A Solicitor v. The Law Society of Hong Kong

CACV 182/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 182 OF 2014

(ON APPEAL FROM AN ORDER MADE BY THE SOLICITORS

DISCIPLINARY TRIBUNAL DATED 13^TH DAY OF AUGUST 2014)

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REASONS FOR JUDGMENT

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Hon Kwan JA (giving the reasons for judgment of the court):

1.This is an appeal of a solicitor against the sanction imposed by the Solicitors Disciplinary Tribunal on 13 August 2014.  The solicitor admitted all the complaints against him in June 2014 only after he sought and obtained an adjournment of his trial in May 2014.  We dismissed his appeal at the conclusion of the hearing and these are the reasons for our judgment.

The complaints and the penalties

2.There were four complaints against the solicitor.  The complaints spanned nearly four years from April 2007 to early 2010 and comprised recurring breaches of the Solicitors’ Accounts Rules, Cap 159F (“SAR”), the Solicitors’ Practice Rules, Cap 159H (“SPR”) and conduct unbefitting a solicitor.

3.The first complaint related to breaches of Rules 10(1) and (2) of the SAR, as a result of the solicitor failing to keep properly written up books and accounts during the period from 1 April 2007 to 31 December 2009.  The incomplete books and accounts kept by him failed to show all dealings with clients’ money held, received or paid by him and any other money dealt with by him through a client account, and failed to distinguish such money held, received or paid by him on any other account.  He also breached the rule that all dealings with clients’ money held, received or paid by him should have been recorded in the books and accounts within three working days after the date of such dealings.

4.In relation to the first complaint, the Tribunal ordered the solicitor be fined $25,000.  There is no appeal against this fine.

5.The second complaint related to the solicitor’s failure to provide monthly reconciliation statements of client accounts and listing of client ledger balances during the same period of 1 April 2007 to 31 December 2009, in breach of Rule 10A of the SAR.

6.For the second complaint, the solicitor was fined $15,000.  There is also no appeal against the fine.

7.The third complaint concerned breaches of Rules 5B(1) and (2) of the SPR and Rules 11(1) and (2) of the SAR.  The Investigation Committee of the Law Society had passed a resolution in January 2008 (“the 2008 Resolution”) requiring the solicitor to forward to the monitoring accountants every three months between January 2008 and December 2009 for scrutiny copies of various accounting documents to ensure his compliance with the SAR.  Despite repeated reminders, the solicitor had either failed to comply fully with the 2008 Resolution and to the limited extent that he supplied some of the documents, it was only after undue delay.

8.For the third complaint, the solicitor was censured, fined $40,000 and suspended from practice as a solicitor for one year, and after the said period of one year, he was to be allowed to practise only as an assistant solicitor but not as a sole proprietor or partner, for a period of three years, under the supervision of a solicitor of not less than ten years’ good standing (“the Practice Condition”).

9.The solicitor appealed against the suspension and the Practice Condition, contending that the suspension period of one year was manifestly excessive and that the Practice Condition was disproportionate and unjustified as regards the public interest it sought to protect and the three-year period was manifestly excessive.

10.The fourth complaint alleged that the solicitor, on account of the facts in the first three complaints, was in breach of Rule 2(d) of the SPR and his conduct was unbefitting of a solicitor.  Four “strong letters of disapproval”[1] were issued to the solicitor from September 2006 to October 2008.  Despite the strong letters of disapproval and repeated requests of the Law Society in respect of the provision of accounting documents, the solicitor failed to rectify the various breaches of the SAR in respect of his firm’s accounting documents, failed to comply with the 2008 Resolution, and persistently failed to maintain proper accounting documents and records over a substantial period.

11.In respect of the fourth complaint, the solicitor was censured, fined $50,000, suspended from practice as a solicitor for one year and placed under the Practice Condition as mentioned above.  The period of suspension was to run concurrently with the suspension ordered in respect of the third complaint.

12.The solicitor appealed against the suspension period and the Practice Condition on the same grounds as mentioned above.

13.The Tribunal further ordered that the solicitor shall over the period of 36 months, commencing from the date of his suspension, enrol in courses amounting to no less than 20 Risk Management Education (“RME”) points related to the practice of solicitors’ accounts under the Compulsory Professional Development programme run by the Law Society, in addition to the yearly RME requirements that the solicitor has to comply with.

