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Hong v Auckland Standards Committee no.5 [2021] NZCA 85 (22 March 2021)

Last Updated: 23 March 2021

JUDGMENT OF THE COURT

1. The application for leave to adduce further evidence is declined.
2. The application for leave to appeal is declined.

100. The applicant must pay the respondent costs for a standard application for leave on a band A basis together with usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by French J)

• [1] Mr Hong was at all material times a legal practitioner. The New Zealand Lawyers and Conveyancers Disciplinary Tribunal (the Tribunal) found him guilty of professional misconduct^[1] and ordered that he be struck off the roll of barristers and solicitors and pay costs and compensation.^[2] The findings of misconduct related to Mr Hong’s personal involvement in transactions and financial dealings with clients.
• [2] Mr Hong appealed the Tribunal’s decisions to the High Court. His appeal was dismissed by Gordon J.^[3]
• [3] Dissatisfied with that outcome, Mr Hong applied for leave to appeal to this Court under s 254 of the Lawyers and Conveyancers Act 2006. The application for leave was, as is required, made in the first instance to the High Court but was declined by Gordon J.^[4] Mr Hong now seeks leave to appeal from this Court.

Background

• [4] The charges arose out of Mr Hong’s dealings with clients identified in the decisions as D, K, J D and the CL Trust (the Trust). The Tribunal made the following key findings of fact which formed the basis of its conclusion that Mr Hong had breached numerous rules of conduct and client care for lawyers contained in the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008:^[5]

(a) The Trust entered into an agreement to purchase a property in September 2005 which it was unable to complete because of an adverse caveat and issues with the vendors. Subsequently, in mid-2006, Mr Hong proposed a solution which entailed his personal involvement with a substantial financial input. Mr K and Ms D described the proposal as a joint venture.

(b) The Trust paid a deposit of $40,000 on the property in 2005, and later a further sum of $5,000 to be held by Mr Hong if needed for an increased deposit. Mr Hong paid the balance of $590,000 to complete settlement on 1 August 2006. Transfer of the title did not take place until 31 July 2008.

(c) Mr Hong transferred title to the property into the joint names of a trustee, Ms D, and himself at a time when he had ceased to be a trustee of the Trust. A week later he transferred the title into the sole ownership of a company under his exclusive control (BGH Trusteeship Ltd).

(d) Between 4 August 2011 and 12 December 2012, Mr Hong registered further transfers of the title, first to Nominees and Trustees Ltd, another company under his sole control, and then to himself personally. He then registered a mortgage to the ASB bank which was intended to secure lending to meet his own financial obligations.

(e) Mr Hong’s actions described in (c) and (d) were done without advice or explanation to his clients.

(f) Mr Hong remains the sole legal owner of the property which is subject to a caveat by Mr K.

(g) Mr Hong has treated Mr K as a tenant whom he unsuccessfully sought to have evicted in 2014. Mr Hong denies any responsibility to Mr K and Ms D. Their dispute with him is entrenched and unresolved to this day.

• [5] These findings were upheld by the High Court.^[6]
• [6] The High Court also upheld the Tribunal’s decision to strike Mr Hong off the roll, having regard to the seriousness of the breaches, his poor disciplinary history, the need for deterrence and his lack of insight.^[7]

The application for leave to appeal

• [7] Under s 254, the right of appeal to this Court is limited to appeals on a question of law and, as mentioned, is subject to a leave requirement.
• [8] Section 254(2) provides that in determining whether to grant leave, this Court must have regard to whether the question of law involved in the appeal is one that by reason of its general or public importance or for any other reason ought to be submitted to this Court for determination. As the case law recognises, the threshold is a high one. The question of law sought to be raised must be a question that is capable of bona fide and serious argument and sufficiently important to justify the attendant delay and cost of a second appeal.^[8]
• [9] Mr Hong advances nine proposed questions of law. Before we turn to address each of the proposed questions, it is necessary for us first to consider an application made by Mr Hong to adduce further evidence.

