THE LAW SOCIETY OF HONG KONG v. A SOLICITOR

Civil Appeal No. 130 of 1995

Headnote

Appeal against Solicitors Disciplinary Tribunal's finding of conduct unbefitting a solicitor - participation in dubious passport scheme.

IN THE COURT OF APPEAL

1995, No. 130
(Civil)

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J U D G M E N T

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Nazareth, V.-P.:

1. On 9th May 1995 the Solicitors Disciplinary Tribunal found that the following two of four complaints against the appellant had been established:

"1. Failing to pay client's money into a client's account without delay in breach of r.3(1) of the Solicitors' Accounts Rules.

Particulars

Between November, 1989 and 18th May, 1990, the [appellant] received US$1,591,150.90 from 28 of the Applicants in payment of real estate investments and political contributions to facilitate the issue of Portuguese Passports which was paid into an Office Account No. 918983 with Citibank entitled Messrs Woo, Kwan, Lee & Lo for Portuguese Immigration.

4. Conduct unbefitting a solicitor - participating in the administration of a dubious scheme for the issue of forged passports.

Particulars

The [appellant] during the period from November, 1989 to June, 1991, applied or caused to apply through a Dr. Manuel Andrade for 14 families and 17 individuals a total of 77 Portuguese passports and identity cards. The scheme for application for the passports and identity cards was a dubious scheme which involved political contributions of either US$50,000.00 for individual and US$100,000.00 for families applicants. The passports and identity cards were subsequently discovered to be forgeries and all 72 passports and identity cards were seized by the Royal Hong Kong Police and removed from circulation."

2. In respect of the first complaint, the Tribunal ordered the appellant to be censured and in respect of the second complaint, that he also be censured and in addition that he pay into the General Revenue a fine of HK$100,000. It also ordered that the appellant pay all the costs of and incidental to the proceedings of the Tribunal and the costs of any prior inquiry or investigation in relation to the matters before the Tribunal on a full indemnity basis.

3. The appellant now appeals to this Court against those findings and orders.

4. The facts which are of importance can conveniently be taken from an agreed statement of facts and a statement made by the appellant, and can be summarised in the following way.

5. The appellant is a senior partner of a prominent firm of solicitors. He came to know one Dr Andrade, a Portuguese lawyer in Macao, who subsequently returned to Portugal but who used to visit Hong Kong. During one of his visits, Dr Andrade mentioned to the appellant that he was able through political connections in Portugal to secure a limited number of identity cards and passports for overseas investors without going through the usual application formalities. The scheme he explained involved an investment of US$50,000 in Portugal supplemented by a political contribution of US$50,000 for single persons or US$100,000 for families. Subsequently, the appellant mentioned the scheme to two of his close friends. They became interested and drew in two other friends. The four of them decided to participate in the scheme.

6. The appellant contacted Dr Andrade who came to Hong Kong. The appellant arranged for the four and their families to meet Dr Andrade one by one at his office, i.e. the appellant's office. Dr Andrade provided blank, unnumbered identity card forms upon which the four and their families signed and fixed their fingerprints. The appellant was present at each meeting. Dr Andrade took the forms and went back to Portugal to look for suitable investment opportunities. Later he telephoned the appellant, asking for photographs of the four investors and their families which were supplied.

7. During his visit, Dr Andrade had brought a draft form of power of attorney in Portuguese for the four investors to sign. As the appellant did not have a Portuguese interpreter nor a suitable typewriter, Dr Andrade, the appellant says, sought and obtained the assistance of the Portuguese Consulate General here. The four subsequently signed the powers of attorney in the presence of a Portuguese Consul in Hong Kong.

8. In the summer of 1989, the appellant and one of the four investors were in Portugal on a golfing holiday and went to Lisbon to see a building Dr Andrade had purchased for the investors in the commercial district; they did not see the title deeds but trusted Dr Andrade. The four paid their contributions direct to Dr Andrade's account in London.

9. After the first 8 passports had been issued to the four original investors, Dr Andrade asked the appellant to increase the political contributions to US$60,000 in the case of individuals and US$120,000 in respect of families, but to remit only US$50,000 and US$100,000 respectively, leaving the balance here which remained in the appellant's firm's account.

