Download Hong Kong Key - Summer 2008 (PDF, 463KB). - Kennedys

The HKey
Summer
2008
What do you say?
There are steps an employer can take to avoid liability when giving an employee
a job reference.
Most employers know they
need to be careful when
giving a reference for a
current or ex-employee.
They are usually concerned
about their possible
liability towards the
recipient of the reference.
However, they may also
be worried about their
exposure to the employee
if they give a bad reference
and the employee then
fails to get the new job. This
article provides guidance on
what employers should and
should not do when providing
a reference, and the legal
issues they should bear in mind
when doing so.
Inside this issue:
Page 4
New Appointments
Page 5
Reject or reserve (Part 2)
Page 7
The disabled employee
Page 11
Righting a wrong
1

Types of reference
A reference may be:
• given by the ex-employer as a corporate
reference
• given by a director, manager or senior
member of the ex-employer for whom the
employee worked
• or a personal reference.
It is important to make clear what type of
reference is being given. An employer is legally
responsible for a reference given on its behalf.
If the reference is given on headed notepaper –
or makes reference to the employee’s job title
and work they carried out for the employer –
the implication will be that it is provided on
behalf of the employer and is not a personal
reference. Employers should therefore have
a policy of who can give references on their
behalf (for example, only senior managers or
above) and require references to be cleared by
the HR department before they are given.
Refusal to give a reference
In the absence of an express provision in the
employment contract or some other relevant
document, an employer is under no legal
obligation to provide a reference. That being
said, a refusal to do so may lead to allegations
of discrimination against the employee. An
employee could also argue that refusing to give
a reference is a breach of the implied term of
mutual trust and confidence present in every
employment contract.
Employers should also bear in mind that
regulatory authorities are sometimes entitled to
demand references to ensure, for example, that
a particular employee is “fit and proper”. This
may extend to a prospective employer having
a right to require a reference from the current
employer – for example, if both employers are
regulated by the same regulator and subject
to the same regulatory requirements or code
of practice (see the Legal and General case
discussed below).
Even if there is no obligation to provide a
reference, an employer will often agree to do
so. Employers tend to feel they have a moral
obligation to provide a reference since, without
it, the employee may not be able to obtain other
employment. In addition, they are sometimes
forced to provide a reference in order to
settle a dispute with a departing employee.
Compromise agreements commonly include a
term agreeing that the employer will provide a
reference and what that reference will say.
In general, it is better for employers to have
a written HR policy dealing with references,
setting out who may give them and what they
should (and should not) say.
Liability to the employee
• For negligence. It is long established law
that an employer owes its employees a duty
to take reasonable care in the preparation of
a reference, and will be liable to an employee
in negligence if it fails to take such care and
the employee suffers financial loss.
The common law cases on this point date
back to 1970 and the English case of
Ministry of Housing v Sharp. But the case
that is usually cited as putting matters
beyond doubt is Lawton v BOC Transhield
Ltd (1987). It was in Lawton that the
court extended the negligent misstatement
principles established in the famous Hedley
Byrne & Co v Heller & Partners (1963) case
to the giving of references for employees.
Lawton was reaffirmed by the English House
of Lords in Guardian Assurance plc v Spring
(1995). This case also confirmed that
holding employers liable in this way is not
contrary to public policy on the grounds that
it might inhibit the giving of full and frank
references. As the court said in the Guardian
Assurance case, there is nothing to stop a
person giving a reference from disclaiming
liability for it and therefore preventing a duty
of care from arising.
A reference may be given either during or
after employment. An employer certainly
owes its employees a duty to take
reasonable care when providing them with a
reference while they are employed. In certain
circumstances, this duty may also apply after
the employee ceases to be employed.
• False and negligent statements. In the case
of Legal & General Assurance Ltd v Kirk
[2001] EWCA Civ 1803, an ex-employee
attempted to go one further and argue that
his previous employer owed him a duty not
to make false and negligent statements even
where he had not asked for (and, indeed, it
had not actually provided) a reference.
The facts of Kirk were as follows. Legal &
General (L&G) employed Mr Kirk as a
financial consultant. After his employment
ended, L&G claimed Mr Kirk owed it £7,500.
Mr Kirk denied he owed L&G anything and
counterclaimed for commission he said was
due to him. He also claimed that, in wrongly
claiming that he owed it a debt, L&G was in
breach of a duty of care not to make false
and negligent statements about him, as such
statements prevented him from obtaining
other employment as a salesman of life
assurance and other financial products. This
was because the rules of the Life Assurance
and Unit Trust Organisation (and its
successor, the Personal Investment Authority)
required that, before appointing a person as
a representative, a member should obtain
appropriate references and that a member
should not appoint a person unless it was
satisfied that the applicant did not owe an
“industry debt” in excess of £1,000. In short,
Mr Kirk did not ask for a reference because he
knew it would refer to the industry debt and
therefore inevitably lead to his rejection as a
candidate for an appointment.
The Court of Appeal rejected this argument,
saying that, for Spring to apply and Mr Kirk
to have a claim for negligent misstatement,
there had to be an actual statement. L&G
had not given Mr Kirk a reference and
consequently no-one, including Mr. Kirk,
had relied on such a reference and suffered
damage as a result.
• Defamation and malicious falsehood.