14.Regarding the fines to be paid in the total sum of $130,000, the Tribunal ordered the solicitor to pay by 13 monthly instalments of $10,000.

15.There is no appeal against the above orders.

16.The Tribunal ordered the solicitor to pay the costs of the Law Society of the proceedings, and the costs of the Tribunal’s clerk, on an indemnity basis.  The solicitor appealed against the costs order contending that the Tribunal had not applied the right standard and/or had not taken into account proper considerations and it was wrong in principle to award indemnity costs.

The agreed facts and the Tribunal’s findings

17.The agreed facts were set out in §§6.1 to 6.54 of the Statement of Findings of the Tribunal.  We do not propose to repeat the details but merely mention some salient matters.

18.The solicitor was admitted as a solicitor in March 2003 and commenced practice as a sole proprietor in July 2005.  In less than a year of his setting up his firm, the Law Society resolved to require him to produce accounting records for inspection by the inspectors.  After three inspections conducted by the inspectors in June and July 2006, the Law Society wrote to the solicitor on 17 July 2006 to seek an explanation regarding his breaches of the SAR.  This was followed by the first strong letter of disapproval on 14 September 2006 for the solicitor’s failure to deal with the correspondence or answer the queries of the Conduct Section promptly or at all.

19.The Conduct Section continued investigation of the solicitor in 2007 and issued a letter to him on 11 May 2007 setting out numerous possible breaches of professional conduct including Principle 6.04 of the Hong Kong Solicitors’ Guide to Professional Conduct (“the Guide”) and provisions of the SAR.  Despite numerous requests, the solicitor only furnished the Law Society with some of the accounting documents of 2007 in February and March 2009.  Some of the documents requested were not supplied by the solicitor.  Various problems were detected in the books and accounts supplied by the solicitor as set out in the first report of the monitoring accountant for the period between April and December 2007.

20.The Law Society sent the second strong letter of disapproval to the solicitor on 31 January 2008 for his breaches of the SAR in that he had failed to maintain proper accounting records and Principle 6.04 of the Guide in that he had failed to respond to the Law Society’s request to produce adequate documentary evidence in support of the entry in the general ledger.  The 2008 Resolution was also notified to the solicitor.

21.From March to July 2008, the solicitor failed to comply with the 2008 Resolution, citing various reasons including personal and family problems and asserting that his breaches had no adverse effect on the clients’ accounts.  The Law Society issued the third strong letter of disapproval on 24 July 2008 for his breaches of the SAR in failing to provide a complete set of clients’ ledgers with transactions prior to January 2008, failing to maintain proper accounting records, failing to keep contemporaneous and accurate clients’ ledgers which were up-to-date on a three-day basis, and breaches of Principles 4.10 and 6.04 of the Guide.

22.As the vast majority of the documents requested by the Law Society were not produced, the fourth strong letter of disapproval was issued on 9 October 2008 for the persistent delay in producing accounting records from April to June 2008.

23.It was only in February and March 2009 that the solicitor sent to the Law Society various accounting documents in respect of all four quarters of 2008.  As found by the monitoring accountant in her second report, the documents were incomplete making it impossible to verify the correctness of entries in the clients’ ledger or cash book.  The accounts for 2008 were not recorded in a timely manner and not properly supported with vouchers and documents.  Various problems were identified in the second report.

24.As for the accounting records for 2009, the respondent was late in supplying some of the documents.  The documents supplied were insufficient, as found by the monitoring accountant in her third report.  Various problems were detected in the documents supplied and the solicitor had failed to maintain proper accounting records for 2009.

25.As shown in the three reports of the monitoring accountant, from April 2007 to December 2009, the solicitor had failed to record many of the firm’s receipts and cheque payments in the relevant client’s ledgers properly, he had failed to detect accounting documents whose closing and opening balances were incompatible, he had failed to post the receipts and cheques of certain transactions to the same ledgers and cash books as stated on the receipts issued to clients or cheque copies, he had wrongly stated the amount of the receipt for certain files, he had failed to detect client’s ledger balances which exceeded the balance on client account cash book and bank statement, he had prepared the client’s cash book and client’s ledgers for the years of 2007 to 2009 by copying from the bank statements, and he had failed to record certain payments on the client’s ledger and cash book within three working days from the date of initiation of the transaction.

