AGA INFORMATION LTD AND OTHERS v. WAN HOK WAI HENRY AND OTHERS

DCCJ 3966/2021

[2026] HKDC 949

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3966 OF 2021

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JUDGMENT

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A.  Introduction

1.  The Plaintiffs are the former clients of the solicitors’ firm Messrs. Henry Wan & Yeung (“Firm”). Between 2011 and 2017, the Plaintiffs paid the Firm HK$3,660,000 as costs on account (“Costs on Account”) for the purpose of handling 8 legal actions in Hong Kong (“Actions”). The Firm also recovered HK$2,205,514 costs from the opponents in the Actions (“Recovered Costs”). Aside from a HK$300,000 refund in 2014, the balance has not been returned to the Plaintiffs.

2.  The Plaintiffs commenced taxation proceedings against the Firm in HCMP 238/2019 (“Taxation Proceedings”). By an Allocatur dated 5 February 2021 (“Allocatur”), Master Hui taxed the costs down to HK$2,768,237.50 (“Taxed Down Legal Costs”). The Firm was also ordered to pay a HK$42,183 taxing fee.

3.  By these proceedings, the Plaintiffs seek to recover the remaining balance, being the Costs on Account (HK$3,660,000) + Recovered Costs (HK$2,205,514) – the refund (HK$300,000) – Taxed Down Legal Costs (HK$2,768,237.50) = HK$2,797,276.50 (“Remaining Balance”).

4.  A distinct feature in this recovery action arises from the Firm’s changing constitution over the years. Between 2002 and its cessation in 2019, the Firm was not a single entity but a succession of six distinct partnership and sole proprietorship configurations. In the Taxation Proceedings, Master Hui was not made aware of this. In these circumstances, questions have arisen as to who (if any) should be liable to repay the Remaining Balance (if so, how much) to the Plaintiffs.

5.  In this judgment, I use the term “the Firm” loosely to describe the partnership or sole proprietorship which was previously known as Messrs. Henry Wan & Yeung without specifying it to a particular partnership or sole proprietorship.

6.  By the time these proceedings were commenced in August 2021, the Firm had already been dissolved. Consequently, the Plaintiffs sought to effect service upon the Firm by serving on the Firm’s former partners, namely the 1^st Defendant (“D1”), the 2^nd Defendant (“D2”), Mr Lee Man Hau (“Kenneth”) and Mr Chan Pak Shing (“Bryan”).

7.  This service was carried out pursuant to Order 81, rule 3(3) of the Rules of the District Court (Cap. 336H) which provides that where a partnership has been dissolved to the knowledge of the plaintiff before an action is begun, the writ must be served on every person within the jurisdiction sought to be made liable.

8.  An action commenced against a dissolved firm in this manner is construed as an action in substance against the individual partners: Lindley & Banks on Partnership, 21^st edn, para 14-32. The Firm remains a party in name only, providing the procedural framework to determine the personal liability of the named defendants.

9.  D1, D2, and Bryan duly acknowledged service and indicated their intention to defend the Plaintiffs’ claims. Conversely, Kenneth has neither acknowledged service nor taken any part in these proceedings.

10.  At the start of this trial, a settlement was reached between the Plaintiffs and Bryan. As part of that settlement, Bryan has agreed to, inter alia, pay the Taxing Fee of HK$42,183. As such, this head of claim is no longer being pursued by the Plaintiffs against the other Defendants.

11.  At this trial, the Plaintiffs are represented by Ms Lau. D1 is represented by Mr Tam together with Mr Ding. D2 is represented by Mr Chiu.

B.  The Parties’ Respective Positions

B1.  Ps’ Claim

12.  The Plaintiffs’ case is built upon three pillars:-

(a)  Pursuant to Section 11 of the Partnership Ordinance (Cap. 38), the Plaintiffs contend that the Remaining Balance constitutes a debt or obligation of the Firm. They argue that because the underlying payments occurred between 2011 and 2017, D1 and D2 remain personally liable to repay the said sum regardless of their respective departure from the Firm.

(b)  The Plaintiffs allege that the Costs on Account and Recovered Costs were trust property. They seek a declaration of trust, asserting that D1 and D2, as partners at the time of receipt, became trustees of these sums and hold the Remaining Balance on trust for the Plaintiffs.

(c)  The Plaintiffs claim the sum as money had and received. They argue that the Firm’s overcharging, as certified by the Allocatur, resulted in the Defendants being unjustly enriched at the Plaintiffs' expense.

13.  The Plaintiffs’ case is that D1, D2 and other partners of the Firm are jointly and severally liable to return the Remaining Balance to the Plaintiffs or that they are jointly and severally holding the Remaining Balance as trustees for and on behalf of the Plaintiffs.

