Re K&R International Ltd

Deputy Judge Winnie Tsui in Chambers
26 February 2021


X was licensed by the Hong Kong Monetary Authority (the HKMA) to issue and operate prepaid cards, namely, anonymous cards, personal cards and co-brand cards. X decided to cease business in August 2020 and launched a redemption exercise through announcements published on its website and newspapers, inviting cardholders to apply to redeem the outstanding value stored on the cards by mid-May 2021. In November 2020, the HKMA expressed concerns over certain issues relating to compliance with licensing conditions and asked X to take proactive measures to successfully contact all verified users with a view to completing the redemption by the end of December 2020 and the residual user float ready to be transferred to court by the end of January 2021. In January 2021, X issued an announcement on its website bringing forward the redemption deadline to 29 January 2021. On 21 January 2021, X applied for an order to pay the unredeemed sum into court under s.62 of the Trustee Ordinance (Cap.29) (the Ordinance). As at that date the unredeemed amount was about $5 million. X claimed that this sum was reduced to about $3.6 million as of 22 February 2021, shortly before the present hearing.

Held, dismissing the application, that:

  1. When considering whether to make an order under s.62 of the Ordinance, the court would first need to be satisfied that the property which formed the subject matter of the payment in application was trust property held by the applicant as trustee. If so, the court then proceeded to consider whether it should exercise its discretion to allow payment in.
  2. It was incumbent on an applicant to demonstrate by proper evidence that it had taken all reasonable steps to try to identify and locate the beneficiaries, notify them of the cessation of business and take the necessary step to return the assets to them. The rationale was that where a company elected to cease its business involving client assets, it bore the primary responsibility to return the assets entrusted to it by the clients. What was reasonable depended on the circumstances of each case, including the nature of the business, the circumstances in which the assets were received by the applicant in the first place and the information it had in respect of the beneficiaries (Re Drake & Morgan Ltd (HCMP 1490/2009, [2009] HKEC 1396), Re X Ltd (HCMP 1658/2017, [2018] HKEC 91), Re RBC Investor Services Trust Hong Kong Ltd [2018] 5 HKC 80 applied).
  3. In exercising its discretion, the court would take into account the implication of a payment in order both from the perspective of the untraceable clients and from that of the court. Once the client asset was paid into court, the client was forced to get back his own asset from the court with incidental costs as a result of the unilateral cessation of the applicant’s business. Further, the costs burden of managing and administering the assets effectively shifted from the applicant to the court and thus the taxpayer. The court needed to consider whether there was sufficient justification for such use of the court resources. Depending on the circumstances, the applicant should also give some thought to any viable alternative solution (Re RBC Investor Services Trust Hong Kong Ltd [2018] 5 HKC 80 applied).
  4. The Court was not satisfied that the discretion should be exercised to grant the order sought as X had not demonstrated that it had exhausted all reasonable means to trace and contact the cardholders for the purpose of returning the stored value to them. There were gaps in the evidence as to what personal information of the holders of personal cards and co-brand cards was in X’s possession. The redemption timetable was also unreasonably and unnecessarily tight. The redemption period was drastically cut short to two weeks with no apparent reason given. In the one month from 21 January 2021, a total of about 900 cardholders had redeemed their cards. The total redemption amounts were about $1,400,000. There was reason to believe that this trend would continue. X should give serious thought to whether there were other options apart from paying the money into court.


This was an application for an order to pay a sum into court under s.62 of the Trustee Ordinance (Cap.29).