HKSAR v. Ip Hon Ming and Another

DCCC 216/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 216 OF 2013

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Reasons for Sentence

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1.I have convicted the 1st and 2nd defendant after trial; the 3rd defendant, I acquitted. The 1st defendant I convicted of 26 charges; the 2nd defendant, 25 charges.

2.The charges are identical and the offence of champerty.  Champerty is an ancient Common Law offence and the facts I found proved, I say, amount to this criminal offence under the Common Law of Hong Kong.

3.It is no longer an issue whether the offence is a criminal one under the law of Hong Kong, despite the abolition of the Common Law offence of maintenance and champerty in England, Wales and other Common Law jurisdictions.  This matter was settled in two authorities:  Unruh v Seeberger [2007] 10 HKCFAR 31 and, secondly, reaffirmed in Winnie Lo v HKSAR [2012] 15 HKCFAR 16.

4.I will not repeat the facts and my findings in detail.  They can be found in my verdict.

5.In short, this case involves the 1st defendant setting up a limited company, a business, in 2000 as a recovery agent. He advertised his services as handling claims for victims of accidents.  His fee was 20 per cent of any successful compensation claimed.  He printed brochures and name cards suggesting he believed he was engaging in a legitimate business.  There were in early 2000 open advertisements in newspapers of other companies involved in this same business. 

6.All 26 claimants in this case engaged the 1st defendant’s services and agreed to pay 20 per cent of any successful claim as his fee.  They understood if there was no compensation obtained, they would pay no fees.  Where claimants were concerned, if there was no win, there was no loss for them.

7.The claimants were then taken to Yeong & Co.  There, they engaged Yeong & Co’s services to commence an action on their behalf.  The claimants assumed those services were covered by their agreement with the 1st defendant, the recovery agent.

8.The 2nd defendant was in charge of their actions.  Ultimately, an award was agreed in each case.  From that the 1st defendant had 20 per cent paid to him.  The claimants received 80 per cent.  Yeong & Co negotiated and received costs from the opposition of each claim or action.  The cases were settled.  Many included a costs order, where costs were to be taxed if not agreed.  No costs went to taxation.

9.Some would say that the 1st defendant and Yeong & Co did provide a service to the claimants.  Not all those claimants would have been eligible for Legal Aid and some claims were almost time-barred. There were some who, but for this arrangement otherwise would not have sued or been able to sue for damages.

10.There was no evidence Yeong & Co had any share of the 20 per cent deducted.  As I found, they negotiated costs without consulting the claimants because it was meant for them only and had nothing to do with the claimants.  The claimants were not liable to Yeong & Co for any costs.  Yeong & Co financially benefited from this arrangement; this arrangement to facilitate the 1st defendant’s agreement with the claimants.

11.I found Yeong & Co, 2nd defendant worked with the 1st defendant to execute and see the agreement to fruition.

12.The dates of the charges start at the earliest in November 2001 and at the latest October 2004.  After this date, there are no other champertous agreements entered into.

13.I enquired why and have been told in mitigation that a Law Society circular dated 17 May 2005 (Circular O5-261(SG)) was issued.  As a result of its contents and warning to solicitors, the 2nd defendant ceased to take up cases from the 1st defendant or anyone on this basis. 

14.Yeong & Co and the 1st defendant were investigated after an anonymous letter was sent to the ICAC in 2010, resulting in this trial.

15.The 1st defendant closed QPCL in 2006 after his firm was searched by the ICAC.  He then knew there was a problem with this business and ceased this trade.

16.This Law Society circular, says that the Law Society was concerned about activities of recovery agents and it is entitled “Recovery Agents”.  It defines these agents as unqualified persons offering themselves to assist accident victims in their claims for compensation.  It sets out features of recovery agency contracts, all of which are found in the 1st defendant’s agreements with the claimants. 

17.It says the Law Society had sought advice from senior counsel on the legality of these contracts and he or she determined them to be champertous and unenforceable.  He or she advised that maintenance and champerty remained a criminal offence in Hong Kong and says recovery agents are liable to be prosecuted.

