Spotlight: regulation of liability for key professions in Hong Kong

All questions

Specific professions

i Lawyers

Solicitors are regulated by the Legal Practitioners Ordinance (LPO)³³ and its subsidiary legislation. The Law Society of Hong Kong (LSHK) is the self-regulatory body and professional association for solicitors, with 13,144 members.³⁴ The LSHK also regulates approximately 98 solicitor advocates (who have higher rights of audience and can make submissions before the High Court and the CFA) and approximately 1,450 registered foreign lawyers (who work for either registered foreign law firms or solicitor firms in Hong Kong).

The Hong Kong Solicitors' Guide to Professional Conduct issued by the LSHK sets out the basic principles governing the practice of solicitors, complaints about which can be made to the LSHK. The Solicitors Disciplinary Tribunal (SDT)³⁵ deals with disciplinary cases that the LSHK brings for alleged professional misconduct. It has a wide range of disciplinary powers, including striking off the name of a solicitor, suspending a solicitor and imposing a fine not exceeding HK$500,000.

Indemnity insurance is mandatory for solicitors. The Solicitors Professional Indemnity Scheme, governed by the Solicitors (Professional Indemnity) Rules,³⁶ is held, managed and administered by Hong Kong Solicitors Indemnity Fund Limited. The limit of indemnity is HK$20 million for claims first notified and first made on or after 1 October 2019. Solicitors' firms can take additional insurance to cover liability over HK$20 million. Registered foreign law firms must have their own equivalent insurance cover.

Barristers are also regulated by the LPO and its subsidiary legislation. The Hong Kong Bar Association (HKBA) is the professional organisation of barristers in Hong Kong, governed by an executive committee known as the Bar Council. There are approximately 100 senior counsel and 1,500 junior barristers.³⁷

Barristers must comply with the Code of Conduct issued by the HKBA. A complaint alleging breach can be made to the HKBA. The Bar Council may then refer the matter to the Barristers Disciplinary Tribunal, which is an independent body comprising members appointed by the Chief Justice that has power to impose different forms of punishment similar to those available to the SDT.

All barristers, including pupils in limited practice, must be insured under the master policy for professional indemnity insurance. The current mandatory limit of indemnity is HK$10 million. Barristers can top up their insurance to cover liability over HK$10 million.

Both solicitors and barristers can be subject to wasted costs orders, which may be imposed by courts against lawyers where legal costs have been incurred as a result of their improper, unreasonable or negligent conduct.³⁸ Wasted costs orders are usually personally borne by the lawyers.

In a claim in negligence, a defendant is only liable for damages in respect of losses of a kind that fall within the scope of his or her duty of care, which is governed by the purpose of the duty and judged on an objective basis by reference to the reason why the advice is given.³⁹

In Dymocks Franchise Systems (China) Ltd v. Norton Rose Fulbright HK,⁴⁰ the solicitors' firm failed to alert the client to critical legislation that imposed liability for past debts on the client when it took over a struggling bookshop. Damages of approximately HK$4.4 million were awarded.

In William Allan v. Messrs Ng & Co (A Firm) & Anor,⁴¹ a partner at the defendant firm divulged confidential information imparted to him by the plaintiff's sister on the plaintiff's behalf with a view to instructing the defendant firm to act for the plaintiff in matrimonial proceedings against the plaintiff's wife. The defendant firm later acted for the wife in the matrimonial proceedings and was vicariously liable for the breach of the duty of confidence by the partner. The SDT separately ordered the partner's name to be struck off and imposed fines of HK$125,000.

In Lee Po Chu Feona v. Joyce Chan & Co (a firm),⁴² the plaintiff claimed against the defendant firm for forfeited deposits of HK$10.5 million under a provisional sale and purchase agreement in respect of a property transaction, alleging that the defendant firm failed to advise her to terminate the agreement on the basis of the vendor's breach of the agreement. The CFI found that the firm provided advice that a reasonably competent solicitor would have given in accordance with the state of the relevant law in 2015.

ii Medical practitioners

There are on average two doctors per 1,000 people in Hong Kong, and these doctors are regulated by the Medical Registration Ordinance.⁴³ The Medical Council of Hong Kong (MCHK) is the relevant regulatory body and has issued the Professional Code and Conduct for the Guidance of Registered Medical Practitioners.

