SEMINAR 1: OVERVIEW AND PRE-COMMENCEMENT CONSIDERATIONS

Problem Solving Approach

1. The 5-stage Process Model of Legal Problem Solving (PG-FLAP):

Stage 1: Problem and goal definition

 What are the client’s goals / objectives / problems?

 What does the client want / need?
 What are the obstacles/ conflict / problems?

Note: the nature of a problem may change over time.

Stage 2: Fact investigation

 Have to get some facts first to facilitate identification of legal issues.

 Through interviews, correspondence, document analysis, searches, investigative work etc
 Legal issues preliminarily identified from facts gathered may necessitate further fact
investigation.

Stage 3: Identification of legal issue and assessment

 Identify legal issues raised by the facts and make an assessment as to the legal merits of parties.
 Often need to do legal research before making the assessment

Stage 4: Advice and decision-making

 Developing options: e.g. sue, settle, mediate, negotiate, admit fault, withdraw, abort transaction,
continue transaction, re-negotiate……
 Evaluating options: quantify outcomes, evaluate client’s risk profile……
 Other (non-law) factors should not be overlooked: including peace of mind, cost in time and
money needed…
 Choosing the best option: (1) client-centred: explain risks and benefits of various options and let
the client decide; (2) lawyer-centred: recommend an option for client to adopt

Stage 5: Planning and implementation

 Some planning normally done at Stage 4 to facilitate decision-making
 More concrete and comprehensive action plans devised after the client has chosen the option
 Specify who does what, and when, and how.

Overview of the Conduct of Civil Litigation in the District Court and the High Court

1. Jurisdiction of the Courts

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Small Claims Tribunal

 exclusive jurisdiction
 any monetary claim below $75,000
 founded in contract, quasi-contract or tort

EXCLUDES
 defamation action
 action by licensed moneylender for the recovery of money lent
 action falling within the jurisdiction of the labour Tribunal
 action in respect of matrimonial maintenance agreement

District Court

 Non-exclusive jurisdiction
 any monetary claim $75,000 - $3,000,000
 founded in contract, quasi-contract or tort (s 32 DCO)
 Plaintiff may abandon part of its claim in excess of $1m so as to bring its claim within the DC’s
jurisdiction (s 34 DCO)

 Non-exclusive jurisdiction over any action for the recovery of land where the annual rent,
rateable value or annual value (whichever is the least) does not exceed $320,000 (s 35 DCO)

 If the claim calls into question the title to an interest in land, DC only has jurisdiction if the
rateable value or the annual value (whichever is the less) does not exceed $320,000 (s 36 DCO)
(exclude annual rent)

 Non-exclusive equity jurisdiction1 where the amount or value of the subject matter
 < $1m (for the part not relating to land)
 < $3m (for the part relating to land) (see s 37(2) DCO)

In determining, for the purposes of ss 32, 33, 36 and 37, whether the claim amount exceeds $1m, any
discretionary interest that may be or is ordered under s 49 is excluded (s 49(7) DCO)

 Paragraph 1.2 of Practice Direction 27: All writs and originating summonses should contain a
plea that the relief sought does fall within the jurisdiction of the District Court, specifying
which section(s) of sections 32 to 39 of the District Court Ordinance do apply to the case.

 Matrimonial proceedings for divorce, maintenance, child custody etc must be commenced in the
DC acting in its capacity as the Family Court.

Court of First Instance of the High Court

 The CFI is a superior court of record and has unlimited civil jurisdiction

1
as identified in s 37(1) DCO e.g. administration of estate, mortgage action, specific performance or rescission of sale and purchase
agreement

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 Action falling within the exclusive jurisdiction of other tribunals cannot however be commenced in
the CFI

 Exclusive jurisdiction to hear judicial review and habeas corpus proceedings

Choice of Court

 If a particular court/tribunal has exclusive jurisdiction => no choice

 If more than one court have jurisdiction (e.g. both the DC and CFI) => in general choose the lower
court, which is normally cheaper, unless there is a good reason to choose the higher court (e.g. by
reason of the importance or complexity of the issues involved).

Transfer of Proceedings between DC and CFI

 The DC shall transfer the action to the CFI if the claim (not being a counterclaim) is outside its
jurisdiction. It may however strike out such action on the defendant’s application if it appears that
the plaintiff knew or ought to have known that the DC has no jurisdiction (s 41(1) and (2) DCO)

 Even if the claim is within the DC’s jurisdiction, the DC may transfer proceedings to the CFI if
there is good reason (e.g. by reason of the importance or complexity of the issues involved) (s 42
DCO)

 The CFI is required to transfer any claim (other than a counterclaim) which appears likely to be
within the DC’s jurisdiction unless it is of the opinion that, by reason of the importance or
complexity of the issues involved or for other reason, the action ought to remain in the CFI (s 43
DCO)

 If the parties consent, the CFI may transfer to the DC any action whose monetary limit exceeds
the DC’s jurisdiction (s 44 DCO)

3. Pre-commencement Considerations

3.1 Whether you should act for client in the matter?

 Any conflict of interest?

Should do a conflict search to see whether your firm has acted for any related parties with opposing
interests

 Does the person giving instruction to you have the authority to represent the actual client?

 Need to distinguish the client in the legal sense and the “client” in business sense (or the person
who gives you instructions).

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 In particular, if the client is a corporation, the legal authority to institute legal proceedings
normally rests on the board of directors (sometimes not even the majority shareholders) so that
one should obtain a written directors’ resolution before commencing any litigation.

 Any proceedings instituted without proper authorisation or subsequent ratification may be stayed
by the court with costs of both parties to be borne personally by the plaintiff’s solicitors (e.g.
Yonge v Toynbee [1910] 1 KB 215 (CA) and Danish Mercantile Co Ltd and Others v Beaumont
and Another [1951] 1 All ER 925 (CA)). In the case of Mercury (London) Ltd and Mercury
International (Hong Kong) Ltd v Mercury Shipping and Trading Ltd, HCCL 75 of 1990, 12 April
1991, the solicitors commenced legal action for the plaintiff corporations on the authorisation of the
majority shareholder without proper board resolution, Godfrey J granted a stay of the proceedings
upon the application of the defendant with costs to be borne by the solicitors on an indemnity
basis).

 Whilst a partner has an implied authority in law to commence proceedings for the partnership
firm (e.g. Court v Berlin [1897] 2 QB 396), in case the matter involves partnership disputes or that
you have reason to suspect that the other partner(s) may not approve the litigation, it is advisable to
obtain proper written authorisation from the partners before commencing litigation.

 Is client entitled to Legal Aid?

 You have a positive professional duty to advise client to seek legal aid if he is eligible (see
Principles 4.01 and 5.21 of the Hong Kong Solicitors’ Guide to Professional Conduct)

 Available to any natural person in Hong Kong, resident or non-resident (NOT available to
companies).

 Cover most civil proceedings

 EXCLUDE proceedings such as defamation proceedings, relator actions, election petitions (unless
human rights issue is involved), disputes between shareholders or business partners, claims for the
recovery of a loan made in the ordinary course of the applicant’s business, and proceedings where
the only question before the court is as to the time and mode of payment for debt and costs (see
Schedule 2 of the Legal Aid Ordinance (Cap 91)).

 Need to satisfy the Director of Legal Aid as to the justification for legal action (the merits test) and
financial eligibility (the means test).

 Merits test: must show that one has “reasonable grounds for taking, defending, opposing or
continuing the proceedings or being a party thereto” (s 10(3) of the LAO)

 Means test: total financial resources (i.e. disposable annual income plus disposable capital)
o not exceeding $260,000 for the Ordinary Scheme
o $260,000 to $1,300,000 for the Supplementary Scheme.

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 Supplementary Scheme: covers only personal injuries or death claims, or professional negligence
claims with an amount exceeding (or likely to exceed) $60,000 (see Schedule 3 of the LAO)

 All aided persons are required to pay an interim contribution equivalent to the maximum
contribution payable under the Ordinary Scheme (plus $1,000 application fee) upon
acceptance of legal aid. (Maximum contribution is 25% of $260,000 = $65,000)

 Ordinary Scheme:

 Aided persons with financial resources of less than $20,000 are exempted from making a
contribution.

 If the aided person is receiving Comprehensive Social Security Assistance (CSSA), he is

generally presumed to have financial resources below $20,000 and so is not required to pay
any contribution.

 Aided persons with financial resources ranging from $20,000 to $60,000 are required to make
a nominal contribution of $1,000 to $2,000.

 Aided persons whose financial resources exceed $60,000 are required to contribute an amount
equivalent to 5% to 25% of their financial resources according to a sliding scale set out in
Schedule 3 of the Legal Aid (Assessment of Resources and Contributions) Regulations
(Hence, the maximum contribution is 25% of $260,000 i.e. $65,000). The contribution is
used to set off any unrecoverable legal costs incurred by the DLA.

 The financial resources of an applicant’s spouse (unless they are separated or have opposing
interests in the proceedings) will be treated as the applicant’s financial resources.

 Amount equivalent to the financial eligibility limit of the Ordinary Scheme $260,000 is
disregarded in calculating the disposable capital of any applicant who is ≥ 60 years old (added
on 30 March 2011)

 Negative Equity Property( 負 資 產 ): In Ng Ai Kheng Jasmine v. Master M. Yuen the negative

equity property could not be taken into account in reducing the total financial resources but would
only be given a zero value.

 In Shem Yin Fun v Director of Legal Aid [2003] 1 HKC 568, outstanding debt owed by the
applicant cannot be taken into account in reducing the disposable capital. Hence, if the applicant
wants to have the debt taken into account, he has to first settle the outstanding debt from his capital
before applying for legal aid.

Case outcome:
 Lose: interim payment is the maximum contribution that he has to pay for the legal costs incurred
by the Director of Legal Aid.
 Win: aided person needs to pay for the legal costs incurred by the Director of Legal Aid on his
behalf but which cannot be recovered from his opponent.

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 In addition, if he recovers or preserves any money or property, he needs to contribute 10% (reduced
to 6% if the case is settled before counsel is briefed for the trial) of the recovered/preserved value.
 The 10% (or 6%, as the case may be) contribution and unrecoverable legal costs will be deducted
(a) first from the interim contribution and application fee already paid and then (b) the money or
property recovered or preserved. See LAO, ss 18 and 32.

 If an aided plaintiff/applicant loses the case, any costs awarded to the unaided defendant/respondent
will generally be borne by the DLA. DLA paid cost to Defendant for aided Plaintiff.

 If an aided defendant/respondent loses the case, neither him nor the DLA will generally be liable
for the costs of the unaided plaintiff/applicant (see s 16C of LAO and Common Luck Investment
Ltd v Director of Legal Aid [2002] 3 HKLRD 81 (CFA)). DLA will not pay costs for aided D to
unaided P.

 Even if one loses in the proceedings, one would not generally be personally liable for the other
party’s costs

 Note however that if one obtains legal aid while the proceedings are ongoing, the aided person
remains personally liable for the costs awarded to the opponent arising before the grant of
legal aid (s 16C(2)). Hence, if one is eligible, one should generally obtain legal aid before the
commencement of the legal proceedings (unless, for example, there is an urgency to start legal
action).

 If an application for legal aid is refused on means, the applicant may re-apply for legal aid when
as a result of changes to his financial circumstances or the financial eligibility limit, his
financial resources are reduced to a level below that of the applicable financial eligibility limit.
However, the Director may refuse legal aid if the applicant has disposed of any capital or income or
fails to maximise his earning potential so as to expend or reduce his financial resources for the
purpose of satisfying the financial eligibility limit (s 10(2))

3.2 Should the matter be resolved through litigation?

 Is the dispute/problem a legal one which can be resolved in court?

 Is the other party worth suing? Principle 4.01 Commentary 5 of the Hong Kong Solicitors’ Guide
to Professional Conduct Volume 1 provides that “In all matters a solicitor must consider with
his client whether the likely outcome will justify the expense or risk involved.”

 Can your client afford the trouble and expense of litigation?

 Prospect of settlement or resolution without intervention of lawyers or court proceedings

 Should the matter be resolved through arbitration or mediation? Under the Civil Justice Reform,
greater use of ADR (primarily mediation) is anticipated and unreasonable refusal by a party to
attempt settlement through ADR may result in costs penalty.

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3.3 Any risk of soon expiration of the limitation period?

 The general periods of limitation of action are laid down in the Limitation Ordinance (Cap 347):-

(a) Contract under seal -- 12 years from date of accrual of cause of action. (i.e. upon breach)
(s 4(3))

(b) Simple contract -- 6 years from date of accrual of cause of action (i.e. upon breach) (s
4(1))

(c) tort (apart from personal injury and death) -- 6 years from date of accrual of cause of
action (i.e. upon damage being sustained as a result of the tortious act) (s 4(1))

(d) recovery of land -- 60 years for action by government and 12 years (N.B. previously 20
years) for action by individual, calculated from the date of adverse possession (ss 7, 8
and 13)

(e) negligence action involving latent damage (apart from personal injury and death) -- the
usual 6-year period can be extended to 3 years from the date on which the plaintiff
first had actual or constructive knowledge required for bringing the action (s 31),
 subject to an overriding time limit of 15 years from the date of the alleged
negligent act (s 32)

(f) personal injury cases -- 3 years from date of accrual of cause of action or from the date
of the plaintiff’s actual or constructive knowledge (if later) of the injury being significant
and attributable to the defendant’s act/omission as well as the identity of the defendant (s
27),
 subject to the court’s discretion under s 30 to override this time limit by balancing the
respective prejudices to the plaintiff and to the defendant having regard to all the
circumstances of the case and in particular to those factors set out in s 30(3) (e.g.
reasons for the delay and conducts of the parties).
 The practice of the courts has been regularly to exercise the discretion in favour of the
plaintiff in all cases in which the defendant cannot show that he has been prejudiced
by the delay (see Horton v Sadler [2006] UKHL 27 per Lord Hoffman at § 44; for an
illustration as to how the court analysed the factors in exercising its discretion, see the
judgment of Deputy High Court Judge Saunders in Chau Chui Ping Winky v Cathay
Pacific Airways Ltd, unreported, HCPI 261/2003, 17 July 2006 and the judgment of
Master M Ng in Cheung Yin Heung v Hang Lung Real Estate Agency Ltd & Another
[2010] 3 HKLRD 67.)

(g) death claims under the Fatal Accidents Ordinance (Cap 22) -- 3 years from the date of
death or the date of the requisite actual or constructive knowledge of the beneficiary of
the claim, whichever is the later (s 28),
 subject also to the court’s discretion to extend the time limit under s 30

(h) Claim against trustee – 6 years from the date of breach of trust for an action by a

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 beneficiary to recover trust property or in respect of any breach of trust.
 But there is no limitation period if it is a claim by the beneficiary in respect of any
fraud or fraudulent breach of trust to which the trustee was a party or privy; or to
recover from the trustee trust property or the proceeds thereof in the possession of the
trustee, or previously received by the trustee and converted to his use (s 20(1))2

EXCEPTIONS: -

(i) In case of an infant or person of unsound mind, the period of limitation does not begin to run until
that person has ceased to be under the disability or died (s 22).

(ii) Where any action is based upon the fraud of the defendant, or any fact relevant to the plaintiff’s
right of action has been deliberately concealed from him by the defendant or the action is for
relief from the consequences of a mistake, the period of limitation shall not begin to run until the
plaintiff has discovered the fraud, concealment or mistake or could with reasonable diligence have
discovered it (s 26).

(iii) In actions where there has accrued a right of action to recover land or any right of a mortgagee of
personal property to bring a foreclosure action and the person in possession of the land or personal
property acknowledges the title of the plaintiff or makes payment of the mortgage debt (principal or
interest), the right of action shall be deemed to have accrued on the date of acknowledgment or
payment (s 23). The acknowledgment must be in writing and signed by the defendant or his agent
and made to the plaintiff or his agent (s 24). The same principle applies in respect of
acknowledgment or part payment of a debt (s 23(3))

 There may be other shorter periods of limitation specified under the contract (in which case one
needs to look at the contract documents) or prescribed under international conventions (e.g. in
respect of carriage by air).

3.4 Any need to take urgent protective measures?

 Any real risk that the other party may take steps to make himself judgment proof? If so, Mareva
Injunction relief (an ex parte order restraining the other party from disposing of his assets) should
be considered.

 Any real risk that the other party may destroy crucial evidence? If so, Anton Piller relief (an ex
parte order requiring the other party to permit access to his premises to search for and preserve
materials and documents) or an order under O 29 r 2 for the detention or preservation of the
evidence should be considered

 Any real risk that the other party may cause further irreparable damage to client pending the
litigation? If so, interim or interlocutory injunction application should be considered.

2
See for example Secretary for Justice v Hon Kam Wing [2003] 1 HKLRD 524. Note however that an action by a beneficiary to recover
trust property from a third party or in respect of any breach of trust in the absence of fraud is still subject to the usual 6 years’ limitation
period: see s 20(2).

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3.5 Any need to serve pre-action notice?

 A notice (letter) before action is not generally required as a pre-condition to the accrual of the cause
of action, though failure to do so in some circumstances could affect the issue of costs (see O 62 r 7
RSC).

 Some causes of action require service of notice as a precondition to the accrual of liability, for
example: -

 Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap 272) allows a victim who has
obtained judgment against the insured driver or owner to enforce the judgment directly
against the insurer (whether or not the insurer is entitled to repudiate liability for breach of
any insurance provision by the insured) provided that certain conditions are fulfilled. The
most important condition is that notice of the bringing of the proceedings be given to the
insurer before or within 7 days after the commencement of the proceedings (s 10(2)(a))

 Under s 24 of the Employees’ Compensation Ordinance, an employee of a sub-contractor

may choose to claim compensation under the Ordinance against the principal contractor.
However, there is a pre-condition that before making such claim the employee shall serve on
the principal contractor a notice in writing stating certain particulars (e.g. his own name and
address and those of his employer sub-contractor; the particulars of the accident and injury as
well as the amount of compensation claimed) (s 24(6)). See also s25B of the Employees
Compensation Assistance Ordinance and the need to serve notice on the Employees
Compensation Assistance Fund Board.

 In a claim against the drawer on dishonoured cheque, s 48 of the Bills of Exchange

Ordinance (Cap 19) provides that the drawer shall not be liable unless notice of dishonour is
given to him within a reasonable time as prescribed in s 49(l) (which is prima facie within the
day after the dishonour of the cheque). In practice most clients have failed to do this and by
the time the matter comes to their lawyers the prescribed reasonable time has long lapsed.
Fortunately, there are exceptions to the rule as prescribed in s 50(2) for the dispensation of
the notice of dishonour. In most cases, the reason given by the agent bank for dishonouring
the cheque will either be “Payment Countermanded” (in which case the dispensation under s
50(2)(c)(v) applies) or “Refer to Drawer” (which has been interpreted by the court to mean
that there are insufficient funds in the drawer’s account so that the dispensation under s 50(2)
(c)(iv) applies). It should, however, be noted that the Statement of Claim must either allege
that due notice of dishonour has been given stating the necessary particulars or set out the
facts relied on for dispensing with the notice of dishonour; otherwise there may be no cause
of action against the drawer (see Thong Ko Sine v Wilkinson [1988] HKC 56 CA).

3.6 Do you need to obtain further facts, evidence or documents? (Carry out further investigation!)

3.7 Do you need to engage experts or counsel and if so at what stage?

3.8 If proceedings are to be commenced, which court has jurisdiction over the matter? (see
discussions at section 2 above).

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4. Procedural Flow in a Contested Action Commenced by Writ

4.1 Issue of Writ (O 6)

4.2 Service of Writ (O 10, O 11 and s 365 Companies Ordinance)

4.3 Acknowledgment of Service (O 12)

4.4 [Dispute over jurisdiction (O 12 r 8)]

4.5 Exchange of Pleadings (O 18)

 Statement of Claim
 Defence [and Counterclaim]
 [Reply] [and Defence to Counterclaim]
 Close of pleadings or further pleadings with leave

4.6 Mutual Discovery and Inspection of Documents (O 24)

4.7 Case Management Directions (O 253)

 For cases other than personal injury actions, parties have to file case management questionnaires
and the Court will give case management directions for the further conduct of the case either by
paper disposal or at the hearing of the case management summons;
 for personal injury actions, automatic directions under O 25 r 8 and detailed procedures set out in
PD 18.1 will apply.

4.8 Exchange of Witness Statements (O 38 r 2A) [and Expert Reports (O 38 Part IV)]

4.9 [Other Interlocutory Applications]

4.10 Case Management Conference(s)

4.11 Setting down the case for trial and fixing trial date (O 34)

4.12 Pre-trial Review

4.13 Trial (O 35)

4.14 Judgment (O 42)

4.15 Enforcement (O 45-52)

4.16 Appeals (O 58-59 RHC and O 58 RDC)

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Under the new Civil Justice Reform rules, O 25 is substantially amended with the introduction of Case Management Summons and
Conference procedures to replace the Summons for Directions procedures.

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5. Overview of Pre-Trial Procedures

5.1 Three Main Functions

 For disposing of action without trial

 For protecting or preserving a party’s rights and interest in the interim
 For preparation for trial
 N.B. The functions may overlap and a pre-trial procedure may be used for more than one objective

5.2 Disposing of action without trial

 Default judgment
 Summary Judgment
 Discontinuance of action and withdrawal of claim or defence
 Sanctioned Offer and Sanctioned Payment into court
 Without prejudice settlement negotiation
 Striking out claim or defence
 Dismissal for want of prosecution

5.3 Protecting or preserving a party’s rights and interest in the interim

 Interlocutory injunction (pending claim for final injunction)

 Mareva injunction (to prevent dissipation of assets)
 Anton Piller order (to prevent destruction of documents and evidence)
 Prohibition order (to prevent the defendant from leaving Hong Kong)
 Interim payment (to alleviate hardship or prejudice to the plaintiff)

5.4 Preparing for trial

 Discovery of documents
 Interrogatories (for discovery of facts)
 Amendment of pleadings
 Request for further and better particulars of pleadings
 Notice to admit facts
 Exchange of witness statements and expert reports (most cases settle after this stage!)
 Case Management Conference(s) and Pre-trial Review

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 Appendix
Relevant Provisions of the District Court Ordinance on Civil Jurisdiction

Jurisdiction-General

S 32
(1) The 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 $3,000,000.
(2) In this section and in section 34, the amount of the plaintiff’s claim means the amount the plaintiff
claims after taking into account-
(a) any set-off or any debt or demand the defendant claims or may recover from the plaintiff;
(b) any compensation, as defined in section 3 of the Employees’ Compensation Ordinance (Cap
282), paid to the plaintiff under that Ordinance; and
(c) any contributory negligence, that the plaintiff admits in his statement of claim.
(3) The Court has jurisdiction to hear and determine any proceedings by way of interpleader in which
the amount or value of the matter in dispute does not exceed $3,000,000.

Money recoverable by enactment

S33
(1) The Court has jurisdiction to hear and determine any action for the recovery of any penalty,
expenses, contribution or other like demand which is recoverable by virtue of any enactment for the time
being in force and for the recovery of any sum which is declared by any enactment to be recoverable as
a civil debt if-
(a) it is not expressly provided by that or any other enactment that the demand shall be recoverable only
in some other court; and
(b) the amount claimed in the action does not exceed $1,000,000.
(2) For the purposes of this section, “penalty” ( 罰 金 ) does not include a fine to which any person is
liable on conviction on indictment or on summary conviction.

Abandonment of part of claim to give Court jurisdiction

S 34 (1) The Court has jurisdiction to hear and determine an action that is in excess of the Court’s
monetary jurisdiction limit on the plaintiff abandoning the amount of the plaintiff’s claim in excess and
the action is one in which the Court otherwise has jurisdiction.
(2) The Court cannot award to the plaintiff in an action under this section an amount exceeding the
Court’s monetary jurisdiction limit for the action.
(3) The judgment of the Court in an action limited under this section is in full discharge of all demands
in the cause of action.

Jurisdiction for recovery of land

S 35 The Court has jurisdiction to hear and determine any action for the recovery of land, where the
annual rent or the rateable value of the land, determined in accordance with the Rating Ordinance (Cap
116), or the annual value of the land, whichever is the least, does not exceed $320,000.

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Jurisdiction where title in question

S 36 The Court has jurisdiction to hear and determine any action which would otherwise be within the
jurisdiction of the Court and in which the title to an interest in land comes into question if -
(a) for an easement or licence, the rateable value, determined in accordance with the Rating Ordinance
(Cap 116) or the annual value, whichever is the less, of the land, over which the easement or licence is
claimed, does not exceed $240,000; or
(b) for any other case, the rateable value, determined in accordance with the Rating Ordinance (Cap 116)
or the annual value, whichever is the less, of the land, does not exceed $320,000.

Equity jurisdiction

S 37 (1) Subject to the maximum limits in amount or value set out in subsection (2), the Court has the
jurisdiction of the Court of First Instance to hear and determine the following proceedings-
(a) proceedings relating to or for the administration of the estate of a deceased person;
(b) proceedings for the execution of a trust or for the declaration that a trust subsists or proceedings
under section 3 of the Variation of Trusts Ordinance (Cap 253);
(c) proceedings for the foreclosure or redemption of a mortgage or for enforcing a charge or lien;
(d) proceedings for the specific performance, or for the rectification, rescission or delivery up or
cancellation of an agreement for the sale, purchase or lease of property;
(e) proceedings for the maintenance or advancement of an infant;
(f) proceedings for the dissolution or winding up of a partnership, whether or not the existence of the
partnership is in dispute;
(g) proceedings for relief against fraud or mistake.
(2) The maximum limits in amount or value referred to in subsection (1) for-
(a) in the case of subsection (1)(a), an estate of a deceased person;
(b) in the case of subsection (1)(b), an estate or fund subject or alleged to be subject to the trust;
(c) in the case of subsection (1)(c), the amount owing under the mortgage, charge or lien;
(d) in the case of subsection (1)(d), for an agreement for sale or purchase, the purchase money or, for an
agreement for lease, the value of the property;
(e) in the case of subsection (1)(e), the property of the infant;
(f) in the case of subsection (1)(f), the assets of the partnership;
(g) in the case of subsection (1)(g), the damage sustained or the estate or fund for which relief is sought,
are-
(i) $1,000,000, where the proceedings do not involve or relate to land;
(ii) $1,000,000, where the proceedings partly involve or partly relate to land and the part that does not so
involve or does not so relate exceeds $1,000,000 in amount or value;
(iii) $3,000,000, where the proceedings wholly involve or wholly relate to land;
(iv) $3,000,000, where the proceedings partly involve or partly relate to land and the part that does not
so involve or does not so relate does not exceed $1,000,000 in amount or value.
(3) A judge has in proceedings authorized by this section in addition to his other powers and authority
the powers and authorities of a judge of the Court of First Instance acting in the exercise of the equitable
jurisdiction of the Court of First Instance.
(4) Nothing in this section gives jurisdiction to the Court in proceedings for the recovery of land or
relating to the title to land, where the annual rent or the rateable value of the land, determined in

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accordance with the Rating Ordinance (Cap 116), or the annual value of the land, whichever is the least,
exceeds $240,000.

Jurisdiction under the Married Persons Status Ordinance

S 38 The Court has the jurisdiction and powers of the Court of First Instance conferred by section 6 of
the Married Persons Status Ordinance (Cap 182).

Counterclaims

S 39 In sections 32 to 37, references to an action or proceeding are to be construed as including

references to a counterclaim.

