IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA401/2020
[2020] NZCA 561

BETWEEN BOON GUNN HONG

Applicant

AND AUCKLAND STANDARDS COMMITTEE

NO 5
Respondent

Court: Kós P and Cooper J

Counsel: Applicant in Person

P N Collins for Respondent

Judgment: 12 November 2020 at 10 am

(On the papers)

JUDGMENT OF THE COURT

A The application for leave to appeal is declined.

B Mr Hong must pay the Standards Committee’s costs calculated for a
standard application for leave to appeal on a Band A basis.
____________________________________________________________________

REASONS OF THE COURT

(Given by Cooper J)

Introduction

[1] The applicant, Mr Hong, seeks leave to appeal to this Court under s 254(1) of
the Lawyers and Conveyancers Act 2006 (the Act) against a determination of Gault J
in the High Court dismissing Mr Hong’s appeals against decisions of the New Zealand

HONG v AUCKLAND STANDARDS COMMITTEE NO 5 [2020] NZCA 561 [12 November 2020]
Lawyers and Conveyancers Disciplinary Tribunal (the Tribunal).1 The application to
this Court is necessary because the Judge declined leave to appeal on the basis that
the intended appeal did not raise questions of law that by reason of their general or
public importance or for any other reason ought to be submitted to this Court for
decision.2

[2] The High Court judgment dealt with two decisions of the Tribunal. In the first,
referred to by the Judge as the liability decision, the Tribunal considered Mr Hong’s
conduct of refusing to make client files available as requested by an audit inspector
employed by the New Zealand Law Society to conduct a general trust account review
of Mr Hong’s solicitor’s trust account.3 The Tribunal held that Mr Hong had a duty to
make the files available under reg 29 of the Lawyers and Conveyancers Act
(Trust Account) Regulations 2008 (the Regulations).4 It rejected an argument
advanced by Mr Hong that he was entitled to refuse to do so in circumstances where
the files contained information confidential to the clients and the clients had not agreed
to him handing the files over.5 Mr Hong also justified his refusal to provide
the information on the basis of a narrow interpretation of the definition of “trust
account records”. He maintained that expression, as used in the relevant provisions of
the Regulations, was limited to records relating to the trust account or to trust money
received. The Tribunal accepted the argument of the Auckland Standards Committee
No 5 (the Standards Committee) that the definition was more comprehensive.6

[3] The Tribunal found that Mr Hong’s actions amounted to misconduct under
s 7(1)(a)(ii) of the Act, which relevantly defines “misconduct” as meaning conduct
“that consists of a wilful or reckless contravention of any provision of this Act or of
any regulations … made under this Act that apply to the lawyer”. The Tribunal
considered that Mr Hong’s conduct was a “wilful” contravention of the Regulations.7

1
Hong v Auckland Standards Committee No 5 [2020] NZHC 744 [High Court judgment].
2
Hong v Auckland Standards Committee No 5 [2020] NZHC 1572 [High Court leave judgment] at
[13].
3
Auckland Standards Committee No 5 v Hong [2019] LCDT 28.
4
At [30].
5
At [31]–[32].
6
At [27].
7
At [35].
[4] The High Court took the same view holding that, in the circumstances of this
case, Mr Hong’s refusal to make the files available for inspection was contrary to
his obligations under reg 29 of the Regulations.8 The Judge also concluded that
Mr Hong had refused to permit the inspector to perform the review, but
he acknowledged Mr Hong had done so in the mistaken belief that he was only
required to produce trust account records and that client confidentiality prohibited him
from disclosing client files.9 The Judge determined:

[64] In the particular circumstances, even accepting Mr Hong’s

contravention was not a “wilful” contravention, I consider it was reckless. …
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.

[5] In its second decision, the Tribunal dealt with the appropriate penalty.10
The Tribunal made orders 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 to the Standards Committee of $35,850.

[6] The High Court quashed the order for payment of costs in the sum of $35,850,
and substituted an order for payment of $30,850.11 The appeals were otherwise
dismissed.

The requirement for leave

[7] Under s 254 of the Act, any party to the proceeding in the High Court may seek
leave to appeal to this Court. Initially, the application is to the High Court, but if that
Court refuses leave, this Court may grant leave in the circumstances set out in s 254(2).
That subsection provides:

In determining whether to grant leave to appeal under this section, the Court
of Appeal must have regard to whether the question of law involved in

8
High Court judgment, above n 1, at [53].
9
At [59].
10
Auckland Standards Committee No 5 v Hong [2019] LCDT 40.
11
High Court judgment, above n 1, at [97].
 the appeal is one that, by reason of its general or public importance or for any
other reason, ought to be submitted to the Court of Appeal for its decision.