14.  No order to account or any tracing relief has been sought in the Statement of Claim (“SoC”).

B2.  D1’s Defence

15.  D1 was suspended from practice as a solicitor and ceased to be a partner of the Firm on 2 April 2015. In defence of these proceedings:-

(a)  D1 asserts that Messrs. Henry Wan & Yeung consisted of six distinct legal configurations. He argues the Plaintiffs’ failure to identify which specific partnership they are suing is a fatal pleading defect. The six distinct legal configurations on different dates (which are not in dispute) are set out below:-

Period	Partnership / Sole proprietorship
Up to 1 April 2015	Partners: D1 and D2
2 April 2015 to 4 May 2017	Sole proprietorship: D2
5 May 2017 to 7 May 2017	Partners: D2 and Kenneth
8 May 2017 to 24 October 2018	Sole proprietorship: Kenneth
25 October 2018 to 7 March 2019	Partnership: Kenneth and Bryan
8 March 2019 to 30 November 2019	Sole proprietorship: Kenneth

(b)  D1 orally informed 3^rd Plaintiff (“P3”) of his suspension in 2015. Further details about his suspension were given by D1 to P3 at a dinner gathering in April 2015.

(c)  On 2 April 2017, D1 resumed practice as a solicitor and was employed as a consultant of the Firm. In about December 2018, D1 ceased to hold any position in the Firm.

(d)  He maintains that no debt existed until the Allocatur was certified in 2021. At the time of the Allocatur, the Firm had already been dissolved.

(e)  Further, since he was no longer a partner to the Firm in 2021, he argues the liability cannot be incurred while he was a partner under section 11 of the Partnership Ordinance.

(f)  He admits he had knowledge of the Taxation Proceedings. In fact, he was asked to make and did make an affirmation which was adduced as evidence in the Taxation Proceedings.

(g)  He pleads that he never personally received the funds. It is his case that all the Costs on Account and the Recovered Costs were applied toward payment of the Firm’s bills and also other disbursements including counsel fees.

(h)  In submissions, he also relies on P3’s evidence made in the Taxation Proceedings that the Firm was authorized to apply the Costs on Account toward defraying the Firm’s office overheads and expenses.

B3.  D2’s Defence

16.  D2 argues he is not bound by the findings in the Taxation Proceedings because the Plaintiffs, despite knowing that he had left, failed to serve the Taxation Proceedings on him. D2 was not made aware of the Taxation Proceedings and was not given the opportunity to defend the same.

17.  D2 joins D1 in raising a number of pleading defects, including the Plaintiffs’ failure to identify which specific partnership/sole proprietorship they are suing.

18.  D2 maintains he was a salaried partner of the Firm for a nominal HK$1 salary, with no interest in the profits from the Plaintiffs’ files (which were D1’s files). He argues that, before D1’s suspension, he never handled the Plaintiffs’ files in the Actions. He had no access to the Firm’s cheque books or accounting systems which were in D1’s exclusive control.

19.  D2 relies upon sections 4(1)(a) and 20(2) of the Limitation Ordinance (Cap. 347). D2 contends that the Plaintiffs’ cause of action accrued at the point of each payment. He argues the Plaintiffs’ trust claim is a Category 2 constructive trust claim and is thus time-barred.

B4.  The Plaintiffs’ Replies

20.  The Plaintiffs plead overcharging as the basis for its claim in unjust enrichment, alleging that D1 and D2 appeared as the fee chargers on the narrative bills produced during the Taxation Proceedings. It is also alleged that D1 and D2 misapplied the Remaining Balance to benefit themselves.

21.  The Plaintiffs deny having actual or constructive knowledge of the Firm's change of constitution or subsequent dissolution.

22.  To counter D2’s limitation defence, the Plaintiffs rely upon section 20(1) of the Limitation Ordinance to say that there is no limitation period for a trust claim falling under section 20(1). Further, the Firm’s failure to provide bills to the Plaintiffs has the effect of postponing the applicable limitation period.

C.  The Parties’ Evidence

C1.  Ps’ Evidence

23.  P3 testified on behalf of all the Plaintiffs.

24.  P3 came to know D1 in about 1997. P3 was the one liaising with the Firm through D1 and also through a Stephen Kam (who was the Firm’s legal executive) to handle the Actions.

25.  When P3 first instructed the Firm to handle the Actions, he gave HK$200,000 costs on account to the Firm without any prompting from D1 or anyone from the Firm. That is also confirmed by D1 under cross-examination.

26.  The subsequent costs on account were also paid by P3 to the Firm on P3’s own volition. It is P3’s evidence that as soon as he was informed that some steps in the Actions were required to be taken, he deposited fund into the Firm, without any express request from D1. I asked P3 how he could ascertain the precise amount required to be deposited. P3’s answer is that the amount was based on his estimation only.

