HO PAK WA v. THE COUNCIL OF THE LAW SOCIETY OF HONG KONG

HCAL 129/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 129 OF 2016

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REASONS FOR DECISION

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Introduction

1.  This is an application by Ho Pak Wa, also known as Alan Ho, (the applicant), for leave to apply for judicial review of the decision of the Council of the Law Society of Hong Kong (Law Society) to intervene in the practice of the firm of solicitors of Messrs Alan Ho & Co (AHC) by way of resolution dated 12 April 2016 pursuant to s.26A(1)(c) of the Legal Practitioners Ordinance, Cap 159, (the Intervention Decision). 

2.  The relief sought was an order of certiorari to quash the Intervention Decision.  The applicant sought an oral hearing if leave was not granted on the papers.  An oral hearing was accordingly arranged at which the Law Society was invited to attend and participate.  The parties were legally represented at the hearing.

3.  There were two grounds on which this application for leave to apply for judicial review was advanced by the applicant.  The first ground complained that the Law Society committed an error of law in making the Intervention Decision and as a consequence the decision was therefore illogical and irrational.  The second ground complained that the Intervention Decision was made when the applicant had legitimate expectation that it would not be made. 

4.  During the course of the hearing the applicant abandoned the first ground and made application to adjourn the hearing to enable him to amend his Form 86 by adding a new ground of review that the Intervention Decision was Wednesbury unreasonable.  The basis of this new ground was that there was insufficient material before the Council to be satisfied as required under the section to intervene in the practice of AHC.

5.  At the conclusion of the hearing I refused the application for an adjournment and to amend the Form 86 and dismissed the application for leave to apply for judicial review.  I said I would hand down my reasons later and this I now do.

Case history

6.  Having been founded in 1998, AHC currently has among its partners, the applicant and Ms Poon Fung Chi Farah, (the putative interested party).  It has four branches throughout Hong Kong. 

7.  In May and July 2015 and March 2016, AHC received a number of complaint letters from the Law Society alleging that AHC was acting in breach of various solicitors’ rules.  During this period, AHC were requested to provide documents and answer queries from the Law Society.  The subject matter of the complaints concerned the alleged preparation by AHC of unauthorised powers of attorney.[1]  In relation to the last complaint, the Law Society wrote to AHC on 3 March 2016 in which they put the applicant on notice of the professional responsibilities and rules relating to the conduct of a solicitor’s practice and that the matter would be considered by the Law Society with possible referral to the Investigation Committee.[2]

8.  On 15 March 2016, the Law Society wrote to AHC stating that it had considered a report of the Conduct Section and resolved to authorise Monitoring Accountants to conduct visits to AHC under rule 11 of the Solicitors’ Accounts Rules and rule 5B of the Solicitors’ Practice Rules to inspect their books and accounts.[3]  Such inspection was carried out on 17 March 2016.  However, AHC were unable to make available all the documents requested.  During the visit, the Monitoring Accountants made lists of documents that were produced and documents that were outstanding.  The lists were signed by the applicant’s partner on behalf of the firm.[4]  A further inspection was carried out on 21 March 2016 but documents still remained outstanding. 

9.  On 18 March 2016, AHC wrote to the Law Society informing them that it had engaged external accountants to prepare the documents that would not be available for inspection on 21 March 2016.[5] AHC requested a period of three months to prepare the outstanding documents to facilitate the inspection.  It was claimed that the requested documents were voluminous or needed to be obtained from storage or other sources.  It should be noted that a number of the documents outstanding were files.

10.  On 24 March 2016, AHC wrote again to the Law Society informing them that they had employed Keyway Management & Secretarial Services Limited to assist in the preparation of the outstanding documents.[6]

11.  On 29 March 2016, the Law Society wrote to AHC informing them that the Council had considered their letters and a report of the Conduct Section in relation to alleged breaches by the firm of the Solicitors’ Accounts Rules and notified them that the Council had resolved that the firm provide for inspection by the Monitoring Accountants certain documents by various specified dates, namely, pursuant to paragraph 1, a complete set of bank statements of the firm’s office and clients’ accounts by 5 April 2016, and pursuant to paragraph 2, various accounting and other documents in relation to the firm’s office and clients’ accounts by 30 June 2016.  It was further stated that in light of the firm’s alleged breaches of the Solicitors’ Accounts Rules, the Council had further resolved to reject the firm’s accountant’s reports which had been submitted and requested that the firm provide fresh accountant’s reports by 31 July 2016.  It was finally stated that the firm’s alleged breaches of the Solicitors’ Accounts Rules would be referred to the Conduct Section for investigation.[7] 

12.  On 30 March 2016, a Notice of Inspection was sent to AHC where it was requested to produce certain specified documents to inspectors appointed by the Council.[8]  The inspectors prepared a number of lists of outstanding documents each of which was acknowledged by the applicant’s partner on behalf of the firm and in which she undertook to produce such documents to the Law Society on or before 12 noon on 1 April 2016.[9]

13.  On 1 April 2016, AHC wrote to the Law Society stating that pursuant to the Notice of Inspection they submitted the requested documents except for a number of documents they listed which included a large quantity of files that were being handled by their clerks who it was said were currently on leave and once they resumed their duties the files would be produced.[10] Other current files were requested to be returned in this letter and in a subsequent letter dated 5 April 2016, because there were outstanding matters in relation to them.[11] 

14.  From the material before me the firm employed a large number of clerks who seemed to have the conduct of a significant number of cases, the files of which had not been produced.  As mentioned in the letter of 1 April 2016, a total of 38 files were awaiting the resumption of duty of clerks on leave in order for the files to be produced.  I should say for my part one would expect that such files would be held by the firm and under the care of the supervising or handling solicitor.