Procedure where proceedings beyond the jurisdiction of the Court are commenced in the Court

S 41 (1) The Court shall, either of its own motion or on the application of any party, order that an action
or proceeding be transferred to the Court of First Instance where an action or proceeding commenced in
the Court, not being a counterclaim, is outside the jurisdiction of the Court but is within the jurisdiction
of the Court of First Instance.
(2) The Court may, if it thinks fit, instead of ordering that the action or proceeding be transferred, order
that it be struck out where, on the application of a defendant, it appears to the Court that the plaintiff or,
if more than one, one of the plaintiffs knew or ought to have known that the Court had no jurisdiction.
(3) If a defendant in an action or proceeding within the jurisdiction of the Court makes a counterclaim
which is not within the jurisdiction of the Court but within the jurisdiction of the Court of First Instance,
the Court may, either of its own motion or on the application of any party, order-
(a) that the whole proceedings be transferred to the Court of First Instance; or
(b) that the proceedings on the counterclaim be transferred to the Court of First Instance; and the
proceedings on the plaintiff’s claim, except for a defence of set-off as to the whole or a part of the
subject matter of the counterclaim, be heard and determined by the Court; or
(c) where the Court considers the whole proceedings should be heard and determined in the Court, that
the matter be reported to the Court of First Instance or a judge thereof.
(4) On the receipt of a report mentioned in subsection (3)(c), the Court of First Instance or a judge
thereof may, as it or he thinks fit, order either-
(a) that the whole proceedings be transferred to the Court of First Instance; or
(b) that the whole proceedings be heard and determined in the Court; or
(c) that the proceedings on the counterclaim be transferred to the Court of First Instance; and the
proceedings on the plaintiff’s claim, except for a defence of set-off as to the whole or a part of the
subject matter of the counterclaim, be heard and determined by the Court.
(5) Where an order is made under subsection (3)(b) or subsection (4)(c) and judgment on the claim is
given for the plaintiff, execution thereon shall, unless the Court of First Instance or a judge thereof at
any time otherwise orders, be stayed until the proceedings transferred to the Court of First Instance have
been concluded.
(6) If no report is made under subsection (3)(c), or if on any such report it is ordered that the whole
proceedings be heard and determined in the Court, the Court shall have jurisdiction to hear and
determine the whole proceedings notwithstanding any enactment to the contrary.

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Transfer of proceedings to the Court of First Instance or the Lands Tribunal

S 42 The Court may, either of its own motion or on the application of any party, order at any stage the
transfer to the Court of First Instance or the Lands Tribunal of all or part of any action or proceedings
before it which are within the jurisdiction of the Court of First Instance or the Lands Tribunal, as the
case may be.

Transfer to the Court from the Court of First Instance of proceedings within the jurisdiction of
the Court

S 43 (1) The Court of First Instance may, either of its own motion or on the application of any party,
order the transfer to the Court of all or part of an action or proceeding, other than a counterclaim, which
appears to the Court of First Instance likely to be within the jurisdiction of the Court.
(2) An order may be made under this section at any stage of the proceedings of the motion of the Court
of First Instance itself or on the application of any party.
(3) The Court of First Instance is required to make an order under this section unless it is of the opinion
that, by reason of the importance or complexity of any issue arising in the action or proceeding, or for
any other reason, the action or proceeding ought to remain in the Court of First Instance.

Transfer to the Court from the Court of First Instance where the parties consent

S 44 (1) The Court of First Instance may, if the parties consent, order the transfer to the Court of all or
part of an action or proceeding, including a counterclaim, which is outside the jurisdiction of the Court,
but would have been within its jurisdiction except for the monetary limits specified in section 32, 33, 35,
36 or 37.
(2) An order may be made under this section at any stage of the proceedings.
(3) Upon a transfer under subsection (1), the Court shall have jurisdiction to hear and determine all or
part of an action or proceeding, including a counterclaim, so transferred notwithstanding any enactment
to the contrary.

Costs in transferred cases, etc.

S 44A (1) This section applies to an action or proceeding transferred-

(a) from the Court of First Instance to the Court;
(b) from the Court to the Court of First Instance; or
(c) from a tribunal to the Court.
(2) The court or tribunal that orders the transfer may make an order for costs prior to the transfer and of
the transfer of proceedings.
(3) The costs of the whole proceedings both before and after the transfer are in the discretion of the court
to which the proceedings are transferred subject to any order made by the court or tribunal which
ordered the transfer.
(4) The court to which the proceedings are transferred has power to order costs and order the scales on
which the costs of the several parts of the proceedings are to be taxed. The costs of the whole
proceedings are to be taxed in the court to which the proceedings are transferred.
(5) In an action founded on contract, quasi-contract or tort, for the proceedings in the Court of First
Instance before the transfer, the Court may, if satisfied that there was sufficient reason for bringing the

15
action in the Court of First Instance and subject to any order of the Court of First Instance, allow costs
on the Court of First Instance scale.

Division of causes of action

S 45 No cause of action shall be split or divided so as to be made the ground of 2 or more different
actions for the purpose of bringing 2 or more actions in the Court.

Interest on claims for debt and damages

S 49 (1) The Court may include simple interest, at the rate the Court thinks fit in a judgment for a debt
or damages, on the debt or damages or on a payment made before judgment, for the period between the
date when the cause of action arose and-
(a) for a sum paid before judgment, the date of the payment; and
(b) for the sum for which judgment is given, the date of the judgment.
(2) Rules of court may provide for the rate of interest and the method of calculation.
(3) In a judgment given for damages for personal injuries or arising out of the death of a person which
exceed $30000, the Court has, unless the Court is satisfied that there are special reasons to the contrary,
to include simple interest at the rate the Court thinks fit on-
(a) payment made before judgment, for the period between the date when the cause of action arose and
the date of the payment; and
(b) any other sum for which judgment is given, for the period between the date when the cause of action
arose and the date of the judgment.
(4) The defendant in proceedings for the recovery of a debt who pays the whole debt to the plaintiff
(otherwise than in pursuance of a judgment in the proceedings) is liable to pay the plaintiff interest at the
rate the Court thinks fit or rules of court provide on the debt for the period between the date when the
cause of action arose and the date of the payment.
(5) Interest in respect of a debt shall not be awarded under this section for a period during which, for
whatever reason, interest on the debt already runs.
(6) Interest under this section may be calculated at different rates for different periods.
(7) In determining, for the purposes of section 32, 33, 36 or 37, whether an amount exceeds or is less
than the amount specified in those sections, the Court shall not take account of any interest that may be
ordered under this section or of any order for interest made under this section.
(8) This section does not affect the damages recoverable for the dishonour of a bill of exchange.
(9) In this section-
“defendant” (被告人) means the person from whom the plaintiff seeks the debt or damages;
“plaintiff” (原告人) means the person seeking the debt or damages.

Interest on judgments

S 50 (1) Judgment debts are to carry simple interest-

(a) at the rate the Court orders; or
(b) in the absence of an order, at the rate the Chief Justice determines by order,
on the total amount of the judgment debt, or on the part that for the time being remains unpaid, from the
date of the judgment until payment.
(2) Interest under this section may be calculated at different rates for different periods.

16
SEMINAR 2: COMMENCEMENT OF PROCEEDINGS, SERVICE AND
ACKNOWLEDGMENT OF SERVICE

Further Reading

Chapters 4 and 5 of A Guide to Civil Procedure in Hong Kong (4th edition, LexisNexis 2011)

Commencement of Proceedings

 Choice of the Originating Processes

 Under the Civil Justice Reform, any action will be commenced either by a Writ of Summons or
an Originating Summons (unless any written law provides for the use of Petition or Originating
Motion procedures).

 Unless the relevant statute prescribes a particular mode of commencement method, the plaintiff
has a choice whether to commence the action by a Writ of Summons or an Originating
Summons.

1. Originating Summons is appropriate if the sole or principal question at issue is, or likely to be,
one of construction of any written law or document or where there is unlikely to be any
substantial dispute of fact (O 5 r 4(2)). Example: mortgagee actions against unpaid debtors.

 Reason: Originating Summons is generally determined on affidavit evidence, without

pleadings, discovery or oral testimony at trial (O 28)

 Court has a discretion to order that proceedings commenced by Originating Summons be

continued as if it had been commenced by Writ of Summons and to order that the affidavits
previously filed stand as pleadings (O 28 r 8)

2. Proceedings commenced by Writ of Summons are most common and involve more post-
commencement procedures. This course will therefore focus on Writ actions.

Formalities for the Writ of Summons

 The Writ must be in the prescribed form: Form No 1 in Appendix A (O 6 r 1).

 The Writ must be sealed with the seal of the Court Registry and accompanied by the prescribed
form of acknowledgment of Service in Form 14, Appendix A RHC/RDC (O 6 r 7(3) and O 10 r 1(6)).

 The parties must be properly identified and described in the title of the action. For detailed rules as to
the description of particular parties, see Appendix 1 to this seminar outline.

 The Writ must bear the following indorsement:

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 (1) A Statement of Claim (a Writ indorsed with a statement of claim is called a specially indorsed
Writ) or,
(2) where the statement of claim is to be served later, with a concise statement of the nature of the
claim made and the relief or remedy required in the action (a Writ indorsed with such a concise
statement is called a generally indorsed Writ) (O 6 r 2(1)(a))

 Where the plaintiff sues for a debt or liquidated demand only, with a statement of the amount claimed
and the amount of costs, plus a further statement that the proceedings will be stayed if the amounts are
paid within 14 days of service (O 6 r 2(1)(b))

 Where the only remedy is for payment of money (either liquidated or unliquidated claim), with a
statement that the defendant may make an admission in accordance with Order 13A within the period
fixed for the service of his defence (O 6 r 2(1)(c); Order 13A will be discussed in Seminar Three)

 A statement of the capacity of the party if it sues or is being sued in a representative capacity (e.g. as
personal representative, representative of members of a club etc) (O 6 r 3).

 The address of the plaintiff, and the name and business address of his solicitor (if any) (O 6 r 5)

 The plaintiff must ensure that he has enough copies to serve all defendants named in the writ with two
additional copies. The original will be filed in the High Court Registry (or District Court Registry) and
the plaintiff will retain one copy. On presentation of the required number of copies of the writ at the
Registry and payment of the filing fee, the Registry staff will assign an action number (High Court
Action, Miscellaneous Proceedings, Commercial List, Bankruptcy List, Construction List, Personal
Injuries List etc) and will seal all the copy writs and date them. The action will be entered in the Cause
Book by Registry staff giving particulars of the action number, parties, solicitors firm involved and the
nature of the claim. A case file is opened in the Registry for filing all documents in the action.

 For the purposes of validity and service the writ takes effect upon sealing.

 For Writ to be served out of the jurisdiction, it shall not be issued or served without the leave of the
court (O 6 r 7(1) and O 11 r 1)

Duration and renewal of the writ

 A writ is valid in the first instance for 12 months from the date of issue: O 6 r 8(2).

 Where a writ has not been duly served on the defendant during its period of validity, the court may, by
order, extend the validity of the writ from time to time for such period not exceeding 12 months at
any one time as may be specified in the order: O 6 r 8(2).

 A writ will not be extended unless good reason is first shown (in which event the court should then
consider all the circumstances of the case for the exercise of its discretion): Kleinwort Bension Ltd v
Barbrak Ltd, The Myrto and Chow Ching Man v Sun Wah Ornament Manufactory Ltd (c.f. Grand
Pacific Equity Ltd v R.S.H. Sports (HK) Ltd, which held that unsuccessful attempts before the

18
 expiry of the original writ to serve the Defendant despite reasonable efforts having been made is
clearly a good reason for leave to renew a writ).

Joinder of Parties

General principles

 Joinder of parties is permitted on a liberal basis to avoid multiplicity of proceedings (O 15 r 4)

 Court may control the proceedings by ordering separate trials or making other order if the joinder may
embarrass or delay the trial (O 15 r 5(1))

 Court has wide discretionary powers to cure any irregularity in the joinder or non-joinder of parties by
adding, substituting or removing them so as to enable an effectual adjudication to be made of all
matters in dispute between them (O 15 r 6)

Joinder of Plaintiffs

 Save with the leave of the court, all persons entitled jointly to a claim MUST be joined together as
co-plaintiffs (e.g. joint tenants).
 If any such person refuses, he should be joined as a defendant to the action (O 15 r 4(2))

 Otherwise, joinder is optional. 2 or more persons may be joined as co-plaintiffs without leave of the
court where:

(a) if separate actions were brought by or against each of them, some common question of law or
fact would arise; and
(b) all rights to relief claimed in the action arise out of the same transaction or series of
transactions.

In other circumstances, leave of the court is necessary (O 15 r 4(1)).

 Where plaintiffs are joined, they must not have conflicting interests in the litigation and must be
represented by the same solicitor and counsel (e.g. Lewis v Daily Telegraph Ltd (No 2) [1964] 2 QB
601, [1964] 1 All ER 705 CA).

Joinder of Defendants

 Joinder is generally optional. Same requirements under O 15 r 4(1) apply (see above).

 However, where the defendants are jointly (but not severally) liable under a contract, the court may
stay the action upon application by the defendant named in the proceedings, until the other person
by whom the joint liability is owed is also joined as a defendant (015 r 4(3)).

 Where two persons are jointly and severally liable, the plaintiff may choose whether to join one or
both as defendants.

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Joinder of Causes of Action

 Similarly, joinder of causes of action is permitted on a liberal basis to avoid multiplicity of

proceedings (O 15 r 1), but subject to the court’s discretion to order separate trials under O 15 r 5(1)

 Causes of action may be joined without leave if the plaintiff claims, and the defendant is alleged to be
liable, in the same capacity in respect of all of the causes of action (or in the capacity of executor or
administrator of an estate in respect of one cause of action and in his personal capacity but with
reference to the same estate in respect of other cause(s) of action): O 15 r1

 In other situations, leave is necessary (O 15 r 1(1)(c)).

Service

 Methods of Service

 General Provisions under O 10

• Three methods under O 10 r 1: personal service; registered post; and insertion through letter box

 Personal service

• Personal service of a document is effected by leaving a copy of the document with the person to
be served (O 65 r 2).
To effect personal service, the clerk or other person entrusted with the task should: -
1. First satisfy himself that he has found the right man
2. Hand to, or leave with, the person to be served a copy of the writ.
3. If the person served will not take the copy, he should tell him what it contains and leave it
as nearly in his possession or control as he can Goggs v Lord Huntingtower (1884) 12 M
& W 503

 Registered Post or Letter Box Service

• Read O 10 r 1(2) and (3):

“(2) A writ for service on a defendant within the jurisdiction may, instead of being served personally
on him, be served-
(a) by sending a copy of the writ by registered post to the defendant at his usual or last known address,
or
(b) if there is a letter box for that address, by inserting through the letter box a copy of the writ enclosed
in a sealed envelope addressed to the defendant.

(3): Where a writ is served in accordance with paragraph (2)-

20
(a) the date of service shall, unless the contrary is shown, be deemed to be the 7th day (ignoring Order
3, rule 2(5)) after the date on which the copy was sent to or inserted through the letter box for the
address in question;
(b) any affidavit proving due service of the writ must contain a statement to the effect that :-
(i) in the opinion of the deponent (or, if the deponent is the plaintiff’s solicitor or an employee of that
solicitor, in the opinion of the plaintiff) the copy of the writ, if sent to, or as the case may be,
inserted through the letter box for, the address in question, will have come to the knowledge of
the defendant within 7 days thereafter; and
(ii) in the case of service by post, the copy of the writ has not been returned to the plaintiff through
the post undelivered to the addressee.”

Barclays Bank of Swaziland Ltd v Hahn

 “Within the jurisdiction” applies to the defendant, and not to the writ for service.
 Hence, D must be within the jurisdiction at the time when the writ is served.
 Time of service is the time when (1) the defendant has knowledge of the existence of the writ and (2)
while he is within the jurisdiction.
 D acquired knowledge of the writ from his servant when he was at Heathrow. That was the time
when service was validly effected.

• See also Forward v West Sussex County Council [1995] 4 All ER 207 (CA)

• Is service duly effected if the proceedings are duly sent by post to D at his usual or last known
address and delivered at that address?

• Under O 10 r1(3)(b), the affidavit proving due service must contain a sworn statement not simply
that there has been compliance with para (2)(a) or (b) but also of the deponent’s opinion that the
letter, whichever mode of delivery was adopted, “will have come to the knowledge of the
defendant within seven days thereafter”.
• This reinforces that knowledge of D is required.
• Service is effected on actual notice to D and not on mere delivery to D’s address.

 Usual or last known address

The Hong Kong Mortgage Corporation Limited v Ching Kit Yu

• One may have more than one usual and/or last known address
• Last known address simply means “last known to P”, whatever the source.
• The rules do not qualify “last known” by reference to the source or impose any duty on P to make
any inquiry or forbid P from making his own enquiry.
• Hence “last known” simply means “last known” to P, whatever the source or absence or presence of
inquiry.
• But if P doesn’t need to make due enquiry, would it encourage P to turn a blind eye to the likelihood
that D no longer lives at an address last known to P?
• Answer: Even if P serves the writ at D’s last known address, if D has no notice of the writ, still no
proper service. “Last known address” is just one of the requirements for proper service.

21
Note the use of the disjunctive word “or” between the words ‘usual’ and ‘last known’

 According to the Oxford English Dictionary, the word ‘address’ means ‘details of where a
person lives, works or can be found, and where letters, etc. may be delivered.’

 Not confined exclusively to a person’s residence.

 The essence really is a location where the person may be reached or where contact or
communication in written form, such as by letter, could be established. If so, a person may have
at the same time a number of addresses.

 “Usual address” means one of the above addresses where a person may usually be reached.
While the word ‘usual’ conveys the idea of a habitual or frequent connotation, the rule does not
say ‘the most usual address’ as to require the address to be one where a person may in most
probability be reached.

 Thus, a person may have a number of usual addresses. He may be usually reached during office
hours at his office address or during other hours at his home address.

 ‘Last known address’ mean the address last known to the plaintiff from whatever source and a
defendant may have a number of addresses last known to the plaintiff, depending on the
circumstances and the diligence of the plaintiff’s inquiries.

 N.B. The requirement on usual or last known address is only one of the requirements for valid
service, and so satisfying this requirement does not necessarily mean that the service is valid.

Other Modes of Service under O 10

 Indorsement by D’s solicitors

O 10 r 1(4): “Where a defendant’s solicitor indorses on the writ a statement that he accepts service of the
writ on behalf of that defendant, the writ shall be deemed to have been duly served on that defendant and
to have been so served on the date on which the indorsement was made.”

 Acknowledgment of Service by D

 O 10 r 1 (5): if a writ is not duly served on D but he acknowledges service of it, it is deemed to have
been duly served on him on the date when he acknowledges service.
 Presumption is rebuttable
 This acknowledgement does not preclude D from disputing jurisdiction of the court/objecting to
any irregularity in the writ of service. (i.e. Even acknowledged service, can still challenge irregular
service!)

 Service of writ on agent of overseas principal

22
  O 10 r 2 permits P to effect service on the principal by serving his agent within the jurisdiction,
without leave to serve principal out of jurisdiction under O 11.
 Court must be satisfied that contract was entered into within jurisdiction with/though an agent
residing/carrying business within jurisdiction.
 Application ex parte to Master, must be supported by affidavit, explain why service on agent is
preferable than actually serving the principal.

 Service of writ in pursuance of contract

 O 10 r 3: Service in accordance with provisions of contract will be good service on D

 Court must have jurisdiction to hear and determine any action in respect of that contract
 If such service is effected out of jurisdiction, leave is still required

 Service of writ in certain actions for possession of premises or land

 O 10 r 1 (1): Writ should be served personally on each D/served by registered post/through letter
box
 O 10 r 4 (2): Copy of writ must be posted in conspicuous place at entrance of premise
 If no person possess land and service cannot be effected on any D, P may apply ex parte to
master by affidavit, showing (a) none is in possession of premises (b) service cannot be effected
 If court is satisfied, it may authorise service be affixing a copy of process on conspicuous part of
land/order that service already effected as good service.

 Actions commenced by Originating Summons, Originating Motion or Petition

Do the abovementioned methods of service under O 10 apply only to action by Writ?

 See O 10 r 5:

(1) The foregoing rules of this Order shall apply, with any necessary modifications, in relation to
an originating summons (other than ex parte originating summons or an originating summons
under Order 113) as they apply in relation to a writ, except that an acknowledgment of service of an
originating summons shall be in Form No. 15 or 15A in Appendix A, whichever is appropriate.
(2) Rule 1(1), (2), (3) and (4) shall apply, with any necessary modifications, in relation to a notice of an
originating motion and a petition as they apply in relation to a writ.

 Other mode of service outside the RHC/RDC

Could the parties agree another mode of service outside the rules?

Kenneth Allison Ltd v AE Limehouse & Co

(Service on a partnership)

 Personal assistant acting on instructions of one of partner

 Told the process server that she was authorised to accept service on behalf of partnership
 Service of originating process

23
- The Rules do not constitute exclusive code and O 10 does not prohibit parties from adopting
alternative service method.
- Parties themselves are free to agree upon particular mode of service
- Even though that method is outside the ambit of Rules
- Provided that the service is carried out in accordance with such an agreement, service will have been
duly effected even though made in a manner not permitted by Rules

 Service on a limited company registered under the Company Ordinance

(N.B. see new Company Ordinance)

S 356 CO: A document may be served on a company by leaving it at or sending it by post to the
registered office of the company.

 If requirements under S356 are satisfied, such service will be good even P is aware that office
has already been vacated/D has changed office address by sending removal notice to P.
 Service is good even writ has not actually been brought to notice of D
 S8 IGCO: service is deemed to take place on date which the letter would be delivered in
“ordinary course of post” which is to be established on facts
 Treasure Land (CA): O 10 r 1 is not intended to apply to service on a limited company. Service
is exclusively governed by s356 CO.
 GITIC v Yuet Wah: relying on O 65r 3 (2), that O 10 r 1 applies to service on limited company.
 If company has no registered office (becomes body corporate), O65 r3 applies. Service is
effected either (1) personal service or (2) registered post.
 May need to argue for both!

 Service on Overseas Company carrying on business in HK

S333A Companies Ordinance: overseas company is required to deliver to Registrar of Company, the
name and address of at least 1 person residing in HK authorised to accept on behalf of the company
service of process and notice. This person is company’s authorised representative.

s 338 (1) CO: process is sufficiently served if addressed to authorised representative and left at/sent by
registered post to his address.

S338 (2) (b) (i) CO: if company failed to register as an overseas company and failed to provide required
info of authorised representative, or authorised representative refuses to accept service or has died or
moved, service may be affected:

1. Leaving the writ/other originating process at or sending it by post to any place of business
established in HK
2. If company has no longer has any place of business in HK, by sending it by registered post to its
registered office, and a copy by post to its principal place of business in the place of its
incorporation (S338 (2) (a), (b) (i) CO)
3. If no such address has been registered, by leaving it at or sending it by post to any place in HK at
which the company has had its place of business within previous 12 months (S338 (2) (b) (ii)
CO)

24
  If foreign corporation has no place of business as at date of service, service under s 338 is
invalid.

S 341 CO: place of business includes share transfer or share registration office and any place used for
manufacture or warehousing of any goods
But does not include a place not used by company to transact any business which creates legal
obligation.

To prove existence of place of business, P has to show

1. Acts relied on to show that company is carrying on business in HK have continued for
sufficiently substantial period of time
2. Acts must have been done at some fixed place of business
3. There must be a person in HK who carries on the business for the company in HK rather than
simply acting as company’s agent
Singamas Management Services Ltd v Axis Intermodal (UK) Ltd T/A Seaaxis: UK incorporated
company (not registered as an overseas company under Part XI of the Companies Ordinance) carrying
on business in Hong Kong through its Hong Kong holding company as its agent did not amount to
establishing any place of business in Hong Kong. Hence, the plaintiff’s purported service on the UK
Company at its holding company’s address in Hong Kong was held to be invalid and the resulting
default judgment set aside.

 Overseas company set up representative office in HK for promotion/public relations activities,

does not create legal obligations. So not place of business
 Service must then be effected by O 65 r 3.

2.7 Service on Partnership

O 81 r 3: writ/originating summons is to be served in 1 of following 3 ways

a. On any 1 or more of partners (O 81 r 3 (1) (a))
 Must comply with modes of service in O 10 r 1, there must be personal service, or service by
registered post, or service through partner’s letter box at his usual or last known address.
 Includes address that a partner practises his profession or his business address
b. At their principal place of business within the jurisdiction, on any person having control or
management of the business at the time of service (O 81 r 3 (1) (b))

c. Sending a copy of writ/originating summons by registered post to the firm at its principal place
of business within the jurisdiction
 Date of service deemed to be 7th day after date on which the writ is sent to firm.

Service in any 1 of above is deemed due service, whether or not any partner is out of jurisdiction (O 81
r 3 (1))
• Read O 81 r 5:
Judgment creditor can levy execution against all property of the firm within the jurisdiction, private
property of any person who has acknowledge service of writ in action, or was served as a partner, or
who admitted in his pleading or was adjudges as partner

25
2.8 Substituted service

What happens if P cannot effect service by any of the above methods?

O 65 r 4:
 Where it is impracticable for any person to serve the writ or other originating process, court may
order substituted service.
 Plaintiff may obtain order for substituted service where personal service or alternative forms of
service are impracticable (If D cannot be located)
 Apply to all personal service
 Abbey National plc v Frost (Solicitors’ Indemnity Fund Ltd intervening): O 65 r 4 not
subjected to requirement that order would be likely to bring the writ to the attention of D
 A case is not rendered unsuitable for substituted service simply because D’s whereabouts are
unknown and there is no likelihood that the writ would reach him or come to his knowledge
 See Chan Yeuk Mui v Ng Shu Chi [1999] 2 HKLRD 376; [1999] 2 HKC 704 CA; [1999] 2 All
ER 206 CA

 In exercising discretion to permit substituted service under O 65 rule 4 (1), the court must consider
whether the form of service proposed would be effective to bring the writ to the notice of the
defendant.

2.9 Service outside the jurisdiction

 O11 r 9: O11 applies to all originating process and summons, notice or order in pending proceedings
 General rule: Leave required under O 6 (for issuing writ) and O 11 (for service)

Seaconsar Ltd v Bank Markazi [1994] 1 AC 438 [1993] 4 All ER 456

Three stage evaluation:

1. whether P has a good arguable case that his claims falls within one of the heads listed in O 11 r
1(1)(a) to (p) (the jurisdiction requirement)

 Require something better than a mere prima facie case

 P may choose which subsection to rely on
 See book chapter on “service outside jurisdiction” for the heads

2. whether P’s evidence discloses a serious issue to be tried, so as to satisfy the court under O 11 r
4(2) that the case is a proper one for service outside the jurisdiction (the merits requirement)

 Only necessary for P to show that there is a serious question to be tried or a substantial question of
fact or law which P bona fide desires to try

 Lower standard of proof than ‘good arguable case’ test under O 11 rule 1 (1)

26
 Distinguish between good arguable case (to consider whether O 11 rule 1 (1) applies) and serious
issue being tried applicable to merits of P’s claim

 When court does not need to consider merits separately: P brings his claim within sub-paragraph (d)
or (e) of O 11 r 1 (1). Court must satisfy as to existence of contract, its breach and place of breach.
Court does not need to consider merits again.

3. whether in the exercise of the court’s discretion (with particular reference to the issue of forum
conveniens) leave should be granted (the discretion exercise)

 Whether HK courts or other foreign courts will be suitable to try the case
 Which is the most appropriate forum in which the actions may be tried more suitably for the interest
of all the parties and for the end of justice
- Is there another forum other than HK which is clearly and distinctly more appropriate than HK?
- Will the holding of the trial in that foreign forum deprive P of any legitimate personal or judicial
advantage that he would enjoy if the trial was in HK?
- Court has to balance advantages of having natural forum against detriment suffered by P.

