Case Document

100%Judiciary

CACV 274/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 274 OF 2006

(ON APPEAL FROM THE REASONS AND ORDER OF THE SOLICITORS
DISCIPLINARY TRIBUNAL DATED 16TH FEBRUARY 2006)

______________________

BETWEEN

	A SOLICITOR	Appellant
	and
	THE LAW SOCIETY OF HONG KONG	Respondent

______________________

Before : Hon Ma CJHC, Stone & Sakhrani JJ in Court

Date of Hearing : 18 July 2007

Date of Further Written Submissions : 13 August 2007

Date of Handing Down Judgment : 23 August 2007

______________________

J U D G M E N T

______________________

Hon Ma CJHC :

1.The present appeal raises an important point of principle regarding proceedings before a Solicitors Disciplinary Tribunal (“the Tribunal”) : what is the proper approach of the Tribunal on costs when complaints against a solicitor are dismissed? The Appellant solicitor in the present case (whom I shall refer to as the 2nd Respondent as he was in the proceedings before the Tribunal below) submits that costs ought to follow the event whereas the Law Society of Hong Kong (the Respondent in this appeal and the original complainant) argues that by reason of the fact that it is discharging a public duty, the usual order in such circumstances ought to be that no order as to costs is made unless the Law Society has somehow acted dishonestly, in bad faith or there is some other good reason to order costs against it.

The Complaints and the relevant facts

2.On 23 April 2002, the Law Society as applicant applied for the Tribunal to consider four Complaints that were made against two solicitors (the 1st and 2nd Respondents) who were at the material time the senior partners of a firm (“the Firm”). The application was, as is usual, supported by an affidavit that went into the details of the Complaints.

3.The Complaints were as follows : -

(1) Complaint 1 (the 1st Respondent)

Between July and October 1991, the 1st Respondent, in his professional capacity as a partner of the Firm, acted for the purchasers of the ground floor of the house built on Section A of Tung Tau Tsuen, Lot No 76 in Yuen Long (“76A”) and the purchasers of the ground and second floors of the house built on Section B of Tung Tau Tsuen, Lot No 76 in Yuen Long (“76B”). It was said that in breach of the principle that a solicitor should not act where his own interests conflicted with those of his client and that a solicitor should act with absolute openness and fairness towards his clients, the 1st Respondent did not disclose to the purchasers (his clients) that the vendor of the relevant properties was his wife.

(2) Complaint 2 (the 2nd Respondent)

This Complaint contained the same particulars as Complaint 1 except that this related to the 2nd Respondent as a partner of the Firm. It was alleged against the 2nd Respondent that he did not disclose to the purchasers of the said properties that the vendor was the wife of his partner, the 1st Respondent. This was said to be a breach of the principle that a solicitor should not act where the interests of his partner conflicted with those of a client and that a solicitor should act with absolute openness and fairness towards his clients.

(3) Complaint 3 (the 1st and 2nd Respondents)

Between July and October 1991 when the Respondents (as partners of the Firm) acted for the purchasers of the ground and second floors of 76B, it was alleged that the Respondents had failed properly to investigate title in that they failed to ascertain whether the house which contained the said properties required a Certificate of Exemption or an Occupation Permit; alternatively, they had failed to advise the purchasers that no Certificate of Exemption or Occupation Permit had been issued in relation to the relevant properties.

(4) Complaint 4 (the 2nd Respondent)

Between July and October 1995 when the 2nd Respondent acted for the purchaser of the first floor of 76B, he was said to have failed properly to investigate title in that he failed to ascertain whether the house containing the said property required a Certificate of Exemption or an Occupation Permit; alternatively, he failed to advise the said purchaser that no Certificate of Exemption or Occupation Permit had been issued in respect of this property.

4.Accordingly, as far as the 2nd Respondent was concerned, only Complaints 2 to 4 were relevant. The Complaints were made following an investigation by the Law Society that was prompted by proceedings that had been brought by the purchasers of the first floor of 76B against the partners of the Firm (including the two Respondents). It was claimed in this action (HCA 19668/1998) that the Firm had been negligent in failing to discover or advise that no Certificate of Exemption or Occupation Permit had been issued. This was of course the substance of Complaint 4.

