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Arbitration & ADR
Hong Kong's Financial Dispute Resolution Scheme will be expanded with effect from January 1 2018 and July 1 2018 by amending the jurisdiction and terms of reference of the Financial Dispute Resolution Centre. Alongside the recent changes to allow third-party funding in arbitration, the changes to the scheme show that alternative dispute resolution is coming of age for financial disputes in Hong Kong where there is an imbalance of power between parties.
The High Court recently reiterated the general principles which govern its power to order a non-party to pay the costs of another party to court proceedings. The court's power is statutory but the general principles that govern the exercise of its discretion arise out of case law. The case law demonstrates that the court's discretion to make an order for costs against a non-party is wide. The interests of justice are paramount.
A High Court judge recently dismissed a party's appeal against a refusal to grant permission to issue subpoenas directed at another party's legal representatives. At the same time, the judge reminded litigants and their legal representatives that subpoenas (directing a witness to attend court to give evidence, produce documents or do both) should be issued in a timely manner, and that late subpoenas which upset the court's case management of trial dates are likely to be frowned upon.
The Norwich Pharmacal order is an important tool for combating fraud. Given the prevalence of electronic and identity fraud, the ability of victims to recover lost money through the civil courts has assumed a high profile of late. For plaintiffs who fall prey to such fraudsters, the ability to obtain a court order prohibiting a defendant from disposing of (among other things) money in a bank account (ie, a Mareva injunction) and to obtain timely disclosure of details of alleged wrongdoing from a defendant's bank (eg, Norwich Pharmacal relief) is often crucial.
The High Court recently handed down a practice note relating to the practice of making settlement offers or payments into court in cases involving claims on behalf of persons under a disability. The practice note confirms the previously understood position that the self-contained procedural regime for formal sanctioned offers and sanctioned payments in Order 22 of the court rules does not apply to claims for money arising out of proceedings on behalf of persons under a disability.
A couple of recent first-instance decisions demonstrate the courts' wide discretion to award costs between parties based on a higher rate of recovery (referred to as an 'indemnity basis'). Such costs are not literally an indemnity – the receiving party does not recover all of their costs from the paying party. While indemnity costs are not the norm, many parties and their legal representatives often seek such costs without sufficient regard to whether this is actually justified.
A recent High Court decision confirms that the normal practice for trial of proceedings commenced by writ is for a witness statement to stand as the witness's evidence-in-chief without them having to give such evidence verbally prior to cross-examination. Further, where a person gives a witness statement but is unable to attend the trial, the weight to be attached to that statement (if any) is a matter for the trial judge.
In a relatively close-knit community such as Hong Kong, it is not uncommon for parties to proceedings or their witnesses, lawyers or experts to be known to a judge or tribunal member, which could create a perception of potential bias. In these circumstances, applications might be made for the recusal of the judge or tribunal member and for the case to be reassigned. Two recent cases serve as a timely reminder of the inherent difficulties and sensitivities involved in an assessment of apparent bias.
In a recent case before the High Court, a novel issue arose as to whether a party's deployment of privileged documents for the purposes of the trial of a preliminary issue concerning limitation would result in privilege in the documents being waived (lost) for the purposes of the main trial, in the event that the court held that the claim was not time barred. The case is a useful reminder of the potential danger of trying to deploy privileged material for the purposes of only part of court proceedings.
In a recent judgment of the Court of Appeal, an issue arose as to whether certain technical survey reports appended to one of the party's expert reports required the court's permission to be adduced as evidence for trial. Taken together, the decisions of the lower court and the appeal court are an interesting summary of what constitutes expert opinion. They are also a good example of the courts' increased scrutiny of the use of expert reports at trial in civil proceedings.
A recent judgment concerning a rather bold request for judicial assistance by the Chapter 11 trustee of a company within the China Fisheries Group provides a useful reminder of the common law criteria to be applied for recognition of foreign office holders. However, a more interesting point, perhaps, is that the Hong Kong courts will not be afraid to defend the integrity of their orders if and when attempts are made to circumvent them.
The Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region (HKSAR) was recently signed by the Supreme People's Court and the HKSAR government. This is the sixth arrangement with the mainland on mutual legal assistance in civil and commercial matters and the third arrangement providing for recognition and enforcement of judgments in civil and commercial matters.
