THE LAW SOCIETY OF HONG KONG v. A SOLICITOR

CACV 31/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 31 OF 2008

(ON APPEAL FROM THE REASONS AND ORDERS OF

THE SOLICITORS DISCIPLINARY TRIBUNAL DATED 11TH JANUARY 2008)

----------------------

----------------------

----------------------

 

----------------------

J U D G M E N T

----------------------

 

Hon Rogers VP:

1.  I agree with the judgment of Le Pichon JA.

Hon Le Pichon JA:

2.  This is an appeal by the appellant from an order of the Solicitors’ Disciplinary Tribunal made on 25 October 2007.  The appellant, who was the second respondent in disciplinary proceedings, was found guilty of 8 complaints.  In respect of each of those complaints, the tribunal imposed a fine and a censure but in respect of 2 of them (complaints 25 and 26), there was, in addition, a penalty of suspension from practice for a period of three months, the period in each case to run concurrently.  This appeal relates to (1) the sentence of suspension imposed on the second respondent; (2) the finding of guilt in relation to complaint 25; and (3) the costs order.  At the conclusion of the hearing, judgment was reserved which we now give.

Background

3.  In May 1995, the firm of solicitors in question accepted instructions to act for the Incorporated Owners of Cherry Mansion (“the complainant”) and the management company of that building in defending a personal injuries claim brought in the High Court by one of the owners who had sustained injuries in the common area (“the litigation”).  The first respondent was the senior partner of that firm in charge of the litigation.

4.  In November 1995, the second respondent joined the firm as a trainee solicitor and handled the litigation as an assistant to and under the supervision of his principal, the first respondent.  After his admission as a solicitor on 20 December 1997, the second respondent was employed as an assistant solicitor in the firm.  The second respondent’s involvement in the litigation was for the period from November 1995 to April 1998.

5.  The disciplinary proceedings arose out of the respondents’ handling of the litigation which included related third-party proceedings.  Initially, 15 complaints were laid against the first respondent and 14 against the second respondent.  By mid-2004, the number of complaints against the second respondent stood at 12, the tribunal having found no prima facie case in respect of 2 of the 14 complaints.

6.  On 16 June 2004, the second respondent’s solicitors gave notice to the tribunal that the second respondent would plead guilty to the remaining 12 complaints and he pleaded guilty to those complaints on the first day of the hearing on 6 June 2005.  Sentencing was adjourned until the conclusion of the contested inquiry into 14 of the complaints made against the first respondent.  That inquiry was spread over 21 sessions and did not conclude until almost a year later, on 24 May 2006.

7.  In its Statement of Findings of 5 October 2007, the tribunal found 8 out of the 12 complaints established against the second respondent.  The tribunal reconvened on 25 October 2007 for submissions on mitigation, sentencing and costs and its decision was handed down on 11 January 2008.

8.  The 2 complaints with which this appeal is concerned are complaints 25 and 26 and involve misrepresentation.  They relate to the handling of ‘without prejudice’ negotiations in the litigation.

9.  The complainant was insured against public liability.  As the personal injuries claim was a third-party risk covered by the policy up to a limit of $500,000, with indemnity for the complainant’s own legal costs, the insurers were joined as a third-party in February 1996.

10.  By letter dated 13 February 1998, the second respondent wrote a ‘without prejudice’ letter to the insurers’ solicitors stating that the complainant would be willing to accept $160,000 in full and final settlement of the claims in the third-party proceedings against the insurers.  The offer was made without the authority of, or instructions from, the complainant.

11.  The insurers’ solicitors accepted the offer in writing on 16 February 1998.  Thereafter, a dispute ensued between the solicitors as to whether a binding settlement agreement had been concluded.  Seagroatt J ruled on the matter in favour of the insurers on 24 March 1998, at the hearing of the insurers’ application for a stay of the third-party proceedings.  The events referred to in complaints 25 and 26 occurred during this period.  It involved a ‘cover-up exercise’ to conceal the fact of the unauthorised settlement by which the complainant was bound.

