News
News //
Submitted by // K Bowers, Partner / Solicitor Advocate
21 July 2017


…AND YOU'RE OUT OF TIME!

Limitation Period and the "Analogy Exception"

Summary

The recent case of Liu Hsiao Cheng v Wong Shiu Wai (No. 2) [2017] HKEC 541 involves disputes between the Plaintiff and the 1st Defendant, who were shareholders and directors of a Hong Kong company in the tobacco business in Zimbabwe ("Company"). In essence, the Plaintiff brought an action against the 1st Defendant for breach of fiduciary duty resulting from various wrongful acts. The 1st Defendant counter-claimed against the Plaintiff that he had breached his own fiduciary duty as a director / de facto director of the Company, by refusing and / or failing to provide an account of funds remitted to Zimbabwe ("Remittances") despite repeated requests by the 1st Defendant.

Seeing as some of the alleged Remittances were made prior to 12 July 2007 (more than 6 years before the date of the start of the action), the Plaintiff made an application to strike out the 1st Defendant's claim in relation to those Remittances on the ground that they were brought out of time by virtue of s.4(2) of the Limitation Ordinance (Cap. 347) ("Ordinance"). Pursuant to s.4(2) of the Ordinance, "an action for an account shall not be brought in respect of any matter which arose more than 6 years before the commencement of the action." In other words, all parties concerned would be time-barred from bringing an action once the 6 year limitation period had expired. [1]

On the other hand, the 1st Defendant argued that s.4(2) of the Ordinance did not apply since his claim for an account against the Plaintiff was a claim for equitable relief under s.4(7) of the Ordinance in circumstances where the duty to account arose from a violation of an underlying right which was equitable in nature, based upon the Plaintiff's fiduciary duty. Pursuant to s.4(7) of the Ordinance, "[the] section shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any provision thereof may be applied by the court by analogy in like manner as the corresponding enactment contained in the Limitation Act 1980 (1980 c 58 UK) is applied in the English Courts." ("Analogy Exception").

Alternatively, the 1st Defendant also argued that his claim could be regarded as a claim to recover trust property or the proceeds thereof within the meaning of s.20(1)(b) of the Ordinance, for which there is no prevailing limitation period.

Decision

The Court decided that the 1st Defendant's claim for an account was for equitable relief, based on the Plaintiff's fiduciary duty as a director / de facto director of the Company, to account to the Company for monies belonging to the Company which were remitted to Zimbabwe. Accordingly, s.4(2) had no direct application to the 1st Defendant's claim.

Nonetheless, under s.4(7) of the Ordinance, s.4(2) might still apply by virtue of the Analogy Exception. Under the Limitation Act 1939 and the Limitation Act 1980, the English Courts have adopted the approach that in determining whether the statute of limitations could apply by 'analogy' to an action for an account in equity, one had to ask whether the underlying cause of action giving rise to the duty to account was itself subject to any prevailing time limit as prescribed by the statute of limitations. In summary, where the equitable claim for an account is ancillary to another equitable claim, the same limitation period would also apply to the claim for an account. In this case, the 1st Defendant's claim against the Plaintiff for an account was based on (i) the Plaintiff being a fiduciary of the Company, and (ii) assets belonging to the Company had (allegedly) coming under the Plaintiff's control. On the other hand, if there is no limitation period applicable to the other equitable claim, the claim for an account would likewise not be subject to any limitation period.

Ultimately, the Court held that the 1st Defendant's claim for an account in relation to Remittances made on or before 12 July 2007 was time-barred (upon expiry of the 6 year limitation period) and granted the Plaintiff's strike-out application. As a matter of principle, the Court held that the prevailing 6 year limitation period could be applied by analogy to the claim for an account by the 1st Defendant against the Plaintiff.

Moreover, the Court disposed of the 1st Defendant's alternative argument based on s.20(1)(b) of the Ordinance, as its claim could not be regarded as an action to recover trust property belonging to the Company, or the proceeds thereof in the Plaintiff's possession.

