HONG v AUCKLAND STANDARDS COMMITTEE NO. 5 [2020] NZHC 1599

HONG v AUCKLAND STANDARDS COMMITTEE NO. 5 [2020] NZHC 1599 [7 July 2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2020-404-441CIV-2020-404-639[2020] NZHC 1599UNDER the Lawyers and Conveyancers Act 2006IN THE MATTER of an appeal against a decision of theLawyers and conveyancers DisciplinaryTribunalBETWEEN BOON GUNN HONGAppellantAND AUCKLAND STANDARDS COMMITTEENO. 5RespondentHearing: 17 June 2020Appearances: Appellant on own behalfP Collins for the RespondentJudgment: 7 July 2020JUDGMENT OF GORDON JThis judgment was delivered by meon 7 July 2020 at 2.30 pm, pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors: B G Hong Law Firm, AucklandNew Zealand Law Society, AucklandCounsel: P Collins, AucklandIntroduction[1] The appellant, Boon Hong, appeals against two decisions of the New ZealandLawyers and Conveyancers Disciplinary Tribunal (the Tribunal). The first is theTribunal's decision of 10 February 2020 finding Mr Hong guilty of professionalmisconduct on three charges.1 The second is the Tribunal's decision of 29 April 2020striking Mr Hong off the roll of barristers and solicitors, ordering him to pay costs andawarding compensation to his former client.2Factual background[2] Mr Hong's client, who was at the centre of events, is a businessman, Mr K.The two had met through mutual friends in the early 1990s. Mr Hong acted for Mr Kon one matter in the 1990s. From 2001 to 2010, Mr Hong was Mr K's lawyer actingfor him personally and for his business interests.[3] The Ks' Family Trust, CLT, was settled by deed dated 30 October 2001. TheCLT Trust Deed was prepared by Mr Hong. Mr Hong was an independent trustee fromthat time until he was replaced by his trustee company, BGH Trusteeship Ltd, on13 June 2007. Mr K's (then) wife, Ms D, continued as the other trustee at that time.[4] On 27 September 2005, CLT entered into an agreement to purchase a propertyat X Road, Z (the property) for $630,000. Mr Hong acted for CLT in this transaction.[5] Also on 27 September 2005, after the agreement had been signed, Mr Hongadvised Mr K that the vendor had received another offer for $645,000 (thus givingCLT three working days under a clause in the agreement to meet that price). The Ksagreed to do that and Mr K communicated directly with the vendor on that issue. On3 October 2005, Mr K, for CLT, paid a deposit of $40,000 direct to the vendor as adeposit. Settlement was due to occur on 4 November 2005. Shortly before that dateMr K deposited $5000 in Mr Hong's trust account to top up CLT's cash contributionto the purchase.1 Auckland Standards Committee 5 v Hong [2020] NZLCDT 5 (liability decision).2 Auckland Standards Committee 5 v Hong [2020] NZLCDT 12 (penalty decision).[6] Completion of settlement was delayed over an extended period because of acaveat lodged by the competing purchaser and because of issues with the vendor overthe purchase price. Mr Hong acted for CLT throughout that period. The competingpurchaser's caveat was discharged in June 2006 following litigation over the issue. Inthe meantime, CLT had entered into an agreement to purchase another property as thefamily home in M.3[7] Against that background, Mr Hong became personally involved in thecompletion of the purchase of the property. Mr Hong denied that he "offered" tobecome personally involved. Rather, he said, Mr K asked him if he could assist. TheTribunal's decision records that Mr K and Ms D described the "offer" as a joint ventureproposal. The decision further notes that Mr Hong denied that statement but that hedid not deny his personal involvement in financing the property purchase and theevents that led to his status as the sole legal owner of the property.[8] There was nothing in writing at the time about the said joint venture proposal(or to use a more neutral term, the "purchase arrangement"). Mr K's evidence is thatit was communicated to him by Mr Hong in a single phone call which occurredsometime before CLT went unconditional on the M purchase. That purchase settledon 30 June 2006.[9] The balance of the purchase price for the property of approximately $585,000was provided by Mr Hong personally or through Orano Developments Ltd, a companyunder his control, on 1 August 2006. But the transfer did not occur for another twoyears. The purchase of the property by CLT was finally settled on 31 July 2008.4[10] In the meantime, the Ks, having sold the property they had purchased in M,moved into the property. They paid rent into Mr Hong's trust account.[11] At the time of the transfer of the property on 31 July 2008, the two trustees of3 Which was later sold by the Trust in May 2007.4 There were issues over the amount paid on settlement ($630,000) by Mr Hong resulting inlitigation over $15,000, being the balance of the purchase price of $645,000.CLT were Ms D and BGH Trusteeship Ltd, which by then had replaced Mr Hong asindependent trustee. However, Mr Hong effected the transfer to Ms D and himself asthe registered proprietors recorded on the title. Mr Hong explains this saying that whatwas used was a hard copy of a transfer that had been sent to the vendor in 2005 inreadiness for settlement on 4 November 2005.[12] On 6 August 2008, Mr Hong effected a transfer of the property into the soleownership of BGH Trusteeship Ltd.[13] The Tribunal's decision records that this occurred without any advice orexplanation to the clients. Ms D signed the necessary documentation and her evidencewas that Mr Hong did not give her any reason, only saying that she needed to trust himand that it was the right thing to do. She accepted that at that time.[14] Mr Hong's position is that the property was transferred to his trustee companyas that was agreed at the outset, pending the K's redemption of the property from him"by repaying my advance so I control such ".[15] On 11 February 2009, Mr K and Ms D paid Mr Hong $50,000. They say itwas a further contribution towards the purchase of the trust's share of the property.Mr Hong says it was for rent.[16] There were two subsequent transfers of the property; from BGH TrusteeshipLtd to Nominees and Trustees Ltd (another of Mr Hong's companies5) on 4 August2011; and from that company to Mr Hong personally on 12 December 2012. Mr Hongremains the sole legal owner of the property, which is subject to a caveat by Mr K anda mortgage to ASB Bank Ltd. The ASB mortgage secured personal borrowing byMr Hong to pay legal fees in litigation in which he was a party personally.[17] As a result of the transfers, Mr Hong became Mr K's landlord. In 2014,5 Mr Hong is the sole shareholder and director.Mr Hong unsuccessfully attempted to evict Mr K (Mr K and Ms D had separated in2011 or 2012).6 Mr K continues to live in the property.[18] Mr K stopped paying rent directly to Mr Hong in 2016. Instead he opened aseparate bank account into which he paid rent. Mr K's evidence was that he has usedthose funds for maintenance and repairs on the property. Mr Hong's position is thathe was owed $138,965 in rent up to the end of September 2019.[19] As a consequence of their separation, Mr K replaced Ms D as the trustee ofCLT on 16 August 2017. BGH Trusteeship Ltd remained a trustee at that time.Mr Hong's position is that he issued a resignation notice to the Ks' new lawyers in2010 and, from that time, BGH Trusteeship Ltd had no further dealings with CLT.The charges[20] There are three charges. Charge 1 relates to conduct that occurred before1 August 2008. It is brought under s 351(1) of the Lawyers and Conveyancers Act2006 (the Act). The relevant rules are the Rules of Professional Conduct for Barristersand Solicitors (RPC) which applied until 31 July 2008. Charges 2 and 3 relate toconduct from 1 August 2008. They are brought under ss 7(1)(a)(i) and/or (ii) and241(a) of the Act. The relevant rules are the Conduct and Client Care Rules (CCCR).[21] Charge 1 reads as follows:Charge One: engaging in a transaction personally with clients contrary toRules 1.03, 1.04, and 1.07 of the Rules of Professional Conduct for Barristersand Solicitors (RPC).[22] This charge concerns events occurring before 1 August 2008 and is broughtunder s 351(1) of the Act.[23] The charge alleges misconduct on the part of Mr Hong in his professionalcapacity; or in the alternative, conduct unbecoming; or in the further alternative,6 Mr K and Ms D give different dates for their separation.negligence or incompetence in his professional capacity of such a degree as to reflecton his fitness to practise as a solicitor or as to tend to bring the profession intodisrepute.[24] Charge 2 reads as follows:Charge Two: acting in transfers of Z property after 31 July 2008 for ownbenefit, contrary to Rules 5, 5.1, 5.2, 5.4, 5.4.2, 5.4.3, 5.4.4, 5.4.5, 6 and 6.1of the Conduct and Client Care Rules (CCCR).[25] The charge alleges misconduct pursuant to ss 7(1)(a)(i) and/or (ii) and 241(a)of the Act; or, in the alternative, unsatisfactory conduct that was not so gross, wilful,or reckless as to amount to misconduct, pursuant to ss 12(a), (b) and/or (c) and s 241(b)of the Act; or in the further alternative, negligence or incompetence of such a degreeas to reflect on his fitness to practise or as to bring his profession into disrepute,pursuant to s 241(c) of the Act.[26] Charge 3 reads as follows:Charge Three: procuring a personal advantage to the detriments of his clientscontrary to s 4(d) of the Act.[27] The same three alternatives are advanced as for charge 2.[28] There are detailed particulars for charges 1 and 2 and to a lesser extent forcharge 3.The Tribunal's liability decision[29] First, on charge 1, the Tribunal noted that the charge was centred around theprovision of $585,000 by Mr Hong personally to his clients to enable them to settlethe purchase of the property. The Tribunal referred to Mr Hong's admission that hepersonally advanced funds to assist the Ks to settle the property. The Tribunal saidthat in doing so it was indisputable that rr 1.03 and 1.04 became immediatelyapplicable. The Tribunal said that there was no evidence that Mr Hong advised hisclients about any conflict of interest or advised them to take independent advice.[30] The Committee then referred to Mr Hong's defence to the charge (and tocharges 2 and 3) as follows:[21] Mr Hong's defence to this charge and to charges two and three is thatthe RPC and the CCR rules are not applicable to him and to the circumstancesof his making personal funds available to his clients. He set out his reasonsas being:(a) He stepped in to assist the Ks and had nothing to gain by doingso.(b) His assistance to the Ks was on a Conscience to Consciencebasis which did not involve a conflict of interest.(c) His advance to the Ks was part of his Benevolence on theConscience Loan Fund which he had established to assistlongstanding clients who found themselves in financialdifficulty.(d) That his advance to the Ks was on the basis that:(i) they would reimburse him the interest that he wouldhave been earning on his funds on term deposit;(ii) that he would take an assignment of the Z propertyuntil repayment of the advance;(iii) that the Z property would be sold in the event offailure to repay the advance and that he was to controlthe sale.[31] The Tribunal referred to Mr Hong's evidence under cross-examination whenhe confirmed his position that he had done nothing professionally wrong when hepersonally took title to the property and borrowed money against it. He also said that,having acquainted himself with the relevant rules, he had not infringed any of the rulesof professional conduct, whether they were the old rules or the current rules.[32] On charge 2, the Tribunal noted, first in relation to rr 5, 5.1 and 5.2, theargument for the Standards Committee was that Mr Hong lacked any conceivablenotion of independence and abandoned professional standards when he dealt with theproperty as if it was his own. This continued when he acted in the transfers of theproperty and received a further substantial payment of $50,000, all of which occurredafter 1 August 2008.