C. Acknowledgment of Service

 Within 14 days after service of the writ (including the date of service), the defendant must file an
Acknowledgment of Service in the prescribed form with the Court Registry (O 12 rr 1-5),
otherwise default judgment may be obtained by the plaintiff (see Seminar 3 on default judgment).

 In the Acknowledgment of Service, the defendant is required to state his address and check the box
to indicate whether he intends to contest the proceedings.

 If the defendant wishes to dispute the court’s jurisdiction under any of the grounds set out in O 12 r
8, he must first file the Acknowledgment of Service stating an intention to defend and then within
the time limited for filing the defence make an application to the court to challenge jurisdiction (O
12 r 8).

27
 Appendix 1
Rules in relation to Particular Parties

1. Persons under a Disability

 Means a person who is a minor or a mentally incapacitated person: O 80 r 1.

 A minor (or an infant) is one under the age of 18: s 6 Age of Majority (Related Provisions) Ordinance.

 A mentally incapacitated person means a mentally disordered person or a mentally handicapped

person (within the meaning of the Mental Health Ordinance) who by reason of mental disorder or
mental handicap is incapable of managing and administering his property and affairs.

 Commencement of Actions - must bring proceedings by next friend and must defend (or make
counterclaim) by guardian ad litem. O 80 r 2(1)

 The next friend or guardian ad litem must Not be a person having an “adverse interest” (see 081 r3(8)
(c)(iii)). Usually the person’s close family member.

 The next friend or guardian ad litem must act by a solicitor4 (O80 r 2(3)).

 Certain documents must first be filed: O 80 r 3(8).

(a) A written consent of the next friend or guardian ad litem to act;

(b) If the next friend or guardian ad litem has already been appointed under the Mental Health
Ordinance, a sealed copy of the previous Court Order;
(c) If no previous appointment has been made, a certificate from the solicitor certifying
(i) that he knows or believes that the client is a minor or mentally incapacitated person
(giving the grounds of his knowledge or belief);
(ii) that in the case of a mentally incapacitated person, no other person has been appointed
under the Mental Health Ordinance; and
(iii) that the next friend or guardian has no adverse interest.

 Description: -

Plaintiff: “AB, a minor/infant/patient, [suing] by XY his [father and] next friend.

Defendant: “CD, a minor/infant/patient [sued] by YZ his [mother and] guardian ad litem”

2. Companies

 A company is a legal entity in its own right so must sue and be sued in the company name. Its trading
name cannot be used as a substitute, though may be added as a further description: e.g. “ABC Ltd
[trading as PCLL Restaurant]”.

4
Unless the Official Solicitor (who is the Director of Legal Aid) is acting as the next friend or guardian ad litem

28
 A company must be represented by a solicitor in the CFI unless the court grants it leave to be
represented by one of its directors. O 5 r 6 RHC.

 However, a company may be represented by one of its directors in the District Court if that director
has been so authorized by the board: O 5A r 2(2) RDC

 Where proceedings are commenced by a company which is in liquidation, the fact of liquidation
should be made clear in the title to the proceedings and the body of the writ etc, eg “ABC Ltd (in
liquidation)”: Akira Sugiyama v Kosei Securities Co (Asia) Ltd ([1992] 1 HKC 261

3. Partnerships

 A partnership firm is not a legal entity but is comprised of individual partners. Hence, its partners may
sue or be sued as such, e.g. “AB, CD and EF, partners of X Investments (a Firm)”

 As a matter of convenience and as an alternative, O 81 r 1 allows partners to sue or be sued in the

firm’s name, e.g. “X Investments (a Firm)”.

4. Sole Proprietorships

 The legal entity of a sole proprietorship is the sole proprietor himself (but not his trade name). Hence,
the sole proprietor may sue or be sued as such (perhaps with the trade name added as a further
description), e.g. “AB [trading as Ming Kee Trading]”

 Alternatively, O 81 r 9 allows a sole trader to be sued in his trade name as if it were a partnership
firm5, e.g. Defendant: “Ming Kee Trading [a firm]”. The rationale is to prevent a sole proprietor from
escaping liability by reason of his creditor’s unawareness of the true name of the person operating the
business6.

 However, it was held by the Court of Appeal in Survival Technology v Loh & Co [1986] HKC 64
that O 81 r 9 applied only to natural individual but not to a limited company trading under a firm
name. Hence, a limited company trading under a firm name (e.g. PCLL Restaurant) cannot be sued
as “PCLL Restaurant [a firm]”.

5. Trustees and Personal Representatives

 Representative capacity should be indorsed on the Writ: O 6 r 3

 Damages to a deceased person may be claimed for the benefit of dependants under the Fatal Accidents
Ordinance (‘FAO’) and for the estate of the deceased under the Law Amendment and Reform
Consolidated Ordinance (“LARCO”). Action should be commenced in the name of the executor or
administrator of the deceased.

 Description:

5
N.B. O 81 r 9 does not apply when the sole trader is the plaintiff.
6
Mary L Lynn v Consolidated Sales Ltd [1970] HKLR 373 at 380, FC

29
 Where an administrator sues: “AB, Administrator of the Estate of XY, deceased”
 Where executors or trustees sue: “AB and CD Executors [or Trustees] of the Will of XY, Deceased”.

 If, for example, the wife of a deceased person has also suffered injuries in the same accident and so is
also claiming for her own damages, the description may be: “AB, suing in her own capacity and as
Administratrix [or Executrix] on behalf of herself and the other dependants of the XY, Deceased”.

6. Representative Actions

 O 15 r 12(1): “where numerous persons have the same interest in any proceedings...the proceedings
may be begun by or against any one or more of them as representing all or as representing all except
one or more of them”

 All persons represented must have the same interest, which is satisfied if (a) they have a common
interest and (b) they have a common grievance; and (c) the relief sought is in its nature beneficial to all
whom the plaintiff proposes to represent. E.g. six fruit growers were entitled to represent all other fruit
growers claiming rights over stands at the defendant’s market: CBS/Sony Hong Kong Ltd v
Television Broadcasts Ltd [1987] FSR 262

 No leave required for commencement but court has power to strike out the name of any party whose
interest is dissimilar.

 Description: “AB, Chairman of XYZ Club, suing on behalf of all members of XYZ Club”.

7. Government

 The government is amenable to civil suit and no prior consent is required (Crown Proceedings
Ordinance, s 3).

 It should sue and be sued in the name of the Secretary for Justice (s 13 Crown Proceedings Ordinance;
see also O 77).

30
SEMINAR 3: DEFAULT JUDGMENT, JUDGMENT ON ADMISSION AND SUMMARY
JUDGMENT

A. Default Judgment (DJ)

P may obtain judgment either

 in default of notice of intention to defend (O 13)
 in default of defence (O 19)

1. Judgment in Default of Notice of Intention to Defend (O 13)

1.1 Claim for liquidated demand

O 13 r 1:
 Where a writ is indorsed with a claim
 against a defendant for a liquidated demand only, then,
 if that defendant fails to give notice of intention to defend,
 the plaintiff may, after the prescribed time, enter final judgment against that defendant
 for a sum not exceeding that claimed by the writ in respect of the demand and for costs,
 and proceed with the action against the other defendants, if any.

- Only applies to writ of summons

- If claim falls within rule 1-5, judgment in default is as of right
Rule 1: claim for liquidated demand only
Rule 2: claim for unliquidated damages only
Rule 3: clam relating to detention of goods only
Rule 4: claim for possession of goods only
Rule 5: 2 or more of the above claims
- Time for entering DJ:
1) If no AS filed, P may enter DJ after expiry of 14 days from date of service of writ.
2) If D filed AS stating intention not to defend, P may enter DJ after date on which the
acknowledgement of service was filed.
- P has to prove either:
1) D has acknowledged service but stated intention not to defend
2) Affidavit of due service filed on behalf of P
3) P produces writ endorsed with D’s solicitor’s statement that he accepts service on D’s behalf
- Final judgment: only for Rule 1 and 4
- Interlocutory Judgment: Rule 2 and Rule 3
- Mixed claim: final for Rule 1 or 4 claim, interlocutory for Rule 2 or 3 claim
- Claim not fall within above categories: P cannot obtain judgment in default of notice of intention to
defend, must serve statement of claim and proceed as if D as given intention to defend

Liquidated demand: debt, amount must either already ascertained OR capable of being ascertained as
mere matter of arithmetic (e.g. claim for stated sum of money paid to D for consideration which has
failed)
- Interest under s48 HCO or s49 DCO does not prevent the claim become liquidated. P can claim +

31
 interest.

Unliquidated damages: need investigation beyond mere calculation (e.g. tort, breach of contract)
- Claim does not become liquidated by expressing in specific sum: Joseph Yen & Co v Luen Cheong
Hong (1952) amount specified under breach of contract not liquidated demand
- Liquidated damages vs. penalty clause: Sum specified as being payable in event of breach of
contract, whether liquidated or not depends on whether it is genuine pre-estimate of damages
flowing from breach
- Final judgment for unliquidated damages: irregular and may set aside
- D must be given 7 days’ notice of hearing of assessing damages in interlocutory judgment.
- Rules of mutual discovery and exchange of documents apply.
- Amount for liquidated demand: only the amount actually due at time of judgment. Credit given for
payments made after commencement of action (e.g. cheque received after commencement of action)
- Judgment for too large sum: court has discretion to reduce sum to correct amount
- More than 1 Defendant: P can obtain DJ against one of them and proceeds action against others.
Special case: if P’s claim against one D is alternative to his claim against other Ds, claim against
other co-Ds based on mutually inconsistent assumption of facts, DJ entered is a bar to action against
other co-Ds.
- Advice: in claims are alternative, don’t apply for default judgment!

Judgment in default of defence (O19):

P may enter judgment if D fails to serve defence within 28 days after: -

(a) time for acknowledging service of writ (AS); or
(b) after service of writ, whichever is later.

- Forms of judgment under this ground: same as above, except for claims not falling within any of
the above grounds (O19 R2-5, which are equal to O18 R1-4), P may apply to court by summon
for DJ.
- COMPARE judgment in default of notice of intention to defend & judgment in default of
defence: (O19 Rule 8A) If D has given notice of intention to defend, no judgment in default of
defence (O19) unless
1) After filing acknowledgement of service and 2 clear days before judgment, P has served notice in
writing of his intention to do so on D or his solicitor AND
2) Affidavit proving such evidence filed in court
3) Above requirements do not apply if court order to extend time for service of defence or D failed
to state his address for service in his acknowledge of service.
- D who counterclaims against P is treated as plaintiff under O19.

More than 1 Def:

 In general P may obtain default judgment against one D and proceed with the action against the
other(s).

 But if P’s claim against D1 is alternative to the claim against D2 in circumstances that the claims
against the co-defendants are based on mutually inconsistent assumptions of facts, default
judgment against one might arguably be treated as an irrevocable election and constitute a bar to

32
 the action against the other (see Morel Bros & Co Ltd v Earl of Westmoreland [1904] AC 11;
[1900-03] All ER 397 and Bonus Garment Co v Karl Rieker GmbH & Co KG [1997] 2 HKC 460
PC)

1.2 Claim for unliquidated damages

• Read O 13 r 2:

“Where a writ is indorsed with a claim against a defendant for unliquidated damages only, then, if that
defendant fails to give notice of intention to defend, the plaintiff may, after the prescribed time, enter
interlocutory judgment against that defendant for damages to be assessed and costs, and proceed with
the action against the other defendants, if any.”

• Not final judgment, only interlocutory judgment for damages to be assessed

What steps need to be taken to assess damages after obtaining interlocutory judgment? (see O 37)

• Damages are assessed at a subsequent hearing before a Master under O 37.

• D must be given at least 7 days’ notice of the hearing - O 37 r 1.

• Rules governing mutual discovery and exchange of witness statements also apply automatically
unless the Master directs otherwise - O 37 r 1(1A).

• Where the default judgment is obtained against some but not all defendants, the damages will be
assessed at the trial unless the Court orders otherwise - O 37 r 3.

1.3 Claim for detention of goods

• Read O 13 r 3

“(1) Where a writ is indorsed with a claim against D

- relating to the detention of goods only, then,
- if D fails to give notice of intention to defend
- P may, after the prescribed time and subject to Order 42, rule 1A-
- (a) at his option enter either-
- (i) interlocutory judgment against that defendant for delivery of the goods or their value to be
assessed and costs; or
- (ii) interlocutory judgment for the value of the goods to be assessed and costs; or
- (b) apply by summons for judgment against that defendant for delivery of the goods without
giving him the alternative of paying their assessed value,
- and in any case proceed with the action against the other defendants, if any. (See App. A Form
41)
- (2) A summons under paragraph (1)(b) must be supported by affidavit and notwithstanding
Order 65, rule 9, the summons and a copy of the affidavit must be served on the defendant
against whom judgment is sought.”

33
1.4 Claim for possession of land

• Read O 13 r 4:

Where a writ is indorsed with a claim against a defendant for possession of land only, then,
if that defendant fails to give notice of intention to defend
the plaintiff may, after the prescribed time, and on producing a certificate by his solicitor, or (if he sues
in person) an affidavit, stating that he is not claiming any relief in the action of the nature specified in
Order 88, rule 1, (mortgagee action)
enter judgment for possession of the land as against that defendant and costs, and proceed with the
action against the other defendants, if any.”

1.5 Mixed claims

• Read O 13 r 5:

“Where a writ issued against any defendant is indorsed with two or more of the claims mentioned in the
foregoing rules, and no other claim, then, if that defendant fails to give notice of intention to defend, the
plaintiff may, after the prescribed time, enter against that defendant such judgment in respect of any
such claim as he would be entitled to enter under those rules if that were the only claim indorsed on the
writ and proceed with the action against the other defendants, if any”

1.6 Other claims

O 13 r 6:
Where a writ is indorsed with a claim of a description not mentioned in rules 1 to 4, then,
 if D fails to give notice of intention to defend,
 P may proceed with the action as if D had given notice of intention to defend IF:
 after the prescribed time and,
1. if D has not acknowledged service, upon filing an affidavit proving due service of the writ on
him and,
2. where the statement of claim was not indorsed on or served with the writ, upon serving a
statement of claim on him,
(2) Where a writ issued against D is indorsed as aforesaid, but by reason of D’s satisfying the claim or
complying with the demands thereof or any other like reason it has become unnecessary for P to proceed
with the action, then, if D fails to give notice of intention to defend, P may, after the prescribed time,
enter judgment against D for costs.”

1.7 Proof of service of writ

• O 13 r 7

Judgment shall be entered against a defendant ONLY IF

(a) D has acknowledged service on him of the writ; or
(b) an affidavit is filed by or on behalf of P proving due service of the writ on the defendant;
or

34
 (c) P produces the writ indorsed by D’s solicitor with a statement that he accepts service of
the writ on D’s behalf.”

1.8 Writ Returned After Judgment

• Read O13 r7

(3) Where, after judgment has been entered against a defendant purporting to have been served by post
under Order 10, rule 1(2)(a), the copy of the writ sent to the defendant is returned to the plaintiff through
the post undelivered to the addressee,
The plaintiff shall either-
(a) make a request for the judgment to be set aside on the ground that the writ has not been duly served,
or
(b) apply to the Court for directions.

(4) A request under paragraph (3)(a) shall be made by producing to an officer of the Registry and
leaving with him for filing, an affidavit stating the relevant facts, and thereupon the judgment shall be
set aside and the entry of the judgment and of any proceedings for its enforcement made in the book
kept in the Registry for that purpose shall be marked accordingly.

(5) An application under paragraph (3)(b) shall be made ex parte by affidavit stating the facts on which
the application is founded and any order or direction sought, and on the application the Court may-
(a) set aside the judgment; or
(b) direct that, notwithstanding the return of the copy of the writ, it shall be treated as having been duly
served; or
(c) make such other order and give such other direction as the circumstances may require.

 Fok Chun-hung v Lo Yuk-shi [1995]: when a writ served by registered post was returned
undelivered after default judgment has been obtained, the default judgment must be set aside
unconditionally without regard to the merits of the defence.

1.9 Cases outside the scope of O 13

 Proceedings by originating summons is governed by O 28 (cf r 6 on failure to acknowledge

service)
 Inapplicable to special types of proceedings such as Admiralty actions in rem (O 75, r 21);
actions against a person under a disability until guardian ad litem has been appointed (O 80, r 6);
probate actions (O 76, r 6(1)); third party proceedings (O 16, r 5)
 Leave of the court required in other cases e.g. actions against the Government(O 77, r 9(1));
mortgage actions (O 88, r 6(1)); actions by a money lender (O 83A, r 4); actions arising out of
hire-purchase or conditional sale agreements (O 84A, r 3); actions in tort between husband and
wife (O 89, r 2)

2. Judgment in Default of Defence (O 19)

2.1 Ordinary Claims

35
Requirements:
1. D fails to serve his defence within 28 days after time limit for acknowledging service of writ or
after service of statement of claim on him, whichever is later
2. Falls within O19 r2-5 (same as O13 r1-4)

Exception: if claim not fall within r2-5, P may by summons apply to court for default judgment and
court shall give such judgment as P appears entitled to on the statement of claim.

2.3 Notice of Intention to Enter Judgment

O 19 r 8A
 Important procedural difference in [judgment in default of notice of intention to defend] and
[judgment in default of defence]
 If D has given notice of intention to defend, judgment in default of defence shall be entered ONLY
IF
1. After filing of acknowledgment of service and not less than 2 clear days before entering
judgment, P intending to enter judgment has served notice in writing of his intention to do so on
D (or his solicitors), AND
2. Evidence of such service by way of affidavit has been filed in court
 This requirement does not apply [O 19 r 8A (2)]
1. if court has made an order prescribing or extending time for service of defence, or
2. where D acts in person but failed to state his address for service in his knowledge of service

Ho Yuen Tsan v Hop Wing Transportation Co Ltd [1996]

 2 clear days’ notice may be served immediately after filing of the acknowledgment of service
without any need to wait for actual default occurring
 P could enter default judgments notwithstanding that a summon for leave to extend time for filing
the defence was taken out by D

3. Setting Aside Judgment in Default

3.1 Principles

O 13 r 9 and O 19 r 9: The Court may, on such terms as it thinks just, set aside or vary any judgment
entered in pursuance of this Order.

Regular judgment: complied with all procedural requirements

 Court has discretionary power to set aside default judgment
 Factors include
o merits of defence
o D’s explanation as to why he allowed DJ to occur,
o D’s delay
o prejudice caused to P or TP if DJ is set aside
 Most important consideration: whether D can show defence on merits. If D has meritorious
defence, court will permit him to go to trial.

36
 o BUT not auto entitlement
o Meritorious Defence: real prospect of success, not merely arguable defence (satisfy the
court that his case and evidence adduced carry some conviction, court has to form
provisional view of the case.

Set aside regular default judgment

GITIC v Yuet Wah
- Where outcome of action is so dependent on whose oral evidence is likely to be accepted, court
may not form a provisional view of outcome.
- Appropriate test of “real prospect of success” is to ask whether the defence could be established
or believed at trial.
O Mark Polyethylene Products Factory Ltd v Reap Star Ltd [2003]
- If provisional view of a case cannot be formed, the appropriate test is simply whether the defence
could well be established at trial.
L&M Specialist Construction Ltd v Wo Hing Construction Co Ltd [2000]
- Defence must have real prospect of success or carry some degree of conviction, so court must
form provisional views of probable outcome, unless such provisional view cannot be formed
without trial of facts.
Young Bing Ching v Chow Yung Fong
- Court will balance other factors, such as long delay of D and prejudice of P and TP

Set aside irregular default judgment

Chu Kam Lun v Yap Lisa Susanto [1999]
- Where the judgment is irregular, it should be set aside without going into the merits of the
defence
- Obiter: where a defence is clearly hopeless, pointless to set aside judgment even if irregular
Liu Chong Hing Bank Ltd v Union World (HK) Ltd & Ors [2005]
- The court will not require D to show that he has a defence on the merits, D is entitled to set aside
an irregular judgment as of right
- In exercising the discretion, the court can consider other relevant matters, like conduct of D after
he learned of the proceedings
- If D delayed substantially before applying to court to set aside judgment, the court is justified to
set aside on terms.
Fok Chun-hung v Lo Yuk-shi [1995]
- When a writ served by registered post was returned undelivered after default judgment has been
obtained, the default judgment must be set aside unconditionally without regard to the merits of
the defence.

3.2 Costs Order

A distinction should generally be drawn between

a. setting aside a regular judgment and an irregular judgment (Consider: who is at fault in
necessitating the setting aside judgment application and so who should bear the costs?): See
Ko Sin Yun v. Chan Chuen & Another [2007] 1 HKLRD 324 (CA) per Cheung JA at para 21
b. the costs of the application and the costs of the contested hearing

37
 Where an irregular judgment is set aside, P will normally have to bear D’s cost of application. If
application is contested, D will normally be awarded the costs of hearing.
 Where a regular judgment is set aside, D will normally have to bear P’s costs of application. Court
may make different cost order relating to contested hearing, depending on its assessment as to
whether and when P should have conceded the application.
 But there are no absolute rules. The Court has a very wide discretion to award different costs orders
so as to do justice in individual cases.
 E.g. if court thinks that no party is at fault (or both are at fault), it may order “costs be in the cause”
or bears his own costs.

Admissions in Money Claims

A plaintiff may file a request for judgment where the only claim that the plaintiff is seeking is a money
claim and the defendant admits the claim under the procedure prescribed in Order 13A.

1. Liquidated Amount of Money Claim

 The defendant may admit the whole or part of the claim, and may make a request for deferred or
instalment payments.

2. Unliquidated Amount of Money Claim

 The defendant may admit liability (in which case damages will be assessed by the court), or admit
liability and offer a sum in satisfaction of the claim. In either instance the defendant may make a
request for deferred or instalment payments.

Form and Deadline

1. Form 16 (liquidated amount), 16C (unliquidated amount)
2. Deadline: Within period fixed for service of defence (i.e. 28 days after Statement of Claim or time
limited for A/S).
3. D may serve an admission after this period if P has not obtained a default judgment.
4. Originating summons action: deadline is the period fixed for filing affidavit (or after this period
provided it is before the date fixed for hearing of the summons).
5. Applicable to Counterclaim and TP claim with necessary modifications: O 13A r 14(2) and (3)
6. New Form 15 for A/S: additional box to indicate whether D intends to admit
7. In cases where judgment is obtained on the basis of D’s admission to a liquidated sum or D’s offer in
satisfaction for an unliquidated amount, judgment must include the amount of interest claimed to the
date of judgment (O 13A r 12).

 The procedure applies to counterclaims and third-party proceedings. O13A r 14(1)

P’s Request for Judgment

 P must respond by filing a reply and/or request for judgment in prescribed form
 If P fails to do so within 14 days after copy of admission is served on him, the claim is stayed until
he files the request.
1. D admits whole of liquidated amount →
P files Form 16A and obtains judgment with fixed costs and interest.
2. D admits part of liquidated amount →

38
 P files Form 16B, either (a) obtains judgment on admitted sum with fixed costs and interest, or
(b) not accept and continue with action
3. D admits liability for the unliquidated amount without offering any sum →
P files Form 16D and obtains interlocutory judgment for an amount to be decided by the Court
and costs
4. D admits liability for unliquidated amount and offers a sum →
P files Form 16E, either (a) obtains judgment on sum offered with fixed costs and interest, or (b)
obtains interlocutory judgment for an amount to be decided by the Court and costs

Proposal for Deferred Payments

1. P accepts D’s proposal => execution of judgment is stayed pending payment according to the
proposal.
 If D defaults on any instalment payment, the stay of execution ceases immediately
and P can enforce entire claim.
2. P does not accept D’s proposal => P must state reasons for objection and may make counter-
proposal
 Judgment will be entered for amount admitted to be in accordance with terms
determined by the court.
 Court can make assessment with a hearing (parties given 7 days’ notice), or on papers (but must take
into account information and reasons filed by D and P).
 If decision on papers, either party can apply for the court’s decision to be re-determined (within 14
days of notice of determination)

 If D intends to make admission under O 13A, in the A/S should he check Yes or No to the box
whether D intends to contest the proceedings?
 Note: O 13 has not been amended or made subject to O 13A: No intention to defend => P may
obtain judgment under O 13
 If acting for D: should still stating an intention to defend
 If acting for P and D does not state an intention to defend, NOT advisable to obtain judgment (Court
may set it aside so as not to allow P to get around O 13A)
 Does “liquidated/unliquidated amount of money” = “liquidated/unliquidated claim” in O 13/O 19?
 cf UK CPR: “specified/unspecified amount of money” for both Part 12 Default Judgment and Part
14 Admissions

Disadvantage of procedure
 If D does not ask for time to pay, seems little advantage (cf. allowing default judgment under O 13
or making a sanctioned payment if D wishes to pay less)
 If D requests time for payment, he is required to make extensive disclosure of financial situation on
oath.
 Rules silent on principles to be adopted by court for resolving disputes between parties who do not
agree on proposals for payment.
 => rather unattractive to many Ds

Summary Judgment

Use and Abuse of the Procedure

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  Summary judgment is a very useful procedure whereby the plaintiff can obtain judgment without
trial on ground that the defendant has no defence to the claim

 Enable the plaintiff to obtain judgment quickly, avoiding all interlocutory procedures (e.g.
discovery, further and better particulars etc) and avoiding the expenses and delay in having a full
trial.

 Summary judgment can cover whole or part of one’s claim.

 If there is no defence on liability but there is triable issue on quantum of damages, application
should be for interlocutory judgment on liability with damages to be assessed.

 Main difference between O14 procedure and O86 procedure: under the latter, application can be
made even before D has acknowledged service of the writ and that P’s summons must set out or
have attached to minutes of the judgment sought.

5. Order 14 Procedure

 Read O 14 r 1

 O 14 r 1(2): Generally available to action begun by writ

 Exceptions: libel, slander, malicious prosecution, false imprisonment or seduction, fraud,
Admiralty action in rem
 Meaning of fraud exception

5.1 Scope of Order 14

Comsec Travel Ltd v Fok Hing Tours Co Ltd [2002]

 Even if the fraud exception as narrowly defined does not apply, the court may still be reluctant to
grant summary judgment if it involves a serious allegation of misconduct or foul play against the
defendant. (allegation is serious, court wishes to give D chance to defend)
 The Court of Appeal held that although the plaintiff’s claim was not within the narrowly defined
fraud exception, it could not be right for a court to conclude that the defendant was guilty of
conspiracy to defraud the plaintiff in summary proceedings save in the clearest possible case and
where the evidence was overwhelming. 

PEWC v Harmutty Ltd and Others [2009]

 Order 14 rule 1(2)(b) expressly excludes the summary judgment procedure from ‘an action which
includes a claim by the plaintiff based on an allegation of fraud’
 There may be one or more claims in the action and the rule envisages that one of the claims may not
be based on an allegation of fraud but another may be. In those circumstances it is clear that an
application for summary judgment under O 14 will NOT lie. (none of the claims can be fraud)

40
 the rule is not confined to excluding actions in which one of the claims is a claim for damages for
fraud, what is excluded is any action where there is a claim in respect of which the underlying
allegations on which the claim is based constitute an allegation of fraud.’
 Exclusion applies so long as one of the claims is based on fraud, no summary judgment even if it is
based on other non-fraud claims
 Claim for fraud vs. claim based on an allegation of fraud
 Fraud exception is still narrowly construed to cover allegations of deceit or false representation with
deliberate dishonesty so that an allegation of ‘fraud on minority’ or ‘fraudulent preference of
creditors’ does not fall under the fraud exception.
 in Borri S.P.A v Tralco Technology Ltd And Others CACV 207/2009, 29 Jan 2010, Rogers VP
explained, “What was said by this court in [the PEWC v Harmutty Ltd case] was that those
provisions of Order 14 preclude both actions for fraud in the Derry v Peek sense and claims which
are based upon allegations of fraud in the Derry v Peek sense. They do not preclude claims which
are based on passing-off by the defendants.”

