Pledge by Constructive Delivery in Hong Kong

Pledge, being the oldest way of secured financing, is still actively pursued by the commercial community in modern commodity trade finance. Nonetheless, in two recent decisions in Hong Kong, the courts were divided as to the nature and effect on the creation of a pledge by constructive possession. This note will first provide a summary of the facts and decisions of the two cases and an overview on how a pledge is applied in modern trade finance through constructive delivery. It will then discuss two specific issues generated by these two cases, namely the law of attornment and the nature of a trust receipt