Hong v Auckland Standards Committee No 5
[2020] NZHC 744
•16 April 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-2236
CIV-2020-404-11 [2020] NZHC 744
UNDER the Lawyers and Conveyancers Act 2006 IN THE MATTER
of an appeal against a Misconduct Liability decision of the Lawyers and Conveyancers Disciplinary Tribunal
BETWEEN
BOON GUNN HONG
Appellant
AND
AUCKLAND STANDARDS COMMITTEE NO. 5
Respondent
Hearing: 2 April 2020 Appearances:
Appellant in person
P Collins for the Respondent
Judgment:
16 April 2020
JUDGMENT OF GAULT J
This judgment was delivered by me on 16 April 2020 at 12:00 pm pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
Parties / Solicitors:
The Appellant
Mr P Collins, Barrister, Auckland
HONG v AUCKLAND STANDARDS COMMITTEE NO. 5 [2020] NZHC 744 [16 April 2020]
[1] Mr B G Hong appeals against two decisions of the New Zealand Lawyers and Conveyancers Disciplinary Tribunal (the Tribunal). First, the Tribunal’s decision dated 11 October 2019 finding Mr Hong guilty of wilful misconduct for obstructing a trust account inspector’s request for access to his client files in breach of trust account regulations.1 Secondly, the Tribunal’s penalty decision dated 23 December 2019 suspending Mr Hong from practice for three months, prohibiting him from practising on his own account until approved to do so by the Tribunal and ordering him to pay costs.2
[2] The appeals were allocated a fixture on Thursday, 2 April 2020. It transpired that was during alert level 4 for COVID-19. The Court treated these appeals as priority matters and retained the fixture which, by consent, was conducted by telephone. At the hearing, difficulty with audio quality led the parties to consent to the Court dealing with the appeal on the papers. It was possible for them to answer the Court’s questions.
Factual background
[3] The audit inspectorate of the New Zealand Law Society conducted a general trust account review of Mr Hong’s solicitor’s trust account from October 2017 to February 2018.
[4] On 30 October 2017 the inspector, Mr Strang, notified Mr Hong of his intention to visit Mr Hong’s office on 7 November 2017 at around 11:30 am/noon. Mr Strang followed up the next day regarding the materials he wished Mr Hong to prepare.
[5] On 6 November 2017, Ms Chan, Mr Hong’s trust account administrator, replied to Mr Strang saying she would have the material to him the next morning. Mr Strang replied indicating he would need to come later the next day around 2:00 pm, so he could review the material.
1 Auckland Standards Committee 5 v Hong [2019] NZLCDT 28.
2 Auckland Standards Committee 5 v Hong [2019] NZLCDT 40.
[6]Mr Hong then emailed Mr Strang saying:
Please do not come to my office as I am in the midst of shifting offices, this office in a total mess. Any other request for further information will also be provided to you by email.
[7] Mr Strang replied saying he would reserve judgement on whether he could dispense with physically attending Mr Hong’s office. He noted he had concluded “very very few reviews without attendance” and asked if there were extenuating circumstances.
[8] Mr Hong replied on the morning of 7 November 2017 attaching the completed questionnaire and referring to his lack of time, stress and allergies. Mr Strang decided to abandon the meeting and try again later.
[9] On 19 December 2017 Mr Strang emailed Mr Hong advising that he had largely completed his trust account review and, noting that Mr Hong had said he was in the process of shifting offices, had postponed his file review. Mr Strang advised that he planned to complete that work in the week of 21 January 2018, likely on 24 January 2018. He asked Mr Hong to advise with reasons if that was not convenient, and advise his new office address.
[10] After not receiving a reply, Mr Strang telephoned on 15 January 2018, spoke with Ms Chan and followed up by email recording that she had advised that Mr Hong remained at the same offices, but they were disorganised pending a shift to an apartment. Mr Strang advised he was not comfortable further deferring and would arrive on 25 January 2018 at 9:00 am.
[11] Mr Hong replied the same day saying he was using his office as a work shop to fabricate what he needed to renovate an apartment, most files had been stored and Mr Strang would not be granted entry. He referred to it as a construction site and attached photos.
[12] Mr Strang replied on 18 January 2018 stating that this was not at all ideal and was compromising the review. He reminded Mr Hong of his duty under reg 11 of the Lawyers and Conveyancers Act (Trust Account) Regulations 2008
(the Regulations). Mr Strang said Mr Hong would recall he signalled he could extend some pragmatism:
If necessary and you agree I could take file/s with me to the Law Society’s Auckland office and return those back to you later.
So what I will do (if you agree) is:
1)Receive the reconciliations…
2)Select some files for my review (they will be recent matters)
…
[13]Mr Hong replied on 23 January 2018:
Sorry I am not in the office all the time as taking time off … as I have said I do not wish to meet, anything U need U email over and such will be provided to you as soon …
any of clients’ files or documents that U need that are not trust records sorry if requested such will need to be directed to clients for their specific consent?
[14] Mr Strang replied the same day stating that he awaited the reconciliations Mr Hong had said he would email and asking Mr Hong to expedite sending those. Mr Strang referred again to reg 11, saying:
… it is my understanding that the client file forms part of those trust account records. It is aspects such as payment authorities, A & I, reporting statements and client care materials that I wish to scrutinise… If you have retained your client file you must make such available to the Inspectorate, on reasonable request. You do not need client authority for such production, the Inspectorate’s supervision of lawyers and their files is conducted pursuant to statutory authority.
[15] Mr Strang set out the definition of trust account records, underlining the reference to files:3
trust account records, in relation to a practitioner, means:
(a)all records (including all books, papers, files, accounts, statements, invoices or copies of invoices, documents, receipts and evidence of authority for payments, cheques, securities, and trust receipt forms used and unused) relating to the practitioner’s trust accounts or to trust money received by the practitioner, whether kept in writing or on computer or machine or in any other manner; and
3 Regulation 3.
(b)if any of those records are kept on computer, includes the relevant computer equipment and software
[16]Mr Strang also said:
I had suggested what I thought was a pragmatic and accommodating compromise between my need to review your files and your apparent ‘flux’ in your office whilst you are awaiting shifting to new premises (which also prevented my site visit in late 2017). Once I have your reconciliations I plan to request from you the client files for selected transactions. Noting my reference above to your obligations to make requested client files available to me please reconsider your indication that you would not make selected client files available to me.
[17] Mr Strang reserved the right to refer the matter to the Lawyers Complaints Service, saying that was the least preferred option. He copied the email to the inspectorate manager.
[18] The next morning, 24 January 2018, Mr Strang emailed Mr Hong a list of six files he requested for his review the next day, asking whether Mr Hong wanted Mr Strang to pick the files up or would drop them off.
[19]On 25 January 2018 Mr Strang sent a further email stating:
I continue to await your advice as to the availability of the requested client files…
I have drawn your attention to your statutory obligations to provide these materials and I have suggested a compromise to accommodate your office constraints.
It is my expectation that I receive these files today (or by latest 9.30 am Friday 26th) failing which I will need to consider referring the matter to the Lawyers Complaints Service as putative non-compliance with Trust account regulation 11.
…
[20] Ms Chan replied to Mr Strang stating that Mr Hong was busy with the renovations at the apartment. She provided some information in relation to the requested files.
[21]Mr Strang replied:
I had asked for the actual files and I have indicated that for each file I will be checking aspects such as payment authorities, A & I, reporting statements and client care materials.