5.During the Law Society’s investigations, a number of matters emerged that led eventually to the lodging of the four Complaints against the Respondents. The following are of note for present purposes : -

(1) The Respondents commenced practice as the Firm in 1988 until 14 July 1994 when the 1st Respondent ceased to be a partner. He then formed another firm (for convenience I shall refer to this firm as W&P). The 2nd Respondent continued practice in the name of the Firm until 12 January 1995 when the name was changed (again for convenience, I shall refer to this firm as NTKC).

(2) The Law Society’s inquiries began with a letter dated 7 January 2000 to NTKC seeking clarification on the Firm’s involvement in the purchase of the first floor of 76B. The letter requested that the partner in charge of the matter be identified.

(3) By a letter in reply dated 26 January 2000, NTKC stated that the developer of Tung Tau Tsuen (which contained the relevant properties with which the Complaints before the Tribunal were involved) was the 1st Respondent’s wife and that the solicitor in charge of the conveyancing transactions acting on behalf of the purchasers was the 1st Respondent.

(4) One assumes that it was this letter that led eventually to the investigations that culminated in Complaints 1 and 2. In short, the Firm had acted for the purchasers of units in a project in which the developer (and vendor) was the 1st Respondent’s wife.

(5) The matter which the Law Society was particularly keen on investigating was the extent of the involvement of each of the Respondents in the conveyancing transactions for the relevant properties.

(6) I have earlier (in paragraph 3 above) identified the relevant properties. The file references of the Firm in acting for the purchasers of the relevant properties all contained the initials “EW” which was a reference to the 1st Respondent. The position of the 1st Respondent in correspondence, however, was essentially that he was not involved in the various conveyancing transactions at all. He identified the 2nd Respondent as the partner in charge of all conveyancing matters in the Firm, in effect asserting that the person in charge of all the relevant transactions was not himself but the 2nd Respondent. The explanation for his initials appearing in the file references was that it was the 1st Respondent who had introduced the conveyancing business to the Firm. The 1st Respondent’s assertions were supported by a statement from his secretary and a letter from a former conveyancing clerk of the Firm.

(7) For his part, the 2nd Respondent insisted that the conveyancing transactions for the ground floor of 76A and the ground and second floors of 76B (these are the relevant properties in Complaints 2 and 3) were handled by the 1st Respondent and not by him.

(8) However, in relation to the sale and purchase of the first floor of 76B (Complaint 4), the 2nd Respondent stated in a letter dated 4 July 2000 from NTKC (in response to the Law Society’s specific inquiry as to who was the partner in charge and having conduct of the file relating to the sale and purchase of the property) that he was “in charge of and handled” the relevant file. This acknowledgment was crucial to the bringing of Complaint 4 (which related solely to the 2nd Respondent).

6.In summary therefore, as regards Complaints 2 and 3, each of the Respondents was pointing to the other as being the partner in the Firm in charge of the relevant transactions. Regarding Complaint 4, the letter dated 4 July 2000 from NTKC (which incidentally, contained in its reference the 2nd Respondent’s initials) clearly indicated that the 2nd Respondent was the partner responsible.

The decision of the Tribunal

7.The four Complaints were heard by the Tribunal in February and December 2003. Apart from affirmation evidence, both Respondents testified before the Tribunal. In a decision dated 7 March 2005, the Tribunal made the following findings : -

(1) The 1st Respondent admitted Complaint 1 and this was accordingly established as against him.

(2) In relation to Complaint 2, the Tribunal found that this was not established against the 2nd Respondent, noting that all along he had maintained that he was not involved in the relevant transactions.

(3) As for Complaint 3, the Tribunal found that this was established against the 1st Respondent (it was found he was fully aware of the risk of the property not having a Certificate of Exemption or Occupation Permit). The Complaint was dismissed as against the 2nd Respondent since he was not involved in the transaction.