N.B. The fraud exception contained in the RHC was abolished in England in 1992 but still remains in
Hong Kong (No change under the CJR)

5.2 The Time at which Application may be made

 O14 r1 (1): summary judgment application under O14 can only be made after D has given notice
of intention to defend and has been served with statement of claim. Application can be made
either before or after the defence has been filed.
 only the start-line but no deadline fixed.
 But court will likely be critical of delay under CJR principles of active case management.
 NOTE: if the application is made before filing of the defence, D is no longer required to serve
his defence until 28 days after he has obtained leave to defend upon resolution of the summary
judgment application [O18 r2 (2)]. Unsuccessful summary judgment will delay progress of
action.
 Court may refuse any late summary judgment application if it would necessitate a change in a
milestone date (day fixed for trial, pre-trial review, case management conference)

Morison, Son & Jones (Hong Kong) Ltd v Yiu Wing Construction Co Ltd [1989]
 Delay of application will be considered by court when looking at substance and merits of the
application and when deciding costs

5.3 How is the Plaintiff’s Application Made?

 Summary judgment application is made by summons supported by affidavit [O14 r2 (1)]

 The summons and the supporting affidavit must be served on D not less than 10 days before the
hearing (the return date) [O14 r2 (3)]
 Affidavit must verify the facts upon which the claim is made and state that in the deponent’s
belief there is no defence to the claim [O14 r2 (1)]
 If affidavit filed does not comply with the rule, the summons may be dismissed with costs.

41
  Hongkong Chinese Bank Ltd v Delon Photo & Hi-Fi Centre Ltd [2000]: Court may exercise its
discretion to allow any defects or omissions in the original affidavit to be cured by an affidavit
made subsequently.
 Affidavit should be sworn by client but not the solicitor, unless the facts are unlikely to be
disputed and the client is living overseas.
 Mutual Luck Investment Ltd v Chiu Yim Man [1999]: if P or D swear or affirm to false
information they can be prosecuted for perjury. If solicitors swear to such information, he may
attract such liability.

5.4 Principles Governing the Determination of the Application

O14 r 3: the court should give judgment for P unless:

1. P’s case does not fall within scope of O14, and should be dismissed
2. P fails to comply fully with procedural requirements for the application, such as the affidavit in
support is defective. If the defect is capable of amendment, the court may give leave to amend
and proceed on amended application, subject to adjournment of costs
3. D satisfies the court that there is an issue or question in dispute which ought to be tried (triable
issue)

O14 r4: burden is on D to satisfy the court on a balance of probabilities there is a triable issue. He is
required to file an affidavit on merits to discharge the threshold onus.

Re Safe Rich Industries Ltd: test at summary stage is whether D’s assertion is believable, not by taking
those allegations in isolation but taking them in the context of the background as either undisputed or
beyond reasonable dispute. In dealing with factual disputes on summary judgment, the issue is whether
D’s assertion is capable of belief, court must refrain from trying credibility on conflicting affidavit
evidence.

Talent Wise Ltd v Cheung Shui Ching [1998]: leave to defend may be given even if no defence is
shown, if reason of D not having defence is due to some hardship.

5.5 The Order of the Court

The court may

1. Grant judgment for P with costs
2. Grant unconditional leave to defend, costs be costs in the cause
3. Grant conditional leave to defend
4. Dismiss the application and order costs in favour of D [O14 r7] if P knew at the outset D has
arguable defence
 The successful party’s costs will be subject to summary assessment by the court or taxation.

5.6 Conditional Leave

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  Usually with conditions, e.g. provide security, make a payment into court for full/pat of P’s
claim
 Per Godfrey J in Unic Company (a firm) v Centus Development Ltd [1988] HKC 643:

If there is no sign of bad faith, or anything to show that the defence raised is a sham, nor anything
suspicious about the defendant’s case, leave to defend should not be made conditional. Further leave
to defend should not be made conditional where, on the evidence as to the financial circumstances of
the defendant, it is plain or even probable that to give the defendant leave to defend only upon
condition that he pays the whole sum into court would be tantamount to refusing him leave to defend
at all.

 It would be improper for the court to impose a condition that, by virtue of his impecuniosity, the
defendant could not fulfil. If such a condition is proposed, it is for the defendant to adduce
evidence of his means to establish that impecuniosity (see e.g. M.V Yorke Motors (a firm) v
Edwards [1982] 1 WLR 444; [1982] 1 All ER 1024 (HL); Muhammad Ibrahim v Asmat Khan
[1986] HKLR 580.)

 Billion Silver Development Ltd v All Wide Investment Ltd [2000]: If D’s defence is shadowy
but P’s case has doubts on validity, unconditional leave to defend should be granted.

5.7 The Defendant Having a Cross-claim

Shenzhen Baoming Ceramics Co Ltd v Companion-China Ltd

An analysis of the authorities as to what order should be made where the defendant raises a set-off or
counterclaim shows that there are four different classes or groups of such orders, namely:
(a) where the defendant can show an arguable set-off, whether equitable or otherwise, he is entitled to
defend to the extent of the set-off and the court has no discretion;
(b) where the defendant sets up a bona fide counterclaim arising out of the same subject matter as the
action and connected with the grounds of defence, the order should not be for judgment on the claim,
subject to a stay pending trial of the counterclaim, but should be for unconditional leave to defend, even
if the defendant admits the whole or part of the claim;
(c) where there is no defence to the claim but a plausible counterclaim of not less than the claim is set
up, judgment should be for the plaintiff on the claim with costs, stayed until trial of the counterclaim;
(d) where the counterclaim arises out of a separate and distinct transaction or is wholly foreign to the
claim, judgment should be for the plaintiff with costs without a stay;
the lack of clarity between classes (b), (c) and (d) gives the court freedom to respond to the perceived
justice of the individual case.

Alco International Ltd v Akai Electronic Co Ltd

Legal set-off

Legal set-off is available if both claims are for liquidated sums. Thus, if a plaintiff has a claim for
unliquidated damages, the defendant cannot at law seek to set off a liquidated claim. This rule was
mitigated by the Court of Chancery through the doctrine of equitable set-off which is available in broad

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terms if there is a sufficient degree of connection between the two transactions, whether or not either or
both claims are unliquidated.

Equitable set-off

For equitable set-off to apply, it must therefore be established, first that the counterclaim is at least
closely connected with the same transaction as that giving rise to the claim, and second that the
relationship between the respective claims is such that it would be manifestly unjust to allow one to be
enforced without regard to the other.
 If it is arguable that there is a sufficient connection between the 2 transactions to invoke the
defence of equitable set-off, the court should give unconditional leave to defend.
 If there is no such connection, such a defence cannot be raised and summary judgment should
follow even though it may constitute a valid counterclaim.

5.8 Parallel Application for Interim Payment

O29 r10 (2): an application for interim payment may be included in the summons for summary
judgment. A parallel application for interim payment is advisable in following cases
1. When D may set up a shadowy though arguable defence. P may ask the court to exercise
discretion to order D to pay interim payment to P instead of paying into court in making
conditional leave.
2. When P is seeking interlocutory summary judgment on liabilities with damages to be assessed. P
may ask court to grant an interim payment under o29 r11 (1) (b) upon judgment on liability
being given.
3. When P is claiming for possession of land and rental arrears and/or mesne profits.

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SEMINAR 4: PLEADINGS AND THIRD-PARTY PROCEEDINGS

Further Reading:
Pages 254-262 of Chapter 6 and Chapter 8 of A Guide to Civil Procedure in Hong Kong (LexisNexis
2011)

Pleadings

 What are pleadings?

Pleadings include:

 Statement of Claim
 Defence (and Counterclaim)
 Reply (and Defence to Counterclaim)
 Particulars of pleadings
 Rare: Rejoinder => Surrejoinder => Rebutter => Surrebutter

Pleadings do not include:

 Petition, summons or preliminary act (O 1 r 4)

 General Indorsement of Claim (O 6 r 2(1); Edward Butler Vintners Ltd v Grange Seymour
Internationale Ltd [1987] 131 Sol Jo 1188; The Times 9 June 1987 (CA)
 Notice of Appeal
 Affidavit
 Witness Statement

 Importance and Functions of Pleadings

 Adversarial system=> terms of reference set by the parties by way of pleadings=> Court only
adjudicates disputes/issues defined by parties in their pleadings => Court in general cannot
determine an issue and grant the relief unless properly pleaded

 See Poon Hau Kei v Hsin Cheong Construction Co Ltd and others [2004] 2 HKLRD 442
CFA: The Court must be satisfied that the other party was fully aware of the case it had to
meet (usually by the matter being made clear in the pleadings) and had been given a full
opportunity to deal with it.

 Pleadings set the agenda for trial, but no AOB (Any Other Business)

 functions of pleadings as summarised by Bokhary JA Aktieselskabet Dansk Skibsfinansiering v

Wheelock Marden Co Ltd [1994] 2 HKC 264 (CA) at 269E-270E:
The things which properly particularised pleadings must do are to:
(1) inform the other side of the nature of the case they have to meet as distinguished from the
mode in which that case is to be proved;

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 (2) prevent the other side from being taken by surprise at the trial;
(3) enable the other side to know what evidence they ought to be prepared with and to prepare
for trial;
(4) limit the generality of the pleadings, the claim and the evidence;
(5) limit and define the issues to be tried, and as to which discovery is required; and
(6) tie the hands of the party so that he cannot without leave go into any matters not included
(although if the opponent omits to ask for particulars, evidence may be given which supports any
material allegation in the pleadings).”
 Formalities of Pleadings

Read O 18 r 6:

(1) Every pleading in an action must bear on its face: -

(a) the year in which the writ in the action was issued and the number of the action,
(b) the title of the action,
(d) the description of the pleading, and
(e) the date on which it was served.
(2) Every pleading must be divided into paragraphs numbered consecutively; each allegation contained
in a separate paragraph.
(3) Dates, sums and other numbers must be expressed in a pleading in figures and not in words.
(4) Every pleading must be indorsed-
(a) where the party sues or defends in person, with his name and address;
(b) in any other case, with the name or firm and business address of the solicitor by whom it was
served, and also (if the solicitor is the agent of another) the name or firm and business address of
his principal.
(5) Every pleading must be signed by counsel, if settled by him, and, if not, by the party’s solicitor or by
the party, if he sues or defends in person.

New Requirement under the CJR:

All pleadings and particulars of a pleading must be verified by a statement of truth in accordance with
Order 41A: O 18 r 20A

 Anyone who makes a false statement without an honest belief in its truth may be liable for
contempt of court.

 May either be signed by the party or his legal representative: O 41A r 3(1)(b). But in general, the
lawyer should not sign it unless it cannot conveniently be signed by the client, as the lawyer will
unlikely have direct knowledge of the relevant facts.

 Should read: “I believe [or if signed by the lawyer, The Plaintiff/Defendant believes] that the facts
stated in this Statement of Claim [or name of other pleadings] are true”.

 If the party is a corporation, must be signed by a person holding a senior position such as a director,
manager or secretary of the corporation: O 41A r 3(2) and (4).

46
 If the party is a partnership, must be signed by one of the partners or a person having the control or
management of the partnership business: O 41A r 3(6).

 If it is signed by the legal representative, must be signed in his own name instead of the name of the
firm: O 41A r 3(10). See also O 41A r 4(3) as to the implied representation given by the legal
representative when he signs the statement of truth on behalf of a party.

 See Kinform Ltd v Tsui Loi & Ors [2011] 5 HKC 426 (Deputy District Judge H Au Yeung) for a
rather rare example where two defendants were found guilty of contempt for making a false
statement under the Statement of Truth and was sentenced to imprisonment of five months and six
months respectively.

 Rules for Pleadings

 O 18 r 7(1) sets out the basic rules for a pleading.

 The basic rule is that every pleading must contain, and contain only, a statement in a summary
form of the material facts on which the party pleading relies for his claim or defence, as the case
may be, but not the evidence by which those facts are to be proved, and the statement must be as
brief as the nature of the case admits.

 O 18 rr 7(2) and (3), 7A, 8, 9, 10, 11, 12, 13, 14 and 15 set out the additional rules for a pleading.
See Appendix for a summary.

 Material facts: Facts relied on for the claim or defence

(1) Facts necessary to establish a cause of action
(2) Relevant facts which the party is entitled to prove at trial (to prevent surprise)
 Whether any fact is material depends on the circumstances of a particular case
 Each party must plead all facts on which he intends to rely, otherwise he cannot strictly give any
evidence of those facts at the trial.

 Statement of Claim

 Main function: sets out all the material facts and necessary particulars which the plaintiff relies
on in support of his causes(s) of action and the relief sought.

 O 18 r.15:
(1) A statement of claim must state specifically the relief or remedy which the plaintiff claims;
but costs need not be specifically claimed.
(2) A statement of claim must not contain any allegation or claim in respect of a cause of action
unless that cause of action is mentioned in the writ or arises from the facts which are the same as,
or include or form part of, facts giving rise to a cause of action so mentioned; but subject to that,
a plaintiff may in his statement of claim alter, modify or extend any claim made by him in the
endorsement of the writ without amending the endorsement.
(3) Every statement of claim must bear on its face a statement of the date on which the writ in the
action was issued.

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 General layout:

(A) Introduction to parties and necessary background

(B) Substantive contents
(C) Prayer for relief

 Defence

 Main functions: to respond to the plaintiff’s allegations and to state the defendant’s case, with the
objective of identifying (and hopefully narrowing down) the issues in dispute between the parties

 Amended Order 18 rule 13 on admissions and denials:

(1) Subject to paragraph (6), an allegation of fact made by a party in his pleading is deemed
to be admitted by the opposite party unless it is traversed by that party in his pleading
or a joinder of issue under rule 14 operates as a non-admission of it.

(2) Subject to paragraph (5), a traverse may be made either by a denial or by a statement of
non-admission and either expressly or by necessary implication.

(3) Every allegation of fact made in a statement of claim or counterclaim which the party on
whom it is served does not intend to admit MUST be specifically traversed by him in
his defence or defence to counterclaim, as the case may be; and a general denial of such
allegations, or a general statement of non-admission of them, is not a sufficient
traverse of them.

(5) Where an allegation made in a statement of claim or counterclaim is traversed by a

DENIAL, the party who denies the allegation shall in his defence or defence to
counterclaim —
(a) state his reasons for doing so; and
(b) if he intends to put forward a different version of events from that given by the claimant,
state his own version.

(6) A party who—

(a) fails to deal with an allegation; but
(b) has set out in his defence or defence to counterclaim the nature of his case in relation to the
issue to which that allegation is relevant, is to be taken to require that allegation to be
proved.
• Therefore, the Defence should go through the plaintiff’s Statement of Claim paragraph by
paragraph, replying to EACH allegation raised. Apart from responding to P’s allegation, the
Defence should also state all the material facts and necessary particulars to establish an
affirmative defence, if any.
• O18 R13 (1): If a particular fact / allegation in the Statement of Claim is not specifically
traversed, it would be deemed to be admitted by the defendant (subject to r 13(6)).
• O18 R13 (2): A specific traverse is made either by denial or by a statement of non-admission.

48
 • Therefore, in a Defence, the defendant would usually respond to each allegation in the Statement
of Claim in one of the following ways: (a) admitting the allegation, (b) not admitting the
allegation, (c) denying the allegation, (d) admitting part of the allegation and not
admitting/denying the rest.
• O18 R13 (5): Where the allegation is traversed by a denial, the defendant must give the reasons
for the denial and must put forward his own version of the events if he intends to put forward
a different version of events from the plaintiff’s.
• The defendant may further go on to state further material facts and/or particulars relating to that
allegation. If the defendant intends to put up a positive defence or averment, he needs to set out
all the material facts and necessary particulars to support it.
• One may add a defence of set off and a counterclaim to the Defence (see below).

 Set-off and Counterclaim

 The defendant may have a cross claim against the plaintiff. This may be pleaded as a set-off and/or
counterclaim.

 A set-off is in the nature of a defence. Under a set-off, the defendant can recover nothing against the
plaintiff. But he can use the set-off as a defence to the plaintiff’s claim (up to the amount of
set-off). It is only a ‘shield’, not a ‘sword’. See O 18 r 17.

 A counterclaim is an active claim by the defendant against the plaintiff. If the main claim is
dismissed or for some reason discontinued, the Counterclaim has its own life. A Counterclaim
is to be treated as an independent action which is tried together with the original action. It is a
sword, not a shield. See O 15 r 2, 3.

 Where a defendant alleges that he has a Counterclaim, the Defence and the Counterclaim must be
made in the same document: O 15 r 2(1) and O 18 r 3(3). The document will then be called a
Defence and Counterclaim.

 If a counterclaim also amounts to a set-off, it is generally advisable for the defendant to plead both.

 A defendant who Counterclaims against the plaintiff and alleges that any other person is liable to
him along with the plaintiff may join that other person as a party against whom the Counterclaim
is made: see O 15 r 3(1).

 Reply and Defence to Counterclaim

Reply
• A Reply may be served by the plaintiff in answer to the Defence of the defendant without leave: O 18
r 3(1).

• In many cases it is unnecessary to serve a Reply. If no Reply is served to a defence which is

unaccompanied by a Counterclaim, there is an implied joinder of issue on that defence.

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• O 18 r 14(1) & (4)

(1) If there is no reply to a defence, there is an implied joinder of issue on that defence
(4) A joinder of issue operates as a non-admission of every material allegation of fact made in
the pleading on which there is an implied or expressed joinder of issue unless, in the case
of an expressed joinder of issue, any such allegation is excepted from the joinder and is
stated to be admitted, in which case the expressed joinder of issue operates as a non-
admission of every other such allegation.

When should one plead reply?

• A Reply is pleaded where it is felt necessary to plead further facts in answer to the issues raised in the
Defence or to further define the issues between the parties.

For example:
 Where the Defence has raised a point for the first time, which requires some clarification or answer
from the plaintiff.
 Where some new matter may have arisen as a direct and relevant result of something that has been
pleaded in the Defence.
 Where there may be certain issues to which admissions can be made in order to delimit the extent of
contention at the trial.

• A Reply must not be used in order to raise new issues which should have been set out in the
Statement of Claim in the first place. The proper process in such an event is to amend the
Statement of Claim, which would in turn give the defendant a right to meet these new matters.

Defence to Counterclaim
 A plaintiff on whom a defendant serves a Counterclaim must, if he intends to defend it, serve
on that defendant a Defence to Counterclaim: O 18 r 3(2).
 It must be served within 28 days after the service on him of the Counterclaim to which it relates:
O 18 r 3(4).
 If the plaintiff makes default in the service of his Defence to Counterclaim, the defendant is
entitled to proceed to enter judgment in default of Defence as if the Counterclaim were a
Statement of Claim: O 19 r 8.
 It is subject to substantially the same rules of pleadings as a Defence to a Statement of Claim.
There is NO joinder of issues, implied or expressed, on a Counterclaim: O 18 r 13 & r 14(3).
Cf. if no reply, there can have joinder of issues: O 18 r 14(1). That means the plaintiff must
specifically traverse every allegation of fact in the Counterclaim which he does not intend
to admit.

 Time for Service of Pleadings

 Statement of Claim: Either

1. served together with the Writ of Summons (called a specially indorsed Writ) i.e. SC + writ
OR

50
2. at any time after the issue of the Writ but before the expiration of 14 days after the defendant
gives notice of intention to defend: O 18 r 1

 Defence (and Counterclaim): Generally, one of below whichever is the later.

1. before the expiration of 28 days after the time limited for acknowledging service of
the writ
OR
2. After the Statement of Claim is served: O 18 r 2. (But this is subject to O 18 r 2(2)
and 2(3).)

 Reply (and/or Defence to Counterclaim): Before the expiration of 28 days after service of the
Defence (and Counterclaim): O 18 r 3(4).

 Close of pleadings: 147 days after service of the Reply (and/or Defence to Counterclaim); or if no
such pleading is served, 28 days after service of the Defence: O 18 r 20.

Note: O18 r 5 RHC: pleadings or amended pleadings shall not be served during the Summer Vacation
(i.e. the whole month of August), except with leave of the Court or with the consent of the parties to the
action. O 3 r 3 RHC: Summer Vacation shall be excluded in reckoning the period for serving or
amending any pleading. Note however that there is no Summer Vacation in the District Court.

 Particulars of Pleadings

• They are generally known as “Further and Better Particulars” (or “F&BP”): O.18 r.12(3):
“The court may order a party to serve on any other party particulars of any claim, defence or
other matter stated in his pleading… or a statement of the nature of the case on which he relies,
and the order may be made on such terms as the court thinks just.”
 According to case law before the CJR, particulars may not be ordered upon a mere traverse.
However, it is at least arguable that particulars may now be ordered if the defendant pleads a
bare denial without giving the reasons for the denial and putting forward his own version
of the events as required by O 18 r 13(5).

 Particulars are pleadings in the sense that they do set out matters which ought to have been included
in the original pleading. Thus, the request for further and better particulars and the answers to
the request will be contained in the pleading bundle prepared for the trial.

 The purposes of particulars (same as pleadings) are to inform the other side of the nature of the case
they have to meet, to prevent the other side from being taken by surprise, and to enable the other
side to know what evidence they ought to be prepared with and to prepare for trial.

 When will F&BP be needed:

- Where there is vagueness in the opponent’s pleading.

7
There is a typo in the 3rd last line at page 271 of A Guide to Civil Procedure in Hong Kong (4 th edn, LexisNexis 2011): it should be
14 days instead of 28 days.

51
 - Where the particulars given by the opponent are insufficient or inadequate or he omits to
plead necessary particulars as required by O.18 r.12.

• ‘Fishing’ applications for evidence are disallowed:

Wootton v. Sievier [1913] 3 KB 499 per Kennedy LJ: “On an application by a plaintiff for
particulars, or for further and better particulars, the court must be careful to see that the
demand is not of a vexatious or oppressive character, or, the material facts being pleaded by the
defendant in the statement of defence, or stated in particulars, if such have been delivered by
him, with sufficient precision to enable the plaintiff to know and to prepare himself to deal with
them, that the plaintiff is not covertly endeavouring to get something more to which he is not
entitled, namely, the disclosure of the evidence to prove those facts which may be in the
defendant’s possession.”

 In deciding whether further particulars should be given, one should bear in mind the following
reminder:

“The purpose of pleadings is not to play a game at the expense of the litigants but to enable the
opposing party to know the case against him. There is a tendency to forget this basic purpose
and to seek particulars which are not necessary when in truth each party knows the others’
case”

(Trust Securities Holdings v Sir Robert McAlpine & Sons Ltd (1994) The Times, December 21,
CA)

 The application for particulars may be made at any stage. Particulars are not normally ordered
before a Defence is served: O 18 r 12(5).
 However, a defendant faced with an ambiguous Statement of Claim may ask for particulars before
Defence when the defendant would otherwise be prejudiced or embarrassed in his pleading. A
plaintiff may be ordered to give particulars before Defence in order that the defendant can
properly deal with the plaintiff’s allegations in his Defence rather than simply raise bare denials.

 A party shall first apply for further and better particulars by letter, otherwise he may not get an
Order: O 18 r 12(6).

 If the other party ignores the letter or fails to provide the particulars as requested, the requesting
party may then take out a Summons seeking a court order for the particulars requested.

10. Amendment of Pleadings

(i) Amendment of Pleadings without Leave:

 O 20 r 3: Any pleading may without leave be amended ONCE in any way before the close of
pleadings. The party who amends his pleadings in this way must serve the amended pleading on
the opposite party, who may then amend his pleading.

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 O 18 r 20: Pleadings are deemed to close 28 days after service of Defence, unless there is a Reply
and/or Defence to Counterclaim, in which case pleadings close 14 days thereafter.

(ii) Amendment of the Writ without Leave:

 O 20 r 1 (3): The writ may, without leave, be amended in any way before it is served.

 After service, the writ may be amended once without leave before the close of pleadings
provided that there is no change in the parties or the causes of action. (O 20 r 1(1) and (3)). The
plaintiff must serve the amended writ on the opposite party.

(iii) Objection to the Amendment Made without Leave

 O 20 r 4: A party served with a writ or pleading which has been amended without leave may,
within 14 days after service, apply to a master by summons for an order striking out the
amendment.

 Test: the amendment will be disallowed if an application for leave to amend would have been
refused. (See below re leave to amend.)

(iv) Amendment of Pleadings by Consent:

 O 20 r 12: Any pleading may be amended at any stage of the proceedings by written agreement
between the parties (unless it consists of the change of a party).

(v) Amendment with Leave:

 Subject to certain exceptions, the court may at any stage of the proceedings allow the plaintiff to
amend his writ, or any party to amend his pleading, on such terms as to costs or otherwise as
may be just: O 20 r 5(1).

 Recent trend is that the court has been less prepared to permit substantial amendments at a late stage
of proceedings without satisfactory justifications. For example, in Chan Wing Cheung Allan v
Ho Shu Yee Susana HCA 1941/2000, 13 January 2005, the court refused an application made on
the second day of trial for substantial amendments to defence and further and better particulars
provided. Waung J commented:

“The modern approach to amendment is certainly no longer the traditional approach that a party
is entitled, as of right practically, to have leave to amend so long as it can be shown that any
prejudice can be cured by way of costs.  The modern approach is that the court must look at
justice overall.  Justice firstly to the parties, in that, parties have gone to litigation with
expectations and they expect to face the trial on the matter pleaded, and not last minute
substantial changes.  Then there is the justice to the court.  The court is now running on a basis
totally different from 25 years ago.  In my days, in the High Court, judges worked about half a
morning and their workload was such that they could cope with changes to the case and perhaps
allow greater flexibility to changes to the case.  These days, the court is run on the basis of back-

53
 to-back cases and the court cannot afford the luxury of giving to the parties the flexibility to run
the case as they see fit.”

 Tang Shun Hay v Jetline Co Ltd & Others [2000] 1 HKC 417 (CA):

The deceased died in an accident on 11 September 1993. The writ was issued on 9 September
1996 against five defendants. Leave was granted to join the sixth defendant beyond the 3-year
period. The sixth defendant filed its Defence on 8 December 1998. It was silent as to any matter
of limitation. On 8 June 1999, the sixth defendant made an application to amend its Defence to
plead the limitation point. There was no affidavit in support, and no explanation or argument
was advanced as to why the limitation point was not pleaded. The judge refused the application,
and the Court of Appeal confirmed the judge’s decision.

Rogers JA: “But the defence is silent as to any matter of limitation and the limitation point... was
entirely absent from that defence... it seems to me that the judge was perfectly correct in
referring to it as ‘this very late stage’ because, it seems to me, it would have inevitably meant the
trial of the action would have to be put off. The accident had happened in 1993. For one reason
or another, the proceedings had extended up until now. It is now more than six years from the
date of the accident. To put this trial off even further would, it seems to me, to be most
undesirable...

In the first place, I do consider that the plaintiff would be prejudiced if the sixth defendant were
allowed to amend its defence now. But I also consider that it behoves a party seeking to amend
in circumstances such as the present case at least to provide some sort of explanation as to why
the original defence did not contain a plea. “

 Moreover, under the CJR, O 20 r 8(1A) is added: “The Court shall not order a pleading to be
amended unless it is of the opinion that the order is necessary either for disposing fairly of the
cause or matter or for saving costs.”
 The new O 25 r 1B(3) also provides that the court shall not vary a milestone date (i.e. the date
fixed for a case management conference, pre-trial review or trial) unless there are exceptional
circumstances justifying the variation.
 For post CJR cases, see C & A Consultants Limited & Anor v Hong Kong Airlines Limited HCA
279/2007, 17 August 2010 (Deputy High Court Judge Carlson) where leave to amend pleadings
which would necessitate the vacation of the trial dates was refused on, inter alia, the ground of
lateness; but contrast Wong Sai Pong v Wong Kim Por HCA 390/2006, 26 October 2010 (Fok J)
where exceptional circumstances were found to exist which justified leave to amend pleadings and
the consequential vacation of the trial dates already fixed.