If the employer gets its facts wrong and
consequently damages the reputation of the
employee, it may amount to defamation.
This will usually be libel, because the
reference will be in writing, but an oral
reference may constitute slander if the
employee can establish what was said and
that this was not true.
References are normally privileged (and
should be marked as such) and cannot form
the basis of a claim for defamation. However,

oadly speaking, if privilege is lost then a
claim for defamation may be possible if the
person giving the reference is malicious or
knows or has reason to believe the relevant
statement was untrue.
If an employee can prove the person giving
the reference has made an untrue statement
about the employee and that this has been
made maliciously, the employee may also
have a claim for malicious falsehood.
It is therefore essential that the person
giving a reference must reasonably believe
the content of the reference to be true.
• Constructive dismissal. Finally, a breach
of the duty to provide a fair and accurate
reference that does not give a false impression
of the employee may – if it is sufficiently
serious and occurs while the employee is still
employed – entitle the employee to leave and
claim constructive dismissal.
Liability to other persons
It is also likely that an employer’s liability when
giving a reference extends to third parties, such
as a new employer, who relies on the reference.
Negligent misstatement is the principal cause
of action a third party will have against an
employer if it fails to ensure the accuracy of
its reference and the third party relies on that
reference. Providing incorrect information
knowing it to be incorrect may also give rise to
a claim for the tort of deceit.
What should an employer say?
The test can probably best be summarised as an
obligation to ensure that any reference it may
give is true, fair, accurate and does not give a
misleading impression.
• Fact and opinion. Reference letters usually
contain a mixture of facts and opinions:
for example, “Ms X was employed by the
company as a senior manger from January
2001 to April 2007 and is a hardworking
and conscientious employee”. It is clear
that, when giving this sort of reference, the
employer must ensure that it has got its facts
right and that any opinions expressed in the
reference are reasonably held in all relevant
circumstances.
• Specific details. Generally, employers
can work on the basis that they have no
obligation to include specific details or to
ensure that the reference is comprehensive
(provided it is true, fair, accurate and not
misleading). Broadly speaking, an employer
is free to provide a simple factual reference.
However, if it has a policy of only providing
such references, it should say so expressly,
in order to prevent prospective employers
from assuming that this is because a positive
reference cannot be given.
• Disciplinary proceedings and misconduct.
A question that is often asked is whether
the employer is required to mention either
misconduct or disciplinary proceedings
(either ongoing or past) or both. Failure to
include information about any disciplinary
proceedings would probably not be fair or
accurate – and give a misleading impression
to the prospective employer – unless the
employer makes it clear that its policy is only
to provide a factual reference, confirming
(for example) that the employee was
employed and their job title. Conversely,
referring to an employee’s misconduct
where the employer has no proof of such
misconduct, or a full investigation has not
been carried out, or, at the very least, where
the employer does not have a genuine and
reasonable belief in the employee’s guilt,
may entitle the employee to claim against
the employer.
• Data privacy. Information about an
employee contained in a reference is almost
certain to constitute personal information
relating to that employee. Employers need to
be aware of their obligations under the Hong
Kong Personal Data (Privacy) Ordinance
(the PDO) in respect of such personal
information. A detailed consideration of the
PDO is outside the scope of this article but
employers should:
ensure they have notified the employee
that their personal information may be used
for the purpose of providing a reference;
check that any personal information which
is provided is no more than is reasonably
necessary for the purpose of providing the
reference; and ensure that any personal
information which is provided is correct and
up-to-date.
There are also specific provisions governing
access rights to personal references. In
short, an employee is not entitled to see
their reference until after they have been
accepted or rejected for the relevant
position but they will then be able to see
what the person providing the reference has
said about them.
An employee who claims their reference
is inaccurate is entitled to apply under
section 22 of the PDO to request that
the inaccuracy is corrected. The employer
is then required (assuming it agrees the
reference is incorrect) to provide a copy of
the amended reference within 40 days of
such request.
• Would the employee be good at the new
job? Ideally, the employer should avoid
commenting. The employer will usually have
little if any information about what the new
job entails. Consequently, any such opinion
about whether the employee will be good
at the new job is likely to be extremely
subjective and therefore harder to justify
as reasonable.
Damages
• Loss of salary. Getting it wrong can be
expensive. An employee is likely to claim
the loss of salary suffered as a result of a
prospective employer deciding not to hire
them because of a negligent reference. In an
extreme case, an individual might become
virtually unemployable as a result of a
negligent reference and the damages would
then be much higher.
• Rehiring costs. A new employer that has
relied on a negligent reference may well claim
the costs of hiring, dismissing and finding a
replacement for an unsuitable employee.
• Financial loss. If an employee has been
dismissed for dishonesty but this fact is
not mentioned in their reference, if they
then repeat the offence while at the new
employer, the damages may well extend
to the financial loss that the new employer
suffers as a result of hiring the dishonest
employee.
• Uncovering past references. There are now
specialised firms that offer to obtain copies

of references from previous employers
so that employees can make sure that
what is being said about them is correct
and reasonable. They will also testify for
the employee in court if the reference is
inaccurate or negligently given and the
employer refuses to correct it.
Summary
Employers should bear the following points in
mind when giving a reference:
An employer is not obliged to give a reference
unless there is an express provision in the
relevant employment contract or elsewhere
requiring it to do so.