15.  On 5 April 2016, the Law Society wrote to AHC stating that they had received by letter dated 1 April 2016 the documents specified in the Notice of Inspection but noting that not all documents had been produced.  The Law Society put on record that AHC had failed to comply with the Notice of Inspection and the matter would be reported to the Council.[12]  On the same day, AHC wrote to the Law Society enclosing bank statements that were previously requested but noting that there were still further bank statements outstanding.[13] 

16.  There followed further communications between the Law Society and AHC concerning the production or return of documents or files. 

17.  On 12 April 2016, the Law Society issued a Notice of Intervention by way of letter from the Secretary General of the Law Society.[14] The Notice had annexed to it a certificate by the Secretary General setting out the resolution of the Council pursuant to s.26A(1)(c) of the Legal Practitioners Ordinance, Cap 159 (the Ordinance) and certifying that at a meeting of the Council held on 12 April 2016, “the Council is satisfied” that the partners of AHC “have failed to comply with rules made by virtue of section 73(1)(b) of the Ordinance”. 

18.  The certificate did not identify the rules that had not been complied with.  It set out 13 resolutions passed at the meeting and that the Council pursuant to s.26A(1)(c) would exercise their power conferred by Schedule 2 to intervene in the practice of AHC.  The Notice and the certificate were served by registered post and by leaving it at AHC’s address.  The Notice was directed to the partners of AHC and in so far as material read: 

“You are hereby notified that

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

(ii) under section 7(1) of Schedule 2 to the Ordinance (and this letter is such notice) you are requested to produce to the Council’s appointed intervention agent, Ms. Kong Yuen Hoong of Messrs. Hastings & Co. at 5/F, Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong all documents in your possession or in the possession of your firm in connection with your practice. Such documents should be produced or delivered to Ms. Kong at such time and place as she shall notify you.

I would direct your attention to sections 2(4), 2(6), 7(3) and 7(8) of Schedule 2 to the Ordinance.”

19.  On 14 April 2016, members of Messrs Hastings & Co (Hastings) attended the offices of AHC in accordance with the Notice of Intervention. 

20.  On the next day, 15 April 2016, the applicant and his partner instructed Messrs Troutman Sanders, (Troutman Sanders), to commence proceedings to challenge the intervention.  An Originating Summons was issued on behalf of the applicant and his partner against the Law Society on 16 April 2016 where they sought various heads of relief, including the release of sums of money for the purpose of completing forthcoming transactions of clients of the firm.[15]  It is pertinent to note that the thrust of the claim sought an order from the court that the Law Society be directed to withdraw the Notice of Intervention dated 12 April 2016 to appoint Hastings as the intervention agent of the Council to intervene in the practice of AHC. 

21.  In those proceedings, an ex parte order was granted by E Toh J on 16 April 2016, releasing certain sums of money to AHC but this was later discharged by consent after an inter partes hearing before L Chan J on 18 and 19 April 2016.  During the hearing, it had been submitted by the Law Society that the original order to release funds to AHC could not be complied with on the basis that it did not have full details of the whereabouts of bank accounts of the firm or documentation concerning those accounts and therefore could not satisfy itself that it was proper to make any payments out of the firm’s accounts. 

22.  On 18 April 2016, the Law Society informed the applicant that he had failed to comply with the Solicitors’ Accounts Rules, Solicitors’ Practice Rules and Hong Kong Professional Conduct Volume 1, 3^rd Edition.[16]  A schedule of prima facie breaches was attached together with appendices and it was mentioned that the matter would be referred to the Conduct Section for investigation.  It was also mentioned that the Law Society was investigating complaints relating to alleged professional misconduct and that the applicant had until 3 May 2016 to respond to the matter.  The schedule particularised the various rules that had been breached together with brief particulars of the offending conduct. 

23.  The schedule listed the following breaches of the rules of the Solicitors’ Accounts Rules:

(1) Rule 10(1), 10(2), 10(3), 10A and 11: “failed to produce a complete set of books and accounts, bank statements, bank reconciliation and clients’ reconciliation statements of all the Intervened Firm’s client accounts prepared monthly and other supporting documents for inspection by the MAs.”

(2) Rule 7 and 9A: “there were 19 overdraft balances of client’s money in the total sum of $5,003,822.10 as revealed from those banks statements of the Firm’s client accounts produced by the Intervened Firm.”

(3) Rule 7: “there were 88 debit balances in the total sum of $27,062,303.55 shown in the “Client Audit List” known as listing of clients’ ledgers, as at 21 March 2016 of the Intervened Firm’s Tsim Sha Tsui Office and the Yau Mei Tei Office.”

24.  The schedule listed the following breaches of the rules of the Solicitors’ Practice Rules (SPR) and the Hong Kong Professional Conduct Volume 1, 3^rd Edition (the Guide):

(1) Rule 2(e) of the SPR and Principle 2.03 of the Guide: “there were (i) 28 cash transactions each in the amount of over $100,000.00 (“material cash transactions”) as revealed from bank statements of the Intervened Firm’s client accounts; and (ii) 372 cash or ATM withdrawals (consisting of various amounts ranging from the sum of $440,273.80 to $50.00) (“cash withdrawals”) as revealed from the bank statements of the Intervened Firm’s office accounts.”

