RE YING WAH SECURITIES COMPANY LTD

HCMP 279/2023

[2023] HKCFI 834

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 279 OF 2023

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REASONS FOR DECISION

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1.  This is an application by Ying Wah Securities Co Ltd (“the Applicant”) by way of ex parte Originating Summons dated 21 February 2023 (“the OS”) for an order, inter alia, to pay into Court unclaimed cash and securities (“Unclaimed Assets”) held in the accounts of 21 clients (“Subject Clients”).

2.  The application is made under ss.56 and 62 of the Trustee Ordinance (Cap 29) (“TO”) and Order 92 of the Rules of the High Court (Cap 4A), and is supported by (1) the Affirmation of Kan Yiu Kwok, a director of the Applicant, filed on 21 February 2023 (“Kan”), and (2) the Affirmation of Lo Hoi Ki Adrian filed on 10 March 2023 (“Lo”).

3.  On 17 March 2023, I granted an order in the terms set out in the Appendix to these Reasons.

4.  S.62(1) of the TO provides that “Trustees, or the majority of trustees, having in their hands or under their control money or securities belonging to a trust, may pay the same into court, and the same shall, subject to the rules of court, be dealt with according to the orders of the court.”

5.  The relevant principles can be summarised as follows:

(a)  The Courts have often allowed finance / security companies to pay into court under s.62 of the TO unclaimed cash and deposits of its clients who could not be contacted.

(b)  This is a “flexible and pragmatic” solution, allowing an applicant to cease its securities business and deal with unclaimed assets in a way that protects the interests of its clients.

(c)  The applicant needs to show that (1) the assets in question are held by the applicant as trustee and (2) despite the applicant’s reasonable endeavours, the beneficiaries cannot be contacted or are unresponsive, or the trustee is otherwise unable to obtain instructions as to how to deal with, dispose of or return trust assets.

See:  Re Glenlyon Ltd [2018] HKCFI 1038 §§4-6;

Re ABN Amro Bank N.V. [2018] HKCFI 1559 §§12-14;

Re Gold Fund Securities Co Ltd [2020] HKCFI 2884 §§12-13;

Re Wah Thai Securities Ltd [2021] HKCFI 355 §5.

6.  Further, under s 56 of the TO, the Court will make an order for disposal (such as sale), if in its opinion it is expedient to do so. For shares in delisted companies which have been compulsorily wound up, dissolved or struck off and where it is not possible for new share certificates to be issued in the name of the Registrar of the High Court, the Court may give liberty to the applicant to deal with those shares as they see fit, including forfeiture thereof: Re Wah Thai Securities Ltd §6, 7.

7.  Where a company elects to cease its business involving client assets, it bears the primary responsibility to return the assets entrusted to it by the clients. The implications of such an order both from the perspective of the affected clients and from that of the court should be taken into account: Re RHB Securities Hong Kong Ltd & anor [2021] HKCFI 1392 §§9, 18, 24.

8.  Ms Jasmine Cheung appearing for the Applicant submitted that she was conscious that as an application of this nature is made ex parte, the Applicant is required to give full and frank disclosure.

9.  The Applicant was incorporated in Hong Kong on 16 July 1992 and carried on business as a licensed securities broker: Kan §4.

10.  On 2 September 2022, the Applicant’s board of directors resolved that the Applicant should enter into voluntary cessation of business: Kan §7.

11.  On 11 November 2022, the Applicant notified the Hong Kong Exchanges and Clearing Limited of its cessation of trading: Kan §9.

12.  On 22 November 2022, the Applicant notified the Securities and Futures Commission of its cessation of business and requested revocation of its licence: Kan §8.

13.  As part of its efforts to cease its business, the Applicant took various steps to contact its clients in respect of Unclaimed Assets:

Date	Steps Taken	Reference
30.9.2022	The Applicant posted notices on its website and sent letters to its clients stating that it was to cease its business and requesting them to transfer or withdraw their securities. The Applicant also made phone calls to its clients.	Kan §10
17.1.2023	The Applicant sent another letter to the clients who had not responded, and published a notice in the Sing Tao Daily.	Kan §12(a), (b)
17-20.1.2023	The Applicant made phone calls to the clients who had not responded.	Kan §12(c)
27.1.2023	The Applicant’s solicitors, Messrs. Lo Lau Lawyers (“LLL”), sent letters to the Applicant’s clients requesting them to transfer or withdraw their securities, and informing them of the Applicant’s intention to make the present application.	Kan §12(d)
8.2.2023	LLL made phone calls to the clients who had not responded.	Kan §12(e)
23.2.2023	LLL sent letters to the Subject Clients and the lawyers representing the interests of Mr Chung, Mr and Mrs Wong, informing them of the present application and hearing.	Lo §4

14.  Following these efforts, there remain 21 accounts which have not been closed. Of these:

(a)  12 Subject Clients could not be contacted.

