LEE SIU HONG t/a HONG LEE & CO (A FIRM) v. THE LAW SOCIETY OF HONG KONG AND ANOTHER

HCA 2216/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2216 OF 2013

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J U D G M E N T

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1.  These proceedings are brought by a sole solicitor practitioner in the name of his firm against The Law Society of Hong Kong and a solicitor firm acting on The Law Society’s instructions. This is an application by those defendants to strike out the proceedings as it is disclosing no cause of action and/or on the grounds that they are vexatious and an abuse of process.

2.  When the papers first came before me, it was apparent that the Statement of Claim was a long, drawn-out narrative, lacking in essentials, but containing paragraph after paragraph of evidence. In its then form, I would have struck the proceedings out because they were incoherent and largely unintelligible.  I did not see why I should have to rely upon the defendants’ submissions and arguments to identify the salient features of the plaintiff’s claim before they proceeded to advance why I should strike it out.  Accordingly, in order to give the plaintiff the opportunity plead a coherent, succinct and intelligible cause of action, I adjourned the original hearing date (12 June) to 23 June, today, for a new Statement of Claim to be filed and served.

3.  Although now half the length of the original and designated as an Amended Statement of Claim, which was not what I asked for or expected, the substituted product is not much better than its predecessor.  Accordingly, I have had to distil from disorganised material the nature and extent of his claims or, more accurately, complaints aided by the written submissions of Ms Poon for the 1st defendant and Mr Yu for the 2nd and 3rd defendants.

4.  The background is as follows.  The initiating event is the filing of a bankruptcy petition against the plaintiff in February 2004.  He does not identify the petitioner in the statement of claim, but it is now clear that it was based on a claim for unpaid wages to staff.  As a consequence, The Law Society became involved and the plaintiff’s practice was placed on the watch list.  In October 2008, a bankruptcy order in respect of these non-payments of wages was made and, as a consequence, the Official Receiver took charge of the plaintiff’s office and, in effect, the practice.

5.  On 8 October 2008, the 1st defendant, The Law Society of Hong Kong, exercising its statutory powers, resolved to intervene in the plaintiff’s practice.  It then appointed the 2nd defendant, a partner in the 3rd defendant practice, as the intervention agent acting on its behalf.  It served Notice of Intervention upon the plaintiff with a certificate that the intervention would be monitored by a committee of three members of the council, including a Mr Thomas So, on or about 9 October 2008. 

6.  On 5 November 2008, the bankruptcy order was annulled with the consent of the petitioner.  The defendants became aware of this shortly afterwards.  The plaintiff alleges that in a meeting on 17 November 2008, the defendants acknowledged that the intervention should cease, but, it is alleged, did not know how to terminate it.  The plaintiff said he asked the 2nd and 3rd defendants to stop the unpacking and repacking of old and closed files.  He said the 1st defendant advised him to apply to the High Court for an order directing withdrawal of the Notice of Intervention under section 2(4) of Schedule 2 of the Legal Practitioners Ordinance, but he says there was no ground for an application for the withdrawal of the notice.  The eight-day period had elapsed and the bankruptcy order had been a valid basis for the intervention and that, it would seem, must be right.

7.  On 24 November 2008, the 2nd and 3rd defendants had completed the transfer of live files to new solicitors, including the Sinoearn file.  On 25 November 2008, The Law Society reissued a practising certificate to the plaintiff.  It acknowledged that the plaintiff’s interpretation of section 2(4) of Schedule 2 to the Legal Practitioners Ordinance had been correct.  Intervention continued and the 2nd and 3rd defendants continued to perform work in the plaintiff’s practice.  The plaintiff was allowed to return to the offices of his practice on 12 December 2008, but not allowed to contact clients or deal with any file. 

8.  On 5 January 2009, The Law Society announced the termination of the intervention and permitted the plaintiff to return to practice.

9.  The plaintiff tried to get back the Sinoearn file, but this was refused.  It seems to me that it could not easily be returned in any event, having been assigned to other solicitors, and it would, as one aspect, require the consent of the clients themselves to the file being returned to its former solicitors.  So there were obviously problems there from the practical point of view.

10.  In March 2011, The Law Society started disciplinary proceedings against the plaintiff for non-payment of counsel’s fees in the Sinoearn case.  It made it clear that the plaintiff was personally liable as a matter of professional conduct and the failure to obtain funds was not an excuse; that is, the plaintiff ought to have made proper provision for his liability for counsel’s fees.

