CHEUNG YICK HUNG also known as CHEUNG YICK HUNG JACKIE v. THE LAW SOCIETY OF HONG KONG

HCMP 1304/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1304 OF 2016

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    HCMP 1305/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1305 OF 2016

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J U D G M E N T

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A.  INTRODUCTION

1. On 14 April 2016, the Law Society intervened into the practice of Messrs Alan Ho & Co (“the Firm”) pursuant to section 26A(1)(c) of the Legal Practitioners Ordinance, Cap 159 (“LPO”) after receiving complaints by its clients.  The purpose of the intervention was to wind up the irregular practice of the Firm.[1] The intervention is said to be the largest ever taken by the Law Society against a firm of solicitors.

2. The appellants, Mr Cheung Yick Hung and Mr Chung Sze Yuen, were at the time of the intervention consultants of the Firm.  Based on its investigations, the Law Society took the view that both of them had failed to supervise and manage the respective law offices for which they were supposedly responsible. Thus, the Consents Committee of the Law Society on 22 April 2016 resolved to exercise the powers under section 6(5)(e) of the LPO and sections 7(1) and (2) of the Practising Certificate (Special Conditions) Rules, Cap 159Y (“the Rules”) to impose Conditions 1 to 5 in Schedule 1 of the Rules (“Schedule 1”) against the practicing certificates of the appellants (“the Decisions”) :

(1)  The solicitor shall complete a period of practice (not exceeding 24 months) as specified by the Council under the supervision of a solicitor holding an unconditional practising certificate.

(2)  The solicitor may only practise in an employment that has been approved by the Council.

(3)  The solicitor may only practise in a partnership that has been approved by the Council.

(4)  The solicitor may only practise on his own account with the approval of the Council.

(5)  The solicitor shall not sign cheques on a client account.

In respect of condition (1), the period of supervision is 24 months for both appellants.

3. The appellants were informed of the Decisions on 26 April 2016.  They then brought these appeals pursuant to section 6(9) of the LPO.  Pursuant to section 36 of the High Court Ordinance, Cap 4, the power of the Chief Judge can be exercised by any judge of the High Court.  Consequently, these appeals were listed and heard together by me sitting as a judge of the High Court.

B.  Overview of the submissions

4. Mr Deng, for the appellants, raised two principal arguments.

5. First, he argued that the Decisions are ultra vires sections 7(1) and (2) of the Rules because, on a proper construction, the Law Society’s power to amend an extant practising certificate by imposing any of the conditions in Schedule 1 is exercisable only if there is a pending application by the solicitor for a practising certificate at any time during the period for which the extant practicing certificate is in force (“the Condition”).  Since the appellants did not make any application to renew their practicing certificates at the time when the Law Society made the Decisions, the Condition was not met.  The Law Society had therefore acted ultra vires section 7(1) and (2) of the Rules.

6. Mr Chan, for the Law Society, submitted that sections 7(1) and (2) of the Rules, on a proper construction, empower the Law Society to amend an extant practising certificate at any time during its currency.  As an alternative, Mr Chan argued that even if the Condition exists, sections 7(1) and (2) of the Rules are inconsistent with section 6(5) of the LPO and should be disregarded : see section 28(1) of the Interpretation and General Clauses Ordinance, Cap 1.  The Law Society is still entitled to make the Decisions under section 6(5)(e) of the LPO, the primary legislation.  As a further alternative to overcome Mr Deng’s ultra vires argument, Mr Chan submitted pursuant to section 6(11) of the LPO, the court has the power to and should direct the Law Society to issue a practicing certificate to each of the appellant with the same conditions as imposed by way of the Decisions.

7. The second argument raised by Mr Deng is that the Decisions are disproportionate because they disregard the appellants’ personal and private rights.  Mr Chan disagreed, contending that having regard to the overall circumstances, the Decisions were proportionate.

C.  Two main issues

8. Arising from the parties’ submissions are two main issues.

9. The first main issue is jurisdictional : are the Decisions ultra vires?  (Issue 1)  Its determination involves two sub-issues :

(1)  Whether on a proper construction of sections 7(1) and (2) of the Rules, the exercise of the power to amend an extant practising certificate is subject to the Condition?  (Issue 1(1))

(2)  If yes, is section 7(1)(a) of the Rules ultra vires section 6(5) of the LPO to the extent of impermissibly subjecting the Law Society’s exercise of the power to impose the conditions set out in Schedule 1 to an already issued practicing certificate to the Condition? (Issue 1(2))

10. The second main issue concerns the merits of the Decisions : whether they are disproportionate as the appellants complained?  (Issue 2)

11. I will consider them in turn.

D.  Issue 1 – Are the Decisions ultra vires?

12. Issues 1(1) and (2) depend on a proper interpretation of the relevant provisions, which must be understood in the overall context of their legislative scheme.

D1.   The legislative scheme

13. Section 6 of the LPO relevantly provides :

“ (1) The Society, on an application in writing by a solicitor in the month of November in any year … shall, subject to subsection (3), issue to the applicant a practising certificate as a solicitor for the period of one calendar year from 1 January next following the date of the application.

...

