Legal Profession: Law Society/Malaysian Bar - Bar Council's Compensation Fund - Power of Malaysian Bar to compensate members of public using money from Compensation Fund - Whether grants out of Compensation Fund only payable for losses arising from dishonest acts of advocates and solicitors practicing as sole proprietors and not those practicing in partnerships - Whether para 2(b) of Guidelines on Making a Claim for Compensation ultra vires s 80(8) Legal Profession Act 1976

This appeal concerned the power of the Malaysian Bar/appellant to compensate members of the public using money from the Bar Council's Compensation Fund ('Compensation Fund'), for losses arising from acts of dishonesty by advocates and solicitors practicing in partnerships (as opposed to sole proprietorships). The solicitor in question in the present case was one Shan Theivanthiran ('Shan'), who had been found guilty of professional misconduct against the two respondents herein by the Advocates and Solicitors' Disciplinary Board. Shan was struck off the Roll of Advocates and Solicitors of the High Court of Malaya, and ordered to make restitution in the sum of RM521,427.00 ('restitution sum') to each respondent respectively.

The respondents wrote to the appellant to enquire if they were entitled to claim the restitution sum from the Compensation Fund. The appellant informed the respondents that it was unable to entertain any claim for the restitution sum to be paid out of the Compensation Fund as Shan was practicing as a partner in Messrs Thevin Chandran & Associates. The reason given by the appellant for not entertaining the respondents' claim was that it was contrary to the eligibility requirements stipulated in para 2(b) of the Guidelines on Making a Claim for Compensation ('Guidelines'). Dissatisfied, the respondents filed an action in the High Court seeking certain reliefs. The High Court dismissed their action, but their subsequent appeal to the Court of Appeal was allowed. Hence, the present appeal by the appellant in which it was argued that grants out of the Compensation Fund were only payable for losses arising from the dishonest acts of advocates and solicitors practicing as sole proprietors, and not for losses arising from the dishonest acts of advocates and solicitors practicing in partnerships.

Held (dismissing the appeal with costs):

(1) Section 80(8) and (9) of the Legal Profession Act 1976 ('LPA') spoke of 'any advocate and solicitor', 'an advocate and solicitor', 'the advocate and solicitor' and 'that advocate and solicitor' and made no distinction between an advocate and solicitor who practiced as a sole proprietor and an advocate and solicitor who practiced in a partnership. Parliament would have made the distinction clear if the intention was to allow payment out of the Compensation Fund only in cases involving dishonesty by advocates and solicitors practicing as sole proprietors and not in cases involving dishonesty by advocates and solicitors practicing in partnerships. From the wordings of s 80(8) and (9), they covered losses from acts of dishonesty not only of advocates and solicitors who had valid practicing certificates but also of those who did not have valid practicing certificates at the time of the commission of the dishonest acts, and more importantly s 80(8) covered, within its ambit, even acts of dishonesty of clerks and servants of the advocates and solicitors. (paras 21-22)

(2) There was clearly no ambiguity in para (2)(b) of the Guidelines. It provided in clear language that monies under the Compensation Fund might be granted only to the victim of a dishonest advocate and solicitor if the advocate and solicitor was practicing as a sole proprietor, and not if he was practicing in a partnership at the time he committed the dishonest act. Contrary to the intention of Parliament under s 80(8) of the LPA, the intention of the Bar Council when formulating para (2)(b) of the Guidelines was to exclude from its purview advocates and solicitors who practiced in partnerships. The stand taken by the appellant in the present appeal was a clear manifestation of that intention. Given the clarity of para (2)(b) of the Guidelines, the only question left to be answered was whether it was ultra vires s 80(8) of the LPA which allowed for a grant to be paid out of the Compensation Fund even for losses due to the dishonest acts of clerks and servants of the advocates and solicitors, with no distinction drawn between advocates and solicitors practicing as sole proprietors and advocates and solicitors practicing in partnerships. The answer to this question was in the affirmative. (paras 47-48)

(3) There was no reasonable ground for the appellant to deprive the respondents' claim for a grant out of the Compensation Fund as the purpose of the Compensation Fund was to protect the interests of members of the public like the respondents who, as clients of advocates and solicitors, suffered losses due to the dishonesty of such advocates and solicitors whom they put their trust in. That being the purpose of the Compensation Fund, it did not matter if the advocate and solicitor was a sole proprietor or in a partnership. (para 32)

Case(s) referred to:

Agathisfour Sdn Bhd v. Papparich Group Sdn Bhd [2020] MLRHU 1822 (refd)

Borg-Warner Acceptance Canada Ltd v. Law Society Of New Brunswick [1988] NBJ 205 (refd)

British Columbia v. Trinity Western University And Another (Lawyers Rights Watch Canada And Others Intervening) [2018] 2 SCR 293 (refd)

Datuk M Kayveas & Anor v. Bar Council [2013] 5 MLRA 437 (distd)

El Hennawy v. Law Society Of Upper Canada [2014] OJ No 395 (refd)

Green v. Law Society Of Manitoba 2017 SCC 20 (refd)

Manggai v. Government of Sarawak & Anor [1970] 1 MLRA 344 (distd)

Party A v. Law Society of British Columbia [2021] BCJ No 600 (refd)

Re Ahmed & Co (A Firm) And Others [2006] All ER 195 (Mar) (refd)

Legislation referred to:

Legal Profession Act 1976, ss 3, 80(8), (9), (12), 100(8), (10)

Partnership Act 1961, ss 7, 11, 12, 14

The Native Courts Ordinance 1992 (Sarawak), ss 7(3), 8(1)(c)

Counsel:

For the appellant: Gregory Das (Jeremiah Rais and Leah Samuel with him); M/s Steven Thiru & Sudhar Partnership

For the respondents: Subashini Gunasegaran (Baljeet Kaur with her); M/s VT Singam, D Gunasegaran & Co

JUDGMENT

Abdul Rahman Sebli CJSS:

[1] The issues that arise in this appeal concern the power of the Malaysian Bar (the appellant) to compensate members of the public using money from the Bar Council's Compensation Fund for losses arising from acts of dishonesty by advocates and solicitors practicing in partnerships (as opposed to sole proprietorships).

