RE CES CAPITAL INTERNATIONAL (HONG KONG) CO LTD

HCMP 1339/2022

[2022] HKCFI 3659

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1339 OF 2022

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JUDGMENT

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THE APPLICATION

1.  This is the application made by CES Capital International (Hong Kong) Co., Limited by way of an ex parte originating summons filed on 16 September 2022, as amended pursuant to leave given at the beginning of this hearing (“the Amended Originating Summons”), for an order, inter alia, to pay unclaimed cash and securities (“the Unclaimed Assets”) into court and otherwise dispose of them pursuant to sections 56 and 62 of the Trustee Ordinance (Cap.29, Laws of Hong Kong) (“the Ordinance”).

BACKGROUND

2.  The applicant (previously known as Bentley Securities Ltd) was incorporated in Hong Kong on 18 August 2000, and has been carrying on business as a licenced securities broker.

3.  On 22 December 2006, the applicant was taken over by C.N.W.A. Holiday Ltd and was renamed as CES Capital International Co., Ltd.

4.  The applicant was then further renamed to its present name, CES Capital International (Hong Kong) Co., Ltd, on 14 November 2011.

5.  Pursuant to a written resolution dated 2 June 2021, the applicant’s board of directors resolved to cease the applicant’s business from 15 June 2021, and to completely wind down its business by 15 October 2021. 

6.  Since then, the applicant has spent much effort in returning the cash and securities which it holds as trustee to its clients. However, despite such effort, there are still assets which are yet to be claimed.  Hence this application.

THE LEGAL PRINCIPLES

7.  Section 56(1) of the Ordinance provides that:

“Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release, or other disposition, or any purchase, investment, acquisition, expenditure, or other transaction, is in the opinion of the court expedient, 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, the court may by order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions, if any, as the court may think fit and may direct in what manner any money authorized to be expended, and the costs of any transaction, are to be paid or borne as between capital and income.”

8.  Pursuant to the above statutory provision, the Court, if it considers expedient to do so, would confer power(s) on a trustee for the purpose of managing or administering trust properties vested in such a trustee.  The powers as provided by the said provision are wide-ranging, and the Court would confer on the trustee such powers which are necessary for the aforesaid purpose.  It goes without saying that, before making the order, the Court would have to be satisfied that the applicant trustee did not have such powers in the first place.

9.  While conferring such powers on the applicant trustee, the Court may also impose terms and conditions as it thinks fit, and direct the manner in which the authorised expenditure and costs of the transactions involved are to be paid or borne between capital and income.

10.  Section 62 of the Ordinance stipulates that:

“62. Payment into court by trustees

(1)     Trustees, or the majority of 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.

[…]

(5)     Every transfer, payment and delivery made in pursuance of any such order shall be valid and take effect as if the same had been made on the authority or by the act of all the persons entitled to the money and securities so transferred, paid or delivered.”

11.  The applicant for an order under section 62 of the Ordinance has to establish that:

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

(2)     Despite reasonable efforts, the beneficiaries cannot be contacted or unresponsive, or the trustee is otherwise unable to obtain instructions as to how to deal with, dispose of or return the trust assets.

DISCUSSION

The applicant as trustee

12.  Counsel have drawn the attention of this Court to a number of agreements which the applicant’s clients have entered into with the applicant while it was carrying on its business as a licenced securities broker.

13.  I am satisfied that, as far as the Unclaimed Assets are concerned, the applicant has been a trustee of its clients.

The applicant’s attempts to return the trust assets

14.  I have considered the evidence filed by the applicant.  It is evident that the applicant has done a lot in an attempt to return the trust assets to its clients, for example:

(1)     it has made arrangement with another securities broker (“the New Broker”) such that its clients’ securities could be, with the consent of the clients concerned, transferred conveniently to the New Broker as a new trustee;

(2)     it has attempted to transfer the cash and securities concerned to its clients directly;

(3)     it has issued and posted cheques to its clients.

15.  Unfortunately, there are still a number of unclaimed assets despite such efforts.

16.  In relation to the Unclaimed Assets, the applicant has tried to contact the owners thereof by various means, and inform them that it would apply to the Court for directions on their disposal, and that in which case such assets might be realised with the sale proceeds paid into court or otherwise disposed of without further notice.

17.  I do not propose to recite in this Judgment all the efforts made by the applicant in locating the beneficiaries of the Unclaimed Assets.  It suffices for me to say that I am satisfied that the applicant has made reasonable effort despite the fact that certain trust assets remain unclaimed.

The unclaimed/abandoned trust assets

18.  The unclaimed/abandoned trust assets may be categorised as follows:

(1)     Abandoned/Unclaimed cash;

(2)     Abandoned/Unclaimed securities which can be paid into court (i.e. the physical share certificates of which can be withdrawn from Hong Kong Securities Clearing Company Limited (“HKSCC”));

(3)     Abandoned/Unclaimed securities which cannot be paid into court (i.e. the physical share certificates of which cannot be withdrawn from HKSCC).

19.  As far as the abandoned and unclaimed cash is concerned, since the two requirements under section 62 of the Ordinance referred to above have been satisfied, I agree that it is appropriate to make an order under the said section 62 for payment of the same into court. 

20.  In relation to the abandoned cash, I should add that counsel for the applicant have very fairly drawn this Court’s attention to the possible counter-argument that since the client concerned has expressly indicated that he would abandon the asset[1], the possibility is that he will never come forward to claim the cash after such cash has been paid into court, and as a result such cash will remain in Court for a long time, which would then impose a burden on the Registrar to monitor the situation and make an application pursuant to Rule 23(1) of the High Court Suitors’ Funds Rules (Cap.4B, Laws of Hong Kong) for an order that the unclaimed sum to be transferred to the general revenue.

21.  On my part, I do not see that as a reason why the Court should not make an order for payment into court as requested.  In my view, if the Court is not satisfied that the applicant has done all it reasonably can for the purpose of returning the trust assets to its clients, then of course no order under section 62 of the Ordinance should be made.  On the other hand, if the Court accepts that the applicant has taken all reasonable steps in returning the assets, then an order under section 62 of the Ordinance should be made, so that the applicant may complete the whole process of dealing with all the trust assets appropriately.  Refusing to make an order for payment into court of the abandoned assets would, in a way, defeat the purpose of the application through no fault on the part of the applicant.

22.  For the same reasons, I am satisfied that an order should be made for the unclaimed/abandoned securities to be paid into court, so long as it is possible to do so (i.e. the physical share certificates of which can be withdrawn).

23.  For the unclaimed/abandoned securities which cannot be paid into court (i.e. the physical share certificates of which cannot be withdrawn), since the requirements under section 56 of the Ordinance are satisfied, I consider it appropriate to grant an order that the applicant may sell or otherwise dispose of (including the forfeiture of) those securities.

ORDER

24.  By reasons of the aforesaid, I make an order in terms of the Amended Originating Summons, and, as requested by the applicant, make no order as to the costs of this action.