(4) Notwithstanding subsection (1), the Society may, upon such conditions as it thinks fit, permit an application for a practising certificate to be made under this subsection at any time and upon such application may issue to the applicant a practising certificate for any period not exceeding one calendar year and ending on 31 December in the year in which it is issued.

(5) Notwithstanding subsection (1), the Society may –

(a) refuse to issue a practicing certificate on such grounds as may be prescribed by the Council;

(b) issue a practising certificate to an applicant subject to such conditions as may be prescribed by the Council;

…

(e) amend an already issued certificate by adding such conditions as may be prescribed by the Council.”

14. For present purposes, the following points arising from section 6 should be noted.

15. First, pursuant to section 6(1) ordinarily a solicitor applies for a practicing certificate in November every year and, if approved, the Law Society issues the practicing certificate to the solicitor for one calendar year from 1 January in the next year.  The practicing certificate is only valid for one year and the solicitor has to apply for another one during its currency in November of the year.

16. Second, pursuant to section 6(4) the Law Society may entertain an application for a practicing certificate to be made at any time of the year and, if approved, issue a practising certificate for the remainder of the year.  A ready example where section 6(4) is invoked is the issuance of practicing certificates to newly admitted solicitors whose admission may take place at any time of the year.

17. Third, pursuant to section 6(5)(b) the Law Society may impose conditions as may be prescribed by the Council when it issues a practicing certificate.

18. Fourth, pursuant to section 6(5)(e) the Law Society may amend an already issued certificate by adding such conditions as may be prescribed by the Council.

19. Previously, the grounds and conditions, as the case may be, referred to in section 6(5)(a), (b) and (e) were made by the Chief Justice.  In 2002, amendments were made to those subparagraphs to change the authority from the Chief Justice to the Law Society as we now find in the current provisions.  It is common ground that the legislative intent of the amendments is contained in the Legislative Council Brief – Statute Law (Miscellaneous Provisions) Bill 2001 dated June 2001 :[2]

“ 34. Under section 6(5)(b) of [the LPO], the Law Society may issue a practicing certificate subject such conditions may be prescribed by the Chief Justice. To date, the Chief Justice has not prescribed any conditions for the issue of a practicing certificate. This created a loophole that has been exploited by some solicitors. If the Law Society is empowered under section 6(5)(a) (b) and (e) to make appropriate rules, it would be able to react swiftly to counteract any undesirable developments in legal practice and to impose restrictions upon the practice of solicitors for the protection of the public interest and the reputation of the profession. The Chief Justice has agreed to transfer his powers under section 6(5)(a), (b) and (e) of the Ordinance to the Council of the Law Society. Such rule-making power would be subject to the Chief Justice’s prior approval under section 73(2) of [the LPO].”

20. Importantly for present purposes, section 6(5)(e) does not set out the circumstances under which the power to amend an already issued practicing certificate may be exercised.  Nor does it provide that the power is subject to any condition precedent.

21. The Rules as envisaged to be made by the Law Society came into force on 1 February 2003.

22. Section 3 of the Rules corresponds to section 6(5)(b) of the LPO.  It provides :

“ For the purposes of section 6(5)(b) of the Ordinance, the conditions subject to which the Society may issue a practicing certificate to a solicitor are –

...

(i) in the case of a solicitor who was a principal in or a consultant of a firm at the time of an intervention of the firm by the Society under section 26A and Schedule 2 to the Ordinance during the preceding 18 months, any one or more of the conditions specified in Schedule 1.”

23. Section 4 of the Rules then enumerates the matters the Society may have regard to when imposing conditions set out in Schedule 1 under section 3.

24. Section 7 of the Rules stipulates :

“ (1) For the purposes of section 6(5)(e) of the Ordinance, and subject to subsection (2), the conditions that may be added by the Society to an already issued practising certificate are any one or more of the conditions specified in Schedule 1.

(2) Subsection (1) has effect in relation to a practising certificate already issued to a solicitor in the case, an only in the case, where –

(a) In the event of an application for a practising certificate being made by the solicitor at any time during the period for which his current certificate is in force, this section would have effect in relation to him by reason of any of the circumstances mentioned in section 3(b), (c), (d), (g) or (i);

(b) The solicitor has entered into a voluntary arrangement within the meaning of the Bankruptcy Ordinance (Cap. 6) with his creditors;

(c) The solicitor has been charged with, or convicted of –

(i) an offence involving dishonesty or deception; or

(ii) an offence which in the opinion of the Council has compromised or impaired or is likely to compromise or impair the reputation of the profession.”

25. Section 8 of the Rules deals with the matters to be considered by the Law Society when imposing conditions on an already issued practicing certificate thus :

“ In considering for the purposes of section 7(1) the addition of any of the conditions set out in Schedule 1 to an already issued practicing certificate, the Society may have regard to the matters set out in section 4.”

26. Returning to section 7, subsection (1) sets out the conditions prescribed by the Council pursuant to section 6(5)(e) of the LPO that may be imposed to an already issued practicing certificate.  They are the conditions specified in Schedule 1.  The power to impose the conditions under section 7(1) is made subject to section 7(2) explicitly.  Section 7(2) is in strict prescriptive terms : the power to impose conditions under section 7(1) is exercisable “if and only if” in any of the three cases provided in subparagraphs (a), (b) and (c), that is, where there is an application for a practicing certificate; the solicitor having entered into a voluntary arrangement and the solicitor has been charge with or convicted of an offence as specified, as the case may be.

