RE HOU TAK SECURITIES LTD

HCMP 83/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 83 OF 2015

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D E C I S I O N

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1.  The applicant is a company incorporated in Hong Kong, and has been carrying on business as securities broker providing securities brokerage services to its clients since 1992.

2.  In or about December 2013, the applicant decided to cease business as securities broker with effect from 3 April 2014.  The applicant held securities in different client’s accounts, and notice was given by the applicant to its clients of its intention to cease business.  It appears, however, that the applicant has been unable to contact a number of clients, and some of the clients whom the applicant managed to contact informed the applicant that they wished to abandon the securities standing in their accounts.

3.  Most of securities remaining in the client’s accounts have, it is said, little or no value because the companies in question have either been delisted or are in the course of liquidation.  Details of (i) the clients who have given notice of intention to abandon their securities and the value of those securities, and (ii) the clients whom the applicant have been unable to contact and the value of the securities standing in their accounts, are set out in exhibits “VTSW‑16” and “VTSW‑17” to the second affirmation of Van Tak Sun Winston filed by the applicant on 13 January 2015 in support of the present application.

4.  It is clear that the applicant holds the securities standing in the client’s accounts as trustee: see Re CA Pacific Finance Ltd (in Liquidation) & Another (No 1) [1999] 2 HKLRD 1; Re Peregrine Brokerage Ltd & Another [2004] 1 HKLRD 856.

5.  In circumstances where (i) the clients have indicated that they wish to abandon their securities and (ii) it is proposed that the relevant securities be paid into court, I consider that it would be appropriate to make an order permitting the applicant to pay them into court pursuant to s 62(1) of the Trustee Ordinance, with consequential directions to be given under Order 92, rule 4 of the Rules of the High Court: see Re Celestial Finance Limited, HCMP 657 of 2005 (Deputy High Court Judge L Chan, 21 June 2005); Re Drake & Morgan Limited, HCMP 1490 of 2009 (Deputy High Court Judge Au, 27 August 2009); Re Hai Tong Securities (HK) Brokerage Limited, HCMP 1387 of 2011 (Deputy High Court Judge L Chan, 1 August 2011).  Although these clients have not been joined as parties, their rights will be preserved because they can still apply for payment out of the securities paid into court under Order 92, rule 5 of the Rules of the High Court.

6.  However, I have more difficulty in relation to cases where (i) the applicant has failed to contact the relevant clients, or (ii) the applicant proposes to forfeit the securities in the client’s accounts.

7.  In relation to those clients whom the applicant has failed to contact, it is apparent that they have no notice of the current application.  Yet, the court is being asked to make an order which affects, or may potentially affect, their rights and interests without them being joined as parties to the proceedings.

8.  In relation to securities which the applicant proposes to forfeit, there is no evidence that those securities have in fact no value.  The mere fact that a company has been delisted, or is in liquidation, does not necessarily mean that its securities have no value.

9.  Since the current application is made by way of ex parte originating summons, any order made by this court will not be binding on any clients whose rights or interests are or may be affected by such order.

10.  I have been referred to some authorities where the court made orders providing for forfeiture of delisted securities in similar circumstances, but it does not appear that there was any discussion on whether the clients ought to have been joined as parties to the proceedings: see Re Yu On Securities Companies Limited, HCMP 1296 of 2013 (L Chan J, 19 July 2013); Re Piper Jaffrey Asia Securities Limited, HCMP 437 of 2013 (L Chan J, 13 March 2013).

11.  In all, I am prepared to make an order in terms of only paragraph 1, paragraphs 2 and 4 (limited to Part B of the Abandoned Accounts Clients List in exhibit “VTSW‑16”), and paragraphs 5 to 7 of the originating summons dated 13 January 2015.