Hong Kong: Litigation

Civil litigation by trial is one of the main methods of resolving commercial disputes and may be commenced in the District Court or the Court of First Instance.

Alternative dispute resolution methods such as arbitration and mediation is also gaining popularity in Hong Kong.

The main procedural rules governing commercial litigation are The Rules of the District Court (Cap. 336H) and The Rules of the High Court (Cap. 4A) (together, the “Rules“). These Rules cover various aspects of court proceedings including without limitation service of court documents, summary judgment, discovery, case management, evidence, appeal and costs.

Practice Directions have also been issued for the conduct of court proceedings and as a practical guidance of the Rules.

The Court of Final Appeal (“CFA“) is the highest appellate court in Hong Kong and hears appeals on civil matters from the High Court (comprising of the Court of Appeal (“CA“) and Court of First Instance (“CFI“)).

The CA hears appeals from the CFI and District Court on all civil matters.

The CFI hears all civil matters with a value exceeding HK$3,000,000 and has unlimited jurisdiction.

The District Court hears all civil matters with a value exceeding HK$75,000 but below HK$3,000,000; whereas the Small Claims Tribunal hears civil claims of value up to HK$75,000.

The Civil Justice Reform was introduced in 2009 to facilitate better case management in accordance with the Rules and judges are given more case management powers in order to facilitate progression of cases. However, it is not uncommon to take least 18 months to 24 months before a claim gets to trial; it may take longer depending on the complexity and the estimated length of trial of the case.

In general, documents filed at court are not available to the public, with an exception that the public may obtain a copy of the Writ of Summons.

Hearings may be open or not open to the public, depending on statutory requirements and the nature of the proceedings. Unless it is specifically required by statute or due to the nature of the proceedings that there are reasons for excluding the press and the public under Article 10 of the Hong Kong Bills of Rights Ordinance, all chambers hearings (interlocutory or otherwise) shall be held in public.

The Court may also by its own motion order that a hearing be closed to the public if it is of the view that one or more reasons in Article 10 of the Hong Kong Bills of Rights Ordinance are satisfied.

By way of example, the following types of proceedings are usually not open to the public by reason of their nature:

• Matters relating to ex parte applications for injunctions or orders of a restraining or compulsory nature
• Matters relating to companies winding-up and bankruptcy
• Matters relating to arbitration
• Matters relating to representation in legal proceedings

The limitation periods for different kinds of actions are prescribed in the Limitation Ordinance (Cap. 347). The limitation period for the main causes of action are:

• Breach of contract: 6 years from the date of the breach;
• Tortious claims: 6 years from the date when the cause of action accrued;
• Tort (resulting in personal injuries): 3 years from the date on which the cause of action accrued or the date (if later) of the plaintiff’s knowledge; and
• Action to recover land: 12 years (or 60 years if the claim is brought by the government) from the date on which the right of action was accrued.

If a cause of action is based upon the defendant’s fraud, concealment or mistake, the limitation period will not run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be).

There are generally no pre-action conduct requirements in Hong Kong.

However, the Court in exercising its discretion as to costs will consider the conduct of all parties, including any pre-action conduct. It is possible that a party with unreasonable pre-action conduct may be ordered to be pay costs.

Court proceedings are commenced by filing and serving an originating process. The main method of commencing proceedings in commercial disputes is by filing a Writ of Summons. Depending on the nature of the claim, there are also other available methods of originating process such as originating summons, originating motion or petition.

Any form of originating process must be personally served on the defendant, i.e. left physically with the defendant.

There are alternative methods for service if it is not possible to personally serve on the defendant:

• By registered post, i.e. sending the originating process by registered post to the defendant at usual or last known address;
• By insertion into letter box, i.e. by inserting the originating process through the letter box if there is one at the address for service.

The deemed date for service by registered post or insertion into letter box is the seventh day after the date on which the copy was sent to or inserted through the letter box.

If it is impracticable for any reason to serve a document using any of the above methods, on the application by the plaintiff, the Court may order that the originating process be served by substituted service (such as by advertisement).

