Re a Solicitor

CACV 182/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 182 OF 1999

(ON APPEAL FROM THE SOLICITORS DISCIPLINARY TRIBUNAL)

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J U D G M E N T

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Keith J.A. (giving the first judgment at the invitation of Godfrey J.A.):

Introduction

1. The Appellant is a solicitor. He was admitted in 1992. At a hearing before the Solicitors Disciplinary Tribunal ("the Tribunal"), he admitted seven complaints which had been made against him. Those complaints were that he had contravened the Solicitors' Accounts Rules ("the Rules") in a number of respects, and that he had failed to comply with one of the Practice Directions issued by the Law Society. The Tribunal ordered that he be suspended from practice for a period of six months. He now appeals against that order.

The facts

2. The disciplinary offences all occurred in 1997, within a year or so of the Appellant commencing practice on his own. They related to four separate transactions and one office practice which the Appellant had allowed to develop.

(i) In the first of these transactions, the Appellant was acting for the purchaser of a flat. A cheque for $514,210.00 was received from his client. It was deposited into the firm's office account. Of that amount, the sum of $499,000.00 represented part of the balance of the purchase price, and $15,210.00 represented the firm's fees. The sum of $499,000.00 should immediately have been transferred into the firm's client account. It was not, and that gave rise to one of the complaints in complaint 1. The next day, two cheques totalling $499,000.00 were drawn on the client account. Because the $499,000.00 had not been transferred to the client account, those cheques resulted in the client account being overdrawn in the sum of $352,812.85. That gave rise to complaint 3. Two days later, the sum of $353,000.00 was transferred from the office account to the client account in order to put the client account back into credit. That meant that the sum of $161,210.00 (being the difference between the sums of $514,210.00 and $353,000.00) remained in the office account, when that sum (less the $15,210.00 representing the firm's fees) should have been transferred to the client account. That gave rise to the other complaint in complaint 1. Finally, the transactions were wrongly recorded in the firm's ledgers. The payment by the client of the $514,210.00 was not recorded in the client ledger, and the transfer of $353,000.00 from the office account to the client account was recorded in the client ledger as a cash transfer. That inaccurate book-keeping gave rise to one of the complaints in complaint 6.

3. None of these contraventions would have occurred if the cheque for $514,210.00 had been deposited into the client account in the first place. The Appellant's counsel told the Tribunal that the failure to pay the cheque into the client account was a mistake on the part of the Appellant's clerk who had been handling the transaction, and had been made without any ulterior or sinister purpose.

(ii) In the second transaction, the Appellant was acting for the purchaser of another flat. A cheque for $1,538,960.00 was received from the client. It was deposited into the office account. It should have been deposited into the client account. Four days later, the amount (less expenses of $10,760.00) was transferred to the client account. The presence of the money in the office account for those four days gave rise to complaint 2. In addition, the deposit by the client of the sum of $1,538,200.00 was not recorded in the client ledger. That piece of incomplete book-keeping gave rise to the other complaint in complaint 6.

4. Once again, these complaints were the consequence of the failure to pay the cheque into the client account in the first place. The Appellant's counsel told the Tribunal that the failure to pay the cheque into the client account was again a mistake, made without any ulterior or sinister purpose, on the part of the clerk handling the transaction. It was when the mistake was discovered by the Appellant's part-time accountant four days later that the money was transferred to the client account.

(iii) In the third transaction, the Appellant was acting for the purchaser of another flat. Two cheques totalling $520,000.00 were paid into the client account. The following day, the sum of $525,000.00 was withdrawn from that account. That resulted in the client account being overdrawn by $5,000.00. That gave rise to complaint 4. What the Appellant's counsel told the Tribunal about that complaint was that it looked as if the client had had $5,000.00 more paid on its behalf than should have been paid, and the Appellant would be absorbing that loss himself. The only feature of this transaction which was complained of was that the error had resulted in the client account being overdrawn. The Appellant had remedied that by causing $5,000.00 to be deposited into the client account.