I can either proceed on the basis that the materials you provided me with in that email is the entire contents of each of the requested files (which it appears it is not) and assay what should be completed and what is not or I proceed on the basis of a failure to produce the file. My inclination is to proceed on the basis of a failure to produce the file.
Please confer with Mr Boon Hong who may wish to reflect whether his energies might be diverted from his ongoing and longstanding alterations to the discharge of his professional duties and progress a review that he has ample time to accommodate. I am mindful of not impairing the review but also our consistency with other practitioners.
It is not practical or efficacious to conduct file reviews by my asking for each and every document- especially as I am unfamiliar with the retainer/s; that approach essentially defeats the purpose of a file review.
The deadline of 9.30 am Friday 26 January to produce the files, (not just some contents) stands.
…
[22] Mr Hong did not provide the files. Mr Strang decided to write his report without making a visit or obtaining full information.
[23] In February 2018 Mr Strang’s report was submitted to Auckland Standards Committee 5 for it to consider the possibility of an investigation on its own motion. Mr Hong was sent a copy and invited to comment on six specific matters, one of which was whether he had failed to provide access to files requested by the inspector in breach of reg 29 of the Regulations.
[24] Mr Hong responded on 26 March 2018. In relation to failure to provide access to files, Mr Hong said Mr Strang had been asking for physical files and documents that do not exist or that have nothing to do with the audit. He perceived Mr Strang had gone outside the scope of the general audit by wanting access to the whole client files rather than just documents with trust transactions. He proceeded to express concern as to why Mr Strang had done so, focusing on one of his sensitive files.
[25] Auckland Standards Committee 5 conducted a hearing on the papers and decided to refer the matter to the Tribunal on 25 July 2018. Mr Hong applied to the Legal Complaints Review Officer (LCRO) to review that decision. On 30 November 2018 the LCRO confirmed the decision.
The Tribunal hearing
[26] Before the Tribunal, Mr Strang gave evidence that he needed to visit the premises to view files because he had concerns arising from his inspection and consideration of the materials that had been provided to him. His concerns were:
(a)the Excel trust account system operated by Mr Hong fell at the lower end of the scale in the context of the Regulations, thus requiring closer inspection;
(b)the Excel system used by Mr Hong was not conventional;
(c)the entries in the Excel system were the equivalent of pencil and could be changed with no trace of that having been done;
(d)the system did not have a receipting function creating the necessity to check entries in the manual receipt book against entries in the system; and
(e)disbursements that appeared not to be true disbursements.
[27] Mr Strang said he had received a degree of cooperation from Mr Hong, but he needed to complete his assurance work because the Excel system was not conventional. He said that he tried to accommodate Mr Hong and at the same time meet the requirements of what he was required to do. He attempted to facilitate a compromise by suggesting that he pick up the files from Mr Hong’s office or that Mr Hong deliver them to him at the New Zealand Law Society Auckland branch offices in Shortland St. He had requested that Mr Hong provide six files that had IBD balances. He was looking for the manner of the handling of those files and more widely for an assessment of how Mr Hong was administering client files.
[28] Mr Strang gave examples of the assurance information he would have expected to see having viewed a file: a client care exchange, a reporting statement, interaction between the firm and its client, compliant invoices, a trustee’s authority, and proof that office expenses were being charged as disbursements. He said that he could not do any of that work and that the information that was provided to him was wholly inadequate. He said this was the first time in 15 years of inspectorate work that he had experienced such a level of non-cooperation, having never before met any resistance to a request for files.
[29] Mr Hong’s position was that the Regulations were only about records of transactions and what Mr Strang had requested had nothing to do with trust account records. Mr Hong could and should decline to make available privileged information.
The Tribunal’s liability decision
[30] The Tribunal quoted the definition of “trust account records” in reg 3 set out at [15] above. The Tribunal considered that client files fall within reg 3, accepting the evidence of Mr Strang who said that the purpose of viewing client files was to see how the practitioner was administering client files and to assess if the handling of those files was representative of the wider pool of clients being handled. Mr Strang instanced the need to check such matters as client care exchange, reporting statements, compliant invoices and client authority to deduct fees.
[31] The Tribunal set out a passage from Duncan Webb’s text, Ethics, Professional Responsibility and the Lawyer, in support of the right that an inspector has to inspect client files:4
Lawyers are subject to rigorous supervision by the Law Society. To ensure such supervision is effective the society has the power to inspect and investigate lawyers’ affairs. Such inspections necessarily require the disclosure of clients’ affairs, but are justified on the basis that such inspections are in the client’s best interests to protect against dishonest or incompetent advisers. Further, the harm from the disclosure is minimal as the information disclosed remains confidential and, in most circumstances, goes no further than the inspecting officers. In such cases the disclosure is
4 Duncan Webb Ethics, Professional Responsibility and the Lawyer (2nd ed, LexisNexis, Wellington, 2006) at [8.8.3]; footnotes omitted.
effectively required by law, so displaces the duty of confidence usually owed by a lawyer.
[32] The Tribunal concluded that Mr Hong had a duty to make client files available to Mr Strang as requested. It said a practitioner’s duty to cooperate is both clearly express and implied from the Lawyers and Conveyancers Act 2006 (the Act) and the Regulations. Cooperation is required. It was the evidence of both Mr Strang and Mr Anderson (Mr Hong’s expert) that Mr Hong’s behaviour was quite extraordinary in the light of the experiences of the many hundreds of investigations undertaken between them.
[33] The Tribunal said that Mr Hong’s argument that he was entitled to refuse to make a client file available in circumstances where he considered client privilege to exist cannot be sustained. The Tribunal considered that the concern about client privilege is fully answered by reg 33, which provides that the inspectorate must not disclose to any person any information obtained during a review of a practitioner’s practice. The Tribunal did not rule out that, in some cases, parts of the client file may be wholly unrelated to the inspectorate’s review of the trust account and so do not need to be inspected. In such a case, however, the Tribunal would expect the practitioner to cooperate with the inspectorate to identify the overall make-up of the client file – preferably at an on-site review – and to agree on those parts of the file that do not require inspection. The Tribunal saw this as an aspect of the duty of practitioners to enable the record to be properly and conveniently reviewed by the inspectorate.
[34] The Tribunal found the charge against Mr Hong proved to the level of misconduct and that such conduct was wilful. The Tribunal accepted the submissions of Mr Collins for the applicant, Auckland Standards Committee 5, that: Mr Strang considered Mr Hong’s failures to be serious; the identified issues were unresolved leading to an inability to complete a full report; Mr Anderson was entirely at one with Mr Strang; Mr Hong is a very experienced lawyer who was not disengaged with trust account concepts; Mr Hong can be taken to have known better and should have consulted others; Mr Hong displayed that he was headstrong by saying he would do the same again; reg 29 is clear as to what is required of a
practitioner to cooperate with the inspectorate; and Mr Hong cannot be the judge of what an inspector may see. The Tribunal added these reasons of its own:
(a)Mr Hong obstructed Mr Strang’s repeated requests for access to trust accounting records;
(b)Mr Hong’s refusal to allow Mr Strang to visit his offices or to make suitable alternative arrangements for Mr Strang to review the complete files was in breach of trust account regulations;
(c)Mr Hong’s refusal to allow Mr Strang to have access to client files was persistent;
(d)Mr Strang’s review of Mr Hong’s trust accounts was compromised and his enquiry was frustrated; and
(e)Mr Hong refused to accept the advice and opinion of his own expert. The Tribunal said it gave some latitude, at the outset, to Mr Hong holding his opinion on the issue of privilege, albeit one that is contrary to accepted law. His obstruction came about when he still refused to accept what the inspector and his own expert were telling him.