Where the defendant does not locate within the jurisdiction, the plaintiff will have to obtain leave from the Court for the originating process to be served on the defendant out of jurisdiction.

The Hong Kong Courts seize jurisdiction over a claim through service on a defendant within the jurisdiction.

If the defendant is not within the jurisdiction, the Hong Kong Courts will be willing to exercise its long-arm jurisdiction over foreign defendants and allow service on them out of jurisdiction in certain cases, including principally where:

• Relief sought is against a person domiciled or ordinarily resident of Hong Kong;
• An injunction is sought ordering the defendant to do or refrain from doing anything within Hong Kong (whether or not damages are also claimed in respect of a failure to do or the doing of that thing);
• The claim is brought in respect of a breach committed within Hong Kong of a contract made within or out of Hong Kong;
• The claim is founded on a tort and the damage was sustained, or resulted from an act committed within Hong Kong;
• The whole subject-matter of the action is land situate within Hong Kong; and
• The claim is made for a debt secured on immovable property or is made to assert, declare or determine proprietary or possession rights, or rights in security in or over movable property situated within Hong Kong.

Nevertheless, the Hong Kong Court may decline to exercise jurisdiction over a claim if it is of the view that Hong Kong is not the forum conveniens for the matter in dispute.

If the parties agreed to a governing law clause, the Court will usually uphold the parties’ agreement.

However, in the absence of any agreement on governing law, the Court will determine the applicable law by applying the “closest and most real connection” test. This will involve considering various factors such as where the parties are located and obligations are to be performed.

A claim may be disposed of summarily without a trial if the defendant has no defence to a claim. However, this summary procedure is not available in an action which includes a claim by the plaintiff for libel, slander, malicious prosecution, false imprisonment or seduction, fraud or an admiralty action in rem.

Alternatively, a claim can be disposed by obtaining a default judgment if the defendant defaults in filing a notice of intention to defend and/or a defence within the prescribed time limit.

The main type of interim relief available in Hong Kong is interim injunctions (such as Mareva injunctions to freeze the assets of the defendant, prohibitory injunctions, mandatory injunctions and anti-suit injunctions).

Hong Kong Courts may also grant interim reliefs in aid of any foreign proceedings or arbitral proceedings (commenced in or outside of Hong Kong). These interim reliefs may include interim injunctions and appointment of receivers over the assets in dispute.

In general, the key documents which the parties are required to file (with Court) and serve on the other party(ies) after an action by Writ of Summons is commenced include:

Disclosure of documents is made by filing and exchanging the parties’ respective Lists of Documents. The parties are required to set out in their respective Lists of Documents all relevant documents that are in their possession, custody and power even if the documents adversely affect their case. Parties’ obligation to disclose is continuous and hence, they should file Supplemental Lists of Documents if further relevant documents that are in their possession, custody and power come up as the proceedings progress.

If a party believes that the other party has not made adequate disclosure, such party can make an application seeking for specific discovery of documents.

In general, documents which are protected by privilege need not be disclosed; and privilege may include legal professional privilege and privilege on ground of public policy.

Legal professional privilege applies to documents that are either created for the purpose of receiving legal advice (whether or not litigation was contemplated or pending at that time), or for the dominant purpose of litigation.

In terms of documents privileged on the ground of public policy, the Court will consider whether withholding of the documents is necessary for the proper functioning of the public service.

Witnesses should give their evidence in a written witness statement. Prior to trial, parties must exchange their respective written witness statements.

Witnesses giving a witness statement should also testify in Court and be cross-examined by the other side’s Counsel at trial.

Depositions can only be received as evidence in trial where the Court considers it necessary for the purposes of justice, to make an order for the evidence to be taken in Hong Kong, before the trial, of a witness who will be unable to attend it. However, it is not limited to the taking of evidence in Hong Kong and where it is sought to take evidence abroad before a special examiner (i.e. a named individual), the Court will also make such order so long as foreign law allows the same.

Expert evidence is permitted in Hong Kong. If the parties wish to adduce expert evidence on any matter, they should first seek leave from the Court to do so.

