After seven years of discussion and consultation, legislative changes are now underway to implement the long awaited civil justice reforms. The reforms aim to improve the cost-effectiveness of the civil procedure systemand to reduce complexity and delays in litigation. Rather than replacing the existing rules, the reforms will amend the current regime, cherry picking what are considered to be some of the best aspects of the civil procedure reforms in England and Wales.

Introduction

The first step of the legislative process took place last month when The Civil Justice (Miscellaneous Amendments) Bill 2007 was introduced in the Legislative Council. The Bill seeks to reformthe civil justice systemwith a view to:

(a) streamlining and improving civil procedures;

(b) facilitating and encouraging early settlement; and

(c) enabling judicial resources to be better distributed and utilised

It is hoped that the reforms will enable civil proceedings to becomemore efficient and expeditious as well as promoting a sense of reasonable proportionality and economy. The intention is to reduce delay and eliminate unnecessary expenses in litigation. This briefing will highlight some of themajor changes proposed in the Bill.

Streamline civil procedure

The Bill introduces, amongst other things, amendments to streamline some existing procedures by empowering the courts to deal with certain applications on paper without a hearing. For example, the Bill provides that the Court of Appeal, comprising two Justices of Appeal, will now have jurisdiction to hear or determine interlocutory applications in relation to pending appeals by a “paper” hearing.

Facilitate settlement

The Bill introduces a number of amendments to facilitate early settlement. For instance, the Bill introduces a new cause of action called “costs-only proceedings”. This is a procedure to allow parties to apply to have costs taxed at court even though no proceedings for substantive relief have been brought. At present, parties who have reached pre-action settlement on a substantive dispute and have agreed who should pay the costs, but cannot agree on the amount of costs, have to litigate the whole dispute in order just to resolve the question of costs, increasing time and expense.

In addition, to promote greater transparency between the parties at an earlier stage, the Bill seeks to extend the court’s power to order pre-action discovery and postcommencement discovery against non-parties to all types of civil claims. At present, these powers are restricted to personal injuries and fatal accident cases.

Better distribution of judicial resources

The Bill also introduces a number of features to help screen out unmeritorious applications and vexatious litigation, and to discourage undue delays andmisconduct. This will facilitate better use of judicial time and resource for genuine disputes. For instance, the Bill includes a leave requirement for interlocutory appeals to the Court of Appeal, to cut down on unmeritorious appeals. Currently appeals fromthe Court of First Instance to the Court of Appeal are as of right. Also included is the ability for a person other than the Secretary for Justice to apply for a vexatious litigant order.

This will enable a person who is, or has been, a party to vexatious proceedings, or who has directly suffered adverse consequences resulting fromsuch proceedings, to apply.

Furthermore, to deter time wasting and improper conduct, barristersmay be exposed to so-called “wasted costs orders” (this has long been the case with solicitors). It is thus intended to armthe courts with an effective remedy where loss and expense have been caused by the unjustifiable conduct of litigation by either side’s lawyers – be that the solicitor or barrister, or both

Other features

Two other important proposals have also been covered by the Bill.

First, the Bill gives the Court of First Instance discretion to grant asset-freezing injunctions in aid of pending or ongoing foreign proceedings in circumstances where those proceedings could result in a judgment or arbitral award enforceable in Hong Kong.

Secondly, the Bill fundamentally amends a specific statutory provision that is currently generally understood to protect non-parties against cost orders in Hong Kong proceedings (section 52A(2) of the High Court Ordinance). As readers will be aware, the Hong Kong courts have recently taken a liberal view of this protection and, as such, the scope of a non-party’s liability for a party’s legal costs is currently a grey area. The Bill has clarified this ambiguity by abolishing the statutory protection and confirming that costs orders can bemade against non-parties provided it is in the “interests of justice” to do so. This would put Hong Kong more in line with the UK position, where costs orders against non-parties, notably insurers, have been commonplace for some time.

Subsidiary legislation

To compliment the provisions introduced by the Bill, amendments will also bemade to the related High Court and District Court rules.

Amongst other things, it is anticipated that the following rule amendments will play a part of the litigation process in the next couple of years: greater casemanagement by judges (including settingmilestone dates for the progress of the action which cannot be varied by the parties), firmer rules on pleadings, provisions for “statements of truth”, a code of conduct for experts, a new systemof “sanctioned” offers of settlement and payments into court, and clearer judicial sanctions for non-compliance with interlocutory orders.

The finalised amendments to the respective court rules will be introduced in the Legislative Council in due course, and once published we will write inmore detail with respect to the proposed changes.

Comment

It is anticipated that the relevant legislative and rule changes will be implemented by 2008-9. The amendments, when enacted, will result in significant piecemeal reformof the current litigation process and will no doubt facilitate important changes to the litigation culture in Hong Kong. Attempts to simplify some court procedures, encourage parties to be less adversarial and improve the cost-effectiveness and predictability of litigation and reduce its complexity, aremoves that should be welcomed by lawyers and their clients alike. All in all, the proposed reforms herald a positive development in the conduct of litigation in Hong Kong.