Grounds of appeal
[35] Mr Hong maintained that all trust account records were provided. His approach in respect of documents or files requested that are not trust account records and contain sensitive, private and confidential or commercially or legally privileged documents is to seek client consent given his strict duty of confidence to clients.
[36] Mr Hong emphasised that the charge is one of obstruction rather than concerned with trust accounting compliance. There were no allegations of misappropriation of funds or any cause for suspicion of such. There was no client loss or complaint.
[37]Mr Hong explained the nature of the six files with IBD sought by the inspector:
(a)First, a litigation file for a client who had refused for it to be released. The running balance of the funds in the solicitor’s trust account paid in by the client had been provided to the inspectorate. The client had confirmed directly to the inspectorate that all payments had been authorised by him and refused consent for this file to be released.
(b)The second file had nothing sensitive and had been provided.
(c)The third was for Mr Hong’s tenant who had paid rent into the solicitor’s trust account – there was no file.
(d)Fourth, the administrators of an estate with sensitive information. The running balance of the trust account for the estate had been provided to the inspectorate. All trust account records had been provided or if further requested would have been provided. Despite referring the inspectorate’s request to the administrators, they declined to consent.
(e)Fifth, a woman who had deposited funds about 10 years ago as an emergency fund for her son. Mr Hong has been unable to track down the woman or her son and intends to pay the funds to Inland Revenue as unclaimed funds.
(f)Finally, funds held as stakeholder in relation to relationship property.
[38] Mr Hong submitted that the Tribunal was in error when it found that his refusal to give to the inspectorate client files that are not trust account records, when the clients have refused to grant consent, constituted misconduct.
Issues
[39]The issues to be determined on the liability appeal are:
(a)the scope of “trust account records” in relation to the content of client files;
(b)whether non-disclosure to the inspectorate of client confidential or privileged documents is justified where the client refuses to consent; and
(c)whether Mr Hong’s conduct amounted to misconduct.
Approach on appeal
[40] The right of appeal to this Court against a decision of the Tribunal is under s 253 of the Act. It must be by way of rehearing.5 It is well established that appeals from the Tribunal, whether they are appeals against findings of misconduct or against penalty, are general appeals,6 and this Court’s approach on a general appeal is settled following the Supreme Court’s decisions in Austin, Nichols & Co Inc v Stichting Lodestar and Kacem v Bashir.7 The appellate court has the responsibility of considering the merits of the case afresh.8 The appellate court must be persuaded that the decision is wrong,9 but the weight it gives to the reasoning of the court or tribunal below is a matter for the appellate court’s assessment.10 Those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate court, even where that opinion is an assessment of fact and degree and entails a value judgment. If the appellate court’s opinion is different from the conclusion of the tribunal appealed from, then the decision under appeal is wrong in
5 Section 253(3)(a).
6 Sisson v Standards Committee (2) of the Canterbury-Westland Branch of the New Zealand Law Society [2013] NZHC 349, [2013] NZAR 416 (Full Court) at [15]; and Davidson v Auckland Standards Committee 3 [2013] NZHC 2315, [2013] NZAR 1519 at [6]-[9].
7 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [13] and [16]; and Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [31]-[32].
8 Kacem v Bashir at [31].
9 Austin, Nichols at [13].
10 Kacem v Bashir at [31]. No deference is required beyond the customary caution appropriate when seeing the witnesses provides an advantage because credibility is important; see Austin, Nichols at [13], and Green v Green [2016] NZCA 486, [2017] 2 NZLR 321 at [27]-[32]. The appellate court may consider it appropriate to give due regard to a specialist Tribunal’s assessment: Orlov v New Zealand Lawyers and Conveyancers Disciplinary Tribunal [2014] NZHC 1987, [2015] 2 NZLR 606 (Full Court) at [191]; and Young v National Standards Committee [2019] NZHC 2268 at [34].
the only sense that matters, even if it was a conclusion on which minds might reasonably differ.11
Trust account records
The statutory scheme
[41] Section 112(1) of the Act contains practitioners’ primary obligation to “keep trust account records that disclose clearly the position of the money in the trust accounts”,12 and to keep the records required “in such a manner as to enable those records to be conveniently and properly audited or inspected”.13 This obligation is repeated in reg 11(1) of the Regulations, which provides:
11 Trust account records
(1)It is the duty of every practice required by section 112(1) of the Act to keep records in respect of trust accounts to do so in such a manner as to enable them to be conveniently and properly reviewed by the inspectorate.
[42]In the Act, the term “trust account records” is defined:14
trust account records—
(a)means records relating to a trust account; and
(b)includes any information which relates to a trust account and which is recorded or stored by means of any tape-recorder, computer, or other device, and any material subsequently derived from information so recorded or stored
[43] As set out at [15] above, the term “trust account records” is defined more explicitly in the Regulations.
[44]The Regulations also relevantly provide:
25Functions of inspectorates
The functions of the inspectorates are as follows:
11 Austin, Nichols at [16]; and Kacem v Bashir at [32].
12 Section 112(1)(a).
13 Section 112(1)(c).
14 Section 6.
(a)to review, under the general direction of the relevant society, the trust accounts of practices:
(b)to ensure that practices comply with the requirements of sections 110 to 114 inclusive of the Act and Parts 1 to 4 of these regulations:
(c)to conduct investigations of the affairs of practices and practitioners under Part 7 of these regulations:
(d)to administer the financial assurance schemes for the protection of money entrusted to practices under Part 8 of these regulations:
(e)to assist in the education of practitioners and incorporated firms and their staff in the matters to which these regulations and any rules relate.
26Powers of inspectorates
(1)The inspectorates have, and may exercise, any powers that are reasonably necessary or expedient to enable them to carry out their functions and may exercise them only for the purpose of carrying out their functions.
(2)Without limiting subclause (1), the inspectorates—
(a)may communicate directly with any clients of a practice and any other persons for the purpose of establishing whether the provisions of the Act relating to trust accounts, these regulations, and any rules have been complied with by the practitioner or incorporated firm; and
(b)have the powers specified in regulations 27 to 31 and 38.
…
29 Review of trust accounts by inspectorates
Every practice must, on the inspectorate’s request,—
(a)permit the inspectorate to perform a review of the trust accounts of the practice; and
(b)produce to the inspectorate any trust account records of the practice that the inspectorate requires, and assist the inspectorate to take copies of those records; and
(c)give to the inspectorate any information relating to the trust account records of the practice that the inspectorate may require; and
(d)take all practicable steps to obtain from a client any information relating to trust money required from that client by the inspectorate.
…
33 Disclosure of information relating to review
(1)The inspectorate must not disclose to any person any information that the inspectorate has obtained in the course of a review of the trust accounts of a practice.
