Dispute Resolution Focus Week: Factors to Consider before Starting Litigation

Dispute Resolution Focus Week: Factors to Consider before Starting Litigation

Dispute Resolution Focus Week: Factors to Consider before Starting Litigation 1202 949 Alfred Ip
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When there are disputes, most people think of seeking their justice in Court.  However, litigation in Hong Kong can be a long-winded and complicated process that full justice may not be achieved for various reasons.  The purpose of this article is to set out a few factors for consideration before commencing litigation.

Alternative Dispute Resolution

Alternative Dispute Resolution (ADR), as the name suggests, is the procedure to resolve disputes without litigation.  Arbitration, mediation, reconciliation or without prejudice negotiation are the three major ADR methods.

ADR procedures can be faster and less expensive.  In some circumstances, such as contractual dispute or labour dispute, ADR is a pre-requisite.

Contrary to litigation, some of the ADR procedures – such as mediation – allow parties to understand each other’s positions.  With the assistance of a neutral third party, the parties can attempt to agree on the terms to settle a dispute, which can be more creative and satisfactory than a Court order which the judge must make without exceeding his jurisdiction to make.

Limitation Period

The Limitation Ordinance (Cap. 347) prescribes the deadline for commencing a civil claim.  For contractual and tortuous claim, the limitation is 6 years from the breach.  Recovery of lands is 12 years, which means squatter can claim adverse possession of a piece of land after 12-year occupation.  Personal Injuries claim is 3 years, and if the injuries sustained in the course of employment and the claimant wishes to claim against the Employees’ Compensation Ordinance (Cap. 282), the limitation is 2 years only.  There is also pre-action protocol in personal injuries claim (Practice Direction 18.1) that the claimant must comply before commencing legal proceedings, and it would take 6 months for compliance of such pre-action protocol.  Claims which are time-barred would be struck out, unless there are exceptional circumstances.  Hence it is important to ensure that the claim is not time-barred before commencing legal proceedings.

It is advisable to commence legal proceedings should there be a valid claim as soon as possible for many other reasons, notwithstanding the limitation period.

Forum

The court can dismiss a civil action when it is of the view that the case should be tried in another jurisdiction.  The appropriate forum is the country which the case can be tried in the interests of all the parties and the ends of justice.

If the Defendant is a foreign one, the Plaintiff must satisfy the Hong Kong Court that it has jurisdiction to hear the case by proving that the claim falls within one of those cases set out in Order 11 Rule 1 Rules of High Court (Cap. 4A) before permission shall be granted by the Court to effect service of the claim document outside Hong Kong.  If the Defendant is within Hong Kong, it can also challenge that the case is more suitable to be tried in another country.

For the above reasons, anyone who intends to commence a claim in Hong Kong should assess whether Hong Kong Court is the most appropriate forum.  There are multiple reasons to start a claim in Hong Kong instead of other countries, and claimant should consult a lawyer in order to have their risk and benefits properly analysed before commencing a claim in Hong Kong.

Security for Costs

Security for costs is ordered to protect a party (usually a defendant) against the risk of the opposite party’s default in paying their costs if they succeed in the litigation.  Security can be made by payment into court or providing a bank bond.  The Court has absolute discretion over whether to order security for costs.

Security for costs is often ordered when there is a foreign plaintiff with no assets within Hong Kong.  There are other circumstances, such as a Hong Kong Company as Plaintiff with limited pay-up capital and holds no assets, which the Court may order security for costs.

Security for costs can be resisted on the following grounds:

  • the claim has very strong merits;
  • the Plaintiff has assets within jurisdiction;
  • the Plaintiff’s claim will be stifled by being ordered to provide security for costs.

If security for costs is ordered, the Court would assess the amount of security payable up to a certain stage of the proceedings, with further security to be made upon further application.  The Claimant who intends to sue in Hong Kong should be aware of such potential expenses when they consider whether to commence legal proceedings in Hong Kong and budget for such claim.

Enforceability of Judgment and Order

A practical consideration is the enforcement of judgment and order against the Defendant.

If a defendant does not have assets, any judgment or order obtained against him would be an empty one.  It makes little commercial sense for a Plaintiff to go through a long and complicated litigation process if the end result cannot compensate the loss plus legal costs.

If the defendant has assets in other jurisdiction, the enforcement of a judgment or order issued by the Hong Kong Court can become an issue when the same is brought to such jurisdiction for enforcement, as there will be additional process before such judgment or order can be recognized by the foreign court.

Litigation in Hong Kong can be a lengthy and costly project.  Anyone who intends to walk into it should be fully advised before they decide, hence legal advice should be sought from experienced lawyer in order to allow proper planning and budgeting before the process begins.

Our team at Hugill & Ip has extensive experience in dealing with Dispute Resolution issues – so kindly get in touch with us to find out how we can help.

This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.

Alfred Ip

Alfred Ip

Alfred assists high net-worth individuals (HNWIs) in handling their wealth-related issues, such as contentious and non-contentious trust and probate, mental capacity, family office, amongst other wealth management matters. He is also a leading Dispute Resolution lawyer with over 20 years of experience in Hong Kong. Moreover, Alfred helps clients with issues regarding Family Law.

All articles by : Alfred Ip
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