(2) Rule 2(d) and (e) of the SPR and Principle 2.04 of the Guide: “failed to ensure every office where the Intervened Firm practised was and could reasonably be seen to be properly supervised and managed.”

(3) Rule 2(d) and (e) of the SPR: “failed to comply fully with paragraphs (2), (3), (4) and (5) of the Notice of Inspection dated 30 March 2016 served on you by the Inspectors.”

Relevant statutory provisions

25.  Part IIA of the Ordinance addresses the circumstances in which the Law Society may intervene in the practice of a solicitor or foreign lawyer.  The Intervention Decision was made pursuant to s.26A and Schedule 2 of the Ordinance. 

26.  The powers that are exercisable on intervention are contained in Schedule 2 of the Ordinance. Section 26A deals with circumstances in which powers conferred by Schedule 2 are exercisable which so far as material provides:

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

...

(c) the Council is satisfied that a solicitor or foreign lawyer has failed to comply with 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.

...”

27.  Schedule 2 is broken up into four parts entitled “Money”, “Documents”, “Mail” and “General” which reads:

“Money

1. (1) The Court of First Instance, on the application of the Council, may order that no payment shall be made without the leave of the court by any person (whether or not named in the order) of any money held by him (in whatever manner and whether it was received before or after the making of the order) on behalf of the solicitor or his firm or the foreign lawyer or his firm.

(2) No order under this section shall take effect in relation to any person to whom it applies unless the Council has served a copy of the order on him (whether or not he is named in it) and, in the case of a bank or other financial institution, has indicated at which of its branches the Council believes that the money to which the order relates is held.

(3) A person shall not be treated as having disobeyed an order under this section by making a payment of money if he satisfies the Court that he exercised due diligence to ascertain whether it was money to which the order related but nevertheless failed to ascertain that the order related to it.

(4) This section does not apply where the powers conferred by this Schedule are exercisable by virtue of section 26C of this Ordinance.

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 of $50000; 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.

3. Without prejudice to sections 1 and 2, if the Court of First Instance is satisfied, on an application by the Council, that there is reason to suspect that any person holds money on behalf of the solicitor or his firm or the foreign lawyer or his firm, the Court may require that person to give the Council information as to any such money and the accounts in which it is held.

4. On the death of a 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, the right to operate on or otherwise deal with any banking account in the name of the solicitor or his firm or the foreign lawyer or his firm, being an account in the title of which the word "client" appears, shall, notwithstanding anything in this Ordinance or otherwise to the contrary, vest in the Council to the exclusion of any personal representatives of such solicitor or foreign lawyer and shall be exercisable as from the death of the solicitor or foreign lawyer.

5. Subject to the service of any notice under section 2(3), and to any application that may be made under section 2(4), the Council or any person in that behalf appointed by the Council may withdraw the moneys, or from time to time any part of the moneys, in any banking account in the name of the solicitor or his firm or the foreign lawyer or his firm, and any moneys in the office of the solicitor or his firm or the foreign lawyer or his firm due to or held on behalf of his clients, and pay them into a special account or special accounts in the name of the Council or such person appointed as aforesaid and may operate on, and otherwise deal with, such special account or accounts as the solicitor or his firm or the foreign lawyer or his firm might have operated on, or otherwise dealt with, that banking account:

Provided that a banker with whom such special account or accounts is or are kept shall be under no obligation to ascertain whether that account or those accounts is or are being so operated on or otherwise dealt with.

6. In any case where the Council is unable to ascertain the person to whom any moneys referred to in a notice served under section 2(3) belong or where the Council otherwise thinks it expedient so to do, the Council may apply to the Court of First Instance for directions as to the transfer of such moneys.

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 of $50000.

(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.

Mail

8. (1) The Court of First Instance, on the application of the Council, may from time to time order that for such time not exceeding 18 months as the Court thinks fit postal packets (as defined in section 2 of the Post Office Ordinance (Cap 98)) addressed to the solicitor or his firm or the foreign lawyer or his firm at any place or places mentioned in the order shall be directed to the Council or any person appointed by the Council at any other address therein mentioned; and the Council, or that person on its behalf, may take possession of any such packets received at that address.

(2) Where such an order is made the Council shall pay to the Postmaster General the like charges (if any), as would have been payable for the redirection of the packets by virtue of any scheme made under regulation 32 of the Post Office Regulations (Cap 98 sub. leg. A), if the addressee had permanently ceased to occupy the premises to which they were addressed and had applied to the Postmaster General to redirect them to him at the address mentioned in the order.

(3) This section does not apply where the powers conferred by this Schedule are exercisable by virtue of section 26C of this Ordinance.

General

9. The powers in relation to sums of money and documents conferred by this Schedule shall be exercisable notwithstanding any lien on them or right to their possession.

10. Subject to any order for the payment of costs that may be made on an application to the Court under this Schedule, any costs incurred by the Council for the purposes of this Schedule, including, without prejudice to the generality of this section, the costs of any person exercising powers under this Schedule on behalf of the Council, shall be paid by the solicitor or foreign lawyer or his personal representatives and shall be recoverable from him or them as a debt owing to the Council.