In a series of recent judgments, the first-instance courts in Hong Kong have demonstrated an increasing flexibility in assisting victims of internet and email fraud, including granting declaratory relief without trial. The courts' increasing willingness to grant declaratory relief without trial in these circumstances is a significant step in the right direction, as it has simplified the civil action to be taken by those affected by email fraud and similar scams.
The High Court recently considered the general legal principles for the grant of injunctive relief to protect an employer's confidential information alleged to have been taken by one or more former employees for the benefit of their new company. The outcome in the case (to date) illustrates the balance that the courts must often strike between recognising the legitimate interests of an employer and a former employee's entitlement to use their own skills and knowledge without obtaining an unfair advantage.
The recent decision of the High Court in Ninotre Investment Ltd v L & A International Holdings Ltd is a further example of the court's statutory power to grant a qualifying shareholder access to and inspection of company records. Section 740 of the Companies Ordinance (Cap 622) has become an established mechanism for aggrieved shareholders, with legitimate complaints in their capacity as shareholders, to obtain access to and inspection of company records.
The Securities and Futures Commission (SFC) has been using Section 213 of the Securities and Futures Ordinance (Cap 571) to good effect to secure (among other things) compensation on behalf of counterparty investors to impugned transactions. As a result of a recent landmark judgment of the Court of Final Appeal, the SFC's remit under Section 213 extends not only to (for example) insider dealing involving locally listed securities and regulated trades, but also to contraventions of Section 300.
The High Court recently considered whether in principle a judgment creditor is entitled to a charging order over funds paid into court by a judgment debtor in a different action involving another party. The case is an interesting review of the respective interests of the parties when funds are paid into court pursuant to a court order. It concerns the application of established principles to what appears to be a different situation, but one that may give other litigants pause for thought.
In a cautionary tale, a group company and its current liquidators have had their claim against the group company's former liquidators struck out under the 'no reflective loss' principle. The strike-out was granted on the basis that the group company's subsidiaries had a closer nexus to the relevant loss than the group company. The appeal judgment demonstrates that the courts will not shy away from dismissing defective claims against professional advisers without trial.
The Hong Kong government recently issued a consultation paper, and sought views from members of the public and interested stakeholders, on a proposed arrangement between Hong Kong and the mainland for the reciprocal recognition and enforcement of judgments in civil and commercial matters. The proposed arrangement seeks to provide a mechanism which widens the existing and limited scope for the enforcement of mainland court civil judgments in Hong Kong and vice versa.
The High Court recently considered the proper basis for the distribution of money in the client account of a closed law firm. The money is held by the relevant regulator on trust for the persons beneficially entitled to it – namely, the former clients. Where there is a shortfall between the verified claims of former clients and the balance in the client account, the court may need to direct how the money should be distributed.
In certain circumstances the courts in Hong Kong can extend Mareva relief against a defendant to third parties under the so-called 'Chabra' jurisdiction. In a recent case, the assets which the trustees sought to locate were not directly held by the bankrupt, but appear to have been indirectly held through a family trust and related companies. As before, the court demonstrated its willingness to extend Mareva relief under the Chabra jurisdiction in deserving cases.
A recent decision of the Court of First Instance confirms the conventional thinking that a relationship between a bank and a customer does not of itself give rise to a duty of care to advise on the part of the bank. The court dismissed the claimant investor's mis-selling claim against the bank on the basis that neither the terms of the relevant contracts entered into with the bank nor the circumstances of the case suggested that there had been an assumption of a duty to advise by the bank.
There are no statutory provisions empowering the Hong Kong courts to provide assistance and recognition to foreign insolvency office holders. The courts therefore rely on their inherent power (where appropriate) under the common law principle of modified universalism to provide such assistance. Although the application of this principle is not without its problems, the courts in recent years have shown some willingness to assist the effective implementation of cross-border insolvency and restructuring regimes.
The Court of Appeal's judgment in Shenzhen Futaihong Precision Industry Co Ltd v BYD Co Ltd is another recent example of the courts in Hong Kong trying to narrow the issues in respect of which parties seek permission to adduce expert evidence. In this case, the court refused to interfere with a lower court's case management decision that had granted the defendants permission to adduce expert evidence with respect to only one issue out of 10 contested issues that the defendants sought to raise.
Significant increases to the jurisdictional limits for civil claims in the District Court have been proposed. The upper limit of the monetary jurisdiction for the Small Claims Tribunal is also set to increase. The Legislative Council of Hong Kong recently passed resolutions which increase these jurisdictional limits by way of amendments to the District Court Ordinance and the Small Claims Tribunal Ordinance.