[33] As to the breach of r 5.4, the Tribunal noted that the allegation was thatMr Hong continued to act in his dealings with the property by which he gained solecontrol of the property to the detriment of the Ks' interests.[34] In terms of r 5.4.2, the allegation was this was breached when he acquired aninterest in the property because of his personal loan, such that his interest as a lawyerand that of his client did not correspond in all respects.[35] The allegation regarding r 5.4.3 arose by reason of Mr Hong transferring theproperty into the sole ownership of BGH Trusteeship Ltd and when he received$50,000 from CLT. The allegation was that these transactions were to the detrimentof the Ks' interests and should be seen as being undertaken in their own right and notonly as a continuation of a relationship entered into earlier.[36] Rule 5.4.4 requires that a client must be advised of the right to receiveindependent advice in respect of any matter where the lawyer enters into a financial,business or property transaction or relationship with his client. The Tribunal notedthat Mr Hong had accepted that he did not advise the Ks of their right to receiveindependent advice.[37] The next allegation under the second charge was that Mr Hong was a party tothe transaction as defined by r 5.4.5. Mr Hong was the sole director and shareholderof both BGH Trusteeship Ltd and Nominees and Trustees Ltd. He was personally thefinal transferee of the property. It was therefore alleged that Mr Hong was deemed topersonally be a party to all those transactions.[38] The final allegation under the second charge was that Mr Hong had acted inbreach of rr 6 and 6.1, which relate to acting for more than one client on a matter. Theallegation was that the situation whereby Mr Hong, acted for himself and for the Ksafter 31 July 2008, created a more than negligible risk that he would be unable todischarge the obligations he owed to the Ks. There was no informed consent.[39] The Tribunal noted that Mr Hong's reasons for defending charge 2 were thoseas set out in [21] of its decision which I have quoted in [30] above.[40] Finally, on charge 3, the allegation was that Mr Hong failed to protect theinterests of his client by procuring a personal advantage for himself.[41] In its discussion, the Tribunal grouped the three charges together saying:[37] Mr Hong has, by his response to [sic] charges and throughout hisevidence, resolutely maintained that the relevant rules do not apply to him inthis matter albeit that he has acknowledged that his personal loan to the Kswas an "adjunct to his legal practice".[38] Mr Hong cannot be correct. He is a lawyer of many years standing.He is required to know and observe the rules relating to professional conduct.He has acknowledged becoming aware of them but continues to maintain thatthey are not applicable to him. Notwithstanding that his reasons for his actionsstem from a "conscience" point of view, his refusal to accept that the rulesapply to his conduct in this case is obdurate. As counsel for the Committee hassubmitted Mr Hong has:(a) Displayed a disregard for any professional issues arising fromhis dealings with the Ks.(b) Lacked appreciation of any kind of need for his clients toreceive independent advice.(c) Assumed ownership and control of the property in questionwithout regard to the professional issues that he was requiredto address.[39] Given the admission of facts by Mr Hong and the resolute stand thathe has taken to these proceedings, we have not found it necessary to addressin detail all the particulars that have been put before us.[42] The Tribunal found that charge 1 was proved and had reached the level ofmisconduct on the part of Mr Hong in his professional capacity under s 112(1)(a) ofthe Law Practitioners Act 1982.[43] The Tribunal also made findings of misconduct under s 7(1)(a)(i) and (ii) ofthe Act in respect of charges 2 and 3.Grounds of appeal – liability decision[44] Mr Hong has filed a detailed notice of appeal and similarly detailedsubmissions. His arguments may be summarised as follows.[45] On the first charge, Mr Hong submits the Tribunal erred and incorrectlyinterpreted the meaning and application of conflict of interest on the facts andcircumstances and accordingly the consequent need for the Ks to be independentlyadvised. He says there was no joint venture. The Tribunal erred in accepting theevidence of the Ks without proper consideration of his evidence on that issue. He hadnothing to gain by his financial assistance to the Ks. It was a loan advance purely tohelp them and was intended to be for a short term only. The advance had to be repaidand he had to be protected until repaid. Mr Hong says his interest was only tofinancially assist the Ks and that coincided with their interests. In those circumstancesthere was no conflict of interest nor was there a potential conflict of interest. TheTribunal was concerned with the form of the rules rather than their substance.[46] On the second charge, the Tribunal erred and incorrectly interpreted themeaning and application of the need for independence; to be free of compromisinginfluences; and to act in the best interests and for the benefit of the Ks. He says theTribunal erred in inferring that the further payment of $50,000 by the Ks to him in2009 was a capital payment towards the property. The payment, Mr Hong says, wasfor the purpose of clearing arrears of rent that had been agreed to be paid to his trustaccount to cover him for interest. He says the Tribunal erred when determining theKs had been financially disadvantaged. They could not have been on the facts, as theyhad no equity left in the property.[47] On the third charge, the Tribunal erred and incorrectly determined facts whenit found he had, by his dealings in the property, procured a personal advantage. Herepeats that the Ks had no equity left in the property and they had withheld rentpayments properly owing to him.[48] Additionally, Mr Hong submits the Tribunal's decision is biased, unreasonableand not in accordance with the rule of law. The Tribunal failed to provide its reasonsfor preferring the Ks evidence to his evidence.[49] Mr Hong further submits that the decision is a travesty of justice as he had bentover backwards to help the Ks and did not charge them for his work apart from workundertaken by his legal executive. He was the one who had suffered, not his formerclients.[50] Finally, Mr Hong says that cultural considerations should be taken intoaccount. He refers to a study undertaken by Ms Mai Chen.7 Mr Hong relies on astatement in the paper as to the perception, corroborated by a literature review, thatpeople of Chinese ethnicity are more likely to conduct business by a "handshake", onthe basis of a trusting relationship, than to complete transactions with writtenagreements. Mr Hong says he undertook the loan to the Ks by a mere handshake inaccordance with his culture. He said this should have been taken into account.Respondent's response – liability decision[51] Mr Collins for the respondent, Auckland Standards Committee No. 5(Standards Committee), submits that the appeal against the misconduct finding shouldbe dismissed. In summary he says that Mr Hong's intervention in the proprietary andfinancial affairs of his clients when they were experiencing difficulty in completingthe purchase of the property, was premised on a misguided notion of charity in whichMr Hong did not accept that he was bound by professional rules or standards at all.The notion of charity was misguided because it failed to acknowledge Mr Hong'sparamount professional responsibilities.[52] Mr Collins submits that the manner in which Mr Hong took control of theproperty, through to and including his sole personal ownership and his status as hisformer clients' landlord, involved serious breaches of the rules restraining lawyersfrom personally entering into proprietary and financial dealings with their clients.[53] Mr Collins submits that a finding at a level of culpability less than misconductwould not have adequately reflected the nature and extent of Mr Hong's professionalfailings.7 Mai Chen Culturally and Linguistically Diverse Parties in the Courts: a Chinese Case Study(November 2019).Approach on appeal[54] An appeal to this Court under s 253 of the Act from a decision of the Tribunalmust be by way of rehearing.8 Whether the appeal is against a finding of misconductor against penalty (with the exception of costs) the appeal is a general appeal.9[55] The appellate court considers the merits of the case afresh.10 It must bepersuaded that the decision under appeal is wrong11 but the weight the appellate courtgives to the reasoning of the court or tribunal below is a matter for the appellate court'sassessment.12 The appellate court may consider it appropriate to give due regard to aspecialist tribunal's assessment.13[56] The parties to the appeal are entitled to judgment in accordance with theopinion of the appellate court, even where that opinion is an assessment of fact anddegree and entails a value judgment.14 If the appellate court's opinion is different fromthe conclusion of the court or tribunal below, then the decision under appeal is wrongin the only sense that matters, even if it was a conclusion on which minds mightreasonably differ.15Transactions or financial dealings with clients[57] In his submissions, Mr Collins provides a helpful summary of the establishedprinciples in relation to lawyers entering into transactions or financial dealings withtheir clients. Mr Hong has no issue with the principles as summarised by Mr Collins.8 Section 253(3)(a).9 Sisson v Standards Committee (2) of the Canterbury-Westland Branch of the New Zealand LawSociety [2013] NZHC 349, [2012] NZAR 416 at [15]; and Davidson v Auckland StandardsCommittee 3 [2013] NZHC 2315, [2013] NZAR 1519 at [6]-[9].10 Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [31].11 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 2013, [2008] 2 NZLR 141 at [13].12 Kacem v Bashir, above n 10, at [31]. No deference is required beyond the customary cautionwhen seeing the witnesses gives an advantage when credibility is important (Austin, Nichols & CoInc v Stichting Lodestar, above n 11, at [13]).13 Orlov v New Zealand Lawyers and Conveyancers Disciplinary Tribunal [2014] NZHC 1987,[2015] 2 NZLR 606 at [191]; and Young v National Standards Committee [2019] NZHC 2268 at[34].14 Davidson v Auckland Standards Committee, above n 9, at [6]-[9].15 Austin, Nichols & Co Inc v Stichting Lodestar, above n 11, at [16]; and Kacem v Bashir, aboven 12 at [32].It is the Tribunal's application of those principles to the facts that Mr Hong argues waswrong.[58] It is fundamental that all lawyers have a professional duty to avoid conflictsbetween their own interests and those of their clients. That duty is expressed fiduciaryterms:16The general principles are well settled. A solicitor has a fiduciary duty inequity to his client. The relationship between solicitor and client carries withit obligations on the solicitor's part to act with absolute fairness and opennesstowards his client. Like any other agent, but to a higher degree because of hisposition as an officer of the Court and the privileges which the law attaches tolegal professional confidence, he is bound to observe the utmost good faithtowards his client.[59] It is a breach of a lawyer's professional and fiduciary duties to act for a clientin a matter in which the lawyer has an interest, without proper disclosure and informedconsent.17 Both the RPC (r 1.03) and the CCCR (r 5.4) impose an absolute prohibitionon lawyers acting or continuing to act for a client in any matter in which the lawyerhas an interest unless the matter is uncontentious and the interests of the lawyer andthe client correspond in all respects.