Legal Profession: Disciplinary proceedings - Disciplinary Committee, findings of - Disciplinary Board found 1st respondent guilty of misconduct after rejecting Disciplinary Committee's finding that there was no misconduct - Whether Disciplinary Board failed to comply with s 103D(1) Legal Profession Act 1976 in failing to furnish reason for rejecting Disciplinary Committee's finding - Whether Disciplinary Board's decision exceeded scope of Act and not supported by any reason and/or justification

This was the appellant's appeal against the decision of the High Court allowing the 1st respondent's appeal to set aside the decision of the Disciplinary Board ("DB") of the Bar Council in finding that the 1st respondent was guilty of misconduct under s 94(3)(n) of the Legal Profession Act 1976 ("LPA"). This appeal originated from a complaint lodged by the appellant against the 1st respondent to the DB. The DB appointed a Disciplinary Committee ("DC") to investigate the complaint. The complaint was in respect of, inter alia, the 1st respondent's alleged gross disregard of his capacity as the advocate and solicitor for the appellant, to protect the appellant's interest in issuing a letter dated 18 March 2009. The appellant contended that the alleged gross disregard had caused the appellant losses in the sum of RM14,168,976.38. The DC was of the view that the complaint lacked any allegation of dishonesty or fraudulent conduct by the 1st respondent, and there was also "no allegation suggesting any defect in character or morally apprehensive conduct that is unfit as a solicitor by the 1st respondent", that formed part of the requirements under s 94(3) LPA. The DC was also of the view that the alleged gross misconduct in the complaint might at its highest (but by no means constituting a finding by the DC) support a claim of negligence. As such, the complaint fell outside the purview of the DC since there was no misconduct. The DC thenceforth recommended that no action be taken against the 1st respondent in respect of the complaint. The DB, however, vide an Order under s 103D LPA dated 17 June 2017 ("Order"), after giving the 1st respondent an opportunity to be heard, disagreed with the findings and recommendations of the DC. The DB then ordered the 1st respondent to pay a penalty of RM5,000.00, payable to the Discipline Fund within one month from the date of the Order failing which the 1st respondent would be suspended pursuant to s 103(1) LPA from practising as an advocate and solicitor until payment of the penalty. The 1st respondent then filed an appeal to the High Court to set aside the Order. The High Court allowed the 1st respondent's appeal, resulting in the appellant's present appeal.

Held (dismissing the appeal):

(1) It was crystal clear that there was a mandatory requirement under s 103D(1) LPA for the DB to furnish a reason to the 1st respondent should it choose to depart from the finding of the DC. In this instance, the DB had, on the facts, failed to comply with the mandatory requirement of s 103D(1) LPA. The purported reason provided by the DB in its letter dated 24 March 2017 in departing from the DC's decision was in fact a mere view, a preliminary one at best. A view must be premised on some reasons and explanations or at the very least, a simple depiction of a thought-process of the DB as to how it arrived at such "view". A finding devoid of reason and explanation was in fact no more than just a plain view. In the total absence of reason, justification or elaboration to support such view, the mandatory requirement under s 103D(1) LPA had not been complied with. Thus, the DB's view/ finding of gross misrepresentation could not be accepted as a finding of guilt of misconduct under s 94(3) LPA nor constitute the reason for the Order of the DB. The DB's further letter dated 21 August 2017 stating that reasons for its decision need not be furnished, only amplified and confirmed its failure on this issue. Hence, there was no reason recorded for such rejection by the DB and such failure was a clear breach of s 103D(1) LPA. Additionally, there was a serious breach of natural justice when the DB failed to furnish a reason for its decision as required by the law. (paras 42-47)

(2) Consequently, the purported finding of the DB of gross misrepresentation by the 1st respondent was problematic based on two reasons. First, gross misrepresentation was within the scope of the law of tort. It did not however fall within the ambit of the LPA. Secondly, a finding of gross misrepresentation, even if it amounted to a misconduct under the LPA, could not be adequately substantiated by the DB because the DB had failed to show the existence of the elements which embodied misconduct such as fraud, dishonesty or deceit by the 1st respondent. The DC was specific in its findings and recommendations when it stated that there was "no allegation of any defect in character or any morally apprehensive conduct that is unfit as a solicitor" against the 1st respondent. Thus, it was questionable when the DB reversed and departed from such findings without any allegation raised towards that effect. In these circumstances, it would be highly indefensible to be in agreement with the finding of guilt of professional misconduct that not only exceeded the scope of the LPA but was not supported by any reason and/or justification whatsoever. (paras 48-50)

