Law Society undertakes largest ever law firm intervention in Hong Kong

Summary  

In December 2020, the Law Society of Hong Kong intervened in the practice of a law firm which had one of the biggest conveyancing practices in Hong Kong – a city in which property (residential and commercial) dominates. The intervention is the largest ever undertaken by the Law Society in its history (of over one hundred years). In short, the intervention is a wake-up call for partners or practitioners to ensure that all staff – including staff who are not legally qualified, such as clerks – are being properly supervised.  

Background 

In Hong Kong, the Law Society is the sole regulator for solicitors, foreign lawyers and their firms.  Its powers of intervention are set out in the Legal Practitioners Ordinance (Cap. 159); in particular, Schedule 2. In exercising its powers, the Council of the Law Society has the public interest, the interests of a firm's clients and the reputation of the profession in mind. A decision to intervene is a serious matter that is not taken lightly.

An intervention does not involve running the practice of the intervened firm. An intervention involves the closure of the firm, undertaken by an intervention agent (another law firm) instructed by the Law Society. In this case, the intervention agent is being assisted by five other law firms; the intervened firm had five offices. "Client" and "trust" monies in the intervened firm's accounts are held by the Council of the Law Society for the persons beneficially entitled to them.

Case

Much is publicly known about the intervention because one of the two partners attempted, unsuccessfully, to challenge the intervention by proceedings for judicial review – Ng v The Council of the Law Society of Hong Kong [2021] HKCFI 379. The Council of the Law Society intervened in the practice of the firm on the following grounds: (i) suspected dishonesty of an employee of the firm – a former clerk; and (ii) alleged serious breaches of the solicitors' accounts rules.  

The Court of First Instance of the High Court held that: 

• Schedule 2 of the Ordinance provides a complete statutory scheme for the court's review of a decision to intervene in the practice of a law firm or a solicitor. The statutory regime permits the court to make a wide range of orders as it sees fit, including the reversal of a decision to intervene;  
• a person served with an intervention notice, pursuant to Schedule 2 of the Ordinance, has a strict 8-day period within which they can apply to the court to challenge it. In this case, the applicant (a former partner) was out of time to challenge the intervention notice. The applicant was not able to challenge the respondent's decision to intervene by judicial review.

The intervention, which is ongoing, has attracted much media attention in Hong Kong. It is likely to have important reputational concerns for the different stakeholders involved.