On 12 May 2022, the Office of the Privacy Commissioner for Personal Data (“Commissioner“) issued the new “Guidance on Recommended Model Contractual Clauses for Cross-border Transfer of Personal Data” (“Guidance Note“). The Guidance Note provides two sets of Recommended Model Contractual Clauses (“RMCs“) in its Schedule to assist local small and medium-sized enterprises in drafting contractual clauses to ensure that personal data will be protected to the same extent as provided under the Personal Data (Privacy) Ordinance (Cap. 486) (“PDPO“) when they are transferred abroad.
The two new sets of RMCs supplement those issued by the Commissioner in December 2014 in its “Guidance on Personal Data Protection in Cross-border Data Transfer” and are designed to cater for two cross-border data transfer scenarios as follows:
The general terms and conditions set out in the RMCs are applicable to transfer of personal data from a Hong Kong entity to another entity outside of Hong Kong, or between two entities both of which are outside Hong Kong when the data transfer process is controlled by a Hong Kong data user.
Please note that the RMCs are only recommended best practices for adoption by data users as part of their data governance responsibility to protect and respect the personal data privacy of data subjects. They may be adapted and modified so long as they are consistent with the requirements of the PDPO. In addition to the RCMs, data users should also consider the necessity of incorporating additional contractual assurances, rights and obligations before transferring data abroad in the specific context. As at the date of this news update, section 33 of the PDPO (which imposes restrictions on cross-border data transfers) is not yet in operation.
For further details, the full media statement and Guidance Note can be found here.
Further to our news update on 31 March 2022, the District Court handed down its decision on costs in Francis William Haden v Leighton Contractors (Asia) Limited  HKDC 152 on 11 May 2022. Previously on 11 February 2022, the District Court dismissed the claimant’s race discrimination claim (where, among others, the use of the term “gweilo” in the work place was alleged to be contributing to race discrimination) and made a costs order nisi that there be no order as to the costs of the action.
It is worth noting that the normal rule of “costs follow the event” does not automatically apply in discrimination claims. The rationale is that if the Court makes an adverse costs order against unsuccessful claimants too readily, it may discourage those who may have legitimate grievances in enforcing their civil rights. Pursuant to section 73E(3) of the District Court Ordinance (Cap.336), the default costs position in race discrimination claims is that each party should bear its own costs unless the Court otherwise orders on the ground that:
The provision is in place to strike a balance between the legislative objectives to eliminate discrimination and change prejudicial attitudes that may exist in society on the one hand, and the concern that over-leniency will encourage the lodging of unmeritorious discrimination claims on the other.
In this case, the Court varied the order nisi that there be no order as to costs and instead ordered the claimant to bear the respondent’s costs of the action (including all costs reserved). The Court held that the proceedings had been brought frivolously when considered objectively. After an evaluation of the evidence relied on by the claimant, the Court was of the view that the action should not have been commenced in the first place. There are also special circumstances in that the claimant unreasonably turned down a previous offer by the respondent to withdraw or discontinue his claim with no order as to costs.
This decision illustrates the importance to conduct an early evaluation of the merits of a claim and to consider offers made by the other side seriously and realistically. Notwithstanding the statutory provision on costs, prospective claimants should still be mindful of potential costs consequences in deciding whether to bring a discrimination claim.
MinterEllison LLP acted for the respondent in successfully defending the discrimination claim and now varying the costs order nisi such that the claimant pays the respondent’s costs.
On 16 May 2022, the Judiciary published the 2022 Guide to Judicial Conduct (“the 2022 Guide“), which was an update to the 2004 edition (“the 2004 Guide“).
The 2022 Guide is largely similar to the 2004 Guide – both are led by the same Guiding Principles, i.e. Independence, Impartiality, Integrity and Propriety. There are, however, several new additions in the 2022 Guide. For example, some of the additions which are not included in the 2004 Guide are as follows:
According to the 2022 Guide, unnecessary, irrelevant or unjustified criticism should be avoided in exercising the judicial function, and the legitimate privacy interests of litigants and third parties as well as the harm which may be done to a person criticised in public judicial remarks should be borne in mind. Remarks which are of a derogatory or discriminatory nature must be avoided as well.
According to the 2022 Guide, a judge must not reveal or use the information acquired in the course of performing judicial functions for personal gain or for any purpose not related to judicial duties.
The apparent bias test was in the 2004 Guide – in gist, whether there is apparent bias depends on the view of a “reasonable, fair-minded and well-informed observer” in the specific circumstances. The 2022 Guide provides guidance on what counts as a “fair-minded and informed observer” – for example, he or she is neither complacent nor unduly sensitive or suspicious, and is not an insider in the judicial system.
