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Making an Apology

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Parties in conflict and disputes rarely apologize to one another. No one wants to admit liability, and saying sorry is often seen as an admission of liability.

On 13 July 2017, the Legislative Council of Hong Kong passed the Apology Bill (soon to be the Apology Ordinance) to enable parties to apologize without fear of legal implications.

Background

Historically, an apology is seen to be an implied admission of fault and/or liability. Such apology, whether written or oral, may constitute evidence of liability in civil proceedings.

Parties in dispute are therefore constantly advised by lawyers not to apologize for their actions, even if the party is in the wrong. The fear of legal implications overrode morality and common decency.
 

The Apology Ordinance
Under the Apology Ordinance, an apology is defined as an expression of regret, sympathy or benevolence. The apology need not be in writing. It can be oral or by conduct.

If a party has apologized, the Apology Ordinance provides that the fact of that apology will not constitute an express or implied admission of the person’s fault or liability and must not be taken into account in determining fault, liability or any other issue in connection with the matter to the prejudice of the person.
 

Exception
While evidence of an apology made by a person is not normally admissible as evidence for determining fault, the Apology Ordinance makes an exception. The exception is this:

If there is no other evidence available for determining an issue, it is possible for statements of fact contained in an apology to be admitted as evidence in the proceedings, provided that it is just and equitable to do so.

The following example may trigger the exception. One party may say to another:

“I am sorry about what has happened”

The above would not normally be admissible as evidence on liability. However, the situation may be different if the party apologizing goes on to say the following:

“The goods were not delivered to you because we had inadequate staff on that day.”

The above might be admissible as evidence even if the apology itself is not, particularly if the fact of adequate or inadequate staff became a relevant issue in civil proceedings and this was the only piece of evidence available in the proceedings. Clearly, this exception means that parties should take great care in how they apologize and what they should include in their apology.
 

Insurance Coverage
The Apology Ordinance also has potential impact upon insurance coverage.

Section 10 of the Apology Ordinance provides that an apology does not render void or affect any insurance cover, compensation or other form of benefit for any person in connection with the matter. There is also an express prohibition against attempting to “contract out” of this section by, for example, a disclaimer or waiver of rights. This section also takes effect whether or not the contract of insurance was entered into before or after the commencement date of the Apology Ordinance.

Liability insurance policies typically contain conditions that an insured party shall not make any admissions of liability or prejudice the claim without the insurer’s prior consent. While Section 10 may avoid an admission of liability, potential problems may arise if the insured prejudices the claim by making an apology which contains facts that are later ruled as admissible by the Court for the reasons set out above. In such circumstances, there may be argument as to whether the additional facts appended to the apology can properly be regarded as being part and parcel of the apology itself.
 

When Will It Take Effect?
It is currently unclear as to the commencement date of the Apology Ordinance although it is expected to come into effect later this year (2017) or early next year (2018).
 

Conclusion
With the implementation of the Apology Ordinance, being the first jurisdiction in Asia to do so, Hong Kong is leading and consolidating its position as one of the foremost centers in the Asia region for mediation and dispute resolution.

Although similar legislations have been passed in the United States, Canada, Australia and the United Kingdom, only time will tell whether the Apology Ordinance will influence parties in Hong Kong to more readily apologise to each other for wrongful conduct.

What should be quite clear however is that making an apology is not all without its risks and parties should continue to take proper legal advice before doing so.

The Beneficial Ownership of Hong Kong Companies

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In my last recent “Transparency and Beneficial Ownership of Hong Kong Companies”, I raised the likelihood of a Companies (Amendment) Bill 2017 (the “Bill“) being published. 

The Bill has indeed now been published and it does aim to introduce new legislation in Hong Kong, to improve transparency in the beneficial ownership of Hong Kong incorporated companies; this is to enhance Hong Kong’s regulatory regime on combating money laundering and terrorist financing.

The Bill now requires that:

  • Applicable Companies maintain a register of Significant Controllers.
  • Applicable Companies carry out investigations, obtain information about its Significant Controllers and keep that information accurate and updated at all times.

Set out below are details of these practical changes:

Significant Controllers Register

Each Applicable Company will be required to keep and maintain a register (the “Significant Controllers Register“) for any person who has significant control over an Applicable Company (the “Significant Controllers“).

The Significant Controllers Register must contain the prescribed contents and be kept at the registered office of the Applicable Company, or at another prescribed place.

