Topic 2 – Legal System • Unintentional tort § The information should be used for selection process § Winding-up Ø Note that

rt § The information should be used for selection process § Winding-up Ø Note that the Labour Tribunal does not have power to determine a claim for a sum §Ethical training and education
§Manufacturers, doctors, accountants, owners of a restaurants, etc., all owe a § Destroy all the data after the selection process • Based on the ground of “unable to pay its debt” at least $10,000 of money in the law of tort • The law should impose a positive duty on officers to report incident to the
v Misrepresentation plaintiff a duty of care in different circumstances ¨ Send a demand letter to its registered office and wait for 21 day Ø No bankruptcy petition or winding up petition should be brought, instead, it should company or the regulators
Ø A false statement of fact made by one party to a contract to the other, at or before Ø Essential elements of a tort of negligence v Distinction between employee and contractor § Fraudulent trading (engaging in malpractice) be brought to • More ethical training should be provided to employees in the sense that
the time of the contract was made, which induces the other to enter into the § Did the defendant owe a duty of care to the plaintiff? Ø Employer / employee • Defraud the employee / creditor § CFI for claims more than HK$1 million they should be refrained from doing it and if there’s such a case, they are
contract • Example § Contract of service • Unlimited liability even after winding § District Court for claims lower than HK$1 million duty bound to report it
Ø 5 main elements ¨ Manufacturer is reasonably foreseeable that the defective products § Protected under employee contract and Employment Ordinance Ø Rest day • Ways to handle a case of insider dealing for company:
§ A statement of fact as oppose to the opinion were going to affect the ultimate users of the products when they were § An employer is liable for the negligence of his employees (vicarious liability) but § Not less than 1 rest day in every period of seven days Topic 6 – Business ethics: Insider dealing ¨ Develop code of conduct
§ Must be false put to public consumption and circulation not for an independent contractor Ø Statutory holidays ¨ Compliance officer are assigned to deal with the complaints
§ Must be made by one party to the contract to the other • According to neighbour principle, it is incumbent on the manufacturer to § Only employees are entitled to claim the benefit (or compensation) under the § 12 statutory holidays in each calendar year which are subjected to change (i.e. v Business ethics and insider dealing ¨ Carry out ad-hoc checks and audits
§ Must have induced the other party to enter the contract take care of the interest of his neighbours, persons who are so closely Employment Ordinance (or Employee’s Compensation Ordinance) discussion on Confucius’ birthday as additional statutory holiday) Ø Is insider dealing a breach of business ethics? ¨ Develop the reporting system
[But-for statement] and directly affected by his act that he ought reasonably to have them in • An employee who is injured in the course of his employment may claim Ø Paid annual leave § According to some economists, the free market principle and the
¨ Ways to handle inside information
§ The contract has been made contemplation compensation for his injuries from his employer § Minimum 7 days with pay after serving every period of 12 months non-intervention policy should be given its fullest meaning.
Ø Enforcement by individual claimants
Ø Silence does not constitute a representation since it must be a clear and • 2 important elements to determine ¨ Independent to his status in the company § May be carry on to the next financial year • In fact, they argued the relaxation of control of insider dealing is conductive
§ s281 of SFO provides a “person” with a right to take private action against
unequivocal statement unless a person is under a duty to disclose certain ¨ Proximity Ø Client / independent contractor Ø End-of-year- payment to economic growth and economic gain from insider dealing is a monetary
insider
information and he fails to do so Ø Person who are so closely and directly affected § Contract for service § Gratuity (fixed) and bonus (link to performance) incentive for officers of the company
• Who has the locus standi to sue?
v Fraudulent misrepresentation Ø Only primary victim can sue the plaintiff except relatives as a § Protected under service contract only Ø Severance payment § We still need to uphold the minimum standard o business ethics and maintain
• Who can be the claimant?
Ø A false statement made by a person with a dishonest intent “closely and directly affected person Ø Tax Issue § Worked for at least 2 years under a continuous contract the confidence in the stability and integrity of the market
Ø It is one which the misrepresentor has made it § 3 approaches:
¨ Foreseeability § Employee: Salary tax Ø Long service payment Ø Reason of the act of insider dealing is objectionable
§ Knowing what he said is false, or § Offence the sense of fair play • Privity traders’ approach
Ø The defendant have plaintiffs in contemplation § Independent contractor: Profit tax § Worked for at least 5 years under a continuous contract
§ Without belief in its truth, or Ø Copyright issue • At the expense of shareholder and the public ¨ To identify the privity relationship in the form of a contractual
§ Did the defendant breach the duty of care? relationship between the plaintiff and the insiders
§ Recklessly whether it is true or false § The right goes to the employer when the work is done within office hour v Termination of contract • Misuse professional capacity and access to information
• If duty of care exists, the burden of proof lie in the plaintiff to prove that the Ø Too restrictive and difficult to locate a contractual relationship
Ø The representee who have suffered some damage from such fraudulent § Contrary agreement to keep or share the copyright with the employer Ø Termination by choice
defendant is in breach of duty between the claimant and the insiders
misrepresentation Ø Priority in winding up § Voluntary termination v Securities and Futures Ordinance
¨ To find the fault of the defendant as tort is a fault-based liability • Contemporaneous traders’ approach
§ Rescind the contract for fraud and claim damages in tort of deceit § Liquidator fee § Either the employer or the employee may at any time terminate the contract of Ø A person connected with a company listed in Hong Kong who is in possession of
• The onus lies in the plaintiff to prove the defendant fails to discharge a ¨ Plaintiffs include all persons who have traded on the opposite side of
• Restore the position as if there is no contract § Government taxes employment by giving notice, either orally or in writing relevant information about the company is prohibited from dealing in the securities
standard of reasonable care on a balance of probabilities the market to the insider at or about the same time as the insider
v Negligent misrepresentation § Fixed charge creditor § Termination within the probation period of that company
• Reasonable man test Ø Trading before or after the insider trade will not be sufficient to give
Ø A false statement made by a person without reasonable grounds for believing § Employee § Termination without notice (i.e. Listed company is what the public interest at stake)
that what he said is true ¨ Whether a reasonable person in the position of the defendant with the § Floating charge creditor rise to contemporaneous traders
• Payment in lieu of notice § Connected person
Ø Much easier to establish negligent one than fraudulent one because: same qualification would behave in the same way as the defendant ¨ It must be traded at the same time or at least on the same day as the
§ Unsecured creditor Ø Summary dismissal • Directors, employee and substantial shareholders (>5% company share)
§ Negligence does not require proving the intention to deceive ¨ The focus is not whether the defendant has acted reasonably but insiders did
• Independent contractor § Fired because of major mistake § Relevant information
§ As a matter of general principle, the burden of proof lies in plaintiff. what a reasonable person would have done if placed in his position • Non-disclosure period traders’ approach
§ An employer may terminate a contract of employment without notice or • Information which is not yet generally known (confidentiality) to persons
• But the burden is reversed according to s3(1) of the Misrepresentation • Factors to be considered by the court in the relation to breach of duty of v Test to distinguish whether employment relationship exists ¨ All those who have traded to the disadvantage during the period
payment in lieu of notice in the following circumstances: who would be likely to deal in the securities of the company.