[60] Foresight is required. Rule 5.4.3 provides that a lawyer must not enter into anyfinancial, business or property transaction or relationship with a client even wherethere is a possibility of the relationship of confidence and trust between lawyer andclient being compromised. The principle of undivided loyalty has been expressed asfollows:18The solicitor must be dedicated to the best interests of the client. If thesolicitor is to have business dealings with the client the requirements of thelaw are rigorous. That is not simply because of the opportunity that exists insuch a case for the confusion of roles. Rather it is because the solicitor ispresumed to be in a position of special influence over the client. A client mustbe able to place complete reliance on the professional advice of the solicitorand is entitled to expect that the solicitor will serve and protect the client'sinterests at all times. Wherever there is potential for conflict of interest, there16 Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 (CA) at [89].17 Day v Mead [1987] 2 NZLR 443 (CA).18 Simms v Craig, Bell & Bond [1991] 3 NZLR 535 (CA) at 543-544.is a risk that the advice of the solicitor may be influenced insidiously or evenunconsciously by the prospect of benefit (other than professionalremuneration) to the solicitor from the transaction which the solicitor isretained to carry through. If the client is to be in a position to make aninformed decision about the proposed transaction he or she must be fullyinformed by the solicitor of the transaction and of all the implications for theclient of entering into it. In short the client must be made aware of everycircumstance relevant to his or her decision.[61] Circumstances may change during the course of the retainer. Even where thelawyer considers he or she may continue to act, he or she must advise the client of theright to receive independent advice and explain to the client that, should a conflictarise, the lawyer must cease to act (r 5.4.4, CCCR).[62] The concept of informed consent arises under r 1.04, RPC and rr 5.4.4 and6.1.1, CCCR. The requirement of informed consent involves the following steps inwhich the lawyer must:19(a) recognise a conflict of interest, or a real possibility of one;(b) explain to the client what the conflict is;(c) also explain to the client the implications of that conflict (for instance,it may be that the lawyer could not give advice which ordinarily thelawyer would give);(d) ensure that the client has a proper appreciation of the conflict, and itsimplications;(e) advise the client to take independent advice and arrange such advice ifrequired; and(f) obtain the informed consent.19 Taylor v Schofield Petersen [1999] 3 NZLR 434 (HC) at 440.[63] "Informed consent" means:20 consent given in the knowledge that there is a conflict between the partiesand that as a result the solicitor may be disabled from disclosing to each partythe full knowledge which he possesses as to the transaction or may be disabledfrom giving advice to one party which conflicts with the interests of the other.Did the rules apply to Mr Hong?[64] Before I consider each of the charges and the individual rules upon which thecharges are based, I address Mr Hong's over-arching submission that the rules did notapply to him on the facts. As is apparent from Mr Hong's responses to questions fromthe Chair and members of the Tribunal and under cross-examination, his position was(and continues to be) the rules did not apply because the arrangement with his clientswas not a joint venture. It was simply a loan, intended to be short-term to assist themwith their property purchase. He adds that it was the clients who have taken advantageof him by abusing his assistance, and not the other way around. An example of someof Mr Hong's responses to questions are as follows:The Chair to Mr HongQ Can I just make sure that I'm understanding you, in that is it yourposition that the rules do not apply to this matter because I was givingpersonal help?A That's right, I step in to assist them then to settle but of course I needmy funds to be repaid and protected and it was as simple as that.Q So can I summarise it then by (1) – by saying, "I'm going to have myfunds protected (a) by transferring the property to the "A BGH Trusteeship Limited holding.Q And then?A Yeah, so I could then decide how long am I prepared, you know, toallow the funds, allow them, you know, to better their financialsituation, yeah.20 Clark Boyce v Mouat [1993] 3 NZLR 641 (PC) at 646.[65] Then there was the following in cross-examination by Mr Collins:Cross-examination Mr CollinsQ Mr Hong is it your position that in all the events surrounding thepurchase of the Kerikeri property from the time the agreement wasentered into in September 2005 through to the time when youpersonally took title [sic] that property and borrowed money againstit is it your position that you have done nothing professionally wrongin any of these events?A Yes.Q That is your position?A That's right.Q And because of this case you've been confronted with some rules, theold rules of professional conduct and the current conduct in [sic] clientcare rules about conflicts and dealing with matters where lawyers gointo dealings with their own clients, you've acquainted yourself withthose rules, haven't you?A Yes.Q And you consider that you have not infringed any of those rules at anyof the events we're looking at today?A No.Q Okay. And the reason for the absence of any duty to people like theKs when you're entering into a transaction with them is becauseyou're doing it to help them, is that basically sound?A That's right. That's right.[66] There was the following question from a Tribunal member:Q But your position on those conflict of interest rules is that they didn'tapply to you in this situation?A That's right because I've nothing to gain. Now if you enter into abusiness arrangement and you've got a profit motivation which is inwriting and enforceable against, you know, the client, then yes, then aconflict.[67] And, finally, there were the following questions from the Chair:Q Mr Hong, I just want to conclude our discussion today by just notingthat you told Mr Collins in his very first question to you that from thebeginning of all of this to the end your view was that you had donenothing professionally wrong?A No.Q And so, and you consider that you have not infringed any of the rulesbecause you were doing something to help your then clients and thatyou were acting out of conscience?A Yes.Q I just want to confirm the fact that I recorded your position with youand that, and ask, is it still your position then that "The rules do notapply to this matter because I was giving personal help and that wasneeded, but I needed my funds to be protected"?A Repeat, yes that's right.Q And either by transferring the property to the trustee BGH?A Yes.Q And then, if necessary, from your point of view, selling to get theproperty to get back the funds that you have advanced?A That's right.[68] In the context of his evidence as to his charitable motives for assisting hisformer clients, Mr Hong made reference to his "Benevolence on the Conscience Fund"which was mentioned in a judgment in this Court,21 and on appeal from that decisionin the Court of Appeal.22 That case was concerned with Mr Hong's unsuccessfulattempt to claim unpaid loans as tax deductible losses for his legal practice.[69] Under cross-examination during the Tribunal hearing, Mr Hong accepted thathis loan to the Ks was another example of the kind of loans under consideration in theearlier case. I note that in the High Court, Jagose J made the observation thatMr Hong's loans to clients raised professional issues for him:23[20] Last, there is no sufficient connection between Mr Hong's legalservices business, and the financial arrangements he seeks to deduct as baddebts. That the two loans at issue happen to be to his clients is not enough.21 Hong v Commissioner of Inland Revenue [2018] NZHC 2539.22 Hong v Commissioner of Inland Revenue [2019] NZCA 336.23 At [20].The two services do not naturally or easily co-exist. Mr Hong lending moneyto his clients raises significant issues under the Lawyers and ConveyancersAct (Lawyers: Conduct and Client Care) Rules 2008 – specifically, inaddressing conflicting interests – about which there is no indication Mr Hongis aware or has addressed. [70] Then on appeal the Court of Appeal said:24[45] In our view, Mr Hong cannot have matters both ways. If the loans areadvanced to clients (whether through his firm or through a separate entity suchas his company Orano Holdings Ltd), there is the potential for a conflict ofinterest and Mr Hong would be required to comply with the relevant rulesrequiring independence, including a prohibition on engaging in conflictingbusiness activities. Prioritising the benevolent aspect of the lending over thefinancial aspect does not remove that risk and, as we have already noted, tellsagainst it being a normal business activity.[71] I accept that Mr Hong's conduct under scrutiny in this case occurred before theabove judgments in the High Court and Court of Appeal, but the point is that Mr Hongwas aware of those judgments at the time of the hearing in this case before theTribunal.[72] Nevertheless, he persisted in his view that the rules did not apply to him. Thatargument cannot be sustained as a matter of principle. He was acting for a client on atransaction that involved the purchase of a property. Mr Hong provided funds toenable the purchase to be completed. He acted for both himself and the client. Therecan be no doubt that the rules applied. And they applied regardless of whether therewas to be joint ownership or an absence of any profit motive on the part of Mr Hong.But, in any event, there was evidence that contradicts Mr Hong's assertion there wasno "profit motivation" and his assertion there was to be no joint ownership. That leadsme to the next section of this judgment in which I address Mr Hong's criticisms of theTribunal's factual findings.24 At [45].Tribunal's factual findings[73] The Tribunal made only a limited number of factual findings. It consideredthat it was not necessary to address in detail all the particulars of the charges given thefacts that Mr Hong did admit and "the resolute stand he has taken to theseproceedings".25 In my view that was an appropriate approach.[74] The limited factual findings that were made in the liability decision were notinconsistent with Mr Hong's evidence. The Tribunal did not make a finding onwhether the arrangement was a "joint venture" or a loan. It simply noted the respectivepositions of Mr K and Mr Hong. And it was not necessary for the Tribunal to make afinding on this issue for the purpose of considering whether or not the charges wereproven.[75] Similarly, in the liability decision the Tribunal did not make a finding as towhether Mr Hong entered into the arrangement with a profit motive in mind. Again itwas not necessary to determine that issue in order to decide if the charges were proven.However, in the penalty decision the Tribunal referred to Mr Collins' submission thatMr Hong entered into "a personal transaction with clients where he had an eye topersonal profit".26 The Tribunal said it adopted Mr Collins' submissions as its reasonsfor the orders it made.[76] I therefore turn to the evidence on that issue and the issue of an alleged jointventure which is bound up with it.[77] The proposal at the outset, as described by Mr K, included that the propertywould be settled under the joint ownership of CLT and Mr Hong personally or an entityunder his control. Ownership was to be in equal shares between the parties. Once theproperty was under the joint ownership of CLT and Mr Hong, it would either be sold25 Auckland Standards Committee 5 v Hong, above n 1, at [39].26 Auckland Standards Committee 5 v Hong, above n 2, at [12](a).for a profit on the then rising market or held to earn rental income. The joint ownerswould share in any income or any capital gain when it was sold. When CLT was in aposition to do so, it would purchase its half interest from Mr Hong.