(4) Complaint 4 was also dismissed since the Tribunal was satisfied that the 2nd Respondent was not the handling solicitor. Despite the contents of the 4 July 2000 letter (see paragraph 5(8) above), his affirmation submitted for the proceedings before the Tribunal stated that he was not involved. I shall presently refer in greater detail to this affirmation.

8.Following its findings, the Tribunal received written submissions regarded the question of penalties and costs. In a determination dated 7 March 2005, the Tribunal ordered that for Complaints 1 and 3, the 1st Respondent be censured for each and fined $400,000 and $200,000 respectively. The 1st Respondent also had to pay 75% of the costs. Overall, I am bound to say on the materials before us that in my view the 1st Respondent had been very leniently dealt with, and can consider himself extremely fortunate. For the 2nd Respondent, notwithstanding the fact that the three Complaints against him were dismissed, no order was made as to costs. The Tribunal said this : -

“ The 2nd Respondent asked for costs. The Tribunal notes that in respect of the 4th Complaint it was not until the 2nd Respondent’s Affirmation on 20th March 2003 that the 2nd Respondent alleged that he was not the solicitor in charge of the relevant file without identifying who the partner in charge was. It was only in cross examination that the 2nd Respondent told the Tribunal who the partner in charge was. Taking all the circumstances into consideration, the Tribunal considers that the appropriate order on costs in respect of the 2nd Respondent and the Applicant is to make no order as to costs.”

9.The 2nd Respondent now appeals this costs order.

The issues on appeal

10.There are really only two issues for determination, one involving an important point of principle, the other a decision on the facts : -

(1) The first issue is the point identified at the beginning of this judgment : - what should be the approach of the Tribunal when it dismisses the complaint or complaints before it? In most adversarial proceedings, costs follow the event, but the Law Society nevertheless argues that the normal order ought to be no order as to costs in cases where complaints are dismissed. It is, however, not suggested that where complaints are established, the normal order should be that no order as to costs is made; quite the contrary, where complaints are established, the Law Society maintains that the solicitor would have to bear the costs (as in fact the 1st Respondent had to in the present disciplinary proceedings).

(2) The second issue for determination in this appeal is whether on the facts, the Tribunal was correct to make no order as to costs notwithstanding the fact that the three Complaints against the 2nd Respondent were dismissed.

Issue 1 : The Tribunal’s approach on costs

11.As earlier observed, in most adversarial proceedings (and this includes proceedings in court), the usual order made by the court or tribunal is that costs follow the event. In the Court of First Instance, this is embodied in statutory form : see RHC O.62 r.3(2). Of course, the court is given a wide discretion as to costs : see section 52A(1) of the High Court Ordinance, Cap.4. As far as the Tribunal is concerned, the discretion as to costs is equally wide. Section 10(2)(e) of the Legal Practitioners Ordinance, Cap.159 (“the LPO”) states : -

“ 10. Powers of a Solicitors Disciplinary Tribunal

(1) …

(2) Subject to the provisions of this Ordinance, on completion of its inquiry and investigation, a Solicitors Disciplinary Tribunal shall have power to make such order as it thinks fit and any such order may, in particular, include provision for all or any of the following matters –

(a) – (d) …

(e) payment by any party of the costs of and incidental to the proceedings of the Tribunal and the costs of any prior inquiry or investigation in relation to the matters before the Tribunal, to be taxed by a Master of the High Court on a full indemnity basis, or payment of an amount that the Tribunal considers is a reasonable contribution towards those costs;”

12.In submitting that the Tribunal was justified in making no order as to costs even though the Complaints against the 2nd Respondent were dismissed, Mr Simon Westbrook SC (for the Law Society) advanced the following proposition : as a matter of approach, a tribunal should not award costs against the Law Society in the absence of dishonesty, bad faith or unless there was good reason to do so. It was, he argued, not enough that the respondent simply had succeeded in defending the complaints made in disciplinary proceedings. The difference lay, Mr Westbrook asserted, in the fact that disciplinary proceedings were unlike private litigation : the Law Society was a statutory body with specified duties set out in the LPO and, in the discharge of those duties, brought proceedings in the public interest and should therefore not (unless the stated exceptions applied), be made to pay costs. He maintained that the Law Society ought to be able to exercise its public function and discharge its duties to supervise and maintain proper professional standards without the threat of an adverse order as to costs. This, he said, was precisely what had happened in the present case.

