Civil asset recoveryParallel proceedings
Is there any restriction on civil proceedings progressing in parallel with, or in advance of, criminal proceedings concerning the same subject matter?
There are no restrictions on civil proceedings progressing in parallel with, or in advance of, criminal proceedings concerning the same subject matter. However, a plaintiff in civil proceedings will need to consider carefully, and as a matter of strategy, whether to choose to wait until the criminal proceedings are concluded before commencing any civil proceedings. A conviction against the defendant in the criminal proceedings may be used to assist the plaintiff in proving liability in the civil proceedings. However, in circumstances where it is important for a plaintiff to take urgent action (such as to make an application for an injunction to freeze assets), normally the plaintiff will not wait for criminal proceedings to conclude.Forum
In which court should proceedings be brought?
The Small Claims Tribunal can deal with civil claims for an amount up to HK$ 75,000.
The District Court has jurisdiction to hear and determine any action founded on contract, quasi-contract or tort where the amount of the plaintiff’s claim does not exceed HK$3 million. However, where the proceedings relate to land, the District Court has jurisdiction to deal with claims not exceeding HK$7 million.
All other claims exceeding HK$3 million or falling outside the District Court’s jurisdiction will be heard before the Court of First Instance.Limitation
What are the time limits for starting civil court proceedings?
There are different limitation periods for different causes of action.
The time limit for commencing an action for simple contract or tort, enforcing a recognisance (ie, a conditional obligation undertaken by a person before a court), enforcing an award, and recovering any sums recoverable under any Hong Kong ordinance is six years from the date on which the cause of action accrued.
For claims in respect of contracts under seal (ie, a deed), the time limit is 12 years from the date of breach.
For personal injury or death claims, the time limit is three years from the accrual of the negligent act or omission, or knowledge.
The six-year limitation period will not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it in respect of the following cases:
- the action is based on fraud;
- any fact relevant to the plaintiff’s right of action has been deliberately concealed from him or her by the defendant; or
- the action is for relief from the consequence of a mistake (ie, a misunderstanding of the facts, which causes one or more party to enter into a contract without understanding the responsibilities or outcomes).
However, the postponement of the limitation period in the case of fraud, concealment or a mistake does not apply in circumstances where the plaintiff seeks to recover any property, enforce any charge against him or her, or set aside the transaction affecting the property against an innocent third party who purchased the property with valuable consideration.Jurisdiction
In what circumstances does the civil court have jurisdiction? How can a defendant challenge jurisdiction?
Subject to certain limitations (eg, over acts of state such as defence and foreign affairs), the civil courts generally have jurisdiction over all cases in the region. However, the civil courts may not have the jurisdiction to hear and determine any action in the following circumstances:
- there is insufficient connection between the parties and the Hong Kong jurisdiction (eg, neither of the parties is domiciled or ordinarily resides in Hong Kong, or the cause of action did not arise in Hong Kong);
- the parties have previously agreed that a particular court outside Hong Kong will have exclusive jurisdiction over any dispute between them, or the matter should be arbitrated;
- considering the best interests and convenience of the parties to the proceedings and the witnesses in the proceedings, the proceedings should be conducted in another court; or
- there are other proceedings pending between the plaintiff and the defendant in another court outside Hong Kong.
A defendant who wishes to challenge the jurisdiction of the Hong Kong court must first complete an acknowledgement of service and give notice of intention to defend the proceedings. The defendant must do the following within the time limit for filing or serving his or her defence:
- issue a summons stating the grounds on which the jurisdiction of the Hong Kong court is disputed, and the relief sought (eg, an order setting aside the writ or service of the writ on him or her, or a declaration that the Hong Kong court has no jurisdiction over the defendant in respect of the subject matter of the claim); and
- file and serve a supporting affidavit verifying the facts on which the application is based.
What is the usual time frame for a claim to reach trial?
The courts are generally quite busy. Assuming all goes smoothly, a matter can proceed to trial within 24 to 36 months of the commencement of proceedings.Admissibility of evidence
What rules apply to the admissibility of evidence in civil proceedings?