10. According to the appellant, in November 1989, Dr Andrade visited Hong Kong in the company of the Portuguese Minister of Commerce and Tourism. This reinforced, he says, his belief that Dr Andrade had substantial political connections in Portugal. The appellant says he entertained the Minister to dinner and invited friends who had applied for Portuguese identity cards and passports. Subsequently, he received a letter of thanks from the Minister, a copy of which he has exhibited.

11. About 1990 a second building was acquired through a company in Gibraltar. Early in 1990 Dr Andrade informed the appellant that the passports and identity cards for the four investors and their families had been issued and would be delivered to Hong Kong by a Foreign Ministry courier. Subsequently, a Mr Hernandez delivered them to the appellant. The appellant says he was under the impression that it was a normal and standard procedure in such instances for such travel documents to be delivered by courier rather than through the Consulate General, as Hernandez had told him he regularly travelled around the world on such missions. The appellant says he had no suspicion at the time of any irregularity.

12. Hernandez left blank identity card forms with him; in case anybody else was interested in the scheme, they were to be sent to Dr Andrade as before.

13. Other friends heard about the scheme and became interested. Altogether 14 families and 15 individuals obtained a total of 77 passports under the scheme.

14. In November 1990, according to the appellant, he was informed by Dr Andrade that a friend who was a very important person would be visiting Hong Kong. A Mr Tavares came to Hong Kong with his wife and introduced himself to the appellant as a consultant to the Prime Minister of Portugal. When he left, he gave identity card forms and a note from Hernandez to the appellant.

15. In his statement, the appellant emphasised that at no time did he solicit any applicants, that his role was purely as a go-between, passing documents and messages to and from Dr Andrade in Portugal on behalf of his friends. He says he knew nothing of the procedures by which the passports and identity cards were issued. He received no money in connection with this scheme. For his part, he saw it as doing a favour for his friends. In one or two instances, some of his friends introduced friends of theirs to the scheme. The appellant added that what he did was purely in his personal capacity and not in the capacity as a partner of his firm. However, he did, he says, use his firm to open a special foreign currency (US$) account to receive and remit the funds in the name of the firm.

16. Subsequently, he says, Dr Andrade told him to forward all future investments to Gibraltar but political contributions were to be sent to Switzerland. He did not consider that unduly suspicious as the investors had already sent money to London.

17. Needless to say, the prosecution did not accept all what was said in the appellant's statement.

18. The scheme came to an end in October 1991 when a Mr Antonio Koo travelling on a passport obtained through the scheme was denied entry to the United Kingdom and had his passports confiscated. His solicitors complained to the appellant's firm.

19. It soon became clear that the passports and identity cards were forgeries. The appellant contacted Dr Andrade who said he was too shocked to talk and thereafter he was difficult to contact. The appellant wrote to apologise to all the passport holders, advising them not to use the passports. Eventually, he refunded to all of them out of his own resources a total of over US$4m.

20. I turn then to the first complaint, upon which the Tribunal made the following finding:

"According to the Statement of Agreed Facts, up until 18th May 1990, the money that the [appellant] received from those people applying for passports was paid into an Office Account. By virtue of the definition of 'client's money' contained in Rule 2 of the Solicitors' Accounts Rules and the circumstances of the case, the Tribunal finds that the money that [the appellant] received was clients' money. It is a fundamental rule of Solicitors' Accounts that such money received in the circumstances must be paid into a client account. The Tribunal found that the [appellant] was not entitled to the money in the circumstances but the [appellant] was acting under a belief that he was so entitled. In applying Rule 2 to the present case, the Tribunal was of the view such belief should not taken into account. Thus, the Tribunal finds that Complaint 1 has been proved.

21. Rule 2 provides that

"'client's money' means money held or received by a solicitor on account of a person for whom he is acting in relation to the holding or receipt of such money either as a solicitor or, in connexion with his practice as a solicitor, as agent, bailee, stakeholder, solicitor-trustee or in any other capacity, but not money to which the only person entitled is the solicitor himself or, in the case of a firm of solicitors, one or more of the partners in the firm".