13.In support of the Law Society’s position, Mr Westbrook relied principally on the decision of the Divisional Court in England in Paul Michael Baxendale-Walker v The Law Society [2006] 3 All ER 675 where Moses LJ said, at 685j-686f : -

“ 43. The question thus arises as to whether the order that the Law Society should pay a proportion of the appellant’s costs and that no costs should be paid by the appellant was correct, as a matter of law. The principles, in relation to an award of costs against a disciplinary body, were not in dispute. A regulator brings proceedings in the public interest in the exercise of a public function which it is required to perform. In those circumstances the principles applicable to an award of costs differ from those in relation to private civil litigation. Absent dishonesty or a lack of good faith, a costs order should not be made against such a regulator unless there is good reason to do so. That reason must be more than that the other party has succeeded. In considering an award of costs against a public regulator the court must consider on the one hand the financial prejudice to the particular complainant, weighed against the need to encourage public bodies to exercise their public function of making reasonable and sound decisions without fear of exposure to undue financial prejudice, if the decision is successfully challenged.

44. Those principles can be derived from a number of cases summarised by Jackson J. in Gorlov v Institute of Chartered Accountants [2001] EWHC Admin. 220 at Part 4, paragraphs 30-35 (and see, in particular, the three principles distilled by Lord Bingham of Cornhill CJ in City of Bradford Metropolitan District Council v Booth [2000] COD 338).

45. In the instant appeal, in my view there was no basis for the order made by the Tribunal. The only ground on which it relied was that the appellant had been successful in his defence of the first allegation. That was not a sufficient ground to order the Law Society to pay any of his costs. There was no finding that the allegation was misconceived, without foundation or born of malice or some other improper motive. In those circumstances the order was without foundation. The mere fact that resistance to the first allegation required greater expenditure in time and money was not a basis for making the Law Society pay any of the appellant’s costs.”

The principles set out in this judgment followed the decision of the Divisional Court (Lord Bingham of Cornhill CJ and Silber J) in City of Bradford Metropolitan District Council v Booth [2000] COD 338.

14.The Divisional Court’s decision was upheld by the Court of Appeal : see [2007] 3 All ER 330. The following passages in the judgment of Sir Igor Judge P are relevant (at 339 and 340) : -

“ [34] Our analysis must begin with the Solicitors’ Disciplinary Tribunal itself. This statutory tribunal is entrusted with wide and important disciplinary responsibilities for the profession, and when deciding any application or complaint made to it, s 47(2) of the 1974 Act undoubtedly vests it with a very wide costs discretion. An order that the Law Society itself should pay the costs of another party to disciplinary proceedings is neither prohibited nor expressly discouraged by s 47(2)(i). That said, however, it is self-evident that when the Law Society is addressing the question whether to investigate possible professional misconduct, or whether there is sufficient evidence to justify a formal complaint to the tribunal, the ambit of its responsibility is far greater than it would be for a litigant deciding whether to bring civil proceedings. Disciplinary proceedings supervise the proper discharge by solicitors of their professional obligations, and guard the public interest, as the judgment in Bolton’s case makes clear, by ensuring that high professional standards are maintained, and, when necessary, vindicated. Although, as Mr Stewart maintained, it is true that the Law Society is not obliged to bring disciplinary proceedings, if it is to perform these functions and safeguard standards, the tribunal is dependent on the Law Society to bring properly justified complaints of professional misconduct to its attention. Accordingly, the Law Society has an independent obligation of its own to ensure that the tribunal is enabled to fulfil its statutory responsibilities. The exercise of this regulatory function places the Law Society in a wholly different position to that of a party to ordinary civil litigation. The normal approach to costs decisions in such litigation – dealing with it very broadly, that properly incurred costs should follow the ‘event’ and be paid by the unsuccessful party – would appear to have no direct application to disciplinary proceedings against a solicitor.

