RE YUE XIU FUTURES COMPANY LTD

HCMP 196/2023

[2024] HKCFI 1069

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 196 OF 2023

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D E C I S I O N

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1.  By an ex parte originating summons of 8th February 2023, the Applicant applied under ss.29, 56 and 62 of the Trustee Ordinance (Cap.29) (“the Ordinance”) for an order, inter alia, to pay various sums in different currencies into court, being sums which stand to the credit of a number of the Applicant’s clients in their accounts with the Applicant (“the Unclaimed Cash”).

2.  The Applicant was licensed to conduct regulated activities (types 2 and 5) under the Securities and Futures Ordinance (Cap.571) and was an exchange participant of the Hong Kong Exchanges and Clearing Limited.

3.  The Applicant intended to cease business.  It gave notice of this to all of its account holders by email, published a cessation notice on its trading platform, and published notices in newspapers.  As at the date of the original application, there were seventy-two clients who had still not made a claim to the funds in their accounts, the total of which comprises the Unclaimed Cash.

4.  Section 62(1) of the Ordinance provides that:

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.  For the court to make an order under the section, it must first be satisfied that the property which forms the subject matter of the payment-in application is trust property held by the applicant as trustee.  If it is, the court then proceeds to consider whether it should exercise its discretion to allow the payment in.  See Re K&R International Ltd [2021] 2 HKLRD 47 at [40].

6.  I was satisfied that the Unclaimed Cash constituted trust property held by the Applicant as trustee, by virtue of (1) the terms of the agreements between the Applicant and its clients, as identified in paragraph 6 of the Affirmation of Chan Wai Hung, and (2) the position at common law that generally, a broker and client relationship is one of principal and agent, so that the broker holds the client’s assets on trust for the client (unless there is evidence to the contrary): Re Peregrine Brokerage Ltd [2004] 1 HKLRD 856 at [9].

7.  However, I was not originally satisfied that all reasonable efforts had been made to locate the beneficiaries and take steps to return the trust assets.  For example, it appeared from the evidence filed by the Applicant that no attempt had been made to contact any of the clients by telephone (although it subsequently transpired that some attempts had in fact been made).

8.  The Applicant made further efforts to locate the clients, as explained in the 2nd Affirmation of Chan Wai Hung.  The Applicant was able to locate a number of them and a further nine clients were able to withdraw their assets from the Applicant.

9.  Having regard to the matters in the two affirmations, I am satisfied that the Applicant has now demonstrated that it has taken all reasonable steps to try to locate the beneficiaries, notify them of the cessation of the Applicant’s business and take the necessary steps to return their assets to them.

10.  I will therefore make an order giving liberty to the Applicant to deal with the Unclaimed Cash by pooling it, using part of it to settle the costs incurred in this application, and to pay the balance into court; and requiring the Applicant to give notice of the lodgment pursuant to RHC O.92 r.4, in terms of the draft order provided by counsel.