Case(s) referred to:

Majlis Peguam Malaysia v. Rajehgopal Velu & Anor [2017] 2 MLRA 1 (folld)

Mohamad Hassan Zakaria v. Universiti Teknologi Malaysia [2017] 6 MLRA 470 (folld)

Re An Advocate [1949] 1 MLRH 641 (folld)

Legislation referred to:

Legal Profession Act 1976, ss 94(3)(n), 103(1), 103D(1), (3), (4)

Other(s) referred to:

Graham J Graham Green, Cordery's Law Relating to Solicitors, 5th edn, London Butterworths, 1961, p 466

Counsel:

For the appellant: Abdul Rashid Ismail (Azreen Ahmad Rastom with him); M/s Rashid Zulkifli

For the 1st respondent: Mohamad Haaziq Pillay (Manisha Sugunesegran with him); M/s JS Pillay & Mohd Haaziq

For the 2nd respondent: Mazura Mohd Amin; M/s Mohanadass Partnership

JUDGMENT

Umi Kalthum Abdul Majid JCA:

A. Introduction

[1] The appellant in this appeal is a financial institution named Bank Kerjasama Rakyat Malaysia.

[2] The 1st respondent in this appeal is an advocate and solicitor of the High Court Malaya.

[3] This appeal, which is one of two appeals, arose from the decision of the learned High Court Judge vide Originating Summons No: WA-17D-22-07-2017 dated 26 April 2018 which allowed the appeal by the 1st respondent to set aside the decision of the Disciplinary Board ("DB") of the Bar Council dated 17 June 2017 in finding that the 1st respondent was guilty of misconduct under s 94(3)(n) of the Legal Profession Act 1976 (LPA).

[4] Aggrieved with the aforesaid decision, the appellant herein filed an appeal to this court.

[5] The other appeal was filed by the Bar Council in Civil Appeal No: W-02 (A)1151-05-2018. When the two appeals were called up for hearing on 18 July 2019, this court was informed that the Bar Council had withdrawn its appeal. This court then gave the appellant's learned counsel the opportunity to seek further instructions from their client in light of the Bar Council's withdrawal of its appeal. However, on the instructions of the appellant at the next hearing date, this court heard fully the appellant's appeal with no participation, other than as a nominal 2nd respondent, by the Bar Council.

[6] For the purpose of this appeal, the parties shall be referred to as they were at this court, that is, as the appellant and the 1st and 2nd respondents respectively.

B. Background Facts

[7] This appeal originated from a complaint lodged by the appellant against the 1st respondent on 4 June 2015 to the DB. The DB appointed a Disciplinary Committee ("DC") to investigate the complaint. The complaint was in respect of, inter alia, the 1st respondent's alleged gross disregard of his capacity as the advocate and solicitor for the appellant, to protect the appellant's interest in issuing a letter dated 18 March 2009 ("Letter of Release"). The appellant contended that the alleged gross disregard had caused the appellant losses in the sum of RM14,168,976.38.

[8] The background facts of the complaint can be gleaned from the Disciplinary Committee Report dated 31 October 2016 ("the DC Report"). The DC Report stated that on 10 May 2008, a company by the name of Instyle Furniture Sdn Bhd ("the Borrower") had applied for a financing facility from the appellant. The appellant then agreed to offer the Borrower a financing facility in the sum of RM50,000,000.00.

[9] In order to facilitate the legal process of this financing facility, the appellant appointed the 1st respondent to advise, to prepare and to do the necessary in respect of the facility agreements and security documents.

[10] It is also an undisputed fact between the parties that the Borrower already had existing facilities with Malayan Banking Berhad ("Maybank") which had debentures created over the Borrower's fixed and floating charges.

