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District Court rules on disability discrimination claim against CUHK’s decision to terminate student’s university course due to mental health conditions

Background

On the 18th of January 2022, C v The Chinese University of Hong Kong [2022] HKDC 77 called on the District Court to consider the University’s decision to terminate the studies of a student suffering from depression and generalised anxiety disorder within the meaning of section 2 of the Disability Discrimination Ordinance, Cap 487 (“DDO“).

The student (‘C’), upon failing to meet graduation requirements, submitted a late application for an extension of the maximum study period (“MSP“) to complete the assignments she had previously failed to do. In support of her application, C  included medical  reports signed by her psychiatrist as supporting evidence that she had not been able to complete the assignments due to difficulties with her diagnosed mental health condition. However, the University rejected C’s application for an extension and discontinued her studies. C then commenced  proceedings at the District Court.  C claimed that the University’s decision to reject her application and terminate her enrolment had relied on her psychiatric condition to her disadvantage and was directly discriminatory.  Alternatively, C claimed that the inflexible application of the MSP was indirectly discriminatory against those with disabilities who required extended periods of leave.  C also complained of instances of harassment and victimisation as part of a broader pattern of discrimination arising from the absence of any policy framework to address the needs of students with disabilities at the University.

Ruling

The Court mainly focused on whether or not the University’s decision to reject the application was solely based on C’s mental illnesses. Not only did C plead that the University used her mental illness as a reason to reject her but also that the University used condescending, stereotyping and patronising language that supported this perception.

The Court was unable to find direct discrimination in the University’s decision, and found that the reference to C’s medical history was included in the Termination Letter to highlight that the pressure for C to complete the outstanding assignments in such a short period of time would not be in her best interests. As C expected the University to consider her medical condition, the University certainly “could and should have regard to the same”. It does not follow that any decision that the University subsequently made must be on the ground of her disability and hence directly discriminatory (§142).

The Court also rejected C’s claim of indirect discrimination. His Honour Judge Kent Yee held that on the balance of probabilities, there was no basis to find that a considerably smaller portion of students with a disability, including C’s disability can comply with the 4-year MSP applicable to her. The Court was satisfied that the 4-year MSP has a perfectly legitimate objective and the means to achieve the objective are reasonable. Further, the extensions expressly provided in the University’s regulations safeguard the rights of those students who, for whatever reasons, fail to complete the Master of Arts Programme within the 4-year MSP. The 4-year MSP is adequately justified and there is no proportionality issue (§173).

Notably, the Court held that so long as a claimant can prove the material facts for both direct discrimination required under section 6(a) of DDO and the material facts for indirect discrimination required under section 6(b) of DDO, he should succeed in both claims, and there is nothing conceptually wrong or objectionable for a claimant to make both claims in an action (§83).

The Court also dismissed C’s victimisation claim as being unfounded having found that her direct and indirect discrimination claims were unsustainable.

Takeaways

Although the present case centers on a claim brought by a student against an university, the judgment highlighted some important points for employers.  When dealing with an employee with a disability , employers would naturally take into account the employee’s disability in their decision making process, which the employee would expect them to do. Nevertheless, employers should carefully note that there is a fine line between taking the disability into account when making a decision and making a decision because of the disability (which could be discriminatory), unless it falls under the exception under section 12(2)(c)(i) and (ii) of DDO. The exception is if the employer finds that the employee, because of the disability, would be unable to carry out the inherent requirements of the particular employment, or if the accommodation required would create unjustifiable hardship for the employer. In the Disability Discrimination Ordinance Code of Practice on Employment published by the Equal Opportunities Commission, “inherent requirements” refer to the core requirements that are essential or intrinsic to a specific occupation (§5.8), and “reasonable accommodation” means the services or facilities that are needed for an employee with a disability to perform the inherent requirements (§5.18).   Therefore, employers should ensure that the reasons for taking any action or step that may be unfavourable to the employee are legitimate.  Employers should also properly document the reasons for such decision .

For details, the full judgment can be found here.

Date:
4 July 2022
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Practice Direction 36 (Handing Down of Reserved Judgments in the High Court) Has Come Into Effect On 6 June 2022

The Judiciary issued Practice Direction 36 (“PD 36“) on 20 May 2022, which came into effect on 6 June 2022. PD 36 provides timeframes regarding when reserved judgments in High Court should be handed down taking into account the circumstances of the case, including its nature and complexity, and the other commitments of the court, in order to ensure that reserved judgments are handed down as expeditiously as is reasonably practicable.

There are 3 main categories of timeframes in PD 36 – timeframes for cases before the Court of Appeal (“CA“) (covering both civil and criminal appeals), the Court of First Instance (“CFI“) (covering both civil and criminal cases) and the Masters. For example, for most civil cases before the CFI, reserved judgments regarding interlocutory applications will be handed down within 3 months after the conclusion of the hearing; for criminal appeals before the Court of Appeal, reserved judgments regarding oral hearings before a single judge will be handed down within 3 months after the conclusion of the hearing.