Experts are appointed by the parties but they owe duties to the Court to assist the Court on matters within their expertise. Such duty overrides any obligations to the party from whom the expert witness has received instructions or by whom the expert is paid. The parties are required to provide the experts with a copy of the Code of Conduct (Appendix D of the Rules of High Court (Cap. 4A) or Appendix E of the Rules of District Court (Cap. 336H)), which explains the experts’ overriding duty to assist the court and sets out the requirement for the experts to declare that they have read the Code of Conduct and understand their duty to the Court. In the expert report, the expert is required to declare that he understands this duty, that this duty has been complied with and that the expert will continue to do so. The failure to make this declaration in the expert report will result in the inadmissibility of the report and any oral expert evidence.

Generally speaking, civil appeals may either be made as of right or with the leave of the Court depending on the nature of the judgment and the Court that renders the judgment.

The following table summarizes the appeal process against the commonly encountered types of judgment, order or decision.

Footnote

1. Interlocutory judgments or order of a CFI Judge on certain matters do not require leave to appeal.

Foreign judgments may be enforced in Hong Kong either:

• Through the statutory registration regime under the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap. 319) (“FJREO“); or
• Under the common law.

The FJREO covers judgments from 15 jurisdictions, including Australia, Austria, Belgium, Bermuda, Brunei, France, Germany, India, Israel, Italy, Malaysia, the Netherlands, New Zealand, Singapore and Sri Lanka. If the foreign judgment is registered under the FJREO, they can be enforced in the same way as a Hong Kong judgment.

Under the FJREO, a party seeking to register a foreign judgment must make an ex parte application supported by affidavit. The Court will only register the foreign judgment if certain conditions are met, including (without limitation):

• The application to register a foreign judgment must be made within 6 years after the date of the judgment
• The judgment has not been wholly satisfied;
• The judgment can be enforced by execution in the country of the original court.

Likewise, Mainland judgments can also be enforced through the statutory registration regime and under the common law.

The statutory registration regime governing enforcement of Mainland judgments is set out in the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap. 597) (“MJREO“). An application for registration of Mainland judgments must be made within 2 years from the date of which the judgment takes effect (or 2 years from the last day of the period for performance if such period is specified in the judgment).

The following conditions must be met before a Mainland judgment can be registered under the MJREO:

• The judgment must be given by a designated court within the meaning prescribed by the MJREO;
• Choice of Mainland court agreement was made on or after the commencement of the MJREO;
• The judgment is final and conclusive;
• The judgment is enforceable in the Mainland; and
• The Judgment orders the payment of a sum of money (not being a sum in respect of taxes or a fine or similar penalty).

A foreign or mainland judgment may also be enforced under the common law regime if its enforcement does not fall within the statutory registration regime under the FJREO or the MJREO. It is done by commencing legal action in Hong Kong against the judgment debtor on the basis of the foreign or Mainland judgment through issuing a Writ of Summons and Statement of Claim.

As a matter of general rule, costs follow the event. This means that the unsuccessful party must pay the reasonable costs incurred by the successful party in the litigation, including solicitors’ fees and other disbursements incurred in the proceedings such as expert’s and barrister’s fees). However, costs are always at the discretion of the Court and hence, the Court may take into account different factors in deciding the issue of costs. For example, a successful party may be ordered to pay part of the other party’s costs if the Court finds that the successful party has not acted reasonably in certain respects.

In the absence of any agreement, the amount of costs payable by the unsuccessful party is determined through taxation, where the taxing master will assess and make an order of the amount of costs to be paid.

In Hong Kong, the only type of collective action permitted is representative proceedings.

If many people have the same interest in any proceedings, unless otherwise ordered by the Court, the proceedings may be commenced and continued by or against any one or more of them as representing any or all of them.

A judgment or order given in these representative proceedings will be binding on all these people as representing whom the plaintiffs sue or, as the case may be, the defendants are sued. However, such judgment or order cannot be enforced against any person who is not a party to the proceedings except with the leave of the Court.