11. Where an offence under this Schedule committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any director, manager, secretary or other similar officer of the body corporate or any person who was purporting to act in any such capacity, he, as well as the body corporate, shall be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

12. Any application to the Court of First Instance under this Schedule may be disposed of in chambers.

13. The Council may do all things which are reasonably necessary for the purpose of facilitating the exercise of its powers under this Schedule.

14. Any requirement of notice under this Schedule shall be made in writing under the hand of such person as may be appointed by the Council for the purpose and may be served on any person either by personal service or by being sent by registered post addressed to his last known place of business or residence.”

The grounds for leave to apply for judicial review

28.  There are two grounds of review in the Form 86.  Under the first ground, which was abandoned at the hearing, it is complained that the Intervention Decision was made on the basis of an erroneous construction or understanding by the Council of s.26A(1)(c) and properly understood it should not have been made.  Under the second ground, it is complained that the Intervention Decision was made in breach of the applicant’s legitimate expectation that the power to intervene would not be exercised until the last deadline, namely 31 July 2016, imposed on the applicant by letter dated 29 March 2016 to produce certain documents and reports for inspection. 

Illegality or irrationality

29.  The applicant argued that the Council had erroneously construed s.26A(1)(c) which provides that the powers conferred by Schedule 2 “shall be exercisable where 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...”. 

30.  Section 73(1)(b) concerns the making of rules governing accounting matters to which a solicitor must comply.  Section 73A concerns the making of rules governing indemnity against loss arising from claims in respect of civil liability incurred by a solicitor and employees of a law firm.  As already noted, Schedule 2 confers, amongst other things, power to the Council to freeze and hold on trust and sums of money held in a law firm and to require a solicitor to produce documents. 

31.  In general terms, under s.29A(1)(c), the Council must be satisfied that a solicitor has failed to comply with professional rules to the extent that it should exercise the powers conferred by Schedule 2.  The powers that the Council exercises will obviously depend upon the particular facts and circumstances of the case concerned.  The applicant’s position was that in the present case the Council was not and could not be so ‘satisfied’.

32.  The applicant submitted that the Council had committed an error of law in interpreting s.29A(1)(c) and therefore the decision in question should be quashed.  See Town Planning Board v Society for the Protection of the Harbour Ltd (2004) 7 HKCFAR 1, at §22 per Li CJ.  He also submitted that a statutory power must be exercised for the purpose for which it is conferred, and if a public body, by reason of it having misconstrued a statute or for some other reasons, so uses its discretion as to thwart or run counter to the policy and objects of the statute, then persons aggrieved are entitled to the protection of the court.  See Padfield v Minister of Agriculture Fisheries & Food [1968] AC 997, at 1030B-D per Lord Reid.  In light of the foregoing, he further submitted that the decision was illogical because there was an error of reasoning and therefore liable to be quashed as Wednesbury unreasonable. 

33.  In short, the applicant argued that this ground of review established that the Council misconstrued s.26A(1)(c) and either misunderstood the proper purpose or principle in making the Intervention Decision or acted illogically in making the Intervention Decision. 

34.  It was contended by the applicant that for the Council to be satisfied as required that could only be achieved through a final and affirmative conclusion on non-compliance rather than alleged non-compliance.  He argued that the Council had misunderstood the section and had thus come to a decision in breach of its purpose.  He submitted that the Council proceeded on alleged, rather than proven, breaches of the rules of the Solicitors’ Accounts Rules and this was not sufficient for the Council to be satisfied that there was non-compliance.  Therefore, the Council did not have the power to intervene in the practice of AHC at that time.  

35.  The applicant based his view that the breaches were always allegedon the point that the investigation of non-compliance was ongoing until May 2016, and therefore at the time of the Intervention Decision the case against AHC was still at an investigatory stage, and thus the Council made the Intervention Decision to fish for evidence for the purpose of ascertaining non-compliance with the rules of the Solicitors’ Accounts Rules.  

36.  The applicant submitted that on 12 April 2016, while the investigation was still ongoing, the Council made the Intervention Decision based on their view that AHC had failed to comply with rules made by virtue of s.73(1)(b) without any particulars of any actual non-compliance.  He further submitted that it was therefore unlawful for the Council to exercise its intervention power for the purpose of fishing for evidence. He asserted that it was clear that the intervention power was for enforcement purpose rather than an investigative tool and therefore the making of the Intervention Decision to fish for evidence for ascertaining non-compliance by AHC with the rules of the Solicitors’ Accounts Rules was an exercise of power by the Council outside the scope of the power conferred.

37.  Moreover, it was argued by the applicant, if the correct purpose of the exercise of the intervention was further investigation, as the Law Society set out in its letter of 29 March 2016, it acted inconsistently in another alleged statement that it exercised such power for the purpose of winding up the irregular practice of AHC.  He submitted that this inconsistency was evidence of illogicality and irrationality, and that the Council in fact made the Intervention Decision with a view to fish for evidence.  He further submitted that the inconsistency between the stated purpose and the actual purpose was illogical and hence the Intervention Decision was liable to be quashed. 

38.  I find no substance to this argument.  The evidence pointed to the Council taking the intervention action to address malpractices by AHC as evidenced by apparent non-compliance of professional rules.

