Hong Kong. Richard Healy & Stephen Chan Oldham, Li & Nie

Transcription

1 Richard Healy & Stephen Chan Oldham, Li & Nie Efficiency of process The legal system is based on the common law. This is reflected in s court procedures which bear significant similarities with other common law jurisdictions. Civil Justice Reform With a view to promoting cost-effective litigation, reducing undue delay and abuse of process, the courts introduced the Civil Justice Reform (the CJR ) in Since the CJR, the courts have been armed with wide jurisdictional and case-management powers to ensure that parties conduct their litigation sensibly and cost-efficiently. In particular: 1. The court actively case-manages each proceeding through case-management conferences and the setting down of firm timetabling directions. In a decision on 6 June 2017 of Wong Fong Yuk (DCPI 1694/2013), the failure on the part of the plaintiff s solicitors to comply with case-management directions resulted in the costs of the adjournment being borne by the plaintiff s solicitors personally on an indemnity basis. 2. The introduction of milestone dates encourages parties to comply with important timetabling directions unless there are exceptional circumstances. This can be seen in the recent decision of Zhang Rui Hua & Anor v Wang Lan & Anor (HCAP 13/2010) on 23 March 2017, where the plaintiff s application to adduce further evidence was rejected on the grounds that it would have the effect of delaying milestone dates already set by the court. 3. Mediation takes place earlier on in proceedings before parties become entrenched in their positions. Failure to mediate gives rise to potential adverse cost consequences. In the decision of Poon Fow Hing v Poon Kwai Ping Corinna (CACV 124/2015) on 6 March 2017, the court made specific directions for the parties to consider mediation as the case, being a family dispute, was one that cries out for mediation. 4. To further encourage settlement of proceedings, a regime of sanctioned offers and payments exists to facilitate settlement negotiations with strict cost consequences on any party that behaves unreasonably in rejecting a settlement offer. Default judgment For cases which are not likely to be contested, the default judgment procedure in offers a cost-effective method of bringing a claim and obtaining a courtorder capable of being subsequently enforced. Order 6 of the Rules of the High Court (Cap. 4A) (the RHC ) allows a plaintiff to initiate a writ action without filing a full statement of claim. Instead, the writ can be indorsed with GLI - Litigation & Dispute Resolution 2017, 6th Edition 75

2 an indorsement of claim with a concise statement of the nature of the claim and the relief sought. It is only after a defendant acknowledges service of the writ with an intention to defend that a plaintiff must thereafter within 28 days file a fully particularised statement of claim setting out the action. If a defendant does not properly acknowledge service within 14 days of service of the writ, Order 13 RHC allows for five different instances whereby claims for default judgment can be entered, the most common of which is a claim for a liquidated sum of monies. Technology In 2014, the High Court in upgraded its Technology Court facilities to support video conferencing, displays of electronic documents and support for hearings related to vulnerable witnesses. There is no current online platform in to upload or file documents to the court directly. However, filing of electronic documents has been the norm in the Court of Appeal and upon specific directions from the court. The judiciary website ( provides a searchable database of judgments which are of significance as legal precedents between 1946 to 1948 and from 1966 onwards. Judgments are generally published on the judiciary website within three working days of being handed down and received. Integrity of process Basic Law The Basic Law of the Special Administrative Region (HKSAR) can be described as a mini-constitution preserving the common law and rules of equity which were in force in prior to 1 July In particular, the Bill of Rights Ordinance (Cap. 383) enacted under the Basic Law serves to protect the spirit of natural justice and its principles. Judges in routinely and consistently apply the principles of fairness and natural justice to the determination of cases, whether applying the requirements under the respective ordinances or through the application of common law principles. By way of illustration, in the recent case of Sun Tian Gang v & China Gas (Jilin) Limited (HCCT 46/2015) decided on 21 September 2016, the court set aside an arbitration award on the basis that the arbitral process and enforcement of the same violated notions of natural justice, fairness, due process and public policy. The arbitration had in fact been commenced without the Plaintiff s knowledge and proceeded in his absence during his period of incarceration. Independence and impartiality of the judiciary According to the World Economic Forum s Global Competitiveness Report , Hong Kong is ranked 8 th out of 138 countries. is the only Asian economy ranked within the top 10 on judicial independence. It is a fundamental aspect of the legal system that members of the judiciary are independent of the executive and legislative branches. Judges are appointed by the Chief Executive of the HKSAR on the recommendation of the Judicial Officers Recommendation Commission, an independent statutory body comprising local judges, persons from the legal profession and reputable persons from other sectors. The Court of Final Appeal, the highest appellate court with power of final adjudication on the laws of, also facilitates confidence in the independence of the judiciary by including world-renowned judges from overseas as non-permanent judges. GLI - Litigation & Dispute Resolution 2017, 6th Edition 76

