RE SINO WEALTH SECURITIES LTD

HCMP 392/2025

[2025] HKCFI 2045

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 392 OF 2025

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D E C I S I O N

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Introduction

1.  The Applicant was licensed by the Securities and Futures Commission to carry on business of dealing with securities under the Securities and Futures Ordinance, Cap 571, with a Type 1 License, with no conditions nor restrictions. Since 1 September 2023, the Applicant has terminated its business. By this originating summons filed on 13 March 2025 (“OS”), the Applicant seeks to pay cash and shares unclaimed by its clients into Court, pursuant to sections 56 and 62 of the Trustee Ordinance, Cap 29 (“TO”). There are only 6 clients affected (the “6 Clients”), who have been set out in a revised schedule attached to the 2^nd affirmation of Mr. Chan Cheuk Yu, a responsible officer and director of the Applicant, dated 29^th April 2024 (“the Schedule”).

Background

2.  Since or about June 2023, the Applicant has notified its clients that it was going to terminate its securities trading business on 1 September 2023. The notices came in the following forms:

Before termination of business:

(1) By written notice since June 2023, sent out through ordinary post, emails and attachment to the monthly statement sent by emails. The notice, amongst others, requested the clients to transfer their assets to other securities entities or withdraw the physical stocks on or before 31 August 2023. None of the emails or monthly statements were returned.

Post-termination of business:

(2) By a 2^nd notice in or about January 2024 sent out through ordinary post and emails. The 2^nd notice, amongst others, requested the client to transfer their securities or other assets held at the Applicant to other licensed intermediary or bank, and informed the clients of the Applicant’s intention to instruct lawyers to handle all unclaimed client assets. None of the emails were returned.

(3) By a 3^rd notice in July 2024 sent out through ordinary post and email. The 3^rd notice, amongst others, requested the client to transfer their securities to other assets held at the Applicant to other licensed intermediary or bank, and informed the clients that the Applicant may make application to pay the unclaimed client assets into court. None of the emails were returned.

(4) By delivery of all 3 notices by registered post to the 6 Clients and other clients in November 2024. Out of them, 5 posts were returned, except for Client no.2.

(5) By multiple telephone calls to the 6 Clients, between September 2023 and January 2025, but to no avail.

(6) By circulating the draft OS to the 6 Clients by email and registered mail on 13 November 2024. Except for the mail to Client no.2, the other 5 registered mails have been returned in December 2024 and January 2025.

3.  By the time of the OS, there are only 6 Clients whose assets remain unclaimed.

(1) The Applicant advertised these proceedings in Chinese and English newspapers on 16 and 17 April 2025, respectively.

(2) Although not obliged to do so: Re K&R International Ltd, [2021] 2 HKLRD 47, §47, DHCJ Winnie Tsui (as she then was), the Applicant has taken the extra caution of serving copies of the sealed OS on the 6 Clients on 23 April 2025 by emails and by registered mails. As of 29 April 2025, both registered mails and emails have not been returned to the Applicant, and none of the 6 Clients have made any oppositions and/or replies.

4.  The unclaimed assets consist of 2 categories:

(1) Unclaimed Cash in the sum of HK$129,830.37 (belonging to Clients no. 2 and 6), which the Applicant seeks an order to pay into Court; and

(2) Unclaimed Shares now valued at approximately HK$75,776.30, which the Applicant seeks an order to

(a) withdraw the physical share certificates of shares in listed companies, register them in the name of the 6 Clients, and deposit the same into Court; and

(b) dispose of the shares in delisted companies if the Applicant is unable to withdraw and/or register the share certificates of such delisted shares within 3 months from the date of the Court’s order.

Legal principles

5.  Section 56(1) of TO provides that the Court can confer wide-ranging powers on a trustee for the purpose of managing or administering trust property vested in the trustee if it is in the opinion of the Court expedient to do so, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the trust instrument, if any, or by law.

6.  Section 62 of TO provides that the trustee may pay the trust assets into Court.

7.  What have to be established for the present application are that (a) the assets in question are held by the applicant as trustee; and (b) despite reasonable efforts, the beneficiaries cannot be contacted or the trustee is otherwise unable to obtain instructions as to how to deal with, dispose of or return the trust assets. The Court will make an order for disposal, if in its opinion it is expedient to do so. See Wah Thai Securities Limited [2021] HKCFI 355, §§ 5 and 6, Au-Yeung J.

8.  In the case of shares in delisted companies which have been compulsorily wound up, dissolved or struck off and where it is not possible for new share certificates to be issued in the name of the Registrar of the High Court, the Court may give liberty to the applicant to deal with those shares as he sees fit, including forfeiture thereof: Wah Thai Securities Ltd, §6.