D2.   Construing the provisions

27. Mr Chan submitted that section 7(2)(a) of the Rules, which seeks to implement section 6(5)(e) of the LPO, should be construed in a way to give full effect to the legislative intent of section 6(5)(e). Thus construed, section 7(2)(a) of the Rules provides that in the circumstances mentioned in sections 3(b), (c), (d), (g) or (i) of the Rules, the Law Society may impose the conditions in Schedule 1 to an already issued practicing certificate as if the holding solicitor were applying for the issue of a certificate under section 6(5)(b).  In short, section 7(2)(a) refers to a notional application.

28. I fully accept that there are strong legislative policy reasons to justify the construction proposed by Mr Chan.  However, his construction, involving a notional application, would violate the clear language used in section 7(2)(a) of the Rules.  I cannot strain the clear language used in order to give it a meaning which it does not bear.  In my view, on a plain reading of section 7(2)(a) of the Rules, especially with the strictly prescriptive words in mind, the power to impose conditions to an extant practicing certificate is exercisable if and only if there is an actual, as opposed to a notional, application for a practicing certificate.  In other words, the Condition exists and must be met before the Law Society can exercise the power to impose conditions to an extant practising certificate.

29. The answer to the Issue 1(1) is “yes”.

30. The next question is whether section 7(2)(a) of the Rules is inconsistent with section 6(5)(e) of the LPO insofar as it imposes the Condition to the exercise of the general power conferred on the Law Society by the primary legislation.

31. The manner of exercise of the power conferred upon a statutory body by primary legislation is always subject to the check and balance available in administrative law, which requires no written law.  There are occasions where subsidiary legislation is enacted to stipulate the manner of exercise of the power.  That is perfectly legitimate and more often than not necessary and desirable.  However, if the subsidiary legislation is inconsistent with the primary legislation by which the enabling power is conferred, it offends section 28(b) of the Interpretation and General Clauses Ordinance.  It is ultra vires and invalid.

32. Here, with the Condition in place, no matter how serious or urgent the situation is and no matter when it arises, the Law Society can simply do nothing until and unless the solicitor in question applies for a practicing certificate for the following year, which would ordinarily take place in November of the current year.  This proposition defies logic and common sense.  More importantly, it defeats the legislative intent of section 6(5)(e).  For a solicitor whose conduct cries out for immediate imposition of conditions to his practising certificate could easily avoid this simply by not applying for a fresh practicing certificate until the last possible moment.  The lacuna and abuse singled out to be tackled by section 6(5)(e) would continue to haunt the legal profession.  This undermines the strong public interest in the effective and timely regulation of solicitors by virtue of section 6(5)(e).

33. As such, the Condition unduly impedes the Law Society’s general power to impose conditions on an extant practicing certificate under section 6(5)(e) of the LPO.

34. Contrary to Mr Deng’s submissions, the impediment created by the Condition in section 7(2)(a) is not salvaged by section 7(2)(b) and (c) because they deal with the particular situations as specified.  They do not apply to any other scenarios.  Mr Deng in particular submitted that in urgent cases the Law Society could have proceeded under section 7(2)(c) by subjecting the solicitor to disciplinary proceedings and then in such proceedings imposing conditions on his current practicing certificate.  His submission begs the obvious question : are disciplinary proceedings covered by section 7(2)(c)?  The word “offence” clearly envisages criminal proceedings or proceedings of similar nature like contempt.  I do not think it covers disciplinary proceedings.  Even if assuming that disciplinary proceedings are covered by section 7(2)(c), there are plainly cases where immediate disciplinary action short of disciplinary proceedings are warranted.  In those cases, if Mr Deng were correct, the Law Society could not do anything.  Even for cases where disciplinary proceedings are warranted, such proceedings may take a long time to conclude.  Again, if Mr Deng were correct, the Law Society could not do anything in the meantime.  I fail to see why the Law Society’s general power to impose conditions under section 6(5)(e) of the LPO should be circumscribed in such a way.

35. In my view, insofar as it seeks to undermines the Law Society’s exercise of the power conferred by section 6(5)(e) of the LPO by virtue of the Condition, section 7(2)(a) of the Rules is inconsistent with the primary enabling provision and ultra vires.

36. The answer to the Issue 1(2) is “yes”.

D3.   Conclusion

37. Whether the Decisions are ultra vires sections 7(2)(a) of the Rules is really neither here nor there.  It is because section 7(2)(a) itself, insofar as it imposes the Condition, is ultra vires section 6(5)(e) of the LPO.  The Law Society is empowered by section 6(5)(e) of the LPO, read together with section 3(i) of the Rules, to impose on the appellants’ current practicing certificates the conditions set out in Schedule 1.