[8] The authorities are clear that leave to appeal may be granted only in cases
where the appeal raises one or more questions of law capable of bona fide and serious
argument, and the case involves some interest, public or private, of sufficient
importance to outweigh the cost and delay of a further appeal. Ultimately, the question
is whether granting leave is in the interests of justice. 12 The applicant must
demonstrate that the alleged error of law is sufficiently important to “justify further
pursuit of litigation which has already been twice considered and ruled upon by
a Court”.13

The proposed questions of law

[9] Mr Hong identifies no less than five separate questions in relation to

the misconduct finding. A further two questions are claimed to arise out of
the penalties imposed and two more questions are set out in relation to the order that
he pay costs.

Misconduct questions

[10] The first question asks whether, under the relevant provisions of the Act and
Regulations, the audit inspectorate of the New Zealand Law Society could require
production of “non trust account records or documents of Clients from a Lawyer when
the Clients of that Lawyer had refused to grant consent and instructed [the lawyer] not
to release their files (other than trust account records)”.

[11] The High Court rejected Mr Hong’s argument and held that a narrow reading
of the term “trust account records” in the Regulations would be contrary to the purpose
of maintaining public confidence and protecting consumers of legal services.14

[12] Section 6 of the Act defines the term “trust account records” broadly:

12
Deliu v National Standards Committee of the New Zealand Law Society [2015] NZCA 399 at
[18(c)].
13
Waller v Hider [1998] 1 NZLR 412 (CA) at 413.
14
High Court judgment, above n 1, at [49].
 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

[13] There is a more detailed definition in reg 3 of the Regulations. There, “trust
account records” are defined as meaning, “in relation to a practitioner”:

(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

(b) if any of those records are kept on computer, includes the relevant
computer equipment and software

[14] It is clear from the definition in reg 3 that the concept of trust account records
includes not only what might be described as the primary financial records, but also
relates to “files”, “documents” and “evidence of authority for payments” to name just
some of the categories referred to. It is self-evident that further information beyond
the bare monetary transactions must be able to be the subject of legitimate inquiry by
inspectors under reg 29 and other regulations in carrying out their functions. It is
an important part of the protection of the practitioner’s clients. The breadth of
the definition in the Regulations confirms that to be the case. On this basis we are not
persuaded that there is a bona fide and serious argument in favour of the narrow
interpretation for which Mr Hong contends.

[15] The second question proposed in Mr Hong’s application concerns the finding
of misconduct. The question is in the following terms:

Is it lawfully correct for a Lawyer who had [a] relied on the literal meaning of
the TAR provisions that Inspectorate did not have the power to require
the production of non tAC RECs in my decision to abide by my clients’
instructions not to release the files to Inspectorate [b] undertaken a thorough
search of judicial decisions affecting the interpretation of the TAR, did not
find any and decided then to challenge such as their lawyer, to be found guilty
of Misconduct pursuant to LCA, s 7(1)(a)(i) my conduct being dishonourable
or disgraceful and/or being willful or reckless contravention of the said L&R
by s 7(1)(a)(ii)?
[16] There are obvious infelicities in the wording of this question.15 Leaving those
on one side, this question is couched in terms too personal to Mr Hong to qualify as
a question of “general or public importance”. We have already quoted the key passage
of the High Court judgment.16 Mr Hong essentially seeks to argue that because
he acted in accordance with his view of his legal obligations, he should not have been
found to have acted recklessly. That is tantamount to claiming he was entitled to act
in accordance with his view of the law even though it was untenable. The justification
for his approach is the claim that he carried out a thorough search for relevant
precedent. But a straightforward reading of the relevant provisions of the Act and
Regulations did not require research. Further, his research was clearly not thorough
(as will be apparent when we discuss the next proposed question). In addition, there
is no suggestion he took independent advice. Once again, we do not consider that this
is a question capable of bona fide and serious argument.

[17] The third proposed question is whether reg 33, which requires the inspectorate
not to disclose information that is obtained in the course of the review of the trust
accounts of a practice, will “protect us lawyers, if we go against the Clients’
instructions releasing the non tAC RECs in their Files to Inspectorate, when
the Clients do not trust Inspectorate and had refused consent and instructed us not to
release such?” The wording of this question again appears to turn on Mr Hong’s
narrow interpretation of “trust account records” but to the extent it does not, it is clear
from the wording of the Regulations that the practitioner’s obligation is to provide
the documents necessary to comply with the inspectorate’s requests. Under reg 29,
every practice “must”:

(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.

15
We have assumed that “TAR” was intended to refer to the relevant provisions of the Regulations
dealing with trust account records, and “tAC RECs” is a reference to trust account records.
16
See above at [4].
[18] It is in this context that reg 33(1) obliges the inspectorate not to disclose to any
person any information that the inspectorate has obtained in the course of a review of
the trust accounts of a practice.

[19] There are exceptions in reg 33(2), some of which are designed to enable
the procedure set out in the Act to work. Another example is where the information is
required by any member of the police or Serious Fraud Office acting in
the performance of their duties. There is nothing difficult or controversial in this.
It reflects the law summarised by Duncan Webb, Kathryn Dalziel and Kerry Cook in
the text Ethics, Professional Responsibility and the Lawyer:17

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 effectively required by law, so displaces the duty of confidence usually
owed by a lawyer.

