THE COUNCIL OF THE LAW SOCIETY OF HONG KONG v. NG WING HUNG (previously practising as a partner in Messrs. Wong, Fung & Co.) AND ANOTHER

HCMP 845/2021

[2024] HKCFI 946

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 845 OF 2021

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D E C I S I O N

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A.  Introduction

1.  This Decision addresses the interesting question as to the what should happen to something provided to fill an apparent hole, when it subsequently turns out that there was in fact no hole.

2.  Put more specifically in context, the question raised is as to the proper character of funds provided – pursuant to certain provisions of the Solicitors’ Accounts Rules Cap 159F (“SAR”) – to rectify an apparent shortfall in a solicitors’ firm’s client account, thought to be the result of money improperly withheld or withdrawn from the client account in breach of the SAR, when it later transpires that there was in fact no shortfall and/or no money improperly withdrawn.

3.  This Decision follows a previous decision and orders made by me on 7 July 2021 – see [2021] HKCFI 2000 – arising out of the Council of the Law Society of Hong Kong’s intervention (“Intervention”) into the practice of the solicitors firm Wong, Fung & Co (“Firm”). The 1^st defendant (“Mr Ng”) and the 2^nd defendant (“Mr Yuen”) were the partners of the Firm.

4.  There have also been related judicial review proceedings – see my decisions of 27 January 2021 [2021] HKCFI 341 and 19 February 2021 [2021] HKCFI 379. A brief background of the matters leading to the Intervention can be found in those various Judgments, and need not be repeated here.

5.  Since I made my orders/directions on 7 July 2021, the Intervention has continued.

6.  Now, by summons dated 4 January 2024, the Council seeks further directions and the determination of further questions pursuant to RHC Order 85 rule 2 and/or sections 6, 10 and 12 of Schedule 2 to the Legal Practitioners Ordinance Cap 159 (“LPO”). The specific questions are as follows:

1. Whether the client’s monies deposited with the banks and accounts set out in Schedule 1 hereto, together with any interest accrued thereon (collectively, the “Client’s Money”), should be distributed to those claimants claiming for money deposited with Messrs. Wong, Fung & Co. (the “Firm”) or to any other claimants as this Honourable Court may think fit (collectively, the “Beneficiaries”) and if so, the basis on which the Client’s Money should be distributed;

2. Whether any notice or further notice should be given (in addition to the notices placed in The Standard, Sing Tao Daily and the Gazette on 24^th September 2021) to invite potential claimants for monies deposited with the Firm to notify the Plaintiff of their claims, and if so, what form or manner should such notice or further notice be given;

3. Whether claim no.558 referred to in paragraph 13 of the third affirmation of Lau Wing Keung affirmed herein on 4^th January 2024 (“the Affirmation”) should be allowed and, if yes, to what extent;

4. Whether claim no.713 referred to in paragraph 26 of the Affirmation should be allowed and, if yes, to what extent;

5. Whether the monies in the bank accounts of Sunny Glory (Hong Kong) Limited set out in Schedule 2 hereto or any part thereof shall be treated as money held by Sunny Glory (Hong Kong) Limited on trust for the Firm or otherwise and how should the said monies be disposed of;

6. Whether the monies in the bank accounts of Mighty Wisdom Limited set out in Schedule 3 hereto or any part thereof shall be treated as money held by Mighty Wisdom Limited on trust for the Firm or otherwise and how should the said monies be disposed of;

7. Whether the sum of $8,000,000.00 deposited into the interest bearing account held by the Law Society of Hong Kong with Hang Seng Bank Limited under paragraph 6 of the Order of the Honourable Mr. Justice Coleman herein dated 7^th July 2021 (“the said Order”) together with interest thereon or fund derived from such money shall be treated as client’s money and be made available for distribution to the Beneficiaries or other purposes as ordered;

8. Whether any further claim against the Client’s Money should be entertained one year after the date of the court order to be made herein;

9. The following files of the Firm seized by Messrs. Chui and Lau (excluding the files with original title deeds and documents other than duplicate sale and purchase agreement or sub-sale and purchase agreement for sale or sub-sale of properties, original tenancy agreement or lease having expired for more than 7 years and sealed copy or copy court pleadings (“the Excluded Files”)) be destroyed:-

(a) Conveyancing files closed for more than 15 years;

(b) General files closed for more than 7 years;

(c) Tenancy files with tenancy agreement expired for more than 7 years; and

(d) Criminal files closed for more than 4 years.

10. After the destruction of the files under paragraph 9 above, the remaining files of the Firm (excluding the Excluded Files) be destroyed as and when they reach the criteria set out in paragraph 9 above;

11. The accounting documents of the Firm seized by Messrs. Chui and Lau relating to an accounting period ending not less than 7 years before the date of this order be destroyed forthwith;

12. After the destruction of the accounting documents under paragraph 11 above, the remaining accounting documents of the Firm should be destroyed as and when they reach the criteria set out in paragraph 11 above;

13. The miscellaneous documents and items of the Firm seized by Messrs. Chui and Lau should be destroyed forthwith;

14. That the Plaintiff’s costs of and occasioned by the present application be paid by the 1^st Defendant and the 2^nd Defendant jointly and severally on a solicitor and client basis or other provision for costs as this Honourable Court shall deem fit and be recoverable from the 1^st Defendant and 2^nd Defendant as a debt owing to the Plaintiff;

15. Whether the monies in the client accounts of the bank accounts in Schedule 1, after setting aside sufficient funds to satisfy payment of all claims filed on or before the expiration of one year from the date of the order to be made herein and proved to the satisfaction of Mr. Lau Wing Keung of Messrs. Chui and Lau or Mr. Lee Ying Biu Andrew of Messrs. Robertsons shall be applied towards payments of the Plaintiff’s costs in paragraph 14 above and paragraph 10 of the said Order;

16. Whether the Rectification Funds of $23,382,260.64 or any part thereof referred to in paragraph 35(a) of the Affirmation shall be applied towards payment of the Plaintiff’s costs in paragraph 14 above and paragraph 10 of the said Order;

17. Further or alternatively, such directions as this Honourable Court may deem fit to give under section 6 of Schedule 2 to the Legal Practitioners Ordinance, Cap.159;

18. That all further, necessary or consequential directions may be given;

19. That such further or other relief may be granted as this Honourable Court shall deem fit; and

20. That there be further liberty to apply.

7.  The application is made in part pursuant to section 6 of Schedule 2 to the LPO, which provides:

6. In any case where the Council is unable to ascertain the person to whom any moneys referred to in a notice served under section 2(3) belong or where the Council otherwise thinks it expedient so to do, the Council may apply to the Court of First Instance for directions as to the transfer of such moneys.