26.As stated by the monitoring accountant, the solicitor had more or less adopted the attitude of leaving it to the Law Society to sort out the accounting matters for him.

27.The Tribunal regarded all breaches of the SAR as serious, as the purpose of the SAR is to ensure that every solicitor firm will have an adequate accounting system so that client money will be dealt with properly and be protected.  The Tribunal noted it was fortunate that the solicitor’s clients did not suffer any losses and it did not appear that the solicitor gained anything from his breaches[2].

28.The Tribunal took into account that the solicitor’s conduct during the Law Society’s investigation and during the proceedings had been “consistently and deliberately obstructive and uncooperative”.  His conduct was “very serious”, reflected by the fact that he received four strong letters of disapproval.  Despite this, he “repeatedly evinced a failure to recognise or understand the importance of the charges brought against him and has in large part been the sole architect why it has taken some 8 years for the matter to be resolved by the conclusion of these Disciplinary Tribunal Proceedings”.  The Tribunal attached weight to the solicitor’s conduct and resulting delay to the determination of the proceedings in making the orders on the penalty[3].

The applicable principles

29.There is no dispute as to the applicable principles in an appeal against the sentencing decision of a Solicitors Disciplinary Tribunal.  The appeal court will give recognition and great weight to a penalty imposed by this tribunal, as it comprises an expert and informed tribunal, particularly well placed to assess what measures are required to deal with defaulting solicitors and to protect the public interest.  But the scope for intervention by the appeal court is no longer restricted to cases where “a very strong case” for doing so is established.  If the court is satisfied that the sentencing decision was “clearly inappropriate” or “clearly wrong” despite paying considerable respect to it, the court will interfere.  It is not enough for the court to take a different view, however forceful that view may be (A Solicitor v Law Society of Hong Kong, CACV 107/2005, 18 May 2007, §16; Salsbury v Law Society [2009] 1 WLR 1286 at 1296E to G, §30; Chan Cheuk Chi v The Registrar of the Hong Kong Institute of Certified Public Accountants, CACV 38/2012, 8 February 2013, §§44 and 45; A Solicitor v Law Society of Hong Kong [2015] 2 HKLRD 802 at §§67 and 68).

30.Each case has to be determined on its own facts.  A submission that a lighter sentence was imposed in other decisions of a Solicitors Disciplinary Tribunal where the failures were no more severe is of little assistance.  Penalties imposed by this 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).

32.This rationale applies with equal force in cases involving breaches of the SAR, which existed “to afford the public maximum protection against the improper and unauthorised use of their money and to assure them of that protection”.  Solicitors are accordingly under a heavy obligation, quite distinct from their duty to act honestly, to ensure observance of the SAR (Weston v Law Society, The Times, 15 July 1998).

33.With these principles, we turn to consider the grounds of appeal taken by the solicitor regarding suspension, the Practice Condition and indemnity costs.  We will consider suspension first as this appears to be a more logical way of approaching the sanction imposed even though the main thrust of the arguments on appeal is on the Practice Condition.

Suspension

34.The complaint of the solicitor is that the suspension period of one year is manifestly excessive.  Even if he had fallen below the required standard of integrity, probity and trustworthiness, the nature and severity of his failures in the third and fourth complaints would still need to be considered (A Solicitor v Law Society of Hong Kong [2003] 4 HKC 229 at 243, §64).

35.Mr Jonathan Chan, who appeared for the solicitor on appeal, placed particular reliance on two decisions of the Solicitors Disciplinary Tribunal.

36.The first one concerned a solicitor CTK and was decided on 18 May 2011.  There were eleven complaints: eight were breaches of the SAR; one was failure to identify correct information in bills and compromise a proper standard of work, in breach of Principle 4.10 of the Guide and Rule 2(e) of the SPR; two were failure to deliver the accountant’s report in time, in breach of section 8(1) of the Legal Practitioners Ordinance.  CTK was censured and fined a total of $75,000 and ordered to pay costs of $187,000.