PD 36 also specifies that when reserving judgment after an oral hearing, the court must simultaneously fix the actual handing down date of the judgment in accordance with the timeframes set out above; for paper applications or disposals, depending on the case, the court will notify the parties in writing of the actual handing down date once a judge has been assigned to handle the matter or immediately after the close of the parties’ submissions.

PD 36 should therefore  provide litigants with a with clearer idea as to the progress of their cases and serve to promote judicial efficiency.

Date:
30 June 2022
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Employment law updates: MPF offsetting arrangement expected to be abolished in 2025; COVID-19-related amendments to the Employment Ordinance now in effect

The Hong Kong Legislative Council (“LegCo“) recently passed two amendment bills that will bring about considerable changes to the current employment law landscape in Hong Kong.  Below is a brief summary of what employers and employees should be mindful of:

  1. MPF offsetting arrangement expected to be abolished in 2025

Further to our news article published on 6 April 2022, the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Bill 2022 was passed by  LegCo on 9 June 2022.  This means that, starting from 2025 at the earliest, employers will not be allowed to offset statutory severance payments (“SP“) or long service payments (“LSP“) against the accrued benefits derived from the employers’ mandatory contributions under the Mandatory Provident Fund (“MPF“) Scheme (the “Offsetting Arrangement“).

The abolition of the existing Offsetting Arrangement will take effect on a date to be determined by the Government (the “Transition Date“) after the eMPF Platform being developed by the Mandatory Provident Fund Schemes Authority has become fully operational – likely in 2025.  You may refer to our previous news article for the respective treatment of SP/LSP entitlement of employees who commence their employment before and after the Transition Date.  Employers should note that, after the Transition Date, they can continue to offset SP/LSP against (a) the accrued benefits derived from employers’ voluntary contributions under the MPF Scheme and (b) gratuities payable based on employees’ length of service, irrespective of whether they are used to offset the pre-transition or post-transition portion of SP/LSP.

Corresponding amendments will also be made to the Employment Ordinance (Cap. 57, the “EO“), Protection of Wages on Insolvency Ordinance (Cap. 380), Mandatory Provident Fund Schemes Ordinance (Cap. 485), Occupational Retirement Schemes Ordinance (Cap. 426) and Inland Revenue Ordinance (Cap. 112, the “IRO“).  Notably, the IRO will be amended to provide that SP/LSP paid in accordance with the EO is not chargeable to salaries tax.

Apart from introducing a 25-year subsidy scheme which aims to lessen the financial burden on micro-, small- and medium-sized enterprises, the Government will also enact a new piece of legislation to launch a Designated Savings Accounts (the “DSAs“) Scheme under which employers will be required to save up  to meet their future SP/SLP liabilities by contributing 1% of their employees’ monthly income to the DSAs until reaching 15% of their annual income.  The relevant bill is expected to be introduced in the next legislative session.

  1. COVID-19-related amendments to the EO now in effect

In another news article published on 20 April 2022, we provided a summary of the Employment (Amendment) Bill 2022 (the “Bill“) which seeks to, among other things, clarify the statutory definition of “sickness day” and what constitutes a valid reason for dismissal or variation of contract for the purpose of addressing COVID-19-related employment issues.

The Bill was passed by the LegCo on 15 June 2022 and came into operation on 17 June 2022. To recap, the major amendments to the EO, which do not have retrospective effect, are as follows:

  • The definition of “sickness day” now includes a day on which an employee (the “Affected Employee“) is absent from work by reason of his/her compliance of a requirement under the Prevention and Control of Disease Ordinance (Cap. 599) which restricts his/her movement, namely a compulsory testing, isolation or quarantine order.
  • Accordingly, an Affected Employee is entitled to sickness allowance where certain criteria are fulfilled.
  • An Affected Employee’s absence from work due to his/her compliance with a Cap. 599 requirement is not a valid reason for dismissal or variation of the terms of his/her contract.
  • However, an employee’s failure to comply with a legitimate vaccination request by the employer may constitute a valid reason for dismissal or variation of the terms of his/her contract.

Employers are encouraged to seek legal advice to ensure that their existing policies and practices are in compliance with the aforesaid abolition and amendments.

Date:
29 June 2022
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Clarifications on the Second Requirement for Winding Up a Foreign Company in Hong Kong

A Hong Kong court could exercise jurisdiction to wind up a foreign company pursuant to section 327(3) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, if the 3 core requirements are satisfied.  As explained in Kam Leung Sui Kwan v Kam Kwan Lai (2015) 18 HKCFAR 501 (“Yung Kee Case”), the 3 core requirements are as follows:

  • There must be a sufficient connection with Hong Kong;
  • There must be a reasonable possibility that the winding-up order would benefit those applying for it; and
  • The court must be able to exercise jurisdiction over one or more persons in the distribution of the company’s assets

(“3 Core Requirements“).

In a recent Court of Final Appeal (CFA) case Shandong Chenming Paper Holdings Limited v Arjowiggins HKK 2 Limited [2022] HKCFA 11 (“Shangdong Case“), the CFA provided clarifications on the second limb (“Second Limb“) of the 3 Core Requirements – in particular, the nature of the benefit that will satisfy the Second Limb.

