News
News //
Submitted by // K Bowers, Partner / Solicitor Advocate
22 September 2017


Building Maintenance: Recent Developments in the Bid-rigging Saga

Introduction

As Hong Kong is a city with a high density population, most people live in private multi-storey buildings or private residential estates with severed blocks of buildings. Naturally, the need to renovate and maintain the common parts of buildings arises. The problem of 'bid-rigging' in building repair works of the common parts has become increasingly prevalent within the community.

Under the Competition Ordinance (Cap. 619), bid-rigging (
圍標) essentially means two or more competitors, without the knowledge of the person calling for bids or requesting a tender, agreeing that they will not compete with each other for tender. Put in the context of building repair works, this may involve building consulting firms / renovation contractors / sub-contractors / property management companies / the Incorporated Owners of the building and even triad members colluding in an attempt to manipulate the tendering process by unlawful means (including significantly inflating maintenance costs) and making secret profits at the expense of property owners. As a result, property owners are forced to pay exorbitant costs for such maintenance / repair works, especially in circumstances where they are unable to assess the reasonableness of the cost as a result of their lack of professional knowledge in the field.

First Ever Conviction in Hong Kong

In September 2016, a sub-contractor was sentenced to 35 months of imprisonment for offering bribes to secure renovation contracts for two residential estates. Remarkably, it was the first ever successful conviction in Hong Kong for bid-rigging in building repair works. The Judge noted that the practice of bid-rigging was 'rampant' and people need to be more aware of it. As observed by Mr. Lam Cheuk-ting, Democratic Party lawmaker and former anti-graft investigator, the conviction has "…marked an "important step" in eradicating tender rigging practices, as it set a precedent and raises public awareness on the issue".

Call for Legislative Amendments

The case demonstrates the lack of protection / regulation in place and calls for amendment to the Building Management Ordinance (Cap. 344) ("Ordinance").

Recently, members of the Legislative Council ("LegCo") expressed their views and concerns over the need to combat bid-rigging to defend the rights and interests of property owners, and urged the Government to take further action. For instance, to "…expeditiously plug the relevant loopholes under the Building Management Ordinance to safeguard the rights and interests of property owners…" as "...bid-rigging seriously undermines the fairness and impartiality of the tendering process of building maintenance works, and also causes the price of the successful bid in maintenance works to far exceed the reasonable market rate, thus greatly increasing the maintenance expense of property owners while the quality of maintenance works cannot be safeguarded".

In response, in the Legco meeting on 8 June 2017, the Secretary for Home Affairs, Mr. Lau Kong Wah indicated that following its previous consultation with the Panel on Home Affairs ("Panel") in May 2016, the Home Affairs Department recently had another consultation with the Panel in March 2017 regarding proposed legislative amendments and the relevant administrative measures proposed to be put in place.

Seeing as the passing and implementation of legislative amendments take time, and as an immediate next step to address the concerns of the public, the Home Affairs Department intends to issue a further Code of Practice in late 2017, incorporating certain proposed amendments to the Ordinance (which are consistent with the current legislation). All Incorporated Owners are encouraged to comply with the Code of Practice.

Comment

As a topical issue in the recent years, any steps towards combatting tender rigging would be in the public's interest. Interested parties are encouraged to keep a close eye on the details and scope of the upcoming issue of the Code of Practice and / or legislative amendments and seek independent legal advice (where necessary). HWB will continue to monitor any future legislative developments.

 

About Us

Howse Williams Bowers is an independent law firm which combines the in-depth experience of its lawyers with a forward thinking approach.

Our key practice areas are corporate/commercial and corporate finance; commercial and maritime dispute resolution; clinical negligence and healthcare; insurance, personal injury and professional indemnity insurance; employment; family and matrimonial; property and building management; banking; financial services/corporate regulatory and compliance.

As an independent law firm we are able to minimise legal and commercial conflicts of interest and act for clients in every industry sector. The partners have spent the majority of their careers in Hong Kong and have a detailed understanding of international business and business in Asia.

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Submitted by // K Bowers, Partner / Solicitor Advocate; P Yeung, Senior Associate
22 September 2017

 

Could moonlighting employees be breaching more than just their employment contracts?

