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Submitted by // J Wong, Partner
15 January 2018


"New Year, New Approach? The SFC's current enforcement activities" 

We have published a new Regulatory newsletter regarding the SFC latest enforcement activities.

Please click here for a printable PDF version.


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.

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Submitted by // K Bowers, Partner / Solicitor Advocate; P Yeung, Senior Associate
08 January 2018

 

When does 'insulting behaviour' before the Labour Tribunal constitute an offence?

Introduction

Legal representation is generally not permitted before the Labour Tribunal ("Tribunal"). Whether litigants are acting as an individual or as a representative of a company (and irrespective of whether they are bringing or defending a claim), appearing before a Presiding Officer can be an unnerving and uncertain experience. Whilst minor, unintentional and one-off breaches of court etiquette during a hearing normally do not result in serious consequences, the Tribunal's Presiding Officer has the power to convict individuals for an offence where they conduct themselves in a manner amounting to 'insulting behaviour'.

This Alert discusses the case of Re Mahesh J Roy [2017] HKCU 2863 and sets out the circumstances in which Presiding Officers can exercise their discretion under section 42 of the Labour Tribunal Ordinance (Cap. 25) ("Ordinance") to summarily punish an individual who "...uses a threatening or insulting expression to or concerning or in the presence of the Presiding Officer" or "...behaves in an insulting manner or wilfully interrupts the proceedings" before the Tribunal.

Re Mahesh J Roy

In this case, the appellant successfully appealed from his conviction for insulting behaviour and disturbing proceedings before a Presiding Officer. The issue first arose when the appellant attended the Tribunal with his friend, who was a claimant in a matter before the Presiding Officer. Whilst waiting for the matter to be called, the appellant spoke with his friend in the public gallery in a manner which the Presiding Officer found to be disturbing. When the Presiding Officer admonished the appellant, he responded belligerently. After some time, when the friend's matter was called, the appellant insisted on speaking with his friend and refused to sit down despite repeated directions from the Presiding Officer to do so. The appellant also declared that he would complain about the Presiding Officer and call the police. Subsequently, the Presiding Officer adjourned the proceedings for the police to be called and notified the appellant that he would be taken to the police station and could be released on bail. In the meantime, the Presiding Officer also reminded the appellant that he had the right to instruct lawyers.

When the appellant next appeared with counsel before the Presiding Officer, he apologised and stated that it had not been his intention to disturb the Tribunal's proceedings. The appellant also stated that his English was poor and that he had only wanted to help his friend, who was also the mother of his child. Nonetheless, the Presiding Officer determined that the appellant was guilty of an offence under section 42 of the Ordinance on the vague basis that he had been "disturbing and interrupting" proceedings or had "wilfully interrupt[ed] the proceedings".

Upon appeal, the Court of Appeal set aside the conviction on the grounds that the Presiding Officer (1) failed to give clear particulars of the charge; (2) failed to hear the appellant's case on lack of wilfulness and failed to consider this defence; (3) failed to consider the adequacy of the appellant's apology; and (4) failed to give reasons for her determination on conviction.

How insulting behaviour should be handled in the Labour Tribunal

In setting aside the conviction, the Court of Appeal stated that in handling situations involving insulting behaviour, Presiding Officers should adopt a progressive approach. First, the Presiding Officer can remind the person involved that insults and threats have no place in a courtroom. If the offending behaviour persists, the person should be excluded from the courtroom, or where that person is a litigant, the Presiding Officer can consider adjourning the proceedings or giving directions for a paper disposal of the matter. Presiding Officers can also give a warning about the possibility of contempt proceedings, or demand for an apology. In any case, summary punishment should be a last resort.

The Court of Appeal further held that whilst section 42 of the Ordinance serves to protect the integrity of proceedings in the Tribunal and ensure orderly conduct, it is a draconian power which must be exercised "cautiously" by the Presiding Officer. At the same time, the Tribunal will not accept conduct which obviously oversteps the line, or disrespectful statements targeted at judicial officers "beyond the due allowance for disappointed or frustrated litigants".

