LI CHIU WAH JOSEPH v. HONG KONG SOCIETY OF NOTARIES

CACV 394/2020

[2022] HKCA 1482

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 394 OF 2020

(ON APPEAL FROM HCAL NO 2658 OF 2019)

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J U D G M E N T

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Hon Au JA (giving the Judgment of the Court):

A. INTRODUCTION

1.  This is the applicant’s appeal against the judgment of Alex Lee J (“the Judge”) given on 30 July 2020 (“the Judgment”), whereby the Judge refused to grant leave to apply for judicial review (in part) and dismissed the applicant’s application for judicial review (for the part in respect of which leave was granted) following a rolled‑up hearing on 24 April 2020.

2.  The impugned decision concerned a charge of $3,000 (“the Late Charge”) levied on the applicant by the Hong Kong Society of Notaries (“the Society”) for his late submission of his 2019 Solicitor Practising Certificate for the renewal of his Certificate of Membership for the practice year 2019 (“the 2019 Membership Certificate”) to practise as a notary public and the Society’s refusal to waive that charge.

3.  At the end of the hearing, we reserved our judgment to be handed down.  This is what we do now.

B.  BACKGROUND

4.  The background facts have been comprehensively summarised by the Judge at [8] ‑ [27] of the Judgment.  It suffices to highlight the following for the purpose of this appeal.

5.  The applicant has been a practising solicitor in Hong Kong since 1987 and a practising notary public since 1995.  He has also been a member of the Society since 2005.  The Society is a company limited by guarantee and incorporated in Hong Kong in 1977 with Articles of Association (“the Articles”).

6.  In Hong Kong, pursuant to sections 40D(1)(d) and 40D(2) of the Legal Practitioners Ordinance, Cap 159 (“the LPO”), in order to be qualified to practise as a notary public, a person must either:

(1)  hold a current Practising Certificate as a notary public from the Society; or

(2)  hold a current Certificate of Membership (“Membership Certificate”) from the Society and a current practising certificate as a solicitor issued by the Law Society (“Solicitor Practising Certificate”).

7.  Pursuant to sections 40A(1)(a)(i) and 40A(1)(a)(ii) of the LPO, for a person to be qualified for appointment as a notary public, his/her name must have been on the roll of solicitors continuously for the whole of the period of 7 years immediately before the date of his application for appointment and he/she must have practiced as a solicitor for a period or periods in aggregate of not less than 7 years.

8.  On 19 November 2018, following the “Guidelines on Application for 2019 Certificate of Membership and Application for 2019 Practising Certificate as a Notary Public”[1] issued by the Society on 19 September 2018, the applicant applied for the renewal of his Membership Certificate for the practice year 2019.

9.  He paid the membership subscription fee of $9,000 and submitted a completed application form[2], in which he agreed to honour a standard undertaking (“the Undertaking”) that he would deliver a certified true copy of his Solicitor Practising Certificate for the practice year 2019 (“the 2019 Solicitor Practising Certificate”) to the Secretary General of the Council on or before 12 noon on Friday, 11 January 2019.

10.  On 14 December 2018, the Society sent his 2019 Membership Certificate to the applicant, together with an “Important Notice” reminding each member to honour the Undertaking, failing which he/she would have to pay the additional administrative charge and may further be subject to disciplinary proceedings.

11.  The applicant however failed to deliver a copy of his 2019 Solicitor Practising Certificate to the Society by 11 January 2019.

12.  On 11 January 2019, the Society informed the applicant by post and email that he had breached the Undertaking and was required to deliver a certified true copy of his 2019 Solicitor Practising Certificate and to pay $3,000 as the additional administrative charge (ie, the Late Charge) on or before 4 pm on 21 January 2019.

13.  On 14 January 2019, the applicant submitted a copy of his 2019 Solicitor Practising Certificate to the Society together with a letter.  In the letter, he apologised for his delay, stating that he was away on holiday and had inadvertently missed the deadline.  The applicant further sought a waiver of the Late Charge on the basis that his delay of one working day did not cause any prejudice and he had not performed any notarial acts in the interim.

14.  On 13 February 2019, the Council of the Society (“the Council”) met and discussed the applicant’s said letter dated 14 January 2019 and his application for waiver.  By a letter dated 25 March 2019, the Society informed the applicant that his application for waiver was refused, and he should pay the Late Charge to the Society soon as it was already more than two months since it had become payable.

15.  On 10 April 2019, the applicant wrote to the Society claiming that there was conflict of interest between himself and three members of the Council, namely Mr Andrew Hart, Mr Jesse Kwok Hong Yee and Mr Kenneth Sit (then President of the Society) because of his various on-going and past dealings with them respectively.  He therefore asked for the three members to be recused from the decision-making process and requested a fresh and impartial panel of the Council to be constituted to review the refusal decision.

