RE YU ON SECURITIES CO LTD

HCMP 1296/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1296 OF 2013

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J U D G M E N T

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1. The applicant seeks an order under sections 56 and 62 of the Trustee Ordinance, Cap 29 to deposit into court unclaimed cash and securities held by it for its former clients.

2. The applicant was in the business of providing brokerage services for securities and futures.  Its clients had, for the purpose of dealing with securities and futures, deposited with it cash and securities which were and are held by it in clients’ accounts maintained with banks and brokerages which are separate from its own securities and cash. 

3. The agreements it entered into with its clients provided that the clients’ cash should be deposited into a client’s trust account and the clients’ securities be deposited in safe custody in a designated account and not be used for its own borrowing or collateral purposes. 

4. In the light of the provisions in the agreements and the nature of the applicant’s business, I hold that the applicant is a trustee of its clients in respect of the cash and securities deposited by the clients with it. 

5. The applicant’s board of directors resolved on 17 September 2012 to cease the applicant’s operation on 31 December 2012 and to wind it up by voluntary liquidation.

6. Pursuant to the resolution to cease business, the applicant on 12 October 2012 sent out a notice of cessation of trading to all its clients whose addresses were known to it.  The notice advised the clients to claim back the cash and securities they had deposited with the applicant.

7. On 4 December 2012, the applicant sent out a 2nd notice of cessation to all its clients with known addresses but who had not responded to the 1st notice.

8. On 7 December 2012, the applicant published an advertisement in the Standard (English) and Sing Tao Daily (Chinese) of its imminent cessation of business.

9. After the notices and advertisements, there were still some clients who did not contact the applicant.

10. The staff of the applicant then made phone calls to those non-responding clients with known phone numbers.  For those non-responding clients with no known phone numbers but with known addresses, the applicant sent them further notices of cessation by registered post on 24 December 2012 and 14 January 2013.  Some of these letters were unclaimed and returned to the applicant.  More registered letters were sent out in March and April 2013 together with follow up phone calls to those non-responding clients with known phone numbers as well.

11. After all these efforts were made, there are still 27 clients who made no response and three clients who had died or been incapacitated but their estates have no authorised representatives to deal with the assets deposited with the applicant.

12. The value of cash and securities of the non-responding clients as at 30 April 2013 are HK$596,368.41 and HK$1,557,844.65 respectively. 

13. One non-responding account in the names of Ong Teng Joo and Ong Teng Lam has HK$421,757.61 cash and HK$833,800 worth of securities.  The applicant does not have the address of these two clients. Long serving staff advised the management of the applicant that they were clients of the applicant from some point of time in the 1970s.  They used to visit the applicant’s office in person to deal with their trading activities.  The applicant however lost contact with them since the early 1980s and it does not have any means to contact them. 

14. Another account in the name of Lam Wai Chun has HK$2,286.71 cash and HK$126,301.98 worth of securities.  The applicant had been advised by another client one Madam Tang, who was acquainted with Lam, that Lam had passed away without any next of kin.  The applicant has not been able to get in touch with any representative of Lam.

15. There is another account in the name of Ng Wai Yi, May which owns HK$15,849.49 cash and HK$262,086 worth of securities.  The last known address of Madam Ng is a shop in a shopping plaza in Kowloon City. Enquiries by the applicant with the landlord revealed that Madam Ng is no longer a tenant of the plaza.  The landlord also declined to reveal any particulars of Madam Ng for privacy reason. 

16. The total sum of cash and securities of the non-responding clients less those belonging to the three accounts above-mentioned are at HK$156,834.60 and HK$335,656.67.

17. When these proceedings were instituted, there were four clients who had died or been incapacitated and whose estates were unrepresented.  Subsequently, a representative was duly appointed for one estate with account no. P2270.  There are now three unrepresented estates which together own cash and securities valued at 30 April 2013 at HK$24,750.93 and HK$936,662.08 respectively.

18. Though these three estates have no legally authorised representatives, there are people with whom the applicant can contact in relation to the assets in the estates.  One estate is of Mr Tam Kai, deceased and it owns cash at HK$17,988.22 and HK$829,402.98 worth of shares of a company traded in the Singaporean Stock Exchange.

19. In addition to the above cash and securities which are held by the applicant on trust for specific clients, the applicant is also holding cash totalling HK$107,166.22 which had been paid to it without reference and it is unable to allocate them to any specific client.

20. The applicant holds in total cash and securities valued at 30 April 2013 at HK$728,285.56 and HK$2,494,506.73 respectively.  They are particularised in exhibits CLY-12, CLY-13 (less account no. P2270), CLY-14 (less account no. P2270) and CLY-15 to the affirmation of Cheung Lo Yau, a director of the applicant, filed on 30 May 2013.

21. In addition to the above cash and securities, the applicant is also holding a total of 15,506,577 shares of nine delisted companies on trust for clients.  These shares have no market worth.  They are under the names of clients some of whom are contactable by the applicant and some are not.  However, no one was interested to claim them back possibly for lack of market worth.  The applicant has encountered difficulties in withdrawing them from CCASS for deposit with the Registrar (see Re Piper Jaffrey Asia Securities Ltd, HCMP 437/2013, unreported dated 13 March 2013).  The applicant is seeking an order that it be at liberty to deal with them.

22. Finally, in respect of the shares traded in the Singaporean Stock Exchange, the applicant wishes to be authorised to withdraw the same in the name of the Registrar of this court from the Singaporean custodian.  This will enable the shares certificates of the withdrawn shares to be issued in the name of the Registrar and be deposited with the Registrar.

23. In the light of my finding that the applicant is the trustee of its clients in respect of the above-mentioned cash and securities and that these assets have remained unclaimed despite reasonable efforts having been made by the applicant to contact the relevant clients and that some of the relevant clients are out of contact, I make the following order as sought by the applicant in the Amended Originating Summons:

(1)   A declaration that the Unclaimed Property and the Singaporean Security as defined in the affirmation of Cheung Lo Yau dated 29 May 2013 (“Cheung’s Affirmation”) and further clarified in Cheung’s 2nd affirmation filed on 15 July 2013 are held by the applicant as trustee for the clients as particularised in exhibits CLY-12, CLY-13 (less account no. P2270), CLY-14 (less account no. P2270) and CLY-15 of Cheung’s Affirmation;

(2)   An order that the applicant do pay into court the Unclaimed Property;

(3)   An order that the applicant do withdraw in the name of the Registrar of the High Court of Hong Kong the Singaporean Security (specifically, 14,646 shares in Hongkong Land Holdings Limited held on the applicant’s behalf by DBS Vickers Securities Nominees (Singapore) Pte Ltd) and thereafter deposit the same into court;

(4)   An order that notification of this order and the rights of the clients of the applicant to apply for payment out of their respective unclaimed cash and securities under Order 92 of the Rules of the High Court (Cap 4A) be given by 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 letters to all the clients at their last known addresses;

(5)   A further declaration that, upon compliance with paragraph (4) above, O 92 r 4 of the Rules of the High Court (Cap 4A) is deemed to have been complied with by the applicant;

(6)   An order that the applicant be at liberty to deal with the HKEx Delisted Securities as particularised in exhibit CLY-18 of Cheung’s Affirmation and the NASDAQ Delisted Security as shown in exhibit CLY-21 of Cheung’s Affirmation as the applicant sees fit, including the forfeiture thereof, and the applicant be discharged from any obligations or claims in respect of these shares;

(7)   No order as to costs; and

(8)   Liberty to apply.