[2] The facts as narrated by the appellant are undisputed and they are as follows, with the necessary modifications. The respondents lodged a complaint with the Advocates and Solicitors' Disciplinary Board ("the ASDB"). The complaint was as follows:

(1) The respondents were two out of four beneficiaries of a property held under P.N. No. Hakmilik Lot 4091, Mukim Hulu Kinta, Daerah Kinta, Perak Darul Ridzuan ("the property");

(2) The respondents consented to the sale and transfer of the property to Kawan Properties Sdn Bhd ("the purchaser"). The respondents' sister, one Cecelia Bernado Carvalho ("the vendor"), executed a sale and purchase agreement dated 12 July 2011 to sell the property to the purchaser for the sum of RM2,524,410.00;

(3) One Shan Theivanthiran ("Shan") practicing as a partner of Messrs Thevin Chandran & Associates acted as solicitors for the vendor;

(4) The purchaser's solicitors issued a cheque for the sum of RM2,145,748.50 ("the balance purchase price") to the vendor's solicitors Messrs Thevin Chandran & Associates;

(5) The balance purchase price was intended to be divided equally between the respondents being the two other beneficiaries of the property;

(6) Shan then issued two cheques, each for the sum of RM521,427.00 to the respondents;

(7) However, the respondents did not cash the cheques as Shan told them not to do so until further notice;

(8) Shan subsequently issued and banked in a cheque for the sum of RM1,042,854.00. This sum was intended to be divided between the respondents. The cheque was dishonoured;

(9) Shan failed to make payment of the sum of RM1,042,854.00 to the respondents despite making assurances to do so.

[3] After a due inquiry, the ASDB affirmed the Disciplinary Committee's finding of liability and recommendation on punishment against Shan and found him guilty of professional misconduct.

[4] By way of an Order dated 18 July 2020, the ASDB ordered Shan to be struck off the Rolls of Advocates and Solicitors of the High Court of Malaya within 21 days from the date of the ASDB Order ("the ASDB Order"). The ASDB further ordered that:

(1) Shan make a restitution in the sum of RM521,427.00 to the 1st respondent within one month of the ASDB Order; and

(2) Shan make a restitution in the sum of RM521,427.00 to the 2nd respondent within one month of the ASDB Order (collectively "the restitution sum").

[5] By email dated 21 September 2020 addressed to the appellant, the respondents' solicitors wrote to enquire if the respondents were entitled to claim the restitution sum from the Compensation Fund. There was no mention made of the steps taken by the respondents to recover the sum under the restitution order.

[6] On 22 September 2020, the appellant issued an email informing the respondents' solicitors that it was unable to entertain any claim for the restitution sum to be paid out of the Compensation Fund as Shan was practicing as a partner in Messrs Thevin Chandran & Associates.

[7] The reason given by the appellant for not entertaining the respondents' claim for the restitution sum to be paid out of the Compensation Fund was that it was contrary to the eligibility requirements stipulated in the Guidelines on Making A Claim for Compensation ("the Guidelines").

[8] Dissatisfied with the decision of the appellant, the respondents by way of an Originating Summons, filed an action against the appellant in the High Court for the following reliefs, amongst others:

(1) An order of certiorari to quash or set aside the appellant's decision;

(2) An order of Mandamus or otherwise that the appellant pay the restitution sum to the respondents from the Compensation Fund pursuant to the ASDB Order;

(3) A declaration that paragraph (2)(b) of the Guidelines is contrary to subsections (2), (8) and (9) of s 80 of the Legal Profession Act 1976 ("the LPA"); and

(4) A declaration that the appellant's refusal to pay the restitution sum to the respondents from the Compensation Fund is ultra vires and is beyond the authority of the appellant and is invalid, void and of no effect.

[9] On 19 August 2021, the High Court dismissed the respondents' Originating Summons. Aggrieved by the decision, the respondents appealed to the Court of Appeal. Their appeal was allowed and the following orders were made against the appellant:

(a) A declaration that paragraph (2)(b) of the Guidelines is ultra vires subsections (2), (8) and (9) of s 80 of the LPA;

(b) A declaration that the appellant's refusal to consider payment out of the Compensation Fund to the respondents to mitigate their loss suffered as a result of the dishonest act of Shan, an advocate and solicitor, is unreasonable and irrational and is ultra vires and/or in excess of the statutory powers of the appellant under the LPA and is therefore null and void and of no effect;

(c) That the respondents in accordance with the procedure in The Advocates and Solicitors Compensation Fund Rules 1978 ("the CFR") resubmit an application to the Malaysian Bar within 60 days from 15 August 2022 and the appellant shall consider the respondents' application for compensation for their loss suffered and shall make an appropriate award of compensation from the Compensation Fund using the same formula for payment for the year in question, which is the year 2020;

(d) Costs of RM10,000.00 to the respondents subject to payment of the allocator fee; and

(e) Parties are at liberty to apply to the High Court.

[10] Having heard arguments by the parties on 12 April 2023 both written and oral, we reserved judgment to a date to be fixed. We have now reached a unanimous decision and this is our judgment.

[11] In dismissing the respondents' Originating Summons, the High Court held that the Guidelines were valid and that the respondents "telah tidak mematuhi kriteria seperti terdapat di dalam Garis Panduan Tuntutan Pampasan yang dikeluarkan mengikut s 80(12) Akta Profesyen Undang-Undang 1976."

