News
News //
Submitted by // K Bowers, Partner / Solicitor Advocate; P Yeung, Senior Associate
28 November 2017

 

A time-honoured tradition: something promised, something given, something performed

Background

It is a well established legal principle that consideration is a vital element in forming legally binding contracts. Consideration requires that each party to a contract provide something of value (a promise, an object, or an act) in exchange for receiving something of value. A contract that allows one party to gain from the deal without giving up anything is void and unenforceable because there has been no mutuality of obligations.

In the context of employment agreements, establishing the existence of consideration is often not an issue because the employers usually promise to provide compensation and in return employees provide their service.

In the case of Wu Kit Man v Dragonway Group Holdings Limited [2017] HKCFI 986, although the parties entered into an addendum to the employment contract which provided that the employee had a right to receive a bonus, the terms did not require her to fulfil any obligations in return. The Court held that the addendum was invalid due to a lack of consideration.

Wu Kit Man v Dragon Group Holdings Limited

In Wu Kit Man, the employee Wu was employed by Dragonway in May 2015 to assist with facilitating Dragonway's IPO on the Hong Kong Stock Exchange. Around five months into Wu's employment, the parties signed an addendum stating that:

"If the Company or its holding company ceased the listing plan or you leave the Company for whatever reason before 31 December 2016, a cash bonus of HK$350,000 will be offered to you within 10 days after the cessation or termination and in any event no later than 31 December 2016."

Wu left her employment on 21 December 2015 and claimed an entitlement to the cash bonus of HK$350,000 pursuant to the addendum. Wu was successful before the Labour Tribunal where the Presiding Officer found that the addendum was valid and binding.

Decision of the Hong Kong Court of First Instance

Upon appeal by Dragonway, the Hong Kong Court of First Instance overturned the Labour Tribunal's decision. On the facts determined by the Presiding Officer (which Wu did not dispute on appeal), the addendum did not require Wu to perform any work beyond what was required of her under the original employment contract. Accordingly, the Court found that, as a matter of law, the employment addendum was only beneficial to Wu and therefore invalid.

Implications for employers and employees

In executing employment addendums or side letters, the parties must ensure that sufficient mutual consideration has been given in addition to the consent of the parties to vary the original terms of employment. Alternatively, the agreement could be executed in the form of a deed, which is binding irrespective of the existence of any consideration.


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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News //
Submitted by // K Bowers, Partner / Solicitor Advocate
28 November 2017


Joint and Several Liability of Co-Owners

Wong Tak Man Stephen v Chang Ching Wai and Another [2017] HKCU 2685

Introduction

In the recent case of Wong Tak Man Stephen v Chang Ching Wai and Another [2017] HKCU 2685, the Court (notably for the first time) decided on the proper construction of section 34 of the Building Management Ordinance (Cap. 344) ("BMO").

The Plaintiffs were the joint and several liquidators of the Incorporated Owners ("IO") of Nos. 6, 6A, 6B, 8, 10, 12, 14 & 16 Wing Kwong Street ("Building"), while the Defendants were two of the owners of the Building.

Summary

Between 2007 and 2009, the IO engaged a construction company ("Company") to perform refurbishment works at the Building ("Refurbishment Work"). Subsequently, the Company brought a claim against the IO for the outstanding payment for the Refurbishment Work and obtained a default judgment in the sum of HK$1,143,567.50, together with interest and costs ("Judgment Debt"). The IO was eventually ordered to be wound up on the basis of the Judgment Debt.

Whilst the Plaintiffs had attempted to recoup contributions from the owners of the Building to settle the relevant debts and liabilities, a substantial number of the owners (including the Defendants) had failed to contribute to the Refurbishment Work and / or the contingency fund set up by the Plaintiffs. The Plaintiffs then commenced proceedings against the Defendants seeking (1) a declaration that the Defendants should be jointly and severally liable for all debts and liabilities of the IO, and (2) an order that the Defendants should pay HK$3,649,932.77 to the Plaintiffs.