18.This circular went on to set out under what circumstances solicitors would commit professional misconduct if they acted in claims financed by recovery agents.  It refers to the misconduct and possible breaches of rules of the solicitors’ practice rules and breaches of principles of the Hong Kong Solicitors’ Guide to Professional Conduct, and I will quote from this circular:

“The Law Society is unlikely to accept any suggestion by a solicitor that he does not know his client’s claim is to be financed by a recovery agent, as he has every practical and ethical reason to discuss financing of the claim with his client. The misconduct is aggravated if the solicitor subsequently seeks to claim costs from the defendant, knowing that, in fact, his client has no liability to pay him.

The triangular relationship between the recovery agent, the accident victim and the solicitor will put the solicitor in an extricable position of conflict, as there is a strong incentive for the solicitor to maintain his relationship with the recovery agent, who may be a constant source of business, and compromise his duties to the accident victim, when differences arise between the recovery agent and the accident victim.

This will render the solicitor in breach of the fiduciary duty of openness and fairness owed to the client and which forms the governing principle in Chapter 7 and principle 7.01 of the Guide.

If a solicitor acting for an accident victim financed by a recovery agent subsequently claims costs from the defendant, knowing that the accident victim does not have any liability to pay him, the solicitor may be faced with serious disciplinary sanction, including possible suspension from practice or even having his name struck off the roll of solicitors.

If a solicitor passes on part of the accident victim’s compensation to the recovery agent, then apart from committing professional misconduct, he renders himself liable to a civil claim by the accident victim.”

19.The last paragraph of this circular is entitled “Duty to report misconduct”:

“The Law Society will have no hesitation in instituting disciplinary proceedings against any solicitor who commits the type of misconduct referred to above.”

20.I quote from this circular because I am of the view that it is good mitigation that once the circular spelt out the consequences of acting in claims financed by recovery agents, the 2nd defendant stopped and ceased to take on cases on this basis.

21.The fact that Law Society had to issue a circular and get senior counsel’s advice highlights how this offence was unknown to many or, at least, confusing to many.  It is an offence that is or was rarely seen, prosecuted or even considered.

22.It may very well be that the 2nd defendant believed that by only taking the costs agreed and not a percentage or a portion of the award received, he was not acting improperly or indeed illegally.  If that was what he thought, he was mistaken, but it would explain why he worked together with the 1st defendant in this manner.

23.The 1st defendant is now 62 years old and had a clear record.  He is educated up until Form 5 level.  He is married with two adult children.  In the past, he has been, amongst other professions, an auxiliary police officer, a director of QPCL as well as working at the Jockey Club tele-betting centre.  Now, he only works as a taxi driver, earning approximately $12,000 a month.  His wife has retired.

24.It was reiterated in mitigation that he genuinely thought this was a legal, legitimate business in the early 2000s, as did many others, as shown in newspaper clippings.  It must have been openly advertised, if the Law Society felt the need to seek advice on it and then inform solicitors of the advice obtained, as a warning to them as professionals.

25.It was reiterated that the 1st defendant did not cheat, defraud or make any misrepresentations to any claimant. He did not act knowingly dishonest and, in fact, he had a vested interest in the claimants’ claims and likely chances of success.  He thought it was a genuine business venture, going so far as printing brochures and name cards.

26.It was pointed out that in the course of the trial, the 1st defendant did not challenge any of the prosecution’s case or the credibility of the prosecution witnesses.

27.The 2nd defendant is now 44 years old, married with one daughter.  He and his wife (the 3rd defendant) are solicitors who set up their own firm in the year 2002.  Obviously, he has a clear record.

28.I have received character references and letters of mitigation from many people.  They include personal friends, clients, colleagues, fellow solicitors, counsel as well as district councillors.

29.I have seen many certificates and documents testifying as to the voluntary work he has done and huge charitable donations that he has made.  In at least one project alone, he donated HK$100,000.

30.Three district councillors have written letters on behalf of the 2nd defendant, all having known him for over 12 to 13 years. They testify as to the significant amount of time, personal time, he has donated to pro bono work and free legal advice to the community he lives in over that period of time. 