[12] The Garis Panduan Tuntutan Pampasan that the High Court upheld to be valid is paragraph (2)(b) of the Guidelines which is couched in the following language:

"(2) Eligibility and Procedure

Any person who has sustained losses owing to the dishonesty of lawyers may apply for a grant out of the Compensation Fund under these circumstances:

(a) ............

(b) The lawyer concerned was practicing as a sole proprietor at the material time of the breach;

(c) ............"

[13] It is interesting to note that paragraph (2)(b) of the Guidelines uses the words "lawyers" and "lawyer" in that order instead of the words "advocate and solicitor" used in s 80 of the LPA. For consistency we shall in this judgment use the words "advocate and solicitor" or "advocates and solicitors" as the case may be.

[14] The Guidelines were made by the Bar Council pursuant to the CFR which in turn was made under s 80(12) of the LPA which reads:

"(12) The Bar Council may make rules in respect of the procedure to be followed in giving effect to this section and in respect of any matters incidental, ancillary or supplemental thereto or concerning the administration or protection of the Fund."

[15] Of relevance to note is that there is nothing in the CFR which states or even suggests that an application for a grant out of the Compensation Fund is restricted to losses caused by dishonest advocates and solicitors who practice as sole proprietors and not to losses caused by dishonest advocates and solicitors who practice as partners in a partnership. The terms of the CFR, made pursuant to s 80(12), are as follows:

"In the exercise of the powers conferred by subsection (12) of s 80 of the Legal Profession Act 1976 [Act 166], the Bar Council makes the following rules:

1. Citation

These Rules may be cited as the Advocates and Solicitors' Compensation Fund Rules 1978.

2. Contribution to be paid annually in advance Contribution to the Compensation Fund for the succeeding year shall be paid annually in advance by each advocate and solicitor on application by him for a Sijil Annual.

3. Notice on Form A

Before or at the time of making an application to the Bar Council for a grant out of the Compensation Fund, an applicant shall complete, sign and deliver to the Secretary of the bar Council a notice in Form A set out in the Schedule or in a form to the like effect approved by the Bar Council.

4. Notice to be delivered to Secretary

Every such notice shall be delivered to the Secretary of the Bar Council within six months (or such other period not exceeding two years as the Bar Council may allow) after the loss in respect of which the notice is delivered, first come to the knowledge of the applicant.

5. Notice to accompany an application

Every such notice shall be accompanied by an application for a grant out of the Compensation Fund, except where it is impracticable to deliver the application with the notice, in which case the application shall be delivered to the Secretary of the bar Council as soon as practicable after the delivery of the notice.

6. Application in Form B

Every application shall be made in Form B set out in the Schedule or in a form to the like effect approved by the Bar Council. The Bar Council may require an applicant to make a statutory declaration in support of the application.

7. Bar Council may require oral evidence of documents

The bar Council may require an application to be supported by oral evidence to be tendered and documents to be produced to the Bar Council or any Committee appointed and authorized by the bar Council to exercise or to assist the Bar Council in the exercise of its functions under s 80 of the Act.

8. Bar Council may require pursuit of civil remedy or criminal proceeding

The Bar Council may before deciding whether or not to make a grant out of the Compensation Fund require, in respect of any application, the pursuit of any civil remedy which may be available in respect of the loss, or the institution of criminal proceedings in respect of the dishonesty leading to the loss, or the making of an application to a Disciplinary Committee.

9. Waiver

The bar Council may waive any of the provisions of these Rules or permit the amendment of any notice or application.

10. Requirement of Bar Council to be communicated by notice

Any requirement of the Bar Council under these Rules may be communicated by a notice in writing which may be delivered personally or sent by post to the addressee at his last known address. Any such notice sent by post shall be deemed to have been received by the addressee within forty-eight hours (excluding Sundays and Public Holidays) of the time of posting."

[16] According to learned counsel for the appellant, the rationale for restricting payment of the grants only to claims involving dishonest advocates and solicitors practicing as sole proprietors is fivefold, namely:

(1) Monies in the Compensation Fund are contributed by members of the appellant themselves who pay an annual subscription under s 80(1) of the LPA;

(2) The Bar Council does not restrict the number of claims that can be made in a year by persons aggrieved by the dishonest acts of an advocate and solicitor;

(3) Given that there is a finite or limited amount of money in the Compensation Fund at any given time, it is of practical necessity that some limits be imposed on who are eligible to receive payouts from the Compensation Fund;

(4) Claims involving partnerships are excluded because losses incurred from the dishonest acts of a partner of a law firm would entitle an aggrieved party to seek recourse by way of a civil suit against the partnership, which in turn would be insured under the appellant's Professional Indemnity Insurance Scheme; and

(5) This recourse is however not available against sole proprietors as the appellant's Professional Indemnity Insurance Scheme excludes the indemnification of an insured person who is the defrauder, ie the defrauder himself.

[17] For context and to provide a clearer picture of the issues involved, it is necessary to reproduce s 80 of the LPA in its entirety:

"Compensation Fund

80. (1) The Malaysian Bar shall maintain and administer in accordance with this section a fund to be known as the "Compensation Fund".

(2) Every advocate and solicitor shall on each occasion he applies for a Sijil Annual pay to the Malaysian Bar a contribution of such sum as the Bar Council may from time to time determine and the Malaysian Bar shall pay that contribution into the Fund:

Provided that an advocate and solicitor who applies for a Sijil Annual shall be required to pay only half the contribution so determined if the practicing certificate for which he proposes to apply is valid for less than six months."

(3) The Malaysian Bar may invest any moneys out of the Fund which are not immediately required for any other purposes and, for the purposes of this section, the Malaysian Bar shall have all the powers of trustees under any written law.

(4) The Malaysian Bar for the purposes of the Fund borrow from any lender and may charge any investments of the Fund by way of security for such loan.