Complaints against doctors are made to the MCHK, which is empowered to investigate professional misconduct, whether complaints are from the public or a public authority.

Any contravention of the Professional Code and Conduct for the Guidance of Registered Medical Practitioners may render a registered medical practitioner liable to disciplinary proceedings and consequences, such as a public warning or reprimand, suspension of registration and striking-off.

The Hospital Authority (the statutory body established under the Hospital Authority Ordinance⁴⁴ to manage Hong Kong's public hospital services) has taken out a Disciplinary Protection Insurance policy, with effect from 1 December 2018, to cover its eligible clinical and non-clinical professionals, including ex-staff and honorary staff who have worked or work in the Hospital Authority at any time on or after 1 December 1991. It aims to support its staff in any disciplinary inquiry commenced in Hong Kong and conducted by professional bodies.

Medical practitioners owe a duty of care to their patients. They may be sued for negligence arising from a breach of a duty of care, for which hospitals may also be held vicariously liable. The test in a claim of medical negligence is the Bolam test.⁴⁵

As to the duty to advise, Montgomery v. Lanarkshire Health Board⁴⁶ held that an adult person of sound mind is entitled to decide which, if any, of the available forms of medical treatment to undergo, and their consent has to be obtained before treatment interfering with their bodily integrity is undertaken; therefore, a doctor is under a duty to take reasonable care to ensure that the patient is aware of any material risks involved in any recommended treatment, and aware of any reasonable alternative or variant treatments.

Wan Sai Ping (Widow of Lo Chung Hing, deceased) & Anor v. Hong Kong Baptist Hospital,⁴⁷ in respect of the outbreak of the severe acute respiratory syndrome in Hong Kong in 2003, held that a plaintiff must plead all the circumstantial facts to support its case on causation and the possible route of transmission that it seeks to establish, such as the nexus between the type of isolation system and contraction of the virus.

If a medical practitioner is found liable in negligence, compensation is awarded to place the plaintiff in the position it would have been in had the medical negligence not occurred. In determining the amount of the award, factors for consideration include the plaintiff's age, previous and current medical condition, length of time to be spent in hospital, the kind and number of treatments received, and any psychological problems.

iii Banking and finance professionals

The Hong Kong Monetary Authority (HKMA) is the central banking institution in Hong Kong and has issued a Code of Conduct for its staff.

Staff who fail to comply with the principles in the Code of Conduct and who by their actions bring the HKMA into disrepute are liable to disciplinary action, including dismissal. Internal investigations may be conducted into allegations of misconduct referred by the Independent Commission Against Corruption, the police and other law enforcement bodies, with a view to deciding whether follow-up disciplinary or management actions are warranted.

All banks must be members of the Hong Kong Association of Banks (HKAB) and subject to the HKAB's rules. The HKAB and the Deposit Taking Companies Association have also jointly issued the Code of Banking Practice, which authorised institutions must comply with when dealing with and providing services to customers.

Based upon the recommendation of the Disciplinary Committee of the HKAB, the Committee (which is the highest executive body) of the HKMA has power to impose penalties on a member in breach of any rules of the HKAB, ranging from reprimand to expulsion of membership.

The Securities and Futures Commission (SFC) is an independent statutory body, empowered by the Securities and Futures Ordinance (SFO)⁴⁸ to regulate Hong Kong's securities and futures markets.⁴⁹ The SFC is guided by the Code of Conduct for Persons Licensed by or Registered with the SFC in considering whether a licensed person satisfies the requirement that they are fit and proper to remain licensed or registered.

The SFC may conduct investigations into offences under the SFO, such as fraud, market misconduct, breaches of disclosure requirements, and insider dealing. The SFC has the power to require, by notice, a person under investigation to produce relevant documents and attend interviews to answer questions.⁵⁰ Other enforcement actions of the SFC include imposing prohibition orders, suspending licences, imposing fines and issuing public or private reprimands.