[11] On 12 January 2009, the 1st respondent wrote to Maybank to seek its consent for the appellant to create the following securities:

11.1 fixed first legal charge over four parcels of land in Muar, Johor;

11.2 cash deposit by way of Memorandum of Deposit on Sijil Pelaburan Bank Rakyat ("SPBR") amounting to at least RM14.9 million;

11.3 Letter of Set-Off on the SPBR;

11.4 specific debentures covering fixed and floating charge over plant, equipment and machineries for particleboard to be financed by the appellant;

11.5 Deed of Assignment of all rights, interests and benefits of Designated Accounts; and

11.6 Sinking Fund of RM100,000.00 to be collected on a monthly basis from the date of the first disbursement up to RM3.7 million.

[12] On 15 January 2009, Maybank informed the appellant that it had consented to the creation of specific debenture covering fixed and floating charge over the new plant, equipment and machineries for particle board production to be financed by the appellant.

[13] On 18 March 2009, the 1st respondent, vide letter of even date ("the Letter"), advised the appellant permitting the drawdown of the facilities which the appellant duly relied and acted upon. The Letter stipulated that the security documents, specifically the Memorandum of Deposit dated 4 March 2009 in respect of cash deposited and charged by the Borrower, had complied with the appellant's requirements and that the interest of the appellant as lender was fully protected.

[14] The Letter formed the basis of the appellant's complaint to the DB. The appellant was of the view that the Letter assured the appellant that the security documents, specifically the Memorandum of Deposit dated 4 March 2009 in respect of the cash deposited and charged by the Borrower, had complied with the appellant's requirements. Thus, ensuring the appellant's interest was well protected.

[15] On the contrary, vide Originating Summons No: 24NCC-68-02-2015, Maybank and Maybank Islamic Berhad filed a claim against the appellant seeking inter alia, a declaration that the charges that were created by the Borrower over its assets in favour of Maybank under the debentures in favour of Maybank which were subsequently vested in Maybank Islamic Berhad rank in priority to the security documents created by the Borrower in favour of the appellant including the Memorandum of Deposit dated 4 March 2009.

[16] The learned High Court Judge in Originating Summons No: 24NCC68-02-2015 held in favour of Maybank and Maybank Islamic Berhad and specifically, the learned High Court Judge held that the Maybank and Maybank Islamic Berhad's debentures had ranked in priority to the security documents created by the Borrower in favour of the appellant including the cash deposits. The appellant appealed against this decision to this Court and the appeal was dismissed on 2 June 2016.

[17] The basis of the appellant's complaint against the 1st respondent was that the 1st respondent had failed to obtain the consent from Maybank to exclude the appellant's securities from its debentures. At the hearing of the DC, learned counsel for the 1st respondent argued that the alleged misconduct committed by the 1st respondent did not come under the purview of s 94(3) of the LPA. The alleged misconduct was at best a mere negligence and should not come under "misconduct" as per s 94(3) of the LPA.

[18] Learned counsel for the appellant on the other hand argued that the 1st respondent had wrongfully represented to the appellant and failed to protect the interest of the appellant. Thus, such failure would amount to "gross disregard" of the appellant's interest under s 94(3) of the LPA.

[19] However, based on the evidence before them, the DC found that the appellant's complaint against the 1st respondent did not satisfy the requirements under s 94(3) of the LPA to constitute "misconduct" on the part of the 1st respondent.

[20] The DC was of the view that the complaint lacked any allegation of dishonesty or fraudulent conduct by the 1st respondent, and there was also "no allegation suggesting any defect in character or morally apprehensive conduct that is unfit as a solicitor by the 1st respondent", that formed part of the requirements under s 94(3) of the LPA.

[21] In addition to that, the DC was also of the view that the alleged gross misconduct in the complaint might at its highest (but by no means constituting a finding by the DC) support a claim of negligence. As such, the complaint fell outside the purview of the DC since there is no misconduct as alleged in the said Letter. The DC thenceforth recommended that no action be taken against the 1st respondent in respect of the complaint.

[22] The DB, however, vide an Order under s 103D of the LPA dated 17 June 2017 ("the Order"), after giving the 1st respondent an opportunity to be heard, disagreed with the findings and recommendations of the DC. The DB then ordered the 1st respondent to pay a penalty of RM5,000.00, payable to the Discipline Fund within one month from the date of the Order failing which the 1st respondent shall be suspended pursuant to s 103(1) of the LPA from practicing as an advocate and solicitor until payment of the penalty. It is to be noted that the DB, before making the Order, had stated vide its letter dated 24 March 2017 to the 1st respondent (but before hearing the 1st respondent) that it "was of the view that the advice given [by the 1st respondent to the appellant] was a gross misrepresentation of the consent given" by Maybank and gave notice to the 1st respondent to appear before the DB on the assigned date pursuant to s 103D(3) and s 103D(4) of the LPA.