Ordinance, defendant need to disprove the negligence care Ø Control test between the insider trade and dissemination of the insider information
• An employee wilfully disobeys a lawful (duty of employee) and reasonable • If it was generally known to them, it would have a material impact on the
• Plaintiff is more likely to claim on the loss suffered ¨ Whether such a loss has been suffered before (repeated accident) § Power of deciding the thing to be done, the way in which it shall be done, the are eligible to bring suit
(depends on cases) order price of those securities (price sensitiveness)
Ø The court expected to do more to prevent it means to be employed in doing it, the time when and the place where it shall Ø Define eligible claimants as any person who buys or sells during
¨ Omit the order from the employer without damage § It will give rise to insider dealing if a connected person
Topic 4 – Tort Law ¨ Whether reasonable and practical precautions had been taken be done the period beginning at the start of the day when the defendant first
• An employee conducts himself in a manner which is inconsistent with the • Deals in the shares, or
¨ Whether the practices of the relevant industry or profession had been § Essentially the employer was regarded as the “master” and the employee as due and faithful discharge of his duties • Counsels and procures anyone else to do, or; unlawfully sells or buys, and ending at the end of the day when all
v Definition of tort followed the “servant”. the materials facts become generally available (precise and
¨ Hurt the interest or the normal operation of the employer ¨ Tipper (active) vs Tippee (passive)
Ø A civil wrong to be brought by a victim against a tortfeasor Ø Can also be sued even follow the professional standard § The greater the degree of control there is, the more likely there was an specific)
• An employee is guilty of fraud or dishonesty ¨ Both have offence
Ø The issue as to who can be plaintiff and who can be the defendant Ø Common practise is not a shelter for a claim for negligence employer-employee relationship in existence ¨ Insiders had a duty to disclose the relevant information while engaging
• Res ipsa loquitar • An employee is habitually neglectful of his duties • Passes the information to a third party with reasonable cause to believe
§ There is no age limit Ø Integration test (Organization point-of-view) in insider dealing
• Employer may either rely on a single incident or the cumulative effect of a that he would deal in the shares
§ Governors are protected for civil offences ¨ Fact speaks for themselves § The extent to which a person was “part and parcel” of the organization ¨ Floodgate issue of the above approaches
series of incidents § It is legitimate to ask:
Ø An award of damages is the usual remedy with no criminal result ¨ Only applied if there is no witness or record of witness (CCTV) § Whether a man is employed as part of business and his work is done as an Ø Put a maximum ceiling on the amount of claims so as to protect the
• The employee losses his right to a long service payment or severance • What is the whole purpose of passing the information if it is not intended liability of the insiders
§ Did the breach cause the damage? (Linkage) integral part of the business
payment under the Employment Ordinance if and only if summary that the third party will buy the share?
v Characteristics • The plaintiff must prove that he has suffered loss of damage because of § Preference to prevail if have conflict on both test Ø Enforcement by shareholders
dismissal is justified ¨ Merely liable as a duty for director to prevent insider dealing § Exist option
Ø Tort is a fault-based liability the defendant’s breach of duty • Especially for high autonomy employee
§ Expert or other professional make mistake may be a fault
§ Example ¨ Tipper is assumed to give benefit to tippee • If the board conceals the acts of insider dealing, shareholders who are
• In order words, there is a casual link between the act and the injury (e.g. doctor in hospital)
Ø Tortious liability arise from breach of a duty fixed by law Ø Multi-factor test • Can employer dismiss an employee who fails to go to work on time every discontented with its decision can always leave the company
suffered
Ø Difference between contract and tort § Is the performer performing these services as a person in business on his own day without paying any compensation? v Problem of enforcement and prosecution § Voice option
• But for test can be applied to establish the causation.
§ A contract creates duties and liabilities between the two contracting parties account ¨ Depends on situation Ø There are only a handful court cases dealing with criminal insider dealing in Hong
• Any affected shareholders can always approach the board and voice their
¨ But for the negligence of the defendant, the victim would not have
according to the principle of privity Ø If tolerance exists in the past Kong
suffered this kind of damage § Multi-factor concerns
§ The law of tort is automatic and uncompromising. It applied to everyone § Implied approval Ø It was not until 2008 that the government initiated criminal prosecution
§ Was the damage the kind of damage that should reasonably have been • The employer’s power to select the individual whom he wishes to work for ¨ They can send representative to sit on the board to make sure their
irrespective of our agreement § Acquiescence § A lot of the dealings are behind the scene through private communications, not
foreseen? • The employer’s power to dismiss the workman voice will be heard
§ Cannot be used as an excuse to terminate the contract to mention the passing of information among family members is also internal.