16.  On 8 May 2019, the Council met to discuss the applicant’s letter dated 10 April 2019 and resolved to set up an ad hoc committee (“the Ad Hoc Committee”) comprising of Mr Kenneth Sit, Ms Au Miu Po (the then Vice President of the Society) and Mr Andrew Hart to consider the applicant’s refusal to pay the administrative charge of $3,000 upon the breach of the Undertaking[3].  The Ad Hoc Committee met on 17 May 2019.  The Ad Hoc Committee recommended that a draft letter to the applicant based on its discussion be prepared by Mr Sit for Council’s approval at the next Council meeting[4].

17.  On 12 June 2019, the Council met again to discuss the applicant’s case.  The Council resolved to approve (subject to certain revisions) the draft letter prepared by the Ad Hoc Committee to the applicant. By a letter of the same date, the Council informed the applicant, among others[5], its decision (“the Decision”) as follows:

“Having given due consideration to the points in our said letter, the Council maintains the position that your application for waiver of the additional administrative charge be refused. Please be advised that if you do not pay the additional administrative charge of HK$3,000 by 12:00 noon on 28^th June 2019, without further notice, the Council will, pursuant to Article 6(5) of the Articles of Association of the Society (copy enclosed), amend your Current Certificate of Membership (i.e. your Certificate of Membership for the 2019 Practice Year) by imposing a condition that payment of the additional administrative charge of HK$3,000 be made by 5^th July 2019. And if you fail to observe the said condition, the Council will consider revoking your Current Certificate of Membership in which event you will no longer be qualified to practise as a notary public.”

18.  Thus, by the Decision, the Council decided:

(1)  to maintain the decision to refuse the applicant’s waiver application of the Late Charge; and

(2)  if he still did not pay the Late Charge by 28 June 2019, to amend the applicant’s 2019 Membership Certificate by imposing a condition that the payment of the Late Charge had to be made by 5 July 2019, failing which the Council will consider revoking his Membership Certificate.

19.  On 27 June 2019, the applicant paid the Late Charge “under protest”.

20.  On 11 September 2019, the applicant filed his application for leave to apply for judicial review to challenge the Decision.  On 11 March 2020, the applicant filed his Amended Form 86.  The applicant’s main grounds in the Amended Form 86 can be summarized as follows:

(1)  The Decision is ultra vires as:

(a)  the Late Charge was in substance a penalty and not a genuine estimate of the Society’s administrative costs in dealing with his late submission.  As such, the Society has no power under either the Articles or the LPO to impose such a penalty.

(b)  The Society’s attempt or threat to impose conditions on the applicant’s practising certificate under sections 40E(5) and or (6) of the LPO is an abuse of power for improper purpose and/or outside the statutory purpose of its power.

(2)  The Decision is Wednesbury unreasonable as the Late Charge is arbitrary and it applies across the board irrespective of the length of the delay.

(3)  The Decision is unlawful as the Council had fettered its discretion by rigidly adhering to the Late Charge without taking into account the individual circumstances of the applicant’s case.

(4)  The Decision was tainted with procedural irregularity for actual/apparent bias due to the involvement of certain members of the Council in the decision-making process.

C.  THE JUDGMENT

21.  On 24 April 2020, the Judge held a rolled-up hearing of the application for leave to apply for judicial review.

22.  In the Judgment, the Judge first treated the Decision as consisting of the following two parts[6]:

(1)  Part (1) of the Decision:

(A)  The applicant’s application for waiver of the Society’s “additional administrative charge” of $3,000 (ie, the Late Charge) be refused;

(2)  Part (2) of the Decision:

(B)  If the applicant did not pay the Late Charge by 12 noon on 28 June 2019, then the Society would without further notice amend the applicant’s 2019 Certificate of Membership by imposing a condition that the charge be made by 5 July 2019; and

(C)  If the applicant failed to observe the said condition, the Council would consider revoking the applicant’s Current Certificate of Membership in which event the applicant would no longer be qualified to practice as a Notary Public.

23.  Regarding Part (1) of the Decision, the Judge concluded that it was not amenable to judicial review as it did not have a sufficiently weighty public law element.  This is so as the power to impose the Late Charge came from the Articles and was contractual in nature and a matter of the Society’s internal management.  The Society was not exercising any of its statutory regulatory functions in levying and refusing to waive the Late Charge.  He therefore refused to grant leave to judicially review this part of the Decision.  See [39] ‑ [40] of the Judgment.

24.  As to Part (2) of the Decision, the Judge considered it to be substantive in nature and amenable to judicial review as it had and was intended to have legal effect in terms of authorising and causing the initiation of the process of revoking the applicant’s membership.  See [41] ‑ [52] of the Judgment.