Takeaway points

Whilst minor, inadvertent and non-repetitive insulting behaviour in the Tribunal may be overlooked by a Presiding Officer, litigants in a dispute before the Tribunal (and individuals accompanying them) should be reminded that a courtroom must maintain its solemnity and decorum at all times. Intentional interruptions to the proceedings and unapologetic and recurring insulting or threatening behaviour will not be tolerated. Ultimately, the Tribunal has the power to enlist the assistance of the police, and in appropriate circumstances, even to direct the arrest of individuals. 


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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Submitted by // K Bowers, Partner / Solicitor Advocate
22 December 2017


Banks owe no duty of care to holders of Mareva injunction

Introduction 

In the recent case of Grasberg Capital Asia Ltd v Bank of Communications Ltd HCA 2016 / 784, the Hong Kong Court had the opportunity to consider for the first time the issue of whether banks, upon receiving a Mareva injunction, owe a duty of care to the holder of the injunction. Applying the UK position as held in the House of Lords case of Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181, the Court of First Instance ("CFI") found that banks in Hong Kong do not owe a duty of care to Mareva injunction holders.

Facts

The Plaintiff is a BVI company and one of its shareholders obtained a Mareva injunction which was subsequently continued ("Injunctions") against a number of parties, to restrain them from disposing of their assets and requiring them to maintain their assets at an aggregate value of no less than HK$35m. The Injunctions were served on the Defendant bank, and it was the Plaintiff's case that upon receipt of the Injunctions by the Defendant bank, it owed a duty of care to the Plaintiff to exercise reasonable care and skill when dealing with assets (funds) which fell within the scope of the Injunctions, and that the duty of care includes ascertaining the assets (funds) which fell within the scope of the Injunctions and ensuring that the terms of the Injunctions are fully observed. The Plaintiff argued that it was fair, just and reasonable for a duty of care to be imposed on the Defendant bank.

The Plaintiff highlighted three companies (which were either fully or partially owned and controlled by one of the individuals who was subject to the Injunctions) which held accounts with the Defendant bank. It was argued that the Defendant bank should have known this, and by allowing various transactions in these three bank accounts, it failed to observe the orders under the Injunctions which amounted to a breach of the duties that it owed to the Plaintiff. It is noteworthy that these accounts were not specifically identified in the Injunctions.

Bank owes a duty to the Court, not to the holder of the Injunctions

Applying Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181, the CFI held that the Defendant bank did not owe a duty of care to the Plaintiff. The facts in this UK case are very similar in that the Customs and Excise Commissioners argued that the bank was negligent by authorising transactions involving accounts referred to in the injunction order. It was held in this House of Lords decision that no duty was owed to the plaintiff for the following reasons:-

i) the bank could not be understood as having voluntarily assumed responsibility so as to give rise to a duty of care;

ii) the injunction was enforceable by contempt of court only and the notified party's duty (the bank) is to the court only; and

iii) it would not be fair, just or reasonable to recognise a duty of care in such circumstances.

The CFI also commented that the facts of the UK case were more favourable to the plaintiffs than the facts in this Hong Kong case, as although the accounts were specifically identified in the injunctions in that UK case, no duty of care was found or imposed on the defendant bank.

Comment

This case is a welcome decision for Hong Kong banking institutions as it confirms (that in respect of injunctions) their duty is owed to the Court and there are no conflicting duties owed to the holder of the injunction or to their customers (i.e. those who maintain banking relationships with them). Had there been a duty of care imposed on the Defendant bank in this recent Hong Kong case, this would have given rise to an enquiry as to whether the duty of care should be extended to other third parties who may be holding assets that are subject to a Mareva injunction.

The judgment in this case also confirms that a holder of a Mareva injunction is unable to make a direct claim against a bank in Hong Kong for failure to ensure that the injunction order is observed. However, this does not mean that banks are free to act in a manner that may cause any injunction not to be observed. As banks owe a duty to the Court when they receive an injunction, they are reminded to carefully review its terms and implement systems and controls to effect the order where necessary, including promptly notifying the relevant payment processing units within the bank to place restrictions on the bank accounts concerned. Any failure to ensure that the order is observed may expose the bank to contempt proceedings, which may result in the bank being fined, assets seized, or even the imprisonment of its responsible employees in extreme cases.


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.

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Submitted by // K Bowers, Partner / Solicitor Advocate
20 December 2017


Ardis International Kindergarten Ltd v Tang Kai Ming, Kenneth and Others [2017] HKCU 2932

Introduction

In the recent case of Ardis International Kindergarten Ltd v Tang Kai Ming, Kenneth and Others [2017] HKCU 2932, the Court considered the extent of a landlord's obligation in relation to non-derogation / to provide a tenant with quiet enjoyment of the rented property.