C. At The High Court

[23] Dissatisfied with the Order made by the DB, the 1st respondent vide Originating Summons No WA-17D-22-07-2017 ("the High Court proceedings") (the basis of this present appeal) filed an appeal to set aside the Order. The Bar Council was allowed to be the Intervener in the High Court proceedings.

[24] The main contention of the 1st respondent was that the DB had rejected the DC's Findings and Recommendations of no action to be taken without providing any reasons and/or justifications at all. The 1st respondent submitted that such failure was contrary to s 103D(1) of the LPA.

[25] The appellant and the Bar Council, acting as the Intervener, submitted that the DB was correct in its decision and that the DB was not bound by the findings and recommendations made by the DC.

[26] The learned High Court Judge agreed with the submissions of the 1st respondent (the appellant at the High Court) and held that the DB's finding of guilt of misconduct under s 94(3) of the LPA and what purportedly constituted misconduct was not properly reasoned and explained by the DB.

[27] The learned High Court Judge further found that the statement made by the DB in its letter dated 24 March 2017 purportedly stating the reason for its decision was not a proper reason as envisaged by s 103D(1) of the LPA. Failure to record reasons to support the decision of the DB was held to be in breach of s 103D(1) of the Act. Further, the DB's statement that the 1st respondent was guilty of gross misrepresentation was flawed because gross misrepresentation does not fall within the purview of professional misconduct. Instead it falls under the law of tort. The learned High Court further agreed with the 1st respondent's submission that there was no fairness at all from the DB because the DB had wanted to hear mitigation without first finding the 1st respondent guilty, which showed that the DB had pre-determined the complaint.

The Appeal

[28] Before us, the appellant submitted that the learned High Court Judge had erred in setting aside the DB's decision and the appellant premised its arguments on the following grounds:

28.1 the DB was correct to have found the 1st respondent guilty of misconduct;

28.2 the DB had recorded and furnished the reasons to the 1st respondent in finding the 1st respondent guilty of misconduct; and

28.3 there was no bias by the DB and it had acted in accordance with the applicable rules and procedures.

[29] The appellant argued that the 1st respondent had a duty of care to warn the appellant of foreseeable risks associated with the facilities and the securities to be created under the circumstances. The 1st respondent, as the solicitor retained in respect of this transaction, knew that the appellant would be relying on the 1st respondent to provide it with accurate and proper advice. Thus, the appellant submitted that the 1st respondent's advice was clearly a gross misrepresentation of the position taken by Maybank and the appellant's interests were not protected.

[30] Following that, the appellant submitted that the DB was correct in departing from the findings and recommendations of the DC. The appellant submitted that in doing so, the DB had clearly stated, in the DB's letter to the 1st respondent dated 24 March 2017 giving notice to the 1st respondent under s 103D(3) and(4) of the LPA, as follows:

"... The Board disagreed with the finding and recommendation of the Disciplinary Committee on the complaint against you. The Board was of the view that the advice given was gross misrepresentation of the consent given by Malayan Banking Berhad."

[31] The appellant argued that this failure on the part of the 1st respondent fell within the scope of s 94(3)(n) of the LPA. The appellant further argued that there is no requirement that there must be deceit or dishonesty under the abovementioned provision and as such, the imposition of the requirement that there must be deceit or dishonesty before a finding of misconduct alluded to by the learned High Court Judge is erroneous.

[32] The appellant emphasised in its submission that the finding of the learned High Court Judge that the DB had breached s 103D(1) of the LPA when the DB purportedly failed to furnish reasons for departing from the findings and recommendations of the DC to be erroneous. The appellant submitted that the letter dated 24 March 2017 had furnished the reasons for the DB's decision.

[33] In respect of the issue of pre-determining the guilt and bias against the 1st respondent, the appellant submitted that all due rules and regulations had been complied with by the DB and the 1st respondent and his learned counsel had been given enough opportunity to submit before the DB on why the DB ought to follow the findings and recommendations of the DC and on mitigation. The steps taken by the DB was consistent with s 103D (4) of the LPA.

