RE SECURIS CAPITAL LTD

HCMP 35/2025

[2025] HKCFI 605

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 35 OF 2025

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D E C I S I O N

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INTRODUCTION

1.  This is an application made by the applicant by way of ex parte originating summons dated 8 January 2025 (“the Summons”)  for reliefs under section 56 of the Trustee Ordinance (Cap 29)  (“the Ordinance”)  to pay cash and securities (“the Unclaimed Assets”)  into court or otherwise dispose of them pursuant to sections 56 and 62 of the Ordinance.

2.  The application is supported by the affirmation of Sun Sin Man Lirranna, the director and responsible officer of the applicant, dated 3 January 2025 together with its exhibits referred to therein (“A’s Aff”)  and the affirmation of Chan Kin Ming, a partner at the applicant solicitors’ firm, dated 4 February 2025 together with its exhibits referred to therein (“CKM’s Aff”).

BACKGROUND

3.  The applicant is a limited company incorporated in Hong Kong on 5 July 2004. It operates as a brokerage and asset management firm, assisting clients in conducting securities trading and asset management in Hong Kong and overseas stock markets.

4.  The applicant currently holds three Securities and Futures Commission (“SFC”)  licences as follows:-

(a)  A Type 9 Licence obtained on 29 August 2005;

(b)  A Type 4 Licence obtained on 16 May 2018; and

(c)  A Type 1 Licence obtained on 16 May 2018.

5.  Due to suffering significant losses and lack of funding, in around April 2023 the applicant ceased all Type 4 and Type 9 licenced activities.

6.  The applicant decided to cease its brokerage, investment advisory and asset management business in July 2023.  An ordinary resolution was passed pursuant to section 548 of the Companies Ordinance (Cap 622)  on 23 July 2023 approving this and all appropriate statutory and regulatory procedures under the Securities and Futures Ordinance to be taken.  At that time, 112 clients had accounts containing stocks and/or cash with the applicant.

7.  The applicant notified the SFC on 29 October 2024 by submitting a Cessation of Business and Revocation Form, followed by its Exit Plan.

LEGAL PRINCIPLES

8.  Section 56(1)  of the Ordinance sets out the discretionary power of the court to confer on trustees power to deal with the assets.

9.  In Re Wing Fat Securities Ltd [2021] HKCFI 3851 at §32, it was stated by Deputy High Court Judge Winnie Tsui (as she then was)  that in order for the court to exercise its discretionary power in section 56 of the  Ordinance:

“…the applicant should demonstrate that, first, there is no power vested in it as a trustee to dispose of the assets and, secondly, it is expedient for the court to confer that power on it.”

10.  In this case, there is no explicit power in the Account Opening Form Terms and Conditions which grants the applicant power to dispose of the assets into court.  Hence, it is necessary to invoke the process of the court in the administration or management of the trust.

11.  The court has a discretionary power to make an order allowing the applicant as trustee to pay money or securities into court: See section 62(1)  of the Ordinance.

12.  Thus, in order to satisfy the court to exercise its discretion, the applicant has to demonstrate the following well-established legal principles (See Re Times Securities Co Ltd [2022] HKCFI 1810 (K Yeung J; 22 June 2022)  at §9 and Re Gold Fund Securities Co Ltd [2020] HKCFI 2884 (K Yeung J; 4 November 2020)  at §§6-9:-

(a)  The assets in question are held by the applicant as trustee; and

(b)  The applicant has used reasonable endeavours to contact its clients as the beneficiaries, but the clients are unresponsive or cannot be contacted, meaning the applicant is unable to obtain instructions on dealing with the assets.

13.  Further, the applicant has to comply with the requirements under Order 92 rule 2(1)(b)  of the Rules of the High Court (“RHC”)  in its capacity as trustee wishing to make a payment into court.

14.  In this case, the applicant has fulfilled such requirements as stated in its supplemental affirmation by Sun Sin Man Lirranna which was lodged in draft and has subsequently been affirmed and filed on 5 February 2025 (“A’s Supp Aff”).

DISCUSSION

Clients’ assets are held by the applicant as trustee

15.  Clauses 10 and 12 of the Terms and Conditions of the Account Opening Form completed by the applicant’s clients make it clear that the applicant holds the clients’ assets on trust for them and therefore the first point in my view has been satisfied.

The applicant has used reasonable endeavours to contact its clients

16.  In Re K&R International Ltd [2021] HKCFI 561 at §43, Deputy High Court Judge Winnie Tsui (as she then was)  highlighted the importance of “[taking] all reasonable steps to try to identify and locate the beneficiaries… and notify them of the cessation and take the necessary step to return the assets to them”.  The learned judge further comments:-

“44. The rationale for this requirement is plain. Where a company elects to cease its business involving client assets, it bears the primary responsibility to return the assets entrusted to it by the clients. Where it has difficulties in doing so, eg due to loss of records by reason of long lapse of time, or lack of client contact information, and such difficulties prove to be insurmountable notwithstanding that reasonable efforts have been made, it is quite legitimate for it to seek the assistance of the court, which may grant leave for payment in as a solution to resolve those difficulties.

45. While it is understandable that the company in question would wish to exit the business as soon as possible, it ought to recognise that it is primarily responsible for an orderly wrap-up of its business.

