Introduction

When dealing with employment issues, employers commonly choose to enter into settlement agreements with employees in exchange for the latter’s undertaking in refraining from and/or doing certain actions to the employers’ potential detriment. The recent District Court decision of HKSAR v Bowers Kevin Richard DCCC 898/2018 [2019] HKDC 1225, however, provides an important reminder that despite a wide freedom to enter into agreements, not only must settlement terms not involve actions that contravene the law, but even the mere proposal of the possibility of including such acts in the settlement may result in prosecution.

Facts

The Defendant was a partner to a law firm which represented the liquidators of a company (Company). In addition to bringing various civil actions against the Company’s parent company (China Rich) and directors, including Ms Kelly Cheng (Ms Cheng), the liquidators also alleged that Ms Cheng and two other former directors of the Company had applied for letters of credit by using sham transactions. The liquidators therefore made a report to the Commercial Crime Bureau and Ms Cheng was eventually charged.

While representing the liquidators, the Defendant held without prejudice discussions with the respective solicitors for China Rich and Ms Cheng in an attempt to settle the civil actions. The prosecution’s case was that during such discussions, the Defendant proposed that in exchange for China Rich and Ms Cheng’s settling the civil claims with the liquidators, the witnesses in the criminal case would not attend court to give evidence, thereby making the prosecution lose impetus, which would then be in the favour of China Rich and Ms Cheng. Although the Defendant’s proposal did not materialise as neither he nor his counterparts were sure that such action would be enforceable, the prosecution argued that such proposal intended to pervert the course of public justice.

The Defendant was acquitted as the District Judge David Dufton considered that there was doubt about what exactly the Defendant had said in the discussion. Further, the prosecutor also failed to prove beyond reasonable doubt that the Defendant had the intention to pervert the course of justice.

Takeaway

In this case, per the Defendant’s explanation, sometimes settlement discussions involve “bluffing”. The Defendant’s mere “looking and exploring and bouncing [of] ideas” with China Rich’s and Ms Cheng’s solicitors not in private and on a without prejudice basis with a view to getting them to agree to settlement, ended in him being prosecuted.

In a separation/settlement agreement, employers and employees usually request for waiver of further claims arising from the employment relationship from the other party. However, if there are implications of criminal prosecutions/investigations (e.g., breach of the relevant legislations), both parties would have to be very careful. It would be improper to request any other party not to report/complain to the relevant authorities or to become a witness in any case in return for certain settlement payments. Accordingly, it is advisable to seek legal advice on separation/settlement negotiation in order to ensure that your rights are being protected and that the settlement agreement is enforceable