3 This helps maintain its high degree of autonomy under the Basic Law and preserves the independence of the judiciary. Privilege and disclosure Introduction In the context of civil litigation in, discovery refers to the stage in the proceedings whereby each party is required to disclose the existence of all relevant documents to the issues in the litigation. Discoverable documents Under the Rules of the High Court (Cap. 4A), each party is required to disclose the existence of documents which: 1. are, or have been, in his/her/its possession, custody or power; and 2. relate to a matter in question in the action. A party cannot pick and choose what documents to disclose. This means that if a document is prejudicial to a party s case, it must still be disclosed if it is relevant to the case overall. Possession, custody or power If the document is physically in the possession of a party, then as long as it is relevant, it is discoverable. A document that a party does not physically have may still be considered to be in that party s custody or power. For example, if a party does not have a document because it is held by an agent, then that party is considered to have access to it. Accordingly, the document is treated as being in that party s custody or power and it is discoverable as long as it is relevant. It is also important to note that if a relevant document used to be in your possession, custody or power, it is also discoverable in the sense that the party will have to disclose its prior existence, and how it came to be lost or disposed of. Relevance A document is relevant if it relates to a matter in question in the action. That will be determined by the pleadings. The idea of relevance is construed very widely. This means that a document is relevant even if: 1. it is of marginal assistance to either party; 2. it may damage a party s own case; or 3. it may lead to a train of enquiry which may directly/indirectly lead to a result which is relevant to the proceedings. Privilege Some documents which might be relevant can be kept from the other party if those documents are privileged. There are two broad categories of privilege in : legal advice privilege; and litigation privilege. A. Legal advice privilege means all communications with a party s lawyer, including inhouse lawyers, for the purpose of giving or receiving legal advice. That advice does not need to pertain to the litigation. B. Litigation privilege protects correspondence between a party, his lawyer and/or a third party, but only if the purpose of the communication was for obtaining or giving advice in relation to the litigation. GLI - Litigation & Dispute Resolution 2017, 6th Edition 77

4 Electronic discovery On 1 September 2014, the High Court in introduced a new pilot scheme for discovery and provision of electronically stored documents for commercial list cases (the Pilot Scheme ). The Pilot Scheme applies to all claims or counterclaims which exceed HK$8m and there are at least 10,000 documents to be searched for the purposes of discovery. The Pilot Scheme and relevant protocols set out in Practice Direction SL1.2 have continued to operate to the benefit of practitioners dealing with cases involving a substantial quantity of documents (see decision dated 13 April 2017 of Zhang Hong Li & Ors v DBS Bank ( Limited) & Ors HCCL 2/2011). Costs Entitlement to costs Generally in proceedings in, costs follow the event. This means that in most cases, the loser pays the reasonable legal costs of the winner on a party and party basis. In some instances, the court can order costs to be paid on an increased or indemnity basis depending on the circumstances (set out further below). If the parties cannot reach agreement on the amount of costs, the receiving party will need to apply for taxation of costs. Taxation is the process whereby the court is asked to assess what reasonable amount of costs are payable. As a result of the taxation process, while a receiving party may pay 100% of his legal costs to his own solicitors, he may not necessarily recover all that he paid from the other party. Security for costs A defendant to an action or proceedings may apply for security for the defendant s costs from the plaintiff. The most common ground is that the plaintiff is an individual or entity which is ordinarily resident outside of. Orders for security for costs are particularly notable for their judicial discretion (see Alviero Martini SpA v Bubble Retail Management Ltd [2013] HKEC 1734) and are often more about the quantum of the security to be ordered, rather than whether security for costs should be given at all. The court generally adopts a broad-brush approach to assessing quantum in view of the circumstances and nature of each particular case. Sanctioned payments and offers Under the Rules of the High Court, parties may offer to settle the whole or a part of a claim by way of a sanctioned offer or payment. The content of a sanctioned offer is strictly prescribed by Order 22, rule 5 of the Rules of the High Court. Any deviation from the strict requirements may render the sanctioned offer or payment ineffective. There are various adverse cost consequences if a party does not accept a properly drafted sanctioned offer or payment, and subsequently either does not succeed in the action, or receives a judgment and fails to do better than the sanctioned offer or payment. In such circumstances, the court has discretion to order the party who failed to reasonably accept the sanctioned offer/payment to pay the costs of the other party, even if the other party did not succeed overall in the litigation. Overall, this encourages parties to adopt sensible positions in settlement and discourages parties who, while having a meritorious claim, persist in litigation claiming disproportionate sums of damages. GLI - Litigation & Dispute Resolution 2017, 6th Edition 78