What is an “Applicable Company”

An Applicable Company is a Hong Kong incorporated company, that is NOT:

  • a listed company; or
  • a type of company, or class of companies, that is exempted from keeping and maintaining a Significant Controllers Register by regulations made by the Financial Secretary of Hong Kong.

An Applicable Company also does not include a non-Hong Kong company which has registered branches or representative offices in Hong Kong under Part 16 of the Companies Ordinance.

Who is a “Significant Controller”?

A Significant Controller means either:

a natural person or specified entity that has significant control over that company (a “Registrable Person“); or

a legal entity that is a member of and has significant control over that company (a “Registrable Legal Entity“).

What constitutes Significant Control?

A person has “significant control” over an Applicable Company if the person fulfills one or more of the following criteria:

  • the person holds, directly or indirectly, more than 25% of: either the issued shares in that company if it has a share capital; or the right or rights to share in the capital or profits of that company if it does not have a share capital;
  • the person holds, directly or indirectly, more than 25% of the voting rights in that company;
  • the person holds, directly or indirectly, the right to appoint or remove a majority of the board of directors of that company;
  • the person has the right to exercise, or actually exercises, significant influence or control over that company; or
  • the person has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or a firm, not being a legal person under the relevant governing law, whose trustee(s) or member(s) meet(s) one or more of the conditions specified above.

Duties and obligations of Applicable Companies

  • Keep a Significant Controllers Register whether or not that company in fact has any Significant Controllers.
  • Carry out investigation and obtain information about its Significant Controllers.
  • Keep information on the Significant Controllers Register up to date including recording any registrable change arising from: (a) any person ceasing to be a Significant Controller; (b) any other change which results in any particulars for any person entered in the Significant Controllers Register being incorrect or incomplete; or (c) any required update on the prescribed additional matters noted in the register.
  • Notify the Registrar of Companies of the place at which the Significant Controllers Register is kept and any change in the place at which the register is kept, subject to certain exceptions.

In fulfilling those duties to investigate, obtain information and keep information updated about its Significant Controllers, each Applicable Company must give notice to the relevant persons (the “Notice“) if it knows, or has reasonable cause to believe that:

  • that person is a Significant Controller;
  • that person knows the identity of another person who is a Significant Controller; or
  • there is a registrable change with respect to that person, the details of which are required to be contained in the Significant Controllers Register.

There are certain exempt circumstances where a Notice may be not required.

Inspection of Significant Controllers Register – Not available to the general public

The following persons have the right to inspect the Significant Controllers Register and obtain copies of the Register:

  • Any Significant Controller whose name is entered in the Significant Controllers Register.
  • Any law enforcement officer of various statutory bodies including the Companies Registry, the Hong Kong Monetary Authority, the Hong Kong Police Force, the Inland Revenue Department, the Independent Commission Against Corruption, and the Securities and Futures Commission.

If an Applicable Company fails to meet the demand for inspection or for making copies by a law enforcement officer, that officer may apply to the Hong Kong Court for an order to compel the Applicable Company to do so.

Designated representative

An Applicable Company must designate at least one representative who has the required qualification, to facilitate and assist it to comply with its duties in relation to the Significant Controllers Register under the new law, including the provision of assistance to any law enforcement officer for the purposes of performing his function relating to the prevention, detection or investigation of money laundering, or terrorist financing.

Effective date

It is expected that the Bill, if passed, will come into force on the commencement date, indicated in the Bill as being 1st March 2018 .

It is unclear whether the Companies Registry will issue guidelines to help Applicable Companies comply with the new requirements after the Bill is passed, and in particular whether an Applicable Company will be given any transitional period to set up the Significant Controllers Register and to take all necessary actions required to comply with the new law after it comes into force as of the proposed commencement date.

What next?

After the Bill is passed, each Applicable Company must start to formulate compliance steps and give itself sufficient time to implement and complete these steps so that as of the proposed commencement date, it will have in place an accurate and up to date Significant Controllers Register. An Applicable Company should also at the same time establish a set of compliance rules in relation to the keeping and maintenance of the Significant Controllers Register to ensure that it will comply with its ongoing obligations under the new law to keep the Significant Controllers Register up to date at all times.