• Ignorance of the law is not a good defence • It is reasonably foreseeable that because of the defendant’s negligence, • The employer’s duty to pay the workman’s remuneration § Oppression remedy and derivative actions are 2 powerful weapons of
Ø Independence of the judiciary Ø Constructive dismissal This is especially true as most of the listed companies are also family-based
the injury or damage is likely to be suffered • The payment of a periodical wage calculated by reference to place or time enforcement in the hands of shareholders
§ There is no case to be brought against a judge for negligence, defamation, § The employee is forced to resign companies
• The damage should not be too remote and should be reasonably worked as opposed to remuneration by fixed sum § The commission of insider dealing is a kind of unfair treatment of the minority
claims, etc. § The conduct of an employer may present an employee with no option but to • Extremely difficult to collect evidence of insider trading because the insiders are abusing their power in getting unjust enrichment at
foreseeable in the first place ¨ Strong indication: injections of fund into MPF for employee terminate his contract of employment § The casual link between a fluctuation in share prices and insider dealing is
• Cannot sue the judge for professional negligence • Example • Performance of at least part of the work by the employee himself the expense of the minority
(i.e.: A domestic worker who is subjected to an oppressive and exploitative difficult to establish
• Appeal and journal writing are the only way to comment on the sentence ¨ Medical expense due to injury during office hour ¨ No sub-contract work is allowed for employee work regime)
§ A judge should be provided with an independent and free environment to ¨ Transferral of liability to the independent contractor by outsourcing Topic 6 – Business ethics: Corporate Social Responsibilities
¨ Too remote: income loss due to loss of promotion § An employee has the right to terminate his contract without giving notice or v Enforcement problem: Family business
adjudicate a case
• Novus actus interveniens • Control test factors payment in lieu of notice if: Ø Enforcement by courts and enforcement agencies
v Background of Corporate Governance in China
¨ The damage is also too remote if an unforeseeable intervening event ¨ The fact that the services are to be performed at the employer’s • He reasonably fears physical danger by violence or disease § Usual procedure
v Classification of tort Ø Dominant control of directorship and the shareholdings by PRC government are
breaks the chain of casual link between the wrong committed and the premises, as opposed to the premises of the employee or of a • He is subjected to ill-treatment by the employer • SFC will first decide whether to take the civil or criminal route
Ø Trespass to the person the main feature of corporate governance in PRC
resulting loss or injury sub-contractor ¨ It will refer civil cases to the Financial Secretary for proceedings in the
§ Assault Ø Corporate problems
¨ Example ¨ The employer’s duty to provide tools and equipment v Current issue in employment: Minimum wage legislation Market Misconduct Tribunal
• Word or conduct to threaten § Insider control, fraudulent trading and listing, corruption and bribery
Ø Doctor responsible for the wrongly cut right leg ¨ The workman’s obligation to work at times determined by the employer Ø Should we address the social issue of disparity between the rich and the poor ¨ For serious cases, refer to the Secretary for Justice for criminal Ø Corporate solutions
• To fear of immediate physical violence
Ø Driver responsible for the broken left leg due to careless driving, but • The fact that the workman is engaged generally without reference to any through minimum wage legislation? prosecution after considering the sufficiency of evidence and the
• No need to have direct contact with the physical body § Agency theory
not the right leg particular task(s) § Government intervention vs non-intervention underlying public interest concern
• Assault vs indecent assault • Reduce agency cost through regulations
¨ Subject to generally duties by umpire supervisor § Floor wage vs liveable wage Ø Whether it’s inline with the best interest of HK • Limitation
• Fear is a necessary element v Professional negligence • Floor wage links the performance
• The use of words in making the contract, which indicate an intention to § Usually inline with the best interest ¨ Need an independent and transparent system to enforce it, or it’ll just
§ Battery Ø Professionals owe a duty of care to their clients in the course of advising them create a contract of service • Liveable wage covers the basic living expense Ø Whether there is sufficient evidence
• Impose physical force on another person Ø If the advice is negligent, then their clients may sue them for professional be rules on paper with no practical effect
§ Corporate social responsibility § First criminal case: HKSAR v. Ma Hon Yeung
• Without lawful justification negligence ¨ Regulation may itself create further opportunities for bribery for
v Continuous contract § Other ways to solve poverty issue • Vice-president give relevant information to his girlfriend and other family
• The amount of the force is irrelevant when it comes to the commission of Ø Difference between professional negligence and misrepresentation compliance and non-compliance of it and this give a chance for people
Ø A period of 4 or more weeks of employment and working at least 18 hours a week § Minimum Wage Commission members whose assist him to deal with the securities on her trading to receive bribe
the battery § Professional negligence is unintentional and not necessary to have a contract Ø Employment Ordinance applies that employer cannot contract out the benefit § Review of the level of minimum wage account
• but it is relevant if it is not intended to do any harm even if it is not intended between the 2 parties Ø To streamline the process by bribe
§ Employee will always be protected under the Employment Ordinance if there is § Composition of the committee: procedural fairness ¨ Vice-president is liable assist to girlfriend § Consistency between agency theory and Confucianism
to do any harm § Misrepresentation is intentional and must have a contract contradiction with the original contract • Broadly representative of the society ¨ Girlfriend is liable to active engagement in acquisition of share
§ False imprisonment Ø There must be special relationship between advisor and advisee • Both agents and the principals are utility maximizers based on the basic
Ø Not restricted to full-time employees § Factors to be considered in the review process • Evidence for conviction
• Act of arresting or imprisoning or preventing a person from leaving the § Proof of special or proximate relationship assumption of selfishness in economics (inherent conflicts)
§ If there is a dispute as to whether or not an employee has a continuous • Inflation ¨ The defendants each bought 500,000 shares on 06-Jul-2006 after a
place • Defendant gives advice to plaintiff ¨ The use of coercive law to suppress the bad behaviour of human being
contract, it is for the employer to prove that an employee has not been § Shifting the duty from employers to customers series of telephone conversation between them, the day before the
• Total restriction on the freedom of movement • Plaintiff relies on the advice Ø Law as instruments to consolidate the ruling power
continuously employed • Appoint NGO or Consumer Council to monitor the increase in CPI announcement of the privatization scheme § Rule by law instead of rule of law
• Without lawful justification • Defendant should realise that his advice is relied upon by the plaintiff • All employees are presumed to be continuously employed ¨ Casual link and time factor
• Awareness of the fact of false imprisonment in not a requirement Ø Example • Rule of law
v Current issue in employment: Privacy issue Ø Strong
Ø Trespass to the property/land § There is no proximate or special relationship if the relation is a one-to-many v Employer’s duty under Common Law ¨ Independence of the judiciary
Ø With the advancement of technology, some employers may check the e-mails of Ø Client has legitimate expectation that there will be no criminal
§ Illegal entry without permission relationship such as the auditors and the individual investors over the auditor’s Ø To pay the agreed remuneration in full and on time ¨ Equality before the law
the employee or record their conversation with their clients or install the video prosecution within 2003-2008
• Unlawfully enters or stays on another person’s land subject to the report. § Minimum wage protection except for certain domestic worker cameras to monitor the performance of the employees ¨ Constitutionalism
§ Strengthening of the power enforcement agencies
exception of adverse possession • Auditors will not know who will rely on his report for whatever reasons Ø Indemnify expenses, losses, or liabilities incurred by an employee whilst performing Ø The issue of invasion of personal privacy • Rule by law
• Wiretapping and video and telecommunication recording should be made
¨ Private: 12 years Government: 60 years • Auditor’s report is for company purpose, not for individual purpose duties § The inspected must be informed of the surveillance/inspection ¨ Use the law as a tool to govern
