Re Piper Jaffray Asia Securities Ltd

HCMP 2569/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2569 OF 2012

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J U D G M E N T

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1.The applicant is a securities broker. It is a subsidiary of the Piper Jaffray Group of companies with the ultimate parent company listed on the New York Stock Exchange and based in Minnesota, the United States of America. The applicant seeks an order to pay certain cash and securities as particularised in three updated Schedules A, B and C produced in exhibit CKSL-22 in the 3rd affirmation of one Chang Kit Sun Lama, the Head of Operations of the applicant filed on 18 December 2012. The following facts are gathered from the 1st, 2nd and 3rd affirmations of Mr Chang filed on 12 November, 17 December and 18 December 2012.

2.The management of the Piper Jaffray Group has recently decided to put an end to the operations of the applicant by means of a members’ voluntary winding up.

3.On 28 August 2012, the applicant’s board resolved to cease its securities brokerage business from 30 September 2012.  Its solicitors have communicated with the Securities and Futures Commission (“SFC”) since 24 August 2012 formally notified the SFC of the cessation of business on 12 September 2012 and requested for revocation of licence by the SFC on 12 October 2012.

4.The applicant has clients in Hong Kong, the mainland and Taiwan.  As soon as the decision was made to put an end to the business, the staff of the applicant began contacting clients seeking instructions from them on how to deal with their assets.

5.Advertisements were placed on 27 August 2012, in the South China Morning Post and Hong Kong Economic Times to inform all clients that the applicant would cease all activities regulated by the SFC with effect from 24 September 2012.  Similar advertisements were placed in the South China Morning Post and Hong Kong Economic Times on 1 September, 5 September, 8 September, 12 September, 15 September, 19 September, 22 September, 26 September and 29 September 2012.  Similar advertisements were placed in the Taiwan Apple Daily in eight different districts on 7 October 2012 and the People’s Daily (Renmin Ribao) on 11 October and 17 October 2012.

6.The advertisements requested clients who maintained cash and/or held securities in the accounts of the applicant to provide instructions regarding the disposal of their assets by completing and signing the applicable forms sent to them and returned them to the applicant.

7.The advertisements also stated that an application would be made to the court of Hong Kong for the continued safekeeping of the client assets for which the applicant had received no instruction from the client.

8.In addition, a similar notice was posted on the website of the Piper Jaffray Group from 24 August 2012 onwards.  The applicant’s solicitors and its accountants KPMG were also instructed to assist in contacting clients.

9.The originating summons was also served on those clients whose assets as kept by the applicant exceed HK$2,000.  I dispense with the requirement of personal service and the need for leave to serve outside Hong Kong as these proceedings are of a non-contentious nature and there have been repeated attempts to contact the clients. 

10.There are still 80 clients who have not responded to the applicant’s request for instructions. The total value of their cash and securities held by the applicant as at 31 October 2012 was at HK$106,531.81.

11.Apart from the 80 clients who had not responded, there are 47 clients who had been contacted by the applicant but who had so far failed to give any instructions on the disposal of their assets.  The total value of their cash and securities as at 31 October 2012 was at HK$53,592.92. 

12.There are another 24 clients who had advised the applicant to forfeit their assets.  The total value of cash and securities of these clients as at 31 October 2012 was at HK$4,353.95.

13.The applicant accepts that a client-broker relationship is one of principal and agent as a matter of law and it is holding the assets of its clients as their trustee.  The agreements it signed with its clients are in conformity with such relationship.

14.In the premises, I am satisfied that the applicant is entitled to the order sought.  I therefore make:

(1)  a declaration that the items of unclaimed clients’ monies and securities set out in the three schedules in Exhibit CKSL-22 of the 3rd affirmation of Chang Kit Sun Lama filed on 18 December 2012 (the “Affirmation”) are held by the applicant as trustee for the clients against whom the items of unclaimed clients’ moneys and securities are noted in the three schedules;

(2)  an order that the applicant do pay into court the unclaimed clients’ moneys and securities particularised in the three schedules;

(3)  an order that notification of this order and the rights of the clients of the applicant to apply for payment out of their respective unclaimed cash and securities under Order 92 of the Rules of High Court be given by way of advertisements in a Chinese-language and an English-language daily newspapers in Hong Kong, the People’s Daily (Renmin Ribao) in the mainland and one Chinese-language newspaper in the same eight districts in Taiwan as previously published on 7 October 2012 within 14 days from the date of this order, and by way of letters to all the clients at their last known addresses.

(4)  a further declaration that, upon compliance with paragraph 3 above, O 92 r 4 of the Rules of High Court is deemed to have been complied with by the applicant.

(5)  No order as to costs.

Ms Grace Ng, of O’Melveny & Myers, for the applicant