Re Fulljet Securities Ltd

HCMP 1874/2022

[2023] HKCFI 228

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1874 OF 2022

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JUDGMENT

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THE APPLICATION

1.This is an application made by Fulljet Limited by way of an ex parte originating summons filed on 15 November 2022 (“the 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 was incorporated in Hong Kong on 26 May 1994. At the material time, it was a securities broker licenced by the Securities and Futures Commission (“SFC”) and an Exchange Participant of the Stock Exchange of Hong Kong Limited (“SEHK”).

3.In the course of its business, it would hold assets on trust for its customers, including securities, cash arising from its customers’ original cash balance, proceeds of sale of securities and dividends received on behalf of its clients.

4.Pursuant to a written resolution dated 28 July 2022, the applicant’s directors resolved to cease the applicant’s business.

5.Pursuant to the aforesaid written resolution, the applicant submitted a notice to SFC and informed the latter that the applicant would cease business on 31 August 2022. A Notice of Cessation of Trading has also been submitted to the SEHK accordingly.

6.Since the date of the said written resolution, the applicant has spent much effort in returning the cash and securities which it held 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. However, 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.The attention of this Court has been drawn 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 spent a lot effort for the purpose of returning the trust assets to its clients, for example:

(1)  it has made phone calls to all of its clients, explained to them the applicant’s decision to close down and advised them to retrieve their assets as soon as possible. For those clients which the applicant could not be reached, repeated phone calls had been made on daily basis;

(2)  it has posted a total of four letters to those clients who had not contacted the applicant, by which the clients were informed that if they failed to come forward and collect their assets, the applicant might have to make an application to the court for directions for the disposal of the unclaimed assets;

(3)  it has caused a total of four advertisements to be published on two different dates in two different local newspapers (The Standard and Sing Tao Daily), notifying its clients of its cessation of business and advising them to contact the applicant as soon as possible for the purpose of collecting their assets. The applicant’s clients were also reminded that the applicant might have to apply to the court for directions for the disposal of unclaimed assets.

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

16.I am satisfied that the applicant has made reasonable effort despite the fact that certain trust assets remain unclaimed.

The unclaimed/abandoned trust assets

17.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 the Central Clearing and Settlement System (“CCASS”));

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

18.As far as the abandoned and unclaimed cash and securities are 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, so long as it is possible to do so (i.e. the physical share certificates of which can be withdrawn).

19.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

20.By reasons of the aforesaid, I make an order in terms of the Originating Summons[1], and, as requested by the applicant, make no order as to the costs of this action.

Mr Wong Pok Chi of Eddie Lee & Company, for the applicant