22. It is apparent from that definition of client's money why the Tribunal referred to their finding that the appellant was not entitled to the money in the circumstances.

23. The appellant's contention has always been that he received the money in his personal capacity as a friend and not as a solicitor to any of the applicants. The primary question was therefore whether he received those moneys as a solicitor or in connexion with his practice as a solicitor, or as he contends, in his personal and private capacity.

24. I pause at this point to mention that the recurrent complaint made by Mr Allen Yau for the appellant, who also represented him before the Tribunal, has been that the Tribunal failed to make findings and give reasons for their decisions and it was therefore difficult for him to make submissions. The alleged absence of reasons is itself one of the primary grounds of appeal and I shall return to it in due course.

25. Turning then to the first 4 grounds of appeal in the appellant's notice of appeal, which pertain to the first complaint, Mr Yau submitted that there was no evidence of a client and solicitor's relationship from any of the applicants, nor any real evidence of such a relationship. That submission must be rejected. Although, as it is not unusual, not all the evidence points one way, there was ample evidence from which the Tribunal could make the inferences necessary to support their findings, for instance, the meetings in the appellant's office, the part he played personally, the use of his office accounts for the funds, moreover funds of which the bulk came from persons who were not partners.

26. I find no merits in the submissions against the Tribunal's findings on complaint 1. Two members of the Tribunal were practising solicitors, well placed to resolve such matters. That is a consideration that has received repeated recognition in the authorities.

27. I turn then to the 4th complaint. This was dealt with by the Tribunal in the following way:

"According to the Statement of Agreed Facts, the oral evidence of Mr and Mrs Antonio Koo and the documents which the parties referred to in the trial, the [appellant] did participate in the administration of a scheme for the issue of passports which subsequently turned out to be forgeries. The Tribunal had to determine whether or not the scheme was dubious and the [appellant's] conduct was unbefitting.

The evidence of both Mr and Mrs Koo gives details as to how they obtained the passports through the [appellant]. When they attended the [appellant's] offices, it was the [appellant] himself who took down all the personal details of Mr and Mrs Koo including taking their fingerprints in his offices. The scheme purported to grant nationality and citizenship of Portugal to foreign applicants. The [appellant] took no steps to verify the legality of the scheme. There was no formal application, no medical examination, no police clearance and no receipts given for the payments that the Koos made towards the scheme although the [appellant] requested that cheques should be issued in favour of Messrs Woo, Kwan, Lee & Lo. The [appellant] was fully aware of the fact that passports would be issued as the payments were made for political contributions.

The Tribunal finds that the arrangements relating to the scheme were dubious and improper and the conduct and the involvement of the [appellant] was unbefitting in the circumstances as a senior solicitor with years of experience. Thus, the Tribunal finds that Complaint 4 has been proved."

28. Mr Yau submits, first of all, that the Tribunal erred in law in formulating the issue 'whether or not the scheme was dubious'. For the purpose of disciplinary proceedings, he contends that that objective test was wrong. Mens rea, he says, is an ingredient of every offence and regard has to be had to the state of mind of the appellant. What the Tribunal should have asked themselves, he adds, is this: in the appellant's perception or knowledge was the scheme a dubious one? However, that view is not supported by the authorities. These, Bird and Weir in The Law, Practice and Conduct of Solicitors [1989] summed up in para.99 at pp.179-181 in the following way:

"An application to the Solicitors Disciplinary Tribunal to strike the name of a solicitor off the roll, or to require a solicitor to answer allegations contained in an affidavit, may be made on statutory grounds, or on the ground of conduct unbefitting a solicitor .

An allegation of unbefitting conduct is substantiated by proof of conduct on the part of a solicitor:

(a) which would reasonably be regarded as disgraceful or dishonourable by his professional brethren of good repute and competency5, or

(b) which is inexcusable and such as to be regarded as deplorable by his fellows in the profession6, or

(c) which is such as to render him unfit to remain a member of an honourable profession7.