38. The answer to Issue 1 is that the Decisions are not ultra vires section 6(5)(e), the enabling provision in the LPO.

39. This brings me to the Issue 2.

E.  Issue 2 – Are the Decisions disproportionate?

E1.   Proper approach

40. The general proper approach adopted by the court to a statutory appeal under section 6(9) of the LPO is well put by Lam VP in Miller v Law Society of Hong Kong [2014] 3 HKLRD 1 :

“ 22. I now turn to the nature of an appeal under s.6(9). As observed by the then Chief Justice in Yau Chung Wo Jeremiah v Law Society of Hong Kong, unlike a judicial review, this is a statutory appeal and the correct approach is not the test of irrationality. The judge hearing the appeal has to put himself in the position of the Law Society to decide whether a practicing certificate should be issued to this solicitor with or without conditions. In so doing, the judge can and should accord proper weight to the decision of the Law Society (as in the case of appeal against a decision of a professional disciplinary tribunal).”

41. After pointing out that the court may consider evidence not placed before the Law Society when it made the impugned decision, Lam VP continued :

“ 29. But this does not mean that an appeal should be conducted as if it is a fresh application before the judge. There are limits to the extent to which a judge hearing such a statutory appeal should have regard to new evidence and new issues. In an appeal, even in the context of statutory appeal under s.6(9) of the LPO, the judge is entitled to place weight on the first instance decision. To permit entirely new and unrelated issues to be canvassed in an appeal will deprive the judge of the advantage of such first instance decision and it should rarely be appropriate. There are good reasons why the legislature entrusted with the task of making a primary decision on the issue or refusal of practicing certificate to the Law Society as opposed to the court. A judge does not have the same experience and understanding on the operation of a legal practice of a solicitor as those members sitting at the Council. In respect of the dealings between a solicitor and his client and how the general finance of a solicitor may impact upon the well-being of his clients, I readily acknowledge that those in the profession are in a better position to assess the situation than me.”

I will respectfully adopt this approach in dealing with the present appeals.

42. In an appeal from the penalty imposed by the Solicitors Disciplinary Tribunal for professional misconduct, Ma CJHC (as the Chief Justice then was) in A Solicitor v Law Society of Hong Kong, CACV 107/2005, unreported, 18 May 2007 said :

“ 16. These, therefore, were the Tribunal’s reasons on penalty. I have dealt with them at some length because in an appeal from a decision of the SDT on penalties, the approach of the Court of Appeal has always been one of caution. The starting point must be that the disciplinary tribunal of the professional body is in a far better position to decide on penalty than the court simply because it has the feel and sense of its members when it comes to weighing up the seriousness of any given conduct and the level of any penalty. That said, the court will, where the circumstances dictate, disturb the decision of a professional disciplinary tribunal even in relation to penalty. For example, if a tribunal has acted under an error of law or the penalty is obviously inappropriate or excessive, the court will then be obliged to disturb the decision. In practical terms, in order to disturb the penalties imposed by a disciplinary tribunal, it must be shown that the decision was obviously or plainly wrong. It is not enough simply for the court to take a different view, however forceful that view may be.”

43. The Decisions are undoubtedly disciplinary sanctions imposed by the Law Society on the appellants, although not through the Solicitors Disciplinary Tribunal.  In my view, Ma CJHC’s observations are equally applicable to the Decisions.  The burden rests with the appellants to persuade the court that the Decisions should be disturbed because they are, as contended, disproportionate.

E2.   Nature of the Decisions

44. In examining proportionality, it is important to bear in mind the nature of the Decisions as a kind of disciplinary sanction imposed by the Law Society on practicing solicitors.  Their proportionality must be gauged by reference to their nature as such sanctions.

45. In A Solicitor v The Law Society of Hong Kong, CACV 182/2014, unreported, 30 June 2015, Kwan JA succinctly summarized the general principles on the nature of disciplinary sanctions imposed on solicitors by the Solicitors Disciplinary Tribunal.  The principles are equally applicable to the Decisions, which are also disciplinary sanctions.  Her Ladyship said :

“ 30. …Penalties imposed by [the Solicitors Disciplinary Tribunal] are not designed as precedents (The Law Society v Emeana [2013] EWHC 2130 (Admin) at [24] to [26]). The essential principle is that which was identified by Sir Thomas Bingham MR in Bolton v Law Society [1994] 1 WLR 512 at 518A to B: it is required of solicitors that they should discharge their professional duties with integrity, probity and complete trustworthiness and 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 by the disciplinary tribunal.

  31.  The sanction imposed by this tribunal is not primarily punitive.  More emphasis would be placed on the need to protect the public and to maintain public confidence in the profession.  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.  The reputation of the profession is more important than the fortunes of any individual member (Bolton v Law Society at 519B to E; A Solicitor v Law Society of Hong Kong [2015] 2 HKLRD 802 at §70).”

46. Relevantly for present purposes, Kwan JA went on to observe :

“ 43. The imposition of practice conditions by a Solicitors Disciplinary Tribunal is about “risk to the public and protecting the reputation of the solicitors’ profession”. The tribunal makes conditions of practice orders both for the protection of the public and for maintenance of the reputation of the solicitors’ profession, and does so applying the well-honed principles in Bolton v Law Society at 518 and Salsbury v Law Society at §30 (Ebhogiaye v Solicitors Regulation Authority [2013] EWHC 2445 (Admin) at §44). Such restrictions are particularly appropriate to protect clients and third parties where, for example, a solicitor “has been shown that he cannot be trusted to practise on his own when dealing with, say, clients’ monies” or is “in need of guidance” (A Solicitor v Law Society of Hong Kong, CACV 107/2005, §17(6)).”