The law relating to the admissibility of evidence (found within, among others, the Evidence Ordinance, the Rules of the High Court and the common law) is complex and beyond the scope of this chapter. However, in general, evidence is admissible in civil proceedings if it is relevant to an issue in the proceedings. Evidence is relevant if it renders the existence of a fact in issue more or less probable. That said, there are a number of exclusionary rules of evidence, which may render relevant evidence inadmissible. The exclusionary rules of evidence generally fall into two categories:
- it is inadmissible because of public policy; for example, the evidence is covered by legal professional privilege or litigation privilege; and
- in cases where a specific rule forbids the admission of certain evidence (for example, the hearsay rule).
What powers are available to compel witnesses to give evidence?
In criminal proceedings, the Court of First Instance and the District Court are empowered to issue a witness summons to compel the attendance of a person at court and to compel that person to give evidence or produce a document specified in the summons.
A magistrate is empowered to issue a witness order in relation to a witness called or whose statement was tendered at a preliminary inquiry, requiring that witness to attend and give evidence at the trial of the accused before the Court of First instance.
A person who disobeys without just excuse a witness order or a witness summons requiring him or her to attend before a court, or refuses to be sworn or to give evidence when duly required to do so, whether or not he or she is the subject of a witness order or a witness summons, is guilty of contempt of that court.
As for civil trial, generally the parties are free to decide which witnesses they call and in what order. The attendance of witnesses in civil proceedings in the Court of First Instance can be enforced by a writ of subpoena issued by the Court Registry.Publicly available information
What sources of information about assets are publicly available?
The following information about assets is publicly available:
- land registration;
- companies registration;
- business registration;
- trademark registration; and
- vehicle registration.
Can information and evidence be obtained from law enforcement and regulatory agencies for use in civil proceedings?
It is possible to obtain information (eg, the identity of the accused) from law enforcement and regulatory agencies for use in civil proceedings by making a request in writing.
In general, information obtained from law enforcement and regulatory agencies is protected by the Personal Data (Privacy) Ordinance. However, the privacy regime provides for specific exemptions whereby access to data for the purpose of the prevention or detection of crime, or for the purpose of legal proceedings within Hong Kong, is permissible. In case the information is required for foreign proceedings, the cross-border transfer provisions apply and are more stringent.
The courts have commented that failure to provide the requisite information by the authorities is seen as an obstruction to the administration of justice. If the authorities are unwilling to cooperate, the relevant party can seek recourse from the courts by taking out a summons for discovery.Third-party disclosure
How can information be obtained from third parties not suspected of wrongdoing?Pre-action discovery
Proposed plaintiffs (both local and foreign) are able to take advantage of a pre-action process known as Norwich Pharmacal applications. Such an application allows the proposed plaintiff to seek an order from the court that innocent third parties, who may have been caught up in a wrongdoing perpetrated against the proposed plaintiff, provide discovery in relation to such wrongdoing.
Norwich Pharmacal orders are often employed by the proposed plaintiff to identify wrongdoers, obtain evidence in support of proposed proceedings against wrongdoers, identify assets belonging to the wrongdoers, or trace assets or funds dissipated by the wrongdoers.
A Bankers Trust order is a form of Norwich Pharmacal order that requires a bank to provide information and discovery ordinarily protected by the bank’s duty of confidentiality, for the purpose of enabling the tracing of funds through bank accounts.Post-action discovery
At any stage of the proceedings, a party may apply to the court for an order that a third party, who appears likely to have or have had in his or her possession, custody or power any documents that are relevant to an issue arising out of that claim, disclose and produce such documents.
The Evidence Ordinance provides a similar provision in respect of banks, in that any party to any proceedings may apply to the court for an order to inspect and take copies of any entries in a banker’s record for the purposes of such proceedings. The court may make such an order with or without summoning the bank.
Alternatively, if a witness is unwilling to attend an examination or to produce documents voluntarily, the witness can be compelled to do so by the serving of a writ of subpoena.Interim relief
What interim relief is available pre-judgment to prevent the dissipation of assets by, and to obtain information from, those suspected of involvement in the fraud?