Legitimate expectation

39.  The next ground the applicant argued was that he had a legitimate expectation that the intervention power, pursuant to s.26A(1)(c), would not be exercised by the Council on or before the last of the three deadlines, namely before 31 July 2016, imposed by the Law Society in the letter to the applicant on 29 March 2016.  The Council’s Intervention Decision was thus in breach of this legitimate expectation.  

40.  The applicant contended that in the letter of 29 March 2016 it was made clear by the Law Society that (i) the Law Society extended the date for the production of a complete set of books and accounts to three different dates, the latest of which was 31 July 2016; (ii) investigation would not be closed before 31 July 2016; (iii) before the investigation were to be finished, the Law Society could not return a conclusion on any actual non-compliance in relation to the alleged breaches; (iv) the Law Society would not take any enforcement action in relation to the alleged breaches before 31 July 2016; thus the Council breached these terms by making the Intervention Decision on 12 April 2016, before 31 July 2016.

41.  It was submitted by the applicant that the letter of 29 March 2016 established a clear promise of an extension of time to AHC to produce accounts for the purpose of investigating the alleged breaches.  Accordingly, there was a clear message to the applicant that this investigation could not be completed by 31 July 2016.  Moreover, it was claimed by the applicant that this represented that no final conclusion regarding the alleged breaches would be made by the Law Society on or before the deadline of 31 July 2016.  

42.  The Law Society therefore represented that it would not take any enforcement action in relation to the alleged breaches on or before 31 July 2016, including but not limited to the exercise of the intervention power pursuant to s.26A(1)(c).  As such, the Law Society’s letter of 29 March 2016 had created a legitimate expectation that on or before 31 July 2016 there would not be any action taken by the Law Society against AHC in connection with the alleged breaches.

43.  The applicant acknowledged that there are ‘reasons recognised by law for not giving effect’ to legitimate expectations, and therefore the legitimate expectation can be ignored.  The applicant stated, however, that there was no reason recognised by law for not giving effect to his legitimate expectation.  The applicant’s willingness to produce documents and other things based on the instruction given to him by the Law Society demonstrated that he had relied on the representation and thus the Law Society in making the Intervention Decision had failed to honour the representation.

44.  The applicant submitted that the Law Society had breached his legitimate expectation that there would not be any action taken, such as the Intervention Decision, on or before 31 July 2016 and therefore the Intervention Decision should be quashed.

45.  I do not agree with the applicant’s submission or with the interpretation he placed on the Law Society’s letter of 29 March 2016.

The objections to the application for leave to apply for judicial review

46.  The Law Society opposed the granting of leave on three grounds. 

47.  First, the applicant had not exhausted available alternative remedies.  He had commenced legal proceedings before this application by way of Originating Summons seeking withdrawal of the Notice of Intervention served on AHC on 12 April 2016 which was the statutory means to give effect to the Intervention Decision.  The Originating Summons is still current. 

48.  Second, the challenge was academic and the relief sought was futile.  The evidence disclosed at the present stage revealed various breaches on the part of AHC.  It was argued that even if the Intervention Decision was quashed, the Law Society, which has a continuing duty to protect the public from misconduct on the part of the solicitors’ profession, would be compelled in the exercise of this duty to reach the same decision as the Intervention Decision. 

49.  Third, the two proposed grounds of review, namely illegality and legitimate expectation, were without merit.

Failure to exhaust alternative remedies

50.  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, §§114-117 and 140 per Ribeiro PJ; Kwok Ping Sheung Walter v The Law Society of Hong Kong, HCAL 73/2012, 27 September 2013, unreported, §19 per Au J; Kwok Cheuk Kin v Secretary for Transport and Housing, HCAL 136/2015, 4 January 2016, unreported, §§98-118 per Zervos J. 

51.  As already noted, AHC had previously applied for withdrawal of the Notice of Intervention by Originating Summons before seeking relief to quash the Intervention Decision.  The Law Society made the point that there was practically little distinction between the Notice of the Intervention and the Intervention Decision, as the former is a mechanism to effectuate the latter.  In other words, upon withdrawal of the Notice of Intervention, the Intervention Decision would have no practical effect.  Pursuant to s.26A(2) the Notice of Intervention is the mandated statutory means of giving effect to the Intervention Decision.  It will be recalled that under subs.(2) the powers conferred by Schedule 2 can only be exercisable under subs.(1)(c) if the Council has given notice in writing as specified. 

52.  The Law Society argued that in any event this was supported by Troutman Sanders’ letter dated 10 May 2016 to the solicitors representing the Law Society, which stipulated that “the Intervention is contested which is the basis of our clients’ Originating Summons filed on 16 April 2016”. 

53.  The Law Society submitted that the applicant had not exhausted his alternative remedies. 

Futility of relief

54.  This ground of objection by the Law Society was premised on the fact that the practice of AHC had attracted the largest intervention ever conducted against a firm of solicitors in Hong Kong.  It followed that even if relief was granted, that is, the Intervention Decision was quashed and the question was remitted to the Law Society for reconsideration, it would inevitably come to the same decision. 

55.  The Law Society submitted that AHC was run in a shambolic manner, without a proper filing system for its accounts, bank account records, client information, and so on.  There was also evidence of non-compliance by AHC after the Intervention Decision was made. Together with its partners and employees, AHC had yet to give a satisfactory response to the prima facie breaches set out in the Law Society’s letter of 18 April 2016.