47. With these judicial pronouncements in mind, I now come to the evidence.  I start with the intervention into the Firm’s practice and the reasons why the Law Society made the Decisions.

E3.   Intervention and investigations

48. On 12 April 2016, the Council of the Law Society resolved to intervene in the practice of the Firm on the basis that its two partners, Mr Ho Pak Wa Alan (“Mr Ho”) and Ms Poon Fung Chi Farah (“Ms Poon”) had failed to comply with rules made by the Council under the Ordinance.  The Council also appointed Messrs Hastings & Co as the Intervention Agent to conduct the intervention subject to supervision by a Monitoring Committee.

49. At the time of the intervention, the Firm had Mr Ho and Ms Poon as partners, 4 consultants, that is, the two appellants, Mr Cheng Tze Kui (“Mr Cheng”) and Mr Lee Kwok Wa (“Mr Lee”), 1 trainee solicitor and 50 unqualified staff.  It had 4 offices situated in Tsim Sha Tsui (“TST Office”), Yau Ma Tei (“YMT Office”), Sheung Shui and Tsuen Wan (“TW Office”) respectively.

50. The complaints filed by the Firm’s clients with the Law Society and the investigations conducted by the Intervention Agent revealed serious misadministration in the Firm’s management and practice.

E3.1  Insufficient supervision

51. Under rule 4A of the Solicitors’ Practice Rules, Cap 159H (“Rule 4A”), a solicitor shall ensure that every office where he or his firm practise and can reasonably be seen to be properly supervised in accordance with the minimum standards specified, namely, (a) every such office shall be managed by a solicitor holding a current practising certificate who shall normally be in attendance at that office during all the hours when it is open to the public; and (b) every such office shall be attended on each day when it is open to the public by a solicitor who holds an unconditional practising certificate and has been admitted for at least 2 years (or such period as the Council may permit), being either a principal of, or a solicitor employed by, the firm and who shall spend sufficient time at such office to ensure adequate control of the staff employed there and afford requisite facilities for consultation with clients.

52. The Firm had 2 partners and 4 consultants at the time of intervention.  But Mr Cheng and Mr Lee were not permitted to supervise and manage an office pursuant to Rule 4A because of the conditions imposed on their practising certificates,[3] leaving only 4 solicitors, Mr Ho, Ms Poon and the appellants, who were fit to supervise and manage the 4 Offices of the Firm in accordance with Rule 4A.  Ms Poon herself was holding a practising certificate with conditions imposed on it between 22 May and 24 August 2015.  For that period, she could not supervise any of the Firm’s Offices.

53. Investigations by the Law Society showed that at all material times Mr Cheung and Mr Chung worked in the TST Office and the YMT Office respectively.  However, when Ms Vicky Lui, Investigation Counsel, and Ms Vivian Yim, Assistant Director of the Compliance Department of the Law Society, visited the TST Office on 21 March 2016 at around 11:30 am, Mr Cheung was not there, as according to a clerk of the Firm, he was in court.  The clerk also informed them that the TST Office was usually attended by Mr Cheung and there was no other solicitor present at the Office at the time.  The Law Society’s case is that there was a prima facie breach of Rule 4A as no solicitor was present in the TST Office at a time when it was open to the public.

54. On 31 March 2016, 2 Investigation Counsel from the Law Society visited the TST Office at about 11:28 am.  Once again, neither Mr Cheung nor any other solicitor was present.  Mr Cheng, who was not qualified to supervise an office pursuant to Rule 4A, returned to the TST Office shortly at 11:40 am and told the Investigation Counsel that he only attended the TST Office that day because he had an appointment with a client.  Normally he did not work there.  Ms Poon then arrived at the TST Office at around 12:11 pm.

55. When the Intervention Agent served the notice of the intervention into the Firm’s practice at the Firm’s Offices on 14 April 2016, Mr Cheung was not at the TST Office or indeed at any other Office.

56. On 17 March 2016, when two Investigation Counsel attended the YMT Office at around 10:45 am, no solicitors including Mr Chung were there.  So there was no solicitor supervising the Office in prima facie breach of Rule 4A.

57. On 30 March and 14 April 2016, when the Investigation Counsel and representatives attended the YMT Office to serve the notice of intervention, again no solicitors including Mr Chung were there.  Mr Chung only visited the YMT Office later in the day on 14 April 2016 to collect his personal belongings.

E3.2  Files handled by clerks rather than solicitors

58. Complaints were made by clients of the Firm to the Law Society that clerks, instead of solicitors, were running their files.  These complaints were confirmed by the Intervention Agent’s investigations.  Ms Yim gave some examples in her first affidavit dated 11 July 2016 at [24] – [25].

59. Apparently, Mr Ho and Ms Poon had little knowledge about the nature of the Firm’s files and their whereabouts.  Only the clerks knew about the files.

60. The problems with identifying the status of the Firm’s files continued after the intervention.  The problems are exacerbated by :

(1) There was no centralised system for the entire Firm or any of its Offices for the opening of files.

(2) Many files had no client contact details or any attendance notes.

(3) Many files were in disarray : copies of issued cheques were not in the files; documents received from the court and other sources had not been properly filed; title deeds had been separated from the files and many pre-signed cheques were found in the YMT Office, TST Office and the TW Office.

