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Costs consequences in discrimination claims – an update on the “gweilo” case and a minefield for the unwary

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 [2022] 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 proceedings were brought maliciously or frivolously; or
  • there are special circumstances which warrant an award of costs.

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.

Date:
24 June 2022

The Judiciary Published the 2022 Guide to Judicial Conduct

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:

  • Comments on persons (Paragraphs 34-36 of the 2022 Guide)

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.

  • Confidentiality (Paragraph 37 of the 2022 Guide)

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 (Paragraph 57 of the 2022 Guide)

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.

  • Grounds for recusal (Paragraphs 76-80 of the 2022 Guide)

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 [2016] 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.

  • Social Media (Paragraphs 91-93 of the 2022 Guide)

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.

  • Use of judicial equipment (Paragraph 99 of the 2022 Guide)

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.

Date:
1 June 2022
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Exchange censures and criticises Hsin Chong Group Holdings Limited and its former directors for failure to comply with Listing Rule requirements relating to discloseable and connected transactions

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.

Date:
17 May 2022
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Hong Kong Stock Exchange published information paper on listing rules amendments relating to bookbuilding and placing activities and sponsor coupling

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.

Date:
4 May 2022
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Competition Commission investigating online food delivery platforms and car repair market

The Competition Commission (“Commission“) is probing into potential anti-competitive conduct in the online food delivery platform and car repair / maintenance markets.

Investigation into Foodpanda and Deliveroo

The focus of the Commission’s investigation of two online delivery platforms, namely Foodpanda and Deliveroo, is to ascertain whether they have contravened the Competition Ordinance (Cap 619) by imposing certain contractual requirements on their partner restaurants. According to the Commission’s press release published on 27 January 2022, these include requiring exclusivity arrangements with partner restaurants, requiring partner restaurants to offer their menu items on the delivery platform at prices that are equal to or lower than those offered on the restaurants’ own menu and on other online delivery platforms, as well as requiring partner restaurants that wish to procure online food delivery services to also procure pick up or other services from the delivery platform.

Investigation into passenger car warranty terms and conditions

On 3 March 2022, the Commission invited passenger car owners, independent car repair workshops and other interested parties to provide information and share their views on restrictive passenger car warranty terms and conditions via an online questionnaire.

According to the latest issue of the Commission’s e-newsletter, the Commission is looking specifically into whether agreements between certain manufacturers of passenger cars and their distributors in Hong Kong mandate the use of restrictive warranty terms and conditions upon passenger car owners under which the continued validity of passenger car warranties is conditional upon the exclusive performance of maintenance and/or repair services at authorised repair centres, regardless of whether the maintenance or repair item is covered by the warranty.

The Commission considers that both the above requirements by Foodpanda and Deliveroo and the warranty terms and conditions by car manufacturers and distributors may lessen competition in their respective markets, hinder entry and expansion by new or smaller market competitors, and ultimately lead to fewer choices of and higher prices for online food delivery and car maintenance and repair services for consumers.

Both investigations are still ongoing and the Commission stressed that the existence of the investigations does not prejudge their outcome.

Date:
3 May 2022
Practice Area(s):
1 2 3 4 5 21

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