Re Quasar Securities Co Ltd

DCMP 4904/2022

[2023] HKDC 196

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 4904 OF 2022

________________

________________

____________________

---------------------

DECISION

----------------------

1.By an ex parte originating summons dated 22 December 2022 (“OS”), the applicant applies for relief under sections 56(1) and 62 of the Trustee Ordinance, Cap 29 (“TO”) and Order 92 of the Rules of the District Court, Cap 336H (“RDC”).

2.The applicant is a stock trading firm registered with the Securities and Futures Commission as a securities dealer.  On 31 May 2022, it resolved to cease its securities trading business.  Despite its efforts to return the cash and securities held by it on behalf of its clients, some assets remain unclaimed (“Unclaimed Assets”).

3.The applicant is seeking a declaration that a trust subsists between it and its 14 clients in respect of the Unclaimed Assets as set out in Schedule A to the OS.  According to the supporting affirmation of Lam Wing Chak Victor (the Responsible Officer of the applicant), the Unclaimed Assets was valued at around HK$292,742.40 as at 25 November 2022.  The application falls within the jurisdiction of the District Court by virtue of section 37 of the District Court Ordinance, Cap 336, as the total value of the Unclaimed Assets said to be subject to the trust is below HK$3 million. 

4.The Unclaimed Assets comprise both cash and securities.  The applicant proposes to forfeit the sums due to four clients given the small amounts involved[1] (“Small-Sum Cash”) and pay the remainder of the cash portion of the Unclaimed Assets into court under section 62 of the TO and Order 92 of the RDC.

5.As to the securities portion of the Unclaimed Assets, I am given to understand that the securities due to one client[2] with the stock code 44289 is unsaleable as trading has been suspended.  The applicant is seeking an order under section 56 of the TO to deal with it as it sees fit including the forfeiture thereof.  On the other hand, the applicant is unable to directly lodge the saleable shares into court due to difficulties with CCASS: para 14 of the supporting affirmation.  It therefore seeks an order to realize the shares and deposit the proceeds into court.

6.In Gold Fund Securities Company Limited [2020] HKCFI 2884 at paras 11-13, Keith Yeung J referred to a number of authorities in which securities companies had been allowed to pay into court unclaimed cash and securities of its clients upon cessation of business and remarked that:-

“There have been ample precedents in which securities companies were pursuant to section 62 of the Trustee Ordinance (Cap 29) allowed to pay into court unclaimed cash and deposits of its clients who could not be contacted.  That has been described as a “flexible and pragmatic” solution for securities houses to cease business and at the same time to deal with unclaimed assets in a way which protects the interests of their clients.”

7.His Lordship generalized the requirements for this kind of applications as follows:-

“In general, what have to be established for an application of the present nature are (1) the assets in question are held by the applicant as trustee, and (2) despite reasonable endeavours, the beneficiaries cannot be contacted or are unresponsive, or the trustee is otherwise unable to obtain instructions as to how to deal with, dispose of or return the trust assets.”

8.The applicant in this case disclaims any beneficial interests in the Unclaimed Assets.  According to the applicant’s counsel (Mr Cheng), the account opening documents exhibited to the supporting affirmation invariably contain provisions authorizing the applicant to operate a securities trading account on the client’s behalf, specifying that the funds deposited by the client shall be kept in safe custody in a designated account, and that the applicant shall not make use of the client’s securities for loans or advances.  I am satisfied that the first requirement mentioned above is satisfied.

9.The applicant sent notice of cessation of business in both Chinese and English to its clients by email on 31 May 2022 and 18 July 2022 respectively to inform them to come forward to reclaim their assets.  Advertisements to the same effect were placed in a Chinese-language newspaper (Hong Kong Economic Journal) and an English-language newspaper (Standard News) circulated in Hong Kong on 17 October 2022, and sent by email to the clients on 16 November 2022. The applicant also made four rounds of telephone calls to its clients on 3, 7, 14 and 21 November 2022 respectively.  Despite the efforts, the 14 clients identified in Schedule A to the OS did not come forward to reclaim their assets.  I agree with Mr Cheng that the applicant has exercised reasonable efforts in

identifying, locating and obtaining instructions but the 14 clients remain unresponsive and the applicant is unable to dispose of the Unclaimed Assets.  The second requirement mentioned in Gold Fund Securities is also satisfied.

10.In terms of Order 92, rule 2 of RDC:

(a)  The applicant has set out in tabular form under para 9 of the supporting affirmation the names and last known addresses of the persons interested in or entitled to the Unclaimed Assets.  There are obvious typographical errors and the applicant has undertaken to file a supplemental affirmation to rectify the same.

(b)  The applicant has also undertaken to depose to in the supplemental affirmation its submission to answer all enquiries relating to the application of the Unclaimed Assets as the court may make or direct as required by rule 2(c). 

(c)  The address where the applicant may be served with any summons or order, or notice of any proceedings, relating to the assets paid into court is Suite 56, 2701, Level 27, Wing On Centre, No.111 Connaught Road Central, Hong Kong: para 11 of the supporting affirmation.

(d)  The applicant proposes that notification of this order and the rights of its clients to apply for payment out of their respective share of the Unclaimed Assets be given by advertisements in a Chinese-language and an English-language daily newspaper in Hong Kong and by ordinary or airmail post to the 14 clients enumerated in Schedule A to the OS at their last known addresses (as some of these addresses are beyond the jurisdiction) within 28 days from the date of this order.

11.Initially, the applicant also asked for an order that upon compliance of the order to be made, the applicant be discharged from any obligations or liabilities in respect of the Unclaimed Assets.  As discussed at the hearing, such an order may not be necessary having regard to para 92/2/1 of Hong Kong Civil Procedure 2023 and para 23 of The Joint and Several Liquidators of BANKAMERICA NOMINEES (HONG KONG) LIMITED (in members’ voluntary liquidation) [2020] HKCFI 399.  Mr Cheng has instructions not to press for such an order.

12.Subject to the undertakings and refinement as aforesaid, I make an order in terms of the draft order placed before me at the hearing.

13.The applicant’s costs be summarily assessed at $60,000, including $30,000 as counsel’s brief.

14.It remains for me to thank Mr Cheng for his able assistance.

Mr Griffith H.F. Cheng, instructed by David Fenn & Co., for the applicant