(iv) In the fourth transaction, a sum of $3,200.00 was transferred from the client account to the office account. That money represented the Appellant's fees from a particular client. However, it was alleged that the client's approval for the transfer had not been obtained, and a written fee note had not been submitted to the client. The fee note was not submitted to the client until 9 days later. That gave rise to complaint 5, which alleged the contravention of the rule which, in effect, only permitted money to be drawn from a client account for costs "where a bill of costs or other written intimation of the amount of the costs incurred" had been submitted to the client.

5. What the Appellant's counsel told the Tribunal about this complaint was that the client's approval for the transfer of this sum for the Appellant's fees had been given orally. The Appellant's admission of this complaint was, therefore, solely on the basis that no written fee note had been submitted to the client by the time the transfer had taken place. However, when the Appellant's counsel was pressed by the Chairman of the Tribunal as to how and when the oral approval had been sought, it emerged that the approval for the transfer had in fact been given many months after the event.

(v) In addition, the Appellant failed to pay to a number of his clients the interest which was payable to them on sums deposited by them into the client account. Six deposits were involved, and the amount of interest which the Appellant had failed to account to his clients for amounted to $18,589.00. That gave rise to complaint 7, which alleged a contravention of the Practice Direction issued by the Law Society, in effect making it mandatory for solicitors to account to their clients for interest accruing on money in a client account. Although the Appellant is said to have been unaware at the time that this requirement was mandatory (and the Chairman of the Tribunal's uncertainty as to whether it was indeed mandatory lends support to what the Appellant is saying), the Appellant's failure to account to his clients for the interest was said by his counsel to the Tribunal to have been an oversight. That suggests that the Appellant realised at the time that, whether or not the Practice Direction was mandatory, the interest should have been paid to his clients. The Tribunal was also told that by the day of the hearing before it the outstanding interest had been paid or tendered to the clients.

The Tribunal's orders

6. On complaint 5, the Appellant was censured. On complaint 4, he was suspended from practice for three months. On all the other complaints, he was suspended from practice for six months. All the suspensions were ordered to operate concurrently with each other, making six months' suspension from practice in all.

7. The Tribunal gave no reasons for making the orders which it did. In particular, it did not state whether it was accepting as accurate what the Appellant's counsel had said by way of mitigation on the facts. If it had not accepted what the Appellant's counsel had been saying, I imagine that the Tribunal would have said so. For my part, therefore, I proceed on the footing that the factual basis on which the Tribunal proceeded was that advanced by the Appellant's counsel. On that basis, complaint 7, namely the failure to account to the clients for the interest earned on their deposits, was particularly serious. Had that failure gone unnoticed, the clients would have continued to have been out of pocket. That is not to say that the offences relating to money destined for a client account being deposited into an office account were not also serious. As the Solicitors' Disciplinary Committee said in an appeal in 1986 (In the Matter of So Ho Ming):

"The Disciplinary Committee are mindful of the very nature of the practice of a solicitor which is to hold money belonging to himself and his client. The object of the Accounts' Rules is to ensure the maintenance of adequate book-keeping and recording systems in order that a solicitor may be assisted in the management of his clients' affairs and of his practice. Unless the Accounts Rules are complied with, he may confuse his clients' money with his own, or make improper payments. The Disciplinary Committee recognise that no evidence of dishonesty or of misappropriation of clients' funds had been adduced, but .... the Disciplinary Committee are mindful in particular of the statement of [the Lord Chief Justice in England] .... to the effect that no solicitor could escape a severe penalty, indeed striking off the roll simply by showing that there had been no dishonesty and no concealment and that no client had suffered."

The appropriateness of the disciplinary sanction

8. It has frequently been said that an appellate court should be slow to interfere with a disciplinary tribunal's decision on what the appropriate disciplinary sanction should be. A professional disciplinary body is the body best fitted to assess the gravity of professional misconduct. But as Godfrey J.A. said in Ng Mei Sin v The Medical Council of Hong Kong [1995] 1 HKC 242 at p.247I:

"If, for example, it appears to this court that the sentence was wholly out of proportion to the gravity of the offence, that would be a proper occasion for this court to interfere."