[78] In the absence of any documentation at the time the arrangement was enteredinto, the best evidence is in communications by Mr Hong prior to any issues about hisconduct arising.[79] On 27 November 2007, Mr Hong sent an email to the Ks concerning theintended settlement of the purchase of the property and his suggestion that the Kscould buy him out at that time. The email reads as follows:The caveats have come off the property. We can now transfer the property toourselves in equal half shares. If you guys want the house as your homestead,you could take me out with a good offer I hope.Otherwise arrange for a Westpac mortgage and inform Westpac [80] This email supports Mr K's evidence that the arrangement was to be for jointownership of the property as between CLT and Mr Hong. It also indicates thatMr Hong was seeking to make money out of the arrangement.[81] Second, in an email to the Ks' accountant on 20 August 2009, Mr Hongreferred to the arrangement for the purchase of the property. The email included thefollowing: I have had to step in to assist, took an assignment of the agreement andsettled. I am hoping the Trust will be able to repurchase the property from meonce it is in a better financial situation after getting rid of all its loss [sic]businesses. If not then we could go half share each. Unfortunately the clientcould not raise ½ of the funds, at this stage either.If client could not purchase then it may be that I will have to resell it. On thesale thereof and if there is a gain, the net proceeds will first be applied towardsan adjustment taking into account rental income received, interest atWestpac's home lending rate (which the client would be charged at, had itbeen able to raise the funds) on the loan I advanced and any expenses. Anygain will then be equally divided and the same goes with any losses.(emphasis added)[82] This email again indicates Mr Hong intended to profit from the arrangement.It also mentions a half share in the property as between CLT and him.[83] Third, the Court of Appeal, referring to Mr Hong's evidence before theTaxation Review Authority, said this:27 In his evidence to the Authority he explained that the fund was used tohelp clients whom he considered would benefit from his assistance. Hiscriteria for access to the fund were as follows:(a) it was to help longstanding clients;(b) the clients were people who were in financial difficulty butwhom he was "confident" could overcome their difficultieswith his help;(c) the clients had to be "good people"; and(d) the need for assistance must be related to a matter that cameup in the course of acting for the client.[8] In return he says the clients had to agree to "do right" by him and paynot just interest, but also a bonus once he had got them out of theirdilemma.(emphasis added)[84] Mr Hong acknowledged that the loan to the Ks was in the same category as theloans under consideration in the High Court and Court of Appeal taxation case.Mr Hong said the following in his evidence:Q And, finally, in return the clients had to, quote, "To do right by youand pay not just interest but also a bonus".A Yes.Q Is that correct?A That's right.Q So those terms applied to the [Ks], did they?A On the conscience, yes.27 Hong v Commissioner of Inland Revenue, above n 22, at [7].[85] Although Mr Hong says the bonus requirement did not apply in this case, theevidence referred to above, in my view, contains an acknowledgment that there was tobe a bonus payment at the end of the arrangement.[86] And fourth, in taking personal control of the property, Mr Hong was able touse it to his own advantage by offering it as security for a loan to pay personal legalfees.[87] In my view the above evidence shows that, contrary to his assertions before theTribunal and again in this Court, Mr Hong did intend to profit from the arrangementwith the Ks and that the arrangement was to be for joint ownership as between himselfand CLT.[88] Mr Hong also challenges what he asserts is a factual inference that the $50,000payment made to him by Mr K on 11 February 2009 was a capital payment, as opposed(he says) to payment of rent.[89] There was disagreement between Mr K and Mr Hong later in 2009 over thenature of the payment. In an email dated 20 August 2009, which Mr Hong sent to thetrust's accountant, copying in Mr K and Ms D, Mr Hong described the payment asrent. Having seen the email, Mr K telephoned Mr Hong, as he was unhappy about it.Mr K said he told Mr Hong that the payment of $50,000 was not for rent, but it was apart-payment for the trust's interest in the property. He said Mr Hong replied only bysaying that the Ks needed to make him a fair offer for the property.[90] In the absence of any documentation at the time the payment was made and inthe absence of any cross-examination on this issue, it is not possible to reach a viewon what the payment was for.[91] In its liability decision, the Tribunal simply referred to CLT paying a further$50,000 to Mr Hong. Then in the context of its discussion of the alleged breach ofr 5.4.3 it again referred to Mr Hong receiving $50,000 from CLT. It did not make afinding on whether this was a capital payment or payment of rent. It was not necessaryfor it to do so. It was a payment by a client of a substantial sum without any associateddocumentation. The lack of clarity as to whether this was a rental or capital payment,underscores the perils that the rules are designed to avoid. I do not accept Mr Hong'scriticism of the way in which the Tribunal referred to this evidence.[92] Mr Hong also takes issue with the Tribunal's statement that he had procured apersonal advantage. I do not accept there was an error in this regard. Mr Hong gainedtitle to a property which his clients had contracted to buy. He was later able to use theproperty as security for personal borrowings.[93] I now turn to address each of the charges and the relevant rules.Charge 1: r 1.031.03 A practitioner must not act or continue to act for any person where there is aconflict of interest between the practitioner on the one hand, and an existingor prospective client on the other hand.[94] A key plank of Mr Hong's argument in this Court was that there was no jointventure. I have found there was an arrangement proposed for the trust and Mr Hongto own the property together. But in the end it does not really matter for the purposesof the rules if it was a "joint venture" or some other financing arrangement.[95] This is what Mr Hong said in his affidavit when describing the arrangement:1st August 2006: Based on their representations to me [a] they will repay meas soon as they are able to provide their financial accounts to Westpac to uplifttheir mortgage with them [b] they will reimburse me the interest I had myfunds on with Westpac [c] the [Z] property was to be sold, put on the market[d] they will start to pay rent to me at 400/week and [e] we will do a finaladjustment when my funds were repaid and [f] the [Z] property was to beassigned on to me, the title transferred on to BGHTL to await their redemptionfrom me such to have protected my funds.[96] What Mr Hong describes is a financing arrangement with a client for thepurchase of a property. The CLT had already paid a deposit to the vendor, a furthersum of $5,000 to Mr Hong's trust account and Mr Hong was to personally participatein the property purchase, providing funding to complete the purchase. He was toacquire an ownership interest (he said as security for the loan).[97] I have found that the documentary evidence supports Mr K's evidence thatthere was to be joint ownership with the aim on Mr Hong's part of making a gain fromthe transaction. But in the end, even on Mr Hong's version, this was a financingarrangement (in which he provided funds either personally or through a company hecontrolled) with a client.[98] From the time the arrangement was discussed between Mr Hong and the Ks,he was acting for both his own interests and Ks' interests. Even on his version, thoseinterests were in conflict. He was to take ownership in circumstances where the Ks'trust had paid a deposit towards the purchase price. As the Ks' lawyer, he had a dutyto protect and advise them about the terms and implications of the proposedarrangement. At the same time he was advancing his own interests. He had aresponsibility to advise the Ks of the consequences of default on their part incircumstances where he was intending to acquire ownership of the home that the Ksfamily trust was purchasing.[99] Mr Hong should have ceased acting for the Ks as soon as the joint financing(and ownership) arrangement was discussed.[100] There was a breach of r 1.03.Charge 1: r 1.041.04 A practitioner shall not act for more than one party in the same transaction ormatter without the prior informed consent of both or all parties.[101] The allegation is that Mr Hong breached this rule because he acted for morethan one party in the same transaction, namely himself and his clients, withoutinformed consent.[102] The evidence of the Ks was that at no time throughout the arrangement werethey told by Mr Hong to take independent legal advice.[103] In his affidavit, Mr Hong said, "this allegation that I failed to advise the Ks totake independent legal advice cannot stand ". He did not however identify anyevidence that he did advise the Ks to take independent legal advice. Rather, in hisaffidavit, he went on to say that he had bent over backwards and had acted to protectthe Ks but could not further compromise his own situation. He insists it was the Kswho had abused his assistance.[104] Mr Hong completely misses the point. The fact he considered he was helpingthe Ks in circumstances when he was acting both for himself and for their interests inthe purchase of their home is no answer to the requirements of the rules. He did notadvise the Ks to take independent legal advice and they did not give their priorinformed consent.[105] There was a breach of r 1.04.Charge 1: r 1.071.07 In the event of a conflict or likely conflict of interest among clients, apractitioner shall forthwith take the following steps:(i) advise all clients involved of the areas of conflict or potential conflict;(ii) advise the clients involved that they should take independent advice,and arrange such advice if required;(iii) decline to act further for any party in the matter where so acting wouldor would be likely to disadvantage any of the clients involved.[106] The allegation is that Mr Hong breached r 1.07 because there was a conflict orlikely conflict between his interests and his clients' interests in circumstances wherehe was acting for himself and he failed to take the necessary steps under the rule.[107] Mr K's evidence was that at the time the proposal was discussed with Mr Hong,they trusted him implicitly and were appreciative of his help. Mr K further said:I was not conscious of and did not put my mind to the professional issues thatarose when Mr Hong became personally involved in the settlement of [theproperty] because I trusted Mr Hong, as my lawyer, completely and I neverthought to question whether he was doing anything wrong or failing in hisduties to me and my family.[108] Ms D's evidence was that:As I have explained, I trusted and respected Mr Hong as our lawyer and didnot have any reason to question his motives or his professionalism at the timeof the joint venture proposal. I did not think to obtain independent legaladvice, since I thought that was what he was meant to be doing, and he did notadvise me to do so. He never mentioned it in my presence and, so far as I amaware, he did not suggest it to [Mr K] either.[109] From the time of the proposed funding arrangement, there was a conflict orlikely conflict of interest between Mr Hong and the Ks. None of the steps required inr 1.07 was taken by Mr Hong. He breached this rule.Charge 2: rr 5, 5.1 and 5.25 A lawyer must be independent and free from compromising influences orloyalties when providing services to his or her clients.Independent judgement and advice5.1 The relationship between lawyer and client is one of confidence and trust thatmust never be abused.5.2 The professional judgement of a lawyer must at all times be exercised withinthe bounds of the law and the professional obligations of the lawyer solely forthe benefit of the client.