Defendants should welcome the recent judgment in Fiscalink International Ltd v Yiu Yu Sum Alex, in which the court struck out the plaintiffs' claims against a majority of the defendants on the basis that the lack of progress over many years was an abuse of process such that the entire action against those defendants should be dismissed. The court's judgment is another example at first instance of a pragmatic application of the relevant principles concerning dismissal for abuse of process.
The High Court recently analysed the rationale behind the common law principle in Hollington v F Hewthorn & Co Ltd when determining the admissibility of parts of an earlier judgment of a Beijing court arising out of criminal proceedings. The court clarified that under Hong Kong common law, the Hollington principle did not prevent the courts from admitting factual evidence referred to in an earlier judgment of another court or tribunal.
A recent landmark judgment of the Court of Final Appeal confirms that in deciding whether it is fair and just to grant a protective costs order in public interest litigation, the courts should be apprised of an applicant's financial position. In the case of a corporate applicant, it is proper to inquire not only into the assets belonging to the company, but also other sources of funding to which it has access. The case is the first in Hong Kong in which the courts have extensively set out the relevant legal principles in this regard.
The High Court recently dismissed proceedings seeking to compel the Hospital Authority to disclose confidential patient records in connection with professional disciplinary proceedings. The decision serves as a good reminder of the tension that exists between the competing interests of preserving client (or patient) privacy rights and the necessity and public interest in the proper administration of professional disciplinary proceedings.
A recent case involved a contested dispute over the liquidators' access to certain documents stated to be in the respondent's possession or control. At first instance, the court refused to order the respondent to give wide-ranging production of documents to the liquidators on the basis that the documents sought did not fall within Section 221(3) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance. This judgment was recently successfully appealed by the liquidators.
In defending themselves against a claim for professional negligence brought by a former client, two law firms and the individual solicitor recently successfully applied to strike out the entire claim against them, with costs awarded on a more generous ('indemnity') basis. The two related judgments are a salutary reminder of the need for a plaintiff to plead all material particulars, failing which there is a real prospect that their claim could be struck out as plainly defective.
The recent judgment in Tao Soh Ngun v HSBC International Trustee Ltd arose from an interesting piece of litigation. In this case, the plaintiff appears to have tried to amend her pleading to add new allegations of breach and loss based on matters that did not exist at the time when the proceedings commenced. To have allowed such amendments would not have sat comfortably with the 'relate back' principle (ie, that an amendment takes effect from the date of the original pleading).
In Registrar of Hong Kong Institute of Certified Public Accountants v Wong & Anor, the accountants appealed a disciplinary committee's decision the substance of which was that they had failed to observe a professional standard in connection with an audited company's compliance with Hong Kong Accounting Standard 39 in respect of an available-for-sale financial asset, before issuing an unqualified audit opinion. That appeal failed. More recently, the accountants' final appeal to the Court of Final Appeal was also dismissed.
In a recent case, the Court of Appeal took the opportunity to clarify the lower courts' role when reviewing disputes over taxed costs. In doing so, the Court of Appeal appears to have come to a sensible compromise in allowing some costs that had been approved by the taxing master but disallowed by the judge on review.
The Securities and Futures Commission (SFC) in Hong Kong has been very active in using civil proceedings pursuant to Section 213 of the Securities and Futures Ordinance to seek redress for investors. A recent judgment confirms that the SFC can seek restorative orders not only against parties to impugned transactions, but also against individuals who aid or abet or who are involved.
Integrated bank accounts are very common in financial hubs such as Hong Kong. In addition to sub-accounts categorised by different currencies, an integrated account may also have sub-accounts with other features (eg, credit cards, investments and insurance). A recent case shed light on the approach of the courts to such accounts in the context of enforcement proceedings and rival claims by different judgment creditors.
In Bespark Technologies Engineering Ltd v JV Fitness Ltd the High Court recently took the opportunity to remind liquidators of their duty to give full and frank disclosure when making an ex parte (without notice) application to the court. A failure to do so could have serious consequences, including a refusal to approve the appointment of a liquidator or an order for his or her removal. The duty to be full and frank applies to all ex parte applications, so there are general lessons to be learned.
