China: The Legal System and Civil Procedure for Commercial Dispute Resolution in Hong Kong (Part II of II)

Last Updated: 3 June 2012
Article by Renee Gu

This article continues to discuss The Legal System and Civil Procedure for Commercial Dispute Resolution in Hong Kong. The first part of this article was published on Chinalawinsight on May 2012.

VIII.Summary Judgment

As an alternative to resolving a dispute by way of a full trial, it may be an option to apply for a summary judgment. The purpose of the summary judgment is to give judgment before trial to a plaintiff, where the defendant has no defence to the claimi. The summary judgment procedure prevents a defendant from delaying judgment and avoids the time and expense of a trial where there is plainly no defence.

The test to determine whether there should be a summary judgment is to ask whether there is a triable issue and if there is one, whether it amounts to an arguable defence in law. If the answer to these questions is yes, then the case is not appropriate for summary judgment

IX.Default Judgment

In addition to summary judgment, default judgment is also an option. Default judgment enables the plaintiff to obtain judgment without having to prove its case at trial if the defendant fails either to acknowledge service or to file a defenceii. The underlying policy is that court time limits are meant to be complied with, and default judgments are a sanction for failing to comply.

A plaintiff may enter judgment against a defendant who has failed either to give notice of intention to defend or to serve a defence within the time periods prescribed in the rules. Default judgment can also be entered if a defendant has expressly stated the intention not to defend on the acknowledgement of service form.

X.Injunctive Relief

In general, an injunction is an order of the court restraining the commission or the continuance of some wrongful act, or the continuance of some omission. An injunction is said to be prohibitory if it forbids the commission or continuance of the act and to be mandatory if it directs that a positive act should be done to repair some omission or to restore the prior position by undoing some wrongful act.

The High Court Ordinance (Cap. 4) refers to both "final" and "interlocutory" injunctions. An injunction granted by judicial decision at trial after the plaintiff has established the existence of his right in law and the fact that the defendant has infringed it or is about to do so may be described as a perpetual injunction. An order other than a final judgment, whether or not such order is made before the judgment, may properly be described as an interlocutory order. Generally, an interlocutory injunction will follow as quickly as possible upon the issue of the Writ of Summons directing the defendant to do or refrain from doing something until the trial of the action. An interlocutory injunction may be prohibitory or mandatoryiii.

Injunctive relief is similar to an "asset preservation order" in China. In particular, Mareva injunctions and Anton Piller orders are two forms of injunctive relief.

The Mareva injunction was conceived as a remedy (usually granted by interlocutory order) designed to prevent a defendant from removing from the jurisdiction assets that may in due course be attached for the purposes of satisfying the plaintiff's judgment. The court has jurisdiction to grant an interlocutory injunction to restrain a defendant from dealing with his assets for the purpose of preventing him from removing them from the jurisdiction to defeat any later judgment against him. Assets up to a value sufficient to satisfy the plaintiff's claim in the action, should he be successful in obtaining judgment, may be "frozen" by such an injunction.

For an Anton Piller order, the court has jurisdiction, for the purpose of preserving the subject matter of a cause and of documents relating thereto, to grant a mandatory injunction requiring the defendant to permit the plaintiff to enter upon the defendant's premises to enable him to inspect such material and to seize and to remove into safe custodyiv.

For the purpose of rendering a Mareva injunction effective (before judgment as well as after judgment), the court may make ancillary orders requiring the defendant (1) to make a statement disclosing his assets, (2) to give discovery of documents, and (3) to answer interrogatories.

Such orders can assist (1) in determining the existence, nature and location of assets, (2) in clarifying questions of title concerning assets, and (3) in identifying third parties to whom notice of the injunction should be given for the purpose of ensuring that they do not advertently or inadvertently assist the defendant in the removal or disposal of assets. The purpose of such an order for disclosure is to ascertain the location of the defendant's assets. In exceptional cases, an Anton Piller order may be made in support of discovery under a Mareva injunctionv.

In the context of arbitration in Hong Kong, arbitral tribunals have additional powers to grant interim injunctions. Under section 35 of the Arbitration Ordinance in Hong Kong, arbitral tribunals have the power to make orders for the preservation of assets. Significantly, under Section 45 of the Arbitration Ordinance, Hong Kong courts also have the power to grant interim injunctions even when the seat of arbitration is not Hong Kong, so long as the arbitration proceedings relate to an arbitration in which the arbitral award is likely to be enforced in Hong Kong or in which interim measures could be granted in Hong Kong vi. It follows that Hong Kong courts may have the power to grant injunctive relief even if the arbitration is commenced in China.