(b)  6 Subject Clients have passed away and their family members indicated in writing that they would not apply for personal representatives to administer the Subject Clients’ estates (Kan §14).

(c)  3 Subject Clients have passed away or are mentally incapacitated, and solicitors’ firms representing their family members have been liaising with the Applicant and LLL regarding their unclaimed securities (“3 Specific Clients”). These 3 Specific Clients will be addressed further below.

15.  The Unclaimed Assets can be divided into 3 categories (Kan §§16-24):

(a)  Unclaimed cash of HK$70,400 (“Unclaimed Cash”).

(b)  Unclaimed securities listed in Annex 1 of the OS with value HK$3,747,268.76. These are securities in respect of which physical share certificates can be withdrawn from CCASS.

(c)  Unclaimed securities listed in Annex 2 of the OS with current value HK$0. These are securities in respect of which physical share certificates cannot be withdrawn and no share re-registration options are available.

16.  The Applicant needs to show that (1) the Unclaimed Assets are held by it as trustee and (2) the Applicant has used reasonable endeavours to contact and/or obtain instructions from the beneficiaries. Both requirements are in my view satisfied.

17.  First, the Applicant holds the Unclaimed Assets as trustee:

(a)  It is well-established that unless the contrary is shown, a broker is a trustee over the money and securities it holds on behalf of its clients: Re New Japan Securities International (HK) Ltd [2007] 3 HKLRD 54 §8.

(b)  There is nothing in the client agreements indicating that the Applicant does not act as trustee. On the contrary, the clauses support the existence of a trust relationship: Kan §5.

(c)  In respect of the Unclaimed Cash, the Applicant believes that it originated from an unidentified client who omitted to give instructions to the Applicant after making a deposit in 2015: Kan §§17-19. Although the client is unidentified, the Unclaimed Cash is nevertheless a trust asset: Re The Joint and Several Liquidators of Bankamerica Nominees (Hong Kong) Ltd [2020] HKCFI 399 §§12-13.

18.  Second, the Applicant has made reasonable efforts to contact the Subject Clients, as set out at §13 above and in Appendix 1 to Kan:

(a)  12 of the Subject Clients have not responded to the Applicant’s requests despite the Applicant’s efforts. The value of the unclaimed securities for these 12 Subject Clients i.e. Items 1 to 11 of Annex 1 and Items 37 to 40 of Annex 2 of the OS amount to HK$2201.9, with the highest value being HK$1,320 (Item (8)) [1]. It seems unlikely that these clients will seek to retrieve their assets, whether now or in the future.

(b)  6 of the Subject Clients have passed away. Their family members have provided written confirmations to the Applicant that they will forfeit their respective securities (Kan §14).

(c)  As for the 3 Specific Clients:

(i)  Mr Chung.

(1)  Items 18 to 21 of Annex 1 of the OS are unclaimed securities of Subject Client Chung Che Yeung (“Mr Chung”) (with value totalling HK$774,590[2]). The family members of Mr Chung are represented by Messrs. Pang, Wan & Choi (“PWC”).

(2)  By letter dated 23 November 2022, PWC informed the Applicant that Mr Chung had passed away and that his wife intended to apply for Letters of Administration.

(3)  Despite the Applicant and LLL’s responses and follow-up letters, no substantive response regarding Mr Chung’s unclaimed securities had been received from PWC before preparation of the bundles. During the hearing, Ms Cheung provided me with a copy of a letter from PWC dated 16 March 23 which indicates that the administration application was ongoing and that there is no objection to the OS.

(ii)  Mr and Mrs Wong.

(1)  Items 22 to 35 of Annex 1 of the OS are unclaimed securities of Subject Clients Wong Wing Tai (“Mr Wong”) and his wife Pang Heung Chien (“Mrs Wong”) (with values totalling HK$2,859,323.90 and HK$107,821.20 respectively[3]). Their family members are respectively represented by and Messrs. Boase, Cohen & Collins (“BCC”):

(2)  By letter dated 11 January 2023, BCC informed the Applicant that Mr Wong had passed away, and that their clients, being the children of Mr and Mrs Wong, had applied to be appointed the committee of the estate of Mrs Wong (who is also the sole executrix and sole beneficiary of Mr Wong’s estate) under Part II of the Mental Health Ordinance (“MHO Application”) seeking, inter alia, an order to be empowered to apply for probate of Mr Wong. BCC stated that their clients expected to receive an order in respect of the MHO Application within a month, and BCC proposed that Mr and Mrs Wong’s unclaimed securities could be deposited with BCC to be held on behalf of the estate of Mr and Mrs Wong. The Applicant has received no update on the MHO Application.

19.  Ms Cheung drew my attention to Re RHB Securities at §26, where the Court considered that the one-year timeframe within which the applicants attempted to wrap up their businesses was “a little too ambitious”, and more time should be given to the clients to withdraw their assets. Ms Cheung submitted, and I am satisfied, that the timeframe in this case (around half a year) is not unduly short. The facts in Re RHB Securities were very different, as in that case (inter alia) some clients appeared interested in recovering their assets but had been hampered in their efforts by travel restrictions imposed during the pandemic.