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Notes

5 Including dishonourable conduct to the court, or to his client or to a third party: Re A solicitor ex parte The Law Society [1912]1 KB 302 ...

6 Re a Solicitor [1972]2 All ER 811, per Lord Denning MR

7 Re Weare [1893]2 QB 439, CA"

29. That view of the law is also confirmed in Halsbury's Laws of England, 4th Edn., Vol. 44 paras 297, 299 to 304 and also in Cordery on Solicitors, 8th Edn. at p.319.

30. A complaint of conduct unbefitting a solicitor may be made out even where no dishonesty is involved but merely naive and stupid behaviour. Bolton v Law Society [1994]1 WLR 512 at 515F-516.

31. In rejecting Mr Yau's submission, it is also pertinent to note the limited role of this Court on appeal. It is for the Solicitors Disciplinary Tribunal to deal with such disciplinary matters and to decide whether the conduct was unbefitting a solicitor judged by the standards which responsible legal opinion demanded of its own profession. A decision to such effect will only be interfered with on appeal if plainly wrong. Re a Solicitor [1988]2 HKLR 137 at 144 A-E and In re A Solicitor (1924)93 LJKB 761. Furthermore, as Channell J said In re A Solicitor, ex parte the Law Society (1913)29 TLR 354 at 355, with reference to persons in a position similar to the Tribunal have:

"... These gentlemen were the most competent to decide upon professional matters of this kind, ... "

That is an important consideration that has been repeatedly recognised by the courts.

32. Mr Yau turns next to the standard of proof, complaining that the Tribunal did not state what standards it had applied. The prosecution, he says, made it plain that it did not allege dishonesty and contended for a burden lower than beyond reasonable doubt, simply a balance of probability. He contends for a standard beyond reasonable doubt and submits that a high standard is required. Moreover, he submits that the position was compounded by the prosecution in its closing address contending that political contributions were a form of bribery and a strong signal of illegality.

33. Taking the last contention first, there was no suggestion that there was anything of that sort on the part of the appellant nor that the Tribunal took such view of the matter as is evident from the very light sentence they imposed. I find therefore no substance in the complaint against the references to bribery and illegality.

34. As for the standard of proof required, clearly it was not that of proof beyond reasonable doubt. This was not even a case of allegations of conduct of the nature of a criminal offence nor was so high a standard required as to be virtually the same. The standard embodied by a balance of probability enables a tribunal to apply that which is commensurate with the gravity of the complaint. See for example Dr Lai King-shing v The Medical Council of Hong Kong, CA 95 of 1995 (unreported) decided by this Court only last month. The conduct that is the subject of the complaint here is far from conduct that would be a criminal offence. There is no reason to suppose here that the Tribunal applied any standard other than what is commensurate.

35. Having carefully considered all that Mr Yau has submitted on the standard of proof, I am unable to find any merits in those submissions.

36. Proceeding then to grounds 7 and 8 of the notice of appeal, these were pursued upon a series of minor complaints, arising out of the way the Tribunal dealt with the 4th complaint in its decision. That I have already read out earlier in this judgment. I find no merit in those complaints individually or cumulatively and will only refer briefly to the following matters to indicate their wholly unmeritorious nature. Mr Yau complains that the reliance on the evidence of Mr and Mrs Koo was misconceived in that the period specified in the charge did not embrace their transaction. However, it is quite plain that what happened to the Koos was part of the overall scheme. Mr Yau complains also that the prosecution failed to call evidence from the Portuguese Consulate on the requirements for Portuguese passports under Portuguese law, and likewise that no expert evidence of Portuguese law was called upon those matters. But there was simply no need for that to be done in the face of the overwhelming evidence of the dubious nature of the scheme. I say overwhelming in the light of the following considerations and matters identified by Mr Joseph Fok for the Law Society. The Portuguese passports which were issued were forgeries. The appellant was involved in the issuance of those passports. The scheme was simply a cash for passports scheme, available to anyone prepared to invest in real estate in Portugal and make political contributions. There were no formalities at all, no medical checks, no police checks. The appellant personally took the fingerprints. No passport forms were filled. The passports and identity cards were delivered in Hong Kong through the appellant. Part of the moneys were paid into bank accounts in Switzerland at the direction of Dr Andrade. Although the scheme was first offered to the appellant's friends, it was subsequently extended to referrals. It involved no less than 77 passports and identity cards, all of which turned out to be forgeries. The moneys were paid into the appellant's firm's account and amounted to a very substantial sum, namely US$4.79m. No more need be said.