Introduction

In Hong Kong, there is an increasing emphasis on the importance of reciprocal duties of trust and confidence between employers and employees. A 'moonlighting' employee (even one who takes up ancillary employment with a non-direct competitor) often sits in a legally precarious position since questions are bound to arise in relation to his/her fiduciary duties, restrictive covenants and/or the implied term of trust and confidence. In fact, a moonlighting employee is also at risk of committing an offence under section 9 of the Prevention of Bribery Ordinance (Cap. 201) ("POBO") which is concerned with transactions between third-parties and agents in relation to the affairs or business of their principals.

This Employment Alert discusses the judgment of the Hong Kong Court of Final Appeal ("HKCFA") in Secretary for Justice v Chan Chi Wan Stephen [2017] HKEC 505 and examines the circumstances which would render an employee guilty of bribery in the private sector.

Background

This case considers whether Chan, the General Manager of a television station ("TVB"), who also voluntarily hosted a television segment for TVB's pay channel, committed the offence of bribery pursuant to the POBO by contracting with a third-party to host an external television segment. In accordance with the POBO, Chan is an agent of TVB by virtue of being an employee of TVB.

The incident arose when TVB contracted with Olympian City, a Hong Kong shopping centre, to produce a New Year's Eve event. Olympian City subsequently entered into a separate agreement with Chan's agent (Tseng) for Chan to host a live rendition of his television segment at the New Year's Eve event broadcast. Chan received HK$112,000 from Tseng as remuneration for this engagement, but did not seek or obtain prior permission from TVB. Nevertheless, the evidence showed that Chan's engagement to host the external television segment was generally known to TVB.

As a result, Chan was charged in the alternative for: (1) "accept[ing] an advantage… as an inducement or reward for or otherwise on account of [him] doing or having done an act in relation to his principal's affairs or business" contrary to s.9(1) of the POBO; or (2) conspiring with Tseng to commit the s.9(1) offence. Tseng was also charged with the offence of bribery pursuant to s.9 of the POBO. Whilst both Chan and Tseng were acquitted at First Instance, the lower court's decisions were overturned by the Court of Appeal. Upon further appeal, the HKCFA unanimously quashed the convictions.

Issues

The primary issues before the HKCFA were as follows:

(i) What is the mental element required to render an agent guilty under section 9 of the POBO?

(ii) Should "in relation to the principal's affairs or business" be interpreted as requiring an element of prejudice to the principal?

(iii) How should the HK Courts approach the defence of "reasonable excuse" under section 9 of the POBO?

(i) Mental element

To secure a conviction under section 9 POBO, the prosecution must prove that the agent "knew or believed" that the advantage was provided as an inducement or reward or otherwise. In other words, if the agent receiving an advantage was unaware that the advantage was offered for a corrupt purpose, he will not be liable. Since the prosecution failed to establish that Chan knew or believed that the remuneration he received for hosting the external television segment was for a corrupt purpose, Chan couldn't be held culpable for the section 9 offence.

(ii) "In relation to the principal's affairs or business"

The HKCFA determined that section 9 POBO required an individual's mischief which is "aimed at the principal's business" to be conduct which "subvert[ed] the integrity of the agency relationship to the detriment of the principal's interests". Conduct which is beneficial to and aligned with the interests of the principal would fall outside the scope of section 9. In accepting remuneration to host the external television segment, Chan had not intended to influence or affect TVB's affairs or business in a manner that undermined the integrity of his agency relationship with TVB. Consequently, Chan couldn't be held culpable for the section 9 offence.

(iii) "Reasonable excuse"

"Reasonable excuse" may be a defence to an act that would otherwise contravene section 9 POBO. Since the HKCFA did not consider that Chan had breached section 9 (for the reasons stated above), the majority of the judges saw no basis for assessing the defence in this case. However, Tang PJ maintained a different view and thus elaborated on the "reasonable excuse" defence. Specifically, Tang PJ held that Chan had a reasonable excuse for hosting the external television segment as he "honestly believed that his principal would not object" to his participation.