(4A) The Bar Council may, for such of the purposes of the Malaysian Bar as the Bar Council deems fit, borrow moneys from the Fund and shall, in respect of any money so borrowed, pay to the Fund interest at the prime rate laid down by the Association of Banks in Malaysia, prevailing from time to time.

(5) The Malaysian Bar may insure the Fund with any registered insurance business in Malaysia for any purpose and on any terms as the Malaysian Bar may consider expedient.

(6) There shall be carried to the credit of the Fund:

(a) all annual contributions paid to the Malaysian Bar in pursuance of subsection (2);

(b) all interests, dividends and other income or accretions of capital arising from the investments of the Fund;

(c) the proceeds of any realization of any investments of the Fund;

(d) all moneys borrowed for the purposes of the Fund;

(e) all sums received by the Malaysian Bar under any insurance effected by the Malaysian Bar under subsection (5); and

(f) any other moneys which may belong or accrue to the Fund or be received by the Bar Council in respect of the Fund.

(7) All moneys from time to time forming part of the Fund and all investments of the Fund shall be applicable:

(a) for payment of any costs, charges and expenses of establishing, maintaining and administering the fund;

(b) for payment of any costs, charges and expenses of the Bar Council in ascertaining whether the rules made under s 78 have been complied with, pursuant to the powers given by such rules;

(c) for payment of any premiums on insurance effected by the Malaysian Bar under subsection (5);

(d) for payment of moneys borrowed by the Malaysian Bar and for payment of interest on any moneys so borrowed;

(e) for payment of any grants which the Malaysian Bar may make under subsection (8); and

(f) for payment of any other sums payable out of the Fund by virtue of this section.

(8) Where it is proved to the satisfaction of the Bar Council that any person has sustained loss in consequence of dishonesty on the part of any advocate and solicitor or any clerk or servant of an advocate and solicitor in connection with that advocate and solicitor's practice in Malaysia as an advocate and solicitor, or in connection with any trust of which that advocate and solicitor is a trustee, then subject to this section, the Malaysian Bar may, if the Bar Council thinks fair and reasonable, make a grant to that person out of the Fund for the purpose of relieving or mitigating that loss.

(8A) If in any year there has been neither an application made for a grant from the Fund nor a grant made from the Fund, the Bar Council may in its discretion transfer from the Fund all interests, dividends and other accretions of capital arising from the Fund, or any part thereof, to a Fund of the Malaysian bar established for the purposes of purchasing or maintaining a library for the use of the members of the Malaysian Bar and to fund established for the purpose of providing legal aid.

(9) A grant may be made under this section whether or not the advocate and solicitor had a valid practicing certificate when the act of dishonesty was committed, and notwithstanding that subsequent to the commission of the act the advocate and solicitor has died or had his name removed from or struck off the Roll or has ceased to practice or been suspended from practice.

(10) On any grant made by the Malaysian Bar under this section to any person in respect of any loss:

(a) the Malaysian Bar shall to the extent of the grant be subrogated to all such rights and remedies as the person to whom the grant is made may have against the advocate and solicitor, clerk or servant in respect of the loss;

(b) the person to whom the grant is made shall have no right by way of bankruptcy or other legal proceedings or otherwise to receive any sum out of the assets of the advocate or solicitor, clerk or servant in respect of the loss until the Fund has been reimbursed with the full amount of the grant.

(11) Reference in paragraphs (10)(a) and (b) to the person to whom the grant is or to the advocate and solicitor, clerk or servant shall include, in the event of his death, insolvency or other disability, reference to his personal representatives or any other person having authority to administer his estate.

(12) The Bar Council may make rules in respect of the procedure to be followed in giving effect to this section and in respect of any matters incidental, ancillary or supplemental thereto or concerning the administration or protection of the Fund.

(13) The income derived from the Compensation Fund shall be exempted from income or all other taxes, and the Fund shall be an institution approved for the purposes of s 45 of the Income Tax Act 1967 [Act 53] payments to which shall be good deductions for income tax purposes in arriving at the aggregate income of the person making the payment for the relevant year."

[18] The words "Compensation Fund" and "the Fund" referred to in the above s 80 are given the following meaning by s 3 of the LPA:

"Compensation Fund" and "the Fund" mean the fund maintained and administered in accordance with s 80.

[19] The duty of the appellant to maintain and administer the Compensation Fund is stipulated by subsection (1). Subsection (8) provides that the Malaysian Bar "may" make a grant out of the Compensation Fund "if the Bar Council thinks fair and reasonable". It is a discretion vested in the appellant "subject to this section". A discretion by its very nature is to be exercised and not avoided.

[20] In reversing the decision of the High Court, the Court of Appeal found that there is nothing in subsections (8) and (9) of s 80 of the LPA to restrict payment out of the Compensation Fund only to losses arising from the dishonesty of advocates and solicitors practicing as sole proprietors. It further found that the two subsections make no distinction between a claim for losses arising from the dishonest acts of advocates and solicitors practicing as sole proprietors and a claim for losses arising from the dishonest acts of advocates and solicitors practicing in partnerships.

[21] In our view, the Court of Appeal was right in making those findings as subsections (8) and (9) of s 80 speak of "any advocate and solicitor", "an advocate and solicitor", "the advocate and solicitor" and "that advocate and solicitor" and make no distinction between an advocate and solicitor who practices as a sole proprietor and an advocate and solicitor who practices in a partnership. Parliament would have made the distinction clear if the intention was to allow payment out of the Compensation Fund only in cases involving dishonesty by advocates and solicitors practicing as sole proprietors and not in cases involving dishonesty by advocates and solicitors practicing in partnerships.