[34] Further, it was also the contention of the appellant that the DB, as an administrative body, was entitled to prescribe the hearing process and was under no obligation to follow the rules and procedures of a court trial as long as the process and procedures subscribed to were fair, to which in this appeal it was submitted that the proceedings were fair.

[35] The appellant submitted that the learned High Court Judge had erred in his findings when he decided that the DB was biased against the 1st respondent and when he, the learned judge, decided that the DB had pre-determined his guilt.

[36] Conversely, in contesting this appeal, the 1st respondent premised his arguments on the following grounds:

36.1 there was a breach of natural justice on the part of the DB and/or a breach of s 103D(1) of the LPA when the DB failed to provide reasons for not following the findings and recommendations of the DC;

36.2 gross misrepresentation is not within the scope of misconduct under the LPA but falls under the law of tort; and

36.3 there was an element of biasness in respect of the DB's decision where the DB had already pre-determined a finding of guilt towards the 1st respondent.

[37] The 1st respondent submitted that the failure of the DB to furnish any reason in finding the guilt of the 1st respondent was a clear breach of natural justice. That the DB had already pre-determined to find the 1st respondent guilty as the DB had only wanted to hear mitigation without first finding the 1st respondent guilty.

D. Our Decision

[38] Section 103D(1) of the LPA provides as follows:

"Consideration by the Disciplinary Board of the report of the Disciplinary Committee

103D(1) After consideration of the report of the Disciplinary Committee, the Disciplinary Board may make an order affirming or rejecting the finding or recommendation of the Disciplinary Committee and if the Disciplinary Board rejects the finding or recommendation of the Disciplinary Committee, the Disciplinary Board shall record the reason for the rejection."

[Emphasis Added]

[39] The Federal Court in Majlis Peguam Malaysia v. Rajehgopal Velu & Anor [2017] 2 MLRA 1 at p 20 had dealt with s 103D(1) and stated as follows:

"[59] We agree that under the current provisions of s 103D(1) of the LPA, the DB shall record the reasons if it rejects the recommendation made by the DC. It is a mandatory requirement. However, it must be noted that the said requirement was only inserted into the section by an amendment to the LPA vide the Legal Profession (Amendment) Act 2012 (Act A1444) which came into effect on 3 June 2014 vide PU(B)262/2014. There was no indication that the amendment was to take effect retrospectively."

[40] In addition to that, this court's decision in Mohamad Hassan Zakaria v. Universiti Teknologi Malaysia [2017] 6 MLRA 470, para 33, stated as follows:

"... Section 103D has since been amended to require the DB to give reasons where it chooses not to follow the findings and recommendations of the disciplinary committee ..."

[41] At this juncture, we must point out that two things are clear from the aforementioned line of authorities. First, it is a mandatory requirement for the DB to provide reason should it choose to depart from the DC's findings and recommendations. Second, the amendment to s 103D(1) is to take effect starting from 3 June 2014. In this appeal, the complaint against the 1st respondent was lodged on 5 June 2015 and thus, the applicability of this provision to this case was to our mind a non-issue.

[42] We had carefully examined the letter dated 24 March 2017 by the DB in departing from the decision of the DC and the relevant excerpt of the said letter is as follows:

"1. We write to inform you that the Disciplinary Board has at its meeting held on 13 January 2017 considered the Report of the Disciplinary Committee on the complaint against you. The Board disagreed with the finding and recommendation of the Disciplinary Committee on the complaint against you. The Board was of the view that advice given was gross misrepresentation of the consent given by Malayan Banking Berhad."

[43] It is crystal clear to us that there is a mandatory requirement under s 103D(1) of the LPA for the DB to furnish reason to the 1st respondent should it choose to depart from the finding of the DC, which in this appeal purportedly they did. The next question is whether this requirement had been fulfilled by the DB?

[44] To assist us in answering this issue, we then directed our minds to a letter dated 21 August 2017 by the DB that was sent to the 1st respondent's solicitors when the latter asked for the reason for the rejection of the DC's Findings and Recommendations. An important excerpt of the aforesaid letter is as follows:

"However, it is pertinent to note that the said provision does not require such reasons to be furnished to the parties."