37. Returning to Mr Yau's submissions, he continued in his previous vein, and I have to say, equally unrealistically and wrongly, in my view, that the Tribunal should not have drawn the adverse inferences indicated in the passage I have quoted from their decision.

38. Finally, I come to Mr Yau's major and recurrent complaint that no reasons were given by the Tribunal. He submits that reasons should have been given and he makes that submission solely upon the authority of the very recent judgment of Rogers J in Fu Ning Dispensary v Pharmacy and Poisons Board, MP No.864 of 1995.

39. Mr Fok, to whom I must say I am indebted generally for his helpful submissions, contends that it is well established that domestic tribunals are not required to give reasons and that in any case, the Tribunal has at the very least given the short reasons contemplated in the Fu Ning Dispensary judgment and the principal authorities it relied upon. The latter submission, I think, must plainly be accepted a fortiori in the context of the relevant issues those reasons addressed. A challenge to the judgment in the Fu Ning Dispensary's case will therefore have to await another occasion when hopefully a better opportunity is afforded to this Court to review the authorities. That is as well, given the importance of the question involved.

40. In the result the appeal fails save in the one respect that Mr Fok very properly concedes. It is this. The maximum penalty was increased from $50,000 to $100,000 only after the appellant's conduct, that is the subject of the 4th complaint. Upon the presumption and principles recognised in A Solicitor v The Law Society of Hong Kong(1995)2 HKC 541 it is the penalty in force at the time of the action that must be applied. Although the appeal must therefore be allowed in respect of the order of payment of $100,000 which must be reduced to $50,000, I would dismiss the appeal in every other respect.

Mayo, J.A.:

41. This appeal by a solicitor is against the findings of a Disciplinary Tribunal of the Law Society.

42. The findings in respect of two of the complaints are the subject of this appeal.

43. The first is that the solicitor failed to pay money into a client account without delay in breach of Rule 3(i) of the Solicitors' Accounts Rules.

44. The Tribunal largely placed reliance upon the contents of an agreed statement of facts.

45. It was the solicitor's case that none of the applicants for Portuguese passports was his client. He was acting purely in a personal capacity.

46. There was a considerable amount of evidence concerning the relationship between the solicitor and the applicants. It was accepted that the applicants, attended at the solicitor's' offices and that payments of the moneys payable under the scheme were paid to the solicitor and that he paid the moneys into his firm's office account.

47. There was also the statement made by the solicitor that he did not charge any of the applicants for his professional services. Some of the applicants were his personal friends or relatives. Also some of the applicants had not previously been known to him. They had been introduced to him by the other applicants.

48. There was undoubtedly sufficient evidence to entitle the Tribunal to find that a solicitor and client relationship existed.

49. What is perhaps of most importance in respect of this complaint is the definition of "client's moneys" in the Rules. It states:

"... means money held or received by a solicitor on account of a person for whom he is acting in relation to the holding or receipt of such money either as a solicitor or, in connexion with his practice as a solicitor, as agent, bailee, stakeholder, solicitor-trustee or in any other capacity, but not money to which the only person entitled is the solicitor himself or, in the case of a firm of solicitors, one or more of the partners in the firm;" (Emphasis added).

50. There can be no doubt on the agreed facts that payments were paid by the applicants to the solicitor and that he in turn paid the moneys into his firm's office account. These moneys were on the above definition "client's moneys".

51. The moneys were not paid into a client's account without delay as was required by the rules and accordingly there does not appear to be any doubt that the Tribunal came to the correct conclusion.

52. It is of course accepted that the payments which were made by the solicitor's partners would not have contravened the rules.

53. The second complaint related to the solicitor's involvement in what was described as a dubious scheme.

54. On the agreed facts the passports which were obtained were forged passports.

55. It was accepted that the solicitor did not know this when he received the payments from the applicants. However it is clear that he knew that the moneys would be applied towards what was described as political contributions.