9. Mr. Kwok Siu Hay for the Appellant in effect does submit that suspension from practice for six months was wholly out of proportion to the gravity of the Appellant's offences. They were book-keeping errors, he says, due to inefficiency rather than dishonesty. In addition, the Appellant had been ordered to pay the Law Society's costs of the disciplinary proceedings on an indemnity basis. That was estimated to amount to about $500,000.00, and that did not include the fees of the agent appointed by the Law Society to manage the firm's affairs when the Law Society decided to intervene and take control of the firm. Mr. Kwok reminded us that by the date of the hearing the Appellant had ceased practising on his own. He had joined an established firm with experienced solicitors, and the circumstances which had resulted in his appearance before the Tribunal were unlikely to be repeated. Finally, Mr. Kwok contended that "a 6-month suspension from practice would in effect take away the career of a young solicitor".

10. Having considered these arguments carefully, I have concluded that the sanction imposed was not one which warrants interference by an appellate court. I would not describe the failure to pay interest to clients as a book-keeping error, nor could the payment into an office account of sums destined for a client account be characterised in that way either. To the extent that some of the contraventions were the result of errors made by the Appellant's staff, that demonstrated an inability or an unwillingness on the part of the Appellant to train or instruct his staff properly. The fact that the Appellant no longer works on his own does not mitigate the gravity of the conduct for which he had to be disciplined. I acknowledge that the award of costs was itself a significant disciplinary sanction, but the Appellant had to be punished for allowing a lax regime to develop. And in my opinion it is an exaggeration to say that a suspension from practice for six months will bring the Appellant's career as a solicitor to an end. A longer period of suspension may be tantamount to an order that he be struck off the register of solicitors, but not a suspension for six months only.

11. It is said that the decision of the Tribunal was a harsh one, but the policy underlying the disciplinary regime for solicitors was comprehensively articulated by Sir Thomas Bingham M.R. (as he then was) in Bolton v. Law Society [1994] 1 W.L.R. 512 at pp.518B-519E:

"Any solicitor who is shown to have discharged his professional duties with anything less than complete integrity, probity and trustworthiness must expect severe sanctions to be imposed upon him by the Solicitors Disciplinary Tribunal. Lapses from the required high standard may, of course, take different forms and be of varying degrees. The most serious involves proven dishonesty, whether or not leading to criminal proceedings and criminal penalties. In such cases the tribunal has almost invariably, no matter how strong the mitigation advanced for the solicitor, ordered that he be struck off the Roll of Solicitors. Only infrequently, particularly in recent years, has it been willing to order the restoration to the Roll of a solicitor against whom serious dishonesty had been established, even after a passage of years, and even where thc solicitor had made every effort to re-establish himself and redeem his reputation. If a solicitor is not shown to have acted dishonestly, but is shown to have fallen below the required standards of integrity, probity and trustworthiness, his lapse is less serious but it remains very serious indeed in a member of a profession whose reputation depends upon trust. A striking off order will not necessarily follow in such a case, but it may well. The decision whether to strike off or to suspend will often involve a fine and difficult exercise of judgment, to be made by the tribunal as an informed and expert body on all the facts of the case. Only in a very unusual and venial case of this kind would the tribunal be likely to regard as appropriate any order less severe than one of suspension.