The crux of the dispute surrounded the proper interpretation of section 34 of the BMO ("Section 34"). Pursuant to Section 34, "In the winding up of a corporation under section 33, the owners shall be liable, both jointly and severally, to contribute, according to their respective shares, to the assets of the corporation to an amount sufficient to discharge its debts and liabilities." (emphasis added)

The Plaintiff submitted that each of the owners of the Building should be jointly and severally liable for the IO's debts and liabilities, and that each owner could then seek a contribution from the other owners of the Building. On the other hand, it was the defence's case that neither of the Defendants should be held liable to contribute where the provision is ambiguous. The sum payable for the Refurbishment Work and the apportionment of such sum between the owners of the Building was also questioned.

Decision

(1) Joint and Several Liability

In determining the proper meaning and effect of Section 34, and as a starting point, the Court considered the legislative background (including its context and purpose) of the current legislation. In essence, the Court was of the view that the addition of the phrase "both jointly and severally" after the phrase "the owners shall be liable" (in the current legislation, enacted in 1993 to replace the old legislation) "…must have intended to change the limit and extent of an owner's liability under the old regime" and evinces a clear intent to create a scheme of joint and several liability on the part of the owners.

(2) Apportionment of Liability

Having decided that owners of a building should be jointly and severally liable, the question arose as to the apportionment of their liability. As summarised by Hon. Kwan J in Re Incorporated Owners of Foremost Building, there are two possible and mutually exclusive interpretations of section 34:

(a) the section allows the owners to be pursued individually, but only to the extent of his / her proportionate ownership of the shares in the building; or

(b) the owners are jointly and severally liable for all of the corporation's debts and liabilities, and may be pursued individually for the whole amount. They then have the right to sue each other for contribution so that at the end of the day, they have only paid a proportion of the liability equivalent to their shares in the building.

The Court accepted the Plaintiff's submission that interpretation (b) represented the correct interpretation of the meaning and effect of Section 34.

In essence, giving effect to the legislative intent, the Court held that "…the owners are jointly and severally liable for all of the corporation's debts and liabilities, and that such liabilities are not limited to their respective shares in the building (even though they would have the right to seek contribution from other co-owners afterwards)".

Comment

This case provides an important, unprecedented clarification of the Court's interpretation of Section 34. It is particularly noteworthy for IO and owners of buildings in relation to their respective rights and obligations regarding contributions to refurbishment / renovation works done to their buildings.

 

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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Press //
Submitted by // B Ho, Partner; E Lee, Consultant
24 November 2017


Howse Williams Bowers ("HWB"), a leading Hong Kong independent law firm, advised Halcyon Capital, the sole sponsor and Halcyon Securities, VMS Securities, Great Roc Capital Securities and KGI Capital Asia, the joint bookrunners and joint lead managers, as the Hong Kong legal counsel, on the HK$155 million listing of the shares of Trio Industrial Electronics Group Limited ("Trio") on the Main Board of the Hong Kong Stock Exchange. The shares commenced trading on the Hong Kong Stock Exchange on 23 November 2017.

Trio is an EMS provider founded in 1983 specialising in the manufacturing and sales of customised industrial electronic components and products, with headquarters in Hong Kong and production facilities in Nansha District, Guangzhou. It provides its customers with a comprehensive scope of services, from procurement of raw materials and manufacturing to product delivery. Its original equipment manufacturer products include: (i) electro-mechanical products; (ii) switch-mode power supplies; and (iii) smart chargers used in industrial electronic equipment.

The HWB team was led by partner, Brian Ho and consultant, Eddie Lee. The team had lead responsibility on legal documentation, providing advice on corporate and regulatory issues, communicating with the regulators and undertaking 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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Publications //
Submitted by // K Bowers, Partner/Solicitor Advocate; M Withington, Partner
18 November 2017

 

ILO New insurance levy to be introduced

Click here to see the International Law Office Article

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