How OLN can help

  • OLN can help you create the Significant Controllers Register, advise on the compliance steps and help establish compliance rules for all ongoing compliance now need.
  • OLN is available to advise you on any questions you may have on the Bill, the proposed new law or any of the above concepts.

Please contact us for more information.

OLN Receives Improved Recognition in ALB Rankings

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OLN is delighted to have been ranked across all categories in Hong Kong and China in the 2017 Asian Legal Business (ALB) Intellectual Property rankings.

Improving on last year’s rankings, OLN is ranked in Tier 2 in Hong Kong for both Patents and Trademark/ Copyright, and maintains its ranking in Tier 3 for both categories for China.

OLN’s Intellectual Property team continues to build on its excellent reputation in providing specialist contentious and non-contentious IP advice to its local and international clients. The team has also been bolstered by Stephen Chan rejoining OLN late in 2016.

About ALB and their Rankings

Thomson Reuters Asian Legal Business magazine provides current analysis and information on law-related issues throughout the Asia region. For its rankings, the ALB conducts research based on the individual firm submissions, interviews, editorial resources and market recommendations and then rank the top firms based on the following: –

  • The volume, complexity and size of work undertaken
  • Presence across Asia and in individual jurisdictions
  • Key personnel hired and growth of the practice group
  • Key clients and new client wins
  • Firm’s viability and profile in the region
  • Year-on-Year development and momentum

Third Party Arbitration Funding given green light in Hong Kong

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On 14th June 2017 the Hong Kong Legislative Council passed the third reading of the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance. Whilst the Ordinance has not yet come into effect, it is expected to be gazetted and become effective later this year.

This legislation will permit the legalization of the third party funding in relation to arbitration and mediation proceedings in Hong Kong and is expected to provide a considerable boost to Hong Kong’s position as an international arbitration centre.

Hong Kong has been careful to ensure that the legislative change is accompanied by relevant safeguards to protect the system from potential abuse and we believe it is a welcome development and will help Hong Kong to maintain its status as one of the world’s leading dispute resolution centres.

Clients should now be considering the use of dispute resolution clauses adopting Hong Kong arbitration in commercial contracts, given the prospect of litigation funding being available for the resolution of such disputes by arbitration as opposed to proceeding through the court system.

If you would like further information regarding this legislation or any of the issues referred to in this article, please feel free to contact our Richard Healy.

GL4: Guideline on ‘Fit and Proper’ Criteria

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The Provisional Insurance Authority ( the ‘PIA’) is already in action and has just written to the Chief Executives of all authorized insurers (‘Insurers’). The communication covers two Guidance Notes ( previously ‘GN’ and now ‘GL’). Here we will focus only on one in summarizing what the PIA had to say in their letter.

GL4: Guideline on ‘Fit and Proper’ Criteria

New section 14A of the Insurance Ordinance will be effective on 26 June 2017. Section 14A sets out a list of matters that the Insurance Authority (the “IA”) must have regard to when determining whether a person is ‘fit and proper’. This is a new section which is applicable to controllers, directors, key persons in control functions and appointed actuaries of all Insurers. GL4 sets out the minimum standard of suitability requirements for these persons.

Transitional Arrangements for Key Persons in Control Functions:

Some Insurers may currently maintain one or more control functions and certain individuals may have been responsible for one or more of these control functions prior to 26 June 2017.

The IA shall introduce the following transitional arrangements effective 26 June 2017:

  1. For individuals who are responsible for any of the control functions of an Insurer before 26 June 2017 and within the definition of ‘key persons in control functions’ (the “Appointed Individuals”), relevant Insurers are required to submit applications for the IA’s approval of their proposed appointments on 26 June 2017. Such applications must be submitted to the IA during the period from 26 June 2017 to 30 September 2017.
  2. They should be provided in the prescribed Form A1
  3. Application fees: HK$18,000 will be waived in respect of applications of the Appointed Individuals.
  4. The IA will consider and will notify the insurers of the application results as soon as practicable.

Transitional arrangements apply to the Appointed Individuals only. If an Insurer wishes to appoint an individual as a key person in any control function(s) on or after 26 June 2017, it must obtain the IA’s prior approval.

For controllers, directors and appointed actuaries of Insurers who have already been duly appointed prior to 26 June 2017 in accordance with the relevant requirements, they are not required to seek the IA’s re-approval. However, if an Appointed Individual assumes a dual role of both an appointed actuary and a key person in the actuarial function, approval will still be required.