37.The second decision concerned also CTK and his partner KCH and was made on 6 August 2014.  There were six complaints, one against CTK, one against KCH and remaining four against both of them.  They concerned the failure to deliver the accountant’s report in time, breaches of the SAR in failing to keep proper books and accounts and prepare reconciliations of client accounts, and failure to produce books and accounts to the monitoring accountant.  CTK was censured, fined $30,000 with a condition that he may not practise as a sole practitioner or in any partnership for two years.  KCH was fined $30,000. Both were ordered to pay costs on a party and party basis.

38.Mr Chan submitted that the complaints in those two decisions are similar to the present case. Suspension was not imposed on CTK or KCH.  A practice condition was imposed on CTK only in the second decision.  Mr Chan emphasised no dishonesty was involved and the solicitor did not gain anything from his breaches.  Hence, one year’s suspension is disproportionate or manifestly excessive in the circumstances.

39.As mentioned earlier, the previous decisions of a disciplinary tribunal are not precedents in sentencing.  Besides, the solicitor’s failures in the present proceedings are clearly more severe than the failures of CTK or KCH in the two decisions, and unlike the present proceedings, neither decision involved findings of conduct unbefitting a solicitor.  Further, as pointed out by Mr Jason Karas for the Law Society, in the first decision concerning CTK, it was noted that he had no previous disciplinary record and he admitted all the complaints against him at the earliest opportunity, saving substantial time and resources.  In contrast, the solicitor here has a poor disciplinary record, the first one was when he was a trainee solicitor.  There were three letters of good practice, one letter of regret, eight strong letters of disapproval and one summary disposal[4].  As found by the Tribunal, the solicitor was in large part the sole architect why it had taken eight years for the matter to be resolved by the conclusion of these disciplinary proceedings.

40.The appropriate length of suspension was squarely within the remit of the discretion of the Tribunal.  We agree with Mr Karas that the period of suspension imposed by the Tribunal in respect of the third and fourth complaints cannot be said to be clearly wrong or inappropriate.  There is no basis to interfere with the Tribunal’s decision.

Practice Condition

41.Section 10(2)(ba) of the Legal Practitioners Ordinance provides that on completion of its inquiry and investigation, a Solicitors Disciplinary Tribunal may make such order as it thinks fit including “permitting the solicitor to continue practice, but subject to conditions which may be imposed for up to 3 years”.

42.There is no doubt that a Practice Condition of the present kind could be highly detrimental to a solicitor’s practice as the options open to the solicitor to resume practice after his suspension would be significantly reduced (A Solicitor v Law Society of Hong Kong [1996] 3 HKC 98 at 110B to C; A Solicitor v Law Society of Hong Kong, CACV 107/2005, §17(6)).

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)).

44.Mr Chan submitted that it is not necessary or justified to impose the Practice Condition in the particular circumstances here.

45.Mr Chan said there was no explanation or justification in the Statement of Findings for imposing the Practice Condition.  Assuming it was imposed to protect the public from the solicitor’s unsatisfactory practice in relation to maintaining an adequate accounting system, he submitted that the Practice Condition was disproportionate, unjustified and wrong in principle for these reasons.

46.Firstly, the solicitor was ordered to be suspended for a year, it is not wholly clear why it is necessary to impose the Practice Condition to keep him from running his own practice, especially when there was no finding of dishonesty and he did not gain anything from his breaches.

47.Secondly, even if there was any further need to prevent the solicitor from causing loss and damage to clients after the one-year suspension, there are other sentencing options which would serve the same purpose more effectively and specifically, such as requiring the solicitor to submit accounts to the Law Society regularly, requiring him to engage professionals or have an adequate accounting system in place, requiring him to enrol in courses related to the practice of solicitors’ accounts.  In contrast, in placing the solicitor under supervision by the Practice Direction, this may not directly serve the purpose of helping the solicitor to learn how to maintain an adequate accounting system.

48.Thirdly, Mr Chan relied on the sentencing decisions concerning CTK and KCH mentioned earlier.

49.He further argued that even if the Practice Condition is necessary or justified, the period of three years is manifestly excessive, noting that it is the maximum period a disciplinary tribunal can impose under the statute.  It is also disproportionate as it is unclear why it should take as long as three years for the solicitor to learn his lessons.

50.Mr Chan drew attention to the fact that the solicitor has been practising as a sole proprietor in just over two years of his admission.  To prevent him from practising as sole proprietor or a partner would be tantamount to suspending his career, and is highly detrimental to him as he is middle aged and started a family late in life.  He submitted that the Practice Condition should be set aside.