25.  However, the Judge refused to grant leave to the applicant to apply for judicial review to challenge this part of the Decision under the following grounds:

(1)  The part of the illegality ground based on the contention that the Society had no power to link the payment of the “additional administrative charge” to the Membership Certificate:  The Judge ruled that this contention raised in the applicant’s written submissions was not pleaded in the Amended Form 86 and, in any event, the LPO did not expressly or by necessary implication override, prohibit or deprive the Council of its clear and pre-existing contractual power under the Articles to amend a member’s certificate of membership.  This ground of challenge was therefore not reasonably arguable. See [54] ‑ [68] of the Judgment.

(2)  The Wednesbury unreasonableness ground: The Judge considered that there was a sufficiently objective basis for the level of the charge fixed and that the amount of $3,000 as a general approximation was not unreasonable.  As such, it was not arbitrary and not one which could be said to be so absurd or irrational as to be Wednesbury unreasonable.  This ground was therefore also unarguable.  See [86] ‑ [90] of the Judgment.

(3)  The bias ground: The Judge concluded that there was no evidence that Mr Hart or Mr Sit would disregard proper professional standards and approach the applicant’s arguments with a closed mind.  This ground similarly was not reasonably arguable.  See [92] ‑ [113] of the Judgment.

26.  On the other hand, the Judge granted leave to the applicant to apply for judicial review under the other parts of the contentions in support of the illegality ground but refused the judicial review application on substantive merits[7]:

(1)  After a detailed examination of the affirmation evidence, the Judge observed that the Society in its 2019 Circular to the members clearly distinguished between the payment of the “additional administrative charge of HKD 3,000” and “disciplinary proceedings for breach of undertaking”.  The Late Charge had consistently been referred to as an “administrative charge” in all the internal minutes of the Ad Hoc Committee and the Council as well as the Society’s correspondence with the applicant.  There was nothing in the evidence to suggest that the Council had treated the levying of the Late Charge as a disciplinary action.  See [81] of the Judgment.

(2)  Moreover, the Judge accepted the Society’s evidence on the list of a series of administrative work that would be required to be done before a demand letter could be issued.  The Judge accepted that the amount of extra administrative work that needed to be undertaken would not depend on the length of the delay in the sense that the same steps would have to be followed once there was a failure to provide the necessary certificate by the deadline.  The amount of $3,000 would unlikely have any deterrent effect on notaries practising in Hong Kong.  Hence, after considering the evidence, the Judge concluded that the Late Charge was not a penalty in disguise but was a genuine administrative charge based on a general approximation of the costs involved.  See [82] ‑ [85] of the Judgment.

D.  THIS APPEAL

27.  In support of his appeal against the Judgment, the applicant in the Amended Notice of Appeal (“the ANOA”) advanced the following four grounds of appeal:

(1)  The Judge erred in separating the Decision into two different parts and erred in holding that Part (1) of the Decision was not amenable to judicial review on the basis that it lacked a sufficiently weighty public element.  Instead the Judge ought to have held the Decision as a whole had a sufficient public element and was amenable to judicial review.  Alternatively, the Judge ought to have held that Part (1) of the Decision itself had a sufficiently weighty public law element to be amenable to judicial review (“Ground 1”)[8] ;

(2)  The Judge erred in holding that the illegality ground in the contention that the Society had no power to tie the payment of the “additional administrative charge” to a Membership Certificate was not properly set out in the Amended Form 86. In any event, the Judge erred in holding that the applicant failed to show the legislative intent of the LPO was for the Society to be deprived of the power to make the Decision.  Alternatively, the LPO impliedly prohibits the Society from imposing the Late Charge and enforcing it by amending or revoking a Certificate of Membership and the Decision was thus ultra vires and illegal (“Ground 2”)[9];

(3)  The Judge erred in holding that the Late Charge was not a penalty in disguise and that it was a genuine administrative charge based on a general approximation of the costs involved (“Ground 3”)[10];

(4)  The Judge erred in holding that it was not arguable that the amount of $3,000 fixed for the Late Charge was Wednesbury unreasonable (“Ground 4”)[11].

28.  The applicant no longer pursues Ground 2.[12]  In the premises, this appeal is only concerned with Grounds 1, 3 and 4.

29.  The Society also filed a Respondent’s Notice of Additional Grounds (“the Respondent’s Notice”) seeking to affirm the Judgment on the additional ground that Part (2) of the Decision is not amenable to judicial review, as the Judge ought to have held that it was an “intermediate step” and not an ultimate decision with substantive legal consequences[13].