The Court of First Instance recently considered some of the legal principles surrounding the scope of an auditor's duty to detect alleged irregularities in a company's financial statements and, in appropriate circumstances, to report alleged wrongdoing to the relevant regulatory authorities. The judgment is an interesting review of some of the legal issues involved, including the applicability of the defence of illegality in the context of a claim brought by a liquidator on behalf of a company against its former auditor.
A recent case provides a nice illustration of some of the problems associated with seeking to enforce a judgment debt against money in a bank account. The defendant judgment debtor was a joint account holder together with his brother. The brother successfully applied to discharge a provisional garnishee order obtained by the plaintiff judgment creditor on the basis that, as a matter of law, money held in a joint bank account could not be attached unless both account holders were judgment debtors.
The long-awaited increase in the guideline solicitors' hourly rates adopted for party and party taxation in civil proceedings was announced towards the end of 2017. The new rates came into effect on January 1 2018 and should serve to narrow the gap between successful litigants' incurred and recoverable costs.
Section 740 of the Companies Ordinance can be a powerful tool in assisting shareholders to obtain inspection of a company's documents. Two new cases demonstrate the continued use of Section 740 by shareholders to obtain inspection of corporate documents. While they show that the courts are generally willing to assist shareholders in appropriate cases, the courts will often rein in applications either by limiting the scope of the inspection or imposing conditions to the order granted.
There has been a number of recent cases in Hong Kong in which successful parties have been awarded their costs on a more generous basis against unsuccessful parties – known as an 'indemnity' basis (in contrast to what is commonly called a 'standard' or 'party and party' basis). A recent example in the Court of Appeal is Qiyang Ltd v Mei Li New Energy Ltd. One might be forgiven for sometimes thinking that orders for indemnity costs are a norm, but they are not.
First Asia Finance International Ltd v Tso Au Yim & Yeung appears to be another example of a misconceived claim against a defendant solicitors' firm. In this case, the court held that the solicitors owed no duty of care to the plaintiff company (which was not a client) with respect to the preparation of a settlement agreement. The plaintiff also failed with a claim that it had informally retained the defendant solicitors with respect to the drafting of the settlement agreement.
The Securities and Futures Commission (SFC) has cast a wide net with its use of civil proceedings pursuant to Section 213 of the Securities and Futures Ordinance. Recently, the Court of Appeal dismissed an appeal arising out of the SFC's use of Section 213 proceedings to obtain declarations that three defendants based in Hong Kong had contravened Section 300 of the ordinance by engaging in a deceptive course of business in transactions involving shares listed on an overseas stock exchange.
In Far Wealth Ltd v Lo Ki Mou the High Court dismissed the proceedings as an abuse of process because the plaintiffs could have protected their position by way of a counterclaim in prior proceedings commenced against them by the defendants. While fact specific, it is clear from the judgment that the court was exercising a wide discretion based on the "underlying objectives" of the court rules.
In Competition Commission v Nutanix Hong Kong Ltd a High Court judge recently considered the scope of the 'direct use prohibition' contained in Section 45(2) of the Competition Ordinance, which protects a person who is required to answer questions as part of an investigation by the Competition Commission pursuant to Section 42. The case decides that the protection does not extend to a third party, even where the third party is the subject of the commission's investigation.
Securities and Futures Commission v Sun Min is another recent example of the Securities and Futures Commission using Section 213(2)(b) of the Securities and Futures Ordinance to obtain restitution, in the form of so-called 'restorative' orders, on behalf of counterparties to impugned transactions. What is interesting about this particular case is that the judge expressed some concern as to whether the amount of restoration sought might result in a windfall for the counterparties involved.
Karla Otto Ltd v Bayram is another recent case that has its origins in misappropriated money being transferred from overseas to Hong Kong. The case took several years to get to trial and when it did, the defendants were absent. Whether that absence was a strategic decision on their part or explained by the first defendant's illness became an issue. The case demonstrates that the courts will be careful to scrutinise applications to adjourn a civil trial on the basis of a party's illness.
The High Court of Hong Kong has a wide discretion to grant shareholders access to company documents, pursuant to Section 740 of the Companies Ordinance (Cap 622). The court has been astute in assisting shareholders to protect their legitimate interests by allowing access to company documents while, at the same time, preventing them from launching so-called 'fishing' expeditions. What may amount to fishing, in this context, was recently considered by the court.