It is important that there should be full understanding of the reasons why the tribunal makes orders which might otherwise seem harsh. There is, in some of these orders, a punitive element: a penalty may be visited on a solicitor who has fallen below the standards required of his profession in order to punish him for what he has done and to deter any other solicitor tempted to behave in the same way. Those are traditional objects of punishment. But often the order is not punitive in intention. Particularly is this so where a criminal penalty has been imposed and satisfied. The solicitor has paid his debt to society. There is no need, and it would be unjust, to punish him again. In most cases the order of the tribunal will be primarily directed to one or other or both of two other purposes. One is to be sure that the offender does not have the opportunity to repeat the offence. This purpose is achieved for a limited period by an order of suspension; plainly it is hoped that experience of suspension will make the offender meticulous in his future compliance with the required standards. The purpose is achieved for a longer period, and quite possibly indefinitely, by an order of striking off. The second purpose is the most fundamental of all: to maintain the reputation of the solicitors' profession as one in which every member, of whatever standing, may be trusted to the ends of the earth. To maintain this reputation and sustain public confidence in the integrity of the profession it is often necessary that those guilty of serious lapses are not only expelled but denied re-admission. If a member of the public sells his house, very often his largest asset, and entrusts the proceeds to his solicitor pending re-investment in another house, he is ordinarily entitled to expect that the solicitor will be a person whose trustworthiness is not, and never has been, seriously in question. Otherwise, the whole profession, and the public as a whole, is injured. A profession's most valuable asset is its collective reputation and the confidence which that inspires.

Because orders made by the tribunal are not primarily punitive, it follows that considerations which would ordinarily weigh in mitigation of punishment have less effect on the exercise of this jurisdiction than on the ordinary run of sentences imposed in criminal cases. It often happens that a solicitor appearing before the tribunal can adduce a wealth of glowing tributes from his professional brethren. He can often show that for him and his family the consequences of striking off or suspension would be little short of tragic. Often he will say, convincingly, that he has learned his lesson and will not offend again. On applying for restoration after striking off, all these points may be made, and the former solicitor may also be able to point to real efforts made to re-establish himself and redeem his reputation. All these matters are relevant and should be considered. But none of them touches the essential issue, which is the need to maintain among members of the public a well-founded confidence that any solicitor whom they instruct will be a person of unquestionable integrity, probity and trustworthiness. Thus it can never be an objection to an order of suspension in an appropriate case that the solicitor may be unable to re-establish his practice when the period of suspension is past. If that proves, or appears likely, to be so the consequence for the individual and his family may be deeply unfortunate and unintended. But it does not make suspension the wrong order if it is otherwise right. The reputation of the profession is more important than the fortunes of any individual member. Membership of a profession brings many benefits, but that is a part of the price."

The absence of reasons

12. Mr. Kwok's subsidiary argument was that the Tribunal was required to give reasons for the orders it made. Its failure to do so means, he says, that the orders it made have to be set aside. He does not assert that the statutory scheme provided by the Legal Practitioners Ordinance (Cap. 159) expressly imposes a duty on the Tribunal to give reasons, but he does assert that that duty has been imposed on the Tribunal by the common law.

13. Historically, it has not been the practice of disciplinary tribunals to give reasons for its decisions, and that practice has not been criticised by the courts. The history of the practice was summarised by Lord Clyde in Marta Stefan v. General Medical Council [1999] 1 W.L.R. 1293 at p.1296C-H. Although there had been no obligation on disciplinary tribunals to give reasons, Lord Clyde said that the benefits of giving reasons were

"subsequently recognised as related to the giving of reasons for a finding of serious professional misconduct, and not to the imposition of a particular penalty, the reasons for which would usually be apparent from the transcript of the evidence .... and the giving of which have been said to be neither necessary nor desirable...."

That distinction is one to which I shall return in a moment.

14. However, in recent years there has been a steady change in judicial attitude towards the giving of reasons by bodies which are required to act fairly. In consequence, in the Marta Stefan case itself, despite the previous practice not to require disciplinary tribunals to give reasons for its decisions, the Privy Council considered whether the Health Committee of the General Medical Council was required to give reasons for its decision to suspend the registration of a doctor indefinitely on the ground that her medical condition was such as to impair her fitness to practise. The Privy Council concluded that, in the light of its judicial character, the framework in which it operated and the provision of a right of appeal against its decisions, there was a common law obligation on the Health Committee to give at least a short statement of the reasons for its decisions. The extent and substance of the reasons would depend upon the circumstances, and they did not need to be elaborate or lengthy. They should be such as to tell the parties in broad terms why the decision was reached. The recording of a generally agreed statement of its reasoning would not add to the burden of the decision-making process, and in many cases a few sentences would suffice to give such explanation as was appropriate to the particular situation.