30.  For the purpose of this appeal, the applicant has also filed a summons on 30 September 2021 (“the Further Evidence Summons”) seeking leave to rely on the extracts of three minutes of the Council respectively dated 13 July 2016, 10 August 2016 and 9 November 2016 (collectively “the 2016 Minutes”) in relation to the Council’s decision to impose the Late Charge at $3,000.  We have indicated that the evidence would be first considered on de bene esse basis in the appeal.

E.  DISCUSSION

31.  As accepted by Mr Lee SC (together with Mr Dykes SC and Mr Yeung) for the applicant[14], in our view, the success of this appeal turns essentially on the question of whether the Late Charge is in substance a penalty as contended by the applicant (ie, Ground 3).  This is so as Ground 1 would not assist the applicant if he fails under Ground 3, and Ground 4 is effectively the flip side of Ground 3.  We will therefore first consider Ground 3.

E1.    Ground 3 – Whether the Late Charge is a penalty

32.  It is common ground in this appeal that the applicable guiding principles in determining whether an impugned provision is in nature a penalty have recently been stated by this Court in Law Ting Pong Secondary School v Chen Wai Wah [2021] 3 HKLRD 185 at [69] - [71] per Chu JA, applying Cavendish Square Holding BV v Makdessi and ParkingEye Ltd v Beavis [2016] AC 1172.  Relevantly for present purposes, they are as follows:

(1)  In determining whether an impugned provision is in nature a penalty, the true test is whether the provision is a secondary obligation that imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation.

(2)  Applying this test, the Court should thus first identify the legitimate interest of the innocent party that is being protected by the clause, and then assess whether the measure adopted under the subject clause is out of all proportion to the legitimate interest by considering the circumstances in which the contract was made.

(3)  In this respect, an innocent party generally has a legitimate interest in the performance of the contract or some appropriate alternative to performance that goes beyond compensation.  Notions of whether the subject clause has a deterrent purpose or whether it is a genuine pre-estimate of loss as traditionally adopted by the Court to determine whether the impugned measures is a penalty would be subsumed by the above broader inquiry.

33.  With these principles in mind, we now turn to consider the contentions raised under this ground.

34.  Mr Lee’s submissions that the Late Charge is a penalty in nature can be summarised as follows.

35.  First, he submits that from the Council’s discussions relating to the need to impose the Late Charge as recorded in the minutes dated 13 July 2016, it is clear that they intended to use the Late Charge to “punish” and therefore “deter” the members from failing to honour the Undertaking.  This is further reflected in the respective minutes of the Council and the Ad Hoc Committee in 2019 when the Council members discussed the applicant’s case. These plainly show that the Late Charge is and is intended to be a penalty in nature[15].

36.  Second, the only case that the Society has advanced in the evidence and in the Court below is that the sum of $3,000 represents a general approximation of the extra costs that would be incurred by the Society in undertaking the eight categories of work said to be necessitated by a late submission of a copy of the Solicitor Practising Certificate.  Ms Margaret Lau (the General Secretary of the Society) explains this at paragraph 25 of her 1^st affidavit as follows:

“25. The Society does not impose ‘fixed penalties’. The Administrative Charge of HK$3,000 is a reasonable fee which is a general approximation of the extra expense required to process all events in that category of work, without having to do an exact and unique calculation each time an event occurs. Indeed, it would be unfeasible and unrealistic for the Society to justify the Administrative Charge on an actual time and cost expended basis each time a member is in breach of his Undertaking. Amongst other things, the scope of the administrative work undertaken by the Society in the event of a breach of the Annual Undertaking includes (as was performed in the Applicant’s case): -

(1) checking by the Secretary General of the Society as to the names of those members who had failed to submit a certified true copy of his/her relevant Practising Certificate as a Solicitor by the 2^nd Deadline;

(2) arranging for the relevant information from the database record for report to the Council;

(3) seeking instructions from the Chairman of the Standards and Development Committee as to the date and time when the defaulting member must deliver a certified true copy of his/her Practising Certificate as a Solicitor;

(4) preparing and sending individual letters to inform each defaulting member of their breach of the Annual Undertaking;

(5) attending to all follow-up attendances, correspondence and telephone conversations with the defaulting member (with each case being different);

(6) giving instructions to deposit the cheque (for payment of the Administrative Charge) and prepare a formal receipt with the Society’s official chop for payment for posting to the defaulting member;

(7) giving instructions to file the certified true copy of the defaulting member’s Practising Certificate as a Solicitor in his/her individual file with the Society and reporting the same to Council; and

(8) preparing notes and papers for the various Council Meetings and Ad Hoc Committee Meeting (as necessary) and the follow up thereof.” (emphasis added)

37.  Mr Lee thus submits that it has never been the Society’s case that the imposition of the Late Charge is to serve any legitimate purpose.  As such, there is no evidence of such purpose and the burden is on the Society to show and prove a legitimate purpose.  The applicant must therefore succeed on this basis alone as the Late Charge is imposed for no legitimate purpose.  It is by default a penalty.