[22] The Court of Appeal also pointed out that from the wordings of subsections (8) and (9), they cover losses from acts of dishonesty not only of advocates and solicitors who have valid practicing certificates but also of those who did not have valid practicing certificates at the time of the commission of the dishonest acts, and more importantly subsection (8) covers, within its ambit, even acts of dishonesty of clerks and servants of the advocates and solicitors.

[23] A clerk or servant of an advocate and solicitor is not an advocate and solicitor, let alone an advocate and solicitor practicing as a sole proprietor or in a partnership, yet by virtue of subsection (8) of s 80, a person who has suffered losses due to the clerk or the servant's dishonest acts would also be entitled to apply for a grant out of the Compensation Fund. From a harmonious reading of subsections (8) and (9), it is clear to us that the net is cast wide enough so to speak to catch every fish in the pond.

[24] This unveils the fallacy of the appellant's argument that grants out of the Compensation Fund are only payable for losses arising from the dishonest acts of advocates and solicitors practicing as sole proprietors and not for losses arising from the dishonest acts of advocates and solicitors practicing in partnerships.

[25] Paragraph (2)(b) of the Guidelines is clearly inconsistent with subsections (8) and (9) of s 80 and is therefore null and void and of no effect. Being a "subsidiary" provision it cannot override the two principal provisions, ie subsections (8) and (9) of s 80 which do not restrict applications for grants out of the Compensation Fund only to losses arising from the dishonest acts of advocates and solicitors practicing as sole proprietors.

[26] There is nothing in s 80(12) of the LPA that empowers the Bar Council to impose conditions such as the condition imposed by paragraph (2)(b) of the Guidelines. As rightly held by the Court of Appeal, it only empowers the Bar Council to make rules in respect of the procedure for making a claim out of the Compensation Fund but not on matters of the substantive rights of the parties.

[27] A careful reading of s 80(12) of the LPA will reveal that the intention behind the provision is to empower the Bar Council to make rules in respect of the "procedure" for achieving the following purposes:

(i) to give effect to s 80; and

(ii) in respect of any matters incidental, ancillary or supplemental thereto or concerning the administration or protection of the fund.

[28] To place a limit on a person's substantive right under s 80(8) of the LPA by restricting his claim only to losses arising from the dishonest acts of an advocate and solicitor practicing as a sole proprietor is not to make rules in respect of the "procedure" for the purposes of (i) and (ii) above. It is to change the rules without legislative sanction.

[29] To support his argument that the Bar Council is empowered to make the Guidelines, specifically paragraph (2)(b), learned counsel for the appellant pointed out that s 80(12) of the LPA is worded widely enough to include matters "concerning the administration or protection of the Fund". It was argued that the eligibility criteria of claims would also relate to the "protection" of the Compensation Fund as it serves as a protection against undue depletion of the Fund, which would happen if unrestricted claims were to be allowed. The concern no doubt is with "undue depletion" of the Compensation Fund.

[30] With due respect, a guideline that takes away a person's substantive right under s 80(8) of the LPA in the name of protecting the Compensation Fund from depletion is unlawful and is liable to be struck down. The power of the Bar Council to make rules or guidelines in respect of the procedure to be followed in protecting the Compensation Fund from depletion does not extend to extinguishing the statutory right given to a person by s 80(8) of the LPA to apply for a grant out of the Compensation Fund for losses due to the dishonest acts of advocates and solicitors practicing in partnerships.

[31] We were told that the Guidelines were made by the Bar Council "to ensure consistency and non-arbitrariness in the processing of the claim as the person administering the Fund may change from year to year." That may be so, but paragraph (2)(b) of the Guidelines in its present form is manifestly arbitrary by excluding advocates and solicitors practicing in partnerships from its ambit when the truth of the matter is that monies in the Compensation Fund come from compulsory annual contributions from every practicing advocate and solicitor registered with the Malaysian Bar, irrespective of whether the advocate and solicitor is practicing as a sole proprietor, in a partnership, as a consultant or as a legal assistant.

[32] There is no reasonable ground for the appellant to deprive the respondents' claim for a grant out of the Compensation Fund as the purpose of the Fund is to protect the interest of members of the public like the respondents who, as clients of advocates and solicitors, have suffered losses due to the dishonesty of such advocates and solicitors whom they have put their trust in. That being the purpose of the Compensation Fund, does it matter if the advocate and solicitor is a sole proprietor or in a partnership? We think not.

[33] It was submitted that the Court of Appeal erred in failing to consider the object and purpose of the Guidelines. The contention was that the Bar Council is entitled under its statutory powers to restrict the payment of compensation to the public with a view to "conserving" the funds in the Compensation Fund. This is just another way of saying that the Fund needs "protection" from depletion arising from claims due to the dishonest acts of advocates and solicitors practicing as sole proprietors but not from claims arising from the dishonest acts of advocates and solicitors practicing in partnerships. It was argued that it is neither feasible nor practical to make the compensatory fund of a professional body to be "open-ended" so as to entertain all claims

[34] Our attention was drawn to the following remarks made by the Deputy Minister who moved the relevant Bill on the LPA:

"Among other purposes, the Compensation Fund may be used by the Bar Council, if it thinks fair and reasonable, to make a grant to a person who has suffered loss because of the dishonesty of his advocate and solicitor or his clerk or servant in his practice or in his capacity as a trustee in managing trust funds. Such grant may also be made where the advocate and solicitor has died or has been struck off the Roll of Advocates and Solicitors or has ceased to practice or has been suspended from practice. It is hoped that this provision will operate as a security against loss to a client as a result of the dishonest conduct of an advocate and solicitor. Any person who receives a grant under this provision cannot claim against the advocate and solicitor concerned."

[35] On the strength of the above statement by the Deputy Minister, it was submitted that the legislature intended the Bar Council to have the latitude in determining when a grant can be made out of the Compensation Fund. What is relevant to note from the above speech is that the Deputy Minister was hoping that the provision on Compensation Fund will operate as a security against loss to a client as a result of the dishonest conduct of "an advocate and solicitor".