5 Litigation funding in Historically, has had a complete prohibition against third party litigation funding due to antiquated English doctrines of maintenance and champerty. However, in the Court of Final Appeal decision of Siegfried Adalbert Unruh v Hans-Joerg Seeberger & Anor [2007] 10 HKCFAR ( Unruh ), the court considered that there were various exceptions to prohibition against maintenance and champerty, namely: 1. the common interest category whereby persons with a legitimate interest in the outcome of the litigation are justified in supporting the litigation; 2. cases involving access to justice considerations; and 3. a miscellaneous category of practices accepted as lawful, such as sale and assignment by a trustee in bankruptcy of an action commenced in the bankruptcy to a purchaser for value. While these comments were largely obiter, the case of Re Cyberworks Audio Video Technology Ltd [2010] 2 HKLRD 1137 ( Cyberworks ) confirmed that the access to justice considerations were applicable in circumstances where insolvent companies with legitimate claims against third parties could obtain litigation funding from third parties in exchange for a split of the proceeds of litigation. As such, the court sanctioned the liquidators in entering into a deed of assignment with the third-party litigation funder. Third party funding for arbitration On 28 December 2016, the Government introduced the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Bill 2016 (the Bill ) to clarify that third party funding of arbitration and mediation is not prohibited by the common law doctrines of maintenance and champerty. The Bill was passed on 14 June The provisions permitting third party funding in arbitration will come into effect later in This will include a Third Party Funding for Arbitration Code of Practice which will need to be issued and finalised by an authorised body appointed under the Arbitration Ordinance (Cap. 609). Interim relief Introduction courts have a wide variety of powers to grant interim relief to litigants, particularly where one party seeks to preserve the status quo and prevent the other party from dissipating evidence and assets. Injunctive relief An interim injunction is a provisional measure designed to protect an applicant s rights from irreparable harm pending litigation and to prevent the defendant from dissipating its assets. Under Section 21L of the High Court Ordinance (Cap. 4), the court may grant an interim injunction in cases where it is just and convenient to do so. The Mareva injunction is a common type of injunction whereby a plaintiff seeks to freeze the defendant s assets (e.g. bank accounts) pending final determination of the proceedings. Generally, an applicant for a Mareva injunction will need to show: 1. a good arguable case on substantive claims against the defendant; 2. the defendant has assets within ; 3. the balance of convenience is in favour of the grant; and GLI - Litigation & Dispute Resolution 2017, 6th Edition 79

6 4. there is a real risk of dissipation of the assets which, if dissipated, would render the plaintiff s judgment nugatory. The plaintiff will generally need to provide an undertaking as to damages, which means that if the plaintiff is unsuccessful in his claim, and the freezing order causes the defendant to suffer loss, then the applicant will be liable to pay for those damages. Urgent injunctions (such as the Mareva injunction) are generally made on an ex parte basis, which means that the plaintiff need not notify the defendant prior to making the application. As only one party will be present at the hearing, the plaintiff will be under an obligation to give full and frank disclosure to the court about all material matters in the case, even those which are detrimental to the plaintiff s case. Enforcement of judgments and awards Foreign Judgments (Reciprocal Enforcement) Ordinance In, if a foreign judgment falls within the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap. 319) (the Ordinance ) and originates from one of the designated countries set out in the Ordinance, then the process for recognition of that foreign judgment must be in accordance with the Ordinance. Broadly, for a foreign judgment to be recognised under the Ordinance: 1. the judgment must be from a superior court, one that has unlimited jurisdiction in civil and criminal matters; 2. the application must be made within six years of the date of the original judgment; 3. the judgment must not have been wholly satisfied; 4. if the judgment has been satisfied in part as at the date of registration, the judgment shall be registered only in respect of the balance remaining payable; 5. the judgment must be enforceable by execution in the country of the original court; 6. the judgment is final and conclusive as between the parties; and 7. the judgment is for a sum of money. Common law process If the foreign judgment falls outside the scope of the Ordinance, the common law process can be used. A judgment creditor can apply for a judgment without a review of the merits of the foreign judgment if that foreign judgment is: final and conclusive upon the merits of the claim in the foreign jurisdiction; a claim for a fixed sum; and the judgment debtor has assets in. In a recent decision on 3 June 2016, the Court of First Instance confirmed in Motorola Solutions Credit Company LLC v Kemal Uzan & Ors (HCA 2232/2013) that where a judgment debtor has no assets in, there is no basis for a judgment creditor to bring proceedings to enforce a foreign judgment in. The courts will not permit an action to be brought in a vacuum. Enforcement of registered judgments The basic pre-requisite for enforcing a judgment in is to either have a registered foreign judgment, or a local judgment. The procedure for enforcement will vary depending on the type of enforcement desired. GLI - Litigation & Dispute Resolution 2017, 6th Edition 80