available to enhance the collection of evidence
• Throw things upon another person’s land • There is no direct communication between 2 parties Ø Take reasonable care of employee’s safety § Main point: disclosure and transparency ¨ Use the law to support the political regime
¨ Raise the issue of privacy
Ø Nuisance and breach of the Deed of Mutual Covenants § There is proximate or special relationship if the relation is a one-to-one § Failure to provide safe workplace may affect the firm image § In reality, bargaining power asymmetry exists • It is good to hold the criminals responsible for bribery but selective
¨ Enforcement agent should exercise their power with caution and obtain
§ To provide a quiet and peaceful living environment for your neighbours to live relationship such as the bank and his client Ø If on piece-work, employer needs to provide reasonable amount of work a court warrant upon establishing a prima facie case prosecution under rule by law
§ In the form of water pollution, noise pollution, vibration, etc. • The advice made by the bank on the client’s financial position will be § If employees experience salary change due to change in duty, employer needs v Current issue in employment: Sexual harassment • On the contrary, rule of law upholds the principle of certainty and equality
• The flexible use of the Interception of Communication and Surveillance
§ Common law of nuisance is applied to all people considered relevant if the client relies on the advice to determine whether to give employee the right to work in both duties before and after the change to Ø Nowadays, the employment contract includes the company’s policy towards sexual ¨ One must apply the law equally to all individuals to give fullest meaning
Ordinance (Cap 589) with the following conditions:
• Deed of mutual covenant is applied to co-owner to start the business roughly maintain the level of salary harassment to the agency theory
¨ For the purpose of criminal investigation
Ø Wrongs to reputation Ø The process of handling the disputes § Stewardship theory
v Employee’s duties under Common Law ¨ There are criminal activities ongoing
§ Defamation Topic 5 – Employment Law § Report to immediate supervisor • Directors are stewards
Ø To carry out lawful orders given by the employer ¨ It is necessary to use covert surveillance as there is no other way to
• Use words or statements to damage a person’s reputation in the eyes of Ø There should be a sexual harassment officer ¨ Act bona fide for the best interest of the company
Ø To perform his work skilfully and with reasonable care collect the evidence
the public v The importance of human resource § Independent enough to handle the situation • Personal needs are compatible with the organization’s need
§ May subject to disciplinary proceedings when fail to align with this duties § Prevention: Blackout period
• The words must be directed at him with publication which a third party Ø Quality of an organization is to a large extent determined by quality of employee Ø It is an unwanted activity of a sexual nature that affects an individual’s employment • Align the personal needs with that of the company by providing shares,
Ø To work faithfully and honestly • If price-sensitive information which is withheld form the market is kept to a
should be acknowledged Ø Maintaining high performance to avoid over-specialization § Unwanted sexual advances, request for sexual favours, and other verbal or options, promotion opportunities, warrants, career development
§ Work as team § Fiduciary duty (loyalty duty) physical conduct of a sexual nature when submission or rejection of this minimum, there will be less opportunity for those desirous of exploiting it.
• Economic loss should be investigated but not necessarily to have for sue • HKEx proposed “the current blackout periods should be extended to • Incentive mechanism to reward instead of through bribery
on defamation • Optimal size: 5-7 ppl/team • Employee are required to obey the employer, or they may be penalised conduct affects an individual’s employment § Consistency between stewardship theory and Confucianism
when provide an advantage to the competitors of the employer commence from the listed issuer’s financial period end date to the date on
• With positive independence • Given the limitation of regulation, promotion of good education to change
• An employee may not set up his own business in competition with his v The Labour Tribunal which the listed issuer published the relevant results announcement
v Vicarious liability § Job rotation the corporate governance is a fundamental need, such as Confucianism
Ø Ensuring that the organization retains competent and high-performing employees employer Ø For the purpose of the Labour Tribunal Ordinance, an employee means a person ¨ This would be very effective as there is no need to prove the
Ø Rationale ¨ The ethical compass for line of business navigation
by: Ø Not to disclose trade secrets or confidential information obtained during who has agreed to serve as an employee under the employment contract technicalities of the law and officers would be prevented from any
§ Employer is vicariously liable for the acts of his employees ¨ For Confucian teaching, it is something from and within the one who
employment Ø There is no requirement of either hours worker or weeks worked and therefore, dealing of the shares, let alone insider dealing
• Employer is jointly responsible for mistake committed by his employee § Providing an attractive remuneration package, promotional prospects and adopts his will to do so because it’s consistent with his conscience
§ While a person is an employee, it applies to all information. temporary workers may be heard by the Tribunal Ø Enforcement by the company
• Employers is ultimately responsible for the conditions at works training opportunities with elements of: Ø Self-management and self-discipline is the highest form of
§ An ex-employee’s duty of confidentiality extends to trade secrets or similar § The plaintiff must be an employee § Company should hold fraudulent directors responsible for insider dealing as it
¨ Unable to provide adequate training and support • Mentor / training manager management
highly confidential information even after termination Ø Any claims which falls within the tribunal’s jurisdiction may not be heard in the HK is a serious breach of fiduciary duty, which
• Employer in a good position to repay compensation to victim • Coaching • In line with stewardship theory, which motivate and channel the good
courts • Act bona fide for the best interest of the company
¨ In many case, have insurance policy to protect company and • Experimental exercise nature through the process of growth and self-actualization
v Important implied terms in the Employment Ordinance § Except the presiding officer takes the view that the nature of the defence and • Avoid a conflict of duty and interest
employees § Appointing a contract to retain in the company in order to retain the employees
Ø Minimum wage protection the legal issues render the case more appropriate to be dealt with the CFI, the ¨ Strict approach
Ø 3 ingredients for action grounded in vicarious liability after supporting them for continuing education v Bad nature vs good nature: mutually exclusive?
Ø Deducting wages District Court, etc. Ø Not allowed to engage in insider dealing in all activity
§ Employee vs independent contractor Ø The path to enlightenment is a realistic one in that if everybody worked hard to
v Legal issues in the recruitment process § The total amount in any one case shall not exceed the equivalent in value of Ø No legal representation is allowed in order to streamline the process ¨ Lenient approach
§ In the course of employment improve one’s character and ethics, there is a potential for all of us to be a saint
Ø Identify the major source of potential job candidates by internet searches, the damage or loss suffered by the employer or $300, whichever is the less. Ø If it involved complicated documentation or complex issues of facts or law, it should Ø Make a full disclosure to the Board
§ Wrongs committed by an employee irrespective of the human nature
employee referrals, college recruiting and professional recruiting organization (job § The total of such deductions in any one wage period shall not exceed a not be dealt with by the Labour Tribunal. Ø The Board vote at your proposal except for interested party
Ø For good corporate governance system, we need both a good system and good
hunter) quarter of the wages payable to the employee Ø Claims to be heard by the Tribunal: • The ACA codified the principle of fiduciary duty where a body corporate is
v Negligence apple
Ø Ways to protect the privacy of the candidates when dealing with their recruitment Ø No late payment of wages § Breach of a contract of employment allowed to sue the insider
Ø Definition § Agency theory still matters but stewardship theory and education of
data § Wages must be paid within 7 days of the end of the wage period. § Failure of any person to comply with the provisions of the Employment • A director is never allowed to make use of his professional capacity to earn
§ Careless mistakes committed by a plaintiff who fails to discharge a reasonable business ethics is more influential in the long run.