The Hong Kong Legislative Council recently passed the Apology Bill with the aim of removing certain legal disincentives for parties to convey an apology in the context of civil disputes. In the footsteps of many overseas jurisdictions which have already adopted apology legislation, Hong Kong is the first Asian jurisdiction to enact this type of legislation, which generally precludes an apology from being taken into account in the determination of fault and liability.
Injunctive relief to freeze a defendant's assets (ie, a Mareva injunction) can extend to third parties under the so-called 'Chabra' jurisdiction where there is good reason to suppose that the assets held by the third parties are in fact assets belonging to the defendant. This jurisdiction is described as exceptional. However, as a recent case demonstrates, while the courts are careful in exercising their jurisdiction in this regard, they will do so in deserving cases.
The Hong Kong Court of First Instance recently ruled that a Chinese state-owned enterprise was not entitled to invoke crown immunity against the execution of a charging order of assets in Hong Kong. The decision provides welcome clarity on the approach that the courts will take in deciding whether, and when, a claim of crown immunity against enforcement of a judgment or an arbitral award might succeed in Hong Kong.
In an age of electronic scams, with money passing through bank accounts in Hong Kong, foreign plaintiffs are increasingly pursuing defendants in Hong Kong to recover their money. In seeking summary judgment, some plaintiffs are careful not to allege fraud on the part of the defendants – rather, their claims may be for the return of money unjustly received by the defendants for no consideration. A recent case is a good example.
In an important decision reported earlier this year, the Court of First Instance decided that the Securities and Futures Commission should adopt a generous test of relevance when giving disclosure of materials in director disqualification proceedings – an approach to disclosure that was more commensurate with the duty of a prosecutor in criminal proceedings.
The Judiciary Administration in Hong Kong has proposed to increase the monetary jurisdiction limits for civil claims in the District Court. The proposals were recently considered by the Legislative Council Panel on Administration of Justice and Legal Services, further to a report of the Judiciary Administration. The proposals appear to have broad agreement among different stakeholders and, subject to the passage of a necessary resolution in the Legislative Council, look likely to be implemented sometime in 2018.
A recent decision underlines the need for caution on the part of defendants and their legal advisers when considering a jurisdictional challenge. In particular, prior to the determination of a challenge to jurisdiction, defendants should think carefully before making any application to the court for relief, to ensure that in doing so they are not invoking the court's jurisdiction. While defendants may seek to reserve their rights to challenge jurisdiction, their conduct could suggest otherwise.
A recent decision is a reminder of the statutory right of qualifying shareholders to seek access to a company's records or documents for the purpose of protecting their financial interests as shareholders. It confirms the principles arising in connection with the statutory provision. It also demonstrates a general willingness on the part of the courts to assist with the protection of shareholders' interests while, at the same time, preventing so-called 'fishing' expeditions.
For litigants involved in disputes concerning cross-border matters between Hong Kong and mainland China, the new Arrangement on Mutual Taking of Evidence in Civil and Commercial Matters between the Courts of the Mainland and the Hong Kong Special Administrative Region is a welcome development. It should speed up the process for Hong Kong parties seeking evidence in the mainland and provide more certainty in the scope of assistance available to them.
Since the financial crisis, only a handful of mis-selling claims on behalf of investors have gone to trial in Hong Kong and even fewer have gone on to appeal. DBS Bank (Hong Kong) Ltd v Sit Pan Jit is one such case. That the investor took his case as far as the Appeal Committee of the Court of Final Appeal means that his mis-selling claim has gone as far as any other in Hong Kong in recent years.
The interest payable by losing parties in litigation, both pre and post-judgment, is an issue of considerable importance to all parties concerned – especially in long-running, complex commercial cases, in which millions of dollars in interest may be at stake. In a recent judgment which should attract the attention of lawyers and litigants, the High Court examined important questions of the court's power to award both pre and post-judgment interest.
Recent lower court cases in Hong Kong have clarified that a sanctioned offer which seeks to deprive a plaintiff of an entitlement to costs, if accepted in time, is not a properly constituted sanctioned offer in this context. Therefore, where such a sanctioned offer is not accepted and the plaintiff fails to better the offer at trial, the defendant (as offeror) should not expect to reap the costs and interest benefits that would otherwise normally follow under the relevant costs rules.
Applications for security for costs are a common feature of civil litigation before the first-instance courts in Hong Kong. Sometimes liability for security for costs and the amount can be agreed between the parties. On other occasions, while the liability of a plaintiff to give security for a defendant's costs may not be disputed, a more contentious issue is the amount and form of the security. Such was the case in the recent admiralty action in Dunham-Bush Industry Sdn Bhd v KLN Container Line Ltd.