If an employer does give a reference, it is
under a duty of care to ensure that the
information in the reference is correct, that
any opinions expressed are reasonable in all
the circumstances and that the reference is
not misleading.
If an employer is in any way concerned about
giving a reference or the information or
opinions expressed in such reference, it should
state that the reference is given “without
liability”.
Disclaimers
If employers are concerned about the
effectiveness of disclaiming liability, they can
rest assured. Since the far-off days of Hedley
Byrne, the courts have accepted that it is
possible to exclude the implied duty of care that
arises when one person makes a statement that
others may rely on by stating that it is given
without liability and should not be relied upon.
However, employers should make sure that any
such disclaimer of liability:
• is as clear as possible;
• excludes liability to anyone else who might
seek to rely on the reference; and
• excludes the liability of not only the
employer but also its directors, officers and
employees.
Practical tips on giving references
• Make it clear whether the reference is a
personal reference or given on behalf of
the employer
• Decide if only a factual reference will
provided and, if this is company policy,
say so
• If more than a simple factual reference
is given, include a disclaimer of liability
towards the recipient of the reference
• References should be clearly marked:
– “private and confidential”
– “for the addressee only”
– “given without liability” (if a disclaimer
is included)
• Ensure that:
– all factual information included
is correct
– all expressions of opinion are
reasonably held
– the reference is not misleading and
provides a balanced view of the
employee
• Include details of any proven misconduct
• Make sure that the employee is aware
of any negative information included
in the reference (such as concerns
over performance, for example, or any
descriptions of misconduct)
• Avoid comments on the suitability of the
employee for the new job
Disclaiming liability towards the employee
is more problematic. It would require the
employee to agree the disclaimer and few
employers will feel comfortable asking their
employees to do so. Even then, such an
agreement would be subject to challenge
on the grounds that it is not reasonable. For
these reasons, employers seldom bother.
Nevertheless, by adding a disclaimer to third
parties, employers will (it is hoped) feel free
to provide full and frank references that tell
prospective employers what they really need
to know. After all, recruitment can be a lengthy
and expensive process and anything that makes
that process easier is to be welcomed.
Richard Bates
Partner
r.bates@kennedys.com.hk
New Appointments
Rudy Chung, Solicitor
Sandy Cho, Solicitor
I am delighted to welcome Rudy and
Sandy to Kennedys and wish them every
success in the future.
Rupert Skrine
Senior Partner
r.skrine@kennedys.com.hk

Reject or reserve (Part 2)
Reservation of rights is still a good idea despite the Court of Appeal’s decision in the Kosmar case.
In the Autumn 2007 issue of The
HKey, we reported on the first
instance decision of Kosmar Villa
Holidays plc v Trustees of Syndicate
1234, which emphasised the
need for insurers to issue a formal
reservation of rights letter to the
insured once they believed there
were grounds for rejecting a claim
for breach of a condition precedent.
Following an appeal by the insurers,
the Court of Appeal in England gave
its judgment on 29 February 2008.
Kosmar background
Very briefly, the facts were these. Kosmar, the
insured, were tour operators. A catastrophic
injury was suffered by a young man, James
Evans, who was on holiday at a Kosmar complex
in Corfu. It took over a year for the accident to
be reported by Kosmar to Euclidian, its insurers.
This was in breach of a condition precedent
in Kosmar’s public liability policy to notify
Euclidian immediately after the occurrence of
any injury or damage.
However, Euclidian did not immediately reject
the claim or reserve its rights. Instead, over
a period of 26 days in September 2003,
Euclidian requested further information from
Kosmar and gave the impression that it was
dealing with the claim. Euclidian subsequently
reserved its rights and repudiated Kosmar’s
claim because of Kosmar’s failure to
comply with the condition precedent. The trial
judge ruled that Euclidian had waived its right
to rely on the condition precedent.
The main legal issue on appeal was the difference
between waiver by election and waiver by
estoppel. In particular, could the breach of a
condition precedent in a claims notification
clause be waived by an irrevocable election,
or could waiver only be achieved through an
estoppel created by reliance on a representation?
Waiver by election
This arises where a person is entitled to
alternative rights which are inconsistent with
one another. If the person has
knowledge of facts that establish these
alternative rights in law – and then acts in a
manner which is consistent with their having
chosen to rely on one of these rights – the law
will hold them to their choice, even though they
were unaware of the legal consequences of
their actions. The person is often said to have
“waived” the alternative right, although “elected”
would be a more accurate legal categorisation.

For example, if A breaches their contract with
B, entitling B to bring it to an end, B must elect
whether or not to terminate the contract.
Waiver by estoppel
Equitable (or promissory) estoppel occurs where
a person who has legal rights against another
unequivocally represents – either by words or
conduct – that they do not intend to enforce
those rights. If the other party then does (or
refrains from doing) something in reliance on
that representation, the representer will not be
allowed to enforce their rights in a way that is
inconsistent with their original representation if
it would be unfair for them to do so.
Comparing waivers
While there are important differences between
the two types of waiver, both require making
an unequivocal representation to someone else.
Unlike waiver by estoppel, however, waiver
by election does not depend on any reliance
on the representation by the other party. The
nature of the representation is also different
in each case. A waiver by election involves the
communication of a choice between exercising
or not exercising a right. In contrast, a waiver
by estoppel involves making a representation or
promise not to enforce a legal right.