§ Handed by limited officers § An employee may terminate his contract of employment without notice or Ordinance secret profits by misusing the confidential information which is regarded as
standard of care payment in lieu of notice if any wages are not paid within 1 month § Right of an employee to severance payment and the amount of it the “property” of the firm
v How Confucianism help directors to be good apple?
Ø Benevolence
§ Be compassionate (unconditional love) towards the needs of employees and
understand problems they faced and help nurturing and developing them
§ Owes a high degree of CSR towards different stakeholders
Ø Righteousness
§ Should adopt righteousness as the guiding principle and not engage in any
illegal trading and unethical activities
§ Confucius will not oppose the making of the profit but using any illegal and
unethical way to obtain it
Ø Rites and rituals
§ Internally, there must be mutual respect between employers and employees so
as to build a harmonious and friendly working environment
§ Externally, they should pay respect and serve the needs of customers
Ø Intelligence and wisdom
§ It manifests in the investment in human capital and intelligence. To remain
highly competitive, a business must invest heavily in human resources and
encourage staffs to use innovative methods to produce things and rewarded for
creativity and new ideas
§ Incentives mechanism should be put in place to encourage employees to learn
and engage in lifelong continuing education in order to be remained as
valuable assets of the company
Ø Trust
§ Internally, there must be mutual trust between colleagues to build a
co-operative working relationship
• It’s especially important when it comes to mutual trust among the board
members in order to avoid meaningless power struggle
§ Externally, mutual trust between company and customers must also be
established.
• Trust is the company’s image, it’s the words of mouth of the company. If a
company is trapped in defective product liability, it’ll lead to a chain of
collapse of trust
v CSR and Confucianism
Ø The essence of Confucian teaching is benevolence
§ According to the Chinese character, benevolence means maintaining a
relationship between 2 persons
§ The starting point is to love yourself, your family your country and the world
Ø There is no exact boundary or definitive meaning of the word self
§ The loss of body components will not affect the meaning of self or diminish the
substance of self. But it is also possible to broaden the meaning of self
§ When a loved one dies or is suffering, people feel the same as the loved one
§ Essentially, there is no absolute boundary of the word self and it may include
not only oneself but family, country, nature or the world
• One can find that Confucian teaching are possible and consistent with
human nature
Ø Company is not just an entity but part of a larger organization that owes a duty to
its customers, employees, shareholders, the community and the environment
§ By adopting Confucian teaching, company would not only be concerned about
its profitability but also the issue facing the community and the environment
• This will also enhance corporate image
Ø Old saying goes “one is all and all is one”
§ An individual’s act can influence the environment whereas the environment can
then affect the well-being of an individual
Ø By focusing on the corporate image and performance, it works well with the saying
“the family that accumulates goodness is sure to have superabundant
happiness and the family that accumulates evil is sure to have
superabundant misery”
§ This saying may be too calculating and utilitarian
• Gentleman does a right thing not because of the instrumental value to
himself but it’s simply a right thing that he is passionate about it
Ø One should not take care too much about short-lived fame or profitability.
§ By taking a broader approach, a political leader should really care about the
well-being of his subjects and his place in history
v CSR and the major stakeholder: Shareholders
Ø According to the rule in Foss v Harbottle, if a wrong is done to a company, then
only the company may sue for redress
§ Known as the proper plaintiff principle
§ 3 exceptions:
• Personal action
¨ To enforce some individual of his own
¨ A shareholder may sue the company to enforce his personal
shareholder’s right (voting, dividend, attend GM) against it
• Representative action
¨ Where a right has been infringed which affects a number of
shareholders in a similar way
¨ The company will be joined as the defendant to be bounded by the
judgement against a representative in the interested group
• Derivative action (AKA fraud on the minority)
¨ Where the alleged wrongdoers are in control of the company so that it
is impossible for the company to bring an action in its own name
¨ An individual shareholder may bring a derivative action when such
abuse of power occurs
¨ Need to prove:
Ø Fraud on the minority
§ Intentional dishonesty
• Unintentional dishonesty (negligence) may amount to fraud
on the minority if the wrongdoers actually benefit from the
transaction
• If there is any unjust enrichment/personal benefit, it will
make the scheme more fraudulent on the minority
§ Difficulty lies in the exact meaning
• Unreliable to rely on court proceedings to achieve one’s
desired outcome given the technicality of the common law
rules and the complexity of the legal procedure
¨ Judicial proceedings are not always the best solution
§ But for Confucian director, they will have a sense of
shamefulness
• No need for them to refer to the common law before they
know it is wrong to pass a dishonest resolution to oppress
the minority
• It will against their conscience
Ø Wrongdoers are in control of the company
(AKA controlling shareholders)
v Minority shareholders’ protection with Confucianism
Ø Teaching of Confucius
§ Confucius advocated the importance of compassion and the difference
between human and animals lie in compassion and understanding
§ The rule of reciprocity
• Confucian logic will help director understand that majority and minority
shareholders are in fact strategic partner
¨ They will not do something that others do not want
§ The rule of sustainability
• The interest of the majority and minority are not mutually exclusive and a
director should pursue a company policy which can create a beneficial
effect for all simultaneously (win-win situation)
Ø Teaching of Mencius
§ Big substance
• Confucian ideal like fairness, justice and reasonableness
§ Small substance
• Mean man cares about satisfaction of their senses and their life is limited
by the desire for fame and money
¨ Materialistic gains to satisfy their own egos
§ Confucian director will fearlessly make a judgement between what is right and
what is wrong.
• If someone asks them to say something untrue and dishonest or ask them
to cover up fraud, they will not do it because they are prepared to die for
their cause to defence truth and ethics
§ Mutually inclusiveness of big and small substances
• The adoption of dualistic thinking is not necessary
¨ The pursuit of “small substance” and “big substance” can be mutually
inclusive.