[110] The allegation under these rules is that Mr Hong lacked independence when hedealt with the property as if it were his own. The key issue here is independence.[111] As will be recalled, the transfer which finally occurred on 31 July 2008 was toMs D and Mr Hong. On one view of the matter it could perhaps be said that theintention was to transfer the property to the trustees of CLT. Although Mr Hong wasno longer a trustee, having been replaced by BGH Trusteeship Ltd on 13 June 2007,he gave his explanation for this (at [11] above).[112] However the transfer that followed on 6 August 2008 to BGH Trusteeship Ltdwas inconsistent with the ownership of the property by the trustees. Ms D continuedas a trustee at that time. Under cross-examination Mr Hong's explanation was asfollows:Q what was the justification for the transfer to BGH Trusteeship Ltdas the sole owner in your recollection of it?A Say?Q What was the justification for that?A My recollection is very clear. I was to control the sale, right, if theydo not sell, as to how long I leave the funds in to allow them torestructure and all that.Q All right.A Yeah.Q So this was implementing the assignment concept?A That's right the assignment of the property to me. It was purely, right,to have the funds repaid.Q So it was, to put it in plain terms, to give you the unilateral power tosell the property if you weren't being repaid or if the Ks were nothonouring their agreement?A Yeah, because it was agreed at the very beginning, right, from thetenancy agreement, we were to sell the property to repay me backASAP.Q And is it your evidence that that does not put you into a conflictingrelationship with your clients?A No, as I said my interpretation of conflict of interest is this, if you aregoing to benefit from a transaction or business deal –Q And your answer is that you do not consider that you had a conflictwhen you became the only person in control of the title?A No, no.[113] Ms D's evidence was that: Less than a week later, on 6 August 2008, the title records the transfer ofthe property to the sole ownership of BGH Trusteeship Ltd. Mr Hong told meabout this but did not give me any reasons, only saying that I needed to trusthim and that it was the right thing to do. While [Mr Hong's replacementby BGH Trusteeship Ltd] may explain the need for the company to be on thetitle,rather than Mr Hong personally, it does not explain why I was removed fromthe title. I was a trustee throughout that time. I remember [Mr K] telling methat I should trust Mr Hong because that that was what he had advised and thatI should do what he said and sign the necessary documents.[114] The outcome was that Mr Hong had sole control over the property. Theevidence of Mr K and Ms D was that this was not explained to them. Mr Hong doesnot suggest that it was.[115] There were then the two subsequent transfers on 4 August 2011 and12 December 2012 to Nominees and Trustees Ltd (another of Mr Hong's companies)and then to him personally.[116] In the meantime, and before the two subsequent transfers, CLT, as alreadynoted, paid $50,000 on 11 February 2009. This was done without any accompanyingadvice or explanation or documentation to protect the interests of CLT. Mr Hongwould have it that this payment was for rent, whereas Mr K's position is that this wasa further payment towards the trust's equity in the property. As I have noted above, itis not necessary to resolve this issue.[117] What can be said is that from the time of the transfer on 6 August 2008, on anyview of things, any notion of independence was not present. Mr Hong dealt with theproperty as if it was his own. That continued when he received the $50,000 paymentfrom the Ks (whether as rent or a capital payment) and when he acted in the subsequenttransfers of the property.[118] There was a breach of rr 5, 5.1 and 5.2.Charge 2: r 5.45.4 A lawyer must not act or continue to act if there is a conflict or a risk of aconflict between the interests of the lawyer and the interests of a client forwhom the lawyer is acting or proposing to act.[119] Mr Collins submits that the reality of Mr Hong's position, at all times after31 July 2008, was that he had a disqualifying conflict of interest because he wasobliged to protect the Ks and their trust while at the same time advancing his owninterests in a substantial financial and property transaction.[120] I accept Mr Collins' submission that Mr Hong breached this rule by continuingto act in his dealing with the property, most particularly when he transferred it to BGHTrusteeship Ltd as the sole owner. From this time, Mr Hong had sole control over theproperty.Charge 2: r 5.4.25.4.2 A lawyer must not act for a client in any transaction in which the lawyer hasan interest unless the matter is not contentious and the interests of the lawyerand the client correspond in all respects.[121] Mr Hong continued to act for the Ks after 6 August 2008. Having acquired aninterest in the property because of his personal loan and his ownership status, hisinterests and the interests of his clients did not correspond in all respects.[122] Mr Hong breached this rule.Charge 2: r 5.4.35.4.3 A lawyer must not enter into any financial, business, or property transactionor relationship with a client if there is a possibility of the relationship ofconfidence and trust between the lawyer and client being compromised.[123] The first issue that arises with this rule (and the following rule) is whetherMr Hong "entered into" a relevant transaction or relationship with the Ks after 31 July2008. On the one hand it might be said that the transactions and the relationship weresimply continuations of a transaction or relationship entered into previously.[124] Relevant events that occurred were the transfer of the property into the soleownership of BGH Trusteeship Ltd and the two subsequent transfers. There was alsothe Ks' payment to Mr Hong of $50,000.[125] Although these were events on a continuum, I consider each can properly beseen as a separate transaction:(a) the wording of the rule (and r 5.4.4) contemplates individual financialor property transactions;(b) the rule would be deprived of its force if it did not apply after the firsttransaction in the series.[126] I consider the rule should be read so that each of Mr Hong's actions can beidentified as a separate transaction in which the duty to protect the Ks' interests arose.At each stage he needed to address his professional duties. Because of his conflict ofinterest in each of the transactions I have referred to, there was a possibility that therelationship of confidence and trust between lawyer and the client being compromised.[127] Mr Hong breached this rule.Charge 2: r 5.4.45.4.4 A lawyer who enters into any financial, business, or property transaction orrelationship with a client must advise the client of the right to receiveindependent advice in respect of the matter and explain to the client that shoulda conflict of interest arise the lawyer must cease to act for the client on thematter and, without the client's informed consent, on any other matters. Thisrule 5.4.4 does not apply where –(a) the client and the lawyer have a close personal relationship; or(b) the transaction is a contract for the supply by the client of goods orservices in the normal course of the client's business; or(c) a lawyer subscribes for or otherwise acquires shares in a listedcompany for which the lawyer's practice acts.[128] None of the exceptions in (a) to (c) applies. Mr Hong accepts he did not advisethe Ks of their right to receive independent advice.[129] There was a breach of this rule.Charge 2: r 5.4.55.4.5 In this rule, a lawyer is deemed to be a party to a transaction if the transactionis between entities that are related to the lawyer by control (including atrusteeship, directorship, or the holding of a power of attorney) or ownership(including a shareholding), or between parties with whom the lawyer or clienthas a close personal relationship.[130] It is clear that Mr Hong was a party to the transaction in which the propertywas successively transferred, first to companies under his control and then to himselfpersonally. As already noted, he was the sole director and shareholder of BGHTrusteeship Ltd and Nominees and Trustees Ltd. Mr Hong was therefore deemed topersonally be a party to all those transactions.[131] There was a breach of this rule.Charge 2: rr 6 and 6.16. In acting for a client, a lawyer must, within the bounds of the law and theserules, protect and promote the interests of the client to the exclusion of theinterests of third parties.Conflicting Duties6.1 A lawyer must not act for more than 1 client on a matter in any circumstanceswhere there is a more than negligible risk that the lawyer may be unable todischarge the obligations owed to 1 or more of the clients.[132] Mr Hong, having acted for himself and the Ks after 31 July 2008 in thecircumstances I have discussed, created a more than negligible risk that he would beunable to discharge the obligations he owed to the Ks. There was no informed consent.[133] Mr Hong was in breach of this rule.Charge 3: procuring a personal advantage to the detriment of his clients contraryto s 4(d) of the Act[134] Section 4(d) of the Act provides:4 Fundamental obligations of lawyersEvery lawyer who provides regulated services must, in the course ofhis or her practice, comply with the following fundamentalobligations:(d) the obligation to protect, subject to his or her overriding dutiesas an officer of the High Court and to his or her duties underany enactment, the interests of his or her clients.[135] The allegation against Mr Hong on this charge was that he was in breach ofone of the fundamental duties of a lawyer which, in this case, is to protect the interestsof his clients.[136] Mr Hong failed to do so by procuring a personal advantage for himself.Mr Hong became the owner of the property as a result of the consecutive transfers oftitle. This all flowed from a transaction in which his duty was to protect and advancethe interests of his clients, not to serve his own interests. Mr Hong acquired theproperty without the informed consent of the Ks, and he was in breach of thefundamental obligation in s 4(d). Mr Hong submits that he has ended up making aloss on the property. Whether or not Mr Hong made a loss is irrelevant. But, as noted,he has used the property as security for a personal loan. As to whether the clients hadany equity left in the property, that is irrelevant. However on their evidence they paida deposit of $45,000, $40,000 of which was paid direct to the vendor. Mr Hong doesnot dispute that. The Tribunal was correct in its finding on this charge.[137] Having upheld the Tribunal in its decision finding the charges proven, itfollows that I do not accept Mr Hong's submission that the Tribunal was concernedwith the form as opposed to the substance of the rules. It also follows that I do notaccept Mr Hong's submission that the Tribunal erred in interpreting the need forindependence on the facts of the case before it.Was there misconduct?[138] I have upheld the decision of the Tribunal that there were breaches of therelevant rules and, accordingly, that the charges were proven. It is next necessary toconsider whether the Tribunal was correct in determining that the conduct reached thelevel of misconduct, or whether it was more properly conduct unbecoming (charge 1)or unsatisfactory conduct (charges 2 and 3) or, in the further alternative, negligence orincompetence (all three charges).[139] In finding that the charges reached the level of misconduct, the Tribunalaccepted the submissions made by Mr Collins as set out in [38] of the Tribunal'sdecision (reproduced in [41] above). The Tribunal added that Mr Hong's conduct fellwell short of the standards required of him as a practitioner at the time.