8.  As can be seen, one of the questions relates to a claim numbered 558 (“Claim 558”), made by Sino Resources (Hong Kong) Ltd (“Sino Resources”). By summons dated 26 January 2024, Sino Resources sought leave to be joined to these proceedings as an Interested Party, and further sought various directions relating to its claim, being essentially designed (1) to approve its claim to beneficial ownership of HK$8,000,000 comprising part of the Rectification Funds (defined below) and (2) to make the Council a creditor of Mr Ng and Mr Yuen ranking pari passu with other creditors.

9.  I granted leave for the joinder, and I heard the remainder of the two summonses together on 28 March 2024.

10.  At the hearing, the Council was represented by Mr CW Ling of Counsel; Sino Resources was represented by Mr Earl Deng of Counsel; Mr Ng appeared in person (with the permission of his trustees in bankruptcy, see below); and Mr Yuen did not appear.

11.  No other person appeared, nor sought to be joined as an interested party, despite the fact that the Council served the Summons on a number of other potentially relevant parties.

12.  At the conclusion of the hearing, I reserved my decision to be handed down later. This is my Decision.

13.  Insofar as is appropriate, I shall continue to adopt the abbreviations and definitions used in my previous decisions.

B.  The Issues in Dispute

14.  Not all of the matters on which directions are sought are very controversial, so that it may be helpful at this point briefly to introduce the main issues which are in dispute. Those disputes relate to:

(1)  The proper characterization of the Rectification Funds (defined below), and the appropriate direction to be given for distribution – including whether the Rectifications Funds can be used to pay the costs of the Intervention.

(2)  The proper characterization of the Undistributable Funds (defined below), and the appropriate direction to be given for distribution – in particular whether the Undistributable Funds can be used to pay the costs of the Intervention.

(3)  How to resolve Claim 558, including whether Sino Resources has a proprietary claim to the HK$8,000,000 apparently lent to Mr Ng for him to use as part of the provision of the Rectification Funds.

(4)  How to resolve Claim 713, which relates to another loan of funds apparently then used as part of the provision of the Rectification Funds.

(5)  Whether sums held by Sunny Glory (Hong Kong) Ltd (“Sunny Glory”) and/or Mighty Wisdom Ltd (“Mighty Wisdom”) are held on trust for the Firm.

15.  Though set out separately, there is some degree of overlap between these matters, as will be seen below.

C.  Updated Information

16.  Before turning to the main issues in dispute which require resolution, it is helpful to provide the updated context of the Intervention.

17.  All clients’ money held in all client accounts of the 19 banks of the Firm were paid into the New Client Accounts. All office money was withdrawn and deposited into the New Office Accounts (but paid towards the Council’s costs pursuant to §§11 and 12 of the 7 July 2021 Order).

18.  As previously identified by me, at an earlier stage of the investigation into the Firm by Monitoring Accountants – even before the Intervention – the sum of HK$23,087,319.85 was required to be protected by a deposit, as a result of the Law Society’s calculation of a shortfall in clients’ money held by the Firm (“Shortfall”).

19.  Accordingly, that sum (“Rectification Funds”) was paid into the client account of the Firm by Mr Ng and Mr Yuen, in two tranches: (1) the sum of HK$15,087,319.95 paid on 11 December 2020, and (2) the sum of HK$8,000,000 paid on 14 December 2020.

20.  The alleged Shortfall, leading to deposit of the Rectification Funds, was calculated by reference to, or comprised:

(1)  HK$2,633,947.56, which should have been in the Firm’s client accounts according to its ledgers as at 12 June 2020 but had gone missing, allegedly due to breaches of Rule 7 of the SAR, i.e. money being improperly withdrawn from the Firm’s client accounts;

(2)  HK$13,341,103.92, which should have been in the Firm’s client accounts according to its ledgers as at 1 January 2019, but missing, allegedly due to breaches of Rule 7 of the SAR

(3)  HK$50, allegedly improperly withdrawn from the Firm’s HSBC client current account in breach of Rule 7 of the SAR; and

(4)  further sums totalling HK$7,112,218.37, allegedly improperly withdrawn in breach of Rule 7 of the SAR.

21.  I might usefully note here that Mr Ng has submitted that items (1) and (4) related to conveyancing transactions, subsequently completed without any claim being made. He also says that item (2) was not a real shortfall as it only appears in the previous accounting when the Firm’s records changed from manual to computer, and there has been no claim. As to item (3), which in any event might be thought to be de minimis, Mr Ng says it was the bank charge for a cashier’s order.

22.  The total amount of client’s money held by the Council is HK$50,986,868.79, which consists of (1) the sum of HK$23,087,319.85 paid as the Rectification Funds, together with interest of HK$378,477.59 interest (which can therefore be included in the definition), totalling HK$23,465,797.44, and (2) the balance money in the Firm’s client accounts of HK$27,521,071.35 being client money of the Firm.

23.  Following three rounds of advertisements in the Gazette and newspapers, various claims were received by the Council. Subject to the remaining disputes to be addressed in this Decision, the process of verification has been substantially completed. If all claims in the process of verification are eventually approved, there would be at least a surplus of HK$22,281,470.13 after payment. If any part of Claims 558, 564, 615 and 713 are not allowed, there would be further surplus.

24.  In other words, it is now apparent that, as things stand and even ignoring the Rectification Funds, there will be a surplus after payment of the verified and approved claims (“Undistributable Funds”).

25.  But, though the Council sensibly proposes that there should be a final cut-off date for any further claims to be entertained, it seems inherently unlikely that any substantial claims would now come out of the woodwork and be lodged. The Intervention garnered significant publicity at the time of its commencement, and as a result of the various pieces of litigation relating to it. Though a further claim, in the relatively modest sum of around HK$50,000, was lodged within the last few weeks, there is little to suggest that further significant future claims are in any way likely.

26.  In the meantime, Mr Ng was made bankrupt by order dated 18 April 2023, in HCB 831/2023. Trustees in bankruptcy were appointed on 28 July 2023. The Trustees have declined (partly as a result of having no funding) to participate in the proceedings, but ultimately consented to Mr Ng representing himself (or his estate in bankruptcy). As the Trustees have recognized, a central question relates to the way in which the Rectification Funds should now be dealt with.

D.  Rectification Funds

27.  A factual dispute has now arisen as to the basis upon which the Rectification Funds were provided, and it is argued that the proper understanding of that basis will inform the true nature or character of the Rectification Funds, and how they should fall to be distributed. In short, the Council argues that the Rectification Funds were provided as and so remain to be client money, whereas Mr Ng and Sino Resources argue that those funds were provided on a different basis so that they fall to be returned to the former partners of the Firm and/or Sino Resources (as appropriately divided between them).

