RE BOCOM INTERNATIONAL HOLDINGS CO LTD

HCMP 1777/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1777 OF 2009

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J U D G M E N T

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1.  The applicant was a securities and futures broker.  It had both cash and margin clients.  It is a wholly owned subsidiary of the Bank of Communications Company Limited.  For the purpose of corporate restructuring it transferred its business to its wholly owned subsidiary BOCOM International Securities Limited, (“BISL”).  The transfer was completed on 29 February 2008.  In the course of the restructuring, the applicant had sent out a letter dated 18 September 2007 to all its clients informing them of the transfer of the applicant’s brokering business to BISL.

2.  The applicant later sent out another letter dated 4 October 2007 to its clients seeking their consent for the applicant to transfer their accounts together with all assets therein (including open positions of securities and futures contracts) to BISL.  The staff of the applicant also tried to contact the clients by telephone for instructions to transfer or to withdraw their assets from the applicant.  Many clients responded. 

3.  For those clients who did not respond, the applicant wanted to terminate the agreements it had with them.  There are two versions of cash client agreement and one version of margin client agreement.  They all have provisions for termination upon notice given by the applicant to the clients. 

4.  The applicant then sent out a notice of termination dated 11 January 2008 to those clients who did not respond to the earlier letters.  The notice of termination stated that the agreement would be terminated on 15 February 2008 unless the client would consent to the transfer of account before that date, and in that event, the notice of termination would be withdrawn.  The client could also withdraw all assets from the account with the applicant.

5.  The applicant also published an English advertisement in the 13 February 2008 edition of The Standard and a Chinese advertisement in the edition of Sing Tao Daily of the same day.  The advertisements notified the public about its restructuring and requested its clients who had not responded to its earlier letters to contact it.  For those clients who still did not respond, their accounts were terminated on 15 February 2008 in accordance with the termination notice. 

6.  The applicant’s restructuring was completed on 29 February 2008 and it ceased its business which was regulated by the Securities and Futures Commission.

7.  The applicant had sent out a further letter to the non-responding clients dated 27 February 2009.  The letter informed the non-responding clients that their accounts had been terminated and their assets were still being held by the applicant.  They were also invited to enter into a new client agreement with BISL.  Eventually, there were still 27 non-responding clients.

8.  The applicant then instructed solicitors to make this application and to ask these clients to notify the applicant on what they wanted to do with their assets in the applicant’s account. 

9.  The applicant’s solicitors sent out a letter dated 27 July 2009 to these clients, informing them of the applicant’s intention of applying to court for an order to deposit their assets into court and requesting them to indicate no later than 7 August 2009 whether they would enter into a new agreement with BISL or to withdraw their assets.  After that, there were still seven clients who did not respond.  Attempts were still being made yesterday by fax, telephone and email to contact these clients, but to no avail.

10.  There are provisions in the account opening documents providing that the cash and/or assets held by the applicant for its clients are held as trust properties.  I also refer to Re Peregrine Brokerage Limited, HCMP2736/2003, paragraphs 8 to 13, where Kwan J declared that unclaimed cash and properties held by a broker for its clients are trust properties.  The situation here is similar to that of Re Peregrine Brokerage.  The unclaimed assets are held by the applicant as trustee for the non-responding clients. 

11.  I am satisfied that the applicant has made reasonable efforts to contact the seven non-responding clients for instructions on how to deal with their assets and these clients have so far made no response.  The applicant has also satisfied the requirements in Order 92 Rule 1 of the Rules of the High Court. 

12.  In the premises, I declare that the unclaimed cash and securities as set out in the schedule in Exhibit CKW-1 of the affidavit of Cho Ka Wai and filed on 11 September 2009 are held by the applicant as trustee for the clients against whom the cash and securities are noted in the schedule.

13.  I grant the applicant leave to pay the unclaimed cash and securities particularised in the said schedule into court under Section 62 of the Trustee Ordinance, Cap.29, and Order 92 of the Rules of the High Court, Cap.4A. 

14.  I order the applicant to advertise once within seven days from the day hereof and once on 1 October 2009, both in a Chinese language daily newspaper and an English language daily newspaper a notification of this order and of the rights of the non-responding clients to apply for payment out of the cash and securities under Order 92 of the Rules of the High Court. 

15.  Any unclaimed cash and securities not paid out of court shall be dealt with in accordance with Rule 23 of the High Court Suitors’ Funds Rules, Cap.4B.

16.  I further order the applicant to serve a copy of the sealed order on all the non-responding clients at all their addresses as known to the applicant.

17.  I make no order as to costs.