…

[39] In our judgment Jackson J was right to equate the responsibilities of the Institute in Gorlov’s case with the regulatory actions of the licensing authority in Booth’s case. As Bolton’s case demonstrates, identical, or virtually identical considerations apply when the Law Society is advancing the public interest and ensuring that cases of possible professional misconduct are properly investigated and, if appropriate, made the subject of formal complaint before the tribunal. Unless the complaint is improperly brought, or, for example, proceeds as it did in Gorlov’s case, as a ‘shambles from start to finish’, when the Law Society is discharging its responsibilities as a regulator of the profession, an order for costs should not ordinarily be made against it on the basis that costs follow the event. The ‘event’ is simply one factor for consideration. It is not a starting point. There is no assumption that an order for costs in favour of a solicitor who has successfully defeated an allegation of professional misconduct will automatically follow. One crucial feature which should inform the tribunal’s costs decision is that the proceedings were brought by the Law Society in exercise of its regulatory responsibility, in the public interest and the maintenance of proper professional standards. For the Law Society to be exposed to the risk of an adverse costs order simply because properly brought proceedings were unsuccessful might have a chilling effect on the exercise of its regulatory obligations, to the public disadvantage. Accordingly, Moses LJ’s approach to this issue did not go further than the principles described in this judgment.”

15.The reasoning of the Divisional Court in Baxendale-Walker was that there is a balance to be considered between the financial prejudice to the solicitor complained against and the “undue financial prejudice” to the Law Society (of England and Wales in that case) in exercising a public function and discharging its duties. The Court of Appeal referred to the ‘event’ (meaning the result of disciplinary proceedings) as being merely one of the factors to be considered, yet emphasized the point that were the Law Society of England and Wales to be subject to an adverse costs order simply because properly brought proceedings were unsuccessful, this would have a “chilling effect” on the exercise of its duties. We are grateful for the additional research that both parties have provided upon our request since the conclusion of oral arguments. It is clear that in England and Wales, any adverse order as to costs will have to be borne personally by the Law Society of England and Wales, and not out of public funds.

16.However, in my view, such reasoning is inapplicable in Hong Kong. Where the Law Society here is unsuccessful in disciplinary proceedings properly brought against a solicitor, an adverse costs order will not be borne by it alone. Section 25 of the LPO states : -

“ 25. Expenses of Solicitors Disciplinary Tribunal and of Society

(1) The expenses incurred by –

(a) a Solicitors Disciplinary Tribunal; and

(b) the Society, in connection with proceedings before a Solicitors Disciplinary Tribunal and any appeal under section 13,

may be paid to the Society out of general revenue upon a certificate issued by the Secretary for Justice.

(2) The Secretary for Justice shall only issue a certificate under subsection (1) if he is satisfied that -

(a) the expenses were necessarily incurred by the Solicitors Disciplinary Tribunal or the Society, as the case may be, in exercise of the powers or duties conferred or imposed by this Ordinance;

(b) the amount of such expenses is reasonable; and

(c) the expenses could not reasonably be recovered from the person whose conduct is the subject of the proceedings before the Solicitors Disciplinary Tribunal or the Court of Appeal, as the case may be. (Amended 92 of 1975 s. 59; 46 of 1989 s. 6)

(3) In this section, ‘expenses’ (開支) includes witnesses’ expenses and fees, counsel’s fees, solicitor’s fees, auditor’s fees and other charges and disbursements.”

17.It was not disputed that the Law Society could under this provision seek reimbursement of an adverse order as to costs made against it by the Tribunal. Of course, the conditions set out in section 25(2) have to be met and these conditions include the necessity of demonstrating that the Law Society was acting in the exercise of its powers or duties under the LPO. In other words, the fact that the Law Society was exercising its public function and discharging its statutory duties will entitle it to claim reimbursement of expenses. This is not the position in England (as Rogers VP noted in Secretary, Nursing Council of Hong Kong v Nursing Council of Hong Kong, unreported, HCMP 667/2007, 13 April 2007, at paragraph 16) and there is no provision equivalent to section 25 of the LPO in that jurisdiction.