27.  P3 said that the Firm never issued invoices or bills to the Plaintiffs despite their continued injection of fund. Only receipts for the costs on account paid were issued. P3 said that to ensure that the Firm would focus the attention on handling the Actions and would be sufficiently financed for doing so, P3 withheld taking any actions against the Firm, despite his dissatisfaction.

28.  The Firm finally sent a Gross Sum Bill No. 14280 dated 12 August 2016 to P3 (“Gross Sum Bill 14280”). This is the first time the Plaintiffs received a formal invoice from the Firm. However, P3 complained that no descriptions of the works done were included in the said bill. Demands were made by P3 for clarifications. On or about 7 October 2016, P3 received through email the 1^st to 32^nd Gross Sum Bills in one go.

29.  Further attempts were made by P3 demanding the provision of breakdowns of fees. On 2 February 2018, the Firm sent an email to P3 attaching the revised “Statement of Account” and some Narrative Bills.

30.  On 5 February 2018, P3 sent an email to Stephen Kam raising multiple complaints about the amount of the legal costs charged. A complaint was lodged with the Law Society in respect of the same. The Plaintiffs also terminated their engagements with the Firm.

31.  On 22 March 2018, the Firm issued a final account to the Plaintiffs i.e. the 33^rd Gross Sum Bill no. 15102.

32.  The Taxation Proceedings were commenced on 21 February 2019. 6 more gross sum bills were produced by the Firm during the process. The legal costs were taxed down by Master Hui to HK$2,768,237.50.

33.  P3 said that by appearing as the fee charger under the Narrative Bills and the Office Bills and billing the Plaintiffs accordingly, D1 was unjustly enriched in that he was never entitled to charge and did overcharge the Plaintiffs on legal fees. By applying the Remaining Balance towards payment of D1’s profit costs and as a recipient of the Remaining Balance, D1 was unjustly enriched or that he was holding the said balance on trust for the Plaintiffs.

34.  During the Taxation Proceedings, P3 made an affirmation which is also adduced as evidence in these proceedings. P3 suggested that the Plaintiffs never expected the funds to sit at the bank account. Ps expected the Firm to use such funds from time to time to pay for general expenses, such as staff costs and overheads. It was P3’s understanding that the costs were placed on a “deposit” basis and that the fees of the Firm in respect of each action would be calculated in one-go at its conclusion. P3, however, added that the Plaintiffs never agreed that the Firm would be allowed to utilise the Costs on Account to fully settle any bills without the Plaintiffs having the opportunity to review, verify and/or challenge the costs charged.

35.  During cross-examination, P3 accepted that there was nothing wrong for the Plaintiffs’ funds to be spent or used. The Plaintiffs’ objection is that no proper breakdown was ever provided to him or that the Plaintiffs were not kept informed as to how much was being charged. In principle, P3 accepted that a solicitor was allowed to charge for the work actually done for the Plaintiffs in the Actions.

36.  Further, I asked P3 at least for the items where Counsel was instructed to perform works in the Actions, whether he was notified of the same and of the amount to be charged. P3 replied that such amount was to be approved on a case-by-case basis. To his knowledge, such disbursements were to be deducted from the Costs of Account. It follows that any such payments or disbursements cannot be said to be made without authority.

37.  Mr Tam submits that the evidence shows that the Plaintiffs authorised the transfer of the fund for the settlement of the Firm’s bills. I agree. The overall evidence does suggest that the arrangement and understanding between the Plaintiffs and the Firm was that the Costs on Account would be used to fund the Actions and to pay for the expenses of the Firm including disbursements. This is also supported by the fact that P3 continued to inject money as costs on account into the Firm, which shows that P3 expected the prior sums injected to be used up and spent. Otherwise, there would not have been any need for P3 to top up the costs on account from time to time. The complaint of the Plaintiffs lies in the lack of proper accounting or provision of information as to how much was charged.

38.  P3 was cross-examined as to when he was made aware of D1’s suspension from practice. He said that he could not recall the exact time of his knowledge but reiterated that he had never been informed by anyone of this matter. However, upon further probing, it appears that P3 at least knew that D1 or D2 were no longer partners of the Firm in 2018.

39.  In respect of the dinner which took place in April 2015 (defined below as the 2015 April Dinner), P3 said in his witness statement that there was a dinner gathering in which D1 did mention that he got into some trouble with one of his cases when trying to help a friend. But P3 maintained that D1 never mentioned his suspension from practice at all.

40.  I should also mention that in P3’s oral evidence, he kept referring to the Firm as an unlimited company, which it was not. It seems that P3 has not appreciated the legal distinction between a partnership (which is not a distinct separate entity) and a company (which is a distinct separate entity). It appears to me that it is exactly this confusion which led the Plaintiffs to have pleaded the current case against the defendants. I will have more to say about this below.

