RE THE JOINT AND SEVERAL LIQUIDATORS OF CHINA POINT STOCK BROKERS LTD

HCMP 297/2018

[2018] HKCFI 1106

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 297 OF 2018

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D E C I S I O N

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1.  I have before me an originating summons issued by the liquidators of China Point Stock Brokers Limited (“Company”) seeking orders in respect of securities and cash originally held by the Company on behalf of its clients.

2.  The liquidators, for the reasons explained in the supporting evidence, are of the view that the Company held the securities and the cash as trustees for its clients pursuant to the terms of the agreements signed between them.  Various of the securities and the cash the liquidators have been unable to distribute for reasons which are not uncommon in such cases, namely, either they have been unable to contact the beneficiary, or for some reason the beneficiary seems to be uninterested in recovering the assets in question. 

3.  In these circumstances, it is necessary for the liquidators to be empowered to deal with the assets in such a way as to allow them to bring the liquidation to an end.  That requires them to have the ability where possible to sell the securities and then to pay the proceeds of the sale along with the cash that they also hold into court.  In the event that the liquidators are unable to sell the securities, they will lodge the relevant share certificates with the Registrar of the High Court.  The mechanisms for achieving these results are contained in sections 56 and 62 of the Trustee Ordinance, Cap 29. 

4.  The approach of the court in these circumstances is broadly as I have just described and the principles are explained a little more fully in [11]–[16] of the decision of Deputy High Court Judge Au (as he then was) in Re Drake & Morgan Ltd (unrep., HCMP 1490/2009, 27 August 2009):

“11. Section 62(1) of the Trustee Ordinance provides:

‘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 the court, be dealt with according to the orders of the court.’

12. Further, unless otherwise is shown, it is a general rule that a broker is a trustee over the money and securities it holds on behalf of its clients: Re Peregrine Brokerage Ltd [2004] 1 HKLRD 856 at 860J-861C, adopting Re CA Pacific Finance Ltd [1999] 2 HKLRD 1, 7D-F, 9H-I, 12F-H, 15H-J, 18G-J, 19G‑20A.

13. Applying the above principles, I am satisfied that the Applicant holds the Unclaimed Assets as a trustee respectively for the 14 clients. There is nothing in the contractual documents (which are placed before this Court) between the Applicant and these clients to show a contrary intention.

14. I am also satisfied with the evidence before me that the Applicant has made reasonable efforts to contact the 14 clients to deal with the Unclaimed Assets without success. Some 11 months have already lapsed since the issue of the standard notice and the Applicant has still not been able to get in touch with these clients.

15. With the matters as they presently stand, the Applicant as a trustee cannot get a discharge in relation to the Unclaimed Assets, and cannot satisfactorily complete its procedures for the cessation of business by having its licence with the SFC properly revoked. Cf: Hong Kong Civil Procedure 2009, para 92/2/1.

16.     In the circumstances, I accept Mr Kwok’s submission that permitting the Applicant to pay the Unclaimed Assets into court under s 62 of the Trustee Ordinance is a ‘flexible and pragmatic’ solution to the present situation. It enables the Applicant to properly cease its securities business and deal with Unclaimed Assets in a way that protects the interest of the 14 clients. Cf also: Re Celestial Finance Ltd (unrep., HCMP 657/2005, 21 June 2005, Deputy High Court Judge L Chan); Re Chekiang First Securities Co Ltd (unrep., HCMP 923/2006, 7 June 2006, Deputy High Court Judge L Chan); Re Peregrine, supra, 859F).”

5.  I will therefore make an order in the terms of the appendix to this decision.

Appendix

1.     The Applicants are at liberty to sell or otherwise dispose of and/or deal with the HSBC Shares identified in section 1 of the Schedule annexed hereto and HSBC Dividends identified in section 2 of the Schedule annexed hereto, pursuant to Order 85 rule 2 of the Rules of the High Court (Cap 4A);

2.     The Applicants do have leave under section 56 of the Trustee Ordinance (Cap 29) to sell or otherwise dispose of and/or deal with the Unclaimed Cash, Unclaimed Securities, Abandoned Assets (consist of Abandoned Cash, Pre‑Liquidation Abandoned Stocks, Post-Liquidation Abandoned Stocks) SCC Securities and Delisted Paper Securities as identified in section 3 of the Schedule annexed hereto (“Remaining Trust Assets”) as they see fit and the Applicants be discharged from any obligations or claims in respect of the Remaining Trust Assets other than to deal with the proceeds (if any) in accordance with paragraph 4 below;

3.     The Applicants be allowed to pool the Unclaimed Cash, the Abandoned Cash, along with the derived income from and the proceeds from the sale of the Unclaimed Securities, Pre-Liquidation Abandoned Stocks, Post-Liquidation Abandoned Stocks, SCC Securities and Delisted Paper Securities (as applicable) and apply to the pooled funds to settle the Applicants’ proper fees, costs and expenses incurred and assessed in (i) administering, collecting and dealing with the Remaining Trust Assets and (ii) making this application and any costs incurred in giving effect to this Order before paying the balance remaining into Court under section 62 of the Trustee Ordinance (Cap 29) and Order 92 of the Rules of the High Court (Cap 4A);

4.     In the event that any of the Unclaimed Securities, Pre-Liquidation Abandoned Stocks, Post-Liquidation Abandoned Stocks, SCC Securities and Delisted Paper Securities have not been sold after three months from the date of this Order, and are listed securities, the Liquidators be authorized to withdraw the relevant share certificates from the relevant stock exchange and/or custodian (as applicable) and deliver the same to the Registrar of the High Court;

5.     Notification of this Order, the rights of the Clients of the Company to apply for payment out or withdrawal of their respective Remaining Trust Assets under Order 92 of the Rules of the High Court (Cap 4A) and any unclaimed cash and securities be dealt with in accordance with Rule 23 of the High Court Suitors Fund Rules (Cap 4B) 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;

6.     The Applicants do have leave to dispense with the requirements under Order 92, rule 4 of the Rules of the High Court (Cap 4A) upon compliance with paragraph 5 above; and

7.     There be liberty to apply generally.

Schedule 

China Point Stock Brokers Limited (In Members’ Voluntary Liquidation)

HCMP 297/2018

Section 1 –HSBC Shares

Section 2 – HSBC Dividends

Section 3 – Remaining Trust Assets

* valued at 22 December 2017