18.Thus, it can be seen that the position in Hong Kong is factually the converse of that envisaged by the Baxendale-Walker case : the Law Society will simply suffer no “undue financial prejudice” and there is no “chilling effect” where an order for costs is made against it by the Tribunal unless it has not acted properly in the exercise of its powers or duties under the Ordinance (where, for example, the Law Society had acted dishonestly, maliciously or in bad faith). The Baxendale-Walker approach therefore does not apply in Hong Kong. Accordingly, the standard approach of the Tribunal when complaints against a solicitor are dismissed, should be that unless good reason exists, the solicitor should be entitled to an order of costs in his or her favour. In other words, costs should generally follow the event. This, I believe, satisfies the requirements of justice and ensures a level playing field in disciplinary proceedings. I see no reason why the Law Society should not be subject to the same rules as to costs as a solicitor who is involved in such proceedings.

19.Were the position otherwise (i.e. that the Baxendale-Walker approach applies), it is difficult to see how section 25 would in practice work. In the course of his submissions, I asked Mr Westbrook under what circumstances, if the Baxendale-Walker approach was the correct one, could section 25 ever be activated by the Law Society to claim reimbursement for costs ordered against it in disciplinary proceedings? If it be the case that such an order for costs could only be made when the Law Society had acted dishonestly, maliciously or in bad faith or there was some other reason for an order for costs to be made against it, it would be, I perceive, impossible or almost impossible for the Law Society to claim reimbursement in such circumstances at all, for it would not be able to satisfy the condition that such an expense had been incurred in the proper exercise of its powers or duties under the LPO. This, in my view, supports the position that the Baxendale-Walker approach cannot be the right one in Hong Kong, given the existence of section 25 of the LPO.

20.I note that in the judgment of Stone J, he is of the view that the funding implications/public policy role of a regulator is not to be regarded as an effective determinant or dominant factor in the incidence of costs’ awards in domestic tribunal proceedings. With respect, a cogent case is made out. However, since the issue does not directly arise in the present appeal in light of the factual distinctions outlined herein between the respective English and Hong Kong positions in this area, for my part I would prefer to leave the point open.

21.By way of a postscript, I should reiterate the fact that the Tribunal has a wide discretion as to costs. It may, in some circumstances, admittedly be relevant that the Law Society was exercising a public function or discharging its statutory duties. For example (and this is a relevant factor in the present case), given the duty on the Law Society to maintain professional standards and therefore investigate possible breaches of professional standards, where a solicitor has brought suspicion on himself or herself in the course of investigations, this may be a relevant factor against awarding costs to the solicitor even when he or she is ultimately successful in defending the complaints made.

22.With the above principles in mind, I now deal with the facts.

Issue 2 : Was the Tribunal correct in making no order as to costs?

23.I have already set out in paragraph 8 above the Tribunal’s reasons for making no order as to costs.

24.While the identity of the partner in charge of the relevant files was not revealed until relatively late in the day as far as Complaint 4 was concerned, the same did not apply for Complaints 2 and 3. For these two Complaints, the following facts and matters are of note : -

(1) The 2nd Respondent had consistently in correspondence denied his professional involvement in the subject-matter of these Complaints. He had, moreover, identified the 1st Respondent as being the partner in charge and this position was maintained throughout the correspondence with the Law Society. While the affirmation he filed for the disciplinary proceedings also made this point, this was not the first time it was made.

(2) For his part, the 1st Respondent had also consistently in correspondence with the Law Society, pointed to the 2nd Respondent as being the partner in charge of the relevant files.

25.Given the respective positions of the two Respondents, it was therefore not surprising that the Law Society proceeded against both solicitors. It was only late in the day that the 1st Respondent admitted that it was he, and not the 2nd Respondent, who was responsible.