7 For example, an enforcement via garnishee proceedings can be achieved by issuing an ex parte summons supported by an affidavit. The affidavit must show the identity of the garnishee (e.g. a bank) in and in what way the garnishee is indebted to the judgment debtor. Cross-border litigation Introduction Prior to the Civil Justice Reform ( CJR ) in April 2009, a foreign plaintiff could not obtain interim relief in unless the applicant could establish that the courts had some jurisdiction over the matter to grant substantive relief (Mercedes Benz AG v Leiduck [1996] 1 AC 284). The rationale was that any interim relief sought in must be dependent upon there being a pre-existing cause of action in. Interim relief in aid of foreign proceedings After the CJR and the introduction of Section 21M of the High Court Ordinance, it is no longer necessary in for a foreign plaintiff to have a substantive claim in Hong Kong before the foreign plaintiff can obtain interim relief. Section 21M provides that the court may appoint a receiver or grant interim relief in relation to proceedings which: 1. have been or are to be commenced in a place outside ; and 2. are capable of giving rise to a judgment which may be enforced in under any ordinance or common law or through the Foreign Judgments (Reciprocal Enforcement) Ordinance. Pre-action discovery Norwich Pharmacal Orders Under Section 41 of the High Court Ordinance ( HCO ), there is also scope for a foreign plaintiff to seek pre-action discovery in against third parties for the purpose of obtaining information which may lead to litigation in either or abroad. This is useful in situations where, for example, an innocent party is aware that his funds have been transferred into a particular bank account in. However, the innocent party may only know of the bank account number and not the name of the bank account holder. Perhaps the innocent party also does not know whether the money still remains in the bank account or has been transferred on to other bank accounts. In order for the innocent party to formulate his claim, he may apply for pre-action discovery against the bank for information. This is commonly referred to as a Norwich Pharmacal application. The rationale behind Norwich Pharmacal applications is that the law imposes a duty upon a person who, through no fault of their own, gets caught up in the wrongdoings of others. In those circumstances, the person becomes obliged to assist the wronged party by providing full information and disclosing the identity of the wrongdoers. The identity of these potential defendants can then be made the subject of discovery by the court. International arbitration Introduction Prior to the enactment of the Arbitration Ordinance (Cap. 609) (the Arbitration Ordinance ) on 1 June 2011, arbitrations were separated into two types; domestic and international. Various rules existed depending on the type of arbitration. For example, only domestic arbitrations could be brought before the courts for determination on GLI - Litigation & Dispute Resolution 2017, 6th Edition 81