56.  It is well established that a court would not generally entertain a matter which is hypothetical or academic in a sense that there is a lack of factual basis that gives rise to the question to be answered.  On other occasions, if the question has been overtaken by a subsequent event, the court might exercise its discretion to hear the matter if it considers relief would serve the public interest and carry utility.

57.  The Law Society argued that in the present case, the facts before the Court called for interference with the malpractices of AHC.  An example is the shortfall of records which concerns missing funds from AHC’s client accounts involving a total of over $1.4 billion.  It followed that the Law Society was compelled to make the Intervention Decision against AHC to protect the interests of the public and to ensure the integrity of the solicitors’ profession.

58.  The Law Society submitted that it was purely an academic exercise for the Court to judicially review the making of the Intervention Decision, when it did not make any practical difference. 

Illegality or irrationality

59.  Section 26A(1)(c) provides that the power of intervention shall be exercisable if the Council is “satisfied” that a solicitor has failed to comply with the professional rules.  It was argued that it was unrealistic for the applicant to speculate that the Council was ignorant of the express need to be satisfied as to the breach of the rules within the meaning of the section.

60.  The Law Society pointed out that the Council was in fact “satisfied” that the applicant and his partner had failed to comply with the relevant rules, as evident from the certified resolution dated 12 April 2016.[17] Moreover, it was open to the Council to be satisfied that failure of compliance had occurred even though the Law Society through its disciplinary process had not yet reached a conclusion that the applicant had committed any non-compliance of the rules.  The fact that the investigation was still ongoing or that the case for breaches was only prima facie at that stage is not inconsistent with the Council being satisfied that there were grounds for intervention pursuant to s.26A(1)(c).  

61.  I entirely agree with this submission and this seems to have been the basis for the abandonment of this ground by the applicant during the course of the hearing. 

62.  The Law Society submitted that the applicant’s allegation that the Council had misconstrued the meaning of “satisfied” was a request for this Court to review the merits of the Council’s decision that there was sufficient evidence for intervention under s.26A(1).  They contended that the weighing of evidence should entirely remain at the discretion of the primary decision maker.  It is well established that a court exercising judicial review jurisdiction will not review the merits of the decision.  That is not the concern of the supervisory function of this jurisdiction.

Legitimate expectation

63.  In the case of Ng Siu Tung v Director of Immigration (2002) 5 HKCFAR 1 the Court of Final Appeal held that any representation relied upon to support a legitimate expectation is to be “clear and unambiguous”, with any ambiguity resolved in favour of the implicated public authority.  See §§103-104 and 360.

64.  In addressing the issue of legitimate expectation the Court noted at §101 that:

“... the applicants must first establish the existence of a legitimate expectation on their part. Though the concept of “legitimate expectation” is somewhat lacking in precision, it is now firmly established that to be legitimate, the expectation must be reasonable (A-G of Hong Kong v Ng Yuen Shiu [1983] 2 AC 629 at p.636, per Lord Fraser of Tullybelton), that is, reasonable in the light of the official conduct which is said to have given rise to the expectation. Whether an expectation is legitimate in this sense depends, at least in part, upon the conduct of the relevant public authority and what it has committed itself to. Whether an expectation is legitimate, and to what extent, must also depend upon what the applicants are entitled to expect. The requirement of legitimacy means that judicial decisions “must be founded not only on what the claimant factually expected, but also on what the claimant, bearing in mind any relevant considerations of policy and principle, was entitled to expect”. ... It follows that, to the extent that an expectation of a benefit which cannot legally be accorded, it is not a legitimate expectation. ...”

65.  As noted by the quoted passage, an expectation of a benefit which cannot legally be accorded is not a legitimate expectation.  Even if there is an established expectation, it will still not be given effect if it involves the decision maker acting contrary to its legal duties, including its public law duties.  This was explained by the Court at §112:

“The principle that the court will not give effect to a legitimate expectation where to do so would involve the decision-maker acting contrary to law is fundamental....Consistently with this principle, the decision-maker cannot give effect to an expectation by exercising his statutory discretion ‘in a way which undermines the statutory purpose’ (R v Secretary of State for Education and Employment, ex p B (A Minor) at p.1132, per Sedley LJ).”

66.  The Law Society argued that there was no legitimate expectation that it would not take any enforcement action before the last closing deadline of 31 July 2016.  They argued that the letter it sent to the applicant on 29 March 2016 did not constitute such a representation, let alone in “clear and unambiguous” terms.  The purpose of the letter was simply to seek the provision of documents within a specified timeframe.  This was part of the ongoing investigation by the Law Society into the practice of AHC.  I agree with this observation. 

67.  The Law Society has a continuing duty to protect the reputation and integrity of the solicitors’ profession and interests of the public.  Therefore, applying Ng Siu Tung, the applicant’s expectation that the Law Society would not take any enforcement action before the last closing deadline could not be a legitimate one, in light of its continuing duty to take urgent intervention if the public interest so demands, regardless of whether an investigation is in progress.  The exercise of the power to intervene was not an abuse of statutory power. 