56. It is also clear that none of the arrangements which were made were made with the Portuguese Authorities or the Portuguese Consulate. When the passports were actually delivered to the solicitor they were brought by a courier independently of the Consulate.

57. Indeed according to the agreed facts the object of the exercise was to bypass the usual formalities.

58. According to the prosecution it was undoubtedly the responsibility of the solicitor to satisfy himself of the propriety of the scheme. He clearly did not take sufficient action to satisfy himself that the scheme was a valid one. He was derelict in his duties in failing to do so.

59. A definition of misconduct is referred to in paragraph 11 of Cap 17 of the 6th Edition of The Guide to the Professional Conduct of Solicitors.

"Misconduct

11. If a solicitor's acts or omissions are such as would reasonably be regarded as 'dishonourable' or 'deplorable' by other members of the profession, it would be open to the Solicitors' Disciplinary Tribunal to reach a finding of professional misconduct in respect of which disciplinary action may be taken. This is so even if the client suffers no loss and is thus unable to sue for damages."

60. This definition can be reconciled with the observations made by Lord Denning at p873 of In re A Solicitor [1972] 1 WLR 869:

"In my opinion negligence in a solicitor may amount to a professional misconduct if it is inexcusable and is such as to be regarded as deplorable by his fellows in the profession."

61. There were ample grounds for the Tribunal to conclude that the solicitor had been guilty of conduct unbefitting a solicitor namely participation in the administration of a dubious scheme for the issue of forged passports.

62. Mr Yau for the solicitor complained that the Tribunal had given insufficient reasons for the conclusions they reached. What this overlooks is that there was very little dispute on the facts. The Tribunal based its findings on the agreed statement of facts prepared by the solicitor. The facts amply supported the findings which were made.

63. What needs to be borne in mind is that the court is reluctant to interfere with the findings by a Tribunal such as in the present case.

64. One reason for this is that the solicitor is being judged by his peers. They are in the best position possible to form a view as to the propriety of a solicitor's conduct.

65. In my opinion the Tribunal almost certainly came to the correct conclusion and there are no grounds for interfering with the decision save for the downward adjustment of the amount to be fined imposed on the fourth complaint.

66. This was conceded by Mr Fok for the respondents. In my view subject to this the appeal should be dismissed.

Chan, J.:

67. I agree that except for the concession by the Law Society with regard to the fine imposed the appeal ought to be dismissed and for the reasons given by my Lords.

68. There is every good sense in the practice that the propriety of the conduct of a professional man is to be judged by his peers. That is also the intention of the relevant legislation. The court will respect the decision of a disciplinary tribunal and will not usually interfere unless it is plainly wrong.

69. I think there is ample evidence to support the Disciplinary Tribunal's finding that there was a solicitor and client relationship in the present case. It is indeed very telling that even the appellant's partner, looking at the office account which was opened on the instructions of the appellant in the name of the film for Portuguese Immigration, saw fit to open a client' s account and put money subsequently received into that account and transferred the balance standing in the office account into it as well. In other words, to her mind, that is, to the mind of a peer and colleague of the appellant, the money should properly go into the client's account.

70. With regard to the fourth complaint, looking at the manner in which the passports and the identity cards were obtained, how the scheme operated and the transfers of money into accounts in various countries, 1 think not only was the Disciplinary Tribunal entitled to find that the scheme was dubious, any reasonable man would also have done so. In fact even Mr and Mrs Koo, who are layman, had taken the trouble of asking the appellant whether that scheme was proper and legal. They were, of course, assured by the appellant that there was nothing wrong in it. If it could make a layman feel uneasy about it, so much more for an experienced solicitor. It is futile to take refuge in the trust which was so clearly misplaced in Dr Andrade. If inexcusable negligence is required as an ingredient of the complaint, I am inclined to say that this is such a case.

71. The Disciplinary Tribunal had given brief, but in my view sufficient, reasons for its findings and conclusions. I can see no ground for saying that they are plainly wrong.