[36] Nowhere did the Deputy Minister say that the Compensation Fund is only meant for losses arising from the dishonest acts of advocates and solicitors practicing as sole proprietors. What he did say is that a person who receives a grant out of the Compensation Fund cannot claim against the advocate and solicitor who committed the dishonest act. The Deputy Minister was of course speaking of the principal Act, ie the LPA and not the CFR or the Guidelines.

[37] What the speech implies to our mind is that a person who has suffered losses arising from the dishonest acts of the advocate and solicitor concerned, irrespective of whether he practices as a sole proprietor or in a partnership, and irrespective of whether he is still alive or dead or has been struck off the Roll, has the option of either to apply for a grant out of the Compensation Fund or to file a civil claim against him. But he cannot have the benefit of both. Nothing beyond that should be read into the statement.

[38] The appellant relied heavily on the principle of deference to be accorded to professional bodies governing the legal profession, which according to learned counsel is well entrenched in Canada, citing Law Society of British Columbia v. Trinity Western University and another (Lawyers' Rights Watch Canada And Others Intervening) [2018] 2 SCR 293; Green v. Law Society of Manitoba 2017 SCC 20; Party A v. Law Society of British Columbia [2021] BCJ No 600; El Hennawy v. Law Society of Upper Canada [2014] OJ No 395.

[39] The argument was that entities like the Bar Council which regulate and govern the legal profession should be accorded wide latitude in making rules in the regulation and governance of the profession.

[40] As for the appellant's contention that paragraph (2)(b) of the Guidelines is not ultra vires subsections (8) and (9) of s 80 of the LPA, reliance was placed on the following authorities from the United Kingdom:

(1) The English Court of Appeal case of R v. Law Society, ex parte Mortgage Express Ltd; R v. Law Society, ex parte Alliance and Leicester Building Society [1997] 2 All ER 348, quoting the following passages in the judgment of the Lord Chief Justice:

"It seems clear to us from the current legislation, the history of the fund and the mode of operating it that the solicitors' profession was never intended or required to assume an open-ended liability to meet any unsatisfied loss sustained by any party caused by the dishonesty of any solicitor. The liability imposed (for instance) on banks and stockbrokers is very much more modest. Any discretion in a matter of this kind must, of course, be exercised reasonably, fairly, in good faith, so far as possible consistently and with regard to the objects of the legislation. But there is nothing to prevent the Law Society formulating and following policies which satisfy these criteria, provided they do not fetter their discretion by applying such policies inflexibly and without recognizing that exceptional cases may call for exceptional exercises of discretion. Administering a limited fund exposed to potentially unlimited demands, and with a membership whose resources are finite, the Law Society are in practice bound (and in law they are entitled) to give priority to those classes of claims which they regard, for sustainable reasons, as having the most pressing claim to be met (wholly or in part) out of the fund. This inevitably means that some applicants who succeed at the first stage fail at the second. That is because they do not have a right to seek a favourable exercise of discretion".

(2) The High Court of England and Wales case of R v. Law Society, ex parteReigate Projects Ltd and others [1992] 3 All ER 232 which found that the Law Society was entitled to adopt a limiting policy that clients of dishonest solicitors would only be compensated from the compensation fund under s 36(2)(a) of the Solicitors Act 1974 for the loss of monies entrusted to the solicitor for the client's purposes and further that compensation would not be paid for any consequential losses arising from the loss of those monies. Particular emphasis was placed by learned counsel on the following observations by the court:

"There are we were told a large number of solicitors in practice without a partner or partners. If every time one of them is dishonest compensation has to be paid on the basis of a claim for damages and consequential loss calculated upon the broadest possible construction of s 36(2), the compensation fund would need to be very much larger than it is, impossibly so if regard is had, as it must be, to the scale of contributions and levies which solicitors can reasonably be expected to bear...

..............

Certain features of the present controversy are, I think, easy to identify and, on authority, capable of being stated as principles for present purposes. They are: (1) the Law Society is entitled, providing it makes known what it is and it is reasonable, to have a policy for administering the compensation fund; (2) it has a discretion to deny or to accept in whole or in part any claim made upon the compensation fund; (3) it must not unwarrantably fetter that discretion; (4) it must provide reasons for its decisions; and (5) it must consider the whole of the representations of a claimant, but it is not bound to hear him in person - see R v. Professional Purposes Committee of the Law Society, ex p Nicholson (11 February 1988, unreported), Kennedy J. I have already dealt with (4) but (5) does not arise for consideration.

The other principles have to be viewed in the light of a proper construction of s 36(2)(a). As to that, I am unable to accept that which was adumbrated by Mr Hamer. It is tantamount to saying that the expression 'loss in consequence of dishonesty' connotes an almost boundless area of consequences which are hardly to be circumscribed except by notions of the like of foreseeability and remoteness those two well-known tests used for determining liability to pay damages in civil actions based on negligence.

It seems to me to be unthinkable that Parliament should have intended to saddle the Law Society with maintaining a compensation fund to meet claims founded upon such a basis as that."

(3) The High Court of England and Wales case of R v. Law Society, Ex Parte Nielsen [1998] Lexis Citation 1438 where the following observations were made:

"There is no doubt that the Law Society has power to formulate and apply general policy guidelines provided they are not applied inflexibly and without regard to the circumstances of the particular case. In this context, Mr Pannick QC, for the respondents, referred to the decision of the Court of Appeal in R v. Law Society, ex parteMortgage Express Limited and Others (1997) 2 All ER 348. At p 359G the Lord Chief Justice set out the court's understanding of the relevant legislation:

Where application is made for payment out of the fund, the first stage of the inquiry is to ask (in a case such as these) whether the applicant satisfied the condition in s 36(2)(a) of the 1974 Act. Has the applicant suffered (or is likely to suffer) loss in consequence of dishonesty on the part of a solicitor? If the answer is negative the Law Society are not entitled to make a grant out of the fund to relieve that loss and would be in breach of trust if they were to do so. If the answer is affirmative, the Law Society may make a grant. That question is one of law, to be answered according to established legal principles as applied to the facts established to the satisfaction of the council.