The application for leave to adduce further evidence

• [10] The application relates to a fund established by Mr Hong called “Benevolence on the Conscience Loan Fund” (the BOTCLF). The fund was at the centre of an unsuccessful attempt by Mr Hong to claim unpaid loans as tax deductible losses for his legal practice and had been the subject of decisions in the Tax Review Authority, ^[9] the High Court^[10] and this Court.^[11] Mr Hong said the conscience fund was an adjunct to his legal practice to help longstanding clients who would benefit from his assistance.
• [11] The BOTCLF featured in the current proceedings because in evidence Mr Hong told the Tribunal that the payment of $590,000 that he made to complete the purchase of the property was another example of the kind of loan at issue in the tax litigation.
• [12] The further evidence which Mr Hong wants to adduce is evidence of his intentions regarding his BOTCLF and his modus operandi as shown by:

(a) the statement of position he submitted in response to Inland Revenue’s Notice of Assessment;

(b) the brief of evidence he filed in the Tax Review Authority proceeding; and

(c) the notes of evidence in the Tax Review Authority proceeding.

• [13] Mr Hong says this further evidence is necessary in order to rectify errors made in the Tax Review Authority and “perverse material findings of fact” carried over into the Court of Appeal decision and in turn to Gordon J’s decision in this proceeding. The specific error identified is the finding that he required clients to pay him a bonus in addition to paying him interest.
• [14] The application is fundamentally misconceived. An appeal limited to a question of law is not an opportunity for re-litigating factual findings, let alone findings from another proceeding. That is quite apart from the objection that this evidence is not fresh.
• [15] The application for leave to adduce the further evidence is accordingly declined.
• [16] We turn then to the proposed questions of law.

Application for leave to appeal — Analysis

Question 1

Is the [High Court] and the Tribunal required to assess then deliberate and providing [sic] their reasons as to why they have found me not to be fit and proper person to practise as a barrister or solicitor as required by s 113 of the Law Practitioners Act 1982?

• [17] Mr Hong faced three charges. The first of these concerned conduct alleged to have occurred while the Law Practitioners Act 1982 was still in force. As a result, the High Court assessed the impugned conduct by reference to the definition of misconduct under that Act.^[12] The other two charges were alleged to have occurred after the Law Practitioners Act had been repealed and replaced by the Lawyers and Conveyancers Act.
• [18] The section of the 1982 legislation that is mentioned in the proposed question is  s 113.  In deciding whether to strike a practitioner off, that section requires an assessment of the lawyer’s conduct and whether by reason of that conduct the lawyer is not a fit and proper person to be a lawyer. The equivalent position in the Lawyers and Conveyancers Act is s 244. It is to the same effect as  s 113. 
• [19] As we understand it, the point sought to be raised by the proposed question is that the Tribunal and the High Court failed to consider by reference to  s 113  whether Mr Hong should be struck off for the conduct alleged. It is correct that neither the Tribunal nor the High Court expressly mentioned  s 113  in their respective penalty deliberations but both did apply the test mandated by  ss 113  and 244 and both gave reasons why Mr Hong was not considered to be a fit and proper person to be a legal practitioner.
• [20] We conclude the question does not raise any contestable legal issue.

Question 2

Is the Misconduct Finding against me valid, when the factual particulars supporting each of the Charges that there was the alleged [joint venture (JV)] as proposed by me with [Mr K and Ms D (the Ks)] had been false, both the Tribunal and the [High Court] had [sic] not determined that there had been such a JV?

Is the Misconduct Finding against me valid as being dishonourable and disgraceful under [the Lawyers and Conveyancers Act], s.7(1)(a)(i) and can such be supported by mere insinuations that I had an eye to profit, such going against the evidence and without the evidence thereon to support its conviction against me or that the property was to be assigned to me as agreed so I could control the sale by auction and recover my funds if the Ks failed to either sell it or redeem the property by raising a mortgage?

• [21] As will be readily apparent, the question raises issues of fact and is case‑specific. It therefore does not meet the threshold of a question of law let alone a question of general or public importance. For completeness we add that in so far as the question may import an argument about the existence of the requisite evidential foundation for the findings, it is not seriously arguable.

Questions 3 and 4

• [22] Mr Hong groups these questions together:

In the deliberation and finding on facts, should the test as enunciated in Z v Complaints Committee be applied when the penalty being sought against me is the most restrictive, such that deprives me of making a living, such humiliating and stressful?

... If the test in Z v Complaints Committee is to be applied and had been applied to the undisputed facts and circumstances, would I still be found guilty of misconduct?