In another significant development in the Securities and Futures Commission's efforts to combat market misconduct-type activity involving listed shares in Hong Kong, the lead market regulator has commenced civil proceedings under Section 213 of the Securities and Futures Ordinance in respect of China Forestry Holdings Co Ltd (in official liquidation). The regulator's civil complaint also names two co-sponsors and the auditor involved with the company's initial public offering.
The High Court recently revisited the often thorny issue concerning the permissible boundaries for a plaintiff to put forward inconsistent alternative claims in a court pleading. In doing so, the court has confirmed that much rests on the knowledge of the relevant party at the time of advancing the alternative claims. While the general principles are not new, they are of significant practical importance to civil litigation in Hong Kong (and in jurisdictions that have similar civil procedural rules).
The Court of Appeal recently declined to interfere with a disciplinary committee's finding that the respondent accountants had failed to observe a professional standard when issuing an unqualified opinion regarding the financial statements of a listed company. The outcome in the case confirms a general caution on the part of the courts when asked to review the decision of a professional body's disciplinary committee that a member failed to observe a technical standard or guideline.
In an important recent judgment, the Court of Final Appeal clarified the general principles that underpin the exercise of the courts' discretion to grant Mareva injunction relief (freezing of assets) in aid of overseas court proceedings, pursuant to Section 21M of the High Court Ordinance (Cap 4). Following the outcome in the final appeal (and the overturning of the lower court judgment), the plaintiff has obtained a Mareva injunction over some of the defendant's assets in Hong Kong.
In the past few years, the Securities and Futures Commission (SFC) has actively pursued those alleged to have committed market misconduct in Hong Kong. The SFC has a number of enforcement tools at its disposal, including initiating civil proceedings in the Market Misconduct Tribunal. A recent decision marks a rare ruling by the tribunal regarding the disclosure of false or misleading information inducing transactions contrary to Section 277 of the Securities and Futures Ordinance.
Earlier this year, in Universal Capital Bank v Hong Kong Heya Co Ltd, the High Court of Hong Kong confirmed that the 'fraud exception' to the jurisdiction to order summary judgment applied where the plaintiff's claim raised an allegation of dishonesty against the defendant. In a more recent case, the court endorsed the attempt in Universal Capital to limit the otherwise wide ambit of the fraud exception.
The appeal committee of the Court of Final Appeal recently refused a plaintiff's application for permission to appeal the Court of Appeal's judgment. The Court of Appeal had struck out the plaintiff's claim in negligence against the defendant firm on the basis that it disclosed no reasonable cause of action. The grounds for the plaintiff's application appear to have been as creative as they were fanciful.
Defendants will welcome the recent decision in Bank of China (Hong Kong) Ltd v Ho Chi Lui, in which a Hong Kong judge struck out court proceedings that the plaintiff allowed to remain inactive for over 14 years. The decision is another illustration of the courts' willingness to strike out stale claims in cases of egregious delay, following the landmark Court of Final Appeal decision in Wing Fai Construction Co Ltd v Yip Kwong Robert.
The Court of Appeal recently rejected an application for permission to appeal its judgment in Harvest Treasure Ltd v Cheung Fat Enterprises Ltd to Hong Kong's top court. The court decided that an expert witness has no obligation to disclose pending disciplinary proceedings against him or her when giving evidence in civil proceedings.
In the most recent so-called 'mis-selling' case in Hong Kong, three claimant investors succeeded in establishing that a bank owed them a contractual duty to exercise reasonable care and skill with regard to their portfolio of investments held with the bank. While the decision is a rare example in Hong Kong of a bank being found to have owed an advisory duty and to have breached it, the case turned on its facts – in particular, the bank was not acting on an execution-only basis.
The Court of Appeal recently held that there was no legitimate interest in having a provision in a settlement letter between the defendant and a material witness which precluded the witness from giving a witness statement to the plaintiff. Therefore, the settlement letter was not 'without prejudice' and could be referred to in a witness statement for the plaintiff.
The Court of Appeal recently ruled that an expert witness is not obliged under the Code of Conduct for Expert Witnesses to give voluntary disclosure of pending disciplinary proceedings against him or her. An obligation of disclosure would arise where the expert witness has been sanctioned by the relevant professional body in such a way as to curtail his or her right to practise.
