Hong Kong – Recent Litigation Developments.

1. Litigation

Hong Kong Court of Appeal rejects the narrow interpretation of “client” and adopts a broader test for legal advice privilege

The Court of Appeal has handed down its much-awaited judgment in Citic Pacific Limited v Secretary for Justice and Commissioner of Police. In a joint judgment, three judges rejected the Hong Kong Court of First Instance’s narrow view of who from within a client organisation constitutes the “client” for the purposes of considering whether legal advice privilege applies. In the Court of Appeal’s judgment, the client is simply the corporation and the question is which employees should be regarded as being authorised to act for it in the process of obtaining legal advice. Importantly, the Court of Appeal has adopted a broader test for legal advice privilege than had previously applied, on the basis that the policy for legal professional privilege as a fundamental right – protected by Article 35 of the Basic Law – is equally applicable to litigation privilege as well as legal advice privilege, and a restrictive definition of the client would tend to frustrate that policy. Click here to read the full post including the salient take away points.

Hong Kong court dismisses investor’s counterclaim against bank for mis-selling of financial products

The Hong Kong Court of First Instance handed down its judgment in DBS Bank (Hong Kong) Limited v Sit Pan Jit on 2 April 2015. In addition to defending the claim, Sit Pan Jit made a counterclaim to an action by DBS Bank (Hong Kong) Limited (DBS) to recover monies owing by him. The court’s decision to wholly reject Sit’s defences and counterclaim and find in favour of DBS follows the recent trend of banks successfully defending claims for mis-selling and misrepresentation by their customers. The recent claims have all benefitted from the court’s clear willingness to uphold the principles of contractual estoppel and enforcing the terms of the written contract between the parties. Whilst banks may take some comfort from this trend, they should be cautious and recognize that decisions like these are significantly reliant on the particular facts of the case. Click here to read the full post and the salient take away points.

Hong Kong Court of Appeal addresses the enforceability of English anti-suit injunction

In Compania Sud Americana de Vapores S.A. v Hin-Pro International Logistics Limited, the Court of Appeal held that an English anti-suit injunction with respect to legal proceedings in another jurisdiction (in this case, the People’s Republic of China) could not be enforced in Hong Kong. This decision serves as a useful reminder that care is required when drafting contractual jurisdiction clauses. The Hong Kong courts may not recognise interim relief granted by foreign courts where Hong Kong is not the primary forum. This was so in Compania even though substantial assets were located in Hong Kong. Click here to read the full post.

Hong Kong’s top court clarifies mental element in money laundering offence

In HKSAR v Pang Hung Fai, for the first time, the Court of Final Appeal (the CFA) offered authoritative guidance on the mental element of “having reasonable grounds to believe” under section 25(1) of the Organized and Serious Crimes Ordinance (Cap 455). Section 25(1) makes it an offence for anyone to deal with any property while “knowing or having reasonable grounds to believe” that such property in whole or in part directly or indirectly represents any person’s proceeds of an indictable offence. The CFA judgment, in effect, overturned previous Court of Appeal jurisprudence and offered much-welcomed clarity on the subject. Click here to read the full post including the salient take away points.

2. Private Wealth

Hong Kong High Court finds trust on basis of co-habitants’ enforceable oral agreement

The High Court of Hong Kong in Ching Chi Sau v. Yip Woon Yin Judy and Another has found in favour of a non-registered owner claiming beneficial interests in properties against its legal owner. The Defendant, the legal owner of the properties and former co-habitant of the Plaintiff, was held to hold the Plaintiff’s beneficial interest in the properties on trust due to the existence of an enforceable oral investment agreement between the parties. The case is a helpful demonstration of how fact specific these types of cases are and how Courts grapple with those facts. Click here to read the full post.

Hong Kong court rules on estate administrator’s breach of fiduciary duties

In Tang Ying Loi v. Tang Ying Ip alias Tang Ying Yip and others, the Court of First Instance held that the defendants, who were appointed as estate administrators, breached their fiduciary duties by unlawfully withdrawing money from the estate’s bank account to purchase property for their own benefit and failing to collect money due to the estate. The court ruled that the defendants were liable to compensate the estate accordingly. Click here to read the full post and the salient take away points.

Hong Kong Court of Appeal ascertains intent in the transfer of shares

In the recent case of LWYA v KYW and LLP v LWYA, the Court of Appeal dismissed an appeal against the determination of a preliminary issue in an application for ancillary relief. The Court of Appeal agreed with the Court of First Instance and ruled that certain shares transferred to a wife by her father should be taken into account as part of the matrimonial estate. The decision is also a useful reminder that an appellate court cannot overturn the findings of a trial judge unless the trial judge had made a significant error, such as ignoring some relevant evidence or taking into account irrelevant evidence. Click here to read the full post.

Wife failed to prove her interest in her matrimonial home after her husband said it was too troublesome to add her as a co-owner

The Court of Appeal in Mo Ying v Brillex Development Limited and Another affirmed the decision of the Court of First Instance to reject the plaintiff wife’s claim of beneficial interest in a Hong Kong matrimonial home (Property) registered in the sole name of her husband. This case is a helpful demonstration of how the Court approaches the issue of common intention constructive trusts in cases where the registered owner of a property provides an excuse not to include his/her spouse as a co-owner. The Court of Appeal also held that the wife was estopped from asserting her beneficial interest against the subsequent purchaser of the Property notwithstanding that the purchaser was found to have constructive notice of her interests. Persons who are not registered as co-owners should not safely assume that they will have an interest in their matrimonial home simply by reason of their marriage. Click here to read the full post.

Conflicts of interest: executors and business partners

The Hong Kong High Court has been strict in its application of the rule that a trustee cannot benefit through the use of trust property or by virtue of his trusteeship, unless he is explicitly permitted to do so. This case involved properties which formed part of the residuary estate of the deceased. The estate was administered by the deceased’s brother, who was co-owner of the properties. A company owned by the administrator occupied the properties. The beneficiaries of the estate argued that the administrator was acting in breach of trust by allowing the company to occupy the estate’s share of the properties for nominal rather than market rent. The court held that the administrator was accountable to the estate for the market rent in relation to the estate’s share of the properties. This case serves as a reminder for advisers to ensure that they carefully consider who should be the executors of their clients’ Wills. Click here to read the full post and the salient take away points.

3. Employment

Paternity leave laws in force from 27 February 2015

The Hong Kong Legislative Council has finally introduced laws to entitle private sector male employees to paternity leave. Since 27 February 2015, male employees are entitled to take up to three days of paternity leave in recognition of the birth of their child. An employee may take paternity leave at any time between four weeks prior to the expected date of delivery of the child and 10 weeks following the actual date of birth. In order to be eligible for statutory paternity leave, an employee must be the father of the child, and be employed under a continuous employment contract immediately prior to taking the paternity leave. Click here to read the full post.

4. Insolvency

Hong Kong court grants leave under new Companies Ordinance to bring unfair prejudice proceedings by way of derivative action

In Yu Yuchuan & Ors v China Shanshui Investment Company Limited, Hong Kong’s Court of First Instance granted leave to minority shareholders of Shanshui Investment Company Limited to bring unfair prejudice proceedings in the name of the company, by way of statutory derivative action pursuant to sections 732 and 733 of the Companies Ordinance (Cap 622). This is one of the first decided cases under the new regime in the Companies Ordinance. In addressing its application and scope, the case provides welcome clarity to minority shareholders contemplating unfair prejudice actions in the face of mismanagement. Click here to read the full post.