38.  Third, in any event, the Society has failed to show by proper evidence that the $3,000 is a general approximation of the extra expense to be incurred for the additional works to be undertaken by the Society when there is a late submission of the certificate by a member as asserted:

(1)  Ms Lau’s claims in her affidavit that those identified categories of work would need to be undertaken are not based on facts, but are at best only a mere expression of an opinion by herself.  While Mr Lee accepts that it would be infeasible and unrealistic for the Society to justify the administrative charge on an actual time and cost expended basis each time a member is in breach of the undertaking, he submits that to qualify as proper evidence, the deponent should have at least stated, for example, who had undertaken the exercise to estimate the alleged time cost and on what basis the estimation was done if such an exercise had ever been carried out in 2016.  However, none of this has been deposed to.  In the premises, these statements are not in the nature of proper evidence and the Judge erred in accepting them.

(2)  In further support, Mr Lee has drawn our attention to the 2016 Minutes to show that there is nothing in them to show any discussions as to how the amount of $3,000 was arrived at when the Council decided to impose the Late Charge.

(3)  In the circumstances, there is simply no or no admissible evidence to support the Society’s claim that the sum levied represents a genuine and general approximation of the extra cost to be incurred.

(4)  Mr Lee further points out that the fixed charge applies across the board irrespective of the length of the delay and is thus clearly arbitrary.  He also says it is difficult to see how the alleged extra time and expenses to be incurred by the Society for the stated additional works could come even close to $3,000 as they are all simple and clerical in nature, and that the Society would have to do some of the items in that list in any event even if there are no defaulting members in a given year.  He further draws our attention to the fact that the $3,000 levied is even higher than some statutory fines.[16]

(5)  In the premises, the Society’s case that the Late Charge is a “genuine administrative charge” being “a general approximation of the extra expense required” must fall apart.[17]  The sum charged is therefore also out of all proportion to any legitimate interest the Society may have (if any) in charging any late delivery fee.

39.  With respect to Mr Lee, we are not persuaded by his submissions.

40.  First, we do not accept that the Late Charge was intended to be imposed by the Council as part of the disciplinary regime to punish and deter its members as submitted by Mr Lee. 

41.  The Council agreed to impose an administrative charge (ie, the Late Charge) on members who had breached the Undertaking at its meeting held on 13 July 2016. The relevant discussions and decisions were recorded at paragraph 92 of the minutes (“the July 2016 Minutes”)[18] as follow:

“92. REVIEW OF 2017 RENEWAL OF MEMBERSHIP PROCEDURE

Council considered the issues relating to Article 6(5) raised by the Standards and Development Committee.

Article 6(5), inter alia, provides –

‘The Council is entitled to prescribe conditions to a Certificate of Membership or amend a Current Certificate of Membership by imposing conditions to it. The Council is entitled to revoke the Current Certificate of Membership of a Member on the ground that he has acted in breach or failed to observe the conditions to his Current Certificate of Membership.’

Council was invited to consider—

(1) Whether the requirement to honour the undertaking given by a member to the Society in his/her application when he/she has elected Option B should be made a condition for issue of the Certificate of Membership to him/her.

The undertaking in Paragraph 1(b) of Part B of the current Application for 2016 Certificate of Membership Form reads—

‘(b) I undertake to deliver to the Secretary General of Hong Kong Society of Notaries by Monday 11 2016 a copy of my Practising Certificate as a Solicitor issued by The Law Society of Hong Kong for the 2016 Practice Year certified as a true copy by another Hong Kong solicitor.’

(2) Whether revocation of a Certificate of Membership already issued should be automatic in the case of a breach of the above-said undertaking.

It was thought that late submission of a certified true copy of a member's current Law Society Practising Certificate as a Solicitor (‘Law Society PC’') per se would not be material to the qualification to practise as a notary public.

When a member has given an undertaking, the breach of which could lead to disciplinary proceedings.

Although the Articles of Association provides that singular includes plural, the said provision in Article 6(5) is in singular and there should be caution when exercising this power to a general class of members.

It was noted that usually members will not get their Law Society PCs until the end of December.

Council thought that if revocation of a Certificate of Membership were automatic in the case of a breach of undertaking, the status of the notarial acts which had been performed might be at issue.

Suggestion was made to impose an administrative charge on members who have breached their undertakings.

Members could be informed that breach of undertaking would lead to disciplinary proceedings.

Council was of the view that members have not taken their undertakings seriously enough in the past. There should not be any individual reminder letter.