Applicability to Euclidian
Following a largely technical review of the
relevant authorities on waiver, the Court of
Appeal concluded that, when considering
breach of a procedural condition precedent, it
was better to apply the rules of estoppel than
those of election to Euclidian’s conduct.
The partial handling of a claim (in this instance,
the action taken by Euclidian during the 26
days following notification of the claim) did not
constitute an irrevocable election to accept liability
under the policy. That conclusion was consistent
with the analysis in Soole v Royal Insurance,
which held that an insurer’s exercise of its right to
conduct a claim made against its insured under a
liability policy did not constitute an unequivocal
election to accept liability under the policy.
"What a reservation of
rights does is expressly to
preserve a situation where
otherwise it might be held that
something unequivocal had
occurred."
The remaining question, therefore, was
whether Euclidian’s conduct amounted to a
waiver by estoppel. In particular, did Euclidian’s
communications in September 2003 – to the
effect that it was willing to handle the claim –
constitute an unequivocal communication
to Kosmar that it had waived reliance on the
condition precedent?
Court of Appeal decision
The Court of Appeal decided that Euclidian’s
communications during September 2003 were
far from unequivocal. The insurers did not say
in terms either that they were waiving the
need for immediate notification or that they
were accepting liability under the policy. But
although there was no oral or written waiver,
could waiver be inferred from Euclidian’s
conduct – in particular, the act of writing to
the injured party’s solicitors, asking them to
note its interest and to ensure that all future
correspondence be sent to Euclidian?
The Court of Appeal concluded that there was
no waiver by estoppel. Euclidian had made it
clear to Kosmar that, pending the receipt of
Kosmar’s requests for information, it was going
to postpone any decision on liability. Therefore
there was no specific acceptance of liability by
Euclidian to meet the claim. Secondly, Euclidian
had made it clear that it needed answers from
Kosmar to its inquiries. Those answers were
required before Euclidian could make any form
of unequivocal representation about coverage.
In any case, why should Kosmar think its late
notification would be accepted when it had
not answered any of Euclidian’s questions,
especially those seeking an explanation as to
the delay in notification?
The court held that Euclidian was entitled to
a reasonable time in which to investigate this
serious and late notification. The fact that its
questions remained unanswered showed that
Euclidian was still at the stage of assimilating
the circumstances of the case.
Reservations of rights
Lord Justice Rix, who gave the leading
judgment, said that, in these circumstances,
there was no need for Euclidian to impose a
reservation of rights (although he added that
this might be a wise thing to do). He described
the effect of a reservation of rights as follows:
“What a reservation of rights does is expressly
to preserve a situation where otherwise it
might be held that something unequivocal had
occurred”. He concluded by saying:
“It would not be good practice for insurers to
rush to repudiate a claim for late notification,
or even to destabilise their relationship with
their insured by immediately reserving their
position – at a time when they were in any
event asking pertinent questions about a claim
arising out of an occurrence about which
they had long been ignorant in the absence of
prompt notification… Legal doctrine should not
push insurers into over-hasty reliance on their
procedural rights.”
There is some force in what Lord Justice Rix
says. However, insurers should still not delay
in imposing reservations of rights once it has
become apparent to them that there might
have been
• either non-disclosure, or
• misrepresentation prior to inception, or
• a breach of a condition precedent after
inception
which might constitute grounds on which
they can either avoid or reject a claim under a
policy. In such circumstances, it is advisable to
impose an early reservation of rights, especially
where the maintenance of an ongoing
relationship with the insured is not a paramount
consideration.
Chris Sharrock
Partner
c.sharrock@kennedys.com.hk

The disabled employee
Employers need to be very careful if they wish to terminate a disabled person’s employment.
In Hong Kong, it is unlawful to
terminate someone’s employment
while they are:
• on sick leave and entitled to be paid sickness
allowance under the Employment Ordinance
(EO); or
• suffering from a temporary or permanent
incapacity that entitles them to
compensation under the Employees’
Compensation Ordinance (ECO), unless the
consent of the Commissioner of Labour is
obtained.
Even when sick leave has ended or employees’
compensation paid, employers should be careful
when dismissing any employee who has any
form of disability, whether as a result of an
accident or illness.
This article focuses on dismissal when an
employee becomes disabled or incapable of
performing their duties due to injury or sickness.
It also explains how the Disability Discrimination
Ordinance (the DDO) protects disabled
employees and what an employer should look
out for in order to avoid DDO-based litigation.
The DDO
It is worth noting that the Disability
Discrimination Ordinance was enacted in
Hong Kong to protect disabled persons in the
workplace against discrimination and to give
employers guidance as to what is required of
them prior to dismissing employees who may be
covered by the DDO.
Similar protection against discrimination by
employers can be found in UK legislation – the
Disability Discrimination Act 1995 (DDA).
The DDO adopts an almost identical wording
to the DDA when defining “discrimination”
and describing the circumstances that make
it unlawful for an employer to discriminate
against a disabled person. The overall
approach adopted by the two statutes towards
disability discrimination is also very similar. For
example, they both require employers to make
adjustments for their disabled employees.
Under the DDO, the definition of “disability” is
extensive and includes all bodily malfunctions,
malformation or disfigurement of a person’s
body, whether presently or previously existing,
or which may exist in the future.