41.  Under cross-examination, P3 confirms that he never met D2 before.

C2.  D1’s Evidence

42.  D1 was admitted as a solicitor in September 1994. He retired and ceased to hold a practising certificate in January 2022.

43.  The name Messrs. Henry Wan & Yeung was used to conduct the business as a solicitors’ firm in the course of 20 years. It was used by various and distinct sole proprietorships and partnerships from time to time.

44.  Between 2 April 2015 and 1 April 2017, D1 was suspended from practice as a solicitor. In suspending his practice, the Court of Appeal imposed a condition that when D1 resumed practice, he was prohibited from practising as a sole proprietor or partner or manager of a solicitors’ firm until the Law Society was satisfied that he was fit to do so.

45.  Having been suspended from practice, D1 called P3 to deliver the news of his suspension. After the call, there was a dinner several days later where D1 further explained to P3 the details and the implication of his suspension face to face. The said dinner was also attended by, for instance, their other common friends Lam Wah Shing, Wallace (“Wallace”) and Wai Kam Keung, James (“2015 April Dinner”). It was suggested to D1 during cross-examination that Wallace did not attend this dinner but D1 disagreed and maintained that Wallace did attend.

46.  After resuming practice in 2017, D1 also recalled that he orally mentioned this to P3. When D1 retired from the Firm in December 2018, he also informed P3 of his leaving.

47.  After his suspension, he did receive emails from P3 chasing the breakdown of legal fees, which were copied to him. But D1 never replied to those emails.

48.  After 2 April 2017, D1 did not rejoin the Firm as a partner but rejoined only as a part-time consultant. He left the Firm in December 2018 when he decided to transition into retirement.

49.  When the Taxation Proceedings were commenced, the partners of the Firm were Kenneth and Bryan. When the Allocatur was issued on 5 February 2021, the then sole proprietorship in the name of Kenneth ceased to be in existence. D1 was informed of the Taxation Proceedings by Kenneth and Bryan. Since D1 was the handling solicitor of the Plaintiffs’ files between 2011 and 2015, he was asked to make an affidavit on behalf of the Firm. He agreed and did so.

50.  Under cross-examination, D1 also said the following:-

(a)  As long as bills are delivered to clients, the money sitting in the Firm’s client account could be transferred to the Firm’s office account, which could then be used to pay for the overheads of the Firm. He disagreed that express authorisation from clients was needed. If clients object to the amounts charged, the objections can be dealt with through the taxation procedures; and

(b)  D1 also confirmed that by the time when the Allocatur was issued, the Costs on Account paid by the Plaintiffs had already been transferred from the Firm’s client account to the Firm’s office account and had been used up in paying for the overheads of the Firm over the years.

C3.  D2’s Evidence

51.  D2 first joined the Firm as a salaried partner in 1999 with a nominal salary of HK$1 per annum.

52.  D2’s role is governed by a Partnership Agreement under which D2 was not entitled to share any profits of the Firm. Under the cross-examination of D1, it was confirmed that D2 had no entitlement to share any profits earned from the files handled by D1. That includes the Plaintiffs’ files with the Firm.

53.  Before D1’s suspension, D2 had no control or access to the Firm’s books and accounts which were in the sole control of D1. D2 had no knowledge of the Plaintiffs’ files. The money paid by the Plaintiffs as Costs on Account were received without D2’s knowledge.

54.  D2 never met with P3. P3 only contacted D1 or Stephen Kam in respect of the Plaintiffs’ files.

55.  After D1’s suspension, D2 handled the Plaintiffs’ files from time to time but he relied upon Stephen Kam to assist with this task. D2’s role was one of supervision. For accounting matters, D2 relied upon the former account clerk of the Firm as she knew about the Firm’s account thoroughly.

56.  On 2 April 2015, D2 was taken by surprise when D1 informed him that he had been suspended from practice by the Court of Appeal. By operation of law, the partnership between D1 and D2 was dissolved on the same day. D2 was made the sole proprietor of the Firm.

57.  D2 said that D1 applied and got approval from the Law Society to work as a clerk for a few months in the initial suspension period to assist the handing over of his files including the Plaintiffs’ files. This episode, however, was denied by D1 under cross-examination.

58.  D1 later introduced Kenneth to take up the Firm and all the files of D1. Kenneth was admitted as a partner of the Firm on 5 May 2017. D2 ceased to be a partner on 7 May 2017. Since then, D2 had no knowledge of what was happening in the Firm.

