RE KEE FUNG SING INTERNATIONAL FINANCE CO. LTD. (in Liquidation)

RE KEE FUNG SING INTERNATIONAL FINANCE CO. LTD. (in Liquidation)

The court held that clients on whose instructions CFS purchased securities hold beneficial proprietary interests in those securities as separate trusts; where specific lines of stock are deficient the remaining shares in each line are to be allocated pari passu among claimants (category B); no priority is to be given to cash clients over margin clients; proceeds of sale of warrants and dividend income are to be distributed pari passu aligned with share allocations; the SFC is subrogated to clients' rights to the extent of UECF payments including reasonable costs; liquidators are authorized to implement a procedure of allocation statements, client election (or deemed election to sell), and...

Citation
RE KEE FUNG SING INTERNATIONAL FINANCE CO. LTD. (in Liquidation)
Parties
Company (in Liquidation): Chark Fung Securities Company Limited (in Liquidation); Company (in Liquidation): Kee Fung Sing International Finance Company Limited (in Liquidation); Applicants / Joint and Several Liquidators: Joint Liquidators (Gabriel Tam, Alan Tang and Nicholas Etches); Statutory Regulator / Interested Party: Securities and Futures Commission
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
13 November 2002
Case Number
HCCW365/1998
Procedural Posture
Companies (winding Up) Nos. 362 & 365 of 1998 / Directions Application Under Section 200(3) (hearing in Chambers)
Outcome
Court granted directions in favour of the liquidators as set out in the Schedule and made orders implementing the proprietary recognition of clients, allocation and distribution regime, SFC subrogation mechanism, distribution mechanics and authorization for payment of liquidators' fees from trust assets; costs...
Legal Topics
Proprietary Entitlement of Clients to Securities, Allocation of Mixed Trust Property, Pari Passu Distribution, Statutory Subrogation (sfc/uecf), Liquidators' Remuneration From Trust Assets
Source Language
EN
Company Law Insolvency Law Trusts and Equitable Proprietary Rights Securities Regulation Proprietary Entitlement of Clients to Securities Allocation of Mixed Trust Property Pari Passu Distribution Statutory Subrogation (sfc/uecf) +1 more

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Parties

Chark Fung Securities Company Limited (in Liquidation)

Company (in Liquidation)

Kee Fung Sing International Finance Company Limited (in Liquidation)

Company (in Liquidation)

Joint Liquidators (Gabriel Tam, Alan Tang and Nicholas Etches)

Applicants / Joint and Several Liquidators

Securities and Futures Commission

Statutory Regulator / Interested Party

Procedural Posture

Companies (winding Up) Nos. 362 & 365 of 1998 / Directions Application Under Section 200(3) (hearing in Chambers)

Legal Issues

  1. 1 Whether clients have a proprietary beneficial interest in securities purchased by broker on their instructions or merely an in personam claim against the broker
  2. 2 Whether any priority exists between different classes of clients (cash clients v margin clients) in distribution of remaining securities
  3. 3 Method of allocation of deficient fungible securities among clients

Ratio Decidendi

The court held that clients on whose instructions CFS purchased securities hold beneficial proprietary interests in those securities as separate trusts; where specific lines of stock are deficient the remaining shares in each line are to be allocated pari passu among claimants (category B); no priority is to be given to cash clients over margin clients; proceeds of sale of warrants and dividend income are to be distributed pari passu aligned with share allocations; the SFC is subrogated to clients' rights to the extent of UECF payments including reasonable costs; liquidators are authorized to implement a procedure of allocation statements, client election (or deemed election to sell), and...

Court Disposition

Court granted directions in favour of the liquidators as set out in the Schedule and made orders implementing the proprietary recognition of clients, allocation and distribution regime, SFC subrogation mechanism, distribution mechanics and authorization for payment of liquidators' fees from trust assets; costs...

Orders

  • Clients on whose instructions CFS purchased securities retain individual proprietary beneficial interests in those securities held for CFS/KFS accounts
  • Where sufficient securities exist within a particular line the Joint Liquidators may allocate to clients in accordance with verified claims