20.  The terms of the order which I made on 17 March 2023 are set out in the Appendix. I will provide my reasons for the significant aspects of the form of the order.

21.  As to the unclaimed securities (leaving aside, for the time being, the assets of the 3 Specific Clients):

(a)  For shares where physical share certificates can be withdrawn, it is proposed that they are paid into Court insofar as practicable (as opposed to being sold), as was preferred in Re ABN Amro Bank N.V. §15. This can be effected under TO s.62.

(b)  For the other shares, as physical share certificates cannot be withdrawn and/or share re-registration / splitting services are no longer provided by the share registrar of the companies, it is proposed that there be leave for the Applicant to sell or otherwise dispose of them (including forfeiture thereof) as the Applicant sees fit, and to pay any proceeds from the sale into Court.

(c)  I am satisfied such orders are appropriate.

(d)  These orders will also cover Mr Chung’s securities. As the unclaimed securities would remain with the Court for at least 5 years (see High Court Suitors’ Funds Rules (Cap 4B) r 23), an application can be made for them to be paid out if and when Letters of Administration have been obtained.

22.  In respect of Mr and Mrs Wong’s unclaimed securities, BCC has proposed that they be deposited with BCC who will hold the securities on behalf of the estate of Mr and Mrs Wong. An order on the MHO Application is expected imminently which will enable the securities to be claimed. It is submitted that depositing the securities with BCC rather than the Court would reduce the administrative burden that a payment out application would impose on the Court. It ought to reduce expenses too. The Applicant has no objection to such an order. Pursuant to s.56(1) of the TO, the Court can and will make such an order.

23.  The Unclaimed Cash and costs. The Applicant’s bill of costs showed costs incurred in excess of HK$300,000 with respect to the making of this application. The Applicant seeks to recover the costs of the making of this application from the Unclaimed Cash. As the Unclaimed Cash is only HK$70,400, the Applicant only sought an order to recover HK$70,400 in respect of costs. I agree to make that order. (Whereas the form of order would normally extend to newspaper advertising fees and other expenses, the Unclaimed Cash is insufficient to cover all of the costs of the application in any event, so the Applicant did not seek this).

Appendix

1.  It be declared that (i) the unclaimed cash in the sum of HK$70,400 (the “Unclaimed Cash”) is held by the Applicant as a trustee for unidentified beneficiaries, and (ii) the unclaimed securities as set out in the Annexes hereto are held by the Applicant respectively as a trustee for each of the clients as set out in the said Annexes;

2.  The Applicant be permitted to use the Unclaimed Cash for the purposes of paying the costs of and occasioned by this application in accordance with paragraph 8 below.

3.  The Applicant do have leave to pay into Court the unclaimed securities (whether held in its own name or in the name of others) as particularised in Items 1 to 21 of Annex 1 by withdrawing the physical share certificates, and thereafter depositing the same (whether in the name of the Registrar of the High Court or otherwise) with the Registrar of the High Court of Hong Kong;

4.  The Applicant do have leave to transfer the unclaimed securities (whether held in its own name or in the name of others) as particularised in Items 22 to 35 of Annex 1 to Messrs. Boase, Cohen & Collins (“BCC”) to hold on behalf of the estates of Wong Wing Tai and Pang Heung Chien, by withdrawing the physical share certificates, and thereafter depositing the same (whether in the name of BCC or otherwise) with BCC;

5.  The Applicant do have leave to sell or otherwise dispose of (including forfeiture thereof) the unclaimed securities (whether held in its own name or in the name of others) as particularised in Annex 2 (or those unclaimed securities as particularised in Annex 1 that are unable to be withdrawn) as it sees fit, and to pay any proceeds from the sale of any such unclaimed securities into Court;

6.  Notification of this order and the rights of the clients of the Applicant as set out in the Annexes to apply for payment out of their respective unclaimed cash or securities, as the case may be, under Order 92 of the Rules of the High Court (Cap 4A), be given by way of advertisements in a Chinese-language and an English-language daily newspapers in Hong Kong within 14 days from the date of this order, and by way of letters to such clients at their last known addresses (if any) by post;

7.  It be further declared that, upon compliance with paragraphs 1 to 6 above, the Applicant be discharged from any obligations or claims in respect of the Unclaimed Assets and Order 92 Rule 4 of the Rules of the High Court (Cap. 4A) is deemed to have been complied with by the Applicant;

8.  HK$70,400 be paid to the Applicant out of the Unclaimed Cash with respect to the costs of and occasioned by this application.

9.  There be liberty to apply.

Annex 1 – Unclaimed Securities where physical share certificates can be withdrawn

Annex 2 – Unclaimed Securities where physical share certificates cannot be withdrawn