The main interim relief available pre-judgment to prevent the dissipation of assets and to obtain information from those suspected of involvement in fraud include the following:
- a Mareva injunction (ie, an injunction restraining a defendant from dealing with his or her assets and removing them from the jurisdiction). The Mareva injunction will also require the defendant to disclose, by affidavit, to the plaintiff all assets owned by the defendant;
- an Anton Piller order (ie, an injunction requiring the defendant to permit the plaintiff to enter the defendant’s premises to enable him or her to inspect the documents relating to the subject matter of a cause, and to seize and remove such documents and place them into safe custody);
- a prohibition order to prevent a debtor from leaving Hong Kong;
- the interim attachment of property of a defendant (whereby property belonging to the defendant becomes a form of security before judgment until the defendant furnishes the required security);
- the appointment of a receiver: a receiver may be appointed to recover and protect funds and other assets that the defendants have obtained in connection with the fraud; and
- the appointment of a provisional liquidator: in circumstances where fraud was perpetrated by or through a company (which may be insolvent or has become insolvent as a result of the fraud), a provisional liquidator may be appointed by the court to preserve that company’s assets pending the determination of a winding-up petition against that company. The provisional liquidators (and any subsequent liquidators appointed) will have the power to investigate the affairs of the company and any fraud perpetrated by or through the company.
How do courts punish failure to comply with court orders?
Courts can order severe sanctions such as striking out a party’s claim or entering judgment against a party, unless the court’s orders are complied with within the prescribed time. This is the most common sanction in Hong Kong to ensure a party’s compliance with court orders.
A person who fails to comply with a court order or an undertaking may also be in contempt of court. Although the primary punishment for contempt is imprisonment, committal orders are usually a remedy of last resort. The court will usually fine the contemnor or require a bond for his or her good behaviour instead.Obtaining evidence from other jurisdictions
How can information be obtained through courts in other jurisdictions to assist in the civil proceedings?
In Hong Kong, there is a mechanism for the examination of a person out of the jurisdiction who is unwilling or unable to be present at trial. An application for an order may be made to the court for the issue of a letter of request to the judicial authorities of the country in which the evidence of that person is to be taken abroad. Such evidence may be taken either orally or by means of written questions. However, the Hong Kong courts will not readily allow such an application as a consequence of the great expense and delay involved. An order for the issue of letters of requests is usually granted in cases where the evidence is directly material to an issue in the case and is necessary in the interest of justice.Assisting courts in other jurisdictions
What assistance will the civil court give in connection with civil asset recovery proceedings in other jurisdictions?
Section 21M of the High Court Ordinance provides foreign plaintiffs with a tool to identify, protect and realise assets in Hong Kong even if the substantive proceedings are conducted elsewhere, provided that the foreign proceedings are capable of giving rise to a judgment that may be enforced in Hong Kong (as a general rule, it must be a final and conclusive monetary judgment).
If so, provided that proceedings have been or are to be commenced against a party in a jurisdiction outside Hong Kong, a foreign plaintiff may use section 21M of the High Court Ordinance to seek interim relief in Hong Kong, such as appointing a receiver, or obtaining a Mareva injunction, over the foreign defendant’s assets. The rules that apply to a local plaintiff seeking such relief will also apply to foreign plaintiffs seeking to obtain similar relief under section 21M of the High Court Ordinance.
The foreign plaintiff can then continue pursuing the foreign proceedings, without the need to run concurrent proceedings in Hong Kong, knowing that assets have been secured in Hong Kong.
If the foreign plaintiff subsequently obtains a judgment in the foreign proceedings, the judgment can be registered in Hong Kong and enforcement proceedings can be commenced against the assets frozen (for enforcement proceedings, see question 19).Causes of action
What are the main causes of action in civil asset recovery cases, and do they include proprietary claims?
The main causes of action in civil asset recovery cases are as follows:
- fraudulent conveyance;
- fraudulent trading;
- fraudulent misrepresentation;
- unjust enrichment;
- money had and received;
- breach of contract;
- repayment of loan;
- infringement of intellectual property rights; and
- money laundering.
Proprietary claims are possible as well.Remedies
What remedies are available in a civil recovery action?
The common remedies available in civil asset recovery actions include the following:
- restitution (ie, restoring the benefit conferred to the non-breaching party);
- seizure of goods or property;
- final injunction (ie, a court order that requires a party to do, or refrain from doing, specified acts);
- constructive trust; and
- account of profits.
