1.1 General Characteristics of Legal System
Hong Kong follows the common law system with a combination of statutory laws as well as laws developed through judgments. The system of stare decisis prevails where lower courts are bound by the decision of higher courts. Court proceedings are carried out in an adversarial manner where counsel of both parties present their respective cases (by way of both written submissions and oral arguments) and the judge decides.
1.2 Court System
Under the principle of "One Country, Two Systems", Hong Kong SAR has its own judiciary which is separate from the Mainland. The jurisdiction of the non-appellate courts is limited by subject-matter, monetary value of the claim or nature and severity of the sentence.
The structure of the courts is as follows:
- The Court of Final Appeal is the ultimate appellate authority with jurisdiction on all matters.
- The High Court consists of the Court of Appeal and the Court of First Instance. The Court of Appeal can adjudicate upon civil and criminal appeals from the Court of First Instance, District Court and other specialised tribunals. The Court of First Instance has in all civil and criminal matters.
- The District Court has limited civil (claims not more than HKD3 million) and criminal jurisdiction (up to seven years of imprisonment) and family matters are commenced in the Family Court within the District Court.
- The Magistrates' Court has exclusive criminal jurisdiction of offences punishable by up to two years' imprisonment and/or a fine of HKD100,000.
- Family Courts deal exclusively with matrimonial and custody matters.
- Further, there are several tribunals with specialised subject-area jurisdiction such as the Lands Tribunal, the Labour Tribunal, the Small Claims Tribunal and the Obscene Articles Tribunal, etc.
1.3 Court Filings and Proceedings
Regarding filings, the writ of summons and published judgments are open to the public. To access any other document, the leave of court is required.
Generally, court proceedings are open to the public unless statute provides otherwise (see 7.6 Extent to Which Hearings are Open to the Public). The court may order the whole or part of the public hearing to be in camera upon application or on its own motion.
1.4 Legal Representation in Court
The following category of legal professionals have rights of audience that vary as per their qualifications:
- Solicitors: solicitors have rights of audience before a Master in chambers and chambers proceedings. Only upon qualification as Solicitor Advocates do they have higher rights of audience before the High Court and the Court of Final Appeal.
- Barristers: barristers are governed by the codes prescribed by the Bar Council of the Hong Kong Bar Association. They have unlimited rights of audience in all the courts.
Foreign Lawyers, who are registered with the Law Society, can only advise on the law of the jurisdiction in which they are qualified. Foreign lawyers do not have rights of audience in the courts and are not entitled to practice the laws of Hong Kong.
No legal representation is allowed in the Small Claims Tribunal and the Labour Tribunal.
2. Litigation Funding
2.1 Third-Party Litigation Funding
The legal system in Hong Kong allows third-party funding in limited areas.
The rationale against third-party funding arrangements is the prohibition against maintenance and champerty. The courts in Hong Kong are prepared to grant leave in certain circumstances. The principle is to balance public policy with access to justice and legitimate interest of parties.
2.2 Third-Party Funding: Lawsuits
Third-party funding is permitted in arbitration proceedings, liquidators of an insolvent company can assign the cause of action to third-party funders and trustees in bankruptcy proceedings are also permitted to enter into third-party funding arrangements.
2.3 Third-Party Funding for Plaintiff and Defendant
Third-party funding is available to both plaintiff and defendant.
2.4 Minimum and Maximum Amounts of ThirdParty Funding
There is no statutory limit of the amounts of third-party funding. The entire cause of action can be assigned to a third-party funder.
2.5 Types of Costs Considered under Third-Party Funding
The funding agreement is required to stipulate the type and extent of the costs that a funder is liable for. The costs could vary depending on the stage at which the agreement is executed. Some of the probable costs include:
- pre-action costs and expenses;
- fees and expenses of the arbitration body;
- adverse cost orders against the assigning party or against the funder;
- security for costs;
- insurance premiums to obtain cost insurance;
- costs of indemnifying the assignee; and
- other financial liabilities.
2.6 Contingency fees
Contingency fee arrangements are prohibited in Hong Kong.
2.7 Time Limit for Obtaining Third-Party Funding
There is no statutory limitation of time for obtaining thirdparty funding.
3. Initiating a Lawsuit
3.1 Rules on Pre-action Conduct
In Hong Kong, a specific Pre-Action Protocol is prescribed only in personal injury cases under Practice Direction 18.1. The requirements are as follows:
- no later than four months prior to commencing proceedings, the claimant must send a "letter of claim", in the prescribed form, to the proposed defendant with enough information, as reasonably required, for a constructive reply;
- the defendant must provide a constructive reply within a month and not a mere acknowledgement; and
- the parties should, over the next three months, communicate constructively and provide mutual disclosure of information and documents with respect to issues of liability and quantum.
There are consequences of non-compliance. If the defendant fails to respond constructively within one month, the claimant is entitled to commence proceedings without the risk of adverse costs consequence arising from non-compliance.
In exercising its discretion on costs, the court takes into account all relevant circumstances. These would include any unreasonable failure of a party to comply with the PreAction Protocol. A defendant who fails to respond constructively may experience adverse costs consequence.
3.2 Statutes of Limitations
The Limitation Ordinance (Cap. 347) prescribes the time limits beyond which commencement of proceedings would be barred. The cause of action is vital to determine the application of the limitation period. The accrual of the cause of action triggers the limitation period. The limitation period stops running when the action is commenced. A limitation period may be shortened or extended by agreement between parties.
Limitation periods applicable to civil suits are as follows:
- torts (excluding personal injuries): six years from date of accrual of cause of action;
- action for damages for negligence (except personal injuries): three years form date of actual or constructive knowledge or six years (whichever is later);
- personal injuries: three years from date of accrual of cause of action;
- contract (excluding under seal): six years from date of accrual of cause of action;
- contract (under seal): 12 years from date of accrual of cause of action;
- recovery of land: 12 years from the date of adverse possession or 60 years where the claim is against the Government;
- fraud, mistake, or concealment: the limitation period does not begin till the fraud, mistake, or concealment is discovered or could have been discovered with reasonable due diligence;
- enforcement of a judgment (except for the below): 12 years from the date on which the judgment became enforceable; and
- recovery of arrears of interest in respect of a judgment debt: six years from the date on which the interest became due.
3.3 Jurisdictional Requirements for a Defendant
Courts in Hong Kong can exercise jurisdiction (hear and determine a matter) against a defendant.
If a defendant is present in Hong Kong such that it can be served with the proceedings within Hong Kong (even if the person is on transit at the airport), the courts can exercise jurisdiction. However, such jurisdiction would not vest in courts if the defendant was defrauded to be present in Hong Kong just for the purpose of service.
If the parties to a dispute have entered into an jurisdictional agreement conferring jurisdiction on courts in Hong Kong, jurisdiction can be exercised.
Jurisdiction can be established if the defendant by conduct accepts the jurisdiction of courts in Hong Kong courts. Thus, challenges to jurisdiction must be made cautiously to avoid submission to jurisdiction.
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Accreditation: Reproduced with permission from Chambers & Partners. This article was first published in Chambers Litigation 2019 Second Edition Guide. For further information please visit www.chambers.com
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