59.  P3 never approached D2 regarding the costs the Plaintiffs had paid or regarding any other matters.

60.  D2 denied that he personally received any profits/benefits from the Plaintiffs’ files. D2 said that, in his view, the Plaintiffs’ files were not profit-earning and the money received from the Plaintiffs was not even sufficient to pay for Stephen Kam’s monthly salary.

61.  Under cross-examination, questions were asked of D2 about the bills rendered before Master Hui in the Taxation Proceedings. D2 said that he did not prepare those bills and had no knowledge as to why they were prepared that way. D2 was not notified of the Taxation Proceedings.

62.  Under cross-examination, D2 said that it does not require an express authorisation from clients before money can be transferred from the Firm’s client account to the Firm’s office account. It can be done after bills are issued to the clients. D2 cannot recall whether he himself authorised the transfer of fund in respect of the Plaintiffs’ files from the Firm’s client account to the Firm’s office account.

D.  Evaluation of the Evidence

63.  I have expressed my preliminary view at trial that the determination of this dispute does not turn much on the assessment of the credibility of the witnesses. The only meaningful factual dispute between the parties is as to whether after D1 had been suspended from practising as a solicitor in 2015, he orally informed P3 of the same.

64.  On this issue, I prefer the evidence of D1 over the evidence by P3 and find, on the balance of probabilities, that D1 did inform P3 of his suspension in 2015 because:-

(a)  It is not in dispute that there was a dinner gathering involving P3 and D1 shortly after D1’s suspension. The existence of this dinner gathering is also borne out the relevant WhatsApp conversation record on 17 April 2015.

(b)  More importantly, P3 accepted that at that time D1 did mention that he got into some trouble with one of his cases when trying to help a friend. Given the proximity in time, the trouble D1 faced is most likely to be a reference to his suspension. There was no other evidence or suggestion D1 was also facing any other trouble apart from his suspension.

(c)  There is no evidence that D1 was trying to conceal his suspension. To the contrary, the fact that he was no longer one of the partners to the Firm was made clear on the face of Gross Sum Bill 14280. In P3’s oral evidence, he accepted that he received this bill at the time and he was aware that only D2’s name was printed on the said bill as a partner of the Firm. Clearly, at least in or about August 2016, P3 should have discovered that D1 was no longer a partner of the Firm.

(d)  Further, after P3 had questions regarding the billing by the Firm in 2016, he contacted Stephen Kam rather than D1 for clarifications (though D1 was copied to those emails). P3 accepted that he knew that Stephen Kam was not a lawyer. Given that D1 was previously the handling solicitor for the Plaintiffs in the Actions, if P3 had not known about D1’s suspension, one would have expected P3 to contact D1 directly, instead of just copying the relevant email to D1.

E.  Analysis

E1.  Overall Observation

65.  The Plaintiffs have sued the Firm as the 3^rd Defendant. As a matter of law, a firm name is merely a procedural shorthand for the individual partners who constitute the firm at the material time.

66.  The evidence establishes that the firm trading as “Henry Wan & Yeung” underwent six distinct changes during the period covered by the Plaintiffs’ claim. Each change resulted in the dissolution of the old partnership and the creation of a new, distinct legal relationship: Lo Wai Sing v. Allianz Insurance (Hong Kong) Ltd, unreported, HCA 4084/2001, 1 February 2005 per Lam J (as he then was) at §§16-17.

67.  There is no such legal entity as a “universal D3” that spans the entire period.

68.  This leads to a fatal defect in the Plaintiffs’ pleadings. By mounting their claims in the current manner, the Plaintiffs have failed to specify which of the six partnership/sole proprietorship configurations they are seeking to hold liable for the Remaining Balance. As D1 and D2 were only partners of specific, earlier configurations, they can only be held liable, whether under section 11 of the Partnership Ordinance or in unjust enrichment, for the debts or obligations incurred during the specific partnership/sole proprietorship to which they belonged.

69.  The Plaintiffs’ reliance on the Allocatur as a “blanket” pleading against all Defendants is therefore problematic. By failing to plead and prove a breakdown of how the Remaining Balance relates to the specific tenures of D1 or D2 (or any subsequent periods), the Plaintiffs have left their case in a state of ambiguity.

70.  The confusion is further aggravated when Ms. Lau opened the case orally where it was confirmed to this Court that the cause of action of the Plaintiffs in money had and received only arose and accrued when the Allocatur was issued by Master Hui on 5 February 2021. By then, even the sole proprietorship in the name of Kenneth ceased to be in existence. The Firm was already in dissolution.

71.  In short, the Plaintiffs have sued without identifying in the SoC the substance of the partners responsible for the alleged overcharging. A plaintiff cannot simply point to a global figure derived from the Allocatur and demand that former partners pay it, without pleading and proving a specific nexus between those former partners and the particular transactions that led to the surplus. Because the SoC treats the six distinct partnerships as one indivisible debtor, it fails to disclose a coherent cause of action against D1, D2 or any other partners personally[1].

