RE CHANGJIANG FUTURES (HK) LTD

HCMP 318/2024

[2024] HKCFI 832

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 318 of 2024

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J U D G M E N T

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Introduction

1.  This is the hearing of an ex parte originating summons taken out by Changjiang Futures (HK)  Limited under section 62 of the Trustee Ordinance, Cap 29 for:

(1)  a declaration that unclaimed cash in its hands is held by the Applicant as trustee for its respective clients;

(2)  leave to the Applicant to pay the unclaimed cash into court;

(3)  an order that the Applicant do give notification of this order and the rights of its clients to the unclaimed cash by advertisement; and

(4)  Upon satisfaction of §§2 and 3 of this order, the Applicant be discharged from any obligations or claims in respect of the unclaimed cash and Order 92, rule 4 of the Rules of the High Court (notice of lodgement into Court)  is deemed to have been complied with by the Applicant.

2.  The Applicant seeks leave to amend the Originating Summons to include (i)  the requirements under Order 92 rule 4 of the Rules of High Court (Cap. 4A)  (“RHC”); and (ii)  discharge from obligations or claims in respect of the unclaimed cash.

3.  The Applicant was a licensed corporation under the Securities and Futures Ordinance (Cap 571)  which carried on the business of dealing in and advising on futures contracts.  For that purpose, it used to hold “Type 2” licence and “Type 5” licence granted by the Securities and Futures Commission (“SFC”).

4.  In 2022, the Applicant planned to cease its futures trading business.  On 12 May 2022, the Applicant informed its clients that it would cease its foreign futures trading service as from 1 July 2022.

5.  As part of its “exit plan” submitted to SFC, the Applicant would submit the request to the SFC to revoke its licence, return the licence certificate to the SFC for cancellation and submit its audited accounts to the SFC to complete the cessation process, after dealing with the clients’ unclaimed assets.

6.  The Hong Kong Stock Exchange approved the Applicant’s application to resign as an exchange participant of Hong Kong Futures Exchange Limited and a clearing participant of HKFE Clearing Corporation Limited for relinquishing its Futures Exchange Trading Right, with effect from 13 July 2023.

7.  On 31 May 2023, pursuant to a board resolution,  an “exit plan” setting out the details of the Applicant’s orderly wind down and closure of business, was submitted to the SFC.  It had been updated twice.

8.  Despite efforts of the Applicants, there still remains 26 clients with unclaimed cash in the Applicant’s hands as set out in the table attached to the originating summons.

9.  The Applicant thus seeks leave to pay the unclaimed cash into court pursuant to section 62 of the Trustee Ordinance. 

Legal principles

10.  Section 62(1)  of the Trustee Ordinance provides that 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 court, be dealt with according to the orders of the court.

11.  The Applicant has to satisfy the Court that it is a trustee of unclaimed cash and that it has made reasonable efforts to contact its clients for collection of the same.  The court has a discretion to order the payment in.

Application of the legal principles

12.  Clause 7.1 of the Futures Trading Agreement signed by the Applicants’ clients when they opened an account with the Applicant provides as follows:

“All monies, securities or other property received by [the Applicant] from the Client or from any other person (including the Clear House)  for the account of the Client shall be held by [the Applicant] as trustee, segrated from [the Applicant’s] own assets and paid into a Segregated Bank Account … as Segregated Securities Account (as the case may be), an that all monies, securities or other property so held by [the Applicant] shall not form part of the assets of [the Applicant] for insolvency or winding up purposes but shall be returned to the Client promptly upon the appointment of a provisional liquidator, liquidator or similar officer over all or any part of [the Applicant’s] business or assets.”

13.  This Clause makes it plain that the Applicant holds the clients’ cash on trust for them.  The Segregated Bank Account is to hold the cash on trust for the relevant clients. Trustee status is established.

14.  The evidence shows that the applicant has made continuous and reasonable efforts over the past 22 months from May 2022 to notify the clients of its cessation of business and to return the unclaimed cash.  In summary, such attempts include:

(1)  the 27.2.2023 notice by emails and by registered post (5 of which were returned)  resulting in withdrawals from 8 accounts;

(2)  the 24.5.2023 notice (to 6 out of the 26 clients who have addresses other than those on the account opening forms)  resulting in 1 withdrawal;

(3)  the 15.11.2023 notice by emails;

(4)  the 26.1.2024 notice by emails; and

(5)  telephone calls at least 3 times resulting in disposal of 2 accounts.

15.  Despite such attempts, there remains unclaimed cash.

16.  In contemplation of this application, the Applicant has stopped charging maintenance fee under Clause 8.5 of the Futures Trading Agreement from February 2024 onwards.

17.  The number of clients is small.  The amount of unclaimed cash is equivalent to about HK$112,015.  It is unlikely that the Court will be burdened with numerous applications for payment out.

18.  For all the reasons given above, this is a proper case to exercise the discretion to grant an order for payment in under section 62 of the Trustee Ordinance.

19.  Pursuant to Order 92, rule 4 of the Rules of the High Court, the Applicant is required to notify the 26 clients of the order to be granted.  I give leave to do so by way of advertisement in a local newspaper.

20.  I also give leave to amend the originating summons to reflect §19 above and the discharge of the Applicant’s obligations upon compliance with §§18 and 19.

Conclusion

21.  I make the following orders:

(1)  there be leave to amend the originating summons as per the draft submitted to the Court;

(2)  there be a declaration that the unclaimed cash in the total sum of HK$29,228.50, US$9,966.90 and JPY 95,745.00, of which the breakdown is set out in the Annex to a draft order, is held by the Applicant as trustee for its respective clients as set out in the Annex;

(3)  there be leave to the Applicant to pay the unclaimed cash into court;

(4)  the Applicant do advertise, within 14 days of this Order, in a Chinese language daily newspaper a notification of this Order and the rights of its clients to claim the unclaimed cash under Order 92 rule 4 of the RHC;

(5)  a declaration that, upon compliance with paragraphs (3)  and (4)  above, the Applicant be discharged from any obligation or claim in respect of the unclaimed cash and Order 92, rule 4 of the RHC is deemed to have been complied with by the Applicant; and

(6)  there be no order as to costs of this application.