Section 6 of the DDO stipulates that a person
discriminates against another if:
• they treat a disabled person less favourably
than they would treat someone without a
disability (known as “direct discrimination”); or
• they impose on a disabled person a
requirement or condition that a disabled
person is less likely to be able to meet,
compared to someone without a disability
(known as “indirect discrimination”); or
• they impose a requirement or condition
which (1) would be unjustifiable even if
imposed on someone without a disability,
and (2) is imposed on the disabled person to
their detriment because they cannot comply
with it.
Under section 11(2) (c) of the DDO, it
is unlawful for an employer to dismiss an
employee on the grounds of their disability.
Dismissal of sick employees during
sick leave
Under section 33(4B) and (4BB) of the EO, it
is an offence for the employer to terminate a
contract of employment of an employee on any
sickness day taken by the employee in respect
of which sickness allowance is payable.
As well as being an offence, such action may
also amount to disability discrimination under
the DDO. A good example of this is the Hong
Kong case, Siu Kai Yuen v Maria College
(2005) (District Court).
• Siu Kai Yuen : the facts. The plaintiff was
a teacher employed by the defendants
since 1988. In 2002, he was diagnosed
as suffering from rectal cancer. He told the
defendants of his medical condition and
informed them that he would undergo an
operation on 13 August 2002 to treat
the problem.
He duly applied for sick leave and the
defendants paid him sickness allowance in
accordance with the EO from 12 August
2002 onwards. The plaintiff had
expected to return to work and said
that he had informed the defendant that
he could resume his teaching duties on
1 November 2002.
In late October 2002, the defendant
terminated the plaintiff's employment
because of his cancer. They argued that
his dismissal was due to his breach of
contractual obligations, rather than to
his disability.
• Siu Kai Yuen : the decision. The court ruled
that the defendants had committed an
unlawful act of disability discrimination by
dismissing the plaintiff.
In determining whether the plaintiff had
been treated less favourably than those
who did not have a disability, the judge
held that the court ought to compare
the plaintiff taking leave with another
teacher (who was not disabled) taking
leave for other reasons, such as maternity.

The judge concluded that because the
teacher without the disability would not
have been dismissed for breach of their
contractual obligations, the plaintiff’s
dismissal amounted to less favourable
treatment in comparison.
The plaintiff further argued that the
contractual provisions for taking leave were
unjustifiable. Under the contract, employees
who “wished to take leave for reasons
beyond their control” (such as disability)
would “lose their employment”. As a result,
the judge concluded that the contractual
provisions were indeed unjustifiable, and
that the plaintiff had been discriminated
against under section 6 of the DDO.
dismissal, a diagnosis of chronic fatigue
syndrome (CFS) was confirmed. He brought
complaints of disability discrimination and
unfair dismissal.
• HJ Heinz : the decision. The employee’s
disability discrimination complaint was
upheld. The employment tribunal noted that
the employee had made his employers, and
its medical adviser, aware of his symptoms.
On that basis, the tribunal ruled that the
employers knew about the disability at
the time when the decision to dismiss was
taken. The tribunal was not satisfied that
the dismissal was justified, as no satisfactory
reasons (in terms of either cost or time)
were put forward as to why the employers
had gone ahead with the dismissal rather
than wait a few weeks until the employee
had seen the consultant immunologist. It also
considered that the employers had not acted
reasonably when it came to considering
part-time work, lighter duties and offers of
alternative employment.
Another more straightforward example is
an English case, HJ Heinz Co Ltd v Kenrick
(2000) (Employment Appeal Tribunal).
• HJ Heinz: the facts. The employee became ill
at the end of May 1996 and was off work. He
consulted many doctors but his condition was
never satisfactorily identified. However, he told
the company's medical adviser that he thought
he had chronic fatigue syndrome (CFS).
In February 1997, he was warned that he
was at risk of being dismissed if there was
no indication of a likely date for his return.
His own general practitioner advised that he
did not know how long it would take him to
get back to normality. He was dismissed in
April 1997 after being off sick for nearly a
year. The company's medical adviser noted
that he was still not fit to return to work.
The employee also asked the employers
to wait until he had seen an immunologist
before acting. After the employee’s

Dismissal of sick employees after
sick leave
It is important that the employer takes into
consideration any adjustments it can make to
help a disabled employee perform his or her job.
The duty of employers to make adjustments
once the employee is not able to perform the
requirements of the job by reason of disability
was emphasised by the House of Lords in the
case of Archibald v Fife Council (2004).
Under section 6(1) of the DDA, where
“any arrangement made by or on behalf of
an employer places a disabled person at
a substantial disadvantage in comparison
with persons who are not disabled, it is the
duty of the employer to take such steps as
it is reasonable, for him to have to take in
order to prevent the arrangement having
that effect”. Section 6(3) gave examples of
the steps which an employer might have to
take in order to comply with section 6(1),
including “transferring him to fill an
existing vacancy”.
• Archibald : the facts. The employee was
hired as a road sweeper. She became unable
to walk and could no longer carry out her
job as a result of complications suffered
during minor surgery. However, she
could do – and was keen to undertake –
sedentary work. She was assessed as
being able to carry out work in an office
environment. Office posts were all at a
higher grade. The employee applied for over
100 vacancies but failed to obtain any of
them. Eventually she was dismissed on the
grounds of incapacity.