26.In these circumstances, there can be no doubt that the 2nd Respondent should get the costs of defending these Complaints. Quite simply, he was successful in defending Complaints 2 and 3. There may have been considerable merit in the Tribunal ordering the 1st Respondent to pay the 2nd Respondent’s costs with regard to these Complaints (orders similar to Bullock or Sanderson orders : cf Hong Kong Civil Procedure 2007 Vol.1 at paragraphs 62/3/8 and 62/3/9). However, although this course was submitted to the Tribunal, the Tribunal did not address this issue and there has been no cross-appeal by the Law Society; accordingly, this course is not open to us. During his submissions, Mr Westbrook invited us to consider making some sort of costs order against the 1st Respondent, but we declined, on the basis that an adjournment would have been necessitated (the 1st Respondent was not before us) and it was in any event far too late in the day to raise this argument.

27.As far as Complaint 4 is concerned, I think the position is quite different. Here, the following are relevant : -

(1) In the letter dated 4 July 2000 (paragraph 5(8) above) the 2nd Respondent’s firm (NTKC) had clearly informed the Law Society that the 2nd Respondent was “in charge of and handled” the relevant file relating to the sale and purchase of the first floor of 76B.

(2) However, in the affirmation filed for the purpose of the disciplinary proceedings, the 2nd Respondent named another solicitor as being the person in charge as well as a conveyancing clerk. He explained the reference to his involvement in the 4 July 2000 letter by saying that he was the partner in overall charge of conveyancing matter in NTKC and that the letter was in fact drafted by yet another solicitor, one Mr Clive Chan.

(3) When the 2nd Respondent gave evidence before the Tribunal that it was revealed (for the first time) that Mr Clive Chan was in fact the handling solicitor.

(4) It is also to be noted that during his oral testimony, the 2nd Respondent admitted he approved the contents of the 4 July 2000 letter before it was sent. As stated earlier, this letter from NTKC contained the 2nd Respondent’s initials in the reference.

28.It was therefore not surprising that Complaint 4 was pursued against the 2nd Respondent. Further, given the inconsistencies in the 2nd Respondent’s position and his failure to provide a full or satisfactory explanation for the contents of the 4 July 2000 letter, it is clear that the 2nd Respondent had brought suspicion on himself. He had certainly brought confusion into the whole matter. I regard this as relevant to the exercise of discretion and am therefore of the view that the Tribunal cannot be faulted for making no order as to costs regarding this Complaint.

Conclusion

29.For the above reasons, I would allow the appeal and set aside the Tribunal’s order as to costs. Doing the best I can, I would also order that the 2nd Respondent should have 65% of his costs in the proceedings before the Tribunal to be paid by the Law Society, such costs to be taxed if not agreed. This order reflects the view I have taken on the three relevant Complaints. I would also make an order nisi that the 2nd Respondent should have 65% of his costs on appeal to be paid by the Law Society, such costs to be taxed if not agreed.

Hon Stone J :

30.I respectfully agree with the judgment of Ma CJHC.

31.In deference to the significance of this particular debate. I wish to add a few words upon the argument of principle propounded by leading counsel on behalf of the Law Society, Mr Westbrook SC.

32.As the Chief Judge has indicated (at paragraph 12 herein), Mr Westbrook adopted the stance thatabsent dishonesty, bad faith or other ‘good reason’, in principle no order as to costs ought to be made against the regulator, in this instance the Law Society, if disciplinary proceedings have been brought, but in the event have proved unsuccessful.

33.Mr Westbrook buttressed his argument by reference to the judgment of Moses LJ in Baxendale Walker, op cit., wherein the justification for this view was expressed on the basis of the “need to encourage public bodies to exercise their public function of making reasonable and sound decisions without fear of exposure to undue financial prejudice” if the regulatory decision is successfully challenged.

34.Ma CJHC has identified (at paragraphs 16 – 18 herein) the significant factual difference between the funding position of the Law Society in England and Wales when compared with that in Hong Kong, and I cannot usefully add to that succinct analysis, which is sufficient in itself to warrant distinguishing the broad approach adopted in England and as adumbrated by Moses LJ in Baxendale Walker.

35.For my own part, however, I would go further.

