After nearly a decade of preparation, the Civil Justice Reform (CJR) will finally come into effect on 2 April 2009. The sweeping changes that will be introduced in the civil procedure rules will revamp the civil justice system and change significantly the way litigation is practiced in Hong Kong. The principle aims of the reform are to reduce delays, complexity and improving cost effectiveness in litigation, ensure a fair allocation of resources of the court and encourage early settlement of disputes.
Although modelled after the English Woolf Reforms, the CJR is a result of cherry-picking the best of the reforms that have worked well in England as well as innovations adopted from other courts, such as that of Western Australia and other common law countries.
In the first of a series of litigation updates, we will highlight some of the major changes that will be introduced.
Under the new regime, the court must consider and give effect to a list of "underlying objectives" whenever it exercises its powers and interprets the rules or practice directions. These include the cost effectiveness of the court practices and procedure and need to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings. Litigants and their legal representatives have an obligation to assist the court to further the underlying objectives.
In implementing the underlying objectives, court proceedings are expected to be carried out more expeditiously, with the court playing a more pro-active role in managing cases, discouraging unnecessary interlocutory applications and facilitating early settlement of disputes.
Active Case Management
To enable the court to further the underlying objectives, the court will have considerable case management powers. Instead of allowing parties to run the case as they think fit, the court will determine the progress and how proceedings would be conducted.
The existing Summons for Directions procedure will be replaced by a "Case Management Summons and Conference" under which parties are required to provide detailed information about their case in a questionnaire upon the close of pleadings. The court will then set a timetable for steps in the proceedings tailor-made for each case including setting "milestone dates". These are dates fixed for a case management conference, a pre-trial review and the trial or the period within which the trial is to take place, which can only be varied in exceptional circumstances.
No Bare Denials in Pleadings
It will no longer be possible for a party to rely on bare denials in response to an allegation in a pleading. A denial in a defence or defence to counterclaim must be supported by reasons and set out a different version of events that the party wishes to put forward. The rationale for requiring a substantive defence is to ensure that issues in dispute are defined at the outset so as to discourage frivolous cases and facilitate early settlement of disputes.
Statement of Truth
Pleadings, witness statements and expert reports must be verified by a statement of truth signed by the maker of the statement. A statement of truth is a declaration of belief that the facts or opinion stated in the relevant document are true and the belief is honestly held.
Failure to verify by a statement of truth may result in a pleading being struck out or render a witness statement or expert report inadmissible in evidence. In addition, a person who makes or causes to be made a false statement in a document verified by a statement of truth without an honest belief in its truth may be liable for contempt of court.
Sanctioned Offers and Payments
The existing rule of "payment into court" procedure will be replaced by "sanctioned offers and payments" as a tactical procedure that may be employed to provoke settlement of disputes. Whilst a defendant may still make a payment into court (now called "sanctioned payment") in respect of monetary claims, it may now also make a "sanctioned offer" on non-monetary claims. In addition, a Plaintiff may also make a "sanctioned offer" in respect of both monetary and non-monetary claims.
Failure to accept a sanctioned offer or payment may result in a party being ordered to pay the other party's costs on an indemnity basis and payment of additional interest on those costs at an enhanced rate of up to 10% above the judgment rate. The defendant also risks being ordered to pay interest on the whole or part of the judgment sum at the enhanced rate for the period after the date the sanctioned offer could have been accepted.
A new practice direction on mediation (effective on 1 January 2010) will require parties to legal proceedings to consider mediation as a means of alternative dispute resolution. The onus is on lawyers to advice their clients as to whether a case is suitable for mediation. If a case is suitable for mediation and a party refuses to mediate and the matter proceeds to trial, even if the party succeeds at trial, the court may decline to award him legal costs if it considers that his refusal to mediate was unreasonable.
Orders on Costs
To deter unreasonable or unnecessary interlocutory applications, the court may disallow an award of costs even if a party succeeds in an interlocutory application. In addition, the court may make wasted costs orders against legal representatives including barristers where costs incurred by a party result from improper or unreasonable act or omission, or undue delay or other misconduct or default of the legal representative, his employee or agent.
The court will also have the power to order costs against a person who is not a party to the litigation, such as a person who has a personal benefit in funding the litigation.
The new regime will result in a fundamental change in the way litigation is conducted. It will require parties to be more upfront and transparent about their cases, be more open to alternative dispute resolution so that only deserving cases will proceed to trial.
As parties are required to be better prepared even in the early stages of the proceedings so as to comply with the new procedural rules and strict case management time tables, there will likely be frontloading of costs if parties seek to pursue litigation.
We will be publishing further updates which will explore in greater detail some of the reforms highlighted above.
If you wish to know more about the CJR or have any query regarding how to commence or contest legal proceedings in Hong Kong, experienced lawyers in our Litigation and Dispute Resolution Department will be happy to assist you.
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.