[140] Section 112(1)(a) of the Law Practitioners Act 1982, which applies to charge 1,provides that if the disciplinary tribunal is of the opinion that the practitioner has beenguilty of misconduct in his professional capacity it may, if it thinks fit, make an orderunder s 112.[141] Section 7 of the Act, which applies to charges 2 and 3, defines misconduct andprovides in relevant part:7 Misconduct defined in relation to lawyer and incorporated lawfirm(1) In this Act, misconduct, in relation to a lawyer or an incorporated lawfirm,—(a) means conduct of the lawyer or incorporated law firm thatoccurs at a time when he or she or it is providing regulatedservices and is conduct—(i) that would reasonably be regarded by lawyers of goodstanding as disgraceful or dishonourable; or(ii) that consists of a wilful or reckless contravention ofany provision of this Act or of any regulations orpractice rules made under this Act that apply to thelawyer or incorporated law firm or of any other Actrelating to the provision of regulated services;[142] Mr Hong submits that the Ks did not suffer any financial loss and he did notgain anything. There was no finding of dishonesty against him. He trusted the Ks andit was an oversight not to have the loan documented and signed before an independentlawyer. He submits this does not reach the level of misconduct.[143] Mr Collins submits that the Tribunal was correct in finding there wasmisconduct. He refers to what he describes as the deliberate nature of the scheme; theabsence of any attempt by Mr Hong to recognise any conflict and the need for the Ks,at various points over an extended period, to have independent advice; and Mr Hong'spersistence in saying that he had done no wrong and that the rules did not apply tohim.[144] The Court of Appeal has observed that the definition of misconduct in the Actmay affect the application of authorities decided under the Law Practitioners Act:28Unlike the Law Practitioners Act 1982, which the current Act repealed andreplaced, there is a lengthy definition of what constitutes "misconduct" in ss7–11 and "unsatisfactory conduct" in ss 12–14 of the Act. These definitionsmust be kept in mind when considering the applicability of the authoritiesdecided under the earlier legislation. The definition of misconduct relevantlyincludes (under s 7(1)(a)(i)), conduct of a lawyer when providing regulatedservices "that would reasonably be regarded by lawyers of good standing asdisgraceful or dishonourable". Misconduct is also defined to include certainwilful or reckless contraventions or failings (s 7(1)(a)(ii) and (iii)) andcharging grossly excessive costs for legal work (s 7(1)(a)(iv)).[145] However, it is necessary in this appeal to consider those authorities for thepurposes of charge 1. An accepted starting point is Complaints Committee No 1 of theAuckland District Law Society v C where Winkelmann J, as she then was, givingjudgment for the Full Court, stated that adjectives such as "disgraceful","dishonourable" and "reprehensible" describe the "gravity of the conduct" but "reveallittle of the type of conduct intended to be caught".29[146] The Judge went on to say that the "essential characteristics of conduct that willamount to professional misconduct are well described in Re A (Barrister and Solicitorof Auckland)", particularly endorsing the statements of Kirby P in Pillai v Messiter(No 2) referred to in Re A (Barrister and Solicitor of Auckland).30 The Judge notedthat Kirby P's conclusion was that "professional misconduct" did not include "mereprofessional incompetence" but required more: "a deliberate departure from acceptedstandards or such serious negligence as, although not deliberate, to portray28 J v Auckland Standards Committee 1 [2019] NZCA 614 at [32].29 Complaints Committee No 1 of the Auckland District Law Society v C [2008] 3 NZLR 105 at [30]30 At [31].indifference and an abuse of the privileges which accompany registration [in aprofession]".31[147] This Court, again sitting as a Full Court, addressed these issues further inShahadat v Westland District Law Society, and settled on a similar approach bydistinguishing between dishonest and dishonourable conduct:32It is important to bear in mind that "dishonesty" can have differentconnotations. (It may describe criminal acts. But it may comprise actingdeceitfully towards a client or deceiving a client through acts or omissions.)"Dishonourable" behaviour on the part of a practitioner may well be differentto that which is seen to be "dishonest" in the fraudulent sense. "Dishonest"may carry a connotation of "fraudulent", whereas "dishonourable" behaviourmay cover a wide range of disgraceful, unprincipled, wrongful acts oromissions comprising blatant breaches of duties owing by a professionalperson.[148] Dishonest or dishonourable conduct was "blatant" or "deliberate" actions inbreach of "duties" owed or "privileges" held by a person in a profession.[149] As to s 7 of the Act, although Shahadat was decided under the LawPractitioners Act 1982, the reasoning of the Full Court was adopted by Wylie J inconsidering s 7 of the Act in A v National Standards Committee.33 Nor, as Whata Jobserved in Burcher v Auckland Standards Committee 5 of the New Zealand LawSociety, is disgraceful and dishonourable conduct limited to intentional wrongdoing.The Judge considered it "clear from the authorities that the presence or absence of anintentional breach of expected standards, together with the presence or absence ofharm (including financial and/or emotional harm) to a client or third person, will berelevant to the assessment".34[150] Indeed, as is made clear by Winkelmann J in Complaints Committee No 1 ofthe Auckland District Law Society v C: "While intentional wrongdoing by apractitioner may well be sufficient to constitute professional misconduct, it is not a31 At [31].32 Shahadat v Westland District Law Society [2009] NZAR 661 (HC) at [31].33 A v National Standards Committee [2020] NZHC 563.34 Burcher v Auckland Standards Committee 5 of the New Zealand Law Society [2020] NZHC 43.See Complaints Committee No 1 of the Auckland District Law Society v C [2008] 3 NZLR 105 at[31]; Deobhakta v Waitako Bay of Plenty Standards Committee [2015] NZHC 965; Ellis vAuckland Standards Committee No 5 [2019] NZHC 1384; A v Canterbury Westlands StandardsCommittee No 2 [2015] NZHC 1896.necessary ingredient of such conduct".35 Although dealing with misconduct under theLaw Practitioners Act 1982, C was adopted by Muir J in Ellis v Auckland StandardsCommittee 5 in his analysis of the terms of s 7(1) of the Act, which he described asauthoritative on the question of what constitutes disgraceful or dishonourableconduct.36[151] J v Auckland Standards Committee 1 is a helpful application of these principlesin the context of s 7 of the Act.37 J was a legal practitioner who was found guilty of acharge of misconduct by the Tribunal. That decision was appealed to the High Courtand Jagose J found the misconduct charge proved. The facts of the case were complexbut turned on the mistaken payment of a sum of money into J's trust account by theformer employer of his client, with whom a settlement had been reached. The fundswere incorrectly used by J, rather than returned. It was more than two years beforethe error was discovered.[152] The charge of misconduct described the actions of J as disgraceful ordishonourable, so came within s 7(1)(a)(i). J was given leave to bring an appeal to theCourt of Appeal on a question of law. Much of the appeal was concerned with thecategories of conduct in the Act. The Court of Appeal found the Tribunal was entitledto find misconduct because "J's proven failings went beyond negligence and involvedbreaches of his fiduciary duty to his client".38 A lack of reasonable care alone is notsufficient to constitute misconduct but breaching a practitioner's fiduciary duty to aclient does amount to misconduct.[153] The present case is one where a practitioner entered into a financial transactionwith his clients, without telling them to obtain independent legal advice and whichresulted in a conflict of interest and breach of his duties to his clients. This conductcontinued over an extended period. It resulted in Mr Hong obtaining legal title to theproperty which the clients, through their family trust, entered into an agreement topurchase.35 Complaints Committee No 1 of the Auckland District Law Society v C [2008] 3 NZLR 105 at [33].Citing Re A (Barrister and Solicitor of Auckland) [2002] NZAR 452 (HC) at [49]-[51].36 Ellis v Auckland Standards Committee 5 [2019] NZHC 1384.37 J v Auckland Standards Committee 1 [2019] NZCA 614.38 At [40].[154] Mr Hong emphasises the absence of dishonesty and the lack of gain. However,the charges did not allege any dishonesty. It also cannot be said his conduct issomehow less serious because of his asserted lack of gain. At the very least, heacquired the property as a result of his status as the Ks' lawyer. He obtained title inhis own name and then he was able to use the property as security for personalborrowing.[155] Mr Hong's conduct was serious and it was on-going.[156] Mr Hong's submission that cultural considerations should be taken intoaccount does not assist him. The Court is of course aware of the need to acknowledgediverse cultural practices. But Mr Hong's cultural background cannot relieve him ofcompliance with the rules of his profession. Nor does it justify the Benevolence onthe Conscience Loan Fund as an exception to Mr Hong's professional obligations.[157] I find that, in relation to charge 1(conduct up to 31 July 2008), Mr Hong'sconduct involved such serious negligence as to portray indifference and an abuse ofthe privileges which accompany registration as a law practitioner. It wasdishonourable conduct in that his acts were disgraceful, unprincipled and wrongful,comprising blatant breaches of duties owed by him as a lawyer to his clients.[158] In relation to charges 2 and 3 (conduct from 1 August 2008) Mr Hong'sconduct was disgraceful and/or dishonourable in terms of s 7(1)(a)(i). Mr Hong'sconduct went beyond negligence and involved breaches of his fiduciary duty to hisclients.[159] Finally, there is Mr Collins' submission that the Court may take into accountMr Hong's position that he has done no wrong and the rules do not apply to him. Inmy view, this does not aggravate the conduct but it does provide assistance in termsof an analysis of the definition in s 7(1)(a)(ii). Wilful, as opposed to reckless,contravention requires some actual knowledge that the act is a contravention.39Mr Hong has steadfastly referred to his subjective belief that he did no wrong.However under s 7(1)(a)(ii) misconduct may also consist of a reckless contravention,39 Hong v Auckland Standards Committee No 5 [2020] NZHC 744 at [59].that is wilful blindness.40 In this case Mr Hong heedlessly went into the arrangementwithout addressing his responsibilities. This was a reckless contravention of therelevant rules. I find there was a misconduct under s 7(1)(a)(ii) (as well as unders 7(1)(a)(i)).[160] The Tribunal was correct to find that Mr Hong's conduct reached the level ofmisconduct. In making its findings there was no bias on the part of the Tribunal norwas its decision unreasonable. The necessary facts, which were mostly admitted byMr Hong, supported the findings on the charges and the Tribunal's finding ofmisconduct.The Tribunal's penalty decision[161] The Tribunal, in its penalty decision of 29 April 2020, made orders strikingMr Hong's name off the Roll of Barristers and Solicitors under s 242(1)(c) of the Actand directing him to pay:(a) The costs of the Law Society, totalling $29,450;(b) A refund to the New Zealand Law Society of the costs of the Tribunalin the sum of $6,923; and(c) Compensation of $8,000 to Mr K under s 156(1)(d) of the Act.