61. In respect of Mr Cheung, 19 active files were opened in his name.  As will be seen shortly, Mr Cheung’s case is that he only had 4 civil celebrant marriage files whilst he was with the Firm.  It raised the obvious question as to who actually handled those 19 files under his name.

E3.3  Incomplete accounts and bookkeeping

62. Investigations by the Intervention Agent also showed that there were numerous breaches of Rules 7, 9A, 10(1) – (3) 10A and 11 of the Solicitors’ Accounts Rules, Cap 159F.  Ms Yim cited some examples in her first affidavit.  I only need to refer to one to illustrate how serious the problems were.  At the time of intervention, the deficit in the Firm’s client accounts totalled HK$1,437,445,763.63, a staggering figure on any view.

63. However, Mr Ho and Ms Poon had little knowledge about the Firm’s accounts and how they were operated.  They were simply unable to answer questions regarding the Firm’s account satisfactorily.  Time and again, they directed the Investigation Agent to ask the clerks for the information.

64. The Firm did not have any complete sets of accounts and bank accounts.  The task of obtaining all the accounts information is particularly onerous when Mr Ho and Ms Poon had no knowledge of the accounts and the clerks were evasive and not giving the Intervention Agent much assistance.

E3.4  Imposing the conditions on Mr Cheung

65. Mr Cheung was the Firm’s consultant between June 2011 and April 2016.  Based on their investigations, the Law Society took the view that Mr Cheung had been practising as a consultant of the Firm for over 4 years and was responsible for supervising the TST Office.  It is inconceivable that he was unaware of the practices being carried on at the Firm at the time.

66. As to the 19 files under Mr Cheung’s name, they included matrimonial, civil and criminal litigation matters.  One of the files was a case assigned to him by the Legal Aid Department (“LAD”).  The LAD wrote to Mr Cheung on 25 November 2014 complaining about his conduct of the case in failing to report progress of the case and preparing court documents expeditiously.  The LAD informed him that they had decided to include him in the unsatisfactory performance record. The Firm wrote back on 25 February 2015 explaining that he knew nothing about the case.  The Law Society took the view that either Mr Cheung handled this particular file himself in an unsatisfactory manner or someone else did it but the degree of supervision was uncertain.

67. The Law Society noted that a total of 11 complaints had been made against Mr Cheung between 1999 and 2012 concerning his unsatisfactory handling of files, including breaches of the Solicitors’ Practice Rules and the Solicitors’ Accounts Rules and one negligence claim.  The Law Society issued a total of 5 letters of regret to him in respect of breaches of the Solicitors’ Practice Rules, Conduct Guide Principles and Continuing Professional Development Rules, Cap 159W.

68. Taking into account all the circumstances regarding his conduct record, supervisory role in the Firm and the practice at the TST Office which Mr Cheung was supposed to be supervising, the Law Society took the view that it was just and reasonable and in the public interest to impose the conditions on his practising certificate.

E3.5  Imposing the conditions on Mr Chung

69. Mr Chung was employed as a consultant of the Firm since 16 December 2014.  Ms Poon and Mr Chung were the only 2 solicitors based at the YMT Office.  However as said between 22 May and 24 August 2015, Ms Poon was not qualified to supervise the YMT Office, Mr Chung was the only solicitor in YMT Office who could do so in compliance with Rule 41.  Mr Chung must therefore have been aware of the practice conducted there.

70. At the time of intervention, a total of 36 files were handled by Mr Chung. Following the common practice at the time, money had been withdrawn from the client accounts in respect of 4 of his files but vouchers recording the withdrawals were either not properly authorised or not authorised at all.

71. Having regard to the circumstances, the Law Society decided that it was just and it was just and reasonable and in the public interest to impose the conditions on Mr Chung’s practising certificate.

72. I next turn to the appellants’ case.

E4.   The appellants’ case

E4.1  Mr Cheung’s case

73. Mr Cheung was admitted as a solicitor in 1995.  He was the sole proprietor of Messrs. Jackie Cheung & Co. between 1998 and 2011.  He mainly served as a civil celebrant of marriages and practised in matrimonial matters.  He was an elected District Council between 1 January 2008 and 31 December 2015.  As he became more involved in his public duties as a District Councillor, he was unable to spend much time on his legal practice.  He therefore decided to close down his firm and became a consultant of another.  Upon learning Mr Cheung’s decision, Mr Alan Ho, a classmate of Mr Cheung’s, offered to employ him as a consultant of the Firm.  Mr Cheung then joined the Firm as an employed consultant on 30 June 2011.  He first worked as a part-time consultant from 8 June 2011 until 4 July 2011, at the latter time he became a full time consultant.  He resigned with effect on 13 April 2016, having given a prior one month notice of resignation on 14 March 2016.

74. Mr Cheung said he had no role in supervising, training or managing any of the solicitors in the Firm.  As a consultant, he was not allowed to handle and had never handled any accounts in the Firm, including both clients’ and office’s accounts.  He had not signed or handled any cheques of the Firm. He was never considered a partner of the Firm and had no business in its management or administration.  He also referred to his consultancy contract with the Firm dated 30 June 2011 under which he was engaged as an “independent contractor”.

