Civil Litigation: The Litigation Process

We have previously discussed some matters for consideration before bringing a civil claim to court in Hong Kong in “Civil Litigation: Pre-Action Considerations”.

Today we will address some key points to note about the litigation process once it has commenced.

Q1. After a hearing, how long does it take to get judgment?

In some cases (particularly in urgent matters, or in very clear matters) the Court may deliver its judgment at the end of the hearing. In most cases, however, judgment will be reserved. In our experience, it generally takes approximately 3 months from the hearing until handing down of judgment, but can be longer.

 Q2. What are the rules and exceptions for disclosure of documents?

Hong Kong adopts the Peruvian Guano standard in relation to the disclosure of documents. It allows for the discovery of documents which may (not which must) either directly or indirectly allow a party to advance his own case or damage the opposing party’s case, or documents which can lead to a “train of inquiry”. In other words, documents which fall under the following categories can be discovered:

1. Documents which the other party relies on to support its own case;
2. Documents which can advance your case or damage the other party’s case;
3. “story” or “background” documents which are relevant to the proceedings; and
4. “train of inquiry” documents.

Although this leads to a broad range of documents which can be discovered, Courts have the discretion to limit the scope of discovery. It will often exercise this discretion if it can be shown that a party requesting discovery is on a “fishing expedition” – that is, where a request for specific discovery is unnecessarily extensive or unrelated to the action. Where specific discovery is formulated too wide and the Court is unable to salvage the application by limiting its scope, it may be dismissed in its entirety even if the request may have covered some relevant documents.

Q3. How is witness and expert evidence dealt with in civil litigation?

Witness evidence can be given both orally in court and by way of written witness statement and/or affidavit/affirmation. A witness will not be allowed to give evidence at trial where a witness statement has not been served beforehand without leave of the court. Witness statements will only be considered evidence if the witness makes a statement in public by verifying it on oath at the trial.

Unlike in criminal trials, hearsay evidence (that is, evidence not based on the witness’s first-hand experience, but on second-hand accounts by the witnesses) is generally admissible in civil trials. However, hearsay evidence may still be inadmissible if the party against whom the evidence is to be adduced objects to the admission of the evidence. The personal opinion of a witness is not considered evidence in court.

That being said, unlike regular witnesses, the opinion given by an expert on any relevant matter within his area of expertise is considered to be evidence by the court. The Court will consider any person with the necessary expertise to be a competent expert, regardless of how the expertise was obtained. As such, while ‘paper qualifications’ may be helpful in determining whether a person has the relevant expertise, they are not necessary.

Q4. Who has the power to appoint experts?

Experts are usually appointed by the parties (Party Appointed Experts). Parties must either obtain consent from all parties or permission from the court before expert evidence can be adduced. However, a court may also appoint experts (Court Appointed Experts) at any time on the application of any party if it considers it necessary to determine any matters.

The Courts may also direct that a Single Joint Expert be appointed where the parties wish for expert evidence to be submitted on a particular issue. A Single Joint Expert is jointly appointed by both parties to the dispute. Where the parties are unable to agree on who to appoint, the court can either choose one from an agreed list of experts prepared by the parties or direct that the expert is to be selected by any other means that it deems appropriate. Courts often prefer Single Joint Experts to separate Party Appointed Experts as it avoids the situation wherein parties will “shop around” for experts that will give evidence that is favourable to their case. Instructing Single Joint Experts rather than separate Party Appointed Experts may reduce the costs and length of trial.

Q5. Can final and interim decisions be appealed?

Appeals generally lie as of right from final decisions made by the Court of First Instance, that is, no leave is required to make the appeal. Appeals can be made either on points of law or on points of fact, however, appeals of findings of fact are difficult to pursue and will only succeed if it is found that the judge in the first instance has made a finding of fact that was manifestly wrong.

Appeals from the District Court can only be made if leave to appeal has been granted. Furthermore, any appeals against decisions made by the Lands Tribunal can only be made on a point of law and if leave to appeal has been granted.

Where leave is required, an application for leave to appeal should be made to the judge or master of the relevant court who made the decision within 28 days after the final decision has been handed down. If the judge or master refuses to grant leave, the applicant may further apply to the Court of Appeal for leave within 14 days from the date of refusal. The decision made by the Court of Appeal in this regard is final and cannot be appealed any further.

It is rarer for interim relief decisions to be appealed. Normally, aggrieved parties who disagree with the interim relief granted by the judge will make an application to have it discharged. Appeals against interlocutory decisions are nevertheless possible, however such appeals from the CFI generally require leave for appeal to be granted.

Applications for leave to appeal against interlocutory decisions must be made within 14 days from the date of the interlocutory decision.

For an appeal to take place in the final appellate court (the Court of Final Appeal), leave is required either from the Court of Appeal or, if leave to appeal has been refused by the Court of Appeal, directly from the Court of Final Appeal. An application for appeal in this context must be made within 28 days from the date of the judgment to be appealed from, or 28 days from which leave to appeal has been refused by the Court of Appeal. Leave to appeal will be granted if in the opinion of either Court, the question involved in the appeal is one which, because of its great general or public importance, or otherwise, ought to be submitted to the Court of Final Appeal for decision.

Q6. How are judgments enforced? Does this also concern foreign judgments?