[162] The Tribunal referred to the primary purpose of its penal jurisdiction as theprotection of the public and the maintenance of professional standards.41[163] In respect of striking off, the Tribunal referred to the "enduring principle" tobe applied, as set out by the High Court in Dorbu v New Zealand Law Society:42The question posed by the legislation is whether, by reason of his or herconduct, the person accused is not a fit and proper person to be a practitioner.Professional misconduct having been established, the overall question iswhether the practitioner's conduct, viewed overall, warranted striking off.40 At [59].41 Daniels v Complaints Committee 2 of the Wellington District Law Society [2011] 3 NZLR 850(HC) at [22].42 Dorbu v New Zealand Law Society No 2 [2012] NZHC 564, [2012] NZAR 481 at [35].The Tribunal must consider both the risk of reoffending and the need tomaintain the reputation and standards of the legal profession. It must alsoconsider whether a lesser penalty will suffice. The Court recognises that theTribunal is normally best placed to assess the seriousness of the practitioner'soffending.[164] The Tribunal stated that in considering the penalty of striking off, it hadconsidered the relevant factors set out in Hart v Auckland Standards Committee 1 ofthe New Zealand Law Society,43 which the Tribunal summarised as follows:(a) The nature and quality of the misconduct found to be established;(b) Previous disciplinary history;(c) Any evidence of remorse or insight;(d) The need for deterrence; and(e) Consideration of any aggravating or mitigating factors.[165] As to the seriousness of Mr Hong's conduct, the Tribunal referred toMr Collins' summary as follows:(a) It was difficult to envisage a more compromising situation involving alawyer entering into a personal transaction with clients where he hadan eye to personal profit;(b) The absence of any advice to the clients about the arrangement, theperils they might face and the absence of any recommendation that theyseek independent advice or an explanation from Mr Hong whyindependent advice would be wise; and(c) Viewing the transactions in their totality, Mr Hong committed anegregious breach of the rules and of the established principles andstandards.43 Hart v Auckland Standards Committee 1 of the New Zealand Law Society [2013] NZHC 83, [2013]3 NZLR 103 at [181]-[189].[166] As to deterrence, the Tribunal noted Mr Collins' submission that the importantfeatures of Mr Hong's disciplinary record were:(a) The span of his career over which they occurred, indicating an enduringtendency to breach professional standards;(b) The range of categories of professional irresponsibility for whichdiscipline has been imposed, including;(i) unprofessional dealings with others;(ii) breach of an undertaking;(iii) misrepresentation about liability insurance cover;(iv) breach of trust accounting reporting standards;(v) communicating directly with a party known to be representedby a lawyer;(vi) undue delay with, and failure to complete, a retainer; and(vii) obstructing the inspectorate.[167] The Tribunal referred to Mr Collins' submission that the disciplinary recorddemonstrated a continuing disregard for the rules and standards of professionalismacross a range of activities consistent with Mr Hong's denial of any breach ofprofessional standards in this case.[168] Further in relation to deterrence, the Tribunal's decision recorded Mr Collins'submission that the case before it included all of the factors warranting specific andgeneral deterrence in the interests of public protection and the maintenance ofconfidence in the legal profession and its disciplinary institutions.4444 Citing Legal Services Commissioner v Nomekos [2014] VCAT 251 at [24].[169] Finally, on the Hart factors, the Tribunal's decision recorded Mr Collins'submission that there were no mitigating factors. Mr Hong had not accepted that hehad done anything wrong and, consistently with that attitude, had not taken any stepsto mitigate the harm he caused his former clients.[170] The Tribunal referred to Mr Hong's submissions, noting that Mr Hong had heldto the views he expressed during the liability hearing. His primary position continuedto be that the rules did not apply to his financial assistance to the Ks in thecircumstances. He submitted that his disciplinary history was not relevant to thequestion of penalty because he had not been sanctioned on the same subject matter orissues.[171] As to deterrence, Mr Hong's submission to the Tribunal was that there was noneed for deterrence. There was not likely to be any concern for the future because hisBenevolence on the Conscience Fund had made its last advance. He was not preparedto make further advances from the fund because human kind could not be trusted whenit comes to money. He had nothing to be remorseful over and his loss, he stressed,was greater than that of the Ks.[172] The Tribunal adopted as the reasons for its orders, the submissions ofMr Collins, describing them as comprehensive, careful and supported by authority.The Tribunal noted it was mindful of the requirement to consider whether a lesserpenalty would suffice but it did not find that to be the case. The Tribunal endorsedMr Collins' submission that it was difficult to envisage a more compromising situationinvolving a lawyer entering into a personal transaction with his clients.[173] In relation to costs, Mr Hong's position was that he did not have the income topay costs as sought. Mr Collins' submission was that the profession should not beburdened with the costs of the proceeding. The case had been a major exercise inunravelling a complex situation and full costs were sought. The Standards Committeealso sought the usual order that Mr Hong refund to the Law Society the Tribunal'scosts which are payable by the Law Society.[174] The Tribunal considered the costs claimed were not unreasonable. Mr Collins'hourly charge out rate was at the amount regularly accepted by the Tribunal asappropriate.[175] Finally, in relation to compensation to Mr K, this was sought to compensateMr K for the emotional harm he had suffered. It was submitted that the case stood outfor an award. Mr K had been living with an unresolved situation for 12 years, causinghim stress and anxiety, including that caused by Mr Hong's unsuccessful attempt tohave him evicted from the property. The Tribunal accepted that submission and madean order of $8,000 by way of compensation to Mr K.Grounds of appeal – penalty decision[176] In relation to penalty, Mr Hong repeats many of his submissions in relation tothe charges and misconduct, which I have already addressed. He also submits that thepenalty of striking him off the Roll of Barristers and Solicitors was manifestly unjust,excessive and against legal principles in the circumstances.[177] He submits that as there had been no joint venture, at worst, in relation topenalty he could only be sanctioned for oversight on his part. He trusted the Ks, didnot require them to enter into a loan agreement with him and did not advise them toseek independent legal advice. He submits the sanction for an error of judgement ofthat sort should merely be a censure and a fine.[178] In relation to his previous disciplinary history, Mr Hong submits that most ofthe previous misconduct findings against him had been over correspondence he hadissued to third parties. They did not relate to complaints by previous clients. Mr Hongrefers to the most recent decision of this Court upholding three months' suspensionand says he has made an application for leave to appeal that judgment to the Court ofAppeal.45[179] He submits the Tribunal erred in considering there was a need for deterrence.He says there will be no repeat of his lending to clients as he has asked "our Higher45 A decision on that application refusing leave has now been given. See Hong v Auckland StandardsCommittee No. 5 [2020] NZHC 1572.Conscience" for him to be released from helping humans who cannot be trusted whenit comes to money.[180] He submits a mitigating factor was that his loan to the Ks was not a businessadjunct to his law practice. It therefore has to be treated as private lending to clientsunconnected with his provision of legal services.[181] As to the costs award of $29,540, Mr Hong submits this was manifestlyexcessive and the Law Society should carry all of the costs (particularly if he issuccessful in his appeal on the misconduct finding and the penalty of strike off).[182] In terms of the compensation order of $8,000 required to be paid to Mr K foremotional harm, Mr Hong submits the order is ultra vires as there must be an actualfinancial loss.Discussion[183] There is no dispute over the Tribunal's statement of principles from Dorbu andHart. As is apparent, Mr Hong takes issue with the application of those cases to hisconduct. On an appeal of this nature it is appropriate for this Court to reach its ownview, but give due regard to the specialist tribunal's assessment.46 I address therelevant factors following the sequence in the Tribunal's decision.Seriousness of the breaches[184] First, the seriousness of the breaches. Mr Hong entered into an undocumentedpersonal transaction with clients involving a significant asset, their intended familyhome, with real financial implications for the clients. The evidence I have referred toindicates that, in doing so, he had an eye to personal profit.[185] There was a total absence of any advice to the clients about the arrangement orany possible consequences for them and, most importantly, the total absence of any46 Orlov v New Zealand Lawyers and Conveyances Disciplinary Tribunal [2014] NZHC 1987,[2015] 2 NZLR 606 at [191].recommendation that they seek independent advice and an explanation of why theyshould do that.[186] The Tribunal was correct when it accepted Mr Collins' submission that,viewing the transactions in their totality, this was an egregious breach of the rules andthe established principles and standards encompassed in the three charges.Disciplinary history[187] Turning to Mr Hong's disciplinary history, Mr Collins submits this was a keyfactor. Using the language of the High Court in Hart, he submits that this history maybe an indicator that striking off is the only effective means of ensuring protection ofthe public in future. Mr Collins notes that although Mr Hong has been in practice forabout 30 years, a significant feature of his disciplinary record is that most of theadverse findings (nine out of 11) relate to conduct over the last 10 years. There havebeen seven adverse findings since January 2016.[188] There is a full discussion of Mr Hong's disciplinary record in the recentdecision of Gault J in Hong v Auckland Standards Committee No. 5.47 The range ofcategories of conduct for which discipline has been imposed is as set out in theTribunal's decision and referred to in [166](b) above.[189] Mr Collins submits that the theme is one of disregard for the rules andstandards of professionalism across a range of activity, consistent with Mr Hong'sdisavowal of any breach of professional standards in this case.[190] I respectfully agree with what was said by Gault J in his recent judgment onthe disciplinary record as it then existed:[82] Mr Hong's disciplinary record since Gilbert J's decision in 2014 is ofconcern. Leaving aside the fact that Mr Deliu appears as an adversary inseveral of the matters, Mr Hong's disciplinary record since 2014 has includeda finding of misconduct relating to correspondence sent in 2010 and 2012,where a two month suspension from practice was only quashed because hehad already served a period of suspension for another matter where theTribunal's decision had been set aside. There are also four subsequent findingsof unsatisfactory conduct, with two fines of $7,500 imposed. Even so, as Mr47 Hong v Auckland Standards Committee No. 5, above n 39, at [78]-[83].Collins' submission to the Tribunal acknowledged, there was not a previousmatter on all fours with the present matter. Indeed, there was nothing akin toit. 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 seriousbreach.