Can a victim obtain a judgment without the need for a full trial?Default judgment
If a defendant fails to file an acknowledgement of service (ie, a notice that states whether or not the defendant intends to contest the proceedings) within 14 days from the date of service of a writ of summons, or a defence within 28 days after being served with a statement of claim or an acknowledgement of service, the plaintiff may enter the following:
i. final judgment if the writ is endorsed:
- for a liquidated sum (ie, an amount that is certain, fixed or agreed, or both); or
- for the recovery of land only;
ii. interlocutory judgment if the writ is endorsed:
- for unliquidated damages (ie, damages that are yet to be ascertained or assessed);
- for the detention of goods only;
- for the detention of goods and damages; and
iii. final and interlocutory judgment if the writ is endorsed with mixed claims under (1) and (2).Summary judgment
If a statement of claim has been served on a defendant and that defendant has given notice of intention to defend the action, a plaintiff may apply to the court for judgment on the ground that the defendant has no defence to a claim included in the writ.
An application for summary judgment applies to all actions except for, among others, a claim based on an allegation of fraud, defamation and malicious prosecution.Post-judgment relief
What post-judgment relief is available to successful claimants?
The main post-judgment relief available to successful claimants includes the following:
- a Mareva injunction in aid of enforcement;
- the appointment of a receiver;
- the examination of judgment debtors in identifying the whereabouts of the assets of the judgment debtors; or
- the discovery or disclosure of documents against third parties.
What methods of enforcement are available?
The following methods of enforcement are available:
- a writ of fieri facias (ie, the mode of enforcement of a money judgment by the seizure and sale of the judgment debtor’s goods and chattels, usually by auction, sufficient to satisfy the judgment debt and costs of execution);
- garnishee proceedings (ie, a process of enforcing a money judgment by seizing or attaching a debt due to the judgment debtor, to be paid directly to the judgment creditor. The most common example is garnisheeing a judgment debtor’s bank account);
- charging orders (ie, an order for any property of the judgment debtor such as land or shares in a company to be frozen for securing the payment of the payment debt);
- the appointment of a receiver;
- an order for committal (ie, an order committing a person to prison);
- a writ of sequestration (ie, a process of contempt by proceedings against the property of the contemnor. It is available if the person is in contempt of court as a result of disobedience to a court order, or in breach of an injunction);
- bankruptcy proceedings; or
- winding-up proceedings.
There are also ways to aid the execution of judgment. These include the examination of judgment debtors or a prohibition order.Funding and costs
What funding arrangements are available to parties contemplating or involved in litigation and do the courts have any powers to manage the overall cost of that litigation?
Under the Legal Practitioners Ordinance and the Solicitors’ Guide to Professional Conduct, a solicitor may not enter into a contingency fee arrangement for acting in any contentious proceedings. A ‘contingency fee arrangement’ means any arrangement whereby a solicitor is to be rewarded only in the event of success in litigation by the payment of any sum (whether fixed, or calculated either as a percentage of the proceeds or otherwise). Such contingency fee arrangements are unlawful and unenforceable in contentious proceedings.
The prohibition against champerty and maintenance still applies. ‘Maintenance’ is defined as ‘the giving of assistance or encouragement or support to litigation by a person who has no legitimate interest in the litigation, nor any motive recognised by the court as justifying the interference’, while ‘champerty’ is defined as ‘an aggravated form of maintenance, in which the maintainer supports the litigation in consideration of a promise to give the maintainer a share in the proceeds or subject matter of the action’. However, the courts have taken a more relaxed approach in relation to maintenance following a Court of Final Appeal case in 2007, and have made the following exceptions:
- if a person assisting or supporting the litigation has a legitimate common interest; and
- if the assistance, encouragement or support to litigation would advance a person’s access to justice, without which he or she would not be able to pursue his or her claim.
Further, the High Court held that Hong Kong liquidators and similar overseas appointment takers are able to enter into litigation funding arrangements in respect of certain causes of action vested in the company over which they are appointed. This is commonly known as the insolvency exception to maintenance and champerty. As a result of these decisions, liquidators are commonly relying on litigation funding to pursue claims and Hong Kong is seeing the emergence of third-party funders and after-the-event insurance in respect of such claims.