(vi) Amendment after the Limitation Period

 The court’s power to allow an amendment to be made after the expiry of the limitation period is
governed by the Limitation Ordinance (Cap 347). Its overriding provision is that a court must not
allow a new claim, other than an original set-off or counterclaim, to be made in the course of any
action after the expiry of the time limit under that Ordinance: s 35(3).

54
 There are however two exceptions. The first is by the statutory discretion of the court to override the
time limits for actions in respect of personal injuries or death: s 30 (see Seminar One). The
second is where the Rules of Court so permit (see below):

 Adding or substituting a new cause of action: O 20 r 5(2),(5): Provided that it arises out of the same,
or substantially the same facts as a cause of action in respect of which relief has already been
claimed in the action, leave will be granted by the court if it thinks it just to do so.

 Altering the capacity in which a party sues / correcting a genuine mistake or alteration of capacity: O
20 r 5(2),(4): Provided that the new capacity was already there or has since acquired, again, the
court will grant leave if it thinks it just to do so.

 Correcting the name of a party: O 20 r 5(2),(3): Provided that the mistake was a genuine mistake and
was not misleading or would cause any reasonable doubt as to the identity of the party
concerned, again, the court will grant leave if it thinks it just to do so.

 Adding or substituting a new party (not genuine mistake situation): O 15 r 6 (5): Only if (a) the
relevant period of limitation was current at the date when the proceedings were commenced and
it is necessary for the determination of the action that the new party should be added or
substituted; or (b) the Court disapplies the limitation period under ss 27 or 28 of the Limitation
Ordinance. Note: O 15 r 6 (6): sets out an exclusive list of 5 circumstances in which the addition
or substitution of a new party shall be treated as necessary under (a).

Third Party Proceedings

 O16 RHC
 Claims by D against third parties, i.e. party / parties who are not already party to the proceedings.
 D must first file A/S
 3 situations:
1) Claims against TP for contribution or indemnity
2) Claims against TP for relief/remedy: related to original subject matter and
substantially the same as that claimed by P
3) Requires determination of question/issue related to original subject matter (not only
between P and D, but also between P/D and TP)
 In some situations, D may allege that in case P succeeds in the action, another person should be
liable for part or all of the remedies granted (or that there are some common issues to be
determined not just between P and D, but also with that other person). D may invoke the
procedure under O 16 r 1 against that other person. The procedure governing this is known as
“Third Party Proceedings”. It is necessary for the defendant to issue a “Third Party Notice”.

 For example, P might bring an action in tort for conversion against D and allege that a car in D’s
possession is P’s property. D might in turn wish to bring a third party proceeding against D’s
vendor, TP.
D would allege that TP had breached the implied condition in a sale of goods transaction to pass
good title to the purchaser D.

55
 It is also possible that TP might in turn wish to sue his vendor, FP. The rules allow such a fourth
party notice to be served by TP upon FP: O 16 r 9

 Where the other person is already a party in the action (e.g. a co-defendant), the notice is issued
pursuant to O 16 r 8 (commonly called a “Contribution Notice”).

 For example: P sues D1 as the principal and alternatively D2 as the agent. D1’s case is that D2
entered into a contract with P without D1’s authority, express or implied. However, the court
may still hold D1 liable if D2 was held out as having ostensible authority to enter into the
contract on behalf of D1. If D1 wishes to seek an indemnity from D2 for contracting on its behalf
without authority, D1 should serve a “contribution notice” on D2.

 There are two main purposes of third party proceedings:

(i) to prevent multiplicity of actions and to bring all interested parties before the court in the same
proceedings: Barclay Bank v. Tom [1923] 1 KB 221
(ii) to prevent the same (or similar) issue being litigated twice, with possibly different results:
Standard Securities Ltd v. Hubbard [1967] Ch 1056
 The plaintiff is not a party to third party proceedings, but the court has power to order discovery,
interrogatories etc as between the plaintiff and the third party: Eden v. Weardale (1887) 35 ChD
287.

 Procedurally, the third-party proceedings are treated as independent of the main action. Even if the
main action is settled, the third-party proceedings can continue: Stott v. West Yorkshire Road
Car Co. Ltd. [1971] 2 QB 651. In this case, P was seriously injured when the motor cycle which
he was riding collided with D’s oncoming bus. D’s bus had pulled out to avoid a van parked in
the road. P sued D, and D brought third party proceedings against the owner/driver of the van.
By a settlement in writing P accepted ₤10,000 in discharge of his claim against D “without any
admission of liability” by D. The Court of Appeal affirmed the order of the registrar that the
third-party proceedings should proceed and be set down for trial.

Lord Denning: “I now turn to the point of procedure. It was said: in consequence of settlement,
the original action is dead, and being dead, there is nothing on which the third-party
proceedings can bite. I cannot agree with this contention…. the third party can proceed in just
the same way as if they had been started by a separate action. It is not necessary to bring a new
action.”

• When TP proceeding does not have own life: However, there may be situations where the third-party
proceedings may no longer be viable if the plaintiff’s claim fails. For example, if the defendant is
seeking an indemnity/contribution, his claim will be dependent on the plaintiff’s claim because the
defendant is seeking to pass on to the third party his own potential liability to the plaintiff. If the
plaintiff loses (e.g. when the claim is dismissed or struck out), then there is nothing to litigate
between the defendant and the third party.

 The court has power to make any order as to costs as justice may require. The court will normally
exercise its discretion in favour of the “winner”, and order that costs follow the event: O.62 r 3(3).

56
 For example, a plaintiff who loses may be ordered to pay the defendant’s costs and those of the third,
fourth, fifth etc parties on the basis that none of the parties would have incurred costs had the
plaintiff not started the proceedings. If, however, the defendant’s claim against the third party is
seen as misguided or not really arguable, the defendant is likely to be ordered to pay the third
party’s costs notwithstanding the fact that the plaintiff’s claim has failed totally: Thomas v. Times
Book Co. Ltd. [1966] 1 WLR 911.

 Plowman J: “I have a complete discretion in regard to the costs of the third and fourth parties…… it
seems to me that not only did the plaintiff’s claim render the third- and fourth-party proceedings
inevitable, but that the fourth party was amply justified in being represented before me by
counsel. After reflecting on the matter, I have come to the conclusion that the right order for me
to make is that the plaintiff should pay the costs of the third and fourth parties.”

 O 16 r 7(2): execution by the defendant against the third party cannot be issued until after
satisfaction of the plaintiff’s judgment against defendant. However, the court has power to grant
leave to a defendant to issue execution before he has satisfied the plaintiff’s judgment.

 Judgment cannot be given for plaintiff against a third party: to enable this to be done the plaintiff
must procure the third party to be added as a defendant (e.g. D2) under O 15 r 6.

Procedure: Third Party Notice against a new party

 O 16 r 1(1): The defendant may issue a third-party notice containing

- a summary of the plaintiff’s claim against the defendant; and
- the nature and grounds of the defendant’s claim against the third party.
(See Form 20 or 21 in Appendix A of RHC)

 O 16 r 1(2): Leave is not required if the action was begun by writ and the defendant issues the third-
party notice before serving his Defence on the plaintiff. Otherwise, leave is required.

• O 16 r 2: application for leave to issue the third-party notice is made ex parte by summons and
affidavit.

 O 16 r 3, 5: The third party has to file the acknowledgment of service. Form of

acknowledgment of service must be served with the third party notice together with all
pleadings. If the third party does not give notice of intention to defend, he shall be deemed to
admit any claim stated in the third-party notice

 O 16 r 4: If the third party gives notice of intention to defend, the defendant must apply to the court
for directions.

 O 16 r 3(4): In third party proceedings the defendant is in the position of a plaintiff, and the third
party is in the position of a defendant. Thus, RHC regulating procedures between plaintiff and
defendant apply to third party proceeding to the extent provided for in O 16 r 3(4).

57
Procedure: Contribution Notice against an existing party

 O 16 r 8: This is commonly called Contribution Notice and it looks much like a third-party notice,
except the heading is the same as the earlier pleadings in the action. It is addressed to the
relevant party in the action. The notice shall contain the nature and grounds of his claim or
question required to be determined.

 O 16 r 8(1): No leave is required.

 O 16 r 8(3): No acknowledgment of service is necessary. “The same procedure shall be adopted”

e.g. O 16 r 4 concerning third party directions.

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SEMINAR 5: DISCOVERY AND INTERROGATORIES

Read Orders 24 and 26 of the Rules of the High Court (“RHC”)

Read Orders 24 and 26 of the Rules of the District Court (“RDC”)

Read Sections 41 and 42 of the High Court Ordinance

Read Section 47A and 47B of the District Court Ordinance

Read Chapter 9 and the section headed “Interrogatories” in Chapter 10

I. Discovery

A. What is Discovery?

(1) The process by which the parties to proceedings disclose to the other side and to enable the other
side to obtain relevant documents relating to the matter in question.

(2) Discovery denotes a 2-stage process: -

Disclosure – by disclosing documents in a List of Documents and by serving the List

AND

Production – when the other side can inspect and take copies of the listed documents

(3) Discovery is a continuing obligation:

Parties are obliged to disclose documents as and when new documents come to light: Vernon v
Bosley No.2 [1997] 3 WLR683.
These new documents should be included in a Supplemental List of Documents.

D. Automatic Discovery O24, RHC and RDC

O24 (1) RHC, RDC

1. After the close of pleadings (Post-action discovery)

2. in an action begun by writ there shall,
3. subject to and in accordance with the provisions of this Order,
4. be discovery by the parties to the action of the documents
5. which are or have been in their possession, custody or power relating to matters in question in
the action.

(1) When?

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(a) 14 days after pleadings are deemed to be closed [(O24 r.2(2)]

(b) provides that pleadings are deemed to be closed

(i) 14 days after service of a Reply or if no reply, service of a Defence to Counterclaim; or

(ii) If there is no Reply or Defence to Counterclaim, at the expiration of 28 days after service of
Defence. [O18 r.20(1)]

(2) What actions applicable?

(a) All action begun by writ

EXCEPTIONS: -

1. Non-writ actions; for example: action begun by Originating Summons, Judicial Review

2. Third Party proceedings [O 24 r2];

3. “Running down” actions – A defendant (or the Plaintiff facing a counterclaim) in an action
arising from a collision or apprehended collision involving vehicles on land does not have to
give discovery unless the Court orders otherwise [O24 r2]. Note, however, Practice Direction
18.1 which governs personal injuries action (and which includes Running down action)
provides that:

 At pre-writ stage, the parties are to exchange documents and information relating to the
issue of liability and quantum [paragraphs 14 and 19, PD18.1]


At commencement of proceedings, the Plaintiff shall serve documents relating to liability
and quantum together with the Statement of Claim [paragraph 65(1) and (2), PD18.1] and
the Defendant shall serve reciprocal documents together with the Defence [paragraph 67,
PD18.1]
4. Personal injuries action – automatic directions under [O25 r8 RHC, O24 r11 RDC]

 There be mutual discovery 14 days after close of pleadings and inspection 7 days
thereafter

 If liability is admitted, only documents on special damages be disclosed

 Photographs, sketch plan and police accident report be receivable in evidence and shall
be agreed if possible

 Certified true copy of records of proceedings be receivable in evidence

 Note also PD18.1.

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 5. Action for recovery of penalty – the Defendant (or the Plaintiff facing a counterclaim) does not
have to give discovery [O24 r2 RHC & RDC];

6. Civil proceedings to which the Government is a party [O77 r12 RHC & RDC];

(3) How?

(a) Stage One: - Discovery and Serving a List of Documents

(i) By the parties making and serving a List of Documents which are or have been in his
possession, custody or power relating to any matters in question between them in the action
[O24 r2 RHC & RDC].

(iii) The List must be in prescribed form

O24 r5(1) RHC and RDC

(iv) First Schedule – all documents that are in possession, custody or power of the party

 Part 1: Documents he is willing to produce

 Part 2: Documents he objects to producing

(v) Second Schedule – all documents that have been but are not now in the parties’ possession,
custody or power. For these documents, must state (a) when they were last in his possession,
custody or power and (b) what has become of them and in whose possession they are now

(vi) Description of documents:

 each document is described separately with date

 when documents are voluminous, can refer to them as contained in bundle provided that
they are documents of the same nature, having regard not only to the character of the
documents themselves but also to the nature of the action and the issues raised therein
(see Wong Tsu Yew Charles v Bermuda Trust (Hong Kong) Ltd [2002] 4 HKC 196
Chung J).

(b) Stage 2: Production

(i) A party who has served a List must allow the other party to inspect the documents referred to
in Schedule 1, Part 1 and to take copies thereof [O24 r9 RHC & RDC].

(ii) Notice to inspect in the List stating a time within 7 days after the service of the List the
documents may be inspected at a place specified in the notice

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 (iii) A party being served with the List is entitled to inspect the documents by: -

 Physical inspection of the documents and thereafter, may request copies of these
documents to be supplied upon undertaking to pay a reasonable photocopying charges
[O24 r11A(1)]

 Simply request copies of documents without actual inspection

(4) Other points about automatic discovery

(a) A party can (at any time before the case management summons is taken out) serve on another
party (required to give discovery) a notice requiring that party to verify its List of Documents
by affidavit [O24 r2(7) RHC & RDC].

The party being served with such a notice must within 14 days file and serve an affidavit in
compliance with the notice.

(b) The parties can agree to limit or dispense with discovery [O24 r1(2) RHC & RDC];

(c) A party can apply to the Court to limit discovery [O24 r2 RHC & RDC]:

In cases where there are potentially many documents to be disclosed and therefore cost of
discovery is substantial. The Court will consider whether full discovery is necessary or whether
Court should limit or dispense with discovery for fair disposal of the matter or for saving costs.

(d) (i) The Court may make orders to limit the scope or direct the manner of disclosure, and the time
for inspection of documents for the purposes of case management and furthering the
objectives specified in Order 1A [O24 r15A RHC & RDC].

(ii) The objectives under O1A RHC are:

 to increase the cost-effectiveness of any practice and procedure to be followed in relation

to proceedings before the Court;

 to ensure that a case is dealt with as expeditiously as is reasonably practicable;

 to promote a sense of reasonable proportion and procedural economy in the conduct of

proceedings;

 to ensure fairness between the parties;

 to facilitate the settlement of disputes; and

 to ensure that the resources of the Court are distributed fairly.

(e) PD5.2, paragraph 5 provides that the parties should

62
 (i)Conduct discovery without waiting for a Court order;

(ii) Parties are encouraged to try to agree directions to discharge their discovery obligations, for
“achieving economies in respect of discovery”.

(f) The trend: discovery under the context of Order 1A – full scale discovery may be refused if it is not
(a) in accordance with the O1A objections, (b) for fair disposal of the question or (c) for saving
costs

See Choi Chun Ming v Cosco – HIT Terminals (HK) Ltd and Anor HCPI 151/2008 [2009]

Tullett Prebon (Hong Kong) Ltd v Chan Yeung Fong Nick & Ors HCA 2197/2009, 9 June 2011, To
J

E. What are “documents”?

(1) Meaning of Documents

Section 3 of the Interpretation and General Clauses Ordinance provides that a “document” “means any
publication and any matter written, expressed or described upon any substance by means of letters,
characters, figures or marks, or by more than one of these means”. In other words, “documents” do not
only mean paper documents, but also include other media in or through which information is recorded,
e.g.:

(a) Tape recordings;

(b) CDs/DVDs;
(c) Video recordings;
(d) Emails;
(e) Films and film negatives; and
(f) Computer storage media.

(2) What if only parts of the documents are disclosable?

(a) When part of a document is irrelevant or that only part of them is disclosable (e.g. a part of the
document is privileged), party making the discovery can seal up or redact the rest of the
document which is claiming to be irrelevant. GE Capital Corporate Finance Group Ltd v Bankers
Trust Co. [1995] 2 All ER 993

(b) In appropriate cases, the Court has power to unseal the documents to determine whether e.g.
objection to discovery is well founded. Guess? Inc v Lee Seck Mon [1989] 1 HKLR 399

F. What documents are disclosable?

(1) Documents which relates to “a matter in question” i.e. relevant documents;

63
(2) Documents which are in the possession, custody and power of that party; and

(3) Documents which are not exempted from discovery.

G. Documents which relates to “a matter in question”:

(1) The Peruvian Guano Rule

 every document relates to the matters in question in the action, which not only would be
evidence upon any issue but also which may reasonably contain information which may either
directly or indirectly enable the party [receiving discovery] either to advance his own case or to
damage the case of his adversary
 ‘either directly or indirectly’: a document can properly be said to contain information which
may enable the party [receiving discovery] either to advance his own case or to damage the
case of his adversary if it is a document which may fairly lead to a train of enquiry

Cie Financiere du Pacifique v Peruvian Guano Co. (1882) 11 QBD 55 CA Brett LJ

(2) “Matter in question” is not limited to pleadings but a pleaded case in a broad sense

 In Test of relevancy, it is ‘every document which relates to the matters in question’. This is not
confined to the pleaded issues.
 For discovery purposes one is not concerned with the detailed particulars of the parties’ pleaded
cases.
 Rather one is concerned with the pleaded claim or defence in the broad sense.

Chan Hung v Yung Kwong Chung HCA 216/2004, 15 January 2009, Deputy High Court Judge H.
Wong SC

(3) What is the limit? – A more restrictive approach: O Company v M Company

 The document or class of documents must be shown by the applicant to offer a real probability of
evidential materiality in the sense that it must be a document or class of documents of which, in the
ordinary way, can be expected to yield information of substantial evidential of materiality to the
pleaded claim and the defence to it in the broad sense which I have explained.
 If the document or class cannot be demonstrated to be clearly connected to issues which have
already been raised in the pleadings or which would in the ordinary way be expected to be raised in
the course of the proceedings if sufficient information were available, the application should be
dismissed’.

O Company v M Company [1996] 2 Lloyd’s Rep. 347

Note that this “more restrictive” approach was apparently adopted in some earlier local cases:

A v B (unreported), May 19, 1998 [1998] HKLRD 542

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Re Estate of Ng Chan Wah HCAP 5/2003, 5 March 2003 Chu J
Re Estate of Wang Teh Huei [2003] HKEC 45

However, in the case of Chan Hung, Supra, Deputy Judge Horace Wong SC commented on the
restrictive approach of O Company v M Company and said “although these sentiments made good sense,
they represented a marked departure from the very wide Peruvian Guano test which had been
accepted by the Court of Appeal in Deak & Co (Far East) v NM Rothschild & Sons Ltd [1981] HKC
78, CA and the court doubted whether those narrower principles could be adopted at first instance in
Hong Kong.

Deputy Judge Horace Wong SC’s rejection of the restrictive approach is followed in other recent CFI
decisions e.g. Wong Hon Wai v The Secretary of Justice HCPI 664/2009, 24 February 2011 (Master
Marlene Ng) and TOECA National Resources B.V. v Baron Capital Ltd and Another HCA 1913/2009,
31 May 2011 (McWalters J)

H. Documents in “possession, custody or power” of party

(1) The requirement is disjunctive, i.e. a party must disclose if the documents are in his possession OR
custody OR power

(2) “possession” – denotes physical holding + a right of possession

(3) “custody” – denotes physical holding only

(4) “power” – denotes a right to inspect or to obtain possession or control

 ‘power’ must mean a presently enforceable legal right to obtain from whoever actually holds the
document inspection of it without the need to obtain the consent of anyone else “ [Lonrho Ltd. v.
Shell Petroleum Co. Ltd. (No.1) [1980] 1 WLR 627 (Lord Diplock), as cited in Mariner
International Hotels Ltd. & Another v. Atlas Ltd. & Others (unrep., HCA 10714, 10752,
10821/1998, [2002] HKLRD (Yrbk) 08):

See also Hong Jing Co. Ltd. v Zhu Hai Kwok Yuen Investment Co. Ltd. HCA 156/2006, 23 December
2008, Chu J

I. Documents exempted from discovery

Some documents, albeit relevant, are protected from production. These documents include:

 Legal professional privilege

- Legal Advice privilege – communication between a party and his legal adviser
- Litigation privilege – communication between the legal adviser and a third party

 Without prejudice communications

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  Privilege against self-incrimination

 Public interest Immunity

 Statutory Secrecy

(1) Legal Professional Privilege

(a) Preliminary Points

(3) The protection legal professional privilege afforded to lawyer-client communications was
not confined to what lawyers and clients said or wrote to each other, but extend to
information gathered or generated in certain circumstances and under certain conditions.
(4) Article 35 of the Basic law provides for the right to confidential legal advice.
(5) Information could be acquired for the dominant purpose of seeking confidential legal
advice in connection with litigation that was in real prospect.
(6) Alternatively, it could be acquired for the dominant purpose of seeking confidential legal
advice on whether a cause of action existed.
(7) In either case, the fundamental right to confidential legal advice entrenched by Article 35
could protect the information from disclosure. Akai Holdings Ltd (in liquidation) v Ernst
& Young [2009] 2 HKC 245, CFA

(ii) No privilege can be claimed or attached if communications or documents are “made or

brought into existence for the purpose of, as part of the process of, crime, fraud, abuse of
statutory power, or in some circumstances, defeating or frustrating the administration of
justice by the Court” R v Derby Magistrates’ Court; Exp. B [1996], AC, cited in China Light
and Power Co. Ltd. and Anor v Ford [1998] 1 HKLRD 382.

(iii) Legal professional privilege is absolute, subject to it being overridden by statute or the Court
(in limited circumstances) or waived by the client – “it cannot be overridden by some
supposedly greater public interest” Three Rivers District Council v. Governor and
Company of the Bank of England (No.6) [2005] 1 AC 610 (Lord Scott):

(iv) The privilege belongs to the client, not the solicitor, i.e. only the client can waive the
privilege.

(v) In very general terms, privilege can be waived under 3 circumstances:

 Intentional waiver – the party deliberately discloses to another party a privileged

document, e.g. a witness statement;

 Unintentional waiver – the party does not intend to waive the privilege, but does some act
which has the effect of a waiver, e.g. quoting the contents of legal advice in an affidavit;

 Implied waiver – sometimes, by its conduct, a party will be deemed to have waived

66
 privilege, e.g. by suing its former solicitors in negligence, the party may be regarded as
having impliedly waived the privilege in its previous communications with those
solicitors to the extent that this is necessary for the Court to decide the claim [see, e.g.
Paragon Finance Plc v. Freshfields [1999] 1 WLR 1183];

(vi) Privilege can be over-ridden by Court order. For example:

 For the benefit of the client

 On taxation of costs

 Where privilege must yield to the paramount consideration of a child’s welfare

(vii) Statutory Interventions

Some statutes specifically override legal professional privilege for example:-

 Prevention of Bribery Ordinance (Cap.201) S.14(2)

 Inland Revenue Ordinance (Cap.112) S.51 (4A)

 Legal Practitioners Ordinance (Cap.159) S.8B(2)

(b) Legal Advice Privilege

(ii) What does LAP Protect?

In general terms, legal advice privilege protects all confidential communications, whether
written or verbal, between a client and his legal adviser in the legal adviser’s professional
capacity for the purpose of receiving or giving legal advice [see, e.g. Three Rivers District
Council and Others v. Governor and Company of the Bank of England]

(iii) “Confidential Communications”

 Communications can be through authorized agents;

 The privilege would cover all documents evidencing the protected communications, e.g.
the client’s request for legal advice;

 The privilege is not restricted to specific requests for advice and documents containing
advice – it extends to all communications aimed at keeping the client informed;

 The privilege covers communications between the solicitor and his/her partners and
barristers, including instructions and briefs to counsel to seek legal advice, and counsel’s
opinion;

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  The privilege also covers documents intended to be communications between the
client and the legal adviser, even if they were not in fact communicated;
see, e.g. Three Rivers District Council v. Governor and Company of the Bank of England
(No.5), above

(iv) “A client”

 Important to identify who is the client

 Is client an individual or an entity

Three Rivers District Council v. Governor and Company of the Bank of England (No.5)
[2003] QB 1556

 The Court of Appeal held that it was the inquiry unit which seek and receive lawyer’s advice.
 The Inquiry unit is, for the purpose of this application, the client rather than any single officer
however eminent he or she may be.

c.f. Skandinaviska Enskilsa Banlen v Asia Pacific Breweries [2007] 2 SLR 367

 When a company retains solicitors for legal advice, the client must be the company.
 But since a company can only act through its employees, communications made by
employees who are authorized to do so would be communications made “on behalf of the
client”

(v) “Legal Advisers in their Professional Capacity”

Includes solicitors, barristers and legal executives in the employ of solicitors, legal advises of
Government department, in house lawyers, advisers to Director of Prosecutions, foreign
lawyers PROVIDED THAT they are acting in their capacity as legal advisers
Alfred Crompton Amusement Machines Ltd v Customs and Excise Comrs (No 2) [1972] 2QB
102

(vi) “Legal Advice”

 All legal advice, whether or not for litigation, is covered by the legal advice privilege

 Test of “legal advice”: “…whether the advice relates to the rights, liabilities, obligations
or remedies of the client either under private law or under public law. If it does not, then,
in my opinion, legal advice privilege would not apply” [Three Rivers District Council v.
Governor and Company of the Bank of England (No.6), above (Lord Scott)]

 “… legal advice is not confined to telling the client the law; it must include advice as to
what should prudently and sensibly be done in the relevant legal context” [Balabel v
Air-India [1988] Ch 317, as cited in Three Rivers District Council v. Governor and
Company of the Bank of England (No.6), above (Lord Scott)]

68
  “Legal advice” includes advice on how to present a case or evidence to a Court or
tribunal or inquiry [Three Rivers District Council v. Governor and Company of the Bank
of England (No.6), above (Lord Scott)]

(c) Litigation privilege

(i) Conditions

 Communications between solicitors/client and non-professional agent/third party; and

 For the sole or dominant purpose of actual or contemplated litigation

See Akai Holdings Ltd (in liquidation) Ernst & Young [2009] 2 HKC 245, CFA

(ii) Dominant purpose

 An accident report prepared by the Railway Board subsequent to an accident and was
partly for the safety purpose and partly for obtaining legal advice in anticipation of
legal proceedings was not privileged and was disclosable.
 A claim of privilege for the purpose of submission to the parties’ legal adviser in
anticipation of litigation must be at least the dominant purpose for which it had been
prepared. Waugh v British Railway Board [1980] AC521

(iii) Experts reports

 If a solicitor commissioned a report from an expert on instructions of his client, the report
is privileged and is made for the dominant purpose of giving legal advice: Litigation
Privilege applies

E.g. Medical expert reports in personal injuries litigation commissioned on instructions of

client and for the purpose of enabling the solicitor to advise on quantum.

 If a client, acting on advice of his solicitors, commissioned a report from the expert and
such report is made for the dominant purpose of receiving legal advice for contemplated
litigation: LP applies

 If a client, not acting on advise of his solicitor, commissioned a report from an expert,
and claimed that he intents to pass it to solicitor for advice: questionable but LP may
arguably apply if it can be established that the dominant purpose of acquiring the report is
to obtain legal advice for contemplated litigation.

(iv) Documents already in existence

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  Documents already existing cannot be privileged just because they are handed to
solicitors for the purpose of litigation

 Example: difference between a medical report and medical records

(2) Without Prejudice Communications

(a) What are they?