PT Asuransi Tugu Pratama Indonesia TBK v. Citibank NA⁵¹ confirms that a banker's duty is to make payments only with the authority of the customer (i.e., in accordance with the customer's mandate). A bank may, however, be able to rely on an agent's apparent (or ostensible) authority by virtue of his or her position as a signatory or officer of the company, which will bind the company as regards a third party who has no notice of the want of actual authority. Further, in transferring funds to another party, a banker acts as the customer's agent and owes all the ordinary duties of an agent, including the duty to exercise reasonable skill and care, both in contract and in tort. Also, the court considered that contributory negligence may be available as a partial defence in respect of a claim for damages for breach of a bank's duty of care in making payments to third parties.⁵²

iv Computer and information technology professionals

Computer and information technology professionals are not regulated except where data is involved, in which case the Personal Data (Privacy) Ordinance (PDPO)⁵³ is the applicable data protection and privacy law.

The Office of the Privacy Commissioner for Personal Data (PCPD) was established under the PDPO as the dedicated and independent data privacy regulator, overseeing the implementation of and compliance with the provisions of the PDPO.

The PDPO applies to both the private and the public sectors. The Data Protection Principles (DPPs), which are contained in Schedule 1 to the PDPO, outline how data users should collect, handle and use personal data, complemented by other provisions imposing further compliance requirements.⁵⁴

Pursuant to the Personal Data (Privacy) Amendment Ordinance 2021 (PDPAO), which took effect on 8 October 2021, it is an offence to disclose any personal data of a data subject without the relevant consent of the data subject and where the discloser has an intent to or is being reckless as to whether any specified harm would be likely to be caused to the data subject or any family member of the data subject. By the PDPAO, the PCPD is empowered with additional powers to: (1) carry out criminal investigation into offences for disclosing personal data without consent; (2) institute prosecution in its own name for summary offences in the magistrates' courts; (3) request the provisions of relevant documents and answers to facilitate an investigation into doxing and its related offences; (4) apply for a warrant to enter and search premises, seize, remove and detain any material for the purpose of a specified investigation; (5) apply for a warrant to access, seize and detain an electronic device and decrypt material stored therein; and (6) serve a cessation notice, with extraterritorial effect, to remove doxing contents.

Complaints about possible contravention of the PDPO by a particular data user in relation to the handling of personal data may be lodged with the PCPD, which may carry out an investigation and publish a report setting out the investigation results and recommendations. The PCPD may also issue an enforcement notice to the data user directing remedial or preventive steps to be taken. The contravention of an enforcement notice is an offence that may result in a maximum fine of HK$50,000 and imprisonment for two years, with a daily penalty of HK$1,000. Subsequent convictions can result in a maximum fine of HK$100,000 and imprisonment for two years, with a daily penalty of HK$2,000.

Data subjects may seek compensation by civil action from data users for damage caused by a contravention of the PDPO. For example, in Tsang Po Mann v. Tsang Ka Kit & Anor,⁵⁵ the defendants sent the plaintiff's workplace a letter containing four video captures from the defendant's CCTV cameras. The plaintiff claimed under Section 66 of the PDPO based on the defendants' contravention of DPPs 3 and 4, and was awarded compensation of HK$70,000 because of the gravity of the injury to her feelings and the manner in which the photos were misused.

v Real property surveyors

Real property surveyors are regulated by the Hong Kong Institute of Surveyors (HKIS), which was statutorily incorporated by virtue of the Hong Kong Institute of Surveyors Ordinance⁵⁶ and has 11,051 members.⁵⁷

The HKIS has issued the Rules of Conduct, complaints of any breach of which may be investigated and result in reprimand, striking-off or suspension of membership. Disciplinary orders may also be published in newspapers.