68.  As noted in Ng Siu Tung at §91, the doctrine of substantive legitimate expectation serves to ensure “first, that statutory powers are exercised lawfully and are not abused and, secondly, that they are exercised so as to result in administrative fairness in relation to both procedural and substantive benefits”.  The Court went on to explain at §92:

“The doctrine recognizes that, in the absence of any overriding reason of law or policy excluding its operation, situations may arise in which persons may have a legitimate expectation of a substantive outcome or benefit, in which event failing to honour the expectation may, in particular circumstances, result in such unfairness to individuals as to amount to an abuse of power justifying intervention by the court. Generally speaking, a legitimate expectation arises as a result of a promise, representation, practice or policy made, adopted or announced by or on behalf of government or a public authority. ...”

69.  The Law Society submitted that in this context there can be no basis for an allegation in the present case that there has been an abuse of statutory powers or that any unfairness has arisen.  I agree. 

Discussion

70.  I will address further the two grounds of review and the preliminary grounds of objection by the Law Society.  Whilst I have already made comments on these matters, I wish to add the following.

Legitimate expectation

71.  The first ground I will address is the one in relation to legitimate expectation. 

72.  The applicant claimed that he had a legitimate expectation that the Law Society would not intervene in the firm’s practice when it did by notice dated 12 April 2016 because he was given a deadline until 31 July 2016.  The deadline the applicant is referring to is the one that was given by the Law Society in its letter of 29 March 2016 in relation to the provision of certain documents and fresh accountant’s reports.  The applicant having been informed that the Council had resolved to request from the firm a list of documents for inspection by the Monitoring Accountants and that in light of the firm’s alleged breaches of the Solicitors’ Accounts Rules, the Council further resolved to reject the firm’s accountant’s reports on the ground that they were not prepared in compliance with the Accountant’s Report Rules and hence fresh accountant’s reports of the firm were requested to be prepared by another certified practising public accountant by 31 July 2016.  The applicant was also advised in the letter that the alleged breaches of the Solicitors’ Accounts Rules would be referred to the Conduct Section for investigation. 

73.  It was clearly apparent from the letter and other communications between the Law Society and AHC throughout this period that AHC were the subject of serious complaints which were being investigated by the Law Society in accordance with its responsibilities and powers. 

74.  A number of relevant documents were requested to be produced but were not forthcoming, and while this was a concern to the Law Society, it was also apparent to the Law Society that an array of malpractices had taken place in the conduct of the firm’s practice.  This was evident from the rejection by the Council of the firm’s accountant’s reports.  The Law Society made its position very clear to the applicant that a number of breaches of the rules had been identified which had been referred to the Conduct Section for further investigation. 

75.  The suggestion by the applicant that he had a legitimate expectation that the Law Society would not take any action against the firm until the last deadline for the production of accountant’s reports by 31 July 2016 is not borne out in reality.  First, the Law Society was constantly taking action to deal with the firm in relation to the investigation it was undertaking.  Secondly, the deadlines were for the production of outstanding documents and the accountant’s reports.  Thirdly, the latest deadline of 31 July 2016 related to the provision of fresh accountant’s reports because the reports submitted were not in compliance with the rules. 

76.  It is simply not open to the applicant to suggest that he had a legitimate expectation that the Law Society would not take some other or further action if it considered it necessary in its dealings with the firm.  The Law Society took a series of steps in its investigation of AHC and clearly put the firm on notice of its concern about the failure to produce certain documents and apparent breaches of the professional rules.  It finally took intervention action.  There was no representation by the Law Society, even implicitly, that the Council would not take intervention action.

77.  There is no substance to this ground and it is completely without merit.

Illegality or irrationality

78.  As I have noted this ground of review was abandoned during the course of oral submission, however I will discuss the argument advanced by the applicant and why it was fundamentally flawed. 

79.  In this regard, it is necessary to focus on the requirement that the Council had to meet in order to invoke the power under s.26A(1)(c), namely it had to be “satisfied” that the solicitor had failed to comply with certain professional rules.

80.  In general terms, the requirement of being “satisfied” involves the decision maker conducting an assessment and evaluation of the information material before him in order to come to an informed decision.  In the present case, this involved the Council applying its mind to the information and material before it in the context of the statutory scheme and its provisions under which the decision was to be made.  It provides for the intervention in a solicitor’s practice in the public interest where it is sufficiently clear that there has been a failure to comply with certain professional rules warranting such intervention.

81.  There were occasions in correspondence where the Law Society refers to prima facie breaches of the rules.  The expression prima facie is frequently used in a variety of situations in legal lexicon.  Prima facie denotes evidence that, unless rebutted, would be sufficient to prove a proposition or fact.  In this instance, prima facie breaches seem to have been used on the basis that the evidence presented was sufficient to prove a breach of the rules, unless the solicitor was able to present evidence that was contradictory. 

82.  To invoke the power pursuant to subs.(1)(c), the Council needs to be satisfied that the solicitor has failed to comply with rules made by virtue of s.73(1)(b) or 73A.  It is a further requirement that the power can only be exercisable if the Council has given the solicitor notice in writing that it is satisfied that he has failed to comply with rules specified in the notice and that the powers conferred by Schedule 2 are accordingly exercisable in his case. 

83.  The Notice of Intervention dated 12 April 2016 set out that the Council was satisfied that the defendant had failed to comply with rules made by virtue of s.73(1)(b) (without identifying the rules that had not been complied with) and that the powers conferred by Schedule 2 would be exercised to intervene in the practice of AHC in the manner described therein.  Later by way of letter dated 18 April 2016, the applicant was provided with a schedule of prima facie breaches of the rules made by virtue of s.73(1)(b) and 73A. 