11.  The plaintiff made a number of complaints concerning these proceedings, including those relating to the withholding of correspondence and other documents and in relation to some procedural aspects.  Nevertheless, the outcome was that he was fined HK$100,000 in costs.  The plaintiff appealed against the findings against him to the Court of Appeal (CACV 188/2012), but his appeal was dismissed.

12.  I have read the court’s judgment. Although the plaintiff pleads that he is appealing to the Court of Final Appeal against that Court of Appeal decision, he has been refused leave by the Court of Appeal in dismissive terms.  I will nevertheless set out the core of the Court of Appeal’s findings.  In my judgment, and I am bound by the findings of that court in any event, there is no substance or merit in the plaintiff’s complaints about the findings of the disciplinary committee.  The Court of Appeal expressed its surprise that the committee omitted to deal with the matter of the so-called “discharge agreement” in its findings.  However, it went on to express its own view, as expressed by Mr Justice Stock VP, in the following terms:

“I am satisfied that the particular arrangement upon which the solicitor said he entered with the barrister would constitute a breach of duty to the client as well as to the court, wherefore it could not amount to a reasonable excuse.”

I would simply add, respectfully, my own initial reaction to the plaintiff’s reliance on this so-called discharge agreement.  It is both bizarre and quite unprofessional.

13.  The judgment of the Vice-President went on to castigate this purported agreement in the clearest terms and concluded with a statement which ought to be a basic tenet of solicitors who instruct counsel:

“He ought either to have secured funds on account in good time or in good time ceased to act. His story, even if true, could not constitute a reasonable excuse.”

It was also of relevance, and this significantly undermined the plaintiff’s case on this issue, that, and I follow another paragraph in the Vice President’s judgment:

“The intervention after the solicitor’s bankruptcy did not constitute a reasonable excuse for his failure to pay the fees. The bankruptcy order was made well after the fees became due and there was no attempt by him in that period or after his discharge from bankruptcy to secure the fees from the client.”

14.  In my judgment, that is the end of the matter as far as the so-called discharge agreement and liability for counsel’s fees are concerned and any attack upon the disciplinary proceedings.  There is no cause of action on this aspect.  There was no negligence on the part of The Law Society in respect of the loss of the lien because he still had recourse against his client which he chose not to pursue.  His complaint about the taxation of costs cannot give rise to any cause of action.

15.  That leaves only the matter of the continuation of the intervention process and the handling of the Sinoearn file during it.  It really boils down to two aspects: the security for the plaintiff’s costs for work done on the Sinoearn file and payment to the 2nd and 3rd defendants for their work done during the intervention.

16.  The particulars pleaded are repetitive and some are eliminated from consideration and therefore not of any relevance by reason of the findings of the disciplinary committee and of the Court of Appeal.  These two remaining aspects are shortly stated as alleged negligence on the part of the defendants in failing to secure protection of the plaintiff’s fees on the Sinoearn file before it was handed over, and allowing and claiming excessive fees in respect of the work done during the intervention, which, it is claimed, went on for far longer than was justified.

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 of 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. 

18.  Although described as draconian and in Geoffrey Vos QC’s view leading “inexorably to the destruction of the solicitor’s practice,” I think that whilst that may be the situation in the United Kingdom, I am far from sure that in Hong Kong this is likely to be the inevitable result.  But it is beyond argument on the authorities that a solicitor cannot bring claims for breaches of a private law duty of care against The Law Society arising out of an intervention.  This cannot coexist with the statutory scheme, “since it would frustrate the operation of that to the point where it would be unworkable.”  That was the conclusion of Geoffrey Vos QC after reviewing all the authorities.  Legislation gives precedence to the interests of the public in being protected from solicitors over the interests of the solicitor himself.  “It is simply not open to a solicitor to challenge the process leading to the decision to intervene by way of a private law action for damages for negligence.”

19.  I have also been helpfully referred to the decision and findings in Egole v The Law Society of England & Wales [2003] EWHC 747 (Ch) which itself considered the decision of Mr Justice Lightman in Kevin Dooley v The Law Society, 23 November 2001.  I do not need to repeat here the salient findings.

20.  That, in my judgment, is an end to the matter.  It is not relevant to the issues, but the plaintiff could and can, despite the intervention, but after it, have sought recourse against his client if he thought his claim for costs and fees was well based, but there is no negligence and no causation.

21.  In view of the authorities and their application to this case, the action brought by the plaintiff is entirely misconceived.  Attempting to re‑litigate matters which have already been decided by courts of competent jurisdiction is itself an abuse; it is vexatious and an abuse of the process of the court.

22.  The plaintiff’s claim is to be struck out and dismissed with costs to the defendants to be taxed if not agreed.