In So Kai Hau v. YSK2 Engineering Company Limited,⁵⁸ the CA upheld the CFI's judgment that a building surveyor's duties extend beyond the period of appointment. In determining the duty to take reasonable care to protect demolition workers from obvious danger after the surveyor's work ceases, foreseeability of harm and a relation of sufficient proximity between the plaintiff and the defendant are required. The greater the potential for harm, the more likely it is that it will be fair, just and reasonable to impose a duty of care, taking into consideration all relevant circumstances and weighing up and balancing competing factual and legal factors.

vi Construction professionals

At common law, employers have a duty to take reasonable care for their employees' safety. A breach of this duty resulting in injury to or death of an employee may give rise to a cause of action against the employer in negligence. Employers are not exempted from this duty by the fact that their employees are experienced and might be able to lay down a reasonably safe system of work themselves.

More particularly, the Factories and Industrial Undertakings Ordinance (FIUO)⁵⁹ imposes a statutory duty on every proprietor of an industrial undertaking to ensure, so far as is reasonably practicable, the health and safety at work of all persons employed by him or her at the industrial undertaking. That duty extends to (1) the provision and maintenance of plant and systems of work that are, so far as is reasonably practicable, safe and without risks to health, and (2) the provision of such information, instruction, training and supervision as is necessary to ensure, so far as is reasonably practicable, the health and safety at work of all persons employed by him or her at the industrial undertaking.

In this regard, the CA in HKSAR v. Gammon Construction Limited⁶⁰ upheld the conviction against the defendant in failing to (1) provide and maintain a safe system of work, (2) provide necessary instruction and supervision for the health and safety at work of persons employed at an industrial undertaking, and (3) develop, implement and maintain a safety management system, under the FIUO and its subsidiary regulation.

vii Accountants and auditors

The main statutory bodies regulating accountants and auditors are the Accounting and Financial Reporting Council (AFRC) (formerly known as the Financial Reporting Council) and the Hong Kong Institute of Certified Public Accountants (HKICPA).

As of 1 October 2022, the AFRC became a fully fledged independent regulator and oversight body for the accounting profession in Hong Kong, when major regulatory powers were transferred from the HKICPA, including the power to regulate both public interest entity (PIE) auditors and certified public accountants (CPA). Its main functions now include the issuance of practice certificates and registration of PIE auditors and CPA firms, as well as responsibility for inspection, investigation and disciplinary matters in the accounting profession.

The AFRC also now oversees the HKICPA's performance of its various statutory functions. The HKICPA remains responsible for registering CPAs, training and development of the accounting profession, and issuing or specifying standards on professional ethics, accounting, and auditing and assurance for CPAs.

A significant number of listed entities in Hong Kong predominantly have operations in mainland China. To assist the conduct of its inspections and investigations, the AFRC can access audit working papers held by accounting firms in mainland China, pursuant to a memorandum of understanding signed between the FRC and the Supervision and Evaluation Bureau of the Ministry of Finance of the People's Republic of China (SEB) on 22 May 2019. The AFRC also regularly engages in dialogue with the SEB to facilitate greater cross-border cooperation and collaboration in relation to audit regulation.

All corporate practices (as opposed to partnerships) are required to have professional indemnity insurance on terms approved by the HKICPA and must ensure that the insurance complies with the minimum requirements set out in the rules. This is designed to protect accountants and auditors from claims arising from negligent acts, errors and omissions, which may occur in the course of providing auditing, accounting, taxation, advisory, valuation, regulatory and consultancy work.

viii Insurance professionals

Insurance intermediaries have been regulated by the Insurance Authority (IA) since 23 September 2019, when it assumed responsibility for the supervision and regulation of all insurance entities in Hong Kong. The IA replaced the self-regulatory regime of the Insurance Agents Registration Board, established by the Hong Kong Federation of Insurers, the Hong Kong Confederation of Insurance Brokers and the Professional Insurance Brokers Association.