28.  To resolve that factual dispute, it is necessary to traverse the contemporaneous correspondence leading to the deposit of the Rectification Funds.

29.  By letter dated 24 November 2020, the partners of the Firm were notified that the Council had considered the Firm’s alleged breaches of the SAR as identified by the Monitoring Accountants, and that in light of those alleged breaches, the Council had resolved to request the Firm to make up the Shortfall in compliance with Rule 9A of the SAR. Attached to that letter was a schedule identifying in two tables what was said to comprise the Shortfall, notably by reference to “alleged breaches of Rule 7” or “alleged overdrawn from the client accounts in breach of Rules 7, 10(1) and 10(2) of the SAR”.

30.  It can therefore be noted that the breaches and the amounts said to have been overdrawn were, quite properly at that stage, described as “alleged”.

31.  In response, by letter dated 30 November 2020, Mr Ng (and, adopting the same approach, Mr Yuen) expressed disagreement that there was any such Shortfall, submitting that the alleged Shortfall might be largely due to the defects in the accounting system which the Firm had been using since 2005, or possibly that previous accounts clerks had made wrong entries in the Client ledgers. Time was sought for providing a fresh accountants’ report.

32.  On 2 December 2020, the Council rejected the request for the extension of time, and reiterated the request to make up the Shortfall. The letter emphasized that there was an obligation to make up the Shortfall from the partners’ own resources pursuant to Rule 9A of the SAR.

33.  By letter dated 4 December 2020, Mr Ng reiterated his view that there was no real Shortfall, that the Firm would continue to investigate a possible shortfall of around HK$7 million, and that in order to show sincere determination to sort out the problem and rectify any breach of the SAR, the partners were willing to deposit a sum of HK$8 million into a designated client account for six months or such longer period as directed by the Law Society.

34.  By letter dated 8 December 2020, Mr Ng wrote further to the previous letter to inform the Law Society that there would be a deposit of the full sum of HK$23,087,319.83 (i.e. the Rectification Funds) into a six-month fixed deposit designated client account of the Firm and to provide documentary evidence in support of that by 21 December 2020.

35.  By letter dated 9 December 2020, the Council rejected that proposal (apparently not least as regards the offered deadline). The material part of the letter read as follows:

The Council has resolved to reject the above proposal.

The Council has also resolved that unless the Council is satisfied that you have complied with the following requests, it will not be in a position to issue you a 2021 practising certificate before 1 January 2021:

(a) that you make up the Shortfall from your own resources in compliance with Rule 9A of the [SAR] by depositing such sum into a 6-month fixed deposit designated client account (“The Fixed Deposit Account”) under the Firm’s integrated client account … and to provide the Law Society with documentary evidence in support that the source of the said deposit is from your own resources and that the same has been placed in the Fixed Deposit Account forthwith and in any event not later than 12:00 noon on 11 December 2020;

(b) that if you are unable to make up the Shortfall by the deadline of 12:00 noon on 11 December 2020, you provide to the Law Society in writing, by the same deadline, the reasons why you are unable to do so and the steps you have taken so far to make up the Shortfall; and

(c) that you undertake to the Law Society

(i) not to withdraw the said deposit from the Fixed Deposit Account; and

(ii) to provide weekly bank statements of the Fixed Deposit Account commencing from 18 December 2020 until the Council is satisfied that you have rectified the Shortfall.

36.  It is worth noting at this point that the second part of that undertaking seemed to identify perhaps that the provision of the Rectification Funds was not itself the step which would satisfy the Council that the partners had “rectified the Shortfall”, but rather that the Rectification Funds were to be maintained, with evidence of their being maintained, until the Shortfall was “rectified” in some other way – perhaps even by demonstrating that there was in fact no Shortfall, or a shortfall in only a smaller amount.

37.  By letter dated 11 December 2020, Mr Ng informed the Law Society that the deadline could not be met, but that Mr Ng had deposited with the Firm the sum of HK$15,087,319.83 by way of his personal cheque, and that the remaining balance of HK$8 million would be deposited with the Firm by the partners not later than 14 December 2020. In the same letter, the undertaking was given not to withdraw any deposit from the fixed deposit designated client account and to provide weekly bank statements commencing from 18 December 2020 until the Council is satisfied that the Shortfall had been rectified.

38.  By letter dated 14 December 2020, Mr Ng informed the Council that the partners had deposited the remaining $8 million.

39.  By letter dated 16 December 2020, the Council pointed out that the Law Society was supposed to have been provided with documentary evidence supporting that the source of the deposits was from the partners’ own resources, but that the enclosures so far provided were insufficient to meet that requirement. The letter requested further documentary evidence and an updated undertaking in compliance with the Council’s resolution made on 8 December 2020 “with specific references to the account number of the Fixed Deposit Account, the amount of money kept in it and the amount of shortfall as alleged by the Law Society”. Again the reference to an “alleged” shortfall can be noted.

40.  By letter dated 17 December 2020, Mr Ng and Mr Yuen provided further information as to the source of the funds deposited and gave the updated undertaking as required.

41.  By letter dated 18 December 2020, the Council stated that the materials provided were “insufficient as the ultimate source of the Deposit had not been shown”. The letter also identified that the Law Society was not in a position to issue a 2021 practising certificate unless the Council was satisfied as to the source of the deposit being from the partners’ own resources, as well as to other matters.

42.  By letter dated 21 December 2020, Mr Ng and Mr Yuen provided proof of: (1) the source of the fund of HK$13 million – being a loan to Mr Ng from PAL Finance Ltd (relevant to Claim 713, see below); (2) the source of the fund of HK$8 million, being a loan to Mr Ng and Mr Yuen from Sino Resources (relevant to Claim 588, see further below); and (3) the source of the remaining amount being two cheques issued by the Firm’s service company, Sunny Glory, said to be the drawings of Mr Ng.

43.  Though perhaps not directly in response, by letter dated 29 December 2020 the Law Society raised various concerns which might lead to refusal of the 2021 practising certificate. Those concerns were not limited to the alleged Shortfall.

44.  On my reading of that correspondence:

(1)  The Council’s request for deposit of the Rectification Funds was plainly made pursuant to Rule 9A of the SAR.

(2)  The Rectification Funds were deposited in response to that request.

(3)  The deposit of the Rectification Funds was also given at the same time as the requested undertaking in the terms as requested or demanded by the Council.

(4)  The suggestion now made by Mr Ng and/or Sino Resources that the deposit of the Rectification Funds was on a different, voluntary basis, is not supported by the contemporaneous correspondence.

(5)  Because the funds were provided pursuant to a request made under Rule 9A, there was no understanding between the Council and the partners of the Firm that the Rectification Funds were somehow to be held in limbo, or as some form of temporary security only.