Comment

This recent judgment illustrates the approach taken by the Court when determining whether any exceptions to the Ordinance would apply to actions brought after the prescribed limitation period. Parties should be mindful of the applicable limitation periods and are encouraged to seek legal advice, where necessary.

Parties should always avoid waiting until the last minute to commence any Court action.

___________________________________________________
[1] Note: Limitation periods vary depending on the nature of the claim.

 

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.

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.

› read more
› minimize
News //
Submitted by // A Scott, Partner
21 July 2017


Apology Bill

1. On 13 July 2017, the Legislative Council passed the much-anticipated Apology Bill, first introduced by the Working Group on Mediation of the Department of Justice in 2010. This is a landmark for Hong Kong as the first Asian jurisdiction to enact a law of this kind.

2. The spirit of the apology legislation is to allow an apology to be made without fear that it will be used as evidence of admission of fault or liability in civil proceedings. Since the Civil Justice Reform in 2009, the increasing use of mediation has rendered apology legislation all the more necessary. Particularly in medical negligence cases, an apology (or lack thereof) can 'make or break' successful resolution.

3. The Apology Bill is a relatively short document, containing 13 Clauses and one Schedule. It is similar to apology legislation in other common law jurisdictions.

4. By virtue of Clause 6, the Bill applies to civil judicial, arbitral, administrative, disciplinary and regulatory proceedings. It does not apply to criminal proceedings and proceedings conducted under the Commissions of Inquiry Ordinance (Cap. 86), Control of Obscene and Indecent Articles Ordinance (Cap. 390) and Coroners Ordinance (Cap. 504).

5. The Bill applies to apologies made after the commencement date of the Ordinance.

6. The Bill does not apply to apologies made by a person in a document filed or submitted; testimony, submission or similar oral statement; or adduced as evidence with the consent of the apology-maker in the applicable proceedings.

7. Clause 4 defines "apology" as "an expression of the person's regret, sympathy or benevolence in connection with the matter, and includes, for example, an expression that the person is sorry about the matter". The expression may be oral, written or by conduct. The definition encompasses an expression that amounts to express or implied admission of fault or liability and also statements of fact.

8. By virtue of Clause 7, an apology is generally not admissible for determining fault, liability or any other issue to the prejudice of the apology-maker in certain proceedings.

9. By Clause 8, the arbiter of any proceedings has the discretion in exceptional circumstances to admit statements of facts contained in an apology as evidence if it is just and equitable to do so. An example is where there is no other evidence available for determining an issue.

10. An apology does not amount to an "acknowledgment" for the purpose of section 23 of the Limitation Ordinance (Cap. 347) (Clause 9).

11. Under Clause 10, an apology does not void or affect any insurance cover, compensation or other form of benefit for any person under a contract of insurance or indemnity.

12. Clause 11 provides that the Bill does not affect discovery or a similar procedure in applicable proceedings; certain provisions in the Defamation Ordinance (Cap. 21) in which an apology is relevant as defence or for mitigating damages; or the operation of the Mediation Ordinance (Cap. 620).


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.

› read more
› minimize
News //
Submitted by // K Bowers, Partner / Solicitor Advocate; P Yeung, Senior Associate
20 July 2017

 

Proposed Changes to Hong Kong's Employment Scene

Employment (Amendment) Bill 2017

On 17 May 2017, the Employment (Amendment) Bill 2017 ("Bill") was introduced in Hong Kong's Legislative Council ("LegCo"). The Bill is largely the same as the Employment (Amendment) Bill 2016 which lapsed at the end of 2016. Our alert on the 2016 Bill can be found here.

In summary, the Bill intends to empower the Labour Tribunal to make an order compelling employers to reinstate or re-engage employees who have been unreasonably and unlawfully dismissed, without the employer's prior consent. Under current Hong Kong law, an employer is required to agree to reinstatement or re-engagement before a Court can make such an order.