These are communications between parties for the purpose of and in the course of negotiations to
settle.

(b) Substance over form

The normal practice is to put the heading “without prejudice” on these communications. However,
whether or not a communication is of a “without prejudice” nature depends on its contents, not the
label.

(c) “Without prejudice” communications are not admissible as evidence at trial:

(ii) Exceptions to rule: when “justice of the case requires it”. For example, where there is a
dispute as to whether the settlement negotiations had resulted in an agreement, the “without
prejudice” correspondence in question can be looked at by the Court to resolve the dispute;

(d) “Without Prejudice, Save as to Costs” communications – Calderbank offers

(i) These are without prejudice communications but the parties are allowed to disclose the
communications when the question of costs arises. Calderbank v Calderbank [1976] Fam
93

(ii) The Court would disallow a party to refer to an earlier without prejudice offer on the question
of costs because the letter was simply marked “without prejudice” and not “without prejudice,
save as to costs”, unless as a matter of construction, the offer was intended to be a Calderbank
offer.

National Commercial Bank Ltd. v Kanishi (Far East) Limited and Anor HCMP 5045/2000
(2002)

(e) In the discovery context, technically speaking, “without prejudice” and “without prejudice, save as
to costs” communications which are relevant should be “listed” by a party, but in practice, virtually
no party will list these communications individually in the List. Rather, there may be a general
description at Part 2 of the List. (see Appendix 1)

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(f) Communications during the ADR process such as mediation are considered “without prejudice”
communications and are privileged. “It must be emphasized that there is no question of the Court
undermining the protection afforded by privilege” in mediation processes (paragraph 6, PD31)

(3) Privilege against self-incrimination

In non-criminal proceedings, a party has a right to refuse to answer any question or produce any
document if to do so “would tend to expose that person [or that person’s husband or wife] to
proceedings for an offence or for the recovery of a penalty” [Evidence Ordinance, s 65(1)]:

(a) It is sufficient that the party believes that the discovery “would” or “might” incriminate him/her
(or his/her spouse), provided the risk is also apparent to the Court. “Tend to incriminate”, for these
purposes, refers only to potential criminal and not civil liability;

(b) The privilege against self-incrimination must be claimed on affidavit, by the person who wishes to
rely on it (i.e. not by his/her solicitor);

(c) In the Court of First Instance, the privilege against self-incrimination has been withdrawn in
relation to proceedings concerning infringement of intellectual property rights or passing off
[High Court Ordinance, s44A].

(4) Public Interest Immunity

(a) The Government/Government agencies can claim this as a ground on which to refuse production in
cases where the law authorizes/requires that a document be withheld, if production would injure the
public interest [O 24 r15], e.g. in the case of internal police document.

(b) If the Court agrees that disclosure would be injurious to the public interest, the discovery
requirements in O24 will not apply. The Court will conduct a balancing exercise between:

(i) The public interest in concealment; and

(ii) The public interest that administration of justice should not be frustrated.

(5) Statutory Secrecy

Disclosure of information is sometimes forbidden by statute. Examples can be found in the Adoption
Ordinance (Cap.290) and the Official Secrets Ordinance (Cap.521). For example, Rule 14 of the
Adoption Rules requires any guardian ad litem, who has been appointed by the Court to investigate a
proposed adoption of a child, not to divulge any information obtained in the course of his/her
investigation into the proposed adoption.

J. Disallowing discovery

(1) Fishing and Oppressive Discovery

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 (a) Court will not allow discovery to enable a party to ‘fish’ for witnesses or for grounds upon
which to hang his case.

Re State of Norway’s Applications [1987] QB 433

“The expression “fishing” is the search for materials in the hope of being able to raise
allegations of facts, as opposed to elicitation of evidence to support allegations of facts which
have been raised bona fide with adequate particularization”, per Kerr CJ.

(b) Where there are numerous documents but only of slight relevance, it would be oppressive
to produce them all. In such case, the Court may disallow discovery or to limit the scope of
discovery under O24 r15A.

“Parties to civil litigation should not be required to turn out contents of their filing systems as
if under criminal investigation, merely on the off-chance that something might show up from
which some relatively weak inference, prejudicial to the case of the disclosing party, might be
drawn” per Colman J, O Company v M Company [1996] 2 Lloyd’s Rep 347, cited by Deputy
High Court Judge H. Wong SC in Chan Hung, Supra.

(c) The Hong Kong Court’s application

Lee Nui Foon v Ocean Park Corp (No.1) [1995] 2 HKC 390

The Court refused the Plaintiff’s application for discovery as the Plaintiff failed to set out a
prima facie case of the existence of documents other than those already disclosed. Further,
the Plaintiff failed to put forward a positive case in relation to some issues, and was
attempting to fish out a case by seeking discovery of documents.

Chan Siu Lan v Union Medical Centre Limited HCPI 264/2006, 23 September 2008, Master
Levy

The Court refused the Plaintiff’s application for discovery against the Defendant Hospital for
information about which patients in the Defendant’s hospital have contracted SARS, as the
Plaintiff was seeking discovery of these documents in the hope that she could show that she
had contracted SARS from the patients. The information is irrelevant as the Plaintiff would
not be able to establish that even if she had come to contact with these patients, she had
contracted SARS from them.

See also Cathay Pacific Airways Ltd. v Cathay Pacific Airways Flight Attendants Union
CACV 156/1996, 21 November 1996

Tullett Prebon (Hong Kong) Limited v Chan Yeung Fong Nick & Ors HCA 2197/2009, 9 June
2011, To J

(2) Discovery not necessary, either for disposing fairly of the case or matter or for saving costs [O24 r8
RHC & RDC]

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 Disclosure will be necessary if

(a) it will give “litigious advantage” to the party seeking inspection

(b) the information sought is not otherwise available to the party

(c) such order for disclosure would not be oppressive

Wallace Smith Trust Co. Ltd (in liquidation) v Deloitte Haskins & Sells and anor [1996] 4 All ER 403

Note: The three point test is to determine the question of “necessity” and not “relevance” Tullett
Prebon (Hong Kong) Ltd v Chan Yeung Fong Nick & Ors HCA 2197/2009, 9 June 2011, To J

K. Discoveries against non-parties to the action

(1) The “mere witness” rule

The Court cannot order discovery or production against persons who are not parties to the action,
who have no connection with the action except that he may be called as a witness at the trial.

“You cannot get discovery against someone who has no connection with the litigious matters other
than that he might be called as a witness either to testify or to produce documents at the trial”.
Norwich Pharmacal Co. v Custom and Excise Commissioners [1974] AC 133, per LD
Kilbrandon

(2) Exceptions to the General Rule

(a) Pre-writ discovery against person likely to be a party to subsequent proceedings

(b) Pre-writ discovery against non-party or Norwich Pharmacal discovery

(c) Post-writ discovery against non-party

(3) First type: Pre-writ discovery against person likely to be a party to subsequent proceedings S.41(1)
HCO and S.47B(1) DCO and O24 r7A(1)

Possible scenario: A potential Plaintiff applies for disclosure of medical reports, notes and records
against the hospital which is likely to be a potential Defendant in a medical negligence suit.

(a) The Statute

S.41 (1), HCO

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 “(1) On the application, in accordance with rules of court, of a person who appears to the Court of
First Instance to be likely to be a party to subsequent proceedings in that Court in which a
claim is likely to be made, the Court of First Instance shall, in such circumstances as may be
specified in the rules, have power to order a person, who appears to the Court of First Instance
to be likely to be a party to the proceedings and to be likely to have or to have had in his
possession, custody or power any documents which are directly relevant to an issue arising or
likely to arise out of that claim

(a) to disclose whether those documents are in his possession, custody or power; and

(b) to produce such of those documents as are in his possession, custody or power to the
applicant or, on such conditions as may be specified in the order-

(i) to the applicant’s legal advisers;

(ii) to the applicant’s legal advisers and any medical or other professional adviser of the
applicant; or

(iii) if the applicant has no legal adviser, to any medical or other professional adviser of
the applicant.”

(b) The requirements – Directly Relevant

(i) person appears likely to be a party to subsequent proceedings in which a claim is likely to be
made

Differentiate between “reasonable prospect of a claim to be made” against “ill-founded

irresponsible and speculative allegations or allegations based merely on hope”

Dunning v Board of Governors of the United Liverpool Hospital [1973] 2 All ER 454, CA

(ii) that person is likely to have or have had in his possession, custody or power the documents;

(iii) documents are directly relevant to an issue arising or likely to arise out of that claim;

(iv) A document is only to be regarded as directly relevant to an issue arising or likely to arise out
of the claim if:

 the document would likely be relied on the evidence by any party in the proceedings

 the document supports or adversely affects any party’s case

Thus a more limited scope than the Peruvian Guano Rule (because targeted on non –
parties)

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 (v) discovery was necessary either for disposing fairly of the case or matter or for saving costs
O24 r8 RHC, RDC.

See also Cheung Sin Tak Anthony v Shun Tak China Travel Ship Management Ltd HCMP
2101/2009, 23 June 2010, Fung J.

(c) How to apply?

(i) By way of originating summons and supporting affidavit under O24 r7A.

(ii) Affidavit should:

 State why the Applicant and Respondent are likely to be parties to subsequent
proceedings;

 Specify the documents sought;

 Identify the issue(s) to which the document(s) relate; and

 Show that the documents are likely to be in the prospective party’s possession custody or
power.

(4) Second type: Pre-writ discovery against non-party: Norwich Pharmacal discovery

(a) Nature

Norwich Pharmacal orders are frequently applied for before any action is started, usually for the
purpose of discovering the identity of wrongdoers so that they may be named as Defendants. However,
Norwich Pharmacal orders can be used to get other types of information.

Possible scenario: internet service provider is ordered to disclose information and identity of an internet
account subscriber for a potential action for infringement

(c) The requirements

(i) The order has to be necessary to enable other wrongdoers to be identified;

(ii) Information sought would not otherwise become available;

(iii) To withhold relief would amount to a denial of Justice

(Lonrho PLC v Fayed (No 2) [1992] 1 WLR 1, 13, per Millet J, cited in Danone Asia Pte Ltd,
Supra)

(d) Order will be refused if

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 (i) Discovery is ‘fishing’

(ii) Discovery is oppressive

(e) Extending beyond the identities of wrongdoers (other information)

Norwich Pharmacal orders are not limited to discovery of names of wrongdoers, e.g.:

(i) “where a plaintiff wishes to investigate the passage of monies in and out of bank accounts in
aid of a tracing claim, discovery can be ordered of a bank’s books and documents” [A Co. v. B
Co. [2002] 3 HKLRD 111 (Ma J) (as he then was), as cited in State Bank of India v. Fleet
National Bank, above];

(ii) “I see no reason why the principle is limited to disclosure to the identity of an unknown
wrongdoer and does not extend to information showing that he has committed the wrong”
[Aoot Kalmneft v. Denton Wilde Sapte [2002] Lloyd’s Rep. 417 (McGonigal J), as cited in
Kensington International Ltd. v. ICS Secretaries Ltd. [2007] 3 HKLRD 207];

(5) Third type: Post-writ discovery against non-party S.42(1) HCO; S.47B(2) DCO and O24 r7A(2)
RHC and RDC

Possible scenario: Plaintiff claiming damages for personal injuries issues application for discovery
against the Police for witness statements pertinent to the liability issue

(a) The Statute

S.42(1), HCO

“(1) On the application, in accordance with rules of court, of a party to any proceedings in which a
claim is made, the Court of First Instance shall, in such circumstances as may be specified in the
rules, have power to order a person who is not a party to the proceedings and who appears to the
Court of First Instance to be likely to have or to have had in his possession, custody or power any
documents which are relevant to an issue arising out of that claim-

(a)to disclose whether those documents are in his possession, custody or power, and

(b) to produce such of those documents as are in his possession, custody or power to the applicant
or, on such conditions as may be specified in the order-

(i) to the applicant’s legal advisers;

(ii) to the applicant’s legal advisers and any medical or other professional adviser of the
applicant; or

(iii) if the applicant has no legal adviser, to any medical or other professional adviser of the
applicant.”

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(b) The requirements

(i) a party to proceedings to apply

(ii) for order against a non party

(iii) who appears likely to have or have had in his possession, custody or power

(iv) documents which are relevant (c.f. S.41(1) “directly relevant”) to an issue arising out of that
claim. Thus the Peruvian Guano Rule applies here. Standard of relevance is lessened.

Where disclosure of a class of documents is sought:-

 Basically each document of that class of document sought must be relevant in the
Peruvian Guano sense.

 Relevance is to be determined by viewing the documents individually or as a member of

the class of documents;

 Provided that all the documents in the class are relevant, it is immaterial that some turn
out in the event not to support the case of the applicant or adversely affect the case of his
opponent.

The power of Court in ordering disclosure is discretionary one: Tullett Prebon (Hong Kong)
Ltd, Supra

(v) the order is necessary either for disposing fairly of the case or matter or for saving costs O.24
r8(2)

(vi) Data Privacy Ordinance

Tse Lai Yin Lily v Incorporated Owners of Albert House [1999] 1 HKC 386

Plaintiff in personal injuries claim sought discovery of witness statement from Police. Police
refused, alleging supply of information would contravene Personal Data (Privacy)
Ordinance.

Suffiad J held that the bringing of a civil claim for damages in tort amounts to the
remedying of unlawful or seriously improper conduct under section 58(1)(d) and so
section 58(2) provides that such personal data are exempted from the provisions of Data
Protection Principle 3.

Alternatively, Suffiad J held that bringing civil action for damages was a purpose directly
related to the purpose for which the witness statements were taken, thus supply of the
statement constitutes an exemption under Schedule 3, principle 3 of the Ordinance.

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(c) To whom should the documents be produced?

S.42(1)(b)

(i) to the applicant’s legal advisers;

(ii) to the applicant’s legal advisers and any medical or other professional advisers of the
applicant; or

(iii) if there is no legal adviser, to any medical or other professional advisers of the applicant.

(d) How to apply?

By summons supported by Affidavit which should

(i) “specify or describe the documents in respect of which the order is sought and show, if
practicable by reference to any pleading served or intended to be served in the proceedings,
that the documents are relevant to an issue arising or likely to arise in the proceedings”; and

(ii) show that the non-party “is likely to have or have had [the documents in question] in his
possession, custody or power”

Order 24 r7A(3)(b) and (4)

L. Discovery by Order of the Court

(1) Court Order General Discovery O24 r3 RHC and RDC

(a) When?

(i) when a party fails to make automatic discovery;

(ii) when a party fails to comply with order for limited discovery; or

(iii) when a party fails to comply with a notice requiring him to verify the list by an Affidavit.

(b) Court may refuse to make Order if discovery is not necessary either for disposing fairly the case or
matter or for saving costs O24 r8 RHC and RDC.

(2) Specific discovery

(a) When?

78
 When a party has filed a list which, in the view of his opponent, is in complete or inappropriate in
that a specific document is missing. His opponent may apply to the Court for specific discovery of
the document.

(b) Requirements

(i) Stage One – The party seeking an order must make out a prima facie case that:-

 some specific documents do exist, which are relevant but are not included in the list;

 the documents are in the possession custody or power of the party;

 the documents relate to a matter in question in the action;

(ii) Stage Two – Once a prima facie case is made out, the Court has discretion to order disclosure.
It is for the resisting party to prove that discovery is not necessary to dispose fairly of the case
or for saving costs.

Tullett Prebon (Hong Kong) Ltd., Supra

and see Paul’s Model Art GMBH & Co KG v U.T. Limited & Ors HCA 1501/2000, 18 January
2011, Deputy High Court Judge Coleman SC; Lee Nui Foon v Ocean Park Corp (No.1) 1995 2
HKC 390 as to how the Court look at pleadings and documents to decide relevance.
(c) How to apply?

(i) Can apply even if documents can be obtained from another source. Tsoi Chan Kwai Kui v
Artist House Co (2000) HCA 5657/1997

(ii) Can apply even if the court has ordered the party to serve a List or a further and better list of
documents or a verifying affidavit O24 r7(2)

(iii) By way of Summons with Affidavit in Support (O24 r7(3) RHC and RDC) which should
state:

 The party in question “has, or at some time had, in his possession, custody or power the
document, or class of document, specified or described in the application”; and

 The document or class of document “relates to one or more of the matters in question in
the cause or matter”.

(3) Further and Better List

(a) When?

Court would order a Further and Better List if some documents have been omitted from the list.

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(b) Requirement

(i) reasonable ground that the party has or has had other documents relating to matter in issue;

(ii) documents in his possession, custody or power;

(iii) OR party has misconceived principle upon which discovery should be made.

M. Other Forms of Discovery

(1) Documents referred to in pleadings, affidavit etc

(a) Where documents are referred to in a party’s pleadings, affidavits/affirmations, witness statements
or experts’ reports, the other party can serve a notice at any time to require inspection and/or copies
of those documents [O24 r10(1)]. (A party refers documents in own pleadings, affidavits, witness
statements, experts’ reports, other party can serve notice to inspect them.)

(b) The party receiving such a notice must, within 4 days after service of that notice, serve on the
requesting party a notice stating a time and a place within 7 days afterwards at which the
documents may be inspected [O24 r10(2)]:

(c) If the party receiving the notice objects to produce any of the documents requested, its own notice
must identify the documents concerned and the grounds of objection, e.g. legal professional
privilege;

(d) If the party receiving the notice fails to serve a notice to inspect, or objects to produce any
documents, or offers an unreasonable time or place for the inspection, the other party may apply
to the Court for an order for production of the documents for inspection [O24 r11(1)];

(e) The court will order the production of documents for inspection or the supply of copies ONLY IF
the order is necessary “for disposing fairly of the case or matter or for saving costs” [O24
r13(1)]:

(i) The burden is on the party seeking production to show that the production is necessary “for
disposing fairly of the case or matter or for saving costs”;

(ii) However, where production is objected to, the Court may inspect the document to assess the
validity of the objection [O24 r13(2)].

(2) Ancillary Discovery Orders Made in Other Interlocutory Orders

Where appropriate, certain interlocutory orders of the Court, such as Mareva injunctions and Anton
Piller orders, also contain disclosure orders, e.g. see paragraph 5 of the standard form Anton Piller
order at PD 11.2.

N. Use of materials obtained in discovery

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(1) Implied Undertaking

(a) Meaning: -

“Any party on whom a list of documents is served or to whom documents are produced on discovery or
pursuant to an order of the court impliedly undertakes to the court that he will not use them for a
collateral or ulterior purpose without the leave of the court or consent of the party providing such
discovery” [Derek Joseph Parry & Another v. Nicholas Bryan Bentley & Another [1994] 1 HKLR 265]:

(c) When is information used for a “collateral or ulterior purpose”?

(i) Test: where the use of the information is “not reasonably necessary for the proper conduct
of the action” [e.g. Wilden Pump Engineering Co. v. Fusfeld [1985] FSR 581 (Falconer J), as
cited in Derek Joseph Parry v. Nicholas Bryan Bentley, above];

(ii) Examples of collateral or ulterior purposes:

 Using sensitive commercial information obtained from discovery in business activities;

 Using the materials in a different action (in Hong Kong or in another jurisdiction);

 The defendant using materials (discovered in respect of the plaintiff’s claim) in the same
action in respect of a counterclaim of a defendant that is unrelated to the Plaintiff’s claim
(Derek Joseph Parry, Supra)

(d) Circumstances when implied undertakings do not apply

(i) documents produced under O 24 r10 (i.e. M: documents referred to in pleadings,

affidavits/affirmations, witness statements and experts’ reports) or r11 (to the extent it relates
to documents within r10) [e.g. see Shun Kai Finance Co. Ltd. v. Japan Leasing (Hong Kong)
Ltd. (No.2), above]:

“So, where a party voluntarily chooses to refer to a document in his pleading or an affidavit,
it is he who has destroyed the privacy of the document and not the other party or the
court…”;

(ii) After a document has been “read to or by the Court, or referred to, in open court”, unless the
Court orders otherwise [O 24 r14A]. This also applies to any express undertaking to the same
effect. The reason is that the information in question will then be in the public domain;

(iii) May be relaxed by the Court in appropriate circumstances where the release or modification
of the undertaking does not “occasion injustice to the person giving discovery” Re NDT (BVI)
Trading Ltd. (HCCW 49/2008) [2009] HKEC 1717)

(2) Restrictions imposed by Court Order

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 Where appropriate, the Court may also impose restrictions on the production/inspection of
documents:

For example, where the Court is satisfied that the documents in question contain trade or technical
secrets, it may order a “controlled inspection” e.g. only a small number of specified persons are
allowed to see the documents, see e.g. PCCW-HKT International Ltd. v. New World Telephone Ltd.
(unrep., HCCL 229/1999, 9 July 2001 Stone J).

O. Solicitor’s duties

A solicitor: -

(1) has a duty to his client, as well as to the Court, as an officer of the Court

(2) should explain the duty and nature of discovery and the implied undertaking to his client

(3) should advise his client not to destroy or withhold disclosable documents

(4) should ensure that full and proper disclosure of all relevant document is made

(5) has a continuing duty on discovery

P. Non-compliance of discovery obligations

(1) If a deficient list is served – apply for further and better List O24 r3(1) and (2), 5(3) RHC and RDC

(2) If some documents are missing – apply for specific discovery O24 r7(1) and (3) RHC and RDC

(3) If no list has been served – apply for general discovery O24 r3(1), RHC and RDC

(4) If a party generally failed to comply with an order for discovery:

(a)apply for an “unless order”

(b) apply to dismiss action or strike out defence O24 r16(1)

(i) The Court will rarely use this power. It will usually only be ordered where the applicant
can show that there is a real risk (as a result of the other party’s default in complying
with its discovery obligations) that it will no longer receive a fair trial. In practice,
Court would usually order that the defaulting party be debarred from producing
documents as evidence at trial. See Yeung Shu Lam Wilson trading as Wilson Yeung &
Co v. Chan Sui Ting HCA 284/2002, 7 December 2004, Reyes J

(ii) If a party fails to comply with a Court order for listing or production, the party is liable to
committal 羈押 [O24 r16(2)].

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(iii) If a solicitor fails without reasonable excuse to give notice of a Court order for listing or
production to his/her client, the solicitor is also liable to committal [O24 r16(4)].

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II. Interrogatories

A. What are Interrogatories?

(1) A way of discovering facts (as opposed to documents)

(2) Written questions served on the other party, regarding facts which are within the other
party’s knowledge and which are relevant to the dispute.

(3) Answering party is required to give answers on oath

C. Requirements O26 RHC and RDC

(1) The Rule

O26(1) RHC

“(1) A party to any cause or matter may in accordance with the following provisions of this Order serve
on any other party interrogatories relating to any matter and question between the applicant and that
other party in the cause or matter which are necessary either-

(a) for disposing fairly of the case or matter; or

(b) for saving costs.”

(2) Requirements

(a) Interrogatories must

(i) relate to a matter in question

(ii) be necessary either for disposing fairly of the case or matter or for saving costs

(b) Interrogatories must not

(i) be fishing, oppressive, prolix or imprecise

(ii) be question which went to evidence the opposing party intend to adduce

(iii) be questions which require an answer which require an answer which was a matter of
opinion or from an expert

(iv) be question which went to the facts which would assist in establishing the opposing party as
opposed to the case of the party seeking to interrogatories

(v) be effectively asking for documents of discovery

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 Lee Nui Foon v Ocean Park Corp (No.2) [1995] 2 HKC 395

D. How to apply?

(1) High Court

(a) Interrogatories may be served on a party twice, without order of the Court [O26 r3(1) RHC].
(Bonus)

(b) However, leave of the Court is required where interrogatories are to be served on the Government
[O26 r3(3) RHC].

(c) Leave of the Court is required where two sets of interrogatories have already been served on that
party without leave (i.e. from third time and so on) [O26 r1(2) RHC].

(d) Application for leave to serve interrogatories is made by summons, attaching the proposed
interrogatories [O26 r4(1) RHC]. Alternatively, by way of notice served for the purpose of case
management summons [O25 r7, RHC].

(e) The Court must take into account any offer by the intended recipient of the proposed
interrogatories to give particulars, make admissions or produce documents, and whether
interrogatories without order have already been served [O26 r4(2) RHC];

See Appendix 3 for a sample Interrogatories

(2) District Court

(a) All interrogatories require the Court’s leave [O26 r1 RDC] (No bonus!)

(b) The application is made by summons (or by a notice served in response to a case management
summons under O25 r10 RDC), attaching the proposed interrogatories [O26 r1(2) RDC]

(c) The Court must take into account any offer to give particulars, make admissions or produce
documents [O26 r1(2A) RDC].

E. When should interrogatories be served?

Normally premature if served before discovery or before exchange of witness statements

It has been suggested that answers requested by the interrogatories must be essential for the preparation
for the trial and cannot reasonably be expected from requests for further and better particulars, discovery
or witness statements. Therefore, if interrogatories are served before discovery or exchange of witness
statements, the Court normally should not regard the interrogatories to be necessary for disposing fairly
of the matter or for saving costs. In other words, the party serving or proposing to serve interrogatories

85
should normally wait for the other party’s discovery and witness statements first and see what
information he will get from these.

However, ultimately whether interrogatories should be ordered at any stage is a matter of judicial
discretion and there cannot be any hard and fast rule as to the time for serving interrogatories. See, e.g.
Zhu Kuan Co. of Zhuhai SEZ v. Brickell Ltd. & Others (unrep., CACV 273/1995, 3 April 1996), where
the CA upheld the judge’s decision to order interrogatories shortly after service of Defence.

F. Failure to Answer Interrogatories

(1) If the interrogatories were ordered by the Court but the receiving party failed to comply, the Court
may make an appropriate order, e.g. for the party to provide a further answer or to be orally
examined by the Court [O26 r5(2)];

(2) If the interrogatories were served (in the CFI) without Court order but the answer is not satisfactory,
the interrogating party may request further and better particulars of the answer [O 26 r5(3) RHC];

(3) If a party fails to answer interrogatories (whether ordered by the Court or not) properly, the Court
has the power to dismiss the action or strike out the Defence [O 26 r6(1)], although this power will
not be lightly exercised by the Court;

(4) If a party fails to answer Court ordered interrogatories or to comply with a Court order made under
O26 r5(2), the party is liable to committal [O26 r6(2)];

(5) If a solicitor fails without reasonable excuse to give notice of a Court order for interrogatory to
his/her client, the solicitor is also liable to committal [O26 r6(4)].

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SEMINAR 6: OTHER INTERLOCUTORY APPLICATIONS

Read Orders 1A, 3, 23, 29, 32 and 44A of the Rules of High Court

Read Chapter 1 at pp 31-35; Chapter 10 at pp 445-455 and pp 492-505; Chapter 11 at pp 507-535, and
pp 537-547; and Chapter 19 at pp 862-867.

A. Interlocutory Applications - General Principles

Introduction

Before making an interlocutory application, it is important that the party should carefully consider

(1) whether the intended application is justified in law; and

(2) if yes, whether it is practically/tactically desirable to make the application.

With regard to question (1), consider the following:

(a) what is the relief sought?

(b) does the court have jurisdiction to grant the relief?
(c) if yes, whether the criteria for making an Order for such relief as prescribed under common law or
the relevant legislation can be satisfied.

With regard to question (2) key considerations include:

(a) Cost-effectiveness - whether the benefit to be derived from the application justifies the costs
involved;
(b) Time - whether the application will delay the progress of the case or the trial;
(c) tactical considerations – For example, whether the application may demoralise the opponent or
expose the weakness of his case so that he will be more receptive to your settlement proposal; or
whether it may unwittingly give him a chance to improve his case e.g. applications for specific
discovery or further and better particulars may alert the opponent of lacuna in his evidence or
pleadings.