72.  I will now go on to examine each head of the Plaintiffs’ causes of action as pleaded in the SoC.

E2.  Section 11 of the Partnership Ordinance (Cap. 38)

73.  The Plaintiffs pray in aid of section 11 of the Partnership Ordinance (Cap. 38). Section 11 provides that every partner in a firm is liable jointly with the other partners for all “debts and obligations of the firm incurred while he is a partner”.

74.  Mr. Tam submits that the “debts and obligations” referred to under section 11 refer only to contractual obligations or engagements. He relies upon Lindley & Banks on Partnership, 21^st edn, para 13-03, fn 7 and Estate Realties Ltd v Wignall [1992] 2 NZLR 615 at 633. I tend to agree. I take the view that the ambit of section 11 is to be distinguished from wrongful acts or omissions of partners which are dealt with separately under sections 12 to 14 of the Partnership Ordinance. Thus, insofar as the Plaintiffs’ case alleging the Firm overcharging or even alleging breach of trust and/or misapplication of fund (which feature in Ms. Lau’s cross-examination), such allegations fall outside the ambit of section 11.

75.  In any event, even if section 11 does apply, in my view, the operation of Section 11 must be entity-specific. It attaches liability only to those specific obligations that were incurred during the precise window of time while the defendant was a partner of that specific partnership configuration.

76.  Thus, the Plaintiffs must plead and prove that the debts and obligations were incurred before D1 and D2 left the partnerships in 2015 and 2017. The burden remains squarely on the Plaintiffs to specify and prove which particular partnership configuration incurred which portion of the debt. In my view, they have failed to do so. The Plaintiffs’ argument conflates dealings with obligations. While the dealings began earlier, the obligation to repay a surplus only arose after the Firm’s bills were taxed down.

77.  In this action, the Plaintiffs have pleaded a single, global sum of HK$2,797,276.50 as the Remaining Balance. However, this figure is a net result of many years of transactions. The Plaintiffs' attempt to use section 11 as a “catch-all” to bypass the multiple dissolution of the partnership is not permitted under the section. Since the debt or obligation in this action is derived solely from the Allocatur, the Plaintiffs’ claim under section 11 fails.

78.  In Ms. Lau’s closing address, she prays in aid of sections 12 and 13 of the Partnership Ordinance and submits that even if section 11 is not applicable, sections 12 and 13 should still apply. Leaving whether a proper claim under these sections have been properly raised by pleading or not (my view is that they have not been properly pleaded), the Plaintiffs have still failed to specify when the alleged wrongs occurred so as to attach liability to a specific partnership configuration. In answer to this, Ms. Lau refers this Court to the bills issued to the Plaintiffs. But, unfortunately, those bills do not show the overcharged parts of the fees. Further, as rightly pointed out by Mr. Tam, some of the bills show works done and charged by D1 after he rejoined the Firm in 2017 not as a partner. The bottom line is that it remains on the Plaintiffs to set out their case clearly. I take the view that they have failed to do so.

E3.  The Plaintiffs’ Claim for a Declaration of Trust

79.  When a client pays costs on account to a firm of solicitors, or when a firm recovers costs from an opposing party on a client's behalf, those funds are held in a fiduciary capacity. In the ordinary course of practice, such funds are trust property held in the firm’s client account.

80.  The legal complexity in this case arises from the fact that the Firm underwent six distinct changes in its constitution during the material period. Each admission of a new partner or the retirement of an existing one results in the dissolution of the old partnership and the formation of a separate legal relationship among the new members.

81.  I accept Mr Tam’s submission that the retainers between the Plaintiffs and the Firm were impliedly assigned to each successively constituted firm. As Lord Sumption observed in Plevin v Paragon Personal Finance Ltd (No 2) [2017] 1 W.L.R. 1249 at §§4-8, a client who continues to instruct a firm following a technical change in its solicitors is taken to have assented to the assignment of that retainer. By extension, the responsibility for the client’s funds and the status of trustee over those funds passed from the old firm to the new one as it was then constituted.

82.  Any proprietary claim for a declaration of trust against D1 or D2 must be premised on the fact that they hold identifiable trust property belonging to the Plaintiffs. It is a fundamental principle of equity that a court cannot make a declaration of trust over unidentified or dissipated property. A plaintiff seeking a proprietary remedy must be able to trace the funds and prove that the property is still in the ownership or possession of the defendants: JSP International S.R.O v Alacrity Ltd and Others [2022] HKCFI 977 at §§32-33.

83.  In the present case, the evidence is not only insufficient but contradictory to the existence of a subsisting trust fund in the hands of D1 or D2:-

(a)  P3 candidly admits that the Plaintiffs expected the Firm to use the funds to defray overheads and general expenses of the Firm.