(2)Nothing in subclause (1) prevents the disclosure of information referred to in that subclause by the inspectorate if the disclosure of information is—
(a)permitted or required by these regulations, or any rules, enactment, or rule of law; or
(b)required for the purpose of any investigation, intervention, or prosecution conducted by a Standards Committee under the Act; or
(c)required for the purpose of any proceedings arising out of the inspectorate’s review of the trust accounts of the practice or otherwise in relation to the trust accounts of the practice concerned; or
(d)required by the relevant society, or any officer or employee of that society authorised for this purpose by the relevant society; or
(e)required by any member of the police or Serious Fraud Office acting in the performance of his or her duty; or
(f)with the prior consent of the relevant society, required for a purpose relating to the review of those trust accounts.
(3)The relevant society may give,—
(a)to any person, any information contained in any report of the inspectorate that relates to money or securities in which the person has a legal or beneficial interest; and
(b)to the New Zealand Institute of Chartered Accountants, any information that the institute may require for the purpose of investigations involving its members; and
(c)to the other society, any information contained in any report of the inspectorate that concerns a sole practitioner, partner, or incorporated firm and is relevant to the functions of that other society's inspectorate.
Discussion
[45] In essence, Mr Hong submitted that the literal meaning of “trust account records” is limited to records relating to the trust account or to trust money received. He said he did a search for judicial precedents in relation to the meaning of trust
account records and could find none. Mr Hong objected to the request for complete client files.
[46] Mr Collins submitted that the definition of trust account records is more comprehensive. He pointed to the inclusion of “files” in the definition. He submitted this broader meaning was reinforced by reg 33 restricting further disclosure by the inspectorate. Mr Collins relied on the reference in the passage in Webb, Ethics, Professional Responsibility and the Lawyer, quoted by the Tribunal, at
[31] above, to the fact that such inspections “necessarily require the disclosure of clients’ affairs”. He also relied on Parry-Jones v Law Society,15 which dealt with client confidentiality and he submitted therefore indicated that the equivalent English regime extended to client files.
[47] Mr Collins also submitted that, where the requested files had trust account transactions, the integrity of the regime required that it be the inspector’s judgement rather than the lawyer’s as to the scope of the records required.
[48] Mr Hong is correct that the definition provides that the phrase “trust account records” in the Regulations means records relating to the trust account or to trust money received by the practitioner. Of course, trust account records are not limited to the practitioner’s accounting system, in this case kept by Mr Hong in Excel. Mr Hong accepts that he needed to provide other documents relating to the trust account. The trust account records include all records relating to the practitioner’s trust accounts or to trust money received by the practitioner. Such records may well be held on client files. But, as the Tribunal seemed to acknowledge, the definition does not extend to wholly unrelated material on client files. Various hard copy and electronic client files may well contain documents that do not relate at all to the practitioner’s trust accounts or to trust money received. Those wholly unrelated documents are not trust account records as defined. That is so notwithstanding the inclusion of “files” within the brackets in the definition, and the obligation in reg 33. Records relating to the trust account may well be on files, including client files, but that does not make all files trust account records. Some trust account records that
15 Parry-Jones v Law Society [1969] 1 Ch 1 (CA).
must be produced may be confidential and privileged and need the protection of reg 33, for example where correspondence with the client records instructions in relation to trust money together with legal advice. Parry-Jones also does not assist in relation to the definition of “trust account records” in the New Zealand context. It does not address the scope of the English Law Society’s notice to produce, which in any event uses the English term “books of account”.
[49] However, focus on a narrow meaning of “trust account records” loses sight of the purpose of the regime. The relevant purposes of the Act are to maintain public confidence in the provision of legal services and to protect the consumers of legal services.16 Handling of client funds is a critical component. The Regulations are promulgated to regulate the use and audit of trust accounts.17 Under the Regulations the relevant statutory functions of the inspectors are to review trust accounts and ensure compliance with the trust account obligations in the Act and the Regulations. This supervision by inspectors is an important aspect of maintaining public confidence. The powers of inspectors under the Regulations are those reasonably necessary or expedient to enable them to carry out their statutory functions. While these relevant statutory functions do not extend to reviewing the conduct of practitioners in other unrelated respects, within the scope of these functions the powers of inspectors are those reasonably necessary or expedient to enable them to carry out these functions.
[50] I therefore accept Mr Collins’ submission that, where the requested files have trust account transactions, the integrity of the regime indicates that it should be the inspector’s judgement rather than the lawyer’s as to the scope of the records required. There is no suggestion here that Mr Hong was seeking to conceal trust account misuse, and he may not even have specifically refused to produce trust account records as defined, but the nature and purpose of the investigation and audit powers require the practitioner’s cooperation in relation to access. In particular, practices must permit the inspectorate to perform a review of the trust accounts of the practice – that is a primary obligation under reg 29(a) additional to the obligation to produce trust account records in reg 29(b). Also, the obligations in s 112 and
16 Section 3.
17 Section 115(a).
reg 11 to keep records in respect of trust accounts in such a manner as to enable them to be conveniently and properly inspected/reviewed by the inspectorate implies an obligation to permit inspection/review. Where trust account records are held on client files, the practitioner’s obligation to permit the inspectorate to perform a review of the trust accounts of the practice extends to permitting access to the client files. As the specialist Tribunal said, cooperation is required. Where a practitioner considers that parts of a client file do not require inspection, he or she should cooperate with the inspector to identify those parts. The practitioner should not require the inspector to call only for specific documents.
[51] Related to this, Mr Hong also submitted that there is no legal requirement for practitioners to grant physical access or face-to-face interviews. Instead, he sought reasonable time to produce information rather than having to rely on memory without opportunity to peruse his records. He acknowledged his office was in a mess. The inspector sought to accommodate Mr Hong’s office situation. But the practitioner’s obligation to permit inspection, and of cooperation that goes with it, requires the practitioner to permit an on-site review unless other arrangements are agreed. Depending on circumstances, the inspector’s powers extend to seeking to review original trust account records at the practitioner’s office and meeting with the practitioner to ask questions. It may well be more expedient for the inspector (and the practitioner) to review the trust account of the practice by checking the trust account bank and ledger records against the other trust account records on the practitioner’s file rather than seeking that copies of all trust account records be separately provided. This is consistent with the references in the Regulations to enabling the trust account records to be reviewed rather than merely producing copies.18
[52] Here, it was Mr Hong’s refusal to accommodate a visit to his office to review his trust account that led to the request for specific client files that included trust account transactions. Even though there is no suggestion that Mr Hong was seeking to conceal trust account misuse, the inspector’s view that Mr Hong’s trust account recording system was unconventional and could be edited without tracking was a
18 Regulations 11 and 29(a).
relevant and legitimate factor in the inspector’s decision to seek further information in the way that he did. Mr Hong’s responses may well have added to the inspector’s concern. It was significant to the Tribunal that Mr Hong’s own expert witness agreed that access to client files was essential to the integrity of the trust account inspection regime. The routine experience and expectation of both experts was that the inspector would be given client files. It was also routine to visit the lawyer’s office for the purpose of an inspection.
[53] I agree with the Tribunal’s assessment that Mr Hong failed to permit the inspectorate to perform a review of his trust account and therefore contravened reg 29(a).
Confidentiality and legal privilege
[54] Practitioners, of course, have obligations to maintain client confidentiality and legal privilege. Those obligations, however, are subject to disclosure required by law. As the Tribunal stated, reg 33 provides that the inspectorate must not disclose to any person any information obtained during a review of a practitioner’s practice. But the underlying point is that the functions and powers of inspectors under the Act and Regulations expressly or by necessary implication override the practitioner’s obligation to his or her client to maintain confidentiality. That is clear from Parry-Jones v Law Society,19 and the passage set out at [31] above. Regulation
33 ensures that the disclosure is limited and so there is no wider loss of confidentiality and therefore no loss of legal privilege. Lack of client consent does not excuse Mr Hong’s non-compliance with the inspector’s requests.