- O1A – Underlying Objectives

- O1B - Court’s express powers of case management
- O2 r 4 – Self-executing sanctions upon failure to comply with court directions
- O25 r 7 – Duty to make all interlocutory applications at case management summons
- O32 r 11 – Power of Master to dispose of interlocutory application on the papers (see also Practice
Direction 5.4)
- O32 r 11B – Power to specify consequences of failure to comply with court order on interlocutory
application

Procedure

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 O32 r11A (1) (a): subject to certain exceptions, masters may now deal with interlocutory
applications on paper, that is, without an oral hearing.
 The power of a master to deal with an interlocutory application without an oral hearing is a matter
for the master’s discretion.
 Consent of the parties is not required, although any representations made by the parties will be
considered by the master.

Practice Direction 5.4 – the practice direction sets out a non-exhaustive list of interlocutory
applications which are considered as appropriate for disposal without an oral hearing:

(a) Determination of the time and rate of payment under Order 13A
(b) Further and better particulars
(c) Security for Costs
(d) Summary judgment
(e) Interim payment
(f) Setting aside default judgment
(g) Amendment (where no argument on limitation)
(h) Case management Summons.

 If the master directs that the application is to be disposed of on paper and a party thinks that it would
be inappropriate to hear the application without an oral hearing, the party may apply for an oral
hearing.

Interlocutory applications made by inter partes summons (normally supported by affidavit evidence) are
returnable before a Master of the court (unless the Master has no jurisdiction to grant the relief
sought e.g. injunction (see O 32 r 11) or the case is listed before certain special lists e.g. the Commercial
List where interlocutory applications will generally be heard by the judge in charge of the list.)

 In exceptional circumstances, interim relief may be sought on an ex parte basis (i.e. without
allowing the other side to be heard)
 Main acceptable justifications are extreme urgency and/or the need for secrecy.
 As a general rule, any such order granted ex parte will be for a short duration until the next inter-
partes hearing and the court would require the applicant to forthwith take out an inter partes
summons to determine whether or not the interim relief should be continued.

Duty of Full and Frank Disclosure on Ex parte Application

 On any application made ex parte the applicant must act in the utmost good faith.
 This includes an important duty to make full and frank disclosure of all the material facts.
 Where an application has been granted on the basis of supporting evidence containing material
misstatements of fact or the applicant has failed to make a sufficient disclosure, the ex parte
order should normally be set aside. An example of this can be seen in the case of New Asia
Energy Ltd v Concord Oil (Hong Kong) Ltd [2000] 2 HKC 681, CA.

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Standard Chartered Securities Ltd. v. Lai Arthur

(1) The duty of the applicant is to make a full and fair disclosure of all the material facts.
(2) The material facts are those which it is material for the judge to know in dealing with the
application as made.
(3) Materiality is to be decided by the court and not by the assessment of the applicant or his legal
advisers.
(4) The applicant must make proper inquiries before making the application (active duty).
(5) The duty of disclosure therefore applies not only to material facts known to the applicant but also
to any additional facts which he would have known if he had made such inquiries.
(6) The extent of the inquiries which will be held to be proper, and therefore necessary, must depend
on all the circumstances of the case including (a) the nature of the case which the applicant is
making when he makes the application; and (b) the order for which application is made and the
probable effect of the order on the defendant and (c) the degree of legitimate urgency and the
time available for the making of the inquiries.
(7) If material non-disclosure is established the court will ensure that a plaintiff who obtains an ex
parte injunction without full disclosure is deprived of any advantage he may have derived by that
breach of duty.
(8) Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge
of the order without examination of the merits depends on the importance of the fact to the issues
which were to be decided by the judge on the application.
(9) The answer to the question whether the non-disclosure was innocent, in the sense that the fact
was not known to the applicant or that its relevance was not perceived, is an important
consideration but not decisive by reason of the duty on the applicant to make all proper inquiries
and to give careful consideration to the case be presented.
(10) Not every omission the injunction will be automatically discharged. The court has a discretion,
notwithstanding proof of material non-disclosure which justifies or requires the immediate
discharge of the ex parte order, nevertheless to continue the order, or to make a new order on
terms.
(11) When the whole of the facts, including that of the original non-disclosure, are before the court, it
may well grant a second injunction if the original non-disclosure was innocent and if an
injunction could properly be granted even had the facts been disclosed.
(12) What is material to be disclosed on an ex parte application was dealt with in Citibank NA v.
Express Ship Management Services Ltd. [1987] HKLR 1184, CA at 1190D, where it was held that
the court was not concerned with whether the matters not disclosed would if they had been
disclosed have caused it to refuse to grant the ex parte order; and the test was whether the court
should have these matters in the weighing scales.
(13) The applicant must make a full and frank disclosure of all relevant matters, including those against
his application: It is clearly the duty of counsel and of the solicitor to point out to the judge any
points which are to their client’s disadvantage, which the judge should take into account in
considering whether or not to grant the injunction.
(14) The extent of the duty to disclose: It may not be a sufficient answer to an allegation of non-
disclosure for a plaintiff to say that the relevant information giving rise to the defence was
contained in an exhibit, though not referred to in the body of the plaintiff’s affidavit in the context
of a possible defence.

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(15) The applicant has the responsibility of ensuring that all relevant points are presented clearly and
distinctly. The applicant must ‘identify the crucial points for and against the application, and not
rely on the mere exhibiting of numerous documents’. Any contractual provision (e.g. an exclusion
clause) which is relevant to the court’s consideration of the application should be referred to and
preferably set out in the body of the affidavit. It will not usually be sufficient simply to exhibit the
entire contract.
(16) Accordingly, it is of the utmost importance that the plaintiff carefully considers the nature of the
cause of action and the facts on which it is based before formulating the application. A thorough
check should be made to ensure that all defences actually raised by the defendant are identified
and fairly summarised in the affidavit.

Cheung Kam Wah v Cheung Hon Wah [2005] 1 HKC 136

The following should in particular be noted:

(4) Material facts are those facts which are relevant to the exercise of the court’s discretion in the ex
parte application. The test was whether the court should have these matters in the weighing
scales, irrespective of whether the matters, if disclosed, would have caused the court to refuse to
grant the ex parte application.
(5) Materiality is to be decided by the court and not by the assessment of the applicant or his legal
advisers
(6) Positive duty on the applicant and his lawyers to point out to the court any points which are to the
applicant’s disadvantage
(7) The applicant must make proper inquiries before making the application. The duty of disclosure
therefore applies not only to material facts known to the applicant (or his agents) but also to any
additional facts which he (or his agents) would have known had he made all inquiries which
should reasonably have been made prior to the application.
(8) If there was material non-disclosure, in general the ex parte order so obtained should, without
more ado, be discharged.
(9) The court however has a discretion, notwithstanding proof of material non-disclosure, to continue
the order, or to make a new order on terms, depending on where the justice of the case lies (e.g.
the degree and extent of the culpability with regard to the non-disclosure, and its significance to
the outcome of the application).

B. Order for an Extension of Time

O 3 r 5:

(1) The Court may, on such terms as it thinks just, by order extend or abridge the period
within which a person is required or authorized by these rules, or by any judgment, order or
direction, to do any act in any proceedings.

(2) The Court may extend any such period as is referred to in paragraph (1) although the
application for extension is not made until after the expiration of that period.

 judges and masters have made it clear that they are likely to be less inclined to grant extensions of
time as they have to ensure that the case should be dealt with as expeditiously as reasonably

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 practicable in accordance with the underlying objectives

Fortune Asset Development Ltd v De Monsa Investments Ltd

The Principles for Seeking Extension of Time

 These rules are applicable equally to the main action as for interlocutory applications.
 The Court has power to extend time even if an application for extension is made after the time for
compliance has expired: Order 1B, rule 1(2)(a).
 In exercising this power, the court will take into account all the circumstances including but not
limited to the following matters (non-exhaustive list):
(1) What was the original time allowed and when has it expired?  The more the original time
allowed, the more difficult it is to justify an extension.
(2) Was the original time laid down by consent or at the suggestion of the applicant?  Under the
Civil Justice Reform, a party is held more to his own bargain.
(3) Why was the original time not adhered to?
(4) When was the application for extension of time taken out?  The greater the delay, the more
difficult it is to obtain an extension.
(5) Has the applicant used his best endeavours to secure the attendance of a witness to take
instructions and impressed upon that witness the importance of attending on a certain date to
affirm?
(6) Is a witness’s availability within the “control” of the applicant?  For example, if the witness is an
unwilling ex-employee, the court may have more sympathy with the applicant.
(7) That a client or witness has to travel frequently out of the jurisdiction is not a good reason in itself
given the advanced means of communication these days by email, fax and telephone conference. 
It is incumbent upon the applicant to obtain the instructions for drafting the affirmation in good
time and to impress upon the witness the need to turn up on a designated date to affirm.
(8) If the witness is an expert, has the expert been informed of the time laid down by legislation, PD
or the court, and committed himself to provide a report by that time?  If he had not so committed
himself, why was that particular expert still engaged?
(9) What realistically is the further time needed to complete and file the affirmation?  An applicant
should not just casually pick a multiple of 7 days without regard to its adequacy for completing the
affirmation.
(10) Was there any de facto extension of time already enjoyed by the applicant, whether by way of
consent, or in waiting for his time summons to be heard?
(11) Will the extension of time sought have impact on any hearing date or milestone date?

 Last minute change in the legal team in itself can hardly be a good reason for seeking extension of
time.

Ip Sau Lin v Hospital Authority

 Court will be more inclined to impose penalties on parties who fail to comply with the rules,
directions or the case timetable.
 For example, where directions which require compliance within a stated time are not complied with,
the court is likely to impose self-executing orders with sanctions that take automatic effect

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Summary on procedural matters
 PD18.2 discourages non-compliance of court-imposed timetable for steps to be taken and/or breach
of court case management directions. The court does not smile kindly on party-driven litigation that
(a) keeps the court in the dark of any delay due to anticipated or actual non-compliance and/or (b)
fails to seek remedial directions on good and sufficient grounds in a timely manner.
 Apart from the case management measures discussed above (e.g. short-scheduled self-executing
orders and inter partes costs sanctions), the court may utilise its further case management powers
under Orders 1B and 2 of the RDC (which include ordering the defaulting party to pay a sum into
court pursuant to Order 1B rule 1(3) and (4) and Order 2 rule 3 of the RDC).
 In clear cases where legal representatives have caused wasted costs to be incurred, the court
may, where it is just in all the circumstances, make a wasted costs order under Order 62 rule 8 of
the RDC.
 Where there has been unwarranted and/or significant delay in bringing the matter to trial, the court
may direct the issue of whether interest should be awarded over the relevant period be reserved to
the trial judge or failing a trial such issue be brought before a judge for determination.

C. Interlocutory Injunctions

Introduction

As a general definition, an injunction is an order of the Court that requires a party to either refrain from
doing a specific act(s) (a prohibitory injunction) or to do a specific act(s) within a specified period (a
mandatory injunction).

An injunction is a form of equitable relief that can be sought either in the High Court or the District
Court, whether interlocutory or permanent: see s 21L HCO and s 52 and s 52B DCO and O 29 r 1.

An interlocutory injunction is a temporary measure designed to protect and preserve legal rights and
interests and to prevent the commission or continuation of a legal wrong.

 pursuant to the amended s 21M of the High Court Ordinance and O 29 r 8A RHC, the Court of First
Instance (but not the District Court) has the power to grant a ‘free-standing’ interlocutory
injunction in support of foreign proceedings in the absence of substantive cause of action in Hong
Kong.
 The Court of First Instance may exercise its power to grant ‘free standing’ interim relief in relation
to proceedings which (a) have been or are about to be commenced in a place outside Hong Kong,
and (b) are capable of giving rise to a judgment which may be enforced in Hong Kong under any
Ordinance or at common law.

Equitable and Discretionary Relief

An injunction is an equitable and discretionary relief. Hence, even if the plaintiff shows its
rights are being infringed, the Court may still refuse the plaintiff an injunction, leaving the
plaintiff with damages and or other relief as its only remedy.

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 Matters that may affect the Court’s discretion as to whether to grant an injunction, permanent or
interlocutory, include :-

1. Where relief by an injunction would instead be properly compensated by damages. The first
principle relating to injunctions is that prima facie you do not obtain an injunction to restrain
wrongs for which damages are the proper remedy, in particular where the wrongs have
ceased and there is no likelihood of its recurring (see: Proctor v Bayley [1889] 42 Ch D 390);
2. Infringement of the plaintiff’s right(s) is trivial. For example, in Behrens v Richards [1905] 2
Ch 614 where there was no injury to the plaintiff landowner, the court considered the grant of
a declaration of the plaintiff’s rights plus an award of nominal damages to be sufficient on
the facts of that case and so refused the grant of an injunction which arose from a “petty
contest”. See also Sharp v Harrison [1922] 1 Ch 502, which held that where the defendant
commits a breach of a negative legal covenant after warning, plaintiff is ‘speaking generally’
entitled to a mandatory injunction without proving damage. But if the defendant proves that
no damage has been occasioned and offers undertakings that will effectually prevent any
future damage by the continuing breach, and the granting of a mandatory injunction would
inflict damage on defendant out of all proportion to the relief given to plaintiff, the court
ought to refuse it;
3. Unacceptable behaviour, fraud or dishonest conduct affects the plaintiff’s claim. Thus the
Court can refuse a plaintiff an interlocutory injunction restraining publication by a former
disciple of its confidential tracts where there is evidence that the plaintiff has been protecting
its secrets by deplorable means and hence does not come with “clean hands” to the court to
protect those secrets (see: Hubbard v Vosper [1972] 1 QB 84);
4. Acquiescence, meaning that the plaintiff stands by while the act complained of is still taking
place or has not yet taken place and the plaintiff knows that the act is being done and it is
aware of the legal rights involved (see: Armstrong v Sheppard & Short Ltd [1959] 1 QB
384);
5. Laches, meaning unreasonable inaction by the plaintiff after the infringement of its right(s)
had already taken place and hence it would be wrong to the defendant that an injunction be
granted. Normally the length of delay is the greatest factor to be considered and it is usual
that laches is commonly used as a defence to interlocutory injunctions (see: Legg v ILEA
[1972] 1 WLR 1245);

General Principles for the Grant of Interlocutory Injunctions

American Cyanimid Company v Ethicon Limited

 Plaintiff does not need to show a prima facie case in the sense of convincing the Court that on the
evidence before it he is more likely than not to obtain a permanent injunction at trial.

Requirement on merits:
 the claim is not frivolous or vexatious
 there is a serious issue to be tried (no need to show a prima facie case of success, but only a real
prospect of success)
 Once a “serious issue to be tried” is established, the court should go on to consider the “balance of
convenience”

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In deciding where the balance of convenience lies, the court should consider:
1. Whether, if P succeeds as trial of the action, an award or damages would be adequate compensation
(irreparable damages or not). If damages would be an adequate remedy and the defendant would be
in a financial position to pay them, no interlocutory injunction should normally be granted, however
strong the plaintiff’s claim appeared to be at that stage.
2. If damages would not provide adequate remedy, then consider, if the interlocutory injunction were
granted, whether D would be adequately compensated under P’s undertaking as to damages (cross-
undertaking). If yes, there would be no reason to refuse the interlocutory injunction
3. Where there is doubt as to the adequacy of the respective remedies in damages available to either
party or to both, that the question of the balance of convenience arises (where balance seems to be
evenly weighted).
4. Factors taken into account: preservation of status quo, relative strength of parties’ cases, public
interest.

Fast-link Express Ltd v Falcon Express Ltd

Practical effect of interlocutory injunction: D has to change its trading name and will unlikely return to
its use even if it eventually succeeds at trial => the grant of injunction will practically dispose of the
whole action and so there will not be a further trial

Para 6: Cayne v. Global Natural Resources Plc (1984) 1 All ER 225:

 Where the grant or refusal of an interlocutory injunction will have the practical effect of putting an
end to the action, the court should approach the case on the broad principle of what it can do in its
best endeavour to avoid injustice and to balance the risk of doing an injustice to either party.
 In such a case the court should bear in mind that to grant the injunction sought by the plaintiff would
mean giving him judgment in the case against the defendant without permitting the defendant the
right of trial.
Para 9: “It seems to me that where the consequences of the injunction would be as far reaching as I
predict, the Plaintiff would need to show that it is at least very likely to succeed at trial before it can
trigger the exercise of the this jurisdiction. This approach would be more consonant with the court
using its best endeavour “to avoid injustice and to balance the risk of doing an injustice to either party.”
 Held: on the evidence available, P has demonstrated a very high probability of success should the
matter ultimately go to trial; balance of convenience also lied in favour of P.

Music Advanced Ltd & Another v. The Incorporated Owners of Argyle Centre

Good summary of principles by Ma J at para 12:

• In the case of interlocutory mandatory injunctions, it is often said the applicant’s case on the merits
has to be made out to a higher standard of proof than in the case of prohibitory injunction (or that the
court needs to feel a “high degree of assurance”).
• The basic approach to interlocutory injunctions, whether mandatory or prohibitory, is the same.
Section 21L of the High Court Ordinance makes no distinction between these two types of
injunctions and simply states that interlocutory injunctions may be granted if it appears to be just or
convenient to do so.

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• At the interlocutory injunction stage, the principal concern of the court is that it might make a wrong
decision in the sense that after trial, the party to whom an interlocutory injunction has been granted
may lose or the party who has been refused one, may win. The court will therefore take whichever
course appears to carry the lower risk of injustice if it should turn out that it is wrong. This
“fundamental” principle is the source of the guidelines that have evolved and therefore, in the
application of any guidelines, sight must not be lost of this principle.
• mandatory injunctions generally carry a higher risk of injustice if granted at the interlocutory stage
=> generally a court will have to feel a high degree of assurance
• However, this is only generally the court’s approach. Where it is shown, as an exception to this
general approach, that the case is one in which the withholding of on interlocutory mandatory
injunction would in fact carry a greater risk of injustice than granting it even though the court does
not feel the “high degree of assurance” as aforesaid, it would be right to grant an interlocutory
mandatory injunction.
• Thus, if a plaintiff in seeking an interlocutory mandatory injunction cannot demonstrate more than a
serious question to be tried, it will have to show that the balance of convenience tilts so much in its
favour that justice requires such an injunction to be granted.
• At no stage in the consideration of the matter does the court lose sight of the practical realities of the
situation to which the injunction will apply
• HELD: on the evidence available P could only establish a serious issue to be tried, but no more.
Injunction refused as balance of convenience lied in favour of D (safety and security for D vs. loss of
business for P)

Shing Luen Fat v Shing Chi Ping

 For deciding whether to grant an interlocutory injunction, the test is whether there is a serious
question to be tried; and where the balance of convenience lies: see American Cyanamid Co v
Ethicon Ltd
 The prejudice that the Defendant may suffer in practical terms
 for a mandatory interlocutory injunction to be granted, the court must feel a high degree of assurance
that in the trial, it will appear that the injunction has been rightly granted
 What underlies the caution of the court is the risk of injustice to the defendant at the end of the day if
the mandatory injunction has not been rightly granted.
 If the circumstances are that justice requires the grant of mandatory injunction at an interlocutory
stage, then such an injunction should be granted irrespective of whether the court has a high degree
of assurance as to the merits of the applicant’s case.
 Where the injunction sought is not expensive to comply with, or is not irreversible or would not
effectively pre-empt the trial, the court may well grant the injunction without requiring a high degree
of assurance even if the injunction is mandatory in nature. (no hardship for D in carrying out the
injunction)

Cross-undertaking as to damages

- Where a plaintiff is granted an interlocutory injunction, the Court will normally require the plaintiff
to give an undertaking to pay damages to the defendant for any loss suffered by reason of the
injunction if it then turns out the injunction should not have been granted.

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- The cross-undertaking in damages is an important safeguard for the defendant, as interlocutory
injunction is usually granted on an urgent basis and without going deep into the merits of the
application and so there is always a risk that the injunction would at the end turn out to be
unjustified. The cross-undertaking will normally be enforced if the injunction was wrongfully
obtained although the Court retains the discretion not to.

- Where there may be doubts as to the plaintiff being able to honour the cross-undertaking, the Court
may require fortification of the undertaking by giving security, such as by a bond or by payment
into Court. Hence, if the injunction is obtained on an ex parte basis, the duty of full and frank
disclosure will normally require the plaintiff to provide relevant information on his financial ability
to honour the cross-undertaking

Wah Nam Holdings Co Ltd & Ors v Excel Noble Development & Ors [2000] (undertaking in lieu of
injunction discharged as Ps failed to give full and frank disclosure of their poor financial position)

• For the protection given to the Defendant by the cross-undertaking to be real and not illusory, the
Plaintiff must obviously be able to honour it if required.
• Where there is no reference to the applicant’s financial worth, the assumption will be that the
applicant’s financial substance is adequate for the purpose of the cross-undertaking that has to be
given.
• if a Plaintiff’s financial position is such that, viewed fairly, it may be said to raise realistic doubts as
to the Plaintiff’s ability to honour the cross-undertaking, it becomes incumbent upon the Plaintiff to
make full and frank disclosure of his financial position to the ex parte judge so as to permit the judge
to determine for himself the correct order to make in the light of such disclosures.
• The judge in such cases has various options. He may consider it proper to refuse the injunction
altogether. Or, he may decide to require some degree of fortification of the cross-undertaking as a
condition for the grant of the injunction. Alternatively, he may simply decide to grant the injunction
against the cross-undertaking notwithstanding the risk that it may not be honoured or fully honoured
if called upon.

• Para 48: where genuine doubts can materially be raised and there has been a failure to disclose the
questionable financial position, it is no answer for P to subsequently argue:
A. that he probably could meet any potential liability; or
B. that he should be excused from the non-disclosure because the ex parte order (e.g.in Anton Piller
cases) has borne fruit, showing the Defendant in a bad light.
• i.e. End doesn’t justify the means! Poison fruit cannot acts as justification of not having frank
disclosure!

Procedure

The application should be made before a judge in chambers, as the power to grant an injunction resides
with a judge, not the Registrar and masters (unless by consent of the parties): see O 32 r 11(1)(d)
and O 32 r 11(2).

An interlocutory injunction can be applied for via:

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 (a) Inter partes hearing:

Under normal circumstances, interlocutory injunction applications should be commenced inter

partes, in other words, with the other parties notified and given a right to contest the application
at the hearing.

(b) Ex parte application:

(i) In exceptional cases, the application may be made ex parte, in other words, with only the
applicant being present.
(ii) O 29 rr 1(2) and (3) state that in cases of urgency the application may be made ex parte
on affidavit. Another reason is the need for secrecy, particularly where a Mareva
injunction or Anton Piller order is being sought.
(iii) If urgency is the only reason, ex parte application will normally only be justified in
cases of extreme urgency, as the court can arrange for an inter partes hearing at short
notice, or require that the application be made “ex parte on notice” i.e. notice be given to
the defendant so that he may be present at the ex parte hearing and even provide
information or evidence to the court.

28. The procedure for applying for interlocutory injunctions is further guided by Practice Direction
5.3, which provides, inter alia, for a Summons Day on Fridays:

1.1 In future each Friday during term will be a summons day. The return dates for all
summonses for interlocutory injunctions, including those where injunctions have been
granted ex parte, will be Friday mornings at 10:00 am.
2.1 The Clerk of Court will mark on the summonses for all injunction applications the date of
the next summons day provided that two clear days’ notice can be given to the
respondent.
2.2 The judge granting an ex parte injunction will determine on which summons day the
injunction shall be returnable. In usual circumstances the return date for ex parte
injunctions granted less than two clear days before a summons day will be the second
summons day following the grant.

29. Since the “Summons Day” is a weekly event taking place normally on Friday 10:00 am and two
clear days are needed for giving notice to the respondent. This means ALL papers must be
served and filed by Tuesday 10:00 am of that same week; otherwise the application will be
fixed for the next Summons Day in the following week (for interlocutory injunction).

30. The procedure for applying for ex parte interlocutory applications is further guided by Practice
Direction 11.1 ‘Ex parte, Interim and Interlocutory Applications for Relief (including Injunctive
Relief)’.

D. Mareva Injunction and Anton Piller Orders

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General comments

There are now standard forms which must normally be followed, as per Practice Direction 11.2 –
‘Mareva Injunctions and Anton Piller Orders’.

Mareva injunction

Introduction

Mareva injunction is a special form of interlocutory injunction, as no final/permanent injunction is

being asked for. The origins of the Mareva injunction derive from Mareva Cia Naviera SA v
International Bulk Carriers, The Mareva [1980] 1 All ER 213 CA. In that case, the English Court of
Appeal held that its courts had jurisdiction, via an interlocutory injunction, to restrain a foreign
defendant from removing assets that were within the jurisdiction of the UK. This jurisdiction was
subsequently extended to restrain a defendant based within the jurisdiction. In Hong Kong it is given
statutory force pursuant to s 21L HCO and s 52B DCO.

In simple terms, a Mareva injunction (also known as a freezing order) is an order of the Court that
prohibits the defendant from disposing of or otherwise dealing with his assets up to an amount stated,
and the defendant will be in contempt of court if he disobeys the order. More importantly, any third
party (e.g. the bank where the defendant has an account) served with the order will also be in contempt
of court, if it assists in the disposal of, or deals with the defendant’s assets in violation of the injunction.

The two main factors in order for a Mareva injunction to be effective are:

(a) Speed;
(b) Secrecy

Hence, by its very nature, a Mareva injunction is applied for on an ex parte basis.

A Mareva injunction can be sought either in the High Court or the District Court, whether before or after
commencement of action, or even post-judgment.

General Principles

38. In order for a plaintiff to obtain a Mareva injunction, in general the following must be
established by affidavit evidence, namely:

(a) The existence of a “good arguable case” or a “strong prima facie case” on a
substantive claim over which the court has jurisdiction.

(b) The defendant must have assets within the jurisdiction (or in the case of a worldwide
Mareva injunction, an insufficiency of assets within the jurisdiction to satisfy the
plaintiff’s claim but with assets outside the jurisdiction).

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 (c) The defendant must have grounds for believing that there is a real risk of dissipation of
assets, or removal of assets from the jurisdiction. A suspicion, a fear, an anxiety of
dissipation is not enough; there must be a real risk. In deciding whether there is a real
risk, the court may take into account all relevant circumstances such as (1) the
defendant’s past conduct relating to evasiveness or dishonesty (2) the nature of the assets
(3) standing and respectability of the defendant in the jurisdiction and with businesses
(for example, the CA held in CAC Brake Co Ltd Zhuhai v Bene Manufacturing Co Ltd
Civ App No. 94/1998, 30 April 1998 that “upon the fact alone that there is a good
arguable case of fraud, it is open to a court to conclude that there is a real risk of
dissipation of assets”. In Honsaico Trading Ltd v Hong Yiah Seng Co Ltd [1990] 1
HKLR 235, Godfrey J thought that ‘an unacceptably low standard of commercial
morality’ giving the court a feeling of uneasiness could drive the court to the conclusion
that there was a real risk of dissipation of assets.)

(d) That the balance of convenience is in favour of grant.

(e) That full and frank disclosure of all material matters has been given.

39. Just as with interlocutory injunctions, the plaintiff needs to give a cross-undertaking as to
damages, with fortification (e.g. by bank guarantee or payment into court) if considered
necessary by the court.

40. Being a discretionary relief, there are factors which may prevent the grant of a Mareva
injunction, such as:

(a) Delay in the application;

(b) Material non-disclosure;
(c) Insufficient risk of dissipation of assets;
(d) Relatively small sums are involved.