[83] Having reviewed these disciplinary matters, I acknowledge that theyspan Mr Hong's career and involve a range of professional shortcomings, butI consider that, more than indicating an enduring tendency to breachprofessional standards or a general disregard for the rules and standards, theincrease in frequency of disciplinary findings over more recent years suggestsa decline in Mr Hong's capacity to maintain professional standards.[191] The conduct involving a disregard for the rules in this case started in 2006 andcontinued over an extended period. During that time, Mr Hong was also involved inbreaching the rules in other ways. The conduct, rather than being part of a recentdecline, shows a serious disregard for the rules at a much earlier date than is disclosedin his disciplinary record. However, I take into account the otherwise more recentdecline referred to by Gault J.Deterrence[192] This factor is both specific for the practitioner and general for allpractitioners.48[193] The Tribunal accepted Mr Collins' submission that this case included all of thefactors warranting specific and general deterrence in the interest of public protectionand the maintenance of confidence in the legal profession and its disciplinaryinstitutions.[194] Mr Hong says he will not be making any loans again of this sort to clients.That does not remove the need for personal deterrence in my view. I say that becausethe reason that Mr Hong gives for his decision is not in recognition of his failure tocomply with the rules but rather because people cannot be trusted, not even long-standing clients or friends, he says.[195] The Tribunal was correct in its determination as to the need for both specificand general deterrence.48 Legal Services Commissioner v Nomekos, above n 44.Any aggravating or mitigating factors[196] The issue of whether there was any evidence of remorse or insight wasconsidered by the Tribunal under this heading.[197] The Tribunal noted that Mr Hong had not accepted that he had done anythingwrong and that consistently with that attitude, he had not taken any steps to mitigatethe harm he had caused his former clients.[198] The Tribunal was correct to find that there were no mitigating factors. Therewas also no evidence of any remorse or insight. To this day there is a lack of insighton the part of Mr Hong into what occurred, even with the benefit of the views of theHigh Court and Court of Appeal on his lending to clients under his Conscience Fund.He continues to blame the Ks, saying he is the one who has suffered not them. Hedescribes the Tribunal's decision as a travesty of justice.[199] Taking all these factors together, and having regard to the assessment of thespecialist Tribunal, I consider that the order striking Mr Hong from the Roll ofBarristers and Solicitors was appropriate. Although this was Mr Hong's firstcontravention of this nature, it was egregious conduct. Also, taking into account thefrequency of the disciplinary findings against Mr Hong over more recent years and hislack of insight, the order striking him off was justified in the public interest, for thepurposes of protection of the public and deterrence.Compensation order[200] The factors the Tribunal took into account were the number of years over whichthis matter spanned and the stress caused to Mr K by the unsuccessful efforts ofMr Hong to evict him from the property.[201] Mr Collins submits that the modesty of the order meant that this was a fair andreasonable application of the compensation provision and should be upheld.Mr Collins says he is not aware of any other cases where the Tribunal has made anaward for compensation for emotional stress under this provision. But he submits itwas a valid exercise of the Tribunal's penal jurisdiction, giving public confidence inits authority by making an order that was more than symbolic, recognising Mr K'slosses at the hands of his lawyer.[202] In his affidavits, Mr K provides evidence of the hardship he has endured as aconsequence of Mr Hong's actions. Mr K placed his trust in Mr Hong to act in hisinterests. He acknowledges the informality of the arrangements for settlement of theZ property were unusual but he says it reflected the relationship he and his former wifehad with Mr Hong. Ms D's evidence is that she likewise trusted Mr Hong. Againstthis background, then, Mr K states the end of his marriage to Ms D was "in large part"caused by the difficulties arising from the ownership arrangements for the property(which Ms D confirms). Mr K has also had to deal with the difficulties arising fromMr Hong's improper actions over a lengthy period.[203] Section 242(1)(a) of the Act applies where a charge has been proved. TheTribunal may make "any order that a Standards Committee has the power to makeunder section 156 on the final determination of a complaint". Section 156(1)(d)provides:156 Power of Standards Committee to make orders(1) If a Standards Committee makes a determination under section152(2)(b), that Standards Committee may—(d) where it appears to the Standards Committee that any personhas suffered loss by reason of any act or omission of apractitioner or former practitioner or an incorporated firm orformer incorporated firm or an employee or former employeeof a practitioner or an incorporated firm, order the practitioneror former practitioner or incorporated firm or formerincorporated firm, or employee or former employee of apractitioner or an incorporated firm, to pay to that person suchsum by way of compensation as is specified in the order, beinga sum not exceeding, as the case may require, the amount thatis from time to time prescribed for the purposes of thisparagraph by rules made under this Act by the New ZealandLaw Society or the New Zealand Society of Conveyancers.(emphasis added)[204] The maximum award is presently $25,000.49 These provisions together re-enact, in slightly modified form primarily to reflect alternative practitioner structures,s 106(4)(e) of the Law Practitioners Act. Like Mr Collins, I have not been able to findany judgment which deals with either s 156(1)(d) or the former s 106(4)(e) awardingcompensation for emotional harm. It is therefore necessary to consider whether suchan award comes within the scope of the provision.[205] That exercise turns on the meaning of loss. The plain meaning of loss, adaptedfrom the Shorter Oxford English Dictionary, is diminution of possessions oradvantages or, alternatively, detriment or disadvantage arising from deprivation or achange of conditions. Loss arising from emotional harm caused by breaches of dutiesby a legal practitioner in whom a client has trust and confidence on matters going tosomething as fundamental as a home for his or her family, and the financialarrangements which go with that, would easily come within the scope of this definitionof loss.[206] In my view, the plain meaning of loss is consistent with the purpose of theprovision and the Act. First, 156(1)(d) specifically provides for the payment of theamount as compensation, not damages. Damages generally are not usually consideredcompensation because they simply put the wronged party in the position they wouldhave been in had the party at fault performed his or her bargain or duty.50 Second, thepeople to whom compensation can be awarded is likewise general. It is not just theclient who has retained the practitioner but "any person" who has suffered loss. Thiswould include, for example, the former employer in J. The provision confers a broadpower on the Tribunal, within the scope of the maximum amount.[207] Third, s 3 of the Act provides that the purposes are to maintain publicconfidence in the provision of legal services and to protect consumers of legal services.Practitioners occupy a privileged and important place in our legal system and society.Clients and the public are entitled to expect they will discharge their duties and adhere49 See reg 32, Lawyers and Conveyancers Act (Lawyers: Complaints Service and StandardsCommittees) Regulations 2008.50 See Premium Real Estate Ltd v Steven [2009] NZSC 15, [2009] 2 NZLR 384 at [99]. Iacknowledge that Tipping J specifically excluded "sums payable pursuant to statute" from hisdiscussion, as is the situation in this case, but the Judge's analysis is still relevant for the purposesof construing this provision.to the rules which come with membership of the profession. Where there is a failureto do so, a complaints process exists to identify and address it. That process includes,and should include, a power to award compensation to those who suffer loss arisingfrom such failure. Whatever form that loss may take, the award of compensation isessential to maintain public confidence in the integrity of the profession and to ensureclients are properly protected where they suffer at the hands of their lawyer.[208] As to quantum, in the absence of further direction in the statute, I am of theview that an analogy with an award of general damages can be drawn. That is, theamount is a matter of personal judgement. I consider this is a case wherecompensation for loss is due to Mr K and that the Tribunal's award of $8,000 isreasonable and appropriate in the circumstances.Costs[209] The Tribunal ordered Mr Hong to pay the costs of the Law Society (theStandards Committee) totalling $29,450 and to refund to the New Zealand LawSociety the Tribunal's costs of $6,923. The Tribunal's costs jurisdiction arises unders 249 of the Act. It may award costs against a practitioner if it considers that theproceedings were justified and that it is just to do so.51 Section 249 confers a broaddiscretion on the Tribunal to award costs in any given case, but the Tribunal must notdisable itself from exercising its discretion in a particular case by rigidly adopting andapplying fixed rules or policies.52[210] An appellate court should only interfere in the exercise of the Tribunal'sdiscretion if the costs order is shown to be wrong in principle or clearly unreasonable.53[211] Before the Tribunal Mr Hong submitted that he did not have the income to paythe costs as sought. He submits in this Court that litigants should not be penalised byway of costs unless they provide irrelevant statements or documents. He says that he51 Section 249(3).52 Hong v Auckland Standards Committee No 5, above n 39, citing Simes v Canterbury-WestlandStandards Committee 2 of the New Zealand Law Society [2013] NZHC 1501 at [27]; and Lagolagov Wellington Standards Committee 2 [2017] NZHC 3038 at [15].53 Daniels v Complaints Committee 2 of the Wellington District Law Society [2011] 3 NZLR 850(HC) at [43].included evidence on, and in support of, his position, particularly on each of themistruths alleged against him (I understand his submission to be that he filed onlyrelevant evidence). Mr Hong further submits the costs awarded were unreasonableand against the objective of the Act that the complaints framework must be costexpedient.[212] I do not consider there is any basis to interfere with the Tribunal's costsdecision. Its approach of awarding reasonable indemnity costs, where the StandardsCommittee has established the charges, is justified on the basis that the lawyer shouldbear that cost rather than the profession generally (through the agency of the NewZealand Law Society).54Result[213] Mr Hong's appeals against the decisions of the Tribunal of 20 February 2020and 29 April 2020 are dismissed.Costs[214] My preliminary view is that costs should follow the event in the usual way.However I did not hear from the parties on costs. If the parties are able to agree costsa joint memorandum should be filed within 20 working days from the date of thisjudgment. If the parties are not able to agree costs, the respondent may file and servea memorandum within five working days of the date for the joint memorandum, withMr Hong to file and serve his memorandum within a further five working days.Memoranda should not exceed four pages, excluding any attachments. I willdetermine costs on the papers.___________________________________Gordon J54 Hong v Auckland Standards Committee No 5, above n 39 at [93].