(6)  Though there was an expression of original doubt about the source of the deposit being from the partners’ own resources, evidence was provided that the substantial part of the deposit came from two loans made to the partners.

(7)  There is no reason to think that the Council rejected the deposit of the Rectification Funds as requested (and on the basis requested) simply because the ultimate source of the funds was substantially money which had been lent to the partners.

45.  Therefore, I hold that the Rectification Funds were provided to meet the request under, and pursuant to the provisions of, Rule 9A of the SAR. Indeed, the Council had no other legal power to request or demand such a provision of funds.

46.  Rules 7, 7A and 9A of the SAR provide as follows:

7. Drawings from a client account

There may be drawn from a client account—

(a) in the case of client’s money—

(i) money properly required for a payment to or on behalf of the client;

(ii) money properly required for or towards payment of a debt due to the solicitor from the client or in reimbursement of money expended by the solicitor on behalf of the client;

(iii) money drawn on the client’s authority; and

(iv) money properly required for or towards payment of the solicitor’s costs where a bill of costs or other written intimation of the amount of the costs incurred has been delivered to the client and the client has been notified that money held for him will be applied towards or in satisfaction of such costs;

(b) in the case of trust money, including money held by the solicitor as solicitor-trustee—

(i) money properly required for a payment in the execution of the particular trust; and

(ii) money to be transferred to a separate bank account kept solely for the money of the particular trust;

(c) such money, not being money to which either paragraph (a) or (b) applies, as may have been paid into the account under rule 4(b) or (d); and

(d) money which may by mistake or accident have been paid into the account in contravention of rule 6:

Provided that in any case under paragraph (a) or (b) the money so drawn shall not exceed the total of the money held for the time being in such account on account of such client or trust.

7A. Authority required for drawing money from client account

(1) No money shall be drawn from a client account under rule 7 unless the withdrawal has been specifically authorized in writing by—

(a) the solicitor in whose name the client account is kept or, where the client account is kept in the name of a firm, any solicitor, partner, consultant or foreign lawyer in the firm;

(b) a certified public accountant (practising) as defined by section 2(1) of the Accounting and Financial Reporting Council Ordinance (Cap. 588), and countersigned by a person referred to in subparagraph (a); or

(c) a person approved by the Council, which approval shall only be given in exceptional circumstances, upon an application in writing made to it by the solicitor or firm and subject to such conditions as the Council may think fit, if any, and countersigned by a person referred to in subparagraph (a).

(2) Paragraph (1) shall not apply to the transfer of money from one client account to another client account at the same bank.

(3) The Council may, on prior written application, suspend or waive the operation of this rule as required for the drawing of money from client account.

9A. Duty to remedy breaches

(1) Any breach of these rules must be remedied promptly upon discovery. This includes the replacement of any money improperly withheld or withdrawn from a client account.

(2) Each principal of a firm shall be jointly and severally liable to carry out the duty to remedy any breach of these rules. This duty extends to replacing missing client’s money or trust money from the principal’s own resources, even if the money has not been misappropriated by the principal himself, and whether or not a claim is subsequently made on the fund established under rule 3 of the Solicitors (Professional Indemnity) Rules (Cap. 159 sub. leg. M).

47.  As an aside, there is a note to Rule 9A, comparing it to the Solicitors’ Accounts Rules 1998 r. 7 U.K.

48.  Hence, Rules 7 and 7A identify the circumstances when client money can be properly withdrawn from a client account, and Rule 9A imposes a duty promptly to remedy any breach, including by replacement of moneys improperly withheld or withdrawn from a client account.

49.  In §41 of my previous decision dated 7 July 2021, I made the following comment:

[Counsel for the Council] also submits that if it turns out that there is no Shortfall (or a lesser amount of shortfall), Mr Ng and Mr Yuen nevertheless remain liable to pay the intervention costs (see below). That may be so, but I do not think that automatically translates into the ability for the Council to look in payment of the intervention costs to funds originally provided to make good the Shortfall, if there is in fact no Shortfall (or a lesser amount of shortfall). As I understand the provisions in Schedule 2 to the LPO, the intervention costs become a debt owed by the solicitor into whose practice the intervention has taken place. But I do not think that necessarily entitles the Council to either security or priority in settlement of the debt. In any event, on the proposed form of the order I am invited to make this morning, that is a point which need not be resolved. Should it turn out that there was no Shortfall (or a lesser amount of shortfall), it seems to me it will then be open to the Council or to Mr Ng and/or Mr Yuen to come back to this Court under the proposed liberty to apply provision, to seek the appropriate directions as to what should happen to those funds.

50.  Obviously, that question now falls to be determined. Whichever way it is determined would not lead to any criticism of the Council for having invoked the powers under Rule 9A in the circumstances when those powers were invoked and the relevant demand for remedy to the alleged Shortfall was made.

51.  However, where Rule 9A is obviously a remedial provision, it pre-supposes there is or was in fact a breach which requires or required a remedy. If there is in fact a breach by the improper withdrawal of client money from a client account, then the remedy is to replace the amount improperly withdrawn, and logically the replacement funds will become client money. In other words, ordinarily the funds provided as the remedy under Rule 9A will be client money.

52.  However, I do not think Rule 9A requires replacement funds to be treated as client money in circumstances where it turns out the factual premise for requiring the replacement was incorrect. If there was in fact no breach (or none can be shown), then there need have been no remedy. Funds provided to replace moneys which were not in fact withdrawn in breach of the SAR would logically fall to be treated as funds provided on a factually mistaken basis.

53.  Further, I do not think the Court’s supervisory and decision-making powers provided under the various provisions of the LPO require the Court to treat something as fact, when it is not (or not shown to be) a fact. In any event, where the Court has some discretion as to the orders and directions it might make in the current context, it would be nonsensical to think that the Court would ignore matters subsequently discovered which shed a very different light on what was previously understood.

54.  As Mr Ling correctly acknowledged, there is a difference between (1) the identification of the true basis upon which the Rectification Funds were provided – here, as I have found, pursuant to a request made under Rule 9A – and (2) the different question as to what the Court would now decide should be done with that money. In other words, the fact that there was no understanding between the Council and the partners of the Firm, that the Rectification Funds would somehow be held in limbo, or as some form of temporary security only, does not necessarily answer the second question.

55.  Before turning to that second question, namely how the Court should decide what should happen to the Rectification Funds, it is helpful to consider the other potential claims to the Rectification Funds. For that purpose, focus can be upon Claim 558 and Claim 713. Other claims – Claim 564 and Claim 615 – also previously made to the Rectification Funds by Mr Yuen and Mr Ng respectively have already been disallowed (and I see no basis to interfere with that decision).