36.I do not consider that public regulatory function and/or the funding circumstances of any particular regulator should in general be regarded as prima facie determinative of the correct approach toward the award of costs in disciplinary proceedings brought by that regulator. These are factors which may be placed into the broad discretionary ‘mix’ in deciding costs’ awards, but in my view certainly should not be accorded the dominant or potentially decisive weight for which Mr Westbrook now contends.

37.It seems to me, with respect, that there is a real danger of trespassing upon dangerous ground were it to be accepted as a matter of principle that, in the absence of “good reason” to do so, there should be no costs’ sanction against a regulator, be it the Law Society or any other entity publicly charged with regulating professional conduct, in the event of a successful defence of disciplinary proceedings.

38.Regulatory disciplinary proceedings represent an important element within our jurisprudential system. Subject to oversight by the courts, whether in terms of application for judicial review or in the invocation (as here) of the appellate jurisdiction, the existence of such ‘domestic’ regulation is an essential requirement, not least in terms of promoting public trust, wherein professionals judge, and pronounce upon, the conduct of other professionals in any particular discipline.

39.Equally, however, and by reason of the potential for damage to any individual charged who subsequently may be exonerated from the allegations mounted against him on behalf of his professional body, as a matter of principle such disciplinary proceedings are not to be instituted absent most careful and rigorous consideration by those tasked with mounting such cases on behalf of the particular regulatory authority.

40.In terms of the award of costs consequent upon any unsuccessful prosecution, it seems to me that any move to adopt a variation in fundamental approach in the terms canvassed before us by Mr Westbrook would not assist, and on occasion positively may serve to detract from the analytical stringency which is required on the part of any regulator electing to advance a case of professional misconduct against a participant within a particular profession.

41.It strikes me that any approach as to costs which as a starting point potentially would serve to ‘insulate’ that regulatory body from the fiscal consequences of a successful defence – so that henceforth the burden would be placed upon a successful defendant to make his case, in terms of “good reason” so to do, that there should be a variation to an effective ‘immunity’ generally to be accorded to a regulator in terms of costs – would constitute a retrograde step, and in my judgment this view should represent the overriding approach in Hong Kong irrespective of considerations of public function and/or the funding implications for any particular regulatory body.

42.I venture to suggest that in terms of the proceedings of domestic tribunals the costs’ position is catered for perfectly adequately by continuing to vest in the particular domestic tribunal concerned – in this instance, the Solicitors’ Disciplinary Tribunal – the ‘usual’ rule as to an wholly unfettered discretion on the part of that tribunal as to the award of costs in the specific circumstances of any given case.

43.The proper and reasonable exercise of such unfettered discretion is, as a matter of principle, more than sufficient to cater for the justice of any particular situation, and with respect, I do not consider that the ‘regulatory responsibility/public interest’ argument, as deployed in Baxendale Walker, suffices to place the prosecuting regulator in Hong Kong outwith the existing and long-standing and generally accepted principles relating to the award of costs in adversarial proceedings.

44.I would add, finally, that the fact that, as in the instant case, a specific costs’ decision ultimately has been susceptible to successful judicial challenge in no sense reinforces the argument that there should be any alteration of fundamental approach on the part of the Solicitors’ Disciplinary Tribunal, or indeed of any domestic disciplinary tribunal, towards an award of costs against a regulator unsuccessful in disciplinary proceedings.

45.I too would allow this appeal on its particular facts, and respectfully concur with the order proposed by the Chief Judge.

Hon Sakhrani J :

46.I agree with the judgment of my Lord the Chief Judge and have nothing to add.

Hon Ma CJHC :

47.For the above reasons, it is ordered that : -

(1) The appeal be allowed;

(2) The order as to costs of the Tribunal, as far as the Appellant (the 2nd Respondent) is concerned, be set aside and there be substituted an order that the Appellant do have 65% of his costs in the proceedings before the Tribunal to be paid by the Law Society, such costs to be taxed if not agreed;

(3) There be an order nisi as to costs that the Appellant do have 65% of his costs in this appeal to be paid by the Law Society, such costs to be taxed if not agreed.