In an interesting recent case, the High Court confirmed that principles of open justice usually require a plaintiff to disclose to a defendant all the affidavit evidence filed at court in support of an ex parte application. The plaintiffs were ordered to disclose to the defendant the redacted parts of evidence filed in support of their ex parte applications to the court to extend time for service of the legal proceedings.
Since the financial crisis, only a handful of so-called 'mis-selling' claims by investors against banks have gone to trial in Hong Kong and resulted in reported judgments. In none of these cases has the investor succeeded. Of these cases, to date only one has been decided by the Court of Appeal. The investor lost on all material points, in a decision which highlights the challenges of bringing such claims.
The Court of Appeal recently handed down three consistent decisions confirming that prime rate plus 1% should continue to be used as the starting point for awarding pre-judgment interest on damages awarded by the courts in civil disputes. The court considered that there was insufficient evidence to show clearly that prime rate is no longer relevant or rarely used in Hong Kong.
The Court of Appeal has recently dismissed a plaintiff shipowner's appeal against a judge's refusal to grant an anti-suit injunction to restrain the holder of a bill of lading from continuing with court proceedings in mainland China in breach of a Hong Kong arbitration clause. The first-instance judge had held that the plaintiff's delay in applying for an anti-suit injunction was of itself a standalone justification to refuse the injunction.
The courts in Hong Kong have traditionally held that the so-called 'fraud exception' to the jurisdiction to grant summary judgment is to be construed widely. Therefore, any allegation of dishonesty by a plaintiff against a defendant is caught by the exception, be it an allegation in a formal pleaded case, sworn statement or supporting legal submission. This was recently confirmed in an interesting decision.
The Court of Final Appeal has brought an 11-year dispute between the founders of the first Itamae Sushi chain restaurant in Hong Kong to an end, dismissing the appellant's appeal by way of a majority judgment. The judgment confirms that the duty of a director is to act in the best interests of a company, which encompasses the 'no-conflict' rule.
The courts in Hong Kong have generally been consistent in rejecting investors' mis-selling claims and in upholding the banks' reliance on the principle of contractual estoppel. This is why a recent High Court judgment is of particular interest. While the plaintiff investor's claim was unsuccessful, he was able to make significant inroads into the usual defence used by banks in this situation.
As banks tighten their standard terms concerning due diligence on customers and their transactions, it is inevitable that disputes will arise and that some will make their way to court. This has been a trend in other jurisdictions; it is now being seen in Hong Kong. One such recent case sheds light on a bank's contractual power to freeze a customer's bank account while it carries out due diligence.
In a judgment earlier this year, the Court of Appeal considered the ambit of the fraud exception to applications for summary judgment (judgment without trial) in Hong Kong. The court held that the fraud exception is construed widely; therefore, applications for summary judgment are barred if the plaintiff's claim raises an issue of fraud in the traditional sense or in a wider sense (ie, involving an allegation of a dishonest act intended to deceive).
In circumstances where the parties to a contract choose the forum and mechanism for dispute resolution, it is critical to ensure that their intentions are precisely expressed. This is particularly the case where there are multiple related agreements. The Hong Kong Court of First Instance recently considered the proper approach when asked to grant a stay of proceedings commenced in potential breach of an arbitration agreement.
Defendants in Hong Kong are making good use of Calderbank offers – that is, offers without prejudice save as to costs – as an alternative to, or in tandem with, the procedural regime for sanctioned payments into court and sanctioned offers that was introduced as part of the court rules seven years ago. This has led to some interesting disputes between parties as to who should bear liability for the legal costs.
Section 213 of the Securities and Futures Ordinance can be used by the regulator to seek declarations in civil proceedings that a person has committed acts in contravention of a "relevant provision" without first having to obtain a finding of (for example) market misconduct. A recent case demonstrates that Section 213 has become a powerful weapon in the regulator's arsenal with respect to alleged wrongdoers, both at home and abroad.
In an important recent High Court judgment, the judge refused to grant an anti-suit injunction solely on the basis of delay. The judgment emphasises the need for promptness when making an application for an anti-suit injunction in Hong Kong in order to enforce an arbitration or jurisdiction clause. It also clarifies that delay is a free-standing objection to anti-suit injunctive relief.