The background facts are as follows. In October 2016, the Respondent served a statutory demand on the Appellant (a Mainland Chinese company listed in Shenzhen and Hong Kong) in respect of the amounts due under an arbitral award (“Award“), but the amounts remained outstanding. Subsequently, the Respondent presented a winding-up petition to the Court.

The Appellant accepted that the first and third requirements were met in the courts below. The issue in the Shandong Case at the CFA level was limited to the nature of the benefit that will satisfy the Second Limb.  The Court, taking into account that the rationale behind the Second Limb is to ensure the winding-up process will serve some useful purpose to the petitioner, held that applying commercial pressure on the Appellant to seek repayment of the undisputed debt which could be brought by presenting a winding-up petition is an entirely proper and relevant benefit. The Court explained that the benefit is not confined to a narrow scope of tangible or monetary benefits upon the actual making of the winding-up order; instead, the ‘leverage’ created by the prospect of a winding-up (as opposed to the making of a winding-up order) is a legitimate form of ‘benefit’ under the Second Limb. In response to the Appellant’s contention that according to the Yung Kee Case, the benefit must flow from the making of a winding-up order and must be sufficient and tangible and that there is no justification for departing from that, the Court responded that the 3 Core Requirements are self-imposed restraints on the Court’s exercise of jurisdiction and should not be approached as if it were an exercise of statutory construction, and is subject to the Court’s discretion.

In fact, the Second Limb has been discussed in some previous cases as well.  In Re China Huiyuan Juice Group Ltd [2020] HKCFI 2940 (“Huiyuan Case“), Re China Greenfresh Group Co Ltd (“the Company”) [2021] HKCFI 1182 (“Greenfresh Case“) and Re Grand Peace Group Holdings Ltd [2021] HKCFI 2361 (“Grand Peace Case“), Harris J held that the winding-up petition did not meet the Second Limb, and that it is necessary for a petitioner to demonstrate by evidence that there is a real possibility of a tangible and sufficient benefit to creditors which would derive from the making of a winding-up order. Although it seems to be inconsistent with the Shandong Case in that the latter suggested that “benefit” is not limited to one arising from the making of a winding-up order and needs not be monetary or tangible, perhaps these cases could still be reconciled in the following way:

Firstly, the case facts are distinguishable. The Shandong Case differs in that the Appellant was solvent and operating profitably, the only reason for non-payment was recalcitrance. Also, the debt was undisputed. As noted in paragraph 39 of the judgment, there is a crucial distinction between undisputed and disputed debts and previous case laws demonstrated a winding-up petition presented in order to bring pressure on a company to pay an undisputed debt is perfectly proper. Further, given that the Appellant was solvent and operating profitably, the likelihood of the Appellant repaying the undisputed debt upon being applied commercial pressure would perhaps be a strong enough reason to constitute a real benefit to the petitioner. In contrast, in the 3 other cases, there may not be much leverage created by the prospect of a winding-up petition given that it was relatively less certain that the company in question could repay the petitioner even upon winding-up. The fact that these cases did not appear to include “leverage” as a benefit could mean that  the relevance of commercial pressure or leverage created by the prospect of a winding-up petition was minimal or non-existent.  Accordingly, the fact that these cases recognised a benefit arising from the making of a winding-up order and did not explicitly recognise other benefit such as “leverage” should not be interpreted as ruling out any other benefit not arising from the making of a winding-up order.

Secondly, on reading the judgments of the Huiyuan Case, Greenfresh Case and Grand Peace Case closely, it appears that when Harris J stated the need for “real possibility of a tangible benefit”, it was stated as opposed to hypothetical or theoretical benefits that potentially arise, which would be different from the benefits in the Shandong Case, which were beyond theoretical or hypothetical. In addition, in a recent case of Re Up Energy Development Group Ltd [2022] HKCFI 1329 in which it was held that the Second Limb was satisfied, the Judge noted that the Second Limb is not a high threshold to discharge and the petitioner is only required to demonstrate a real possibility of benefit, and that the nature or extent of the likely benefit to be shown under the Second Limb is to be given flexibility. Therefore, it seems that the Shandong Case and those previous cases are not necessarily in conflict, perhaps only with different focuses.

Taking into account all of the above factors, it appears that on top of the existing requirements that the benefit required to be shown under the Second Limb ought to be discernible and real as opposed to hypothetical or theoretical, the Shandong Case has clarified the scope by also expressly including intangible benefits such as leverage created by the prospect of a winding-up petition.

Date:
28 June 2022
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The Office of the Privacy Commissioner for Personal Data issues two sets of Recommended Model Contractual Clauses for cross-border transfer of personal data

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:

  • Data user to data user: Where personal data is transferred from one data user to another data user (both the data transferor and data transferee will use the data for their separate business purposes).
  • Data user to data processor: Where personal data is transferred from a data user to its data processor (the data processor will only process the personal data for purposes designated by the data user).

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.

Date:
24 June 2022
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