The case was heard at the employment
tribunal, which decided that the defendant
was not in breach of its section 6 duty. Fife
Council relied on section 6(7) of the DDA,
which in broad terms provided that nothing
in that part of the DDA was to be taken as
requiring an employer to treat a disabled
person more favourably than it treated (or
would treat) others. Therefore, there was
nothing that the authority could have done.
The employee’s appeal to the Employment
Appeal Tribunal was dismissed. She appealed
to the House of Lords.
The law lords considered the definition
and scope of an employer’s duty to make
such adjustments under section 6 of the
DDA. The defendant argued that this duty
could not arise when the disability meant
that the employee could not do the job
at all and there was no adjustment to the
arrangements for that job which could make
any difference.
• Archibald : the decision. Under
section 6(1) of the DDA, an employer
is obliged to take such steps as are
reasonable, in all the circumstances of the
case, to prevent any arrangements made
by or on its behalf placing a disabled person
at a substantial disadvantage. This duty
is triggered when an employee becomes
so disabled that they can no longer meet
the requirements of their job description.
Transferring an employee to fill an “existing
vacancy” within section 6(3) includes an
upwards, sideways or downwards transfer:
the phrase “existing vacancy” is not
qualified by any words such as “at the same
or a lower grade”. Clearly, the duty is more
extensive than simply allowing an employee
to apply – or shortlisting or considering
them – for an existing vacancy.
In addition, section 6(7) is prefaced by
the words, “subject to the provisions of
this section”. To the extent that the duty
to make reasonable adjustments requires
it, an employer is not only permitted but is
positively obliged to treat a disabled person
more favourably than others.
In this case, where there was no equal or
lower grade job to which the employee could
be moved, transferring Ms Archibald to a
sedentary position that she was qualified to
fill was one of the steps which the defendant
might reasonably have taken when the
plaintiff could no longer walk and sweep.
Her appeal was therefore allowed.
Discrimination exceptions
The DDO exempts employment discrimination
from being unlawful if it falls within two criteria,
namely “genuine occupational qualification” and
“inherit requirements”. These exceptions were
not discussed in the Archibald case because the
defendant did not take this line of defence.
According to section 12(1) (a) and 12(2) of
the DDO, an employee can be dismissed without
being subject to discrimination where:
(1) a person without a disability is a genuine
occupational qualification for the job;
(2) the person’s past training, qualifications
and experience relevant to the particular
employment is considered;
(3) the employee’s performance of the job is
taken into account;
(4) the person would be unable to carry out
the inherent requirements of the job; or
(5) the person would require facilities or
services that are not required by a
non-disabled person and which would
impose an unjustifiable hardship on
the employer.
• Genuine occupational qualification.
Under the DDO, a person without a
disability will be a genuine occupational
qualification where:
(1) the nature of the job would be materially
different if it were carried out by a person
with a disability; or
(2) if the nature or location of the job makes it
impractical for the holder of the job to live
elsewhere and
– the only such premises which are
available for persons holding that
kind of job are not equipped with
accommodation and facilities for
persons with a disability, and
– altering those premises to be so
equipped would impose an unjustifiable
hardship on the employer.
• Inherent requirements. As to what this
term means and whether an employee
can fulfil the inherent requirements of the
job, Hong Kong cases have relied on the
Australian decision of Qantas Airways
Ltd v Christie (1998) (High Court of
Australia), in which the judge held that the
inherent requirements of the job was an
“essential element” of the employment.
When deciding the inherent requirements
of the job, the “purpose” of the job should
also be taken into consideration. Clearly,
the inherent requirements are different
for every job.

Reasonable accommodation
The adjustment discussed in Archibald
is referred to in the Hong Kong DDO as
“reasonable accommodation”. It includes:
• changes and alterations made in the
workplace to ensure that facilities and
areas of the workplace are accessible to the
disabled employee;
• changes to job design, work schedules or
other work practices to ensure that disabled
employees are able to fulfil the requirements
of the job;
• provision or modification of facilities and
equipment in the workplace to enable ease
and efficient use by the disabled employee;
• provision of further training for disabled
employees as required; and
• reviewing personnel changes in the
workplace and offering alternative positions
in the establishment to a disabled employee
in order to enable them to continue to work.
Unlike the DDA, the DDO does not make explicit
the duty on employers to take reasonable steps
to prevent employers making arrangements
that place a disabled person at a substantial
disadvantage. However, if an employee can
fulfil the inherent requirements of the job with
adjustments, such as the provision of facilities
or services, the employer must first take
this into consideration and make necessary
accommodation to support the employee,
unless such accommodation imposes an
unjustifiable hardship on the employers. The
burden of proof is on the employer to show that
he faces such hardship.
Unjustifiable hardship is covered by section 4
of the DDO, and all relevant circumstances are
taken into account. The courts will consider
both the advantages and disadvantages of
making any accommodation for the disabled
employee. In doing so, they will make allowance
for the effect of such accommodation on
the disabled employee, and the financial
circumstances (for instance, the considerable
expenditure and/or recurrent expenditure that
will have to be undertaken by the company)
and the burden on the employer of providing
such accommodation. It is up to the employer to
prove hardship when running this defence.