84.  The first observation to make in relation to the power under the subsection is that it only requires the Council to be “satisfied” of a failure to comply with the rules.  The Council in so being satisfied must act reasonably and fairly.  Whilst the applicant sought to raise a complaint that the Council acted unreasonably, it lacked sufficient particularity and substance. 

85.  It is to be noted that the applicant did not take issue with the form of the Notice or the lack of particularity in relation to the rules made by virtue of s.73(1)(b) that had not been complied with.  His complaint was that the Council could only invoke this power after there had been a formal determination that the applicant had breached the rules in question. 

86.  That is not what the section says.  This is a power of intervention by the Council to be exercised in the circumstances as specified by the section.  The taking of disciplinary action against a solicitor involves a separate process where ultimately a formal finding is made as to whether or not a solicitor has committed professional misconduct.  In this sense, the power of intervention is different where the Council only has to be satisfied of a failure to comply with professional rule by a solicitor. 

87.  As drastic as the power of intervention may be, it is there for the governing professional body, the Council, to take prompt and effective action to protect the public interest and maintain and safeguard the standards and ethics of the solicitors’ profession. The Council is constituted by elected members of the Law Society, who are practicing solicitors, and in their decision making processes they are governed by a detailed set of rules and requirements.  There was nothing before me that indicated that the Council departed from the relevant rules and requirements and in consequence acted unfairly or unreasonably.

88.  I should explain that although no issue was taken by the applicant on this matter, the Notice did not specify the rules that the solicitor had failed to comply with.  This is a requirement under s.26A(2).  I should note that there were other documents that listed the rules concerned.  It would be prudent when drafting a document pursuant to, and in the exercise of, a statutory power and in order to provide formal notification to an affected party, that it sufficiently particularises compliance with the relevant statutory provision or provisions by appropriately following the statutory language and sufficiently particularising the requirements as necessary and appropriate in the circumstances.

Wednesbury unreasonable

89.  As pointed out, during the course of oral submission the applicant abandoned the first ground and sought an adjournment to amend the Form 86 to include a new ground under the head of Wednesbury unreasonableness on the basis there was insufficient evidence to warrant a decision by the Council to intervene. 

90.  As noted by the Law Society such a complaint is unsustainable.  The weighing of evidence is entirely for the primary decision maker subject only to clear and obvious cases of irrationality in the assessment and evaluation process.  It was difficult to see any merit in this ground given the history and circumstances of the case. It not only lacked specificity but also substance.

Academic and futile

91.  I turn to deal briefly with the general grounds of objection by the Law Society that it would be academic and futile to quash the Intervention Decision.  Even though judicial review proceedings may be viewed as academic, leave may be granted where an important point of law or matter of public interest warrants adjudication by the court in the context of public duties or functions.  See Chit Fai Motors Co Ltd v Commissioner for Transport [2004] 1 HKC 465, at §20 per Ma CJHC (now Chief Justice Ma). 

92.  It is beyond question that it is of vital importance to the public interest that solicitors discharge their professional duties with integrity, probity and complete trustworthiness.  The purpose of intervention in the practice of a firm of solicitors is not punishment as would normally be available in disciplinary proceedings against a solicitor but for the protection of the public and upholding the rule of law.  Solicitors are officers of the court and they have a unique and important role and responsibility in the administration of justice and any form of compromise or diminution of that role and responsibility can have serious deleterious consequences to our legal system. 

93.  As noted by the Law Society, the Council is under a continuing duty to protect the integrity and reputation of the solicitors’ profession and the interests of the public and in light of all the facts and circumstances of the present case there were grounds for intervention against AHC at the time although they argued that since then further grounds have emerged that reinforce the intervention of AHC. 

94.  I would not go as far as suggested by the Law Society in their submission that where there is little or no practical effect judicial review should be disallowed.  It will very much depend upon the particular facts and circumstances of the case concerned and the issue or issues under consideration.  The court in judicial review does have the discretion not to provide a remedy if to make an order would serve no practical purpose.  See De Smith’s Judicial Review, 7^th Edition, at §18-054.

Alternative remedy

95.  Finally, there is the issue that the applicant had not exhausted an alternative remedy, namely the Originating Summons in which together with his partner he seeks the withdrawal of the Notice of Intervention. 

96.  Judicial review is an exceptional remedy and the grant of it is in the discretion of the court. There is a blurred distinction as to whether the Originating Summons in seeking the withdrawal of the Notice is also challenging the decision of the Council.  In any event, as I have already explained pursuant to s.26A(2) the Notice is the mandated statutory means of giving effect to the Intervention Decision.  In the present proceedings the applicant did not seek to challenge the validity of the Notice but rather sought to question the Council’s decision on the basis of construction of s.26A(1)(c), which he has now abandoned.

97.  It would seem that the forum of the Originating Summons did provide the means of an alternative remedy in that the applicant by seeking the withdrawal of the Notice of Intervention was in effect challenging the decision to issue it.

Conclusion

98.  For the foregoing reasons, I concluded that none of the grounds advanced by the applicant were reasonably arguable.  I refused the application for an adjournment to amend the Form 86 and for leave to apply for judicial review of the Intervention Decision. 

99.  I make an order nisi that there is no order as to costs.  I do so because this is a leave application and the Law Society were invited to attend the hearing to assist the Court if it so wished, even though I was assisted by its submission.