A proposed overhaul of the civil claims monetary jurisdiction limit for cases in the Hong Kong District Court could bring significant improvements in public access to justice in the jurisdiction. The changes, if implemented, would represent the first increase in the jurisdictional limit of the District Court since 2003.
The Court of Appeal has ruled that legal advice privilege does not extend to communications by an accountant giving advice on tax law. Therefore, it is now clear that in Hong Kong the privilege applies only to confidential communications between a qualified lawyer (acting as such) and a client. Legal advice privilege does not extend to communications between an accountant and a client even if they are to do with advice on tax law (or on any other law).
The Court of Appeal recently overturned a lower court's ruling and struck out a claim sounding in alleged negligence against the accountant-trustees on the basis that the claim disclosed no reasonable cause of action. Strike-out applications may be made at any stage of civil proceedings. However, the earlier that they are made, the more potent they can be.
Pursuing a civil claim in Hong Kong can be a costly exercise. In bigger commercial disputes, opportunities for financial assistance from a commercial third-party funder can help to alleviate and manage the cost and ensure that a party's lack of financial resources does not prevent its pursuit of a meritorious claim. However, such opportunities are limited by the crimes and torts of maintenance and champerty that continue to survive in Hong Kong.
Section 21M of the High Court Ordinance gives the High Court power to grant interim relief in aid of or in anticipation of overseas court proceedings. Often that interim relief is in the form of a Mareva injunction. As recent case law confirms, an application under Section 21M for Mareva relief is likely to have a greater chance of success if it is in support of similar relief already obtained in the courts exercising a primary jurisdiction overseas.
Deciding whether to apply for an injunction ex parte in civil proceedings in Hong Kong requires a more careful exercise of judgement on the part of an applicant's lawyers than used to be the case. Recently, the courts have continued the trend in scrutinising an applicant's need to apply ex parte for injunctive relief. The lessons are clear: ex parte applications are for cases of genuine urgency or secrecy.
The Securities and Futures Commission has commenced its first set of proceedings in the Market Misconduct Tribunal against a listed company for allegedly failing to disclose price-sensitive inside information to the public as soon as reasonably practicable, contrary to the Securities and Futures Ordinance. In the absence of a formal class action regime in Hong Kong, the commission has made headlines in bringing some of the highest-profile litigation in this jurisdiction.
Recently, the Hong Kong Bar Association (HKBA) revised its Practice Guidelines for Ad Hoc Admission of Overseas Counsel. Applicants and their instructing solicitors would be well advised to review the revised practice guidelines, particularly given the HKBA's role in such applications and the court's repeated emphasis on the need for timely engagement with the HKBA.
The ownership dispute between the founders of the Itamae Sushi chain restaurant has been ongoing for a decade. Recently, the Court of Final Appeal granted permission to appeal so that the dispute can finally be resolved. The case highlights the importance of clear contractual drafting and obtaining written confirmations of oral representations, as well as demonstrating that the scope of a director's fiduciary duties is often difficult to define.
After several years of litigation, Tsit Wing (Hong Kong) Co Ltd v TWG Tea Company Pte Ltd is headed for Hong Kong's Court of Final Appeal. The case and the forthcoming appeal raise special issues relating to (among other things) the proper approach in determining infringement of a registered trademark and aspects of the tort of passing off in Hong Kong.
In an important and much-anticipated judgment, the Hong Kong Court of Appeal recently decided that legal advice privilege (often referred to as 'solicitor-client' or 'attorney-client' privilege) can extend to confidential internal communications between employees of a client organisation, provided that those communications were created for the sole or dominant purpose of obtaining legal advice.
While there appears to be no precise legal definition of 'dormant claim' in Hong Kong, the expression tends to refer to stale proceedings in which nothing much has happened for over a year or more. As a recent case shows, there has been some welcome judicial willingness to strike out dormant claims (and counterclaims) where one or more parties have effectively abandoned the proceedings.
Following the introduction of formal sanctioned payments and sanctioned offers, it has not been entirely clear to what extent pre-trial Calderbank offers (without prejudice save as to costs) still provide costs protection for an offeror. A recent case confirms that in certain circumstances, a Calderbank offer is appropriate and can provide costs protection for the offeror.
In a series of recent cases in Hong Kong, the courts have brought welcome clarification to the vexed issue of the interaction between disclosure of relevant documents in civil disputes and balancing competing confidentiality and personal data concerns arising out of the contents of such documents. In light of these cases, public bodies should pay closer attention to information requests involving personal data.