12.  There were two meetings with the complainant during this period: the first was a general meeting on 16 February 1998 convened by the complainant, as a matter of urgency, at the request of the first respondent; and the second was an all owners’ meeting on 10 March 1998, attended by numerous co- owners and representatives of the complainant.  The first and second respondents attended both meetings and for the February meeting, they also were accompanied by counsel.

13.  Instead of ‘coming clean’ and advising the complainant of the unauthorised settlement, the first respondent misrepresented the position at the February meeting by reporting to the complainant not only that there was an offer from the insurers to settle the third-party claim for $160,000 but also that such offer would lapse if not accepted before the deadline allegedly imposed, whether of 18 February or within 3 days of the meeting.  Those statements were made in the presence of the second respondent, who remained silent.

14.  No consensus was reached at the February meeting.  Two days later, it was unanimously agreed at a general meeting held by the complainant that the offer would not be accepted.  At the March meeting, the respondents again recommended that the offer should be accepted.  This did not happen.  Then came the order of Seagroatt J staying the third-party action against the insurers.  Dissatisfied with the respondents' explanation concerning the stay, on 20 April 1998, another firm of solicitors was instructed to take over the litigation from the firm, culminating in the complaints that became the subject matter of the disciplinary proceedings.

15.  The complainant subsequently compromised the litigation for $700,000.  It then commenced an action for damages against the firm for professional negligence which was eventually settled at $1.25 million, with the firm waiving their claim for legal costs in acting for the complainant in the litigation.

This appeal

16.  As earlier noted, this appeal raises three issues.

Suspension

17.  Complaints 25 and 26 (each of which gave rise to a censure, a fine of $30,000 and suspension from practice as a solicitor for a period of three months) read as follows:

“ Complaint 25:-

    “That you, [the Solicitor], an Assistant Solicitor employed by the Firm of Solicitors, Messrs. Wong Poon Chan Law & Co breached Rule 2(d) of the Solicitors’ Practice Rules on or about 16^th February 1998 in the capacity of an Assistant Solicitor by making a misrepresentation to your client, which conduct was likely to impair the reputation of the profession.

Particulars

    Such breach consisted in that on or about 16^th February 1998 you made a representation to your client, the Incorporated Owners of Cherry Mansion (hereafter called “the Incorporated Owners”) in High Court Personal Injuries Action No.394 of 1995 and N.V. The Netherlands Insurance Co Ltd EST 1845 (hereafter called “the Insurance Company”) offered to settle Third Party Claim of the Incorporated Owners against the Insurance Company in the said action in a sum of HK$160,000.00 which representation was false and untrue in that it was you or your firm who made an unauthorized offer purportedly on behalf of the Incorporated Owners by a letter dated 13^th February 1998 to Messrs. Johnson, Stokes & Master to settle the Third Party Claim of the Incorporated owners against the Insurance Company in the sum of HK$160,000.00.”

  Complaint 26:-

    “That you, [the Solicitor], an Assistant Solicitor employed by the Firm of Solicitors, Messrs. Wong Poon Chan Law & Co breached Rule 2(d) of the Solicitors’ Practice Rules on or about 10^th March 1998 by making a misrepresentation to your client, which conduct was likely to impair the reputation of the profession.