41. The amount of the defendant’s assets which the Court should “freeze” for a Mareva injunction
is, normally, the amount which the plaintiff’s claim is prima facie justifiable (see: Z Ltd. v A-Z
and AA-LL [1982] 1 QB 558).

42. Mareva injunction may cover assets which, though appear on their face to belong to a third party,
are in truth the assets of the defendant. The relevant principles are set out in S.C.S. Finance Co.
Ltd. v. Masri [1985] 1 WLR 876 when Lloyd L.J. stated (at p.884):

“(i) Where a plaintiff invites the court to include within the scope of a Mareva injunction assets which
appear on their face to belong to a third party, e.g. a bank account in the name of a third party,
the court should not accede to the invitation without good reason for supposing that the assets
are in truth the assets of the defendant.
(ii) Where the defendant asserts that the assets belong to a third party, the court is not obliged to
accept that assertion without inquiry, but may do so depending on the circumstances. The same
applies where it is the third party who makes the assertion, on an application to intervene.

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 (iii) In deciding whether to accept the assertion of a defendant or a third party, without further
inquiry, the court will be guided by what is just and convenient, not only between the plaintiff
and the defendant, but also between the plaintiff, the defendant and the third party.
(iv) Where the court decides not to accept the assertion without further inquiry, it may order an
issue to be tried between the plaintiff and the third party in advance of the main action, or it may
order that the issue await the outcome of the main action, again depending in each case on what
is just and convenient.”

Ancillary Orders

43. Ancillary orders can be made in support of a Mareva injunction, such as disclosure of or
protection of assets, discovery, cross-examination of deponents, tracing orders (see: Yau Chiu
Wah v Gold Chief Investment Ltd. & anor. [2002] 1 HKC 383; CTO (HK) Ltd v Li Man Chiu
& Ors [2002] 2 HKLRD 875; Hang Seng Bank Ltd v Lau Ching Che & Ors [2008] 1 HKC
385), “delivery up” order of “assets” (e.g. cars, vehicles, jewellery, choses in action) (see: CBS
United Kingdom Ltd. v Lambert [1983] Ch. 37).

44. Norwich Pharmacal discovery against the defendant’s banker plus a gagging order may also
be ordered by the court if the circumstances justify such exceptional orders in order to make the
Mareva injunction effective

A Co v B Co

 A strong case has to be made out that an order should be made.

 (Were the wrongdoer or wrongdoers to be forewarned that action was about to be taken or was being
taken against them by the plaintiff, this might cause them to embark on an activity that may well
prove to be prejudicial to the plaintiff.)
 Nature of the allegations: breaches of duty and corruption, makes this risk a real one.

 Are there any factors that should militate against such an order being made in the exercise of the
court’s discretion?
1. The prejudice which would or might be caused to the defendant.
2. Where a gagging order is in place, its ability to make enquiries is seriously hampered. The defendant
is thus put in an invidious position. (One of the points made was that a gagging order should not be
given since the plaintiff had instituted the present proceedings by originating summons rather than
by writ.)
3. What was meant was that an originating summons procedure was inappropriate where there were
allegations of breach of fiduciary duty and fraud.
4. However, it has to be borne in mind that the originating summons procedure is often suitable for the
hearing of Norwich Pharmacal relief

Service

45. A Mareva injunction should normally be served immediately against not just the defendant but
also third parties that are holders of an asset of the defendant such as banks. As such, the

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 plaintiff must give third parties notice of the Mareva injunction, notify them of their right to
vary the order and the details of the order with as much certainty as possible (see: Guinness Peat
Aviation [1992] 1 Lloyd’s Rep 190).

Anton Piller Order

Introduction

46. The origins of the Anton Piller order derive from Anton Piller K.G. v Manufacturing Process
Ltd. [1976] Ch. 55. In that case, the Court recognized the inherent jurisdiction of the Court to
make an order on ex parte application requiring the defendant to permit the plaintiff (subject to
limitations) to enter its premises and remove and detain offending and or sought items pursuant
to orders of the Court.

47. O 29 r 2 allows for similar relief, with a caveat:

“(1) On the application of any party to a cause or matter the Court may make an order for the
detention, custody or preservation of any property which is the subject-matter of the cause or
matter, or as to which any question may arise therein, or for the inspection of any such property
in the possession of a party to the cause or matter.
(2) For the purpose of enabling any order under paragraph (1) to be carried out the Court
may by the order authorize any person to enter upon any land or building in the possession of
any party to the cause or matter…
(5) An application for an order under this rule must be made by summons or by notice under
O 25 r 7.”

48. The Anton Piller order has emerged because the relief under O 29 r 2:

(a) Can only be applied inter partes, by summons or notice,

(b) By giving notice, there would be the danger that an unscrupulous defendant would
destroy evidence, papers will be lost, and in essence justice will not be done. As
explained in Ex p. Island Records Ltd. [1978] 1 Ch. 122:

“These ‘pirates’ used to do enormous trade in infringing copies of recorded music. It was
very difficult to catch them. As soon as one small shopkeeper was sued, he got rid of all
the infringing material. He passed his stock to a fellow pirate: and then declared that he
never had any records except the one which the plaintiffs had discovered.”

General Principles

49. As explained by Ormrod LJ in the Anton Piller case, there are three essential pre-conditions for
the making of an Anton Piller order:

(a) There must be an extremely (or very) strong prima facie case that the damage, potential
or actual, must be very serious for the applicant;

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 (b) That the defendants have in their possession incriminating documents or things (which
was the subject matter sought to be preserved) and that there is a real possibility that the
defendants may destroy such material before any application inter parte can be made;
and

(c) That there is a balance in favour of the applicant in granting the order.

50. As with Mareva injunction, there is a duty of full and frank disclosure and a need to give a cross-
undertaking as to damages, to be fortified if necessary.

51. Read Ng Chun Fai Stephen v Tamco Electrical and Electronics (Hong Kong) Ltd. [1994] 1
HKLRD 178; [1993] 1 HKC 160 CA for a review of the principles and criticisms of Anton Piller
applications.

E. Order for Security for Costs

Introduction

Jurisdiction to order security for costs:

Order 23 rule 1:

(1) Where, on the application of a defendant to an action or other proceeding in the Court of First
Instance, it appears to the Court (any one)-
(a) that the plaintiff is ordinarily resident out of the jurisdiction, or
(b) that the plaintiff (not being a plaintiff who is suing in a representative capacity) is a
nominal plaintiff who is suing for the benefit of some other person and that there is reason to
believe that he will be unable to pay the costs of the defendant if ordered to do so, or
(c) subject to paragraph (2), that the plaintiff’s address is not stated in the writ or other
originating process or is incorrectly stated therein, or
(d) that the plaintiff has changed his address during the course of the proceedings with a view
to evading the consequences of the litigation,
then if, having regard to all the circumstances of the case, the Court thinks it just to do so, it
may order the plaintiff to give such security for the defendant’s costs of the action or other
proceeding as it thinks just.

(2) The Court shall not require a plaintiff to give security by reason only of paragraph (1)(c) if he
satisfies the Court that the failure to state his address or the misstatement thereof was made
innocently and without intention to deceive.

(3) The references in the foregoing paragraphs to a plaintiff and a defendant shall be construed as
references to the person (howsoever described on the record) who is in the position of plaintiff
or defendant, as the case may be, in the proceeding in question, including a proceeding on a
counterclaim.

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  Section 357 of the Companies Ordinance (Cap. 32):

Where a limited company is plaintiff in any action or other legal proceeding, any judge having
jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe
that the company will be unable to pay the costs of the defendant if successful in his defence,
require sufficient security to be given for those costs, and may stay all proceedings until the
security is given.

53. The grounds set out in the statutory provisions are exhaustive and the court has no inherent
jurisdiction to order security for costs (see: Condliffe v Hislop [1996] 1 All ER 431, CA.).
Hence the first question one needs to decide is whether any of the prescribed grounds exists (step
1). If the answer is in the negative, the court simply has no power to order security for costs.

54. The Court now has an additional power under O 2 r 3 to order a party (including the defendant)
to pay a sum of money into court as security if that party has without good reason failed to
comply with a rule or order of the court.

55. Discretionary power:

 Order 23 rule 1: having regard to all the circumstances of the case, if the Court thinks it just
to do so, it may order the plaintiff to give such security for the defendant’s costs of the action
or other proceeding as it thinks just.

 Section 357 of the Companies Ordinance: any judge having jurisdiction in the matter may, if
it appears by credible testimony that…

 Hence, if the answer to the first question (i.e. whether any of the prescribed grounds exists) is
“yes”, then the court will need to consider whether as a matter of discretion, security for costs
should or should not be ordered (step 2).

56. Who is allowed to make the application?

 Order 23 rule 1(1): the defendant

 Order 23 rule 1(3): the person in the position of the defendant (e.g. D who counterclaims
against P becomes P)

Grounds

57. Grounds for applying for security for costs:

a) The plaintiff being ordinarily resident out of the jurisdiction

- Order 23 rule 1(a)

- This is the most commonly invoked ground for applying for security for costs: the
court has explained that it is prima facie unjust that a foreign plaintiff, who is more or

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 less immune against costs if he is unsuccessful, should be allowed to proceed without
making funds available within the jurisdiction, against which any costs order against
him may be executed. (see e.g. Walt Disney Co v Disney Property Agency HCA
7829/1992; The Alpha [1991] 2 Lloyd’s Law Reports 52, CA)
- The concept of being “ordinarily resident out of the jurisdiction” is balanced between
permanent residence and temporary residence, and is a matter of fact and degree.
The onus is on the defendant to establish that the plaintiff is ordinarily resident out of
the jurisdiction.
- To determine whether a company is ordinarily resident out of the jurisdiction, the
test is not where the company was incorporated, but where its central management
and control lies: see Charter View Holdings (BVI) Ltd v. Corona Investments Ltd.
& Another [1998] 1 HKLRD 469, Keith J.
- Hence, if a company incorporated overseas has its central management and control
in Hong Kong, O 23 r 1(a) does not apply, nor does s 357 of the Companies
Ordinance (since it only applies to company incorporated in Hong Kong). The CFA
in Akai Holdings Ltd (In Compulsory Liquidation) v Ernst & Young (A Firm)
[2009] 5 HKLRD 804 [2009] 5 HKC 218 held that this was a lacuna which could not
be filled by the court, but only by the legislature.
- A non-resident plaintiff may resist an order for security for costs by showing fixed
assets in Hong Kong (see e.g. Tsang Yee Lui v Personal Representatives of Mak
Chik Wing HCA 2606/2006).

(b) Nominal plaintiff

- Order 23 rule 1(b)

- A plaintiff who has assigned the benefit of the action may be a “nominal plaintiff”
(see Semler v. Murphy [1968] Ch 183)

(c) Misdescription of the plaintiff’s address

- Order 23 rule 1(c)

- Security for costs should not be ordered where the failure to state the address or the
mis-statement of the address by the plaintiff was innocent and without intention to
deceive: Order 23 rule 2. See Raj Kumar Mahajan v HCL Technologies (Hong
Kong) Ltd And Others HCA 1510/2004, 15 September 2010

(d) Change of address by the plaintiff

- Order 23 rule 1(d)

(e) Section 357 of the Companies Ordinance – where the plaintiff is a limited company
incorporated in Hong Kong

- The defendant must show that the plaintiff “will be unable” to pay the costs (as
opposed to “may be unable”) and this must be supported by credible evidence (see
Success Wise Ltd. v. Dynamic (BVI) Ltd. [2006] 1 HKC 149)

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Exercise of discretion

58. The Court has a discretion (both under s 357 and Order 23 rule 1) whether to order security
having regard to all circumstances of the case.

57. For a summary of considerations which the court has identified as relevant in exercising its
discretion whether to grant or refuse an application for security for costs see pp 460-461 A Guide
to Civil Procedure in Hong Kong.

Giuseppina Tagliani v. Lee Wai Yin, Elvis [2006]

• P sued D (a surgeon) for $7.6m for medical negligence

• P moved to Singapore after action
• The court must carry out a balancing exercise. On the one hand it must weigh the injustice to the
plaintiff if prevented from pursuing a proper claim by an order for security. Against that, it must
weigh the injustice to the defendant if no security is ordered and the defendant finds himself unable
to recover costs from the plaintiff in due course.
• Court may have regards to P’s prospect of success, but should not go into merits in detail unless it
can clearly be demonstrated that there is a high degree of probability of success or failure.
• The court should consider not only whether the plaintiff can provide security out of its own
resources, but also whether it can raise the amount needed from its directors, shareholders or other
backers or interested parties.
• It is for the plaintiff to satisfy the court that it would be prevented by an order for security from
continuing the litigation.
• Held: on the facts, D’s likely costs could be up to around $2m, but P not able to afford it and unable
to raise any money from friends and relations apart from up to $300,000 => security for costs of
$300,000 ordered.

Perfect Best Ltd. v. Yip, Tse & Tang

In exercising its discretion under O 23 r 1(a), if other matters are equal, it is normally just to exercise
that discretion by ordering security against a non-resident plaintiff. However, the Court will usually not
order security for costs (1) if there is a co-plaintiff resident within the jurisdiction (D’Hormusgee v.
Gray [1882] 10 QBD 13), or (2) where the plaintiff has substantial property of a fixed or permanent
nature within the jurisdiction (see Re Apollinaris Co.’s Trade Marks [1891] 1 Ch 1 and A-G v. Vianini
Lavori SpA [1991] 1 HKC 423.

If the plaintiff is impecunious and the order for security for costs would unfairly stifle a genuine claim,
this would be a very strong factor against making the order.

Amount of the security for costs

61. The amount of the security for costs to be paid is per the discretion of the Court, having regard to
all circumstances of the case. The Court will fix such sum as it thinks just.

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62. They usually extend to costs already incurred and future costs (see Henrik Andersen & Another
v. Huang Kuang Yuan & Others [1997] HKLRD 1360).

63. Costs are usually assessed on a party and party basis, not on an indemnity basis (see Cal-Trade
Pte Ltd. v. Mindo Community Trading Co. Ltd. [1982] 2 HKC 112).

When should an application for security for costs be made?

64. An order for security may be made at any stage of the proceedings.

65. However, delay in making the application may be relevant to the exercise of the Court’s
discretion to refuse security (see Henrik Andersen & Another v. Huang Kuang Yuan & Others
[1997] HKLRD 1360).

Manner of giving security

66. Order 23 rule 2:

“Where an order is made requiring any party to give security for costs, the security shall be
given in such manner, at such time, and on such terms (if any) as the Court may direct.”

 E.g.: security by payment into Court, security by solicitor’s undertaking, security by bank
guarantee

Application for security for costs

67. By way of summons supported by affidavit. There is usually a demand by letter before the
summons is issued.

68. It is of great assistance to the Court to be informed of the estimated costs already incurred and
the estimated future costs. Usually, a skeleton bill of costs would be exhibited to the affidavit in
support of the application.

69. If the application is successful, the master will usually fix the amount and give directions on the
mode and time where the security is to be given. It is usual that the order will provide that a
specific sum by a certain date be paid into Court to satisfy the security. It is also usual that the
master will also make it a part of the order that until the security is given the proceedings will be
stayed (see Lam Fei Hong v. Wong Kam Fong [1999] 2 HKC 781).

Default in giving security

70. If the plaintiff defaults in giving security, an “unless order” may be granted to require him to
give security before a specified time, and in default the action will be dismissed.

71. The power to dismiss an action for default of payment for security for costs derives from the
inherent jurisdiction of the Court and applies to orders made under section 357 of the Companies

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 Ordinance and Order 23 rule 1. The Court has power to dismiss the action where it is satisfied
that:

(a) the action is not being pursued with diligence;

(b) there is no reasonable prospect that the security will be paid; or
(c) the time limit prescribed by the Court for giving the security has been disregarded.

F. Prohibition Orders

Introduction

72. Order 44A rule 2:

“A plaintiff or judgment creditor may apply ex parte to the Court for an order prohibiting a
debtor from leaving Hong Kong.”

73. A prohibition order can be obtained at any time:

 Pre-action application – prior to the commencement of proceedings (see O 44A r 1)

 Pre-judgment application - after commencement of proceedings but before a judgment is given

 Post-judgment application – after a judgment is given (to be covered in the Enforcement

Seminar)

Pre-action and Pre-judgment application

74. Section 21B(1)(c), High Court Ordinance:

(1) The Court shall have jurisdiction to make an order prohibiting a person from leaving
Hong Kong (a prohibition order) to facilitate the enforcement, securing or pursuance of-
(c) a civil claim (other than a judgment)-
(i) for the payment of money or damages; or
(ii) for the delivery of any property or the performance of any other act.

75. A “civil claim” should be given the widest possible meaning (see Bunker Holdings Ltd. v. Asia
Pacific Seafood Management Ltd. [2005] 2 HKC 62).

76. Four conditions need to be satisfied: Section 21B(3) of the High Court Ordinance:

(3) The Court shall make an order under subsection (1)(c) ONLY IF it is satisfied that there is
probable cause for believing that-
(a) there is a good cause of action;
(b) the person against whom the order is sought-

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 (i) incurred the alleged liability, which is the subject of the claim, in Hong
Kong while he was present in Hong Kong; or
(ii) carries on business in Hong Kong; or
(iii) is ordinarily resident in Hong Kong;
(c) that person is about to leave Hong Kong; AND
(d) by reason of paragraph (c), any judgment that may be given against that
person is likely to be obstructed or delayed.

77. A good cause of action is usually demonstrated by reference to the writ and supported by
affidavit evidence.

78. To “incur the liability…in Hong Kong” refers to the “crystallization” of the liability in Hong
Kong

(see: Bank of India v Murjani Industries (HK) Ltd & Anor [1989] 2 HKLR 276, CA, which
held that the defendant’s liability on the guarantee was crystallised when he was served with a
demand for payment in Hong Kong).

79. It has been said that to “carry on business in Hong Kong” is the personal business of the debtor
(and not the business of the debtor company’s director), and that “ordinarily resident in Hong
Kong” is a matter of fact supported by evidence of residence (see: Chase Bank Int’l v Carlos
Shalon Sultan Abadi [1986] HKLR 1104).

80. It has been said that “judgment likely to be obstructed or delayed” is a matter of fact and can
be in relation to the obstruction of matters supporting enforcement see: Bank of India).

Procedure

81. Application is made ex parte, by affidavit: O 44A r 2. As with all ex parte applications, the
applicant is under a strict duty to make full and frank disclosure.

82. Note that this duty is continuous and it extends to relevant information that comes to the notice
of the applicant after the order has been granted but before it has been served. Where this
happens, the applicant must seek a further appointment before the judge who granted the order
and inform him of the fresh information: Auto Treasure Ltd v Pyramid International (a firm)
(CACV 24/1992, 22 May 1992).

83. Upon the hearing of the matter, the court may make an order subject to such conditions as it
thinks fit, including a condition that the order shall have no effect if the judgment debtor satisfies
the judgment or provides such security as the court orders : s 21B(4) (b) HCO.

84. The order must be in the prescribed form: see App A, Form 106.

Service and duration of the order

85. Under s 21B(6), a sealed copy of the order must be served on:

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  The Director of Immigration
 The Commissioner of Police
 The judgment debtor, if he can be found

Additionally, the Chief Bailiff must be served with four sealed copies of the order. See Law Society
Circular 98-185(PA).

86. Once the Director of Immigration has been served, he will place the name of the debtor on the
‘stop list’.

87. A prohibition order lapses on the expiry of one month, but the court may extend the order so that
it operates for a maximum period of three months: s 21B(5) HCO, s 52B(5) DCO. After the
expiry of the three-month period, the court may issue a fresh prohibition order if appropriate:
Hong Kong Industrial and Commercial Bank Ltd v Wong Siu Leung Tammy & Ors [1986]
HKC 101 (CA).

Effect of the order

88. If the judgment debtor (after having been served with the order or otherwise informed of its
effect) attempts to leave Hong Kong, he may be arrested by any immigration officer, police
officer or bailiff: s 21B(7) HCO; s 52E(7) DCO.

89. An attempt to leave Hong Kong is a breach of a prohibition order and constitutes a contempt of
court: Sino Wood Investment Ltd v Wong Kam Yin [2006] 1 HKLRD 176; [2006] 1 HKC 1,
CFA, overruling the Court of Appeal at [2004] 2 HKLRD 1053, CA.

Discharge of order

90. Once the judgment debtor has made payment of the monies due, the usual practice is for the
prohibition order to be discharged by consent.

91. Provision is also made in O 44A r 4 for the application by the debtor to discharge the order.

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SEMINAR 7: CASE MANAGEMENT; SANCTIONS FOR NON-COMPLIANCE;
PREPARATIONS FOR TRIALS; TRIAL PROCEDURES; JUDGMENT AND COSTS

Read Chapters 1 at pp 8-11 and 22-26; Chapter 10 at pp 417-441; Chapter 14 pp 708-720; Chapter 15 at
pp 725-744; Chapter 16 at pp 769-774 and Chapter 20 at pp 957-989.

1. Case Management

Read Orders 1A, 1B, 25

A. Underlying objectives of the rules and the Court’s case management powers

(1) Underlying Objectives

See PPT slides 2-3.

(2) Active Case Management Activities

See PPT slides 4-5.

(3) Court’s Case Management Powers

See PPT slide 6.

B. Timetabling Questionnaire and Case Management Summons

(1) Application of the Rules and Practice Direction

(a) The Operating Rule – See Order 25. The operating PD – See PD 5.2

(b) Order 25 applies to all cases commenced by writ. However, read Order 25 rule 1(2) and
note the exceptions therein.

(c) Notably, O25 does not apply to personal injuries cases which are governed by PD 18.1.

(d) PD 5.2 governs case management of all civil actions in CFI and District Court except
cases in the specialist lists. The aim of PD 5.2 is stated as: “…to facilitate the more
efficient, expeditious and fair disposal of cases.”

(e) For cases in the CFI the trial of which is likely to last 15 days or longer the parties must
also comply with Practice Direction 5.7 on Long Cases and apply to have the matter
assigned to a trial judge.

(2) Directions for preparation after close of pleadings

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 (a) PD 5.2 provides specific directions regarding preparation of the case by the parties after
the close of pleadings in relation to discovery and interlocutory applications.

(b) With regards to discovery, the parties should proceed with discovery without the need to
wait for an order of the court and to try to agree on the directions for modifying discovery
obligations or on the manner of their implementation with a view to achieving economies
(para 5, PD 5.2).

(c) With regards to interlocutory applications the parties should seek to reach agreement on
directions (para 6(1)), focusing on relevant issues (para 6(2)). Where agreement cannot
be reached, an application should be made to the court (para 6(3)), but ‘unnecessary and
disproportionate’ applications or ‘unnecessary and unreasonable’ oppositions should not
be made and may be met with adverse costs orders (para 6(4)).

(3) Checklist for preparation of CMS by handling solicitors

See lecture 7 notes.

(4) Filing and Serving of Timetabling Questionnaire (“TQ”)

(a) Order 25 rule 1(1) provides that within 28 days after pleadings are deemed to be closed,
each party to the action shall complete and serve a questionnaire called Timetabling
Questionnaire (“TQ”) in the form as prescribed in Appendix A of PD 5.2 (See Appendix
2 of this outline). The parties should consult with each other prior to the filing of the
questionnaires.

Close of pleadings: 14 days after service of the Reply (and/or Defence to

Counterclaim); or if no such pleading is served, 28 days after service of the Defence: O
18 r 20.

(b) Faith Bright Development Ltd. v Ng Kwok Kuen

(i) The Court will take into consideration the TQ in determining interlocutory
application (for one example, see Chok Yick Interior Design and Engineering Co.
Ltd. v Lau Chi Lun t/a Chi Hung Construction Engineering Co. HCA 1480/2008,
5 May 2010 when Lam J, after taking into consideration the information filed by
the parties in the TQ, refused the parties’ application for leave to adduce expert
evidence before trial)

(ii) The Court will decline to hear case management summons without TQ

(iii) TQ can be reused at adjourned case management summons unless there are
drastic changes

(c) When filling in the TQ, the Court requires substantive compliance by the parties with the
spirit of the CJR, and not only in form, i.e. the Court requires the parties to consider the

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 case properly before filling in the TQ and to provide useful and correct information in the
TQ Yip Kee Wai v So Kim Wah [2010] 5 HKLRD 4, HCA 1504/2009 (20 October 2010),
Registrar K.W. Lung

(d) The TQ contains questions addressing the parties to consider the directions/applications
that it would seek in order to prepare the action for trial, specifically the following:

See lecture 7 notes.

(e) Expert Evidence (see also outline below pertaining to expert evidence under preparation
for trial)

Expert evidence will cause special concern for the Court because it may cause delay and
waste of expenses for the parties if proper directions are not made for its preparation.

The Court will permit the parties to adduce expert evidence ONLY IF that party has:-

(i) Identify the expert by name or field

E.g. Dr. XXX, Professor, University of Hong Kong, Mechanical Engineer

(ii) Identify the issue to which the expert will relate

E.g. To ascertain whether there was any defect in the braking system of the Jeep
in question

Note: a mere reference to adducing expert evidence “limiting on the question of

liability or quantum” is not sufficient

(iii) Consider the appropriateness of appointing a single joint expert

(para 20(1) PD 5.2)

A party who obtained expert evidence before obtaining leave does so at his own risk of
costs, unless he has complied with a pre-action protocol (para 20(2), PD 5.2)

In the case of Chok Yick Interior Design and Engineering Co. Ltd, Supra, Lam J stated:-

Under the CJR regime, parties and their legal representatives must address the question of
expert evidence after the close of pleadings when they prepare their Timetabling
Questionnaire in accordance with Practice Direction 5.2. Para. 8 of PD 5.2 requires the
parties to consult each other and para.9 requires them to give as much information as is
required in the Timetabling Questionnaire to enable the court to give case management
directions. Section E of the Questionnaire deals with expert evidence. Para.20 sets out
the general approach of the court regarding expert evidence.

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 If a party envisages the calling of expert evidence, he or she should obtain expert
directions under the Case Management Summons. Attempts should be made to agree
upon the directions sought. In cases where different experts are engaged by the parties,
such directions should generally, in the light of what has been said above, include
directions for expert meetings and joint expert report.

(5) If directions and timetable can be agreed by the parties

(a) Upon completion of the questionnaire, if the parties are able to agree the directions and
timetable relating to case management which they wish the Court to make, then they
should procure an order to that effect by way of Consent Summons within 14 days after
receiving all timetabling questionnaires or when the time for all Defendants to file the
timetabling questionnaires expires (O 25 r 1 (1)) (whichever is the earlier). (PD 5.2, para
13)

(6) If directions and timetables cannot be agreed by the parties

(a) If no agreement can be reached on all directions or timetables, each party should make a
proposal on the questionnaire and the plaintiff should take out a Case Management
Summons (“CMS”) within 14 days after receiving all timetabling questionnaires or when
the time for all Defendants to file the timetabling questionnaires expires (whichever is the
earlier). (PD 5.2, para 16)

(b) The case management summons shall set out (i) all directions and timetable that can be
agreed; and (ii) each party’s proposal in respect of the directions and the timetable that
cannot be agreed (PD 5.2, para 18).

(7) Court’s Direction after the filing of TQ

See slides 15-16.

(8) Matters to be considered and dealt with by the Court when the Case Management Summons first
comes to be determined

(a) When the Case Management Summons is first determined, the Court has an independent
duty to consider the following:

(i) whether it is possible to deal then with all the matters which, by the rules of Order
25, are required to be considered at the Case Management Summons; and

(ii) whether it is expedient to adjourn the consideration of all or any of those matters
until a later stage (Order 25 Rule 2(1)).

In other words, the Court should consider all matters that are required to be dealt with at
the Case Management Summons and at what stage to deal with such matters.

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 (