AGREED that:-

(i) there should be no automatic revocation of a Certificate of Membership already issued to a member in the case of a breach of undertaking by that member to provide his/her certified true copy current Law Society PC by the deadline;

(ii) the circular on renewal of membership procedure should state to the effect that –

– an administrative charge would be imposed on members who have breached their undertakings

– members who have breached their undertakings might be subject to disciplinary proceedings; and

(iii) no individual reminder letter be sent.” (emphasis added)

42.  It is pertinent to note that in the above minutes:

(1)  It recorded the discussion that: “Suggestion was made to impose an administrative charge on those members who have breached their undertaking”.

(2)  This must be read in contrast with what follows in the discussion that: “Members could be informed that breach would lead to disciplinary proceedings”.

(3)  The Council then agreed, inter alia, that in future, the circular on renewal of membership procedure should state to the effect that (a) “an administrative charge would be imposed on members who have breached their undertakings”, and (b) “members who have breached their undertakings might be subject to disciplinary proceedings”.

43.  When these are read objectively and in its proper context, in particular the way that the imposition of an administrative charge and the possibility of taking out disciplinary proceedings against a member were recorded to be discussed and considered separately, it is clear to us that:

(1)  The Council recognised that there were incidents of breach of the Undertaking by members who had failed to submit the Solicitor Practising Certificate by the deadline.

(2)  To address the problem, the Council first discussed and decided that an administrative charge should be imposed when such circumstances arose.  By the use and reference to the words “administrative charge”, it is objectively plain that the charge was intended to be imposed to cater for the need to carry out extra administrative works by the Society to deal with a late submission of the Solicitor Practising Certificate.  In this respect, it is simply common sense that additional out of the routine works would need to be undertaken by the Society whenever there is a late submission of certificate.

(3)  Further, separately and independently, the Council also discussed and recognised that disciplinary consequence might be imposed on a member who had breached the undertaking.

(4)  The Council then agreed separately (a) to impose the administrative charge, and (b) to inform a defaulting member of the possibility of disciplinary proceedings being undertaken against him or her.

44.  In the premises, it is objectively plain to us that the imposition of the Late Charge as an administrative charge was not intended by the Council to be part and parcel of the disciplinary regime undertaken against a member who is in breach of the undertaking. 

45.  Second, in considering whether the Late Charge is a penalty, adopting the approach as set out in Law Ting Pong, the Court should first identify the legitimate interest of the Society in imposing the Late Charge of $3,000.

46.  When asked about this at the hearing, Mr Yu SC for the Society submits that the purpose of the Late Charge is to ensure the members’ compliance of the Undertaking.

47.  In relation to this, Mr Lee first objects that it is not open to the Society to advance this submission since:

(1)  This was not the case the Society had advanced in the Court below.   Its only case before the Judge and set out in its opposing affidavit is that the Late Charge is a genuine pre-estimate by way of general approximation of the extra expense to be incurred for the stated additional works that need to be undertaken by the Society in a late submission case.  The applicant will therefore suffer prejudice if the Society is allowed to raise it for the first time now; and

(2)  In any event, there is no evidence to support the so-called legitimate purpose.

48.  We reject Mr Lee’s objections:

(1)  Given Mr Lee’s acceptance that the relevant guiding legal principles as to whether a charge imposed on the breach of contract on the default party is a penalty are those now adopted in Law Ting Pong, it must be open to the Society to advance its case on what it says to be the legitimate purpose that the Late Charge is to serve. There is also no question that the applicant will be prejudiced by not having the chance to put forward any evidence in reply to this: Mr Lee has not been able to indicate and suggest what evidence the applicant might have been able to adduce to rebut this purpose if the Society had raised it in the Court below.

(2)  In any event, the legitimate purpose now advanced by Mr Yu arises objectively from common and commercial sense.  It must be plain and obvious that a charge so imposed would have the effect of encouraging compliance with the Undertaking by the members. 

49.  In our view, the Society’s purpose of ensuring compliance with the Undertaking is plainly a legitimate one:

(1)  As mentioned at [32(3)] above, the Court generally recognises that the innocent party has a legitimate interest in enforcing the contract.  The inquiry is only whether “the means by which the contracting party’s conduct is to be influenced are ‘unconscionable’ or (which will usually amount to the same thing) ‘extravagant’ by reference to some norm.”[19]

(2)  In the present case, a breach of an undertaking given in a professional context is clearly a serious matter, in particular, when the person giving the undertaking is a practising notary public and senior solicitor of at least seven years standing.  As recorded in the July 2016 Minutes, the Council had noted incidents of members breaching the Undertaking and not taking their undertakings seriously.  In these circumstances, it must a fortiori be legitimate for the Society as a professional body to ensure such compliance.