Misconduct
[55] Mr Hong also submitted that given his view that the inspector was not entitled to the information in the client files that was refused, in the absence of judicial precedent the Auckland Standards Committee should have sought a declaration rather than charged him with wilful misconduct. He characterised his
19 Parry-Jones v Law Society [1969] 1 Ch 1 (CA) at 7 per Lord Denning MR, and at 9 per Diplock LJ. See also Brayley v Wilton [1976] 2 NSWLR 495 (SC) at 497. This is quite different from the case of a practitioner’s own privilege in relation to legal advice when under investigation by the Law Society: B v Auckland District Law Society [2003] UKPC 38, [2004] 1 NZLR 326.
view of the legal position as being above the arguable threshold. He submitted that given his honest belief, he is not guilty of wilful misconduct.
[56]Misconduct is relevantly defined in the Act as follows:20
In this Act, misconduct, in relation to a lawyer or an incorporated law firm,—
(a)means conduct of the lawyer or incorporated law firm that occurs at a time when he or she or it is providing regulated services and is conduct—
(i)that would reasonably be regarded by lawyers of good standing as disgraceful or dishonourable; or
(ii)that consists of a wilful or reckless contravention of any provision of this Act or of any regulations or practice rules made under this Act that apply to the lawyer…
[57] Mr Collins submitted that the Tribunal had found Mr Hong guilty of misconduct in terms of both s 7(1)(a)(i) and (ii). Although he acknowledged that the Tribunal did not refer to the conduct as “disgraceful or dishonourable”, he submitted that such a finding could be inferred from the Tribunal’s acceptance of the charge as brought. The charge brought was framed as misconduct pursuant to s 7(1)(a)(i) and (ii), and s 241(a) of the Act and, in the alternative, unsatisfactory conduct pursuant to ss 12(a), (b) and (c), and 241(b) of the Act. In its decision paragraph,21 the Tribunal said: “We find that the charge against Mr Hong is proved to the level of misconduct and that such conduct was wilful. We accept the submissions of Mr Collins.” The Tribunal then added its own reasons, as indicated at [34] above.
[58] Without suggesting that wilful contravention of the Act or any regulations or practice rules made under it may not also constitute misconduct under the “disgraceful or dishonourable” limb in s 7(1)(a)(i), I consider the Tribunal did not specifically address, or make a finding of misconduct in terms of, s 7(1)(a)(i). There is nothing in the Tribunal’s reasons for its decision that specifically addresses the “disgraceful or dishonourable” threshold. The Tribunal’s reference to finding the charge “proved to the level of misconduct and that such conduct was wilful” may be
20 Section 7.
21 Auckland Standards Committee 5 v Hong [2019] NZLCDT 28 at [35].
read as a finding in terms of s 7(1)(a)(ii) only. Further, I note this is consistent with the Tribunal’s own reference to its decision in its subsequent penalty decision, where it referred to “finding Mr Hong guilty of misconduct. That misconduct consisted of a wilful contravention of the trust accounting regulations…”.22 As Mr Collins also acknowledged, Mr Hong’s conduct fits more neatly under s 7(1)(a)(ii). I proceed on that basis.
[59] I have concluded that Mr Hong failed to permit the inspectorate to perform a review of his trust account and therefore contravened reg 29(a). Mr Hong wilfully refused to permit the inspector to perform that review, but I acknowledge Mr Hong did so mistakenly believing that he was only required to produce trust account records and that client confidentiality prohibited him from disclosing client files. The question is the significance of that mistaken belief in relation to the charge of misconduct. Whereas a defence of honest belief may arise in relation to a state of affairs or the existence of a fact, which if true would make the act innocent,23 mistake of law is ordinarily no defence. Section 7(1)(a)(ii), however, requires a “wilful or reckless contravention”. Mr Collins did not suggest “wilful” applied only to the refusal. A wilful, as opposed to reckless, contravention requires some actual knowledge that the act is a contravention. Mr Collins acknowledged Mr Hong’s subjective belief, accepting that Mr Hong was not subjectively wilful. I therefore do not consider that Mr Hong’s conduct consisted of a “wilful” contravention. However, misconduct under s 7(1)(a)(ii) may also consist of a “reckless” contravention, that is wilful blindness.
[60] Mr Collins submitted that Mr Hong’s acts amounted to misconduct given his general obstruction and the positive duty to give access and comply explicit in reg 29 and implicit in s 112. Mr Collins submitted that if practitioners think they have a legal reason not to do so, they have a duty to appraise themselves of the legal position. Mr Hong did not do that. He stuck to his position. I consider that Mr Collins’ submission has greater force in relation to Mr Hong’s mistaken belief regarding client confidentiality, since Mr Strang told him he did not need client authority; the inspectorate’s supervision of lawyers and their files is conducted
22 Auckland Standards Committee 5 v Hong [2019] NZLCDT 40 at [1].
23 R v Thomas [1991] 3 NZLR 141 (CA) at 143.
pursuant to statutory authority. Also, if Mr Hong had looked for legal authority, Parry-Jones v Law Society24 and the passage in Webb’s Ethics, Professional Responsibility and the Lawyer (at [31] above) should have it clear that his view on confidentiality was mistaken. In relation to his belief as to the meaning of “trust account records”, he was unable to find judicial precedent and I accept that Mr Strang’s focus in emails to Mr Hong was on reg 11, rather than reg 29.
[61] In assessing whether Mr Hong’s actions amounted to misconduct, I am conscious that the threshold for a finding of misconduct is high. It is also necessary to distinguish between the conduct which is the subject of the charge and Mr Hong’s subsequent attitude during the hearing, to which the Tribunal also referred. In particular, the Tribunal recorded concern that Mr Hong had chosen not to heed the advice of his own expert.25 The Tribunal noted that when Mr Hong was asked if he disagreed with his own expert, he said he did.26 When asked if his response would be the same after these proceedings, he said it would be unless he had a clear ruling.27 In its decision, the Tribunal accepted Mr Collins’ submissions, including that Mr Hong displayed that he was headstrong by saying that he would do the same again. The Tribunal also stated:28
Mr Hong refused to accept the advice and opinion of his own expert, Mr Anderson. We gave some latitude, at the outset, to Mr Hong holding his opinion on the issue of privilege, albeit one that is contrary to accepted law. His obstruction came about when he still refused to accept what the inspector and his own expert were telling him.
[62] Mr Collins accepted that the views of Mr Hong’s expert were not relevant to Mr Hong’s conduct that was the subject of the charge because the expert was not engaged at the time. When referring to Mr Hong not accepting his own expert’s views, the Tribunal was referring to Mr Hong’s attitude at the hearing. Mr Collins accepted this was only relevant insofar as it may have assisted to confirm Mr Hong’s
24 Parry-Jones v Law Society [1969] 1 Ch 1 (CA) at 7 per Lord Denning MR, and at 9 per Diplock LJ. See also Brayley v Wilton [1976] 2 NSWLR 495 (SC) at 497.