Domestic judgments can be enforced in a number of ways, the most common of which include:

1. 1. Garnishee proceedings – where a third party (the garnishee) owes money to the judgment debtor, the judgment can be enforced directly against the garnishee. The garnishee will then pay its debts to the judgment creditor instead of the judgment debtor. This option is often used against the judgment debtor’s bank.
   2. Charging order / order for sale of assets – judgment creditors can obtain security over the assets of the judgment debtor. It is commonly used against assets such as land.
   3. Writ of fieri facias – also known as a fifa order, allows an officer to seize and sell the judgment debtor’s goods and chattels.

While not, strictly, a method of enforcement, where a judgment debtor fails to pay, bankruptcy or insolvency proceedings may be considered as a means of attempting to satisfy judgment debt. However, in this scenario, it is possible that only a fraction of the judgment debt can be recovered, as the bankrupt/insolvent judgment debtor will likely have other debts to satisfy.

A foreign judgment can be enforced in Hong Kong either through the statutory registration schemes based on reciprocity under the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap 319) (“FJREO”), the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap 597) (“MJREO”) for the enforcement (subject to certain conditions) of judgments in Mainland China, or under common law.

Under the FJREO, judgments from “superior courts” of 15 countries (namely Australia, Austria, Belgium, Bermuda, Brunei, France, Germany, India, Israel, Italy, Malaysia, the Netherlands, New Zealand, Singapore, and Sri Lanka) are enforceable by the simple procedure of registration. A “superior court” means a court with unlimited jurisdiction in civil and criminal matters, such as the High Court in Hong Kong.

Similarly, the MJREO applies to judgments from the Supreme People’s Court, any Higher or Intermediate People’s Court, or certain recognized Primary People’s Courts from the Mainland (as defined under section 2 of the MJREO to mean any part of China other than Hong Kong, Macau, or Taiwan). Judgments registrable under the FJREO or MJREO are not enforceable via other means.

Where the FJREO and the MJREO does not apply, the judgment creditor can commence an action in Hong Kong under common law using the foreign judgment to obtain monetary relief. Under common law, there is no limit to the countries or territories whose judgments can be enforced in Hong Kong. Once a foreign judgment has been registered under statute or recognized under common law, it will be treated as a Hong Kong judgment and can be enforced in the same way.

Q7. What costs of litigation can the other side recover?

Courts have a wide discretion to make costs orders. Normally, costs will follow the event. This means that the costs of the winning party will be paid by the losing party. In some cases, however, for example where the conduct of the winning party was unreasonable, the court may order that the winning party has to pay their own costs, or even some of the losing party’s costs.

Cost awards are often subject to “taxation” if not agreed between the parties. In this context, “taxation” is the process where the court assesses what the reasonable amount of costs payable under the costs order will be. On taxation, parties seldom recover all of the costs claimed and typically only recover around 65-70%.

Q8. Can third parties join on ongoing proceedings and/or consolidating two sets of proceedings?

The Court may order that a third party be joined into ongoing proceedings where:

1. the rights to relief are in respect of, or arise out of, the same transaction or series of transactions; AND
2. there is some common question of law or fact.

However, the Court retains a discretionary power to order separate trials if it considers that the joining of parties may embarrass or delay the trial or is otherwise inconvenient.

The Court may also order two sets of proceedings to be consolidated where:

1. there is some common question of law or fact that arises in both sets of proceedings; OR
2. the rights to relief claimed in both sets of proceedings are in respect of, or arise out of, the same transaction or series of transactions.

Aside from consolidation, the Court may order that the proceedings be tried one after another.

Q9. Is third-party funding allowed?

Third-party funding is the practice of financing litigation or arbitration costs by a party other than the named parties to the action, usually in consideration of a portion of the proceeds of the claim should it succeed.

Third-party funding in litigation (as opposed to arbitration) is generally forbidden in Hong Kong, subject to 3 exceptions:

1. 1. Common Interest – where the litigation funder has a legitimate common interest in the subject matter of the litigation or genuine commercial interest in the outcome of the litigation, this is an exception to the prohibition. For example, it is not prohibited for groups or associations to fund their members’ actions.
   2. Access-to-justice considerations – where a claimant has a meritorious claim but does not have the resources to fund litigation services, it is not prohibited for them to seek funding through the Supplementary Legal Aid Scheme.
   3. Insolvency proceedings – liquidators or trustees in bankruptcy often find themselves without sufficient funds to recover assets or pursue other legitimate claims in the name of the debtor, and so the law has accepted litigation funding arrangements as a legitimate practice in liquidation proceedings. Such arrangements may include the sale and assignment by a liquidator or trustee in bankruptcy of an action commenced in the bankruptcy to a purchaser for value.

By contrast, third-party funding is permitted in arbitration. A third-party funder and the funded party are required to enter into a written funding agreement, where the funder is permitted to obtain financial benefit in the event that the arbitral award is made in favour of the funded party. Arbitration funding can be in the form of money or any other financial assistance in relation to the costs of the arbitration. Should a party to an arbitration enter into a funding agreement, it must notify the arbitration body and the other party of: (i) the fact that there is a funding agreement, (ii) the name of the funder, and (iii) when the funding agreement comes to an end. Importantly, third-party funding of arbitration extends to the funding of any related court proceedings and mediation proceedings under the Arbitration Ordinance (Cap 609) as well.

The Code of Practice for Third-Party Funding of Arbitration dated 7 December 2018 sets out the practices and standards of third-party funding in arbitration, including, among other things, the requirements for funding agreements. While non-compliance with the code does not give rise to any cause of action, it is admissible as evidence in other proceedings.