Lloyd's Maritime and Commercial Law Quarterly
Trust in money and money in trust: brokers, barbers and Hong Kong oddities1
Arianna Pretto * and Bernard Rudden †
Unlawful dispositions of monies received by stockbrokers for the purchase of securities or derived from the sale thereof and supposedly held by them on trust for their clients are one of the great concerns of modern securities regulation. The fact that the money is held upon trust offers some protection to the investor, with a corresponding danger to some recipients. In Hong Kong, from the point of view of recipients, the Securities Ordinance appears on its face to attach particulary harsh consequences to such dispositions. It seems to provide that in every case the disposition shall be void and the recipient shall obtain no title to the money received. This departs sharply from the general principles about the nature of money, its circulation in the tangible form of coins or banknotes and the passing of title in it by means of delivery. The
occasio legis, though particular, being perhaps determined by the local worry about the large numbers of small stockbrokers operating in Hong Kong, invites reflection on the drafting. Interpretation should try to mitigate any excessive restrictions to the circulation of money that may derive from a literal reading of the provision. This paper examines this situation in a comparative context and seeks to reconcile it with the general principles of the law relating to money.
This paper is primarily concerned with one important aspect of securities regulation in Hong Kong. In these days of globalisation, to deal with such a matter in an English journal needs no apology. However, in this case, the particularities of the law of Hong Kong also have an immediate bearing on similar problems in England. The subject is the misdirection of money by a stockbroker and the victim investor’s hopes of restitution from the recipient. This is territory familiar to the readers of this Quarterly.
This analysis of the Hong Kong Ordinance should be of immediate interest to all engaged in, or likely to be affected by, that species of legislative activity. It is in all probability party because the common law’s basic position has been insufficiently clear that the Hong Kong regulation was enacted in the words which now appear. There is a
* Brasenose College, Oxford. A.P. would like to thank the Arts and Humanities Research Board and the University of Insubria for their financial support.
† Emeritus Professor of Comparative Law, University of Oxford; Emeritus Fellow of Brasenose College, Oxford.
1. The idea for this paper originated from the vivid interest aroused by posting the core problem on the Restitution Discussion Group, an e-mail list hosted within the University of Oxford and maintained by Professor L.D.Smith of McGill University (previously St Hugh’s College, Oxford). The authors wish to thank the subscribers to the list for their comments. They are very grateful also for the bibliographical assistance so readily furnished by the Law School of the City University of Hong Kong, notably by Professor E.L.G.Tyler and by the Law Librarian, Ms Madeleine Lee, and her staff. The article was submitted for publication on 4 October 2000.
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