RE CMB INTERNATIONAL CAPITAL CORPORATION LTD

HCMP 355/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 355 OF 2011

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J U D G M E N T

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1.  This is an ex parte application under section 62 of the Trustee Ordinance, Cap. 29, and Order 92 of the Rules of the High Court.

2.  The applicant seeks leave to pay the unclaimed cash, together with interest, if any, of its seven clients into court.  The details of the seven clients and their moneys are set out in a schedule exhibited as LCH-1 in an affirmation of its general manager, Lau Chung-hung, filed on 8 March 2011. 

3.  The applicant is a Hong Kong company incorporated on 6 July 1993.  It is a wholly owned subsidiary of China Merchants Bank Company Limited, a joint stock company incorporated in the mainland and listed in Hong Kong.  The applicant is licensed by the Securities & Futures Commission to carry on the business of dealing in securities, which is a regulated activity under the Securities & Futures Ordinance, Cap. 571.

4.  In 2010 it transferred this business to its wholly owned subsidiary CMB International Securities Limited.  The transfer was completed on 4 October 2010.  The applicant’s licence, however, has not been revoked by the commission as it is still holding some moneys belonging to its clients.  The applicant therefore seeks an order to pay the moneys into court and then to seek the revocation of the licence. 

5.  Regarding the relationship between the applicant and its seven clients, clause 3.1 of the agreements between them provides that the applicant should act as agent for the clients in effecting transactions and securities in the client’s account.  Clause 4.1 authorises the applicant to act upon the instructions of the client to deposit, purchase or sell securities in the client’s accounts.  Clause 11 allows the applicant to deposit the client’s moneys in segregated accounts designated as trust accounts or client accounts. It is thus clear that the applicant is the agent of the seven clients and it holds their moneys as their trustee (see Re Peregrine Brokerage Limited & Anor [2004] 1HKLRD 856; Re Celestial Finance Limited & Anor, HCMP657/2005 21 June 2005; Re Chekiang First Securities Company Limited,HCMP923/2006 7 June 2006).

6.  For the purpose of the transfer of business, the applicant had sent a notice dated 2 July 2010 and a reminder notice dated 30 July 2010 to all its clients.  For those who had provided e-mail addresses to the applicant, the notices were sent by e-mail.  For those who did not provide e-mail addresses, the notices were sent by post. 

7.  By these notices, the applicant advised its clients about the applicant’s intention to transfer the business of the regulated activity to its subsidiary and sought the clients’ consent to transfer their assets to the subsidiary.  A reminder notice stated that for any client who should fail to respond to the notice, the applicant would terminate his account on 4 October 2010.  Clause 25 of the agreements between the applicant and the seven clients provides that either party can terminate the agreement by giving the other no less than seven banking days’ prior notice. 

8.  The applicant had also, on 5 August 2010, advertised in the Hong Kong Economic Times a notice about the transfer of business, which was intended to be completed on 4 October 2010, and that the notice and reminder notice had been sent to the clients asking them to contact the applicant. 

9.  Finally the applicant sent a termination notice dated 1 September 2010 to the clients who had not yet responded.  The notice advised the clients that their agreements with the applicant would be terminated on 4 October 2010.  Any client who was not desirous of having their assets transferred to the applicant’s subsidiary should withdraw or transfer them out.  Many of the applicant’s clients have given direction to the applicant to assign and transfer the client agreements and assets to the applicant’s subsidiary.  For those who have not, which included the seven clients in question, the applicant has terminated their agreements pursuant to the termination provision aforesaid. 

10.  The transfer of business was completed on 4 October 2010.  The applicant also gave post-termination notice to all those clients who had not responded or had not given direction to the applicant on the disposal of their assets.  The applicant informed them of the termination of their accounts and that the regulated business activity had been transferred to the subsidiary.  It also told the clients to get back their assets as soon as possible.  In addition, the staff of the applicant also contacted the clients by telephone and SMS.

11.  For the seven clients in question, the 1st to 3rd clients and the 5th to 7th clients responded verbally and said that they did not want their money back, but the 4th client could not be contacted at all. 

12.  Finally the applicant’s solicitors, by notice dated 11 January 2011, informed the seven clients that the applicant would be making this application for an order to pay their moneys into court.  The originating summons and supporting affirmation have also been sent to the seven clients by the solicitors.

13.  In the premises I am satisfied that the seven non-responding clients have been notified about this application.  I am also satisfied that the applicant is entitled to the relief sought.  I declare that the items of moneys set out in the schedule in Exhibit LCH-1 (“the schedule”) annexed to the affirmation of Lau Chung-hung filed on 8 March 2011 (“the affirmation”), are held by the applicant as trustee for the clients against whom the items of unclaimed clients’ moneys are noted in the schedule.

14.  I make the following orders:

-   I grant leave to the applicant to pay into court the unclaimed clients’ moneys particularised in the schedule;

-   I order that notification of the declaration and order and the rights of the clients to apply for payment out of their respective unclaimed moneys under Order 92 of the Rules of the High Court be given by way of advertisements in a Chinese language and an English language daily newspapers within seven days from the date of this order, and by way of letters to these seven clients at their last known addresses;

-   I also declare that upon compliance with the above paragraph, Order 92, rule 4 of the Rules of the High Court is deemed to have been complied with by the applicant.

15.  I make no order as to costs.