15. The Solicitors Disciplinary Tribunal is analogous to the Professional Conduct Committee of the General Medical Council. It is right to observe that the Privy Council declined to express a view as to whether the Professional Conduct Committee of the General Medical Council was obliged to give reasons for its decisions. However, the fact remains that whether the Solicitors Disciplinary Tribunal should be required to give reasons will, in my opinion, depend upon whether in the particular circumstances of the case that is what fairness requires.

16. I think that there is a very considerable difference between the finding that a solicitor has been guilty of unprofessional conduct and a finding as to what the appropriate disciplinary sanction should be. Reasons may well be required for the former but not the latter. Take this case as an example. If the Tribunal had been required to give reasons for its view that the Appellant's conduct merited suspension from practice for six months, I rather doubt whether the Tribunal would have been able to do much more than state that, taking into account the Appellant's personal circumstances, and the circumstances in which the contraventions occurred, the seriousness of what he did merited his suspension from practice. That is in fact what the Tribunal stated when it announced the orders which it made. No reasons needed to be given because the reasons emerged from the Tribunal's recitation of the agreed facts of the case. I accept that there may be a need to give reasons if a penalty is apparently out of tune with the usual penalty imposed for a particular example of unprofessional conduct. In such a case, it may be necessary for the Tribunal to explain why it is taking an exceptional course. But in view of my conclusion on the merits of the appeal, that need did not arise in the present case.

17. Accordingly, I do not think that the requirements of fairness could only have been met in the present case by the giving of reasons. I would not want to be seen to be laying down a general rule that disciplinary tribunals should give reasons for findings of guilt but do not need to do so for the disciplinary sanction imposed. Each case must depend on its own facts, and what fairness requires in that case. All I am saying is that reasons were not required in the present case.

Conclusion

18. For these reasons, I would therefore dismiss this appeal.

Rogers J.A. :

19. I agree that this appeal must be dismissed.

20. I have undoubted sympathy for the Appellant who will, no doubt, suffer a severe penalty, but this is, again, another example of the importance of adhering to the principle that this Court is very reluctant to interfere with an order of a disciplinary tribunal. This is especially so when the only matter of appeal relates to sentence or penalty. The solicitors' profession is empowered to regulate its own affairs. The disciplinary tribunal is uniquely qualified to evaluate what is a proper sentence. The importance of maintaining rigorous standards by solicitors in financial matters is of particular significance in relation to the handling of sums of money on conveyancing. Punishment of the individual is one aspect, but as Sir Thomas Bingham, M.R. said in Bolton v. Law Society [1994] 1 WLR 512 at p.518 the most fundamental matter of all is the maintenance of the reputation of the profession and the trust of the public.

21. In my view, this appeal should be dismissed.

Godfrey J.A. :

22. I agree with both judgments.

23. I am satisfied that a "full understanding of the reasons why the tribunal makes orders which might otherwise seem harsh" (see per Sir Thomas Bingham, M.R. in Bolton v. Law Society [1994] 1 WLR 512 at p. 518F) clearly indicates that the decision of the Solicitors Disciplinary Tribunal here is not one which we are entitled to disturb. We cannot simply substitute our own view as to penalty for that of the Tribunal, although I must confess that, if that course had been open to us, this is a case in which I would have been tempted to do so.

24. I have not forgotten that the Tribunal in fact gave no reasons for its decision as to penalty in this particular case, but in my opinion it is only where the penalty imposed is quite exceptionally severe that fairness demands reasons to be given for imposing it. I do not consider this to be such a case.

25. Accordingly, I too would dismiss this appeal, and it accordingly stands dismissed. The appellant must pay the respondent's costs of the appeal, to be taxed if not agreed.