• [23] The case mentioned in the questions is a decision of this Court which concerned the standard of proof to be applied in professional disciplinary proceedings.^[13] This Court held the standard of proof was the ordinary civil standard of the balance of probabilities. It also stated in a passage relied on by Mr Hong:^[14]

The balance of probability standard means that a court is satisfied an event occurred if the court considers that, on the evidence, the occurrence of the event was more likely than not. When assessing the probabilities the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability. ... Built into the preponderance of probability standard is a generous degree of flexibility in respect of the seriousness of the allegation.

• [24] In our view, there is no basis for asserting that the Tribunal and High Court have misdirected themselves on the standard of proof. We note too that in finding misconduct, both relied on Mr Hong’s admitted conduct and his own statements.^[15]

Question 5

Is it proper for Statements of Facts in the [BOTCLF] Proceedings to be merely used as proper findings of facts without an inquiry in the manner as I have illustrated above, in breach of s. 50 of the Evidence Act 2006?

• [25] Section 50 of the Evidence Act 2006 prohibits a judgment or a finding of fact in a civil proceeding being used in another proceeding to prove the existence of a fact that was in issue in the earlier proceeding.
• [26] Mr Hong contends Gordon J breached s 50 by quoting in her judgment an extract from his evidence in the Tax Authority which had been reproduced in the decision of this Court in the tax litigation. This relates to the BOTCLF and the finding that he had required clients to pay him a bonus in addition to interest on the loans.
• [27] However, the contention there was a breach of s 50 in this case is not seriously arguable. The quoted evidence from the Tax Review Authority hearing was put to Mr Hong in cross-examination at the disciplinary hearing before the Tribunal. Mr Hong agreed that the clients had to pay a bonus at the end of the arrangements as well as interest and significantly also agreed that the same terms applied to the Ks. There was thus evidence of the loan terms adduced independently of the tax judgments.
• [28] It follows that Question 5 also fails to meet the threshold for granting leave.

Question 6

Had the Misconduct Finding against me been properly determined in accordance with the Law, Legal principles and precedents as I have noted as errors of Law above when [a] I had not breached our Fundamental [sic] [b] the Ks had not and could not have suffered any financial harm of [sic] loss as at all times when I dealt with the Property the appraised sale value would not realize enough to have repaid my advances to the Ks [c] I had not gained anything [d] none of the adverse perverse finding [sic] of facts as relied upon could be relied upon since [they are] incorrect ?

• [29] As will be readily apparent, this question is an attempt to relitigate factual findings for which there was available evidence. It does not qualify as an error of law.

Question 7

Had the Misconduct Finding against me been properly determined in accordance with the Keene’s case when on my interpretation of the applicability of the Rules that such did not apply under the indisputable facts and circumstances once [a] the fact that there had not been the alleged JV against me [b] the Ks did not suffer any financial harm [c] I had nothing to gain, did not gain anything from the Ks and could not have had an eye to profit when the Property would be sold at a loss [d] even interest [sic] if the Ks could not pay rather than could but refused to I would not have an issue and [e] my loan as with anyone’s must be re-paid and if the Ks could do so they would have been able to redeem the Property from me, were taken into consideration, at worse, that I should only be found to have erred in my judgment, lack of hind‑sight, such should not be taken against me to the extent of striking me off or even suspending me?

• [30] In the decision of Keene v Legal Complaints Review Office, this Court held that correctly interpreted the rule which Mr Keene had been charged with breaching had not been breached.^[16] This Court went on to say that even if it was wrong about that, and the rule had been breached, a disciplinary response would not have been warranted. That was in part because the practitioner’s interpretation was reasonably open to him as evidenced by the fact it had been adopted by the District Court and also of course by the Court of Appeal itself.^[17]
• [31] Keene is not authority for the proposition that just because the practitioner believes they are not breaching the rules, that in itself is enough to exonerate them. The belief must be based on an interpretation that is reasonably open. And on the evidence in this case, that is not an arguable point.

Question 8

Had the Struck-Off Penalty as levied against me been determined in [accordance] with the Law, Legal principles and precedents as I have noted as errors of Law above [a] on the grounds as I have noted in respect of the Misconduct Finding [b] that there had not been any of my eyes on profit as I had been more concerned over the full recovery of my advance [c] there had been nothing in my Disciplinary History that could have supported this strike‑off penalty, the seriousness of the offences and fines levied had been enlarged against me in discrimination (by reference to precedents) and bad faith, such as initiated by our Lawyers Complaints Service personnel when I had stepped on their toes that I have in my judicial review proceeding in CIV 2020-404-854 taken action on such discrimination and for an inquiry on such and [d] I have never repeated any of such offences against me?