75. According to Mr Cheung, he took care of his own clients and files while devoting to his public service as a District Councillor.  He did not have time to do substantial legal work for clients and did not bring any new clients to the Firm except for a few celebrant of marriage cases for his friends.  He did not handle any of the Firm’s clients.  He said that out of those 19 files identified by the Law Society only 10 cases (9 civil celebrant cases and one civil litigation case) were actually handled by him.  The other 5 cases were referred by him for Mr Ho’s handling, and he had no idea regarding the remaining 4 cases.

76. As to the complaint by the LAD in the case referred to by the Law Society, Mr Cheung explained that, upon the decision to close down his sole proprietorship, he wrote to the Director of Legal Aid to have his name removed from the Legal Aid Panel List.  It was after he joined the Firm that Mr Ho urged him to reinstate to the Legal Aid Panel List.  He duly signed the application for reinstatement because he did not wish to be seemed as un-cooperative.  He later completely forgot about the signing until the subsequent events transpired.  Mr Cheung said that he only realized that the LAD had assigned cases to him after he received a complaint letter from the Director of Legal Aid in late March 2014.  After Mr Cheung confronted Mr Ho as to what happened, the Firm issued a letter dated 25 February 2015 to the LAD claiming that Mr Cheung knew nothing about the cases assigned to him. 

77. After Mr Cheung failed to get re-elected as a District Councillor in November 2015, he discussed with a Miss Chow Wai Mee May in early 2016 for the prospect of joining her firm Messrs. Chow, Wong & Lawyers, as a consultant with a view of becoming a partner after he builds up sufficient client base.  Miss Chow indicated that she had reservation about Mr Cheung’s joining her firm after she knew about the conditions imposed on Mr Cheung’s practising certificate.  The reasons are that the condition of supervision would increase the workload of the partners of her firm and that the conditions of Mr Cheung’s practising certificate would affect her firm’s position to get in or stay in the bank’s approval panel list.  Furthermore, Mr Cheung deposed that his civil celebrant license had been revoked by the Registrar of Marriage because of the conditions imposed on his practising certificate. 

78. Mr Cheung firmly believed that he had nothing to do with the misadministration of the Firm.  The conditions imposed on his practising certificate involved no public interest and was just a draconian measure purely served as a punishment by his mere association with the Firm.  He further complained that the conditions might raise wrong perceptions that he lacked competence, integrity or fitness to practise as a solicitor in Hong Kong and that he pose a risk to the interests of his clients.

E4.2  Mr Chung’s case

79. Mr Chung was admitted as a solicitor in 1996.  He first worked as an in-house Legal and Compliance Administrator of the Midland Realty Group.  He joined Messrs. Chan & Partners in 1998 and worked as an associate until 2003.  He became a partner of Messrs. S. T. Cheng & Co. from 2004 to 2009.  For personal reasons, he decided to scale down his legal practice.  He then withdrew the partnership of Messrs. S. T. Cheng & Co. in 2010 and worked as an in-house part-time legal counsel to the Elite Industrial Group. Subsequently, he joined the Logistics and Supply Chain Management Enabling Technologies (“LSCM”) as broad secretary to its Hong Kong R&D Centre.  In the meantime, he was also an independent consultant to various law firms.  Mr Chung had been a consultant of the Firm since 16 December 2014 until the Firm was intervened by the Law Society on 14 April 2016.

80. Mr Chung denied that he was responsible for supervising and managing the YMT Office.  His case is that he only attended the YMT Office on “need to go” basis, namely that he would only attend the office if there was a matter that required him physically to be present, such as advising a client or attending a conference or collecting correspondence or to pass papers to clerks for filing and registering purposes.  Contrary to the normal working hours as set out in his employment contract, he was allowed to have flexible working hours as he needed to work part-time as Company Secretarial Manager at LSCM.  It is Mr Chung’s case that the YMT Office was supervised either by Mr Ho or Ms Poon.

81. Mr Chung admitted that at the time of the intervention, he had about 50 files concerning various areas of law.  All the files were handled by him personally.  Out of those 50 files, only 9 were active.  As to the 4 cases where money were withdrawn from client’s account without being authorized by a solicitor or without having any authorization at all, Mr Chung said that he had no authority to deal with client accounts of the Firm and that what he had done was to submit payment vouchers to the Firm’s accounts department for processing.  

82. As in the case of Mr Cheung, the Registrar of Marriage revoked Mr Chung’s civil celebrant licence due to the conditions imposed upon his practising certificate.  Mr Chung said that he could no longer take on cases and advise client without his full professional capacity. Save and except an offer to work as a consultant after the determination of this appeal, Mr Chung said he could not get any other offer because of the conditions imposed on his practising certificate.

E.5   My views

83. The high standard of professionalism required of a practising solicitor must underlie the court’s consideration of cases such as the present.  As Sir Thomas Bingham MR (as he then was) explained in Bolton v Law Society [1994] 1 WLR 512 at p 518A-E :

“ It is required of lawyers practicing in this country that they should discharge their professional duties with integrity, probity and complete trustworthiness….