25 At [19].
26 At [23].
27 At [24].
28 At [35(e)].
attitude during the review, referring to Daniels.29 I consider that Mr Hong’s relevant conduct was his interaction with the inspector during the review rather than his attitude at the hearing. Similarly, the relevant latitude given to him is limited to that given by the inspector at the time rather than by the Tribunal during the hearing.
[63] Related to this, Mr Hong also submitted that he engaged Mr Anderson to advise on the adequacy of his trust accounting (which was not pursued by the Law Society), and not to advise him on the law and Mr Anderson is not a lawyer. Mr Collins acknowledged that neither Mr Anderson nor Mr Strang were lawyers, but both were experienced trust account inspectors with expertise as to trust account practice. I accept their evidence in this respect was substantially helpful. Both said they had never experienced a refusal of a request for a client file.
[64] In the particular circumstances, even accepting Mr Hong’s contravention was not a “wilful” contravention, I consider it was reckless. Mr Strang did, as he said, extend some pragmatism. Mr Hong’s apparent concern that the Law Society was on a fishing expedition and he should provide the minimum required was unfortunate. He was persistent in his obstruction of the inspector’s trust account review and failed to acquaint himself with his legal obligation to permit the inspector to carry out the review notwithstanding client confidentiality, and his obstruction had the effect of compromising the inspector’s trust account review. Without those features, his contravention of reg 29 may more appropriately have been characterised as unsatisfactory conduct in terms of s 12(c) of the Act. But in the circumstances, I conclude that Mr Hong’s actions amounted to misconduct in terms of s 7(1)(a)(ii) of the Act.
29 Daniels v Complaints Committee 2 of the Wellington District Law Society [2011] 3 NZLR 850 (HC Full Court), which dealt with how conduct defending proceedings may be relevant to penalty (at [28]).
Penalty and costs
The Tribunal’s penalty decision
[65] The Tribunal’s penalty decision, dated 23 December 2019,30 made orders suspending Mr Hong from practice for three months,31 prohibiting him from practising on his own account until approved to do so by the Tribunal,32 and ordering him to pay costs.
[66] The Tribunal referred to the primary purpose of its penal jurisdiction as the protection of the public and the maintenance of professional standards.33 The Tribunal also referred to the relevant factors set out in Hart v Standards Committee 1 of the New Zealand Law Society,34 which the Tribunal summarised as:
(a)the nature and quality of the misconduct found to be established;
(b)previous disciplinary history;
(c)the need for deterrence; and
(d)consideration of any aggravating or mitigating factors.
[67] In respect of suspension, the Tribunal referred to the enduring principle explained in Daniels:35
A suspension is clearly punitive, but its purpose is more than simply punishment. Its primary purpose is to advance the public interest. That includes that of the community and the profession, by recognising that proper professional standards must be upheld, and ensuring there is deterrence, both specific for the practitioner, and in general for all practitioners. It is to ensure that only those who are fit, in the wider sense, to practise are given that privilege. Members of the public who entrust their personal affairs to legal practitioners are entitled to know that a professional
30 Auckland Standards Committee 5 v Hong [2019] NZLCDT 40.
31 Section 242(1)(e) of the Act.
32 Section 242(1)(g) of the Act.
33 Daniels v Complaints Committee 2 of the Wellington District Law Society [2011] 3 NZLR 850 (HC Full Court) at [22].
34 Hart v Standards Committee 1 of the New Zealand Law Society [2013] NZHC 83, [2013] 3 NZLR 103 at [181]-[189].
35 Daniels v Complaints Committee 2 of the Wellington District Law Society [2011] 3 NZLR 850 (HC Full Court) at [24].
disciplinary body will not treat lightly serious breaches of expected standards by a member of the profession.
[68] The Tribunal also referred to the statement in Bolton v Law Society that one of the purposes of a limited period of suspension is that “it is hoped that experience of suspension will make the offender meticulous in his future compliance with the required standards”.36
[69] The Tribunal noted that the assessment of penalty required it to review “the entire conduct of the practitioner and transgressions the subject of disciplinary proceedings, and the general behaviour of the practitioner”.37
[70] The Tribunal adopted Mr Collins’ submissions as its reasons for the orders made:
(a)The seriousness of Mr Hong’s conduct, shown by wilfulness, in an aspect of legal practice essential to the integrity of the profession and the maintenance of public confidence.
(b)Mr Hong’s obdurate attitude indicating lack of insight and, consequently, the risk of recurrence – there were no mitigating factors.
(c)Mr Hong’s prior disciplinary record – since 1997 two findings under Law Practitioners Act 1982 (one of misconduct and one of conduct unbecoming), six findings of unsatisfactory conduct under the Act and one finding of misconduct under the Act. Penalties imposed have included three censures and two fines of $7,500. This record discloses that the following important features of his offending render his disciplinary record a relevant ground to support the pleas for suspension, notwithstanding that the charges and circumstances of each event are not on all fours with the present matter:
36 Bolton v Law Society [1994] 2 All ER 486 (CA) at 492.
37 Daniels v Complaints Committee 2 of the Wellington District Law Society [2011] 3 NZLR 850 (HC Full Court) at [32].
(i)the span of his career over which they have occurred indicating an enduring tendency to breach professional standards;
(ii)the range of professional responsibility showing a disregard for the rules and standards of professionalism across a range of activities; and
(iii)the frequency with which unprofessional conduct has been found to have occurred over the last decade, which suggests a decline in Mr Hong’s capacity to maintain professional standards.
(d)The need for deterrence – one of the primary purposes of imposing sanctions for failings of professional standards is to provide a deterrent to other practitioners38 – there was a need arising out of this case to demonstrate to the wider profession the consequences of serious repeat offending in addition to the consequences of obstruction of a trust account inspector performing the lawful functions of the office.
(e)The cumulative effect of those factors which justify the protection of the public. An order prohibiting Mr Hong from practising on his own account was warranted in the interests of public protection given:
(i)the pattern of disciplinary findings shows his consistent fall below acceptable standards; and
(ii)the connection between his professional decline and apparent deterioration in his personal circumstances evidenced by the fact that he had not conducted a bank transaction in the firm’s office or trust account since 2008, his delegation of the
38 Citing Wislang v Medical Council of New Zealand [2002] NZAR 573 (CA), and Canterbury Westland Standards Committee v Horsley [2014] NZLCDT 47.
management of those aspects of the practice to Ms Chan (his former wife) who is not a qualified lawyer and is described as a half owner of the practice over whom he has no authority, and his evidence that he labours under physical and occasional intellectual impairment.
Grounds of appeal
[71] In relation to penalty, Mr Hong reiterated his submissions as to misconduct, already addressed, and submitted that the Tribunal erred in finding:
(a)he had an enduring tendency to breach professional standards;
(b)there was a need for deterrence;
(c)an aggravating factor was his refusal to accept the expert views; and
(d)he had not conducted a bank transaction since 2008, had no control over his trust account administrator and laboured under occasional intellectual impairment.
[72] He also submitted his suspension was excessive compared with penalties imposed on other practitioners, and disputed the costs order.
Penalty
[73] There is no dispute about the Tribunal’s statements of the relevant principles and purposes cited from Daniels and Hart set out at [65]-[69] above, while recognising that Hart was a striking off case. Mr Hong takes issue with their application.
[74] The Tribunal’s reasons for its orders suspending Mr Hong from practice for three months and prohibiting him from practising on his own account until approved to do so by the Tribunal reflected the relevant factors it set out from Hart albeit in a slightly different sequence. On an appeal of this nature it is appropriate for this
Court to reach its own view, albeit giving due regard to the specialist Tribunal’s assessment.39 I turn to the relevant factors, following the Tribunal’s sequence.