If (as here) that question is answered affirmatively, the second stage of the inquiry begins. That involves asking: Should a grant be made? That is a question of quite a different nature. The answer is not to be found in the application of established legal principles to the facts as proved but in the exercise of discretion or judgment. So much appears from use of the word 'may', which is the language of discretion, and the word 'relieving', which is the language of mitigation."

[41] With due respect to learned counsel, none of the cases, both from Canada and the UK are relevant as the courts in those jurisdictions were not dealing with provisions that are identical or similar to paragraph (2)(b) of the Guidelines, which restricts payment out of the Compensation Fund only to advocates and solicitors practicing as sole proprietors and not to advocates and solicitors practicing in partnerships.

[42] There is nothing in the passages from the Canadian and UK cases quoted by learned counsel to support his contention that the Bar Council has power under s 80(12) of the LPA to make such inflexible guideline as paragraph (2)(b) of the Guidelines, which runs counter to s 80(8) and 80(9) of the LPA.

[43] In any event, in none of the cases were the courts called upon to decide on the issue of conflict between different provisions of the law with regard to payment of compensation for losses arising from the dishonest acts of practicing advocates and solicitors either as sole proprietors or as partners. If at all, the cases are relevant for the proposition that the discretion under s 80(8) of the LPA must be exercised by the appellant reasonably, fairly, in good faith, so far as possible consistently and with regard to the objects of the legislation (ex parte Mortgage Express Ltd). The following observation made by the learned judge of the High Court of England and Wales in ex parte Nielsen (supra) is pertinent:

"There is no doubt that the Law Society has power to formulate and apply general policy guidelines provided they are not applied inflexibly and without regard to the circumstances of the particular case."

[44] What paragraph (2)(b) of the Guidelines does is to completely shut the door to the Compensation Fund to persons who have suffered losses due to the dishonest acts of advocates and solicitors practicing as partners in a partnership. That is untenable as it takes away the discretion vested in the appellant by s 80(8) of the LPA to make grants out of the Compensation Fund arising from the dishonest acts of "any advocate and solicitor" and not just from the dishonest acts of advocates and solicitors practicing in sole proprietorships.

[45] From within our shores, learned counsel cited the decision of this court in Datuk M Kayveas & Anor v. Bar Council [2013] 5 MLRA 437 for the proposition that the liability of a defrauding solicitor who practices in a partnership can be jointly and severally enforced against all partners of the firm by reference to ss 7, 11, 12 and 14 of the Partnership Act, 1961.

[46] Likewise the case is of no assistance to the appellant as the issue is not germane to the issue before the court in the present appeal. It provides no answer to the question whether paragraph (2) (b) of the Guidelines is ultra vires subsections (8) and (9) of s 80 the LPA.

[47] As can clearly be seen, there is no ambiguity in paragraph (2)(b) of the Guidelines. It provides in clear language that monies under the Compensation Fund may be granted only to the victim of a dishonest advocate and solicitor if the advocate and solicitor was practicing as a sole proprietor and not if he was practicing in a partnership at the time he committed the dishonest act. Contrary to the intention of Parliament under s 80(8) of the LPA, the intention of the Bar Council when formulating paragraph (2)(b) of the Guidelines was to exclude from its purview advocates and solicitors who practice in partnerships. The stand taken by the appellant in the present appeal is a clear manifestation of that intention.

[48] Given the clarity of paragraph (2)(b) of the Guidelines, the only question left to be answered, at the risk of repetition, is whether it is ultra vires s 80(8) of the LPA which, as alluded to earlier, allows for a grant to be paid out of the Compensation Fund even for losses due to the dishonest acts of clerks and servants of the advocates and solicitors with no distinction drawn between advocates and solicitors practicing as sole proprietors and advocates and solicitors practicing in partnerships. We have answered the question in the affirmative earlier in this judgment and we shall not dwell on it any further.

[49] It is worth recalling that one of the reasons given by the appellant for excluding claims involving advocates and solicitors practicing in a partnership is because losses incurred from the dishonest acts of a partner of a law firm would entitle an aggrieved party to seek recourse by way of a civil suit against the partnership, which would be insured under the appellant's Professional Indemnity Insurance Scheme. In that way compensation will be paid out of the insurance scheme and not from the Compensation Fund, thus saving the Fund from depletion.

[50] This recourse according to learned counsel is not available for claims against an advocate and solicitor practicing as a sole proprietor for the reason that the scheme excludes the indemnification of an insured person who is a defrauder, ie the sole proprietor himself.

[51] We must confess we fail to understand how this will save the Compensation Fund from depletion as money in the Compensation Fund is payable in any event, albeit only in cases of losses arising from the dishonest acts of advocates and solicitors practicing as sole proprietors as provided by paragraph (2)(b) of the Guidelines. The argument would hold water if the Compensation Fund is not payable in all cases involving losses arising from the dishonest acts of advocates and solicitors, whether practicing as sole proprietors or as partners in a partnership. That of course would be contrary to s 80(8) of the LPA.

[52] It was also pointed out that the respondents in the present case had obtained orders of restitution from the Advocates & Solicitors Disciplinary Board under s 100(8) of the LPA which orders by virtue of s 100(10) are deemed to be orders of the High Court and enforceable by the complainant. Subsection (8) of s 100 reads as follows:

"(8) Notwithstanding subsection (7), the Disciplinary Board may also make an order of restitution of the complainant's monies if it is established that such monies were or held by the advocate and solicitor in his professional capacity and the complainant is entitled to the return of such monies or part thereof."