8 a substantive issue of law. International arbitrations could only be appealed in in very exceptional circumstances. After 1 June 2011, with the introduction of the Arbitration Ordinance adopting the UNCITRAL Model Law, both domestic and international arbitrations are now subject to the same set of rules. General approach of the courts of The courts have generally adopted a pro-arbitration approach by ensuring minimal intervention in arbitral proceedings. In KB v S & Ors [2015] HKCFI 1787, the court recognised that its primary aim was to facilitate the arbitral process and to assist in the enforcement of arbitral awards. Enforcement of arbitral award The Arbitration Ordinance provides that any award made in any country (including Hong Kong) may be enforced in as though it were a judgment from the Court of First Instance, provided that leave is obtained. The party seeking leave to enforce must produce: 1. an authenticated original award; 2. the original arbitration agreement; and 3. if the award is not in either Chinese or English, a duly translated copy of the same. The courts have powers to refuse to grant leave to enforce an arbitral award under the Arbitration Ordinance if: A. A party to the arbitration agreement was under some incapacity. B. The arbitration agreement was not valid, either under the law to which parties subjected it or under the law of the country where it was made. C. The dispute related to matters not contemplated within the terms of arbitration or is beyond the scope of terms of arbitration. D. The arbitral procedure was contrary to what parties agreed or the law where arbitration took place. E. The award is not yet binding on parties or has been set aside or suspended by a competent authority. It should be noted that the Arbitration Ordinance draws a subtle distinction between those awards made in a territory that is party to the New York Convention (a Convention Award ) and those that are not (a Non-Convention Award ). For Convention Awards, the enforcement can only be refused on one of the grounds of refusal set out above. The courts in do not have residual discretion to refuse. For Non-Convention Awards, the courts in retain residual discretion to refuse leave to enforce for any reason they see fit. Mediation After the Civil Justice Reform, mediation has become an integral keystone to litigation. While not only actively encouraging parties to mediate at an early stage in proceedings, adverse consequences in costs have been prescribed against those parties who unreasonably refuse to mediate. Mediation is a confidential and private process. The entire process is without prejudice, meaning that any information exchanged between the parties during the GLI - Litigation & Dispute Resolution 2017, 6th Edition 82

9 course of mediation cannot later be used as evidence in the substantive proceedings. The general approach to mediation in is as follows: 1. The parties will send their position papers to the mediator. These position papers may be exchanged with the other party if agreed. 2. At mediation, each party will generally provide their opening statements, their views, intentions and possibly their desired outcome. 3. The mediator will then facilitate discussions of options. The conduct of the mediation will depend upon each individual mediator. 4. If mediation is successful, the parties will usually enter into a settlement agreement. In order to facilitate mediation, the courts in have wide powers to stay proceedings for a period of time to allow the parties to explore mediation. Either party may apply for a stay, and in some instances, the court may order a stay of its own motion. Mediate First pledge 2017 The Department of Justice has actively promoted mediation by way of Mediate First pledge events since The Mediate First pledge is a commitment by signatories of the pledge to use mediation first to try and resolve disputes before resorting to other means of dispute resolution. As of 2017, more than 360 companies and organisations in have signed the pledge. Regulatory investigations Money lenders With very low interest rates in, the money lending business has flourished in recent years. Those carrying on business in as a money lender are governed by the Money Lenders Ordinance (Cap. 163). On 1 December 2016, additional licensing conditions were imposed upon money lenders. Further restrictions on advertising were imposed which require that lenders must: show their money lender s licence number on any advertisements; and there must be a risk warning statement included in any audio advertisement. Competition Ordinance The Competition Ordinance (Cap. 619) came into effect in in December On 28 March 2017, the Competition Tribunal handed down its first written decision in the case of Competition Commission v Nutanix Limited & Ors (CTEA 1/2017). The Nutanix case involves proceedings brought against five information technology companies over an allegation of bid-rigging in a tender to provide information technology services. The Competition Commission seeks remedies including pecuniary penalties and a declaration of contravention of the Competition Ordinance. While the decision in Nutanix is not a substantive one, it nonetheless sets a precedent for the treatment of confidential information in originating documents filed in the specialist court. GLI - Litigation & Dispute Resolution 2017, 6th Edition 83

10 Richard Healy Tel: / richard.healy@oln-law.com Richard is head of the OLN Dispute Resolution Group and is responsible for matters involving civil and commercial litigation, dispute resolution, and corporate and commercial matters generally. Richard has acted in connection with shareholders/director s disputes, intellectual property infringement and general commercial litigation. In recent years such matters have included a number of insolvency and regulatory matters, matters involving the misselling of financial products and other professional negligence claims, contested probate matters, arbitration and expert determination relating to rent reviews. Stephen Chan Tel: / stephen.chan@oln-law.com Stephen is a litigation partner at Oldham, Li & Nie. He regularly acts for multi-national corporations in -based commercial litigation and international arbitration matters, and has extensive experience in Mareva (freezing) injunctions, tracing and recovery of funds. He also advises on contentious employment and intellectual property disputes. Stephen is admitted to practise law in both and New Zealand, and is an experienced advocate, having appeared in various Courts and Tribunals in both and New Zealand. Stephen is a current member of the Law Society Arbitration Committee. Oldham, Li & Nie 5th Floor, St. George's Building, 2 Ice House Street, Central Tel: / Fax: / URL: GLI - Litigation & Dispute Resolution 2017, 6th Edition 84