[75] First, the nature and quality of the misconduct found to be established. The Tribunal adopted Mr Collins’ submission that the seriousness of Mr Hong’s conduct, shown by wilfulness, in an aspect of legal practice essential to the integrity of the profession and the maintenance of public confidence was a factor supporting the orders made, but did not expand upon this factor in its penalty decision. I have concluded that Mr Hong’s conduct involved reckless rather than wilful contravention. He was, however, persistent in his obstruction of the inspector’s trust account review and failed to acquaint himself with his legal obligation to permit the inspector to carry out the review notwithstanding client confidentiality, and his obstruction had the effect of compromising the inspector’s trust account review.
[76] Secondly, Mr Hong’s obdurate attitude indicating lack of insight and, consequently, the risk of recurrence. I consider that Mr Hong’s conduct during the review was obdurate. While I have concluded in relation to the misconduct decision that Mr Hong’s attitude at the hearing was only relevant insofar as it may have assisted to confirm his attitude during the review, his attitude at the hearing was relevant to penalty as it did indicate a lack of insight and remorse. I note though that Mr Hong did qualify his response that his actions would be the same after the proceedings by saying that was unless he had a clear ruling. He considered the legal position was not clear. Given that and the Tribunal’s decision finding misconduct, I do not consider there is a real risk of recurrence.
[77] Thirdly, Mr Hong’s disciplinary record. Mr Hong disputed that it indicated an enduring tendency to breach professional standards. He explained his disciplinary history, relying on Gilbert J’s decision in one of his earlier disciplinary matters, Hong v Auckland Standards Committee No 3.40 Mr Hong also emphasised that he always worked hard for his clients for very little and had never had a client complaint in relation to fees. He submitted that his only client complaint in 29 years
39 Orlov v New Zealand Lawyers and Conveyancers Disciplinary Tribunal [2014] NZHC 1987, [2015] 2 NZLR 606 (HC Full Court) at [191].
40 Hong v Auckland Standards Committee No 3 [2014] NZHC 2871.
of practice involved a client, Mr P, for whom he could not complete his retainer, for which he was fined $7,500. Mr Collins submitted Mr Hong’s disciplinary history was a key factor.
[78] Hong v Auckland Standards Committee No 3 was an appeal by Mr Hong against a decision by the Tribunal in 2014 to suspend him from practice for 10 months for failing to comply with an order of a Standards Committee following a finding of unsatisfactory conduct in relation to advice Mr Hong gave to a client facing eviction from commercial premises for non-payment of rent. One of the issues on appeal was whether the Tribunal overstated the seriousness of Mr Hong’s disciplinary history. Gilbert J stated:41
The Tribunal stated that Mr Hong’s “disciplinary history is not comfortable reading for the Tribunal” and “display[s] an ongoing pattern of professional failings”. Apart from his advice in May 2009 which the Committee found to be robust but deficient, Mr Hong had been disciplined on only three occasions in the course of his 23 years of practice. None of these incidents was particularly serious; he received fines of $500 and $1,500 for the first and third of these incidents and no fine at all for the second. It is not accurate to describe these three incidents as “17 years of disciplinary findings” displaying “an ongoing pattern of professional failings”. The Tribunal overstated the extent and seriousness of Mr Hong’s disciplinary history. Mr Hong had not previously failed to comply with an order of a Standards Committee or the Tribunal.
[79]Gilbert J also stated:42
With the benefit of hindsight, Mr Hong regrets that he did not comply promptly with the Committee’s orders even though he intended to challenge them. He says that he would have done so had he realised that there was a prospect that he would be suspended if he did not. He argues that he could not reasonably have anticipated this in view of the way other practitioners have been dealt with in similar circumstances. There is force in this submission.
[80] Gilbert J quashed the 10 months’ suspension and substituted a suspension of four months, which had already occurred.
[81]In addition to those matters considered by Gilbert J, there are the following:
41 At [33].
42 At [40].
(a)In 2014, a finding of unsatisfactory conduct relating to corresponding directly with another practitioner’s client.43 Mr Hong was ordered to pay a fine of $1,000. That decision was confirmed by the LCRO.44
(b)In 2015, a finding of misconduct pursuant to s 7(1)(a)(i) of the Act relating to correspondence Mr Hong sent in 2010 and 2012 while a defendant in civil proceedings brought by former clients, where Mr Deliu was acting for the plaintiffs. Mr Hong was suspended from practice for two months. That suspension was quashed on appeal by Faire J,45 but only because Mr Hong had unnecessarily served a period of suspension in respect of an earlier matter (following Gilbert J’s penalty decision in the matter referred to at [78] above, Mr Hong had successfully applied for judicial review of the Tribunal’s 2014 liability decision).46
(c)In 2016, a finding of unsatisfactory conduct relating to Mr Hong’s breach of reg 17 of the Regulations by failing to reconcile his trust account ledger with the corresponding bank accounts for interest- bearing accounts. He was ordered to take appropriate advice from a suitably qualified trust account specialist.
(d)In 2016, a finding of unsatisfactory conduct for failing to complete his retainer – the matter involving Mr P referred to at [77] above. Client funds remained in Mr Hong’s trust account. Mr Hong was censured and ordered to pay a fine of $7,500 together with costs of $1,000.
That decision was upheld by the LCRO.47
(e)In 2017, a finding of unsatisfactory conduct relating to statements that Mr Hong made in court about Mr Deliu and Mr Collins. Mr Hong was ordered to pay a fine of $7,500.
43 This finding was shortly before Gilbert J’s decision.
44 LCRO 264/2014.
45 Hong v Legal Complaints Review Officer [2016] NZHC 184.
46 Hong v Auckland Standards Committee No 3 [2015] NZHC 2521.
47 LCRO 21/2017.
(f)In 2018, a finding of unsatisfactory conduct relating to a submission in court accusing Mr Deliu of making a fraudulent cost claim. The finding was made by the LCRO on a review by Mr Deliu,48 after the Canterbury Westland Standards Committee had decided to take no further action in relation to his complaint in 2013. No penalty was imposed.
[82] Mr Hong’s disciplinary record since Gilbert J’s decision in 2014 is of concern. Leaving aside the fact that Mr Deliu appears as an adversary in several of the matters, Mr Hong’s disciplinary record since 2014 has included a finding of misconduct relating to correspondence sent in 2010 and 2012, where a two month suspension from practice was only quashed because he had already served a period of suspension for another matter where the Tribunal’s decision had been set aside. There are also four subsequent findings of unsatisfactory conduct, with two fines of
$7,500 imposed. Even so, as Mr Collins’ submission to the Tribunal acknowledged, there was not a previous matter on all fours with the present matter. Indeed, there was nothing akin to it. One matter involved a breach of the Regulations (the first 2016 finding at [81](c) above), but not of the same nature as this case and it was not a serious breach.
[83] Having reviewed these disciplinary matters, I acknowledge that they span Mr Hong’s career and involve a range of professional shortcomings, but I consider that, more than indicating an enduring tendency to breach professional standards or a general disregard for the rules and standards, the increase in frequency of disciplinary findings over more recent years suggests a decline in Mr Hong’s capacity to maintain professional standards.