9.  In relation to unclaimed securities of which physical certificates might be withdrawn, the Court may allow the applicant to withdraw the physical share certificates and deposit the same into Court. If the applicant is unable to obtain the physical share certificates, an order may be made to sell or dispose of the same and pay the proceeds into Court. See KVB Kunlun Asset Management (HK) Ltd [2023] HKCFI 907, §17, DHCJ Jenkin Suen SC.

10.  In weighing whether the applicant is allowed to pay the unclaimed assets into court and the unfairness that may be caused to the clients, the size of the assets of each client is a relevant factor. In order to discharge the duty of full and frank disclosure, the applicant shall identify clients who hold sizeable amount of assets and provide further information with those clients: Re Grant Cartel Securities Limited [2022] HKCFI 743, §§26-28, DHCJ Winnie Tsui (as she then was); Re RHB Securities Hong Kong Ltd & Another [2021] HKCFI 1392, §§7-9, DHCJ Winnie Tsui (as she then was).

Analysis

11.  The relationship between the Applicant and its clients are governed by a set of documents, including an Accounting Opening Form (“the AOF”), Terms and Conditions for Securities Trading (General) (“the T&C”) and a Request Form entered into between the Applicant and the clients from time to time. Pursuant to part 6 of Clause 2 of the AOF, the client declares and confirms that he/she is the beneficial owner of all monies, funds, securities, collateral or other assets deposited by the client to the Applicant.

12.  Clause 1.4 of the T&C provides that “[the Applicant] agrees that it will open and maintain such Securities Account(s) and act as an agent for the Client in the purchase and sale of Securities subject to the terms and conditions of this Agreement.”

13.  Clause 12.4 of the T&C stipulates that “the Client hereby appoints [the Applicant] and/or Sino Wealth Trading Agent as custodian of all such cash and securities of the client as are delivered to and accepted by [the Applicant] or any of its sub-custodians and held pursuant to the Agreement …”.

14.  I am satisfied from these contractual clauses that there was a relationship of trustee and beneficiary between the Applicant and the 6 Clients. The requirement in paragraph 7(a) above is satisfied.

15.  Although the Applicant only gave 2 months’ notice to the clients before termination of its business, the Applicant has continued with its efforts in locating them in the following 20 months. The 6 Clients have all along remained uncontactable. I am satisfied, by virtue of paragraphs 2 and 3 above, that the Applicant has exhausted all reasonable efforts in trying to find its clients but could not. The requirement in paragraph 7(b) above is satisfied.

16.  All of the 6 Clients have unclaimed shares, out of whom only 2 have unclaimed cash. Considering also the relatively small sum and value of the Unclaimed Cash and Shares, these would not impose an undue burden on the Court’s resources: Re Grand Cartel Securities Limited [2022] HKCFI 743, §30.

17.  From the AOF and T&C, I also do not see therein vesting of any power for the Applicant as trustee to do what the Applicant now seeks to do as stated in paragraph 4(2)(b) above.

18.  Having considered the evidence, I am of the view that it is expedient to make an order for payment into Court of the Unclaimed Cash and Shares. I order as follows:

(1) A declaration that the items of cash and securities set out in the revised schedule annexed to the 2^nd affirmation of Mr. Chan Cheuk Yu, dated 29^th April 2024 (the “Revised Schedule”), [to be attached to the draft order] are held by the Applicant as trustee for its clients against whom the items of unclaimed clients’ cash and securities are set out in the Revised Schedule (the “Clients”);

(2) There be leave to the Applicant to do the following:

(a) The unclaimed cash set out under the column titled “Cash Balance” in the Revised Schedule (the “Unclaimed Cash”) be paid into Court;

(b) The unclaimed securities as set out under the column titled “Stock-holding” in the Revised Schedule (the “Unclaimed Securities”) be deposited into Court after the Applicant has obtained share certificates from the Central Clearing and Settlement System (the “CCASS”) or wherever applicable; and registered the certificates in the name of the respective Clients;

(c) It being in the opinion of the Court that it is expedient but the same cannot be effected by reason of the absence of any power for that purpose vested in the Applicant by law or by the trust instrument, if the Applicant is unable to obtain and/or register the share certificates of the shares of delisted issuers within 3 months from the date of this Order, the shares shall be sold or disposed of and any proceeds shall be paid into Court.

(3) The Applicant shall give notification of the declaration in paragraph 1 above and this Order and the rights of the Clients to apply for payment out of their respective unclaimed cash/securities under Order 92 of the Rules of the High Court (Cap. 4A) by way of an advertisement in a Chinese language daily newspaper circulated in Hong Kong within 7 days from the date of this Order, and by way of letters and emails to the Clients at their last known addresses and email addresses;

(4) Upon compliance with paragraph 3 above, Order 92 rule 4 of the Rules of the High Court (Cap. 4A) is deemed to have been complied with by the Applicant;

(5) Any unclaimed cash and securities be dealt with in accordance with Rule 23 of the High Court Suitors’ Funds Rules (Cap. 4B); and

(6) There be no order as to costs.

19.  I thank Ms Sui for her assistance.