The case concerned a tenancy dispute where a tenant ("Tenant") claimed against the landlords ("Landlords") for the return of rental deposits and damages, and the Landlords counterclaimed for arrears of rent and damages.

Summary

The Tenant entered into two written tenancy agreements ("Tenancy Agreements") with the Landlords of two properties ("Properties"). However, at the start of the tenancies, the Tenant discovered that there was no electricity supply to the Properties.

The Tenant then gave notice to the Landlords to terminate the Tenancy Agreements, demanded the return of the deposits and pre-paid rental, and commenced proceedings on the basis that the Landlords were in breach of the implied covenants of non-derogation and/or to provide the Tenant with quiet enjoyment of the Properties.

Legal Principles of Non-derogation / Quiet Enjoyment

In a nutshell, the principle of non-derogation from grant means that, "…if one man agrees to confer a particular benefit on another, he must not do anything which substantially deprives the other of the enjoyment of that benefit: because that would be to take away with one hand what is given with the other."

As stipulated in Platt & Ors v London Underground Ltd [2001] 2 EGLR 121 (the leading case on the implied covenant against non-derogation), "…it is well established that a landlord, like any grantor, cannot derogate from his grant…there is a close connection, indeed a very substantial degree of overlap, between the obligation not to derogate from grant, the covenant for quiet enjoyment, and a normal implied term in a contract".

Implied Obligations

The Court in this case held that the implication of obligations depends on the facts of each case, and the following general principles of implied terms1:-

"The proposed term (1) must be reasonable and equitable; (2) must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) must be so obvious it goes without saying; (4) must be capable of clear expression and (5) must not contradict any express term of the contract."

Decision

One of the key questions before the Court was "what were the acts (deliberate or otherwise) or omissions of the Landlords by which they have committed to derogate from the grant".

Seeing as it was undisputed that the Landlords had already applied to CLP Power Hong Kong Ltd. ("CLP") for independent electricity supply to the Properties before the signing of the Tenancy Agreements, the Court found that there was nothing further that the Landlords could do to ensure that CLP would complete the work and to supply electricity by the start of the tenancies.

The Court distinguished a case in which the landlord was found liable for breach of the covenant for quiet enjoyment for deliberately cutting off the electricity supply to the rented property. In the present case, the Landlords did not cut off the electricity supply, and there were no complaints that the Landlords had taken any deliberate action to delay the installation of an electricity meter or the supply of electric power to the Properties.

In the Court's view, "…a fair, reasonable or equitable implied duty would be a duty to facilitate the connection of electricity, but not to provide, install or connect electricity by the commencement date of the tenancy agreement, as pleaded by the [Tenant]."

Consequently, the Court found that there was no omission on the part of the Landlords. It followed that the Landlords were not liable for causing any substantial or material interference with or disturbance to the Tenant's full benefit and enjoyment of the Properties, and that therefore, there was no breach of the covenant to allow the Tenant quiet enjoyment of the Properties. By the same token, the Landlords were not liable for rendering the Properties unfit or substantially less fit for the purpose for which they were let to the Tenant, and so there was also no breach of the non-derogation covenant.

The Tenant's claim was dismissed and the Tenant was found liable for the Landlords' consequential loss and damage as a result of the Tenant's wrongful repudiation of the Tenancy Agreements.

Mitigation of Loss

Whilst the Tenant argued that any loss and damage suffered by the Landlords was caused by the Landlords' failure to mitigate their loss, the Court found, on the balance of probabilities, that the Landlords had established their attempt to mitigate their losses by having sought assistance from various estate agents to lease the Properties in the open market.

Comment

It is important to bear in mind that all cases are fact-specific. In reaching its findings, the Court in this case distinguished the facts of other similar (but not identical) cases - for instance, the case where the tenancy agreement contained an express written condition that the landlord had a duty to provide electricity, and the case where the landlord deliberately switched off the electricity supply. Innocent parties in tenancy disputes should bear in mind their duty to take all reasonable steps to mitigate (minimize) their loss.

________________________________
1 Subject to exceptions

 

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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