  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 …” 

84. Mr Deng submitted that there is no evidence to show that the appellants had acted dishonestly.  He is entirely correct.  In fact, it is never the Law Society’s case that the conditions were imposed on them because they had acted dishonestly while they were consultants of the Firm.  But as Bingham MR pointed out in Bolton v Law Society, supra, at p 518B – E :

“ Lapses from the required high standard may take different forms and be of varying degree. The most serious involves proven dishonesty, whether or not leading to criminal proceedings and criminal penalties…. 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 remains very serious indeed in a member of profession whose reputation depends on trust.”

85. Here, the incidents leading to the intervention into the Firm’s practice and the subsequent investigations, as summarised above, revealed multiple, prevalent and serious breaches of the Solicitors’ Accounting Rules and the Solicitors’ Practice Rules.  The failings in management and administration of the Firm were neither isolated nor limited to one particular Office of the Firm.  Rather, they were systematic and perpetrated in the entire Firm.  The Law Society made the Decisions principally because they took the view that both appellants had failed to discharge their duties and responsibilities in managing and supervising the TST Office and YMT Office respectively, thereby rendering themselves liable for the systemic failings in the Firm’s practice at those Offices.  However, it begs the question whether they, as consultants, had assumed such managerial and supervisory role in the first place.

86. In this regard, as against Mr Cheung the Law Society relied on what they learnt from the clerks during the visits at the TST Office as referred to in [54] – [56] above.  That is of course hearsay.  As against Mr Chung, the Law Society relied on his employment contract with the Firm dated 24 November 2014.  That contract was under the letterhead of the YMT Office, indicating that he was based in that Office and was expected to attend that Office between 9:30 am and 6:00 pm during the week throughout the tenure of his employment with the Firm.  But the mere fact he was required to work full time at the YMT Office does not necessarily mean that he had taken up any managerial and supervisory role.  It also appeared that the Law Society regarded the prima facie breaches of Rule 4A at the TST Office and YMT Office as evidence that the appellants were supposedly responsible for supervising the Offices.  But that is, with respect, putting the cart before the horse.  A prima facie breach of Rule 4A does not necessarily mean that the appellants had assumed such supervisory responsibility.  All in all, the quality of the evidence relied on by the Law Society to support their view that both appellants had assumed managerial and supervisory duties is rather unsatisfactory.

87. Further, both appellants have explained in unequivocal terms that as consultants, they were not tasked with any managerial or supervisory duty or responsibility in running the Firm or any of the 4 Offices.  Their evidence is supported by their consultancy contracts.  Both were engaged as an independent consultant (Mr Cheung’s case) or a self-employed consultant (Mr Chung’s case).  None of them were required to manage or supervise any Office of the Firm.  It is hardly surprising given the nature of their engagement.

88. I note in passing that that consultancy arrangement is not uncommon among the profession.  In the President’s Message entitled “What’s in a name?” dated January 2010, the then President of the Law Society said that the term “consultant” denotes a form of special engaged arrangement between the consultant and his or her firm rather than the level of seniority and that some firms use the term for solicitors who are not necessarily very experienced but who provide services form with their firms on a more independent basis.

89. Having considered the evidence in its totality, I do not think the Law Society’s view that the appellants were respectively responsible for supervision and management of the TST Office and YMT Office is borne out sufficiently by evidence.  It follows that the principal basis of the Law Society making the Decisions is not made out.  However, the matter does not end there.

90. Mr Chan submitted that the appellants indisputably did undertake work and serve clients under the auspices of the Firm.  In so doing, their clients were, at minimum, exposed to the risk of substantial harm by reason of the systemic failings in the Firm’s administration, including its parlous accounting and client-fund handling practices.  There is no suggestion that the appellants took steps to ensure that the Firm’s general administration was sound before exposing their clients to it.  Instead, all objective facts suggest that the appellants themselves were, at best, cavalier, and indifferent as to the Firm’s managerial and administrative practices.  Thus from a public protection perspective, all this more than suffices to warrant the imposition of the conditions by way of the Decisions.  And given the appellant’s fundamental failure to be alert to and protect their clients against the Firm’s deep and manifold problems, each of the conditions is appropriate for the purposes of safeguarding the appellants’ conduct as practising solicitor and the interests of the public.

91. I can see considerable force in Mr Chan’s submissions.  The appellants’ conduct, even on their own case, viewed against the systemic failings in the Firm’s practice, as reasoned by counsel, may justifiably call for immediate disciplinary action by the Law Society by imposing conditions on their practising certificate.  The Law Society should approach the matters accordingly to see if that is in fact the case for each of the appellants and if so what conditions should be imposed on each of their practising certificate.

F.  DISPOSITIONS

92. For the reasons given, I am minded to remit the matters to the Law Society for reconsideration in accordance with my observations in [91] above.

93. As to how to dispose of the appeals and the question of costs, the parties may well wish to be heard.  I therefore direct the parties to lodge with the court and serve their written submissions within 14 days after the handing down of this judgment.  I will then dispose of the two outstanding matters on paper.

94. Lastly, I would like to thank counsel for their able assistance.

[1] See the Law Society’s letter to its members dated 22 April 2016.

[2] Reference LP 3/00/8C.

[3] Despite the prohibition, the investigation Counsel of the Law Society discovered  during the visit to the TW Office on 21 March 2016 that Mr Lee was then supervising that Office.