46. In this regard, it is for the applicant to satisfy the court that proper and sufficient notice is given to its clients and by reasonable means before it comes to any conclusion that a particular client can be said to be not contactable or untraceable”(Emphasis added)

17.  What has been considered “reasonable endeavours” “depend[s] on the circumstances on each case”: (See Tak Fung Shares Investment Co Ltd [2024] HKDC 196 at §12).  In Tak Fung Shares Investment Co Ltd, Deputy District Judge Carol Wong was satisfied that the applicant therein had made reasonable endeavours to contact its clients in the following manners:-

“(5)  Since 1 December 2021, the Applicant has made the following attempts to contacts its remaining clients on its cessation of business:-

(a)  On 1 December 2021, the Applicant sent letters to each of its clients except those it had lost their contacts concerning the cessation of business and invited its clients to sell or withdraw their shares with the Applicant. None of the letters had been returned to the office of the Applicant through the undelivered letter service.

(b)  From 1 December 2021 to 28 March 2022 the Applicant contacted its clients through telephone for whom it had records of phone numbers.

(c)  On 11 January 2023, the Applicant placed advertisements in Chinese and English in two locally circulated newspapers, namely Sing Tao Daily and The Standard…”(Emphasis added)

18.  In our present case, I find the applicant has clearly used reasonable endeavours to attempt to contact its clients multiple times by ordinary post, email and telephone.  This is particularly prevalent considering the small value of the stocks and/or cash held by the applicant on trust for almost all its individual clients.

19.  The applicant sent out letters to its 112 clients at their last known addresses on 23 July 2023, the same day that the ordinary resolution to wind down its SFC activities was passed.  It has followed up with further letters no less than eleven times between 5 September 2023 and 6 December 2024: See A’s Aff at §17 and Exhibit SSML-7.

20.  The applicant first sent its clients emails with the same content as the letters at their last known email addresses on 4 August 2023.  It has followed up with further emails no less than five times and continues to send monthly reminders: See A’s Aff at §18 and Exhibit SSML-8.

21.  The applicant first attempted to contact its clients by telephone on 27 September 2024 and left voicemails on the clients’ answer machines.  The applicant has made no less than five further attempts to contact the clients by phone between 30 September 2024 and 20 December 2024.  It made particular efforts to follow up with a client who owns 97.6% of the unclaimed shares by telephone him every working day between 13 November 2024 and 9 December 2024 after the client suggested he would take the appropriate steps regarding his assets.  However, despite the applicant’s best efforts, the client has not done so: See A’s Aff at §19 and Exhibit SSML-10.

22.  In a final attempt to contact the clients, the applicant posted notices on 22 November 2024 in China Daily in English and the Hong Kong Economic Journal in Chinese giving notice that it had ceased dealing in securities since 31 October 2024 and for any clients to contact them or their solicitors by 20 December 2024, failing which an application would be made to the court.  The applicant did not receive any responses to these notices: See A’s Aff at §20 and Exhibit SSML-9.

23.  As a result of the applicant’s efforts, a total of 77 clients have been successfully contacted and have taken steps to retrieve their assets.  Only 35 clients have either not responded at all to the applicant or have not confirmed how they would like to deal with their assets: See A’s Aff at §21 and Exhibit CKM-1 at §5 of CKM’s Aff and Exhibit SSML-11. 

24.  The applicant submits that these assets now need to be dealt with so that the applicant can proceed to revoke its SFC Licences and wind down its operations.

25.  In my judgment, the applicant has satisfied the first requirement that there is no power vest in it as a trustee to dispose of the Unclaimed Assets. Hence, it is expedient for the court to confer that power on it. 

26.  Further, in my view, the applicant has also amply demonstrated that it has used reasonable endeavours to contact its clients as the beneficiaries but the remaining 35 clients are either unresponsive or cannot be contacted, meaning that the applicant is unable to obtain instructions in dealing with those Unclaimed Assets.

27.  In the aforestated premises, I am satisfied that the applicant has established both requirements.

28.  The Unclaimed Assets fall into 3 categories as set out in the Schedule under Exhibit SSML-10 of A’s Aff:-

(a)  Unclaimed stocks (“Unclaimed Stock”);

(b)  Cash in US dollars (‘Unclaimed USD Cash”); and

(c)  Cash in Hong Kong dollars (“Unclaimed HKD Cash”).

29.  For the Unclaimed Stock, given the relatively small amount involved, the applicant will have leave to sell, release or dispose of the same and to pay any proceeds into court.

30.  For the Unclaimed USD Cash and Unclaimed HKD Cash, they can simply be paid into court.  

31.  Hence, I will make an order in terms of the Summons, to the effect that:-

(a)  it be declared that the Unclaimed Assets as set out in the Schedule under Exhibit SSML-10 of A’s Aff are held by the applicant as trustee for each of the named clients;

(b)  the 3 categories of the Unclaimed Assets be dealt with as above;

(c)  notification of this order and the rights of the customers to apply for payment out by way of advertisements in a Chinese-language and an English-language newspaper within 14 days from the date of this Order, and by way of letters to each of them at their last known addresses; and

(d)  upon compliance of the above, the applicant be discharged from any obligations or claims in respect of the Unclaimed Assets.