¨ The materialistic “small substance” is the basic foundation for the
pursuit of some higher values
• Relation with fundamental assumption in economics
¨ Capitalism is based on the belief that everyone is selfish in that they
fight for their own interested
¨ Ultimately, because of their hard work and contribution, the society will
collectively benefit with a high GDP
¨ The attention should be put on “big substance” although they can be
co-exist
Topic 6 – Business ethics: Auditors and Ethics Plus Model
v Auditing
Ø Every HK company is required to keep proper books of accounts which give a true
and fair view of the company’s financial position
Ø Audited accounts must be presented to the member of the company at an AGM
§ s122 requires the directors to prepare profit and loss account and balance
sheet for each financial year
§ In order to verify the account, the director must appoint an (external) auditor to
prepare audit reports and to give an opinion on the affairs of the company
v Duties of auditors
Ø Under s141(4) of the Companies Ordinance, it is the duty of auditors to report if:
§ Proper accounting records have been kept
§ Proper returns have been received from branches not visited by the auditors
§ The accounts are in agreement with the books of account and return
Ø Auditors are required to report to the member on the accounts examined by them
Ø Auditors must act honestly and with reasonable care and skills
§ They may rely on information from manager or other responsible official of the
company unless they have reason to suspect that the information is inaccurate
• They are allowed to rely on that information with the assumption that that
information are honest
§ Auditors are entitled to conduct random sampling without going through every
document
v Resignation and removal of auditors
Ø Resignation
§ An auditor may resign by depositing notice in writing at the registered office of
the company
• Applicable for voluntary resignation or unfair resignation due to
unreasonable commercial pressure from the company
• The notice must contain either:
¨ A statement to the effect that there are no circumstances connected
with his resignation which he considers should be brought to the notice
of members or creditors of the company
¨ A statement of any such circumstances
• The company should send a copy of the notice containing a statement of
facts to its members, debenture holders and any other persons who are
entitled to receive notice of a general meeting
Ø Removal
§ s116B provides that members may (instead of attending an actual meeting)
pass a resolution by a written resolution signed by all the members
• If an actual meeting is not held to consider the resolution, the auditor
concerned will be deprived of his right to make oral representation in the
general meeting before a vote is taken
• A general meeting must be held to approve a resolution to remove an
auditor
• Also applicable for unfair removal by directors
v Independence of auditors
Ø Professional Code of Conduct
§ Professional independence is a concept fundamental to the accounting
profession
§ The auditor’s opinion is provided to enhance confidence in the reliability of
financial statements that are the representations of the management.
• If the auditor were not independent of management, the auditor’s opinion
would add nothing to the financial statement
§ Independence (statement 1.203) is defined as “an attitude of mind
characterized by integrity and an objective approach to professional work”
§ No matter what technical proficiency the auditor possesses, the auditor’s
impartiality is the indispensable quality that inspires confidence in the
dependability of the suitor’s opinion, and therefore the reliability of the auditor
financial statements
Ø Interpretation of the COC
§ Auditors should be as independent as possible, not to have any financial
connections and not hold shares with the clients’ company
§ Auditors must be with rotation of audit partner to ensure independence
§ Same auditor should not provide financial statements and auditing services at
the same time
• Auditor will be less critical
Ø Objectivity
§ The principle of objectivity imposes the obligation to be
• Impartial
• Intellectually honest
• Free of conflict of interest
¨ Members should perform all professional responsibilities with the
highest sense of integrity
Ø Service and the public trust should not be sub-ordinated to personal
gain and advantage
¨ Significant overdue fees from an audit client or group of connected
clients can also be a threat to objectivity
Ø The fee may be treated as a loan to a client
Ø The fee may be a threat to generate unqualified audit reports in
order to get the audit fee
§ Refrain from attending social occasions invited by client is suggested to ensure
independence and objectivity
v Ethics Plus Model
Ø Example – background
§ Tom fraudulently withdrawn a substantial amount of money from the firm
§ Mary as Tom’s fiancée promised to repay
§ Duty of the chief accountant
• Oversee the operation and cultivate a good culture
Ø Application
§ Step 1: Establish the facts
• Whether I as the department head should keep secret for Tom?
§ Step 2: Take stock – shareholders
• List out all stakeholders in this case
¨ Myself, Tom, Mary, accounting professions, company
§ Step 3: Have an assessment – each stakeholders’ position v Conclusion: Neil does not owe a duty to the public, the court will not impose unlimited § Employee can ignore the order if it is not reasonable and lawful The following events subsequently take place:
Stakeholders Not report Disclose liability to the writer (i) Jeffery buys shares in ABC Television Ltd
Compromise professionalism of Conclusion: (ii) Jeffery tells his friend Nat about the likelihood of the take-over and Nat buy shares in
not being independent and Rachael side v Constructive dismissal ABC Television Ltd
objective Jeopardize relationship v There is close relationship between Neil and Rachael Ø Employer posing pressure to remove the fence (iii) At a dinner party Jeffery, without actually telling him about the take-over proposal,
Myself v The class size which Rachael belongs to is small Ø Mavis may claim for long-service payment since working for at least 5 years advises his brother Peter to buy shares in ABC and Peter does so.
Not fulfil responsibilities as with Mary
department head v The purpose of giving the book is to show off the intelligence of him
v The advisor will not know hope Rachael will use the book for any transaction taken Example question 4 – Employment law Are they guilty of insider dealing?
Disloyal to the firm
v Conclusion: Neil does not owe on Rachael
What are the
Ken is employed by L Ltd as an electrician. One day, he was asked to repair a ceiling fan First information: (too broad)
consequences
Terence side located in L’s workplace and is told to dismantle the fan and take it to the electrical We need to know the
Face criminal prosecution v There is close relationship between Neil and Terrence workshop for repair. In order to save time, Ken attempts to repair the fan whilst standing on v Agenda
May change / reform for the and ruin his career
Tom v The class size which Terence belongs to is small a stepladder and whilst doing so he drops a pair of pliers which lands on Martin’s head. v Outcome of the position
better prospect v It is reasonable for Terence to rely on the advise as Neil has told himself to do so Martin is also employed by L Ltd. Because Martin is of a rather nervous disposition, he is v Outcome of the decision to the company
Face disciplinary
v Neil will realise that his advise will be relied for investment purpose off work for two months following this accident, rather than the two days which would be v Impact to the future development
proceedings internally and v Conclusion: Neil owe a duty of care to Terence normal for such an injury. Following this incident, Ken decides to comply with his
externally
instructions and dismantles the fan but, while he is doing this, his screwdriver snaps and a Second information: Takeover bid (relevant)
Financial loss and affect corporate culture
