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Items filtered by date: December 2016
Wang Chau, a little known rural area in Yuen Long, enclaved by industrial and residential estates, came under the wrong side of the spotlight in the latter part of 2016 concerning a public housing project to be built there. A can of worms was opened when allegations were made against the government for colluding with business interests, rural leaders and triads about the planned development of public housing in Wang Chau.
The controversy endures as it was later revealed that the consultant to the winning tenderer of Wang Chau project, Ove Arup & Partner (“Arup”), had allegedly breached its confidentiality agreement with the government by quoting insider information obtained from the government in its consultancy report to the tenderer.
Politics aside, the Wang Chau saga leads one to ponder what constitutes “confidential information” and what general exceptions would apply.
Confidentiality between consultancy firms and its clients
The relationship between a consultancy firm and its clients is primarily contractual, which is outlined in the retainer and/or service agreement between the parties. In a plain vanilla scenario, the law is rather straight-forward: a piece of information is confidential when it is defined so, whether loosely or strictly, in the agreement.
Apart from the express terms in the retainer, there are also circumstances which establish an implied contract of confidentiality. For instance, if a company engages a consultancy firm and divulges its trade secret to the firm in the process, there is an implied contract of confidentiality between the company and the consultancy firm due to a reasonable expectation that the information will only be shared with individuals which the company authorizes. A similar obligation also arises in equity under the broad principle that he who has received information in confidence must not take unfair advantage of it.1
There were also instances where the court has held that parties under a fiduciary position, due to a “special relationship of trust and confidence”2, have a duty to uphold confidentiality.
Drafting a proper non-disclosure agreement is not an easy task. All too often confidentiality clauses are overly broad and fail to specify in a meaningful way what exactly constitutes confidential information within the scope of the agreement in question.
The parties ought to negotiate the confidentiality clauses properly, using clear technical terms and practical legal terms. Customization is also crucial to fit the targeted users. For instances, information such as source code, algorithms, and design documents are paramount in software consultancy, while internal financial affairs are paramount in business consultancy. A well-drafted disclaimer could also serve as sufficient warning for anyone using the data.
Treatment of Confidential Information
When we say information is confidential, it may only be shared after authorization is provided and only be restricted to the authorized individuals. Most non-disclosure agreements, whether express or implied, remain in effect indefinitely. In common law, there are generally two recognized exceptions:-
1. If the law requires you to disclose confidential information
2. If the information is accessible in the public domain anyway
Practically speaking, sometimes the loophole might be on employees who fail to appreciate confidentiality. While the law does not require a consultancy firm to implement a Chinese wall, it may be wise for a consultancy firm, while dealing with entities with voluminous confidential data, to set up information barriers to avoid negligent staff from inadvertently disclosing confidential information.
For advice and drafting in respect of your non-disclosure agreements and confidentiality clauses as well as personal data (privacy) guidance, email your OLN partner contact, Ms. Anna Chan.
 See Seager v Copydex Ltd  2 All ER 415
 See Woods v Martins Bank Ltd  1 QB 55
By Christopher Hooley, Partner
In recent years, many complaints have been lodged with the Hong Kong Police about “financial intermediaries” luring potential borrowers into applying for low interest loans, and then defrauding them of the money borrowed. In some instances, people have been defrauded out of millions of Hong Kong Dollars. So in an attempt to regulate these unscrupulous “financial intermediaries”, the Hong Kong Government has now introduced a number of conditions which each licensed money lender must observe.
These conditions (“Conditions”) took effect on 1st December 2016, and were introduced to:
- Increase public awareness of unscrupulous financial intermediaries; and
- Prevent those “financial intermediaries” (each a “Third Party”) from charging borrowers with separate fees; and
- Improve and enhance the transparency between the licensed money lender, any Third Party and every intended borrower.
Each person or company involved in the “procuring, negotiation, obtaining, application, guaranteeing or securing the repayment of” a loan, but who is not a solicitor instructed by the intended borrower for the sole purpose of providing legal services, nor the lender, nor the borrower of the loan, is considered to be a Third Party for the purposes of the Conditions.
The Conditions can be considered within the following four practical areas.
1. Pre contract Obligations
Every licensed money lender now has an obligation, before entering into any loan agreement with an intended borrower, to:
- Ensure that there is no Third Party involved, OR
- That the Third Party has already been successfully registered with the Registrar of Money Lenders;
- Ask the intended borrower whether he has entered into or signed any agreement with a Third Party;
- State in writing the intended borrower’s reply to (2) above;
- If the intended borrower’s reply to (2) is “Yes ”, then the licensed money lender must
- obtain the name and address of the Third Party
- state in the intended loan agreement the name and address of the Third Party, whether the licensed money lender is in any way related to the Third Party, and if so the nature of such relationship;
- request the intended borrower to provide a copy of the Third Party agreement; and
- attach such agreement to the actual loan agreement.
- Explain to the intended borrower all the terms of the loan agreement, in particular
- the interest rate per annum and total interest payable under the loan agreement;
- the repayment amounts; and
- the consequences of a default in repayment; and
- Seek confirmation in writing from the Third Party to that
- he has not and will not receive any benefit from the intended borrower for his role in the loan, and
- the Third Party has not agreed with the intended borrower that the intended borrower provide any benefit to any other party, whether for purchase of any goods or services;
and keep written, video or audio records, to prove compliance with all the above.
2. Registration Obligations
Each licensed money lender must inform the Registrar of Money Lenders about each Third Party, by submitting a “Notice of Particulars of Third Party Appointed by Licensed Money Lenders in relation to Granting of Loans” (ML-ATP 1 form), to include the name, address and identification number of each such individual or company considered as a Third Party.
Upon successful registration to the Registrar of Money Lenders, the name and address of a Third Party will appear on the Register kept by such Registrar of Money Lenders.
3. Personal Data Obligations
Each licensed money lender has an obligation to take steps to ensure that the collection and usage or disclosure of all personal data for the purposes of or in relation to the licensed money lender’s business would be in compliance with the provisions of the Personal Data (Privacy) Ordinance (Cap 486).
4. Advertising Obligations
Any money lending advertisement, whether published by a licensed money lender in his own name or through another person, in any form, must contain the following:
- The money lender’s telephone hotline for handling complaints; and
- A risk warning statement in the same language as that of the advertisement or the relevant part thereof, in specified form.
Question: Are the Conditions a stop gap measure, or a long term solution?
The Conditions suggest that there is no current intention to regulate the “financial intermediaries” themselves, as the extended protection for a borrower now comes from imposing more onerous obligations on the actual licensed money lenders themselves.
The argument that the Conditions will be a long term solution may be weak, given that no due diligence will be conducted on the “financial intermediaries” themselves, so there will still remain loopholes for unscrupulous “financial intermediaries” to take advantage of borrowers, it is merely that those financial intermediaries will be shown on a Register.
Practically, whether the Conditions work will be seen from on the number of complaints now lodged with the Hong Kong Police regarding unscrupulous “financial intermediaries”.
This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.
OLN partner and head of Private Client, Alfred Ip was invited by LGBT Network, Asia ex-Japan to talk about “Estate planning for same-sex relationships in HK”, on 7 December 2016. The event was hosted by Nomura, an Asian financial services group with a global network, who promotes diversity and inclusion in its company. The presentation and discussion session evolved around the things that those in same-sex relationships need to consider when planning their estate, how to go about putting in place an effective will and how to ensure that wishes are carried out concerning assets, significant others and dependents. Alfred raised the importance of having a will and the risks and consequences that may arise if a will is not in place, and addressed many concerns and uncertainties that the attendees had.
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