RE CELESTIAL FINANCE LTD AND ANOTHER

HCMP657/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 657 OF 2005

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J U D G M E N T

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1.  This is an application by the 1st and 2nd applicants for an order under section 62 of the Trustee Ordinance, Cap. 29 and Order 92 of the Rules of the High Court, Cap. 4A.

2.  Both applicants are wholly-owned subsidiaries of CASH Financial Services Group Ltd.  The 1st Applicant was registered as a securities margin financier under the repealed Securities Ordinance.  It was licensed to provide margin financing for securities trading transacted through margin accounts opened with it. 

3.  The 2nd Applicant was licensed under the repealed Ordinance to conduct securities dealing.  It has been a Broker Participant of the Hong Kong Securities Clearing Company (“HKSCC”). 

4.  Under a “Client Trading Master Document-Terms and Conditions” entered into between the 1st Applicant and its clients, the clients of the 1st Applicant have expressly authorized the 2nd Applicant to transfer payment to and from their margin accounts with the 1st Applicant to settle outstanding payment or effect set-off for securities trading.

5.  Under the Securities and Futures Ordinance (Cap. 571) (“SFO”), which came into effect on 1 April 2003, a market intermediary may conduct securities trading for clients and also provide margin financing for securities trading in margin accounts.  The owners of the two applicants have decided to transfer the margin financing business of the 1st Applicant to the 2nd Applicant as the 2nd Applicant has applied for and obtained a license to conduct both types of activities.  Under the transitional provisions, the 1st Applicant had two years from 1 April 2003 to wind up its margin financing activity.

6.  In order to transfer the margin financing accounts from the 1st Applicant to the 2nd Applicant, the 1st Applicant had issued an “ Assignment Notice” on 21 October 2003 (“the Assignment Notice”) to all its clients seeking their agreement to transfer their margin accounts to the 2nd Applicant or to withdraw their assets from the 1st Applicant.  There are however 242 (which was later clarified to be 267) clients who did not respond at all to the Assignment Notice.  The total unclaimed sum held by the 1st Applicant for these clients as at 9 March 2005 was at HK$199,044.21 and the net value of the unclaimed but tradable securities held by the 2nd Applicant for these clients as at 9 March 2005 was at HK$3,443,015.10.  They have been set forth in a schedule annexed to the amended originating summons. 

7.  The 1st Applicant has since 21 October 2003 attempted repeatedly to contact these clients by reminder letters as well as telephone inquiries but all to no avail.  20 months have now elapsed since the issue of the Assignment Notice and they are still out of reach.

8.  I referred to Re Peregrine Brokerage Ltd HCMP 2736 of 2003 and hold that the cash and securities held by the 1st Applicant and by the 2nd Applicant on behalf of the 1st Applicant respectively are held upon trusts for these clients.

9.  In the premises, I declare and order in terms of the amended originating summons the effect of which is to allow the applicants to pay the unclaimed cash and deposit the unclaimed securities into court under section 62 of the Trustee Ordinance and Order 92 of the Rules of the High Court and that the two applicants shall advertise once within the next 7 days and once on the first day of next month in both a Chinese-language and an English-language daily newspaper a notification of this order and of the rights of these clients to apply for payment out of such cash and securities under order 92 and that any unclaimed cash and securities be dealt with in accordance with Rule 23 of the High Court Suitors Fund Rules, Cap. 4B.  I make no order as to costs.