[53] It was submitted that the respondents ought to have resorted to this alternative remedy first before applying for a grant out of the Compensation Fund, citing Manggai v. Government of Sarawak & Anor [1970] 1 MLRA 344 (Manggai). It was submitted that the restitution orders obtained by the respondents would stand as adequate alternative remedies available to them against the advocate and solicitor (Shan) for the losses that they sustained due to his dishonest act.

[54] It was further suggested, or rather advice given to the respondents that the option for them to institute civil proceedings against Messrs Thevin Chandran & Associates is still open despite the fact that the firm has ceased operations with effect from 1 January 2019, for the following reasons:

(1) The cessation of operations of Messrs. Thevin Chandran & Associates does not preclude the institution of proceedings against the firm for losses at the time the firm was in operation. See the High Court case of Leong Sing (sued as a firm) v. Perusahaan Kuari (Melaka Pindah) Sdn Bhd (Formerly Known As Malacca Lian Hwa Sdn Bhd) [1996] 3 MLRH 140;

(2) The cause of action accrued on 8 April 2016, which was the date of the breach by the lawyer in question. This was the date on which the lawyer issued the instruction to the bank to stop payment on the cheque that enclosed the respondents' share of the balance purchase price;

(3) As at 8 April 2016, Messrs. Thevin Chandran & Associates was in operation, and it had 3 partners;

(4) Therefore, the respondents are open to commence proceedings against the firm to recover losses that resulted from the breach in question;

(5) Messrs Thevin Chandran & Associates and its partners (jointly and/or severally) at the time of the breach would be liable for the losses caused by the conduct of Shan whilst he was a partner at the firm.

[55] We are unable to accede to the argument. First of all, it is for the respondents to decide on the course of action that will best serve their interests. They must have their own reasons for not pursuing the other alternatives open to them against the dishonest advocate and solicitor whose partnership firm Thevin Chandran & Associates has ceased operations and is no longer in existence.

[56] As for the case of Manggai (supra) relied on by the appellant, we do not find the ratio decidendi of the case to have any bearing on the issues before the court. In that case the Federal Court sitting at Kuching Sarawak was dealing with s 8(1)(c) of the Native Courts Ordinance (Cap 43 of the Laws of Sarawak, 1958). Section 7(3) of the Ordinance provides that:

"Such appeal shall be made within thirty days of the date of such decision, or within such further time and upon such terms as the court to which the appeal lies may in any particular case allow, and may be made either verbally or in writing and either personally or by proxy."

[57] The applicant did not pursue his right of appeal to the Native Court of Appeal. The High Court refused his application for a declaration, inter alia, that the Resident's native court was functus officio and without jurisdiction to hear the case by way of appeal or otherwise and that the purported judgment delivered by that court was null and void. In dismissing the appeal, the Federal Court held that the High Court was right in refusing to make the declaration as the applicant had not pursued the alternative remedy available to him of an appeal to the Native Court of Appeal.

[58] What separates the present case from Manggai is that unlike the applicant in that case, there is no statutory requirement for the respondents in the case before us to first exercise their alternative remedies of enforcing the restitution orders or to sue the dishonest advocate and solicitor for their losses before they were entitled to apply for a grant out of the Compensation Fund.

[59] The last major issue raised by the appellant that merits consideration is its contention that the Court of Appeal erred in making the order that the Bar Council shall make an appropriate award of compensation from the Compensation Fund using the same formula for payment for the year in question, which is the year 2020.

[60] It was submitted that this order would be contrary to s 80(8) of the LPA which does not prescribe a mandatory obligation on the Bar Council to make a grant out of the Compensation Fund, citing Agathisfour Sdn Bhd v. Papparich Group Sdn Bhd [2020] MLRHU 1822; Borg-Warner Acceptance Canada Ltd v. Law Society of New Brunswick [1988] NBJ 205; Re Ahmed & Co (A Firm) And Others [2006] All ER 195 (Mar).

[61] In the circumstances, it was argued that the Court of Appeal order ought to be set aside. The order complained of is in the following terms:

"that the appellants in accordance with the procedure in The Advocates and Solicitors Compensation Fund Rules 1978 ("the CFR") resubmit an application to the Malaysian Bar within 60 days from 15 August 2022 and the Malaysian Bar shall consider the respondents' application for compensation for their loss suffered and shall make an appropriate award of compensation from the Compensation Fund using the same formula for payment for the year in question, which is the year 2020."

[62] Obviously there are three parts to the order, namely:

(1) The respondents are to resubmit their application to the Malaysian Bar within 60 days;

(2) The appellant shall consider the respondents' application for compensation from the Compensation Fund; and

(3) Having considered the application, the appellant shall make the appropriate award based on the same formula for payment for the year in question, which is the year 2020.

[63] With due respect to learned counsel, we find nothing of substance to the complaint raised. There is nothing objectionable about this order. It merely directs the appellant to consider the application when made by respondents using the same formula for payment for the year, which is the year 2020. That is fair considering that 2020 was the year when the respondents' application was made and rejected by the appellant.

[64] For all the reasons aforesaid, our answers to the questions posed are as follows:

Questions 1, 3, and 7 - Affirmative so long as they are in conformity with the provisions of s 80(8) and (9) of the LPA, which in this case they are not. In that sense the questions are academic but answers are needed due to their public importance.

Questions 2, 4, 5, and 6 - Negative.

Question 8 - No answer needed as there was no such order issued by the Court of Appeal.

[65] Accordingly the appeal is dismissed with costs of RM50,000.00 to the respondents subject to payment of the allocator fee.