Example question 3 – Termination of contract piece of metal enters his eye. v Specific
Company
Unfair to other honest staffs v Confidential
Hurt her feelings B and L work for the ABC Company. B took a week off work without permission and Advice Martin and Ken of any remedies available to them. Ø The public has no access to it
Mary Feels loyal to Tom
May break engagement without telling his manager the reasons for his absence. In fact, B’s wife had left him. He v Price sensitive
has worked for the firm for 20 years but of late has shown little interest in his job. The Case of Martin: Ø Create a positive impact put he share price of the company
Affect public confidence in the profession and its members
Accountants manager told him yesterday that, because of his attitude, he was being taken off his job as v Sue Ken (1st defendant) and L Ltd (2nd Defendant)
Taint the profession
supervisor and put back to working the machinery. B told his manager to ‘stuff” his job and v For L Ltd: Managing director:
§ Step 4: Identify alternatives and assess the effect on each stakeholder
left saying ‘See you in court.’ Ø Primary liability v May be breach of confidentiality
• Keep secret
§ To provide safe working environment to the employee Ø Should not leave important message on answering machine
• Keep secret and Mary repay the money if nothing is happened L was employed as a sales representative for 10 years. He was employed under a contract Ø Secondary liability § As parent may hear the information
• Keep secret and ask Tom to resign and review the internal control system which required him to work 35 hours a week. Two weeks ago, on 1 April, the company § Vicarious liability Ø MD should protect the secrecy of the information for insider trading
• Report the incident to a regulatory body
announced that it will require all sales representatives to work up to five hours a week • L Ltd will be liable for the tort committed by Ken
• Resignation of myself if the dilemma is not resolved compulsory overtime from 1 May. Staffs were not consulted about this change. Although Jeffery: Tippee
• Criteria
§ Step 5: Compare and evaluate each alternative most of the sales representatives have accepted this change, L has refused to do so and v It is an offence for tippee to deal in the shares after receiving the information
¨ Ken must be L Ltd’s employee
• 4 standards has resigned with effect from 30 April. ABC has introduced the change because of an ¨ The accident should be in the course of employment v Liable for passing the information to his friend
¨ Professional code of conduct anticipate increase in competition. ¨ There should be wrongs done by the employee Ø May give rise to insider trading as a tipper, with the intention that his friend (Nat)
Ø Statement 1.203
Ø Ken owes Martin a duty of care by the principle of neighbourhood will also buy the shares of the company
§ Integrity, objectivity and independence Advise B and L. Ø Ken is in breach of the duty v Liable for counsel and procures Peter to do so in the dinner
• Objectivity should not be affected by personal relationship Ø Peter may not be liable
§ A reasonable person will not have dropped the pliers when
Ø Statement 1.290C Criteria of constructive dismissal § Peter has not received any relevant information and has no knowledge about it
repairing the fan and hit Martin’s head
§ Should report internally v Resignation
• According to the thin-skull rule/egg-shell rule
Ø “See you in court” give the assumption of permanently leave the job Example question 7 – Proper plaintiff principle
¨ Legal requirement – Criminal offences ¨ Take the victim as you find him
v Force to resign because of the unreasonable actions by the employer
¨ Uncompromising self-value ¨ Fully responsible for the damage of the victim
Ø May not be argued if procedure fairness has been carried Two directors, when negotiating a construction contract for the company, took the contract
Ø Loyalty to firm Ø But for the act, Martins will not have suffered in this kind of injury
Ø Loyalty to profession v Proportionality in their own names. When this was queried by some minority shareholders, a special
even though Martin is weak and vulnerable
Ø Honesty Ø Conduct of employee resolution was passed to confirm that the company had no interest in the contract.
Ø Internally
Ø Integrity Ø Punishment Furthermore, the two directors decided that they would be paid a dividend of $100 per
§ L Ltd can sue Ken for failure to take reasonable care and failure obey a lawful
Ø Fairness share but the minority shareholders would not be paid any dividend. Their recommendation
and reasonable order
Ø Care for the family Valid reason for the absence of B was approved in general meeting because they as the majority shareholders voted for the
Case of Ken
¨ Sunshine test – Ethical dilemma v Wife left B recommendation in the meeting.
v Argument (primary duty)
Ø Can I disclose my decision to any parties? v As a employers, they should treat their long-serving employee more leniently
Ø Employer fail to provide safe equipment
§ Firm Ø Procedure fairness to act as a responsible employer a) What are the principles laid down in Foss v Harbottle?
§ Employer are required to provide safe environment and equipment inclusively
§ Family § Employer needs to carry out investigation or meeting with B If there is any wrong done to the company, only the company can sue as a separate legal
§ Warning may be imposed entity
§ Friends Example question 5 – Insider dealing
§ Subject to any disciplinary proceedings to signal the action for the company
§ Colleagues
• Inform the reason for punishment b) What are the exceptions to the rule in Foss v Harbottle and to what extent can the
§ Step 6: Select the most appropriate course of action Happy Ltd is a listed company that has diverse business activities. Mark is an employee
• Offer a chance to appeal minority shareholders of the above case rely on the exceptions to the rule in Foss v
working in the accounts department of the company. One afternoon during lunch Mark had
Harbottle?
Example question 1 – Proximity heard from a director that the company just a few hours ago had heard from Malaysia that
v Missing of reason to disappear for a week
the Malaysian government had approved of an important joint venture. The director had
D the driver of a stock car, negligently fails to maintain his vehicle. In the course of a race, v May be subjected to summary dismissal v Personal action
stated that the information had come from the managing director, Mr. Happy himself.
which is being televised, D’s brakes fail and his car crashes into a crowd of spectators. The Ø Must be accompanied with a warning letter v Representative action
car narrowly misses A but strikes and kills B. B’s daughter, C, is very badly injured but v B should apply for leave rather than disappear suddenly Ø Anyone from the group of the minority shareholders can sue because they are
The evening on his way home Mark had met June, his girlfriend, and had told her that as
survives and is taken to hospital. infringed in a similar way
soon as the Malaysian Joint venture was announced the share of Happy Ltd would pick up
Valid reason for L to work for 5 hours Ø Judgement will be binding on the company
in price as Happy Ltd was the only Hong Kong company that had received the approval for
A, a person of unusually nervous disposition, develops an anxiety neurosis. v Employee are responsible for the competition in the market / demand in the market v Derivative action
the venture. He wanted June to obtain further shares and sell them when the shares
v Request from the employee Ø Fraud on the minority
reached the peak.
F, a friend of B, is present at the scene of the accident. At first, she attempts to help, but Ø Unilateral and permanent § Any abuse of power on the part of the wrongdoers
realizing that B is dead and that C is being dealt with by professionals, F rushes back to tell § No consultation and consent • Misuse their voting and management power in making dividend to
June made a profit by selling the Happy shares a few days later.