51.We do not think the Practice Condition is unnecessary or unjustified in the circumstances of this case.  The reasons for the Practice Condition are not difficult to discern.

52.There were very serious breaches of the SAR over a three-year period.  The solicitor “repeatedly evinced a failure to recognise or understand the importance of the charges brought against him”, notwithstanding four strong letters of disapproval were issued to him.  As stated in the letter of the Law Society to him dated 3 June 2008, the reasons he gave for his delay to produce accounting records were “evasive, incomprehensible or nonsensical” and his persistent delay and failure in supplying documents and his conduct in totality showed that such delay and failure was “wilful, intentional and contumelious”.  Even after the complaints of the present proceedings were laid, the solicitor continued to receive letters of disapproval from the Law Society.  The latest was dated 25 February 2014 for failing to submit properly completed particulars relating to sole practitioner within the stipulated time as required by Rule 5AA(1)(b) of the SPR.  The Tribunal took into account the solicitor’s conduct during the investigation and the proceedings had been “consistently and deliberately obstructive and uncooperative”.  This matter had taken eight years to resolve, and the solicitor was the sole architect why it had taken so long.

53.The Tribunal was entitled not to repose trust and confidence in the solicitor to practise as a sole practitioner or partner when dealing with clients’ monies, given that breaches of the SAR were found in less than a year of the solicitor practising on his own and multiple recurring breaches were not rectified during the inspection and investigation which lasted from mid 2006 to the end of 2009.  The solicitor had informed the Law Society in the past that he had engaged a professional accounting firm to prepare accounts for his firm but this was to no avail as multiple defects were found in the accounting documents reviewed by the monitoring accountant.

54.The Tribunal had obviously taken the view it was insufficient for the protection of the public merely to require the solicitor to enrol in courses related to the practice of solicitors’ accounts.  The fact that the Practice Condition could be highly detrimental to the solicitor’s practice and could amount to further suspending his career cannot in itself be an objection to imposing the Practice Direction, as it is far more important to protect the public and to maintain public confidence in the profession.

55.The decisions concerning CTK and KCH are not to be regarded as precedents.  In any event, a Practice Condition was imposed on CTK, albeit for two years, the second time he was brought before a disciplinary tribunal.

56.As for imposing the maximum term of three years for the Practice Condition, this was squarely within the exercise of discretion of the Tribunal.  It cannot be regarded as clearly wrong or inappropriate.  There is no room for this court to interfere.

Indemnity costs

57.Section 10(2)(e) of the Legal Practitioners Ordinance provides that a Solicitors Disciplinary Tribunal may order payment by any party of the costs of and incidental to the proceedings, and any costs of any prior inquiry or investigation, to be taxed on a full indemnity basis, or payment of an amount that the Tribunal considers is a reasonable contribution towards those costs.

58.The principles relating to costs were not in dispute.  At the hearing before the Tribunal, the prosecutor for the Law Society referred to this passage in Professional Conduct and Risk Management in Hong Kong (2007 ed) at §16.123[5]:

“Whilst [section 10(2)(e)] expressly provides for a costs order by the Solicitors Disciplinary Tribunal to be taxed on an indemnity basis, this does not mean that the Tribunal is compelled to impose a mandatory indemnity costs order whenever costs are awarded against the solicitor. The normal principles for imposing an indemnity costs order in civil litigation should apply to proceedings before the Solicitors Disciplinary Tribunal, namely, indemnity costs should be imposed only in rare and exceptional cases where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties. The Solicitors Disciplinary Tribunal has the discretion to make other costs orders, for example, costs on a party-party basis.”

59.The prosecutor submitted to the Law Society that the solicitor’s litigation conduct in the present proceedings was reprehensible for indemnity costs to be awarded against him.  The following facts were relied on by the Law Society[6]:

(1)   At a hearing on 17 September 2013, notwithstanding his earlier indication to the Tribunal and the Law Society that he would plead guilty to the first and second complaints thereby causing the Law Society to prepare admitted facts for those complaints, the solicitor suddenly resiled from that stance and pleaded not guilty to all the complaints.

(2)   Notwithstanding his agreement to the directions of the Tribunal on 17 September 2013, the solicitor failed to file any list of documents or any affidavit evidence, contrary to the directions.