Particulars

    Such breach consisted in that on or about 10^th March 1998 you made a representation to your client, the Incorporated Owners of Cherry Mansion (hereafter called “the Incorporated Owners”) in High Court Personal Injuries Action No.394 of 1995 that N.V. The Netherlands Insurance Co Ltd EST 1845 (hereafter called “the Insurance Company”) offered to settle Third Party Claim of the Incorporated Owners against the Insurance Company in the said action in a sum of HK$160,000.00 which was false and untrue in that it was you or your firm who made an unauthorized offer purportedly on behalf of the Incorporated Owners by a letter dated 13^th February 1998 to Messrs. Johnson Stokes & Master to settle the Third Party Claim of the Incorporated Owners against the Insurance Company in the sum of HK$160,000.00.” ”

18.  It is relevant to state that the first respondent was found guilty of mirror complaints after a protracted inquiry.  Before the tribunal, the first respondent categorically had denied having seen and/or having had knowledge of the 13 February letter prior to meeting the complainant on 16 February.  The tribunal was unable to accept the first respondent’s evidence for the reasons elaborated in § 148 of the Statement of Findings: in short, the tribunal concluded that the first respondent was lying when he had denied all knowledge of the letter prior to attending the February meeting.  In respect of each of the mirror complaints in relation to the first respondent, the tribunal imposed a suspension of six months, such period of suspension to run concurrently.

19.  The gravamen of Mr Yau’s submissions on behalf of the second respondent was that the penalty of a three-month suspension for the second respondent, who had admitted his wrongdoing at the outset, was disproportionate and unduly harsh when compared to the six-month suspension on the first respondent.  It was also said that the second respondent was clearly playing a subservient role in the cover-up that had been instigated by the first respondent who was the senior partner of the firm.  At the time, the second respondent was freshly qualified and only two months into full practice.  Further, there had been a long delay in bringing the disciplinary proceedings to a conclusion, nine years having elapsed since the events in question and it was not a case where the complainant had suffered any pecuniary loss.

20.  It is necessary, first, to consider the tribunal’s reasons for the three-month suspension and what matters it had taken into account.  The tribunal accepted that

“5.    … the Respondents must have endured a lot of anxiety and uneasiness in facing these complaints over this lengthy period of time and they should somewhat be compensated for the delay on the part of the Applicant in bringing them to trial.  The Tribunal will record that there is no theft or misappropriation on the part of the Respondents in committing the complaints…”

21.  As regards the second respondent’s role in the whole affair, the tribunal had this to say:

“6.    Mr. Chu submitted on behalf of the 2^nd Respondent that he had only played a small part in committing the misconduct and that because of his inexperience as a Solicitor and as an employee of the 1^st Respondent, he could not simply shy away from the “cover up” misrepresentation to the Incorporated Owners.  The Tribunal does not accept the 2^nd Respondent has no alternative whatsoever and there were certainly other options open to him to remedy the wrong including, but not limited to, urging or stopping the 1^st Respondent from making the misrepresentation which he knew to be false.  In compromising and in joining the wrongful act of the 1^st Respondent in the “cover up”, the 2^nd Respondent was effectively an accomplice in a conspiracy to continue a wrong against the client which is certainly unforgivable, unprofessional and unethical.  It is easy for the 2^nd Respondent to say that he was only acting under the direction and the supervision of the 1^st Respondent but he was already a Solicitor then and to connive at something which he must have known to be wrong was no reasonable excuse.  The Tribunal could not accept the submission that the complaints were committed by the 2^nd Respondent due to no fault of his.  The “cover up” is certainly a despicable act but so is the apparent acquiescence by the 2^nd Respondent in the “cover up”.  The Tribunal does, however, to a certain extent sympathize the position of the 2^nd Respondent, as he was all along playing a subservient role to the 1^st Respondent at the time of committing the misconduct.  The Tribunal further accepts that the 2^nd Respondent was inexperience, having only been admitted as a newly qualified solicitor when the complaints ensued and the Tribunal looks favourably on his guilty plea which was made at the first opportunity before the Tribunal and which, when taken together with the other factors, would merit him a lighter sentence …”

22.  What is apparent from the tribunal’s reasoning is their express disapproval of the continuing course of conduct of the second respondent between the February and March meetings.  Leaving aside the question whether at the February meeting he should or could have disassociated himself from what was being said by his principal (as to which see §§ 28-29 below), in my view, quite rightly, it strongly disapproved of the continuing course of conduct, namely the second respondent’s s total inaction between the February and March meetings, culminating in the further misrepresentation to the complainant at the March meeting.