E.  Claim 558 – Sino Resources

56.  In Claim 558, made within the Intervention, Sino Resources seeks repayment of the HK$8 million lent to Mr Ng and Mr Yuen, and then paid by them into the Firm’s client account. Although the Loan was made to Mr Ng and Mr Yuen personally (and not to the Firm), Sino Resources claims that it is the beneficial owner of the Loan Sum and the interest owing, together totalling HK$8,288,000. The Intervention Agent’s initial indication was that the claim would be rejected, on the basis that SRHK might have a personal claim against Mr Ng and Mr Yuen, but there was no basis on which to assert beneficial ownership.

57.  On 16 June 2021, Sino Resources issued a generally endorsed writ in HCA 926/2021 (“1^st Action”). The claim made against Mr Ng and Mr Yuen in the 1^st Action sought (1) rescission of the Loan Agreement, alternatively (2) a declaration that Mr Ng and Mr Yuen hold the sum of $8 million on trust for Sino Resources, and that it was a sum for the purpose of providing evidence to the Law Society that the Firm has sufficient moneys to make up the Shortfall from its own funds, or (3) a declaration that Mr Ng and Mr Yuen hold the Loan Sum on constructive and/or resulting trust for Sino Resources.

58.  In my previous decision, it appeared to me that the proper place for the resolution of Sino Resource’s claim would be in the 1^st Action. Therefore, I agreed that the Intervention Agent should not accept the claim at that stage. However, the 1^st Action was subsequently withdrawn.

59.  Nevertheless, a second claim was brought by Sino Resources against Mr Ng and Mr Yuen, in HCA 660/2022 (“2^nd Action”). By the Amended Statement of Claim filed in that action, it is clear that Sino Resources sued on the relevant Loan Agreement, on the basis that Mr Ng and Mr Yuen were justly and truly indebted to Sino Resources on the terms of the Loan Agreement. The particulars of the debt owed were set out. On 3 April 2023, Judgment in default was entered in favour of Sino Resources against both Mr Ng and Mr Yuen pursuant to Order 83A rule 4 (the procedural rules relating to a moneylenders action), awarding the amount of debt claimed, with interest at the contractual rate pursuant to the Loan Agreement.

60.  Mr Deng advanced the argument on Claim 558 in the following broad manner:

(1)  It is now known that there is no actual Shortfall.

(2)  Hence, Rule 9A of the SAR is not engaged.

(3)  Anyway, the Firm’s partners’ purpose in providing the Rectification Funds was simply to show proof of funds.

(4)  The Council should consider Claim 558 on its merits, even without necessarily Sino Resources obtaining a declaratory judgment for a proprietary interest against Mr Ng and Mr Yuen.

(5)  On the evidence and facts presented, a proprietary interest in the Loan (together with interest) can be established on the basis of a Quistclose trust, i.e. the Loan was made for a specific purpose only (to show proof of funds pending investigation on the Shortfall, and not to be used to satisfy any actual or real shortfall).

(6)  Alternatively, as a result of the latest disclosure of correspondence between the partners and the Council, it might be thought that Mr Ng and Mr Yuen procured the Loan by making material fraudulent misrepresentations to Sino Resources. Had Sino Resources known about that correspondence, it could have relied on fraudulent misrepresentations to rescind the Loan Agreement, thus conferring it with a proprietary remedy.

(7)  No one disputes that the HK$8 million of the Rectification Funds can be traced to the loans of HK$8 million taken by Mr Ng and Mr Yeun from Sino Resources.

(8)  Therefore, the total sum of HK$8,378,477.59 ought to be released back to Sino Resources.

61.  I have already rejected the argument insofar as it is based upon any suggestion that the Rectification Funds were provided only as some sort of proof of funds, rather than to meet the request made by the Council under Rule 9A.

62.  Further, the relevant Loan Agreement is contained in a standard form for a straightforward personal loan. The agreement does not have any reference to any security, nor any restrictions on disposal of the proceeds. It has an entire agreement clause which points strongly against the imposition of any unwritten trust.

63.  In any event, it seems to me that the simple answer to any proprietary claim is that Sino Resources has sought and obtained a remedy based upon an entirely inconsistent basis, namely that there is a proper debt and interest due under the contractual terms of the Loan Agreement. Far from exercising any right to rescind the Loan Agreement, Sino Resources has actually affirmed it. It is trite that once a claimed representee has elected to affirm the contract, that affirmation is irrevocable.

64.  Therefore, Claim 558 should be disallowed or rejected.

F.  Claim 713

65.  Claim 713 was made by PAL Finance Ltd (“PAL”) for the sum of HK$13 million plus interest being the amount of the loan made by PAL to Mr Ng. The claim was made on the assertions that PAL was the legal and beneficial owner of the sum claimed, on legal principles of bailment and trust – though PAL has never elaborated (despite requests) on how those principles might establish beneficial ownership.

66.  In any event, the documents supplied by PAL clearly evidence a moneylenders’ loan, inconsistent with the assertion of bailment or trust.

67.  Therefore Claim 713 should be disallowed or rejected.

G.  Sunny Glory and Mighty Wisdom

68.  Though perhaps not strictly connected to any claim to the Rectification Funds or the Undistributable Funds, it is also convenient at this juncture to deal with the matters relating to Sunny Glory and Mighty Wisdom.

69.  Mr Ng is the sole director and shareholder of Sunny Glory.

70.  It is the Council’s case that there were many large and suspicious sums of money paid from the office accounts of the Firm into the bank accounts of Sunny Glory and the label of “management fees” in the Firm’s general ledger. From 1 January 2019 to 11 June 2020 (approximately 18 months) the sums transferred added up to over HK$75.4 million, and from 30 July 2020 to 21 December 2020 (approximately five months) the sums transferred added up to HK$20.5 million. The total sums transferred from the Firm’s office account to Sunny Glory’s bank accounts apparently added up to over HK$101 million.

71.  Section 2(2) and 2(2)(a) of Schedule 2 to the LPO provides that all sums of money held by or on behalf of the solicitor or the firm in connection with their practice shall vest in the Council upon the Council passing a resolution to such effect. The Council asserts that, in light of the vesting provisions, once it is established that the transferred funds are the traceable proceeds of funds that originated from the Firm, it is for Sunny Glory to establish that they had by bona fide transactions acquired good title to the Funds as a bona fide purchaser for value, with the burden on Sunny Glory to show the transactions are genuine. However, Sunny Glory has failed to make any application under section 2(4) of the Schedule to seek a Court order directing the Council to draw the notice given under section 2(1).