The IA is now responsible for supervising insurance intermediaries' compliance with the Insurance Ordinance (IO),⁶¹ and the relevant regulations, rules, codes and guidelines issued by the IA. The IA is also responsible for promoting and encouraging the adoption of proper standards of conduct and has wider regulatory powers in relation to licensing, inspection, investigation and disciplinary sanctions. Under this regime, the IA has power to take a number of disciplinary actions against regulated persons under the IO, including imposing pecuniary penalties of up to HK$10 million or three times the amount of profit gained or loss avoided by the person as a result of the misconduct.

There are two main categories of insurance intermediaries. First, licensed insurance agents act for insurance companies in arranging and accepting insurance policies on behalf of the insurer. Second, licensed insurance brokers act as agents of clients and provide advice on insurance policies, including negotiation and arrangement of policies with insurers and handling claims on behalf of insureds.

All insurance intermediaries carrying out regulated activities under the IO need to hold the appropriate type of insurance intermediary licence, unless an exemption applies such as in relation to employees of certain insurance intermediaries, including claims handlers or staff discharging clerical or administrative duties.

All licensed insurance brokers must maintain a professional indemnity insurance policy and must ensure that the insurance complies with the minimum requirements set out in the IO. In contrast, licensed insurance agents do not need to maintain professional indemnity insurance.

ix Insolvency practitioners

There are no specific licensing or registration requirements for insolvency practitioners (IPs) in Hong Kong. In practice, however, most IPs tend to be accountants or similar professionals.

There are various types of IPs in Hong Kong, including liquidators, provisional liquidators, receivers, trustees in bankruptcy, administrators and managers. In general, IPs are usually appointed by the court, or pursuant to some loan or other agreement, and do not enter into traditional engagement letters. This means that the scope of duty for each type of IP depends on the circumstances in which they came to be appointed, the terms of the court order or other document pursuant to which they were appointed and the relevant statutory provisions, regulations and codes.

For example, a liquidator is responsible for investigating the company's affairs, realising the assets of the company and distributing the proceeds to the creditors in accordance with the Companies (Winding ­Up and Miscellaneous Provisions) Ordinance⁶² and the Companies (Winding-Up) Rules.⁶³ In certain circumstances, a liquidator may commence legal action in the name and on behalf of the company, including against former directors and officers or professional advisers engaged prior to the company's collapse. A liquidator also owes fiduciary duties towards the company and the creditors, and is expected to act honestly, with due care and diligence, and in good faith, in dealing with the company's assets. In certain cases, such as compulsory winding-up proceedings, a liquidator is an officer of the court and must act impartially, to the same standards as a judge.

Hong Kong has not adopted the United Nations Commission on International Trade Law Model Law on Cross-Border Insolvency, which provides mechanisms for dealing with cases of cross-border insolvency. There are also no specific statutory provisions empowering the Hong Kong courts to render assistance to a foreign court in insolvency proceedings. Instead, the Hong Kong courts have developed a common law framework to address issues of this kind. The Hong Kong courts have recognised foreign liquidators and provided assistance at their discretion.

On 14 May 2021, the Hong Kong and mainland China authorities signed the Record of Meeting of the Supreme People's Court and the Government of the Hong Kong Special Administrative Region on Mutual Recognition of and Assistance to Bankruptcy (Insolvency) Proceedings between the Courts of the Mainland and of the Hong Kong Special Administrative Region, which sets out the much anticipated cross-border mutual recognition of and assistance to insolvency proceedings between Hong Kong and mainland China. This the first time that either Hong Kong or mainland China has entered into a cooperation framework with any other jurisdiction in respect of insolvency matters. Under this new cooperation framework, Hong Kong liquidators can now apply to specified mainland China courts for recognition and vice versa. At present, this arrangement is currently limited to the courts of Shanghai, Xiamen and Shenzhen, although it is anticipated that other mainland courts will be added to this arrangement.

IPs, unlike other professionals such as lawyers or accountants, cannot limit the scope of their duty and services as they are prescribed by law. As a result, IPs are vulnerable to criticism and subject to a variety of professional negligence claims. Most claims are made under the tort of negligence or misfeasance, although there has been a rise in claims based on economic torts, such as unlawful means conspiracy.