(3)  It is the practice and policy of the Society to deliver to its members their respective Membership Certificate in mid‑December, about two weeks prior to the commencement of a new practice year, so that the members may perform notarial acts immediately upon the commencement of the practice year.[20]  This practice is to facilitate the members’ practice as a notary public and thus for their benefit, and is built upon the trust that they would honour their Undertaking.  It is therefore plainly legitimate that the Society seeks to ensure such compliance.

50.  Further, the sum of $3,000 is clearly not “extravagant” and “out of all proportion” to the Society’s said legitimate interest:

(1)  The amount should be assessed by reference to the exclusive group of persons against whom the Late Charge is levied.  They are all senior practising solicitors of at least seven years standing, and as notaries public charge not insignificant professional fees for their services.  Objectively viewed in this context, the amount of $3,000 can hardly be said to be “extravagant” or “out of all proportion”.

(2)  The amount of the Late Charge has been repeatedly published and highlighted to the members in the annual circulars and application forms issued by the Society since 2016.[21]  There is no evidence that prior to 2019, there had been any complaints or challenges made by any members that this amount was unreasonable or too high.  Other than the applicant, members who had breached the Undertaking in relation to their applications for the 2019 Membership Certificates had all promptly and unconditionally paid the Late Charge.[22]  The fact that no other members had complained or objected to this charge, on the basis that the amount levied was far too much, since its implementation until now objectively lends support to show that the amount of the Late Charge is not outrageous, “extravagant” or “out of all proportion”. Cf: Cavendish at p.1227C.

(3)  Moreover, the present case itself also serves as a good example to underline why the amount of $3000 levied as an additional administrative charge cannot be regarded as extravagant or out of all proportion.  The applicant had engaged in various correspondence with the Society between 11 January and 27 June 2019 in relation to his breach of the Undertaking.  The matter had to be dealt with and attended to by Council members, who themselves are senior legal practitioners, at length.  See [11] - [17] above.   It must thus be obvious that extra time-cost so incurred by the Society in dealing with the applicant’s case must by any account be substantially more than $3,000.  Therefore, the $3,000 levied as a fixed administrative charge to cater for all events arising from a breach of the Undertaking by members cannot in any view be said to be extravagant or out of all proportion to the Society’s purpose in enforcing the Undertaking.

51.  In the premises, applying the principles in Law Ting Pong, we are satisfied that the Late Charge serves a legitimate purpose and the amount of $3,000 charged is plainly not out of all proportion to this purpose.  It is therefore not a penalty in nature.

52.  Given the above conclusion, it is unnecessary to deal with the issue of whether the $3,000 charged represents “a general approximation of the extra expense required to process all events in that category of work”, as this exercise has been subsumed into the question of whether the sum itself is so extravagant and out of all proportion to the legitimate purpose it is to serve.  See: Law Ting Pong at [70] per Chu JA.  As Lord Neuberger PSC and Lord Sumption JSC observed in Cavendish at [31] as follows:

“… The real question when a contractual provision is challenged as a penalty is whether it is penal, not whether it is a pre-estimate of loss. These are not natural opposites or mutually exclusive categories. A damages clause may be neither or both. The fact that the clause is not a pre-estimate of loss does not therefore, at any rate without more, mean that it is penal. To describe it as a deterrent (or, to use the Latin equivalent, in terrorem) does not add anything. A deterrent provision in a contract is simply one species of provision designed to influence the conduct of the party potentially affected. It is no different in this respect from a contractual inducement. Neither is it inherently penal or contrary to the policy of the law. The question whether it is enforceable should depend on whether the means by which the contracting party’s conduct is to be influenced are ‘unconscionable’ or (which will usually amount to the same thing) ‘extravagant’ by reference to some norm.” (emphasis added)

53.  Accordingly, the Judge was correct in holding that the Late Charge is not a penalty.

54.  We therefore reject Ground 3.

E2.    Ground 4 – Whether the Late Charge is Wednesbury unreasonable

55.  Given our analysis under Ground 3, this ground must also fail.

56.  For the same reasons as explained in [50] above, the amount of $3,000 as levied on the applicant was plainly not so unreasonable that no reasonable decision maker would arrive at the same conclusion.  Equally, adopting a fixed sum to be applied across cases is also far from being Wednesbury unreasonable as discussed under Ground 3 above.

E3.    Ground 1 – Amenability of the Decision

57.  Given our above conclusion that the Late Charge is neither a penalty nor Wednesbury unreasonable, it is unnecessary for this Court to go into the issue of the amenability of the Decision or whether the Decision should be separated into two parts, as the applicant will fail in this appeal in any event.