XI.Commercial List and Languages

To expedite the litigation process, complicated commercial cases involving substantial amounts will be directed by the court to the Commercial List. The function of the Commercial List is to facilitate the disposal of actions involving commercial mattersvii. The matters are heard before a Commercial List judge. Most of the Commercial List judges have expertise in commercial disputes and are bilingual so that they can understand the complexity of the case in both Chinese and English. Also, judges have control over matters in the List and of interlocutory applications therein and may make such directions and orders regulating the conduct or trial of such matters as they think fit.

The Commercial List deals with causes arising out of the ordinary transactions of merchants and traders and embraces cases relating to the construction of mercantile documents, export or import of merchandise, affreightment, insurance, banking and commercial agency and mercantile usages.

In addition to Chinese language, English may be used as the official language by the courts of Hong Kong. Most of the judges in Hong Kong are bilingual and could use either Chinese or English or both in any proceedings before the judge as the judge thinks fit. The same applies to a party or the legal representative of a party who can use either Chinese or English or both in a legal proceeding.

Additionally, any witness may testify in either English or Chinese, or in any other language through an interpreter.

XII.Civil Justice Reform

A.Background

In resolving disputes in the commercial world, the parties' main concern is usually to resolve the matter in the most cost-efficient and expeditious manner. In Hong Kong, Civil Justice Reform ("CJR") is implemented to achieve this aim. CJR was launched on 2 April 2009 to enhance the competitiveness of the dispute resolution system. One of the most notable features of the reform is the courts' encouragement and facilitation of the use of alternative dispute resolution ("ADR") methods, in particular mediation, in order to filter litigation cases and procure early settlementsviii. CJR is in line with the suggestion that the court should be the last resort for resolving disputes and used only for those cases in which it is really needed.

B.Underlying Objectives

The underlying objectives of CJR provide that when the court exercises its power under the RHC (Rules of High Court) or interprets the same and any practice directions, it is required to give effect to the following six underlying objectivesix:

  1. to increase the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the court;
  2. to ensure that a case is dealt with as expeditiously as is reasonably practicable;
  3. to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings;
  4. to ensure fairness between the parties;
  5. to facilitate the settlement of disputes; and
  6. to ensure that the resources of the court are distributed fairly.

The court is directed to give effect to these underlying objectives when it exercises any of its powers.

C.Active Case Management

The court is also directed to further the underlying objectives by actively managing cases, which includesx:

  1. encouraging the parties to use an alternative dispute procedure if the court considers that appropriate and facilitating the use of such procedure; and
  2. helping the parties settle the case (in whole or in part).

D.Sanctioned Offers and Payments

An important change under CJR is the system of sanctioned offers and payments. The new rules include a formalized system of offers to settle. The system allows the defendant and the plaintiff to make an offer to settle disputes and imposes specific cost consequences against a party who rejects an offer which he is unable to better at trial. It is a procedure which aims to encourage the parties to take possible settlement seriously and to avoid unproductive prolonging of the litigation.

E.Alternative Dispute Resolution

Alternative Dispute Resolution ("ADR") means all forms of dispute resolution other than litigation in courts where the parties by agreement may appoint a neutral third party to settle or help settle their dispute.

Apart from the fact that ADR processes are more flexible than the court's rules and parties can avoid the stress brought by litigation, one of the advantages is that ADR encourages the preservation of the parties' relationship. Even though parties may fail to reach any settlement in the process, it is still a constructive process which may narrow down the differences between parties, leading to subsequent settlement without court proceedings.

F.Mediation

Although the new rules under CJR are presumed to encompass all forms of ADR, the judiciary indicated that mediation is the preferred court annexed ADR process for the civil justice system in Hong Kongxi. Mediation is a dispute resolution process conducted in confidence in which a neutral third party (the mediator) is engaged by the parties in dispute by consent to facilitate the parties in arriving at a negotiated settlement of the dispute.

Footnotes

i O.14, Rules of High Court, High Court Ordinance
ii O.13 and O.19, Rules of High Court, High Court Ordinance
iii Order 29, paragraph 29/1/1, White Book 2011
iv Order 29, paragraphs 29/1/1 and 29/1/5, White Book 2011
v Order 29, paragraph 29/1/67, White Book 2011
vi Saurabh Bhagotra, "Asian arbitration redefined", Hong Kong Lawyer, October 2011
vii Practice Direction SL 1.1 of Hong Kong
viii Weixia Gu, "Civil Justice Reform in Hong Kong: Challenges and Opportunities for Development of Alternative Dispute Resolution", Hong Kong Law Journal, 40 HKLJ 43, 2010, p.1
ix Weixia Gu, p. 3 & Rules of High Court, Order 1A, r1
x Rules of High Court, Order 1B
xi Weixia Gu, p.4

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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