• [32] This question also seeks to relitigate factual assessments and therefore does not qualify as an error of law.

Question 9

Is the order requiring me to compensate Mr. K for stress and anxiety permissible and validly exercised under [the Lawyers and Conveyancers Act] s. 156 and when [a] other than his oral testimony of such there are [sic] no evidence in support of such and when such against the Evidence, the Property was to be sold to have repaid my advance, the Ks had said and were aware by the sales appraisal that the Property if sold at the time we tried to sell it would be insufficient to clear my advance even?

• [33] Mr Hong did not seek leave in the High Court to appeal this question to this Court. Whether compensation for emotional harm is “loss” for the purposes of compensation payable under s 156(1)(d) of the Lawyers and Conveyancers Act is a question of law. The High Court was not made aware of any authority on the issue, meaning it may be a question of general or public importance.^[18]
• [34] However we consider the Judge’s reasoning in finding that emotional harm can constitute loss for the purposes of compensation to be compelling. The Judge considered the plain meaning of “loss” includes the emotional harm caused to a client whose trust and confidence is breached by his or her lawyer.^[19] This meaning is consistent with s 156(1)(d) and the general purpose of the Act which is to maintain public confidence in the legal profession and to ensure clients are properly protected as well as general law.^[20]
• [35] Accordingly no reasonably arguable question of law arises.

Outcome

• [36] The application for leave to adduce fresh evidence is declined.
• [37] We conclude that none of the proposed questions meets the threshold required under s 254 before leave to appeal may be granted and accordingly the application is declined.

• [38] The application having failed, the applicant must pay the respondent costs for a standard application for leave on a band A basis with usual disbursements.

Solicitors:
New Zealand Law Society, Auckland for Respondent

^[1] Auckland Standards Committee 5 v Hong [2020] NZLCDT 5 [Liability judgment].

^[2] Auckland Standards Committee 5 v Hong [2020] NZLCDT 12 [Penalty judgment].

^[3] Hong v Auckland Standards Committee No 5 [2020] NZHC 1599 [High Court substantive judgment].

^[4] Hong v Auckland Standards Committee No 5 [2020] NZHC 2613 [High Court leave judgment].

^[5] See the summary in the Penalty judgment, above n 2, at [2].

^[6] High Court substantive judgment, above n 3, at [138].

^[7] At [199].

^[8] Deliu v National Standards Committee [2015] NZHC 67 at [17]; aff’d [2015] NZCA 399 at [18]; and Morahan v Wellington Standards Committee 2 [2018] NZHC 1583 at [9].

^[9] XXX v The Commissioner of Inland Revenue [2018] NZTRA 3.

^[10] Hong v Commissioner of Inland Revenue [2018] NZHC 2539, (2018) 28 NZTC 23-073.

^[11] Hong v Commissioner of Inland Revenue [2019] NZCA 336, (2019) 29 NZTC 24-015.

^[12] Section 112(1)(a). The Judge also considered the definition of “misconduct” in relevant authorities: High Court substantive judgment, above n 3, at [145]–[148], citing Complaints Committee No 1 of the Auckland District Law Society v C [2008] NZHC 2284; [2008] 3 NZLR 105 (HC) at [30]–[31]; and Shahadat v Westland District Law Society [2009] NZAR 661 (HC) at [31].

^[13] Z v Complaints Assessment Committee [2007] NZCA 91, [2008] 1 NZLR 65.

^[14] At [26], quoting Re H (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563 (HL) at 586. See also the Supreme Court on the appeal of the decision which Mr Hong did not cite: Z v Dental Complaints Assessment Committee [2008] NZSC 55, [2009] 1 NZLR 1.

^[15] See for example Liability judgment, above n 1, at [20] and [39]; and High Court substantive judgment, above n 3, at [73] and [160].

^[16] Keene v Legal Complaints Review Officer [2019] NZCA 559.

^[17] At [84]–[89].

^[18] High Court substantive judgment, above n 3, at [204].

^[19] At [205]–[206].

^[20] At [207]; and Lawyers and Conveyancers Act 2006, s 3.