Applying DDO to Archibald
Given Hong Kong’s DDO rules, should a case
like Archibald happen in Hong Kong, the main
questions will be:
• whether the higher grade office posts are
those where lack of disability is a genuine
occupational qualification; and
• whether a person with a disability would
be unable to carry out the inherent
requirements of those posts.
In Archibald, the employee was assessed to be fit
for office vacancies. She applied for over 100 but
failed to obtain any of them. On the other hand,
it depends on the job nature and requirements
of office posts. Surely, a road sweeper is not
expected to have the language ability and office
skills that most office jobs require.
But it is arguable whether the employer
in Archibald was considerate enough or
made sufficient effort to make reasonable
accommodation for her since she applied for
over 100 such posts. A city council is likely to
have at least some office positions which are
less demanding in terms of languages and office
skills. In any case, an employer must not claim
that a disabled person cannot fulfil the inherent
requirements of a job without first considering
the provision of reasonable accommodation.
In this regard, the city council will probably
be adjudged to have discriminated against
Ms Archibald.
However, if an employer can successfully prove
that by making such sedentary accommodation
for the employee, it will suffer unjustifiable
hardship, then a court will rule that it is lawful to
discriminate against (in the sense of refusing to
employ or dismissing) the disabled employee.
On dismissal
If an employer decides to dismiss an employee,
it is worth taking the following points into
account to avoid being accused of wrongful
dismissal and disability discrimination:
• Do not dismiss an employee during sick
leave.
• Ensure that dismissal procedures are
adequate and justifiably put into place so
that a disabled employee is not discriminated
against when being dismissed.
• Consider the ways in which the company can
(both now and in the future) accommodate
disabled employees, in terms of providing
adequate facilities and equipment to enable
them to do their job.
• Be prepared to offer alternative employment
to a disabled employee whose incapacity
renders them unable to perform their original
job, and ensure that a disabled employee has
the opportunity to apply for an alternative
post in the organisation.
• Encourage good working relationships
between employees in the workplace to
minimise the risk of discrimination against
disabled employees (employers may be held
liable for discrimination if a successful claim
is brought against an employee).
• If an employee becomes disabled, pay
attention to their performance and ability
to work and the reasons for their taking
sick leave.
• When dismissing an employee, explain
clearly the grounds on which they are
being dismissed, calculate the sickness day
entitlements and (in line with the provisions
of the EO) set out in the termination
letter the details of the employee’s final
pay entitlement and any other benefits.
Paid sickness days may be accumulated
up to a maximum of 120 days. Sickness
day entitlements accrue on the basis of
continuity of employment.
Kelly Wong
Partner
k.wong@kennedys.com.hk
Daisy Kwok
Trainee Solicitor
d.kwok@kennedys.com.hk
10

Righting a wrong
Finally, justice is being done to ship operators and transport carriers.
In the Autumn 2007 issue of
The HKey (“An unjust target”),
we reported how operators and
carriers in the shipping industry face
the unfair risk of prosecution for
suspected infringement of the trade
description, customs and excise,
import and export laws of the Hong
Kong Special Administrative Region.
This is because of the difficulty in
bringing the true culprits – foreign
importers and exporters – to justice
in Hong Kong.
Ship operators and carriers prosecuted in
Hong Kong often try to defend themselves on
the basis they did not know, had no reason
to suspect and could not with reasonable
diligence have discovered that the carriage of
the goods was contrary to the laws of Hong
Kong. Or they may argue that they have taken
all reasonable precautions and exercised all
due diligence to avoid committing any offence.
However, it is hard to persuade a magistrate
that this has been done.
But just when the shipping and transport
community had resigned itself to its fate, relief
has come in the form of the Court of Appeal’s
decision in the Kong Hing case.
The Kong Hing case
In HKSAR v Kong Hing Agency Ltd [2007]
HKCU 2022, the appellant (Kong Hing Agency
Ltd) appealed against its conviction for
attempting to import goods bearing a false
trade description, contrary to section 12(1)
of the Trade Descriptions Ordinance, Cap 362
(the TDO). The main issue in the appeal was
whether the reasonable diligence defence
under section 12(2)(a) of the TDO was
available to the appellant.
Kong Hing was a shipping agent that arranged
the shipment from one location to another,
following instructions from a freight forwarder.
The shipment was intended to go from Beijiao,
China to Inchon, Korea. As there was no direct
route from Beijiao to Inchon, the containers
had to be sent to Hong Kong first, where they
would then be transhipped on another vessel
to Korea. The appellant was not told to help
in the stuffing – or to supervise the loading –
of the containers.
While the containers were in Hong Kong,
customs officials boarded the vessel and
opened two sealed containers, each with
420 cartons of water dispensers. The cartons
contained on their face the words "Made in
Korea" and the water dispensers themselves
also bore this statement on labels attached
at the back. When the containers were
opened, the cartons stuffed in the front row
all had blue adhesive tape covering the words
"Made in Korea".
Reasons for being charged
There were two main reasons for the appellant
being charged under section 12(1):
• The presumption under the TDO.
Evidence that the goods have been
imported from a particular place is prima
facie evidence that the goods were
manufactured, produced, processed or
reconditioned in that same place. In Kong
Hing, the vessel arrived in Hong Kong
from Beijiao, China. Accordingly, the
presumption was that goods had been
manufactured in China, not in Korea.
