RE GUARDIAN TRUST CO (ASIA) LTD

HCCW 407/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING‑UP) PROCEEDINGS NO 407 OF 2012

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D E C I S I O N

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1.  Part 8 of the Trustee Ordinance (Cap 29) (“the Ordinance”) contains the regime which allows a company to be registered as a trust company.

2.  Section 77(2) contains the requirements and criteria which need to be satisfied before registration by the Registrar of Companies.  Sub-sub-section (e) provides:

“ (e) the company has either—

(i) deposited in the name of the Director of Accounting Services with an authorized institution within the meaning of section 2 of the Banking Ordinance (Cap. 155) a sum not less than $1,500,000 and lodged a receipt issued by the authorized institution for that amount with the Director of Accounting Services;

(ii) deposited in the name of the Director of Accounting Services with a finance company that is a subsidiary of a bank within the meaning of section 2 of the Banking Ordinance (Cap. 155) a sum not less than $1,500,000 and lodged a receipt issued by the finance company for that amount with the Director of Accounting Services; or

(iii)     deposited with the Director of Accounting Services a guarantee, in terms acceptable to the Director of Accounting Services, from a bank within the meaning of section 2 of the Banking Ordinance (Cap. 155); …”

3.  Section 80 deals with the purpose of the deposit.  Sub‑section (1) provides:

“ (1) From the time of the issue to any company of a certificate under section 78, the sum of money deposited under section 77 must be held as security for the depositors and creditors of the company and for the faithful execution of all trusts which may be accepted by or imposed upon the company and for its obligations generally.”

4.  The Ordinance does not specify in what circumstances the deposit may be paid out of the account into which it has been deposited, or provide any mechanism for determining whether any person has a claim which should be satisfied out of the deposit. 

5.  The present company is a registered trust company.  It is in liquidation.  A debate has arisen between its liquidators and the Director of Accounting Services as to how the sum of HK$1.5 million that has been paid into court pursuant to section 77 should now be dealt with.

6.  The debate largely arises by virtue of the fact that Part 8 does not deal with the matters to which I have just referred and as a consequence some consideration has been given by both the liquidators and the Director of Accounting Services and the Registrar of Companies as to the character of the deposit and how it can and, on the facts of this case, should, be dealt with.

7.  Today Mr Eugene Fung SC appeared before me, instructed by the Department of Justice, for the Registrar of Companies and the Director of Accounting Services.  I allowed the liquidators not to appear and make submissions.

8.  There is, as Mr Fung, in my view correctly, observes, some difficulty in identifying what the legal character of the deposit is.  I agree with Mr Fung that it is fairly clear that the language of the relevant sections do not create a statutory trust.  It is unclear whether or not the deposit can properly be characterised and treated as one of the recognised four categories of common law security.  It does not seem to me, however, that it is necessary to resolve that legal issue.

9.  It seems to me that the matter is best approached by focusing on the language and the purpose of the relevant sections.

10.  It is clear that the deposit is intended to provide security for the satisfaction of claims principally by depositors and creditors of a trust company.  It seems to me that as long as the deposit is distributed in a way which is intended and is likely to be consistent with the achievement of that purpose, the Director of Accounting Services can properly pay it. Where, as in the present case, the depositing trust company has gone into liquidation, the natural mechanism for distributing the deposit with a view to ensuring that it is properly used — properly in the sense of being used consistently with the purposes of Part 8 — is to pay it to the liquidators, and for them to distribute it to any person who has a claim which properly falls within the categories described in section 80.

11.  If a particular issue arises as to whether or not a person does fall within that category it may be that that specific issue is one to be resolved by the court, but generally I would not expect the court to have to become involved in matters of this sort.

12.  If, as I understand, it is likely to be the case with the present matter, the deposit exceeds any likely claim, then the surplus would become part of the general assets of the company and available for use in accordance with the statutory scheme, which includes the payment of the costs of the liquidation and other preferential creditors, with any surplus being available for distribution on a pari passu basis to unsecured creditors. 

13.  The summons that has been issued in the present case, it follows from what I have just said, is in my view unnecessary, but I can understand how, given the absence of anything in Part 8 directing the Director of Accounting Services as to how the deposit should be dealt with, that the debate between the liquidators, the Director of Accounting Services and the Registrar of Companies has led to the parties feeling that it was appropriate to make an application for an order by the court.

14.  I will therefore make an order in the terms produced by Mr Fung.