Court of Appeal orders solicitor be struck off for serious breaches of accounts rules
In an important judgment in Law Society of Hong Kong v A Solicitor,1 the Court of Appeal set aside an order that a solicitor be suspended from practice for 24 months and substituted it with an order that he be struck off from the roll of solicitors. The solicitor, the sole proprietor of a practice that had been closed by the Law Society of Hong Kong, had committed numerous and serious breaches of the Solicitors' Accounts Rules, together with another solicitor in the same practice. Emphasising the need to protect the public, the Court of Appeal concluded that the Solicitors Disciplinary Tribunal's suspension order had been manifestly inadequate and, therefore, clearly wrong.
In September 2016, the Law Society of Hong Kong intervened in the respondent's practice, effectively closing it down. As a result of the Law Society's regulatory investigations, the respondent and another solicitor faced 11 complaints before the Solicitors Disciplinary Tribunal. In short, the complaints related to serious and multiple breaches of (among other things) the Solicitors' Accounts Rules (Cap 159F). The respondent allegedly committed these breaches together with another solicitor over a period of a few years prior to the Law Society's intervention. As one example, one passage of the judgment recites:
It is also not disputed that the total amount outstanding which the 1st respondent and [the other solicitor] were demanded to replace involves at least $23 million and that the above breaches had occurred on multiple occasions involving many different clients over the period of three years from 2013 to 2016.2
The respondent admitted the regulatory charges and did not appear at the Tribunal hearings in August 2019 and October 2020. The other solicitor pleaded not guilty and attended. The Tribunal found each of the 11 complaints proven against the respondent and the other solicitor. The Tribunal ordered (among other things) that the respondent be suspended for two years, in addition to being censured and fined HK$30,000 (approximately £3,000) for each complaint.
The Law Society obtained permission to appeal the Tribunal's suspension order – such appeals are heard by the Court of Appeal direct from the Tribunal.3
The primary ground of appeal was that the Tribunal's suspension order was manifestly inadequate and clearly wrong in view of the seriousness of the complaints and their nature and gravity. The principal issue for the Court of Appeal to determine was whether the Tribunal's suspension order was wrong as a matter of legal principle.
The Court allowed the Law Society's appeal based on the primary ground of appeal and ordered that the suspension order be set aside and substituted with an order that the respondent be struck off.
The Court acknowledged that it would give great weight and considerable respect to the sanction imposed by a disciplinary tribunal. However, the scope of the Court's intervention was not restricted to there being "a very strong case" for doing so – rather, the test was whether a disciplinary tribunal's sanction or penalty was "clearly wrong".4
With specific reference to whether a solicitor should be struck off or suspended from practice for serious misconduct, the Court stated:
Where a solicitor has acted dishonestly, an order of striking off should generally be imposed, although there may be exceptional cases where suspension may suffice.5
The Court also confirmed the rationale for such sentences, including:
- protection of the public; and
- maintenance of public confidence in the legal profession.
The Court considered that the suspension order failed to adequately reflect the seriousness of the respondent's misconduct and to prioritise the protection of the public.6 The Court specifically referred to (among other things) the:
- "rampant misappropriation and mishandling" of client monies;
- significant number and frequency of improper withdrawals of client monies;
- abdication of responsibility for accounting matters to an unqualified member of staff;
- systematic failure to keep proper books and accounts, and client cash and ledgers at relevant times;
- serious failure to produce complete office ledgers at relevant times; and
- "failure to rectify the accounting breaches by replacing vast amounts of missing funds in excess of HK$22 million [approximately £2.2 million] belonging to 25 identifiable clients".7
The Court also took account of the fact that the respondent's serious misconduct was not a one-off incident but lasted for over three years. The Court stated:
In our view, these clearly show that there had been a wholesale and persistent disregard by the 1st respondent of his professional duties as a solicitor, the relevant rules, and the interests of his clients. The 1st respondent as a professional had clearly fallen way below the required standards of integrity, probity and trustworthiness and his conduct has brought serious disrepute upon the profession.8
The Court's judgment will no doubt be welcomed by the Law Society and the legal profession generally. For too long a small number of practitioners have committed flagrant, serious and persistent breaches of the Solicitors' Accounts Rules. Some of these breaches have resulted in several interventions by the Law Society in the last seven or so years, causing financial loss to members of the public and significant cost to the profession. The Court's judgment is a warning to solicitors (in particular, partners) that serious breaches of the Solicitors' Accounts Rules can justify the ultimate sanction of strike off. It is unlikely to be an excuse that such breaches were the result of a partner's or sole proprietor's lack of supervision of unqualified staff.
There is also the point that persistent breaches of the Solicitors' Accounts Rules are often a red flag for serious misconduct. The regulator should investigate these quickly and thoroughly, with respect to a profession that is still self-regulated in Hong Kong. The Court's judgment rightfully emphasises the protection of the public, especially given the importance of handling and accounting for client monies. From this perspective, serious breaches of the Solicitors' Accounts Rules (involving client monies) should be referred to the Tribunal and not be a matter for low-level sanctions, such as (for example) so-called "warning letters" by the regulator.
Finally, the Tribunal should be cognisant of the Court's judgment – it sends a clear message to all relevant stakeholders. Serious misconduct involving the misappropriation of client monies should result in the solicitors concerned being struck off and their referral (together with the relevant unqualified staff) to the relevant law enforcement agencies.
This article was originally published in the Litigation Newsletter of the International Law Office.
1 HKCA 694, 29 May 2023 (date of written reasons), CACV 63/2022.
2Supra note 1, at para 8.
3CAMP 164/2021, 27 January 2022. Legal Practitioners Ordinance (Cap. 159), section 13(2A).
4Supra note 1, at paras 12 and 18.
5Supra note 1, at para 13(1).
6Supra note 1, at para 16.
7Supra note 1, at paras 17(1)-(9).
8Supra note 1, at para 19.