58.  However, for completeness, we would deal with this ground briefly.

59.  The main argument raised by Mr Lee in support of this ground is that the Decision should be read and understood as a whole as the imposition of the Late Charge is part and parcel of the entire disciplinary regime adopted by the Society to “punish” or “penalise” a member who has defaulted in submitting the certificate in time.  It is thus not only artificial but also wrong in principle to separate the Decision into two parts as adopted by the Judge.  Counsel emphasizes that, in this respect, the levying of the Late Charge must be considered together with the imposition of the condition in the Membership Certificate and the threat of revoking the certificate upon the failure to pay the Late Charge by the time stipulated.

60.  For the same reasons set out at [40] ‑ [44] above, we reject this contention as it is clear to us the imposition of the Late Charge is not and is not intended by the Society to be part of the disciplinary regime concerning a member’s breach of the Undertaking.

61.  We will therefore also dismiss Ground 1.

E4.    Respondent’s Notice

62.  Given that the applicant has failed in all his grounds of appeal, it is unnecessary for us to deal with the Respondent’s Notice.

E5.    The Further Evidence Summons

63.  There is no dispute that the 2^nd Affidavit of Lau Suk Ying Margaret (“Margaret Lau’s 2^nd Affidavit”) exhibiting the 2016 Minutes was filed by the Society in order to correct its written submissions lodged on 11 August 2021 in opposing the applicant’s summons filed on 13 July 2021 to re-amend the Notice of Appeal.  That summons was dismissed by this Court by the Amendment Judgment.[23]  As such, as submitted by Mr Yu, the 2016 Minutes were, strictly speaking, not produced for the purpose of the present appeal.

64.  Accordingly, for the applicant to rely on the 2016 Minutes which were not produced before the Judge, the three conditions set out in Ladd v Marshall [1954] 1 WLR 1489 must be satisfied, namely:

(1)    The further evidence could not have been obtained with reasonable diligence for use at the trial;

(2)    The further evidence is such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and

(3)    The evidence is such as is presumably to be believed.

65.  On the other hand, it is also well settled that in the context of public law proceedings, “some flexibility” from the strict requirements of Ladd v Marshall may be allowed where the “interests of justice” so requires, and while those principles “… remain the starting point, but there is a discretion to depart from them in exceptional circumstances”: see E v Secretary of State for the Home Department [2004] QB 1044 per Lord Phillips of Worth Matravers MR; Dr Kwok-Hay Kwong v The Medical Council of Hong Kong (CACV 373/2006, unreported, 5 September 2007) per Ma CJHC (as he then was) and A Solicitor v The Law Society of Hong Kong [2021] 5 HKLRD 445 per G Lam JA.

66.  Bearing the above legal principles in mind, we are of the view that the unique circumstances of the present case satisfied the Ladd v Marshall rules, and in any event, for the interests of justice, we will grant leave for the applicant to rely on the 2016 Minutes for the following reasons:

(1)  Although the 2016 Minutes could arguably have been obtained for use at the rolled-up hearing by the applicant by say applying for discovery, it is pertinent to note that even on the Society’s own evidence, up to 1 September 2021, it had always been its mistaken belief that there was no document relating to the imposition of the Late Charge by the Council in 2016.[24]  Given these circumstances, we do not think it is unreasonable for the applicant not to have applied for discovery of such documents against the Society prior to the rolled-up hearing.  To look at it in another way, even if the applicant had so applied for discovery, given the Society’s above own evidence and position, its response would likely have been that there was no such documentation.  In the premises, we accept that the 2016 Minutes could not have been obtained by the applicant before the rolled-up hearing even with reasonable diligence.

(2)  The 2016 Minutes are plainly credible.

(3)  More importantly, the 2016 Minutes are also plainly relevant to the important issue as to whether the Late Charge is a penalty as they reflect the reasons and basis upon which the Council considered it necessary to impose the Late Charge in the first place in 2016.  For the same reason, it would also be wholly unrealistic and unjust for the Court not to look at them in seeking to resolve the issue.  Indeed, as is evident above, we have taken into account the 2016 Minutes in our analysis when dealing with Grounds 3 and 4.

67.  We therefore allow the Further Evidence Summons and grant leave for the applicant to rely on the 2016 Minutes as evidence in the present appeal.

F.  DISPOSITION

68.  For all the reasons set out above, the applicant fails on all his grounds of appeal, and we dismiss the appeal.

69.  As to costs, we see no reason why costs should not follow the event.  Accordingly, we make the following orders:

(1)  Costs of the Further Evidence Summons be to the applicant with certificate for two counsel, to be taxed if not agreed.  In this respect, for taxation purpose, it should be noted that effectively no time was spent at the hearing on this summons as we had indicated that the evidence would be dealt on de bene esse basis. 

(2)  Costs of the appeal be to the Society with certificate for two counsel, to be taxed if not agreed.