(3)   He failed to file any reply to the Law Society’s notice to admit facts, ignoring the multiple chasers by the Law Society.  He did not even clarify whether he would be filing any reply.

(4)   He failed to file any witness statement, again ignoring the correspondence of the Law Society.  The Law Society could only assume he would not be calling any witness.

(5)   Three days before the hearing on 13 May 2014, the solicitor requested an adjournment for the appointment of counsel, when he had contemplated and indicated in September 2013 that counsel was to be engaged.  The Tribunal reluctantly adjourned the hearing to 4 and 5 June for the solicitor to retain counsel.

(6)   On the first day of the adjourned hearing on 4 June 2014, the solicitor informed the Tribunal and the Law Society he intended to plead guilty.  An adjournment to the next day was required for the preparation of agreed facts, when he could have informed the Law Society of his change of intention much earlier on and saving all the unnecessary costs.

(7)   On 5 June 2014, the solicitor failed to provide in a timely manner his version of the agreed facts, leading to further delay.

60.The Tribunal accepted the prosecutor’s submissions and regarded the solicitor’s litigation conduct as reprehensible[7].  As pointed out by Mr Karas, this was consistent with the forewarning given to the solicitor that the Tribunal was “absolutely dismayed” by the solicitor’s behaviour in the conduct of the proceedings and that it considered such behaviour to be “reprehensible”[8].  There are also unchallenged findings that the conduct of the solicitor during the investigations and during the proceedings “has been consistently and deliberately obstructive and uncooperative”[9].

61.Mr Chan submitted that mere prolongation of proceedings without more will not ordinarily justify indemnity costs, and emphasised that there was no prolongation of the proceedings by false allegation of facts, citing A Solicitor v The Law Society of Hong Kong, CACV 221/2003, 11 November 2003 at §126 which quoted from Walton v McBride (1995) 36 NSWLR 440.

62.We do not think the litigation conduct of the solicitor was merely to prolong the proceedings without more.  The facts relied on by the prosecutor speak for themselves.  The solicitor had been “consistently and deliberately obstructive and uncooperative”.  The Tribunal was fully justified in finding the solicitor’s conduct reprehensible.  There is no basis to think that the Tribunal had not properly directed its mind to what is required to find reprehensible conduct.

63.Mr Chan drew the court’s attention to the fact that the Law Society had sought costs and disbursements of $1,094,740.09.  He submitted that any costs order should “strive for at least some element of proportionality” and consideration should be given to the combined effect of penalty and costs on the person who is subjected to the burden of paying both in connection with his financial capability and the appropriateness of the amounts (A Solicitor v The Law Society of Hong Kong, CACV 221/2003, at §§114 to 116; Solicitor (302/02) v The Law Society of Hong Kong [2006] 2 HKC 40 at 77B §130).  He submitted that as the total fines imposed amounted to $130,000, the indemnity costs may be disproportionate to the penalty imposed and the court should take this into account in considering if the award of indemnity costs was appropriate.

64.CACV 221/2003 was an extreme case, as recognised in §116 of the judgment.  The total fines imposed amounted to $170,000 and the cumulative costs bill came up to some $4 million.  Hence, the court remarked in §§115 and 116 that the penalty was dwarfed by the costs, and it would not be fair or just that the solicitor should be visited with a bill of costs totally disproportionate to the level of punishment imposed.  The court therefore set aside the costs order and referred the issue of costs back to the tribunal for reconsideration in light of a detailed bill of costs which it was proposed to visit upon the solicitor on completion of taxation.

65.The costs and disbursements put forward by the Law Society of over $1 million will be taxed if not agreed.  The likely amount of taxed costs on an indemnity basis is not so completely disproportionate to the level of total fines of $130,000 that the court would say it is unfair or unjust to award costs on an indemnity basis.

66.No information was put before the Tribunal on the solicitor’s financial capability to meet the combined payment of fines and costs.

67.There is no error of principle and no error in the exercise of discretion to award indemnity costs.

Conclusion

68.For the above reasons, we dismissed the appeal of the solicitor with costs to the Law Society, on a party and party basis.

Mr Jonathan Chan, instructed by Poon & Cheung, for the Appellant (Applicant)

Mr Jason Karas (Solicitor Advocate), instructed by Chui & Lau, for the Respondent (Respondent)