension cannot survive the failure of the finding that the appellant had committed the breaches in question recklessly if not as a conscious participant. I would allow this appeal to the extent - but only to the extent - of setting aside the order for suspension. I would not disturb the order that the appellant pay $250,000 into the general revenue. Nor would I disturb the order that he pay the costs below to be taxed on a full indemnity basis if not agreed.

31. I would allow the appeal to the extent indicated: in other words, to set aside the order for suspension.

Rogers, J.:

32. I agree.

33. Nothing which I say should be taken as in any way doubting the importance of rule 5C of the Solicitors' Practice Rules.

34. The reason in my judgment that this appeal should be allowed is that the appellant had not been given an adequate opportunity to deal with the matters that led to the finding that he was "at the very least grossly reckless, if not actively, consciously participating" in breaches of rule 5C of the Solicitors' Practice Rules.

35. The point, in my view, emerges from the fact that there were two charges in respect of each series of acts. The 1st charge was a breach of the Solicitors' Practice Rules per se. The 2nd charge was that the solicitor knowingly allowed the same acts to be done in a manner which compromised or impaired or would compromise or impair the reputation of the profession by way of a conflict of interest. The fact of compromising or impairing the reputation of the profession is the same in both charges. The difference in substance between the charges is the question of the appellant's knowledge.

36. Given the fact that the 2nd charge was not pursued, it became all the more important when a plea in mitigation was made on the basis of lack of specific knowledge that if the substance of that plea was not accepted that those matters should be drawn to the appellant's attention so that, if necessary, he could give evidence and be tested and challenged about it.

37. There was no challenge to the submission that it was a technical breach of the rules. In circumstances where, as I say, the tribunal was not prepared to accept a submission as to the appellant's state of mind, in my view, it was necessary for the matter to be brought to his attention at the time.

38. I also observe that the submission of technicality and the appellant's state of mind was based on a letter which had been written nearly two years earlier by the solicitor himself to the Law Society in answer to their preliminary inquiries. It is also pertinent to point out that shortly after the decision in his case the appellant was asked to confirm the contents of that letter in evidence to be used against the other solicitor.

39. In my view, therefore, the appellant has a valid ground of complaint in respect of this finding and this appeal must be allowed.

Penlington, J.A.:

40. For the reasons given by Bokhary JA and Rogers J, I am also of the view that this appeal should be allowed to the extent that the order for suspension should be set aside. In doing so, I am very conscious of the decisions of this court that a penalty imposed by a professional disciplinary tribunal should be interfered with only if it is clearly wrong in principle or excessive and that the tribunal is the proper authority to decide matters as to the gravity of any particular offence. Here, however, I am satisfied that when the Law Society did not proceed with these second and fourth complaints that it was not then possible for them to come to the finding that they did i.e. that the appellant was "grossly reckless to allow these admitted breaches of Rule 5C to occur, if not actively and consciously participating in such" upon which the order for suspension was based. The striking-off was suspended but nevertheless an order for suspension must be a very serious matter to a professional man.

41. I also bear in mind the well-known dicta of Lord Widgery CJ In re a Solicitor (1976) 120 SJ 353 that there is a very substantial gap between the penalty of a fine and a penalty of suspension. While from the authorities which we have been referred to by Mr. Ho, a finding of dishonesty is not a prerequisite for an order of suspension, I think it is clear that such an order should not be made in the absence of a finding of dishonesty unless the conduct is such as to be very serious. Here I do not think that was the case and a substantial fine was the proper penalty.

42. The appeal is therefore allowed to the extent that the order for suspension from practice is quashed. The other parts of the Tribunal's rider will remain.

[Argument on costs]

43. As the appellant has succeeded partly in this hearing he is to have one half of his costs of the appeal.