23.  In my view, the reasoning of the tribunal is impeccable and is wholly consistent with the principles enunciated in Bolton v The Law Society [1994] 1 WLR 512 at 518B-519E.  On no basis could be said that the penalty of suspension which the tribunal saw fit to impose was in any way ‘plainly wrong’ so as to warrant any interference by this court.

24.  So far as Mr Yau’s submission of disproportionality is concerned, it was premised upon the six-month suspension period imposed on the first respondent as being correct, there being no appeal against such suspension by the first respondent.  Whilst I would agree that the penalties meted out to the first and second respondents respectively are disproportionate, I do not accept the correctness of Mr Yau’s basic premise.  Having regard to the matters stated in § 18above, the first respondent should consider himself singularly fortunate: in my view, the appropriate period of suspension for the first respondent would have been a period of at least twelve months.

25.  For these reasons, I would not interfere with the suspension of three months imposed by the tribunal.  But I would make the following observation.  Where, as here, the tribunal’s disapproval is of a course of conduct over a period of time, it is inappropriate and unsatisfactory, to say the least, to frame the complaint as two separate complaints by artificially isolating the beginning and the end of that course of conduct and in making those the subject matter of two separate complaints.  Rather, it should have focused on the overall course of conduct and have made that the subject matter of the complaint.

Complaint 25

26.  Notwithstanding his admission of guilt, the second respondent sought to challenge the tribunal’s finding, based on the agreed summary of facts, that complaint 25 had been established.  Mr Yau referred to paragraphs 18 and 19 of the agreed summary and submitted that the facts therein stated were insufficient to support the charge (set out in full in § 17above).  In pertinent part, paragraph 19 read:

“… The 1^st Respondent and the 2^nd Respondent attended the meeting with Mr. Matthew Chong Chung Sang of counsel.  During that meeting, instead of informing the Complainant that on that same day JSM had accepted the Respondents’ own offer of HK$160,000.00 in full and final satisfaction of the Complainant’s Third Party Claim with no order as to costs, the 1^st Respondent informed the Complainant that the 1^st Third Party had offered to settle at HK$160,000.00 on condition that such offer was to last until 18^th February 1998.  The 1^st Respondent recommended that the Complainant accept such offer and stated if such offer was accepted, the Complainant could use the sum to fund the P.I. Action.  As the members present could not reach a consensus after repeated discussions, the 1^st Respondent suggested that the Complainant apply for legal aid and if such application failed, the Complainant could accept the offer…”

27.  It is apparent from that passage that all relevant misstatements had been made by the first rather than by the second respondent.  Was the mere presence of the second respondent at the time the statements were made by the first respondent, and who had remained silent throughout, sufficient to ground liability?  Unless the view be taken that, in the circumstances, the second respondent’s silence at the meeting itself was inexcusable and was tantamount to a misrepresentation, it is difficult to see on what basis it could be said that the complaint had been made out.

28.  There is no evidence to suggest that there was any preconceived plan to which the second respondent was privy as to that which the complainant should be told at the meeting.  In other words, there is nothing to suggest that the second respondent had any prior knowledge of the ‘cover-up’ exercise until he heard the first respondent’s ‘explanation’ for the first time at the meeting.  Bearing in mind the fact that the second respondent was then a newly qualified solicitor, accompanying his senior partner to a meeting with the clients, is it realistic to expect a person in that position to have interrupted proceedings immediately on hearing (and presumably absorbing) the misstatements as made by the senior partner?

29.  Mr Yau drew a rather apt analogy between the situation facing the second respondent on hearing what was being said by the first respondent at the meeting on 16 February with that of the ‘thinking distance’ available to the driver of a vehicle.  Short of an immediate reaction and intervention, by the time the second respondent could even turn over in his mind what the first respondent should have said, it would be too late because by then the first respondent already would have gone on to other things: thus, the further into the meeting, the greater second respondent’s predicament.