Implications for moonlighting employees

Although this judgment may bring a sigh of relief to moonlighting employees, it certainly does not provide a carte blanche for multiple employment (especially where the employers are in the same industry). The decision on whether or not a breach of section 9 POBO has taken place is fact-sensitive and dependent on factors such as the agent's intentions and the nexus between the principal's business and the third-party's terms of engagement. Moonlighting employees should seek their employer's informed written consent before taking on additional employment, so as to ensure compliance with their employment obligations, and steer clear of any potential criminal prosecution.


About Us

Howse Williams Bowers is an independent law firm which combines the in-depth experience of its lawyers with a forward thinking approach.

Our key practice areas are corporate/commercial and corporate finance; commercial and maritime dispute resolution; clinical negligence and healthcare; insurance, personal injury and professional indemnity insurance; employment; family and matrimonial; property and building management; and financial services/corporate regulatory and compliance.

As an independent law firm we are able to minimise legal and commercial conflicts of interest and act for clients in every industry sector. The partners have spent the majority of their careers in Hong Kong and have a detailed understanding of international business and business in Asia.

Disclaimer: The information contained in this article is intended to be a general guide only and is not intended to provide legal advice.  Please contact pr@hwbhk.com if you have any questions about the article.

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Press //
Submitted by // C C Tan, Partner
22 September 2017


Howse Williams Bowers ("HWB"), a leading Hong Kong independent law firm, acted as the legal adviser to the sole sponsor and the underwriters in relation to the approximately HK$82.5 million share offer and listing of Cool Link (Holdings) Limited (Stock Code: 8491) ("Cool Link") on the Growth Enterprise Market of the Stock Exchange. Vinco Capital Limited acted as the sole sponsor while Pacific Foundation Securities Limited and Vinco Capital Limited acted as the joint lead managers. The shares commenced trading on the Growth Enterprise Market of the Hong Kong Stock Exchange on 22 September 2017.

Cool Link is one of the leading Singapore-based importers of food products in the ship supply industry in Singapore. They supply food products to ship chandlers for consumption by ship crews and passengers.

The HWB team, led by partner Chia Ching Tan, had lead responsibility in the verification process, legal documentation, corporate and regulatory issues and general transaction management.


About Us

Howse Williams Bowers is an independent law firm which combines the in-depth experience of its lawyers with a forward thinking approach.

Our key practice areas are corporate/commercial and corporate finance; commercial and maritime dispute resolution; clinical negligence and healthcare; insurance, personal injury and professional indemnity insurance; employment; family and matrimonial; property and building management; intellectual property; banking; financial services/corporate regulatory and compliance.

As an independent law firm we are able to minimise legal and commercial conflicts of interest and act for clients in every industry sector. The partners have spent the majority of their careers in Hong Kong and have a detailed understanding of international business and business in Asia.

Disclaimer: The information contained in this article is intended to be a general guide only and is not intended to provide legal advice.  Please contact pr@hwbhk.com if you have any questions about the article.

 
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Submitted by // B Ho, Partner
18 September 2017


Howse Williams Bowers ("HWB"), a leading Hong Kong independent law firm, on 11 September 2017, advised Truly International Holdings Limited ("Truly") on the completion of its HK$320 million placing of new shares. The placing agents were HSBC and Mizuho. At the same time, the controlling shareholder of Truly subscribed for shares in Truly in the sum of HK$107.7 million.

The principal business activities of Truly are the manufacture and sale of liquid crystal display products and electronic consumer products.

The HWB team was led by corporate partner, Brian Ho. The team had lead responsibility for legal documentation and general transaction management.


About Us

Howse Williams Bowers is an independent law firm which combines the in-depth experience of its lawyers with a forward thinking approach.

Our key practice areas are corporate/commercial and corporate finance; commercial and maritime dispute resolution; clinical negligence and healthcare; insurance, personal injury and professional indemnity insurance; employment; family and matrimonial; property and building management; intellectual property; banking; financial services/corporate regulatory and compliance.

As an independent law firm we are able to minimise legal and commercial conflicts of interest and act for clients in every industry sector. The partners have spent the majority of their careers in Hong Kong and have a detailed understanding of international business and business in Asia.

Disclaimer: The information contained in this article is intended to be a general guide only and is not intended to provide legal advice.  Please contact pr@hwbhk.com if you have any questions about the article.

 
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