B’s wife, G, what has happened. Some time later, G, who is also C’s stepmother of six § Change to the term of employment themselves, but not to the minority shareholders
months’ standing, drives to the hospital and asks to see B and C. G is shown B’s body and • Need to sign a new contract to get their consent ¨ May be ordered by the court to declare dividends
It has also transpired that Unhappy, a director of Happy Ltd, had purchased the shares in
sees C on a hospital trolley, awaiting treatment, crying in pain and in a badly disfigured v Argument for L the company from Mr. Sad, a shareholder, without informing him of the venture in ¨ The court may execute a buyout order to buy all minority shares at fair
state. Ø There will be enough human resources to due with the increase of demand price by majority shareholders
Malaysia. Unhappy had then made a profit from the sale of the shares. Advise the parties
§ Not a reasonable request accordingly. Ø The wrongdoers are in control of the company
H, B’s mother, sees a live television broadcast of the events, recognizes her son in the Ø There may be economic duress § The only the controlling directors
crowd and realizes that D’s car has crashed into the area where her son is standing. Ø Rebuttal Relevance of the information § They are the controlling shareholders
§ Employer should be fair to all the existing employee v Confidentiality
F, G and H are all horrified by what has happened. Both F and G suffer from reactive § Still need to consult and get the consent from the employee Ø The public has no access to such information Resolutions:
depression. H helps care for G and C following the accident and becomes a recluse v Price sensitiveness Fraud on the minority
because of her inability to come to terms with the psychological suffering of G and the Example question 4 – Dismissal Ø Create positive impact to the share price of the company v They are using their voting power to oppress the minority
physical injuries suffered by C. Advise A, F, G, and H. v Company unable to earn profit in 2 contracts, less dividend distributed to shareholders
Rita and Mavis both worked for ABC Machine Tools Ltd. Stakeholders
Primary victim v Mark (custodial offence) Example question 8 – Proper plaintiff principle
v Primary victims include the immediate victims and those who nearly suffered from Rita was the machine shop floor supervisor. She was dismissed when she missed a shift Ø Connected person: employee
personal injury because she was visiting her sick mother in hospital. After an internal appeal, she was Ø Liable for “counsel for his girlfriends to do so” A company was controlled by its two directors who were husband and wife. It bought land
v Candidate: A, B, C reinstated at a lower grade (demotion), with a consequent reduction in salary, after v Director for $400,000 and later resold it at the same price to the lady director. She resold it for
v A can claim for the compensation of development of anxiety neurosis consideration had been given to the fact that: $800,000 and therefore earned a profit of $400,000. A minority shareholder sued the
Ø Connected person: told Mark about the information
Ø But for careless driving, A won’t develop anxiety neurosis Ø Passing of information directors by way of a personal action.
Ø Thin Skull Rule: Has to be responsible for suffering/damage for weak victims. a) she had been worked there for 15 years; § The activeness of the passing process is in doubt
Secondary victim b) she had an exemplary work record; and To what extent can a minority shareholder rely on the exceptions to the rule in Foss v.
• Mark heard the news, not actively asking for the information
v Secondary victims are those whose identifiable mental illness stems from other c) she had arranged for another supervisor to cover her shift and no disruption to the § Director may not be liable Harbottle?
reaction to physical injury caused to the primary victims. business occurred.
Ø Duty to protect the secrecy of the information
v Candidate: F, G, H § Director may be liable Proper plaintiff:
v H cannot sue D and claim on any compensations. Rita resigned after the appeal. v If there is any wrong done to the company, only the company can sue as a separate
v Mr. Happy (custodial offence depends on situation)
Proximity Ø Connected person: managing director legal entity, subject to 3 exceptions:
v Proximity is in term of relationship where there must be a close tie of love and affection Mavis worked on the shop floor for five years. Due to foreign imports, ABC had been Ø Personal action
Ø Exchanging information for company information
with primary victims striving to produce more products in less time and the workers were ignoring safety § Personal right as a shareholders have been infringed
§ The law does not prevent informations exchange among directors for company
Ø Direct relative of the primary victims procedures, such as fencing machinery, to meet targets ABC had set. Mavis refused to § Not appropriate as no shareholders right have been infringed
operation, especially the board meeting
v Proximity is in terms of time and location. remove the fence on her machine and therefore could not work as quickly as the others. Ø Representative action
v June
Ø Location ABC warned her that if she could not meet her targets by removing the fence, he would § Your right as a group of a shareholders have been infringed in a similar way.
Ø Connected person: tippee
§ Scene of the location reduce her wages. Because of the stress placed upon her, she resigned. Ø Derivative action
Ø Offence for tippee to deal in the share after receiving the information
§ Its immediate aftermath § Fraud on the minorities
Ø May not liable to custodial offence if commit 1 time only and no more leak of
• Hospital or Morgue Advise Rita and Mavis. information • Negligence
v F cannot sue D because of insufficient fulfilment (relationship / time and location) v Mr. Unhappy (custodial offence) ¨ Miscalculation
Case of Rita: Miss a shift (Mistake) Ø Connected person: director • Financial benefit
Example question 2 – Tort law v Principle of proportionality of conduct of employee to punishment Ø Liable for insider dealing by dealing the shares • Conclusion: fraud as in Daniels v. Daniels
Ø The punishment must not be out of proportion to the conduct of the employee v Mr. Sad § Wrongdoers are in control of the company
Neil, who is an accountant, writes a book entitled “How to Make a Fortune on the Stock Ø Conduct: Ø Not informed of the price sensitive information (joint venture) • Controlling directors
Market.” Karen buys a copy from a book shop and Peter is given a copy as a birthday § Work for 15 years Ø Non-disclosure of information
present. Neil gives a copy to Rachel, his girlfriend, saying ‘Have a look at this and see how § Work well Ø Director is duty bound to protect confidential information: Unhappy is not duty
clever I am’, and a copy to Terence, his brother, saying ‘Follow these tips and you will § Never miss shift bound to disclose the information to Sad
become a millionaire.’ Karen, Peter, Rachel and Terence have followed the advice in the Ø The valid reason of missing the shift: Ø Not able to bring action
book and have lost a large amount of money, as the book is erroneous in several important § To visit her sick mother
aspects. Advise the parties. § Had arranged someone to cover the shift Example question 6 – Insider dealing
Ø No disruption on the normal operation
Factor to be considered Ø Conclusion Jeffrey lives with Kim. Kim is on the Board of directors of ABC Television Ltd which has
v The purpose for which the statement was made § The punishment is too excessive been considering a take-over bid from XYZ Television Ltd. One Friday Kim tells Jeffrey that
v Whether there’s a close relationship between the advisor and advisee § Totally out of proportion to the conduct of Rita she has to attend a very important board meeting of ABC Television Ltd, the outcome
v The size of the class to which the advisee belongs § Will be entitled for long-service payment (15 years working) which could have a crucial impact on the future of the company. At the Board meeting it is
v Whether the advisor know that his advise will be relied by the advisee for a particular agreed that, subject to some final negotiations to be carried out by the Managing Director
purpose Case of Mavis: Fail to remove the fence of ABC Television Ltd, the take-over bid should be accepted. That evening the Managing
v Employer duty to provide safe working environment to the employee provided in the Director phones Kim and leaves a message on the answering machine confirming that the
Karen and Peter side Common Law negotiations have been successful and the take-over bid will therefore be accepted and
v There is insufficient proximity between Neil and Karen and Peter, since there is no Ø The fence should not be removed eventually the share price will go up. When Jeffery comes home, before Kim, he hears the
direct communication between them. Ø ABC is in breach of the duty of safety by asking the employee to remove the safety message.
Ø Peter even is not a purchaser of the book measures
v The class size which Karen and Peter belongs to is too large, which is the general v Employee need to carry out orders given by the employer
Ø Employee are required to obey reasonable and lawful orders by the employer
public