30.  In my view, realistically, the second respondent could not be said to have made any representation by failing to take any action during the meeting on 16 February.  As the facts stated in paragraph 19 of the agreed summary do not support the particulars for complaint 25, the tribunal ought not have found that it had been made out.  It follows that the penalties imposed in respect of complaint 25 must go.  But this would not affect complaint 26, nor the penalties imposed for that complaint, including that of a three-month suspension, for reasons explained above.

Costs

31.  In § 7 of the tribunal’s Reasons, it is stated that:

“ …the Tribunal has been greatly assisted by the various parties in apportioning their assessed costs in their respective Skeleton Bill of Costs incurred attributable to the Respondents in these proceedings.  As the second respondent had pleaded guilty on the first day of the hearing, the Tribunal does not think the substantial costs incurred after the first day of the hearing which lasted over 18 sittings should be borne by the second respondent.”

32.  In this context, the reference to “the various parties” would appear to be referable only to the charging parties, namely (1) the applicant’s solicitors; (2) the applicant; and (3) the clerk of the tribunal.  It is not apparent whether the second respondent agreed to the apportionment, or had any opportunity to comment on it.  It would appear not as otherwise one would have expected an estoppel argument to have been raised.  Be that as it may, it would appear that the tribunal simply accepted the apportionment as put forward.  It noted the following apportioned costs:

“ (1)  Applicant’s Solicitor’s Costs and Disbursements

    Incurred specifically in relation to the case against the 1^st Respondent:

    HK$(2,879,610 – 602,037) + 1,004

    =HK$2,278,577

    Incurred specifically in relation to the case against the 2^nd Respondent:

    HK$(602,037 + 11)

    =HK$602,048

    Total: HK$2,880,625

    …

  (3)  Clerk of the Tribunal’s Costs and Disbursements

Costs and disbursements incurred up to the first Tribunal hearing on 6th June 2005 relating to both Respondents:	HK$123,275
THEREAFTER costs and disbursements incurred in relation to the 1st Respondent:	HK$317,062
In relation to the 2nd Respondent:	HK$19,600

”

(The applicant’s costs have been omitted since those are not challenged on this appeal.)

33.  The second respondent was ordered to pay:

“ (i)   a contribution representing 35% of the assessed costs of the Applicant’s solicitor incurred in relation to the case against him (i.e. HK$602,048 x 35%), round down to HK$210,700;

(ii)  …

(iii) a contribution representing 80% of the assessed costs of the Clerk of the Tribunal incurred in relation to the case against him plus 1/2 share on the costs incurred up to the first Tribunal hearing on 6^th June 2005 [i.e. HK$19,600 + (HK$123,275 ¸ 2) x 80%], round down to HK$64,900.”

The first respondent was ordered to pay a similar percentage by way of contribution in relation to the assessed costs apportioned to him.

34.  A major criticism of the costs order as made was that the second respondent was made to bear a percentage of the assessed costs down to and including the first day of the hearing on 6 June 2005 notwithstanding that, almost a year earlier, the second respondent’s solicitors had given written notice that he would be admitting the complaints at the hearing.  In my view, given that earlier notice, it is wrong in principle for the second respondent to bear costs incurred after 16 June 2004 and before the first day of the hearing on 6 June 2005.  At the hearing, Mr Burns SC, who appeared for the applicant, was unable to proffer any good reason why the second respondent should be made so to do.

35.  The suggestion that he had caused additional costs to be incurred in respect of the agreed summary is unsupported by the evidence, which shows that within 10 days of receiving the summary, the prosecutor had been advised in outline what minor respects revisions had to be made.  There does not appear to be any valid basis for suggesting that the second respondent had in any way caused unnecessary additional costs to be incurred.