72.  The Council has performed the tracing exercise according to (1) the rule in Re Hallett’s Estate, namely that the trustee is deemed to withdraw his own funds first and exhaust them before withdrawing the trust funds, and (2) the ‘lowest intermediate balance rule’, namely that the trust funds that remain in a mixed account can never exceed the lowest balance after they were deposited. On that basis, the Council asserts that particular portions of the balances held in Sunny Glory’s bank accounts along to the Firm (with only the remainder belonging to Sunny Glory). The Joint and Several Provisional Liquidators of Sunny Glory have no objection to the Council’s position.

73.  Mr Ng argued that Sunny Glory was the service company of the Firm, and all moneys paid to it were legitimate and lawful money, not client money. Therefore, he said, the Council has no right to claim any interest in the Sunny Glory funds, let alone to say that they could be used to pay the Council’s costs. Rather, he said that the funds should belong to his trustee in bankruptcy, to be available to use to pay his creditors.

74.  As to Mighty Wisdom, two former clerks of the Firm are its directors and shareholders.

75.  The Council argued that there had been large and suspicious sums of money paid from the office accounts of the Firm into the bank accounts of Mighty Wisdom under the label of “management fees” in the Firm’s general ledger. There were seven such payments from 25 February 2019 to 13 March 2020 totalling HK$2,907,780.

76.  Mighty Wisdom has written to say that it provides monthly and ad hoc services to the Firm, but not pursuant to any written agreement. The amount of monthly fees was agreed after each month’s end, and the charges for ad hoc services were invoiced from time to time. Mighty Wisdom has also written to the Court to complain that it is bank accounts have been frozen, causing it to terminated business relationship with other clients and making it unable to pay profits taxes to the Inland Revenue Department. It says there is no reason to think that moneys received as service charges were given to it as client money.

77.  But, the Council has pointed out that the reply information given by Mighty Wisdom is inconsistent with the services described in invoices, and there has been a failure to provide the kind of informational documents which would potentially show the funds released by the Firm to Mighty Wisdom were released on a bona fide basis. The Council also noted that no application has been made to the Court under section 2(4) of the Schedule 2 to the LPO, whether within the eight day period required or at any time.

78.  Again applying the appropriate tracing exercises, the Council has identified the sums of money standing in the accounts of Mighty Wisdom which it asserts should belong to the firm and Mighty Wisdom respectively.

79.  In light of the materials, I accept the Council’s position as regards both Sunny Glory and Mighty Wisdom. I also accept the amounts identified through the tracing exercises performed. In other words, those particular sums of money are to be treated as held on trust for the Firm as office money of the Firm. I also agree that those funds can be applied towards payment of the Council’s costs in the context of this intervention.

H.  Use of Rectification Funds and Undistributable Funds

80.  The main contest in this context is whether the Rectification Funds and the Undistributable Funds can be used by the Council in payment of its costs of the intervention, and these proceedings.

81.  The starting point is section 10 of Schedule 2 to the LPO, which provides as follows:

10. Subject to any order for the payment of costs that may be made on an application to the Court under this Schedule, any costs incurred by the Council for the purposes of this Schedule, including, without prejudice to the generality of this section, the costs of any person exercising powers under this Schedule on behalf of the Council, shall be paid by the solicitor or foreign lawyer or his personal representatives and shall be recoverable from him or them as a debt owing to the Council.

82.  Pursuant to that provision, it is not controversial that it is appropriate to make a costs order in favour of the Council against Mr Ng and Mr Yuen as former partners of the Firm. I so order.

83.  The question which arises is as to what sources the Council can look to in order to seek to recover those costs. The main ‘pots’ of money relevant to this question are the Rectification Funds and the Undistributable Funds.

84.  What to do with the Rectification Funds seems to me to be straightforward, in light of my above analysis. Whilst properly demanded at the time pursuant to Rule 9A of the SAR, and provided to meet that demand, the factual allegations which justified the demand have now not been shown to have been correct. Indeed, rather than there being any Shortfall, there is a surplus. In other words, it now seems that there is no actual Shortfall or deficit in client funds, and no actual client victims of any breach of the SAR.

85.  Had that factual position been understood immediately prior to the provision of the Rectification Funds, the demand for them would have been withdrawn. Those moneys would have been retained by the partners. I see no reason to depart from that approach simply because of the change of chronology; the important factual questions remain entirely similar.

86.  Therefore, I conclude that the Rectification Funds must be returned to the trustees in bankruptcy of Mr Ng. Insofar as is necessary, the Council will be able to prove in that bankruptcy to seek to recover its (or part of its) costs.

87.  As to the Undistributable Funds, the Council has pointed to the fact that, on a practical level, once it is accepted that the Undistributable Funds are truly undistributable, they are funds in the Council’s hands that cannot be paid to any party, while at the same time the intervention costs are outstanding. It has submitted that it would make no sense to leave the Undistributable Funds in limbo indefinitely, and the appropriate alternative use would be to pay the Undistributed Funds to settle (or towards) the intervention costs.

88.  Mr Ling for the Council has relied on the English case of Re Ahmed & Co (a firm) [2006] EWHC 480 (Ch). In that case, the Law Society of England and Wales (“LS E&W”) sought an order that, after distribution to beneficiaries had been effected so far as reasonably possible, any money remaining could be retained by LS E&W as reimbursement for its costs and expenses in administering the trust under paragraph 6 of Schedule 1 to the Solicitors Act 1974 (“SA 1974”) (the equivalent of section 2 of Schedule 2 to the LPO).

89.  The Court held that the LS E&W, as a statutory trustee, did not have the usual entitlement of a private law trustee to be indemnified out of trust property, but instead must have a clear statutory right to levy a charge. However, the Court concluded that the LS E&W is entitled to make the deduction from undistributable funds.

90.  At §§118-121, the Court held (in my summary):

(1)  The funds held by the LS E&W by virtue of paragraph 6 are to be held on trust to exercise in relation to them the powers conferred by Part II of Schedule 1 to the SA 1974, and only subject thereto on trust for the persons beneficially entitled to them.

(2)  The solution effectively involves two forms of statutory trust; one arising whereby the moneys are held to exercise in relation to them the powers conferred by Schedule 1; and the other arising under paragraph 6, namely for the persons beneficially entitled to the funds.

(3)  The LS E&W therefore has a statutory power to determine who is entitled to the funds under paragraph 6.

(4)  But that does not mean it has a discretion as to who is beneficially entitled. Rather, in taking steps to determine who is beneficially entitled, it must exercise the power in a way that is bona fide, rational, reasonable and taking into account relevant considerations and not taking into account irrelevant considerations.

(5)  The exercise of that power will be subject to review on public law grounds.

(6)  So also the statutory power to distribute must be exercised in accordance with public law principles.