31.At least six clients, some who count him as a friend, have written letters of support. 

32.A City University professor, who is a long-term friend of the 2nd defendant, has written to this court.

33.I will not repeat the contents of those letters, but clearly the 2nd defendant is a man who is civic-minded, humble and of charitable character.  The letters and references which I have no reason to doubt, are glowing and implore leniency for the 2nd defendant. 

34.I will consider their contents where sentence is concerned.

35.There are other several factors I find relevant to sentence.

36.There is no guideline for sentencing this offence of champerty.  It has rarely been charged as a criminal offence.  In fact, this is the second case dealt with in this court. 

37.The particular facts of each individual case is obviously what is most relevant in considering sentence and I have found that the reasons behind the 1st and 2nd defendant working together was purely financial.  I am sure the 1st defendant started his business out of financial reasons and I accept there is no evidence of cheating, deceit, fraud or any misrepresentations to claimants from either defendant.

38.This distinguishes this case from HKSAR v Mui Kwok Keung [2014] 1 HKLRD 116.  There, a custodial sentence of some length was approved by the Court of Appeal, but the facts of that case involved elements of dishonesty, fraud, theft and exploitation of less able members of the public.

39.I will also consider relevant to sentence obviously the background of each defendant, their previous clear records and the mitigation put forward on their behalf. 

40.Where the 2nd defendant is concerned, the consequence of a criminal record will reverberate on his career and this is a relevant factor.

41.Another factor is the age of the offences - all were commenced between November 2001 and October 2004; that is over 10 years ago. The rarity of the offence is noteworthy, making it relatively unknown as a criminal offence even to legal practitioners.

42.Why the defendants decided to stop acting on this basis is also very relevant and I accepted the reasons given.  It is strong mitigation.  If the 1st and 2nd defendant had continued after such a circular or knowledge had become common knowledge, a more serious and heavier sentence would be appropriate.

43.Is a term of imprisonment necessary?  Defence counsel have asked me to consider a suspended sentence, if I find it appropriate to consider imprisonment.

44.I have asked myself whether it is in the public’s interest to impose a term of imprisonment that the defendants would be required to serve immediately.  Not that I can see.

45.The 2nd defendant, as I have said, will suffer consequences beyond any sentence I impose, as he will surely face disciplinary action and may even face the possibility of being struck off the roll of solicitors.  That will be an additional punishment imposed outside of this court and, as I have said, I take that into account.

46.These were convictions after trial.

47.However, I do take into account the way the trial was conducted by the defence.  The defence hung their hat on legal submissions and arguments to defend the charges.

48.After having considered all I have just referred to above, specifically the facts particular to this case, the ancient nature of this offence, the age of these charges and when and why this scheme ceased, I am of the view that, although a term of imprisonment would be appropriate, I will suspend it.  I am sure there is no likelihood of either defendant re-offending.

49.Bearing in mind the number of charges and the time period in which all actions were commenced, I will take a global approach to a starting point.

50.Defendants, please stand up.

51.Where the 1st defendant is concerned, for Charges 1 to 26, I will take the same starting point of 12 months’ imprisonment for each charge.  There is no reason for any discount from that starting point. 

52.The 1st defendant is sentenced to 12 months’ imprisonment for each charge.  All charges will run concurrently and be suspended for 18 months.

53.For 2nd defendant, Charges 1 to 25, I take a starting point of 15 months’ imprisonment for each charge.  There is no reason to discount that starting point. 

54.The 2nd defendant is sentenced to 15 months for each charge.  All 25 charges are to be served concurrently and I suspend that sentence for 24 months.

55.I will explain a suspended sentence. Defendants, you will not be required to serve this sentence immediately. However, in that period of suspension, either 18 months or 24 months, if you commit an offence punishable by imprisonment and are convicted by any court, then the court will most likely activate this term of imprisonment and order it to be served with any other punishment from any further offence consecutively.

COURT: Do you both understand?

DEFENDANTS: Understand.

	A. J. Woodcock
	District Judge