In Hong Kong, joinder of parties as plaintiffs or defendants in ongoing proceedings is allowed as of right, subject to the discretionary power of the Court under Order 15 r. 5 of the Rules of High Court, if the conditions set out in Order 15 r. 4 of the Rules of High Court is satisfied, i.e.:

• The right to relief in each case be in respect of or arise out of the same transaction or series of transactions; and
• There must be some common question of law or fact.

Separately, if a defendant believes that a third party (or parties) should be responsible for the plaintiff’s claim instead, the defendant can commence third party proceedings against that third party (or parties) for a contribution or an indemnity.

In respect of consolidation of two sets of proceedings, two or more causes or matters may be consolidated if it appears to the Court that:

• Some common question of law or fact arises in both or all of them;
• That the rights to relief claimed therein are in respect of or arise out of the same transaction or series of transactions; or
• That for some other reason it is desirable to make an order for consolidation.

Third party funding for court proceedings is not allowed and may attract potential tortious or even criminal liabilities. However, under the Arbitration Ordinance (Cap. 609) (the “AO”), third party funding is allowed. Part 10A of the AO provides for measures and safeguards in relation to third party funding of arbitration and mediation.

The COVID-19 pandemic caused significant delay in court proceedings as the Hong Kong Courts had to be closed during that period. All court proceedings were adjourned (except urgent and essential hearings) for three months from 29 January 2020 to 3 May 2020; known as the general adjourned period (“GAP“).

Following the GAP, the Courts have adopted appropriate social distancing measures for crowd control to ensure that the courts can continue to carry on business as safely as circumstances permit. This includes having simple hearings to be conducted remotely by telephone, whereas substantive hearings were conducted by video conference.

In addition, the Court Proceedings (Electronic Technology) Ordinance (Cap. 638) (“CPETO“) was also passed on 17 July 2020, but has yet to come into effect. The CPETO provides for e-filing of court documents and the recognition of e-signatures on court documents. However, the exact timetable for the implementation of CPETO has not been announced. It is expected that it would take a few years before the Hong Kong courts will be able to go fully paperless.

The major advantage of litigating international commercial disputes in Hong Kong is its judicial independence.

Separately, Hong Kong has a panel of high quality judges from different jurisdictions which is highly favourable for resolving international disputes. Since the handover of its sovereignty to the Mainland China, Hong Kong has started to develop an English-Chinese legal system which also facilitates the resolution of disputes involving Chinese elements. The fact that Hong Kong has reciprocal arrangements with 15 countries and the Mainland China for the enforcement of foreign and Mainland judgments also means that it is highly favourable for international and Chinese parties to resolve their disputes in Hong Kong.

Hong Kong is also arbitration friendly, with the Hong Kong Courts always adopt a supportive attitude.

As to the major disadvantage, like many other jurisdictions, litigation in Hong Kong can be time consuming and costly. A normal commercial dispute may take up to 18-24 months before a trial will take place.

Since the handover of Hong Kong’s sovereignty to the Mainland China, commercial activities between Hong Kong and the Mainland have been on the increasing trend. This will no doubt continue to be so with the development of the Greater Bay Area and Hong Kong’s role in it. It is therefore anticipated that commercial disputes involving Chinese elements will be a major growth area in Hong Kong.

Following the passing of the CPETO, the Hong Kong Courts are driven to integrate an electronic process throughout court proceedings. As part and parcel of the CPETO, the Hong Kong courts have been working on an Integrated Court Case Management System (“iCMS“) which would be implemented in phases across all levels of the courts to enable electronic handling of court-related documents and payments.

It remains to be seen how the iCMS will be successfully implemented as electronic court document filing is entirely voluntary. This will largely depend how quickly law firms and other litigants will be willing to adopt this new approach.

COVID-19 has caused serious disruptions to Court proceedings in Hong Kong. However, this has caused the Hong Kong Courts to adopt more flexible approach in handing hearings. Also, the passing of CPETO will enable handling of court documents electronically. However, implementation of an electronic system in the Hong Kong Courts is still at its early stage. It may be possible that commercial parties are looking to resolve their disputes by way of arbitration which allows more flexible process.