36.  The matter is exacerbated by the fact that the applicant’s solicitors’ skeleton bill of costs is wholly uninformative as to the approach and basis of apportionment of costs as between the first and second respondents.  While there is a half page summary of the second respondent’s costs and disbursements under headings marked A, B, C, D and F+G, the details provided related to all costs incurred in respect of the first and second respondents.  One is left none the wiser as to what was considered to be properly attributable to the second respondent.  A quick perusal of the items of work undertaken under heading B, for example, reveals that the bulk of it plainly was incurred after the second respondent’s letter of 16 June 2004 and related to the trial and had little, if anything, to do with the second respondent.  Nevertheless, approximately $450,000 of costs were said to be attributable to the second respondent.

37.  While recognizing that the tribunal did baulk at the time spent by the applicant’s solicitors and had reduced the amount claimed by 65% overall, it defies belief that the costs said to be attributable to the second respondent could remotely be of the order of $200,000, representing approximately one-fifth of the total bill, given that the second respondent conceded the case at the earliest opportunity and had played no part in the lengthy trial of 21 days other than on the first day of hearing and at the reconvened hearing for mitigation and costs.  Moreover, in any apportionment of costs between the respondents, it would be appropriate to give recognition to the co-operative attitude of the second respondent.  This would serve to bring home to solicitors faced with disciplinary charges the disadvantage of advancing unmeritorious and untruthful defences.

38.  I fully accept that certain costs had to be incurred, for example, for the formulation of the complaints and the preparation of the agreed facts, but those costs would be common to, and should be borne by, both respondents equally.  Approaching the matter with a broad brush and taking matters in the round, and recognizing, in particular, the second respondent’s co-operation and the consequent saving of time and expense, I consider that costs of the order of $30,000 in respect of the applicant’s solicitors costs to be appropriate.

39.  As regards the costs of the clerk to the tribunal, it is impossible to discern from the skeleton bill submitted what is the basis of the apportionment between the first and second respondents.  Again, it is not known what costs were apportioned to the second respondent and the amount of costs as incurred between June 2004 and 2005.  The criticism of the inappropriate cut-off date of 6 June 2005 adopted by the tribunal applies, mutatis mutandis, to the clerk’s bill.  Those matters aside, two items of costs as claimed merit comment.  The first is a charge of $59,333 (at $2,000 an hour) in respect of 29 hours 40 minutes spent in the “perusal” of documents and the second is a charge of $48,000 (at $3,000 an hour) in respect of 16 hours spent in “proofreading”.

40.  I confess to being nonplussed by the ‘perusal’ claim.  I have difficulty identifying the type of documents that was incumbent upon the clerk to peruse, which would have taken up over 3½ entire days of his time.  I am equally puzzled that ‘proofreading’ took 16 hours, or the equivalent of 2 entire working days.  The obvious candidates for proofreading would be the Statement of Findings (of 67 pages) and the Reasons and Orders (of 10 pages).  In my view, that task should not have taken more than two hours to accomplish.

41.  Again, adopting a broad brush approach and taking matters in the round, with particular regard to the proper role of the clerk to the tribunal, a task which essentially is administrative in nature, the appropriate contribution by the second respondent in respect of the clerk’s costs should be no more than $15,000 and therefore I would reduce the amount awarded accordingly.

Conclusion

42.  For the reasons stated, I would 

    (1)   dismiss the appeal against suspension;

    (2)   set aside the finding of liability and penalties imposed under complaint 25 and allow its appeal; and

    (3)   allow the appeal on costs, setting aside the costs orders in favour of the applicant’s solicitors and the clerk to the tribunal and substituting therefore an award of $30,000 and $15,000 respectively.

43.  I would also propose an order nisi that there be no order as to costs for this appeal.

Hon Stone J:

44.  I respectfully agree with the judgment of Le Pichon JA, and have nothing to add.

Hon Rogers VP:

45.  There will accordingly be an order in terms of §§ 42 & 43.