• The identity of the consignee. The
consignee named in the cargo manifest
was a non-existent company. The appellant
was unaware of this fact. Following the
inspection of both the containers and the
manifest, the suspicion was that the “Made
in Korea” description of the goods was false.
Role of shipping agents
The Court of Appeal recognised that it is typical
for shipping agents all over the world, not just in
Hong Kong, to be instructed – often by freight
forwarders or other shipping agents – to make
the necessary arrangements for the carriage
of goods by sea. Normally, and in the absence
of a specific contractual obligation, shipping
agents such as the appellant do not carry
any responsibility for the loading, supervision
of loading, inspection of goods or (as in the
present case) the stuffing and sealing of
containerised cargos.
The Court of Appeal went on to say that if
shipping agents were to be held responsible
for the stuffing of the containers and loading,
they would have to be able to break the seals
on the containers. It was clearly undesirable for
carriers or shipping agents to break the seals of
containerised cargoes for no reason.
While the court ruled in favour of the shipping
agents/carriers, the court warned that:
• shipping agents should bear the TDO in mind;
• where there are indications that the goods
being carried bear a false trade description
or false trademark, it will be reasonable to
expect shipping agents to make inquiries or
take further action;
• the extent of those further inquiries and
actions would depend on the circumstances
of the particular case;
• it would be asking too much to expect
shipping agents to embark on an extensive
inquiry (which would probably be out of all
proportion to the remuneration they receive)
when there are no indications that there has
been any infringement of the TDO.
11

Shipping agents are generally not involved
with the goods at all, except as regards their
actual carriage. Nor are they concerned with
the identity of the consignor or consignee,
the quality of the goods or even with what
the goods are. Therefore, there is nothing
in the normal course of their duties that
required Kong Hing to make further inquiries
or to take some other action in relation to
the goods.
Knowledge of shipping agents
Kong Hing was aware of the following:
• the involvement of a freight forwarder,
which gave the appellant the initial
instructions to arrange the carriage and with
whom it had dealt previously;
• (from the shipping order) the cargo
comprised two containers of water
dispensers to be sent from Beijiao to Inchon;
• (again, from the shipping order) the shipping
arrangement;
• (from the bill of lading) the transhipment
of the goods in Hong Kong before onward
carriage to Inchon; and
• (again, from the bill of lading) the name of
the consignor.
However, Kong Hing did not know:
• that the water dispensers were apparently
manufactured in Korea;
• the consignor of the goods or the identity of
the consignee (it had no previous dealings
with the consignee);
• the contents of the manifest and therefore
did not realise that the consignee was a
non-existent entity.
The court concluded that the appellant had
no indication that the relevant goods might
be carrying false trade descriptions, forged
trademarks or possessed any other suspicious
features.
Key points
The decision is good news for carriers and
operators, not just for shipping agents. The
law has recognised the practical realities of
the shipping world. It is worth remembering,
though, that the Court of Appeal also stressed
that each case would turn on its own facts.
However, shipping agents, carriers and transport
operators are reminded of the following:
• if anything about the goods arouses suspicion,
they should inquire further and take action;
• when deciding liability, the court will look at
what shipping agents, carriers and operators
could reasonably be expected to have done
in the circumstances; and
• the court has recognised the job nature and
role of the shipping agent and that in some
circumstances, it will be impossible to require
them to undertake extensive inquiries if
there are no indications of any suspicious
features. However, each case will turn on
its own facts and the court will look at the
particular circumstances of the accused.
Mary Thomson
Consultant, arbitrator, accredited mediator and
“commercial man”
m.thomson@kennedys.com.hk
Daisy Kwok
Trainee Solicitor
d.kwok@kennedys.com.hk
Hong Kong
11th Floor
The Hong Kong Club Building
3A Chater Road, Central
Hong Kong
T + 852 2848 6300
F + 852 2848 6333
www.kennedys.com.hk
London
Longbow House
14-20 Chiswell Street
London EC1Y 4TW
United Kingdom
T +44 20 7638 3688
F +44 20 7638 2212
mailbox@kennedys-law.com
www.kennedys-law.com
Belfast
64-66 Upper Church Lane
Belfast BT1 4Q1
Northern Ireland
United Kingdom
T +44 28 90 240067
F +44 28 90 315557
DX 490 NR Belfast 1
Auckland
Level 6
70 Shortland Street
PO Box 3158
Auckland
New Zealand
T + 64 9 379 9011
F + 64 9 379 9025
Madrid
Paseo de la
Castellana N°50,
3a Planta
28046 – Madrid
Spain
T + 34 91 523 7210
F + 34 91 523 7212
Dubai
Po Box 212620
403 Sheikh Essa Tower
Sheikh Zayed Road
Dubai
United Arab Emirates
T + 971 4 321 5685
F + 971 4 321 5695
Sydney
Level 31
Citigroup Centre
2 Park Street
Sydney NSW 2000
Australia
T + 61 2 8215 5999
F + 61 1300 761 156
Associated offices
Dubai, Abu Dhabi, Dublin, Karachi, Lisbon,
Mumbai, New Delhi, Paris, Santiago and
Warsaw
For further information about any of the articles within this issue please contact the author concerned or your usual partner. This newsletter is designed to provide a summary of recent case law. It does not purport to be comprehensive or to offer legal advice. All rights reserved.
12