(b)  D1’s and D2’s unchallenged evidence is that the Firm’s overheads at the time were substantial (about HK$500,000 per month). D1 confirmed under cross-examination that that the funds in question were exhausted for these operational purposes years before the commencement of this action.

(c)  No evidence has been adduced by the Plaintiffs to identify which specific portion of the Remaining Balance was transferred between firm configurations, or more importantly, whether any of it remains in D1 or D2’s hands today.

(d)  Even Ms Lau has to fairly accept in her oral opening submissions that the Plaintiffs have no evidence and cannot prove the current whereabouts of the Remaining Balance. While this is not something of which the Plaintiffs, as outsiders to the Firm, would have knowledge, it was open to the Plaintiffs to seek discovery prior to the trial of these proceedings.

84.  I should pause here to mention that at day 1 of these proceedings, Bryan sought to adduce, inter alia, the bank account statements (client account) of the Firm in 2018, which was not objected to by the Plaintiffs. I granted leave for those statements to be adduced. That, however, does not assist the Plaintiffs as it does not show what happened to such sums after 2018.

85.  Once the trust property is spent on overheads, the trust is dissipated. The Plaintiffs cannot maintain a proprietary claim in a non-existent fund.

86.  The Plaintiffs’ alternative argument that the trust property consists of the profit costs or salaries shared by D1 and D2 is speculative. There was no evidence as to the exact amount of profit (after deducing any expenses of the Firm) D1 and D2 received. As D2 was a salaried partner for a nominal HK$1, the notion that he is currently holding nearly HK$2.8M as profit is unsupported by any evidence.

87.  During cross-examination, the Plaintiffs seem to be running a case that by transferring money from the Firm’s office account to the Firm’s client account without authority, D1 and D2 acted in breach of trust. But that is not the case pleaded by the Plaintiffs in the SoC. I do not consider it fair for the Plaintiffs to run such a case in these circumstances. In any event, any allegation of breach of trust is severely unparticularised.

88.  The Plaintiffs’ references to a “constructive trust” or “quistclose trust” in their submissions do not salvage this claim. Not only was the factual basis for such a trust, such as fraud or unconscionable conduct, unpleaded, but even a constructive trust requires an identifiable asset to attach to.

89.  Accordingly, the Plaintiffs’ claim for a declaration of trust is dismissed.

E4.  Ps’ Claim in Unjust Enrichment

90.  Turning to the Plaintiffs’ claim in unjust enrichment. They seek the return of the Remaining Balance on the basis that its retention by the Defendants is unjust following the certification of the Allocatur.

91.  As a matter of pleading, it is incumbent upon a plaintiff to clearly identify the unjust factor relied upon, be it mistake of fact, total failure of consideration, or some other recognized category. In this regard, I find the Plaintiffs’ SoC to be deficient. The SoC merely asserts that the Defendants have “failed and/or refused” to return the funds, without identifying the specific legal basis that renders such retention unjust.

92.  It was only at the Reply stage that the Plaintiffs introduced the specific plea of overcharging, alleging that the fees charged were excessive or unearned, as the “unjust factor” underpinning their claim. This allegation of overcharging is a material fact essential to the cause of action in unjust enrichment. Its absence from the SoC means the Defendants were never properly informed of the basis of the claim they were required to meet.

93.  Following the principle in Magic Score Ltd v. Broad Idea Investments Ltd, unreported, HCA 11077/1994, 8 June 2006 at §§19-20, a plaintiff cannot use a Reply to cure a defective SoC or to raise a new cause of action. The purpose of a Reply is to answer the Defence, not to serve as a secondary pleading for the plaintiff's primary claim. By failing to plead the specific unjust factors in the SoC, the Plaintiffs have deprived the Defendants of a fair opportunity to meet the case on its merits, e.g. the chance to plead a proper change of position defence in response. In the premises, this claim should fail for the pleading deficiencies alone.

94.  At the closing stage, Ms. Lau confirms that the Plaintiffs are relying upon the total failure of consideration as the basis. But, that is nowhere to be found in the SoC.

95.  Even if I were to overlook these pleading defects, the Plaintiffs’ claim still faces a significant substantive hurdle in respect of the overcharging allegation.

96.  A claim in unjust enrichment requires the Plaintiffs to prove that a specific Defendant was enriched at their expense and that such enrichment was unjust. In the context of this case, where the Firm existed in six distinct legal configurations, it was incumbent upon the Plaintiffs to identify and prove which particular partnership configuration received the over-payment and, more crucially, which configuration was thus enriched by the alleged overcharging.