[45] We were of the view that the DB had in fact failed to comply with the mandatory requirement of s 103D(1) of the LPA. We were also of the view that the purported reason provided by the DB in the letter dated 24 March 2017 was in fact a mere view, a preliminary one at best. To our minds, a view must be premised on some reasons and explanations or at the very least, a simple depiction of a thought-process of the DB as to how it arrived at such "view". We were mindful that a finding devoid of reason and explanation was in fact no more than just a plain view. In the total absence of reason, justification or elaboration to support such view, the mandatory requirement under s 103D(1) had not been complied with. Thus, the DB's view/finding of gross misrepresentation could not be accepted as a finding of guilt of misconduct under s 94(3) of the LPA nor constitute the reason for the Order of the DB. The DB's letter dated 21 August 2017 only amplified and confirmed its failure on this issue.

[46] We therefore agreed with the learned High Court Judge that there was no reason recorded for such rejection by the DB and such failure was a clear breach of s 103D(1) of the LPA.

[47] In addition, we were also mindful of the fact that there was a serious breach of natural justice when the DB failed to furnish reason for its decision as required by the law.

[48] Consequently, we were also of the view that the purported finding of the DB of gross misrepresentation by the 1st respondent was problematic based on two reasons. First, gross misrepresentation is within the scope of the law of tort. It does not however fall within the ambit of the LPA. We refer to Cordery's Law Relating to Solicitors by Graham J Graham Green, 5th edn, London Butterworths, 1961, at p 466 which states as follows:

"Again, conduct amounting to mere negligence, however gross, is not professional misconduct."

[49] Secondly, a finding of gross misrepresentation, even if it amounts to a misconduct under the LPA, could not be adequately substantiated by the DB because the DB had failed to show the existence of the elements which embody misconduct such as fraud, dishonesty or deceit by the 1st respondent. We refer to the decision of Re An Advocate [1949] 1 MLRH 641 where it was held, at p 645, that:

"... In all the cases I have examined where what was involved was the solicitor's relations with his client and where the Courts have held that professional misconduct has existed, there has been present some element of fraud, dishonesty or deceit. I can find no case where the simple failure to do work for which payment has been made or where neglect or even a refusal to pay money where there has been no question of fraud or misappropriation has been held to amount to professional misconduct ..."

[50] What were the factors that the DB had taken into account in arriving at the finding of gross misrepresentation? The DC was specific in its findings and recommendations when it stated that there was "no allegation of any defect in character or any morally apprehensive conduct that is unfit as a solicitor" against the 1st respondent. Thus, when the DB reversed and departed from such findings without any allegation raised towards that effect was questionable. In these circumstances, we were of the view that it would be highly indefensible to be in agreement with the finding of guilt of professional misconduct that not only exceeded the scope of the LPA but was not supported by any reason and/ or justification whatsoever.

[51] On the issue of the biasness of the DB and on whether the DB had predetermined the guilt of the 1st respondent, we were in agreement with the learned High Court Judge that even after the findings and recommendations of no misconduct by the DC, the 1st respondent was directed to make his representations on why liability should not be found against him before the DB vide DB's letter dated 16 May 2017. This 16 May 2017 letter was in addition to the DB's letter dated 24 March 2017 referred to earlier where the DB had already made a finding of gross misrepresentation before even hearing the 1st respondent.

[52] In addition to that, we were also of the considered view that the act of one of the members of the DB in instructing the 1st respondent's solicitor to submit on mitigation before a finding of guilt served to show the biasness. The mitigation was proceeded with even after such instruction was queried by the 1st respondent's solicitor. To our minds, this was a clear indication that the DB had pre-determined the finding of guilt of the 1st respondent. The 1st respondent's affidavit affirmed on 26 October 2017 had raised this very issue and this allegation remained unrebutted as the DB had not filed any affidavit to the contrary to rebut the allegation of bias.

E. Conclusion

[53] Based on the reasons adumbrated above, we were of the unanimous view that the appeal be dismissed with no order as to costs. We were fortified in our decision by the fact that the Bar Council had earlier on withdrawn its appeal against the learned High Court Judge's decision. We therefore saw no cogent reason to disturb the decision of the learned High Court Judge. The deposit of this appeal was to be refunded, if any.