91.  As to whether there can be costs reimbursement from undistributable sums, at §§139-145 the Court held (in my summary):

(1)  Undistributable sums may arise from a combination of different factors, and may amount to significant amounts of money.

(2)  Undistributable sums are those which are otherwise not able to be distributed to clients, those clients not being reasonably and proportionately identifiable or contactable.

(3)  Reimbursement would not present a problem if the LS E&W were a private law trustee, since it would be entitled to be indemnified out of the trust property for all expenses and costs incurred in connection with the performance of its duties.

(4)  But, if a public body is to levy a charge, there must be clear statutory authority to that effect.

(5)  The authority must be express or arise by necessary implication.

(6)  With some hesitation, the conclusion to be reached is that the LS E&W is entitled to make the deduction from the undistributable funds.

(7)  The fact that the relevant funds are undistributable is not relevant to the existence of the power, but does mean that it is unlikely that there will be any prejudice to anyone if it should turn out that the LS E&W has no power to deduct its costs.

(8)  The essential question is whether, in the absence of an express power, there is any necessary implication that there is such a power.

(9)  Against such an implication of the express provisions for costs.

(10)  Nevertheless, there is the necessary implication because although, in fact, the LS E&W has sufficient funds to carry out the intervention exercise, it is not publicly funded and it might be possible to envisage cases in which it could not carry out the intervention exercise unless it could be satisfied that the costs would be met.

(11)  The potential sources of recovery from the intervened in solicitor and the applicable Compensation Fund – the latter not relevant in the Hong Kong scenario – should not preclude reimbursement out of money that would not otherwise be distributed, particularly if it may be that in a given intervention recovery under the express provisions is theoretical only and would not in reality result in recovery of all or part of the costs incurred.

(12)  The power to reimburse can be derived from the general principle that where a person seeks to enforce a claim to an equitable interest in property, the court has a discretion to require as a condition of giving effect to that equitable interest that an allowance be made for costs incurred in connection with the administration of the property.

92.  I note that the approach in Ahmed has apparently been followed in cases in Hong Kong, albeit without significant analysis. For example, very recently, in Re Li & Associates (An Intervened Firm) [2023] 1 HKLRD 1096 at §§33-34, Au Yeung J referred to section 10 of Schedule 2 to the LPO and made an order that the defendant solicitor pay the Council’s costs, and that the costs be recoverable from the defendant as a debt owing to the plaintiff, “in accordance with usual practice”. She also directed, at §§35-38, that costs should be paid out of money in (or to be received) in the office account, and that money kept in the firm’s client account after distribution to the claimants entitled shall also be applied towards the payment of the intervention costs to the extent sufficient to cover such costs. This was apparently on the basis of the Ahmed decision – as has also apparently occurred in other cases for which the Council has provided copies of the relevant court orders there made.

93.  Mr Ng submitted that in light of his previous practice of drawing a fixed monthly salary and leaving money within the Firm for future use, it is not surprising that there are surplus funds or Undistributable Funds. However, he submitted that where there is no further claim for client money, the surplus balance should be released to his trustees in bankruptcy, on the basis that it can be presumed that the funds are not client money.

94.  Mr Deng submitted that it would be wrong as a matter of principle to treat undistributable funds as client funds for the purpose of giving priority to the Council to offset its costs of intervention. Instead, he submitted, the funds should be treated as a general fund for the purpose of satisfying all general creditors of Mr Ng; to do otherwise would be to confer secured status to the Council. Mr Deng suggested that the same analysis as was applied in Ahmed has to identify the person beneficially entitled to funds should be applied to a trust arising under section 2 of Schedule 2 to the LPO. But, he submitted, where the Undistributable Funds – perhaps better described as undistributed funds – may not all be moneys belonging to clients, there may be funds left in the client accounts which might have been transferred to the office account as or costs bill but not yet charged, so that the funds after distribution are inherently likely mixed with client moneys with no ascertainable owners.

95.  Mr Deng submitted that the prior practice of offsetting costs of intervention from unascertainable surplus client funds is, at best, a practice of convenience. It should not be the presumed or default order to be made in favour of the Council to the detriment of all other general creditors of the relevant ‘errant solicitor’. Mr Deng also submitted that there are no good public policy reasons for the Court to afford preferential status to the Council for its intervention costs to the prejudice of other creditors. He pointed out that the Ahmed case did not involve any competing claims by creditors of the Firm, and the judge in that case was himself hesitant and only made the orders on the basis that it would not prejudice any person even if he were wrong.

96.  However, I agree with Mr Ling that there is no legal basis to say that the Undistributable Funds should be paid to the trustees in bankruptcy of Mr Ng. As was made clear in Ahmed, the decision as to who is beneficially entitled to the funds held in a client account is not a discretionary exercise. Whilst it is correct that it has not been possible to ascertain the identity of clients beneficially entitled to those funds, nor has it been established that the funds belong beneficially to Mr Ng (or his trustees in bankruptcy). Therefore, it is incorrect to argue (as Mr Deng did) that Mr Ng’s other creditors would somehow necessarily be prejudiced if the Undistributable Funds were not paid to the trustees. It might even be asked why, if the moneys cannot be shown to belong to Mr Ng, his general body of creditors should enjoy any claim to them.

97.  In the circumstances, I am persuaded by the reasoning adopted in the Ahmed case. I take into account the express provisions for costs, but I also take account of the wide terms of section 6 of Schedule 2 to the LPO, which specifically identifies that where the Council is unable to ascertain the person to whom any moneys referred to in a notice served under section 2(3) belong, the Council may apply to the Court of First Instance for directions as to the transfer of such moneys. That seems to me to give the Court a broad discretion as to how to direct the transfer of such moneys, in what appears to be the most appropriate way in any given set of circumstances.

98.  Further, in so far as it might be necessary to do so, I would think it appropriate to imply from general principles a provision for reimbursement from otherwise undistributable funds. As with the LS E&W, the Law Society in Hong Kong is also not publicly funded. The potential sources of recovery from the former partners of the Firm subject to the Intervention in this case should not preclude reimbursement out of money that would not otherwise be distributed, particularly where recovery would in reality not result as regards at least part of the costs incurred.

99.  In the circumstances of this case, it seems to me to be appropriate and I direct that the Undistributable Funds should be made available towards the costs of the Intervention.