97.  As mentioned above, in the Plaintiffs’ oral opening submissions, it was confirmed that the Plaintiffs’ cause of action accrued only at the time when the Allocatur was issued. At that time, the Firm has already been dissolved. The Plaintiffs’ case is unclear as to how in these circumstances, any of the former partners (if any) should be held liable under such a cause of action.

98.  The Plaintiffs’ case is built almost entirely upon the Allocatur. The Plaintiffs must do more than simply point to a final global figure. They must prove that the overcharging occurred during the specific tenures of D1 and/or D2, which the Plaintiffs have failed to do either by way of pleading or by submissions.

99.  The evidence on this point is also non-specific. The Plaintiffs only introduced the overcharging particulars in their Reply (which I have already found to be impermissible). They have failed to adduce any evidence linking the surplus to the specific periods when D1 or D2 was still partner of the firm. Thus, the claim that they were unjustly enriched, as opposed to the firm’s later partners like Kenneth Lee, remains in the realm of speculation.

100.  Conceptually, a distinction may be made in respect of the Recovered Costs which were received by the Firm during which D1 or D2 were partners. But the Plaintiffs have not chosen to run this as an alternative case. Given that I have received no arguments on this from either party, I do not consider it fair that I should make any findings on this.

101.  Reliance has been placed by the Plaintiffs on the decision in Re Burton Marsden Douglas (a firm) [2004] 3 All ER 222, but unlike in that case where it was established that the overpayment was received solely by the former partner, in the present case, parts of the Costs of Accounts and the Recovered Costs were received before D1’s suspension and parts were received after  D1’s suspension.

102.  In the premises, it is not open to this Court to simply make an order that D1 and D2 are jointly or severally liable for the whole sum. The Plaintiffs’ claim in unjust enrichment also fails.

E5.  The 2^nd Defendant’s Limitation Defence

103.  Although I have already determined that the Plaintiffs’ claims fail on the above grounds, for the sake of completeness, I will also address D2’s limitation defence. D2 argues that the cause of action accrued at the date each payment was made and is thus barred by the 6-year limitation under Section 20(2) of the Limitation Ordinance (Cap. 347).

104.  Had the Plaintiffs' claim succeeded on the merits, I would have found that D2’s limitation defence fails.

105.  In my view, the relationship between a solicitor and a client regarding funds held in a client account is one of express trust. Unlike a Category 2 constructive trust which arises only upon a wrongful act, these funds were trust property from the moment of receipt. Under section 20(1)(b) of the Limitation Ordinance, no period of limitation applies to an action by a beneficiary to recover trust property from a trustee provided that the trust property is still in the possession of the trustee.

106.  Further, in the alternative, even if a 6-year period were to apply, I would have found that the commencement of the period was postponed under section 26(1)(b) of the Limitation Ordinance. Section 26 provides that where any fact relevant to the plaintiff's right of action has been deliberately concealed by the defendant, the period of limitation does not begin to run until the plaintiff has discovered the concealment or could with reasonable diligence have discovered it.

107.  The fact relevant in this case was the true state of the Firm's accounts and the extent of the alleged overcharging. The Plaintiffs could not have known they had a cause of action for the recovery of the Remaining Balance until the Allocatur on 5 February 2021. As such, the commencement of the limitation period would have only commenced then.

F.  The Position of Kenneth

108.  Finally, I address Mr. Tam’s suggestion that any liability for the Remaining Balance should be attributed to Kenneth as the final partner of the Firm.

109.  I do not find that attractive or fair. My findings in this Judgment are centered on the fundamental flaws in the way the Plaintiffs have pleaded and presented their case and their failure to provide a specific evidentiary breakdown of the alleged overcharged sums.

110.  Given these deficiencies, it would be neither fair nor realistic for this Court to apportion blame or liability onto Kenneth in his absence. Furthermore, on the evidence currently before me, the extent to which he could be held liable remains entirely unclear.

111.  The dismissal of the Plaintiffs’ claims rests on the Plaintiffs' failure to prove the requisite nexus between these specific Defendants and the global sum claimed, and it is not the function of this Court to speculate on the potential liability of Kenneth to salvage a deficiently run case.

G.  Disposition and Orders

112.  Based on the reasons above, I dismiss the Plaintiffs’ claims against all Defendants.

113.  In respect of costs, there is no reason why costs should not follow the event. I see that D1 was represented by two Counsel. Whilst I appreciate the assistance I have received from Mr Tam and Mr Ding, I do not consider that a certificate for two Counsel is warranted at this trial.

114.  I hereby make a cost order nisi that the Plaintiffs do pay the costs of these proceedings and of this trial to the 1^st and 2^nd Defendants (including all costs reserved), to be taxed if not agreed, with certificate for  one Counsel.

115.  At last, I wish to express my gratitude for all parties’ assistance in this matter.