[84] Fourthly, the need for deterrence. As indicated, this is a relevant factor, both specific for the practitioner and in general for all practitioners. It is one aspect of the primary purpose of advancing the public interest. The Tribunal accepted there was a need arising out of this case to demonstrate to the wider profession the consequences
48 LCRO 314/2013.
of serious repeat offending in addition to the consequences of obstruction of a trust account inspector performing the lawful functions of the office.
[85] Considering all these factors together, and having regard to the specialist Tribunal’s assessment, I conclude that the order suspending Mr Hong from practice for three months was appropriate. I consider Mr Hong’s obstruction of the trust account inspector’s review, amounting to reckless contravention of reg 29, would not, of itself, have warranted suspension. But such misconduct combined with his disciplinary history, and the absence of insight or other mitigating factors, justified the suspension having regard to the protective and deterrent aspects of the public interest.
[86] Mr Hong submitted that the Tribunal’s decision was inconsistent with its recent decision in Auckland Standards Committee 1 v Pomeroy,49 where the practitioner was censured and fined $5,000 for failing to produce a client file to the Auckland Standards Committee. However, that case was quite different. The practitioner had produced the file at the hearing and explained an acute stress disorder. The Tribunal made a finding of unsatisfactory conduct, not misconduct. Rather than wilfully frustrating the disciplinary process, the practitioner was overwhelmed by broader circumstances which, notwithstanding the lack of medical evidence, the Tribunal was satisfied were linked to a medical condition. The Tribunal’s penalty decision made no reference to the practitioner having any previous disciplinary record.50
[87] In relation to the Tribunal’s reasons for an order prohibiting Mr Hong from practising on his own account until approved to do so by the Tribunal, protection of the public is the primary consideration.
[88] Mr Hong took issue with the Tribunal’s acceptance of Mr Collins’ submissions as to the reasons warranting this order. He took issue with the Tribunal’s reference to the fact that he had not conducted a bank transaction in the firm’s office or trust account since 2008. I accept that Ms Chan’s evidence was
49 Auckland Standards Committee 1 v Pomeroy [2019] NZLCDT 27 and [2020] NZLCDT 7.
50 Auckland Standards Committee 1 v Pomeroy [2020] NZLCDT 7.
simply that Mr Hong does not do any bank transactions unless she has to take urgent leave of absence, which last occurred in 2008. Mr Hong also took issue with the Tribunal’s reference to his delegation of the management of the relevant aspects of the practice to Ms Chan (his former wife) who is not a qualified lawyer and is described as a half owner of the practice over whom he has no authority. Ms Chan is Mr Hong’s trust account administrator and the person most familiar with his trust account system. In that respect, Mr Hong submitted she is under his control and supervision. In the circumstances, I do not draw adverse inferences from Ms Chan’s evidence claiming to be a half owner of the practice and stating that Mr Hong told her that he did not wish to be bothered with trust accounts. Mr Hong told her that in 2010 when they separated and Mr Hong told her to apply for a conveyancer’s license if she wanted to continue working on conveyancing matters as he could operate without a trust account.
[89] Mr Hong also took issue with the Tribunal’s reference to his evidence that he labours under occasional intellectual impairment. He submitted that he is diabetic and so has issues with extended concentration, but is not intellectually impaired. In the absence of more specific evidence such as a medical report, I do not infer that Mr Hong has an intellectual impairment. But the evidence did indicate that his health situation has deteriorated since 2013 including inability to concentrate, deteriorating vision and stress allergies. More recently, he has been diagnosed diabetic.
[90] Taking these various matters into account, and focusing on protection of the public, I consider that Mr Hong’s persistent obstruction of the trust account inspector’s review, the increase in frequency of the disciplinary findings against him over more recent years suggesting a decline in his capacity to maintain professional standards and his lack of insight warranted the order prohibiting him from practising on his own account until approved to do so by the Tribunal.
Costs
[91] The Tribunal ordered Mr Hong to pay the costs of the Standards Committee of $35,850 and refund to the New Zealand Law Society the Tribunal’s costs of
$6,225. The Tribunal has power under s 249 of the Act to award costs against a practitioner if it considers the proceedings were justified and it is just to do so.51 Section 249 confers a broad discretion on the Tribunal to award costs in any given case but the Tribunal must not disable itself from exercising its discretion in a particular case by rigidly adopting and applying fixed rules or policies.52
[92] Mr Hong’s submission challenging the Tribunal’s cost order also reiterated his submissions as to misconduct, already addressed, and submitted that the Standards Committee’s costs were grossly overcharged. The Tribunal dealt with the same submission by stating:53
This matter generated voluminous documentation including an affidavit filed on behalf of Mr Hong 64 pages in length and containing 305 paragraphs and multiple exhibits. The report from Mr Hong’s expert was 39 pages long. Counsel’s hourly charge out rate was at the amount regularly accepted by the Tribunal as appropriate. We do not find that the costs claimed are unreasonable.
[93] The Tribunal’s approach of awarding reasonable indemnity costs where the Standards Committee has succeeded in establishing disciplinary charges is justified on the basis that the lawyer should bear that cost rather than the profession generally through the agency of the New Zealand Law Society.
[94] The only matter warranting further consideration is whether the Standards Committee’s costs should be reduced to reflect the fact that its investigation initially extended beyond the access to files issue – to issues with Mr Hong’s trust account compliance that were not pursued. However, the issues had narrowed by the date of the charge laid by the Standards Committee on 23 January 2019. Thereafter it was Mr Hong’s choice to present evidence from Ms Chan and Mr Anderson on wider issues. Mr Collins’ costs for the earlier period were only $6,450. On the information available it is not possible to apportion those earlier costs accurately between the different issues. I consider a reduction of $5,000 is fair and reasonable.
51 Section 249(3) of the Act.
52 Simes v Canterbury-Westland Standards Committee 2 of the New Zealand Law Society [2013] NZHC 1501 at [27]; and Lagolago v Wellington Standards Committee 2 [2017] NZHC 3038 at [15].
53 Auckland Standards Committee 5 v Hong [2019] NZLCDT 40 at [19].
[95] Mr Hong also claimed financial hardship. He has had to turn away work due to ill-health and the amount of conveyancing work has reduced. He provided letters from Inland Revenue showing losses in each of the last three tax years, which were not before the Tribunal. He did not submit, however, that he was unable to pay the costs ordered and in the absence of specific evidence as to his financial position there is insufficient basis to interfere with the Tribunal’s costs decision beyond the
$5,000 reduction.
Result
[96] The appeal against the Tribunal’s decision dated 11 October 2019 finding Mr Hong guilty of misconduct is dismissed.
[97] The appeal against the Tribunal’s decision dated 23 December 2019 suspending Mr Hong from practice for three months, prohibiting him from practising on his own account until approved to do so by the Tribunal and ordering him to pay costs is dismissed except that the order that Mr Hong pay the costs of the Standards Committee of $35,850 is quashed and an order that Mr Hong pay the costs of the Standards Committee of $30,850 is substituted.
[98] As to costs in this Court, I consider the respondent is entitled to costs on a 2B basis but with a modest deduction in respect of the appellant’s success in part in relation to the Tribunal’s costs order. If the parties cannot agree, I direct that the respondent file and serve a costs memorandum not exceeding three pages within 15 working days, and the appellant file and serve a costs memorandum not exceeding three pages within a further 10 working days.
Gault J
5
10
1