I.  Result – Orders and Directions Made

100.  As stated above, a number of the other matters on which the Court’s orders or directions are sought are not very controversial. In consequence of my approach adopted above, and granting liberty to apply as to the precise terms of the order, I propose to make the following orders and directions:

UPON the Plaintiff’s undertaking that after distribution of the Client’s Money (as defined in paragraph (1) of this Order) to the Beneficiaries (as defined in paragraph (1) of this Order) and the surplus balance thereof (“Surplus Balance”) applied towards payment of the Plaintiff’s costs of and occasioned by the present proceedings and the intervention of Messrs. Wong, Fung & Co. Solicitors (“Firm”) to the extent sufficient to cover such costs leaving a net surplus balance (if any) (“Further Surplus Balance”), if any claimant, who has not previously filed with the Plaintiff any statement of truth and declaration form (“SOT”) to claim against the Client’s Money but does file with the Plaintiff a SOT to claim against the Client’s Money within 6 months after the date of this Order, the Plaintiff shall repay to such claimant, from the sum received by the Plaintiff from the Surplus Balance, the duly verified claim of such claimant if the Further Surplus Balance (if any) is not sufficient to pay the duly verified claim of such claimant.

IT IS ORDERED THAT:-

1. Subject to the verification of the claims as directed under the order of The Honourable Mr. Justice Coleman herein dated 7^th July 2021 (“7/7/21 Order”), the client’s moneys deposited with the bank accounts of the Firm set out in Schedule 1 to the Summons, together with any interest accrued thereon (collectively, “Client’s Money”), should be distributed in accordance with the direction under paragraph 2 below to those claimants claiming for money deposited with the Firm and found to be beneficially entitled to the Client’s Money (collectively “Beneficiaries”).

2. The claims of the Beneficiaries, whose statement of truth and declaration forms were received by the Law Society of Hong Kong, Messrs. Chui and Lau, Messrs. P.C. Woo & Co., Messrs. Cheung Tong & Rosa Solicitors, Messrs. Robertsons or Messrs. Vincent T.K. Cheung, Yap & Co. before the expiration of one year from the date of this order, shall be paid in full from the Client’s Money.

3. The Plaintiff shall continue to receive claims from persons claiming to be entitled to the distribution of the Client’s Money (collectively, “Claimants”) and verify such claims for a period of 6 months from the date of this order. No further claim against the Client’s Money from Claimants shall be entertained 6 months after the date of this order.

4. No further notice is required to be given (in addition to the notices placed in The Standard, Sing Tao Daily and the Gazette on 24^th September 2021) to invite potential claimants for moneys deposited with the Firm to notify the Plaintiff of their claims before distribution of the Client’s Money under paragraph 2 hereof.

5. Claim no.558 should not be allowed.

6. Claim no.713 should not be allowed.

8. The following amounts in the following bank accounts of Sunny Glory (Hong Kong) Limited in Schedule 2 to the Summons shall be treated as money held by Sunny Glory (Hong Kong) Limited on trust for the Firm and shall be applied towards payment of the Plaintiff’s costs in the present application and under paragraph 10 of the 7/7/21 Order:-

	Bank account no.	Sum belonging to the Firm
(a)	Public Bank current account no.0714-369752-031	$1,798,424.72 (out of the bank balance of $3,092,842.62 on 31st December 2021) and interest thereafter proportional to the Firm’s share in the said bank balance
(b)	Public Bank savings account no.0714-369752-233	Nil
(c)	HSBC current account no.023-855943-001	$270,670.77
(d)	HSBC savings account no.023-855943-838	$230.89

Other amounts in the above bank accounts shall be paid to Mr. Pui Chiu Wing and Mr. Iu Chi Leung, the Joint and Several Provisional Liquidators of Sunny Glory (Hong Kong) Limited.

9. The following amounts in the following bank accounts of Mighty Wisdom Limited in Schedule 3 to the Summons shall be treated as money held by Mighty Wisdom Limited on trust for the Firm and shall be applied towards payment of the Plaintiff’s costs in the present application and under paragraph 10 of the 7/7/21 Order:-

	Bank account no.	Sum belonging to the Firm
(a)	Public Bank current account no.0714-370475-031	$589,503.56 (out of the bank balance of $695,735.74 on 31st December 2020) and interest thereafter proportional to the Firm’s share in the said bank balance
(b)	Public Bank savings account no.0714-370475-233	Nil
(c)	HSBC current account no.023-855950-001	$1,000,558.12
(d)	HSBC savings account no.023-855950-838	Nil

Other amounts in the above bank accounts shall be paid to Mighty Wisdom Limited.

10. The following files of the Firm seized by Messrs. Chui and Lau (excluding the files with original title deeds and documents other than duplicate sale and purchase agreement or sub-sale and purchase agreement for sale or sub-sale of properties, original tenancy agreement or lease having expired for more than 7 years and sealed copy or copy court pleadings (“Excluded Files”)) be destroyed:-

(a) Conveyancing files closed for more than 15 years;

(b) General files closed for more than 7 years;

(c) Tenancy files with tenancy agreement expired for more than 7 years; and

(d) Criminal files closed for more than 4 years.

11. After the destruction of the files under paragraph 10 above, the remaining files of the Firm (excluding the Excluded Files) be destroyed as and when they reach the criteria set out in paragraph 10 above.

12. The accounting documents of the Firm seized by Messrs. Chui and Lau relating to an accounting period ending not less than 7 years before the date of Intervention be destroyed forthwith.

13. After the destruction of the account documents under paragraph 12 above, the remaining account documents of the Firm should be destroyed as and when they reach the criteria set out in paragraph 12 above;

14. The miscellaneous documents and items of the Firm seized by Messrs. Chui and Lau should be destroyed forthwith.

15. The Plaintiff’s costs of and occasioned by the present application be paid by the 1^st Defendant and the 2^nd Defendant jointly and severally on a solicitor and client basis and be recoverable from the 1^st Defendant and 2^nd Defendant as a debt owing to the Plaintiff.

16. The moneys in the client accounts of the bank accounts in Schedule 1 to the Summons less the Rectification Funds of $23,465,797.44 and interest thereon, after setting aside sufficient funds to satisfy payment of all claims filed on or before the expiration of 6 months from the date of this Order and proved to the satisfaction of Mr. Lau Wing Keung of Messrs. Chui and Lau and Mr. Lee Ying Biu Andrew of Messrs. Robertsons shall be applied towards payments of the Plaintiff’s costs in paragraph 15 above and paragraph 10 of the 7/7/21 Order to the extent sufficient to cover such costs.

17. The Rectification Funds of $23,465,797.44 and interest thereon shall be distributed to the trustees in bankruptcy of the 1^st Defendant.

18. There be further liberty to apply.

101.  I will deal on paper with any matters arising relating to the precise terms of the above orders and directions, for which I give liberty to apply.

Mr Ling Chun Wai, instructed by Chui and Lau, for the plaintiff

The 1^st defendant, acting in person

The 2^nd defendant, acting in person, absent

Mr Earl Deng, instructed by JCC Cheung & Co., for the interested party