The 2022 Guide provides guidance regarding the grounds for recusal. For example, the 2022 Guide explains that just because a judge has publicly expressed views before appointment regarding an issue which he or she is now required to determine, is not necessarily a ground for recusal and would depend on the particular circumstances, citing ZN v Secretary for Justice & others  1 HKLRD 174, which concerns an application seeking a judge’s recusal from this case. Although the case involves a judicial review on the issue of human trafficking and that the judge has previously taken an active role in addressing the problem of human trafficking as the Director of Public Prosecutions, what the judge was being asked to decide in this case was essentially a question of law concerning a determination of the duties and obligations of the government under Article 4 of the Hong Kong Bill of Rights and whether there has been any failure to fulfil such duties and obligations, and yet he has never previously expressed any views in relation to such question. The application was subsequently dismissed.
The 2022 Guide provides guidance on the judges’ use of social media. For example, judges should avoid commenting on cases on social media, having their private information enter the public domain unnecessarily, or having any social media association with any person, group or entity which may undermine the perception of their impartiality in a particular case.
The 2022 Guide provides that judges should not use equipment (including IT equipment) provided by the Judiciary for official use for other purposes which could bring them or the Judiciary in general into disrepute.
The changes shown in the 2022 Guide reflect how the legal field may often need to catch up with the development of information technology. Such changes also seem to provide more protection and fairness for litigants and third parties.
On 11 April 2022, The Stock Exchange of Hong Kong Limited (“Exchange“) published a Statement of Disciplinary Action against Hsin Chong Group Holdings Limited (delisted, previous Stock Code: 404) (“Company“) and seven of its former directors (“Directors“).
Between August and December 2016, the Company entered into a sale and leaseback agreement and a renovation cooperation agreement (“Agreements“) with two related companies of Mr. Zhou Wei (“Mr. Zhou“), a then executive director of the Company. The Agreements were subsequently terminated, and the total sum of RMB376.5 million that had been paid out were treated as loans made to the related companies of Mr. Zhou. Such loans remained outstanding as at 23 March 2018, being the date of the Company’s last published annual report before its delisting in December 2019.
The Agreements and the transactions thereunder (“Transactions“), which constituted discloseable and connected transactions of the Company, were approved by Mr. Zhou alone without knowledge of the board of directors of the Company. Mr. Zhou did not address his conflict of interest, nor did the Company comply with the relevant reporting, announcement, circular and shareholders’ approval requirements set out in Chapters 14 and 14A of the Listing Rules. The Transactions were subsequently discovered by the auditors of the Company and became an audit issue which led to disclaimer opinions from the auditors. The Company admitted that the Transactions had not been brought to the attention of the board due to lack of internal controls in place.
The Company was censured by the Exchange for failing to publish and/or despatch its 2016 Annual Results and 2017 Annual Reports in a timely manner, while Mr. Zhou was censured for, among other things, wilfully failing to discharge his responsibilities to avoid actual conflict of interest and to act honestly and in good faith in the interests of the Company and its shareholders. In the public censure of Mr Zhou, the Exchange made a PII statement to the effect that had Mr Zhou remained in office and the Company remained listed, his retention of office would have been prejudicial to the interests of investors. It is noteworthy that had the Company not been delisted and had Mr Zhou not ceased to be a director way before the delisting, the seriousness of Mr Zhou’s misconduct could have warranted a Director Unsuitability Statement with follow-on action as part of the disciplinary sanctions within the powers of the Listing Committee under Chapter 2A of the Listing Rules which had been enhanced since 3 July 2021.
As for the Directors other than Mr. Zhou, they were publicly criticised by the Exchange for breach of their duties of skill, care and diligence as directors, hence the failure to safeguard the Company’s assets and ensure the Company had adequate and effective internal controls for compliance with the Listing Rules.
This case serves as a reminder that every director of a company listed on the Exchange bears the responsibility to procure the company to implement appropriate internal control and risk management measures, and to provide training to the relevant staff. Above all, each director must take an active interest in the operations and use of financial assets of the company.
In our previous news article dated 25 November 2021, we reported that the new Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (“New Code Provisions“) will come into effect on 5 August 2022, following Consultation Conclusion by the Securities and Futures Commission on (i) the Proposed Code of Conduct on Bookbuilding and Placing Activities in Equity Capital Market and Debt Capital Market Transactions and (ii) the “Sponsor Coupling” Proposal.
On 22 April 2022, The Stock Exchange of Hong Kong Limited published an information paper (“Information Paper“) outlining the consequential amendments (“Rule Amendments“) to the Hong Kong Main Board and GEM Listing Rules which will complement the New Code Provisions. The Rule Amendments will reflect the “sponsor coupling” requirement (for Main Board IPOs only) and certain other requirements for issuers and parties involved in specified activities with a view to facilitating the discharge of obligations under the New Code Provisions by intermediaries.
The Rule Amendments will apply to new applicants and listed issuers submitting (or re-filing) their listing applications for IPOs or other specified types of placings on or after 5 August 2022. No specific amendments will be made to the Listing Rules relating to the placing of debt securities. Intermediaries should abide by the New Code Provisions for the standards of conduct expected of them in debt capital market transactions where applicable.
The full text of the Information Paper is available here.
See news from our global offices