[20] It is also in accordance with the position in England, discussed in Parry-Jones

v Law Society, and succinctly summarised by Lord Denning MR:18

In my opinion the contract between solicitor and client must be taken to

contain this implication: the solicitor must obey the law, and, in particular, he
must comply with the rules made under the authority of statute for the conduct
of the profession. If the rules require him to disclose his client’s affairs, then
he must do so.

[21] The contrary position which Mr Hong apparently wishes to assert is not
seriously arguable. The proposed question must be rejected for that reason.

[22] The fourth proposed question asks whether the inspectorate is empowered to
file a report with the New Zealand Law Society under reg 32 when it had “none of
the causes as defined therein from its review of the months’ trust transactions that it
had selected for the review?” This appears to be a new issue, not dealt with in

17
Duncan Webb, Kathryn Dalziel and Kerry Cook Ethics, Professional Responsibility and
the Lawyer (3rd ed, LexisNexis, Wellington, 2016) at [8.8.3] (footnotes omitted).
18
Parry-Jones v Law Society [1969] 1 Ch 1 (CA) at 7.
the High Court judgment. The question is inappropriate for that reason. The purpose
of a second appeal is to correct errors in the judgment of the first appeal court,
as is apparent from s 254(1) of the Act. That section contemplates a second appeal
where a party is dissatisfied with a determination of the High Court as being erroneous
on a point of law. Here, the Judge made no determination about the meaning
or application of reg 32, because he was not asked to do so.

[23] But the question is also inappropriate for another reason. Regulation 32(1)
relevantly provides that the inspectorate is required to give a report of the results of
a review of the trust accounts of a practice as soon as practicable after the completion
of a review. But the report need only be made when the inspectorate has reasonable
cause to suspect one or other of the matters listed under reg 32(2). These include
various problems with trust accounts, dishonesty and failures to account for trust
monies. But other matters that may require the inspectorate to file a report include
reasonable cause to suspect that:

(d) there is or has been any failure by a practice to comply with

the provisions of the Act relating to trust accounts, these regulations,
or any rules (being a failure that, in the opinion of the inspectorate,
is material to the risk to client assets); or

(e) there is any other matter relating to the duties of, and restrictions on,
practices under the provisions of the Act relating to trust accounts,
these regulations, or any rules that should be reported.

[24] It seems that Mr Hong wishes to argue that his failure to provide
the information sought by the inspectorate should not have been reported because it
was conduct which could not be brought within reg 32(2). But that is untenable:
there was clearly reasonable cause for the inspectorate to conclude Mr Hong had failed
to provide information relevant to the review of his trust account, in breach of his
obligations under reg 29. Both paras (d) and (e) of reg 32(2) apply. An argument to
the contrary is not capable of bona fide and serious argument.

[25] The fifth question would ask whether Mr Hong had a “lawful justification or
excuse or claim of right” as a defence to the misconduct allegation. Its lengthy
wording (which we do not need to set out) again invokes Mr Hong’s narrow
interpretation of “trust account records”, his obligation to comply with his clients’
instructions, his duty of confidence owed to them and his ability to resist providing
the requested information pending clarification by the courts. This is essentially
a repetition of Mr Hong’s argument about the meaning of “trust account records”
covering the same ground as the first and third questions. For reasons already
explained we do not consider the question raises a legal issue capable of bona fide and
serious argument.

Penalty questions

[26] Questions six and seven both relate to the penalties imposed by the Tribunal.
Question six would ask whether the imposition of a penalty of suspension was lawful
when, under s 262 of the Act, the penalty for the offence of wilful obstruction of
an investigator is a maximum fine not exceeding $25,000. The short answer to this
proposed question is that Mr Hong was not charged with an offence under s 262 of
the Act. Rather, he was charged with misconduct under ss 7(1)(a) and 241(a).
The penalties imposed were properly within the contemplation of s 242 of the Act.
Once again, the question did not appear to have been asked in the High Court and
Mr Hong can point to no error in the High Court judgment as a consequence. But in
any event, the argument that Mr Hong apparently wishes to pursue under this question
is not capable of bona fide and serious argument.

[27] Proposed question seven asks whether the three months’ suspension and
the order made under s 242(1)(g) prohibiting Mr Hong from practising on his own
account until authorised by the Tribunal to do so was “fair and reasonable in
accordance with the objectives and purposes of the Act”. This is not a question of law.
Rather, it relates to the merits of the penalties imposed. The question is accordingly
not a proper subject of a second appeal.

Costs questions

[28] Question eight concerns the costs ordered by the Tribunal. It would ask
whether they were fair and reasonable. It does not raise a question of law, still less
one that is capable of justifying a second appeal.
[29] Question nine purports to ask whether the Law Society has proceeded in
the most cost expedient manner. As with the previous question it does not raise
a question of law.

Result

[30] For the reasons we have given, the application for leave to appeal is declined.

[31] Mr Hong must pay the Standards Committee’s costs calculated for a standard
application for leave to appeal on a Band A basis.

Solicitors:
New Zealand Law Society, Auckland for Respondent