The main difference between the 2017 Bill and the 2016 Bill is that the proposed penalty for an employer who fails to comply with an order for reinstatement under the 2017 Bill is set at three times the employee's average monthly wages, subject to a maximum of HK$72,500 to be paid to the employee. This is an increase to the maximum penalty of HK$50,000 under the 2016 Bill. Failure to pay the penalty wilfully and without reasonable excuse is made a criminal offence.

Reinstatement / Re-engagement

An order for reinstatement/re-engagement is rarely asked for or made. This is because by the time the employer and employee have litigated the matter in the Labour Tribunal or High Court, the relationship between the parties has significantly deteriorated. Therefore, whether the proposed new law will in reality be an additional recourse of action available to the employee is yet to be seen.

Although the proposed amendment removes the need to obtain an employer's agreement, the Court is still required to hear both parties' views and consider all the circumstances of the case. If there is evidence that, for example, the relationship between the employer and the employee has completely broken down and it would be impracticable to re-employ the employee, then it is unlikely that the Court will order a reinstatement/re-engagement.

Proposed changes to the MPF offset mechanism

Meanwhile, a proposal in LegCo calls to scrap a controversial arrangement where employers dip into their workers' pension funds in order to pay their employees' severance and long-service payments. With strong opposition from the business sector, it remains to be seen if the proposal will come into effect.

Current MPF offset mechanism

Under current Hong Kong law, an employer who is liable to pay an employee severance payment or long service payment can offset these payments with the accrued benefits derived from the employer's contributions to an MPF scheme for the employee. In other words, employers can use the employees' pension funds to offset the severance or long service payments.

An employer, after paying an employee his/her severance or long service payment, can apply to the MPF trustee for re-payment from the employee's MPF fund. An employee, if not paid the entire amount, can also apply to withdraw such sum from his/her MPF account.

As a result of the MPF offset mechanism, billions of dollars are withdrawn yearly from employees' MPF accounts. HK$3.85 billion was withdrawn last year, which represents a 70% increase from 2012.

Proposed change

A recent proposal in LegCo calls for an abolishment of this offset mechanism, which means that employers will have to dig into their own pockets to pay severance or long service payments to eligible employees, thereby increasing business and overhead costs.

Although employers will no longer be repaid these payments from their employees' MPF accounts, the proposal calls for a reduction in the amount of severance and long service payments in order to reduce the burden upon employers. The amount payable, if the proposal comes into effect, will be adjusted downwards from the existing entitlements of two-thirds of the last month's wages to half, for each year of service.

The proposal comes after months of consultations with both employer and employee groups, but is still vigorously opposed by the business sector which could try to block the implementation of the proposal.

If the proposed change comes into effect, it would not apply retroactively. Further, employers would also have a 10-year period from the date of implementation during which the Government would bear part of the costs involved in such payments, thereby allowing business and other employers to prepare and making arrangements in light of the change.

Although it would be a welcome development for employees, the proposal is predicted to hit small and medium sized businesses hard. 


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.

› read more
› minimize
News //
Submitted by // K Bowers, Partner / Solicitor Advocate
20 July 2017


Greenlight for Third Party Funding for ADR in Hong Kong…Finally! 

Note: This is an update to our March 2017 Dispute Resolution Alert. Please see the Alert for more information.

Introduction


The Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Bill ("Bill") was passed by the Legislative Council on 14 June 2017. Long-awaited by third party funders and other members of the arbitration and mediation sectors, the passing of the Bill means that it will soon be legal for third parties to fund arbitration and mediation proceedings in Hong Kong.

Changes to the Bill

The final version of the Bill contains two changes compared to its previous version, first introduced in December 2016. Firstly, lawyers are now permitted to fund proceedings as third parties. Secondly, there are now more situations where confidential information can be disclosed in mediation proceedings.

Lawyers as third party funders to arbitration & mediation proceedings

The most notable update to the Bill is that lawyers are now permitted to fund arbitration and mediation proceedings as third parties. In the previous version of the Bill, lawyers were restricted from funding third party proceedings due to concerns about conflicts of interests and other professional conduct issues. Under the final version of the Bill, lawyers and law firms are now permitted to do so. However, it is not permitted for lawyers or law firms to fund proceedings if they are acting for any of the parties in the proceedings.

Permitting disclosure of mediation proceedings to seek funding

The second change to the Bill is that there are now more situations in which information can be disclosed for the purpose of seeking third party funding in mediation proceedings. Under s. 8 of the Mediation Ordinance ("MO"), "Mediation Communications" (as defined under the MO1) are confidential and cannot be disclosed except in circumstances provided for by the MO. The Bill introduces an exception to this rule by allowing a party to mediation to disclose Mediation Communications for the purpose of finding third party funding. In the previous version of the Bill, a party must have agreed to mediation before Mediation Communication could be disclosed. The final version of the Bill will allow any person to disclose Mediation Communication for the purpose of finding third party funding, even before having agreed to mediate.

The updated Bill also allows for the disclosure of Mediation Communication for the purpose of obtaining professional advice in connection with third party funding. In addition, it also allows a funded party, or a third party funder, to disclose Mediation Communication in legal proceedings arising out of the third party funding of mediation. However, leave of the relevant court or tribunal must be obtained before the disclosure.

Implementation

Code of Practice for Third Party Funding of Arbitration and Mediation Proceedings

Under the Bill, a Code of Practice will be issued by an authorised body for the purpose of regulating the activity of third party funders in Hong Kong. Whilst an authorised body has not yet been appointed, s. 98Q of the Bill provides a number of suggested practices and standards, which includes rules relating to:-

• the content of promotional materials;
• minimum capital requirements for third party funders;
• conflicts of interests, and
• the content of third party funding agreements, including:-

o the degree of control of third party funders;
o liability of third party funders, and
o the withholding or termination of funding.

The Code of Practice will not be legally binding, but should be admissible as evidence in court or in arbitral proceedings. It should also be taken into account by the court or an arbitration tribunal if it is relevant to a question being decided in these proceedings.

No timeline for implementing the Bill

Whilst the Bill has been passed by the Legislative Council, the operative sections are not yet in force. There is currently no specific timetable for the commencement of the operative sections, particularly in view of the fact that both the advisory body and the authorised body will first need to be appointed. Further, the authorised body will need to draft and publish the Code of Conduct before the commencement of the operative sections.

Comment

The legalisation of third party funding is expected to bring a number of changes to arbitration and mediation proceedings in Hong Kong. In particular, third party funding should help to promote arbitration as a cost-effective method of resolving disputes and lower the barrier to entry for parties seeking to arbitrate. Further, it should give companies greater flexibility in managing their risks by allowing them to offload the cost of arbitration to third party funders.

Overall, the relaxation of the rules against third party funding puts Hong Kong more in line with other major arbitration centres, and should help to enhance Hong Kong's position as a major centre for international arbitration.

Meanwhile, it remains to be seen how effective the new third party funding regime will be in terms of mediation in Hong Kong. The jury is still out on whether the introduction of the Bill will have any material impact upon the volume and frequency of mediation in Hong Kong, which is a voluntary dispute resolution process with mediators applying a facilitative model to achieve financial and other non-financial settlements - something not necessarily in tune with the commercial objectives of potential third party funders.

As the Bill is not yet in operation, parties concerned should keep a close eye on the upcoming details about the implementation of the Bill, such as the date of commencement of the operative sections. Third party funders should pay particular attention to the Code of Practice which will be issued by the authorised body, and for upcoming details of any compliance obligations.

Defined in s. 2 of the Mediation Ordinance as "anything said or done, any document prepared, or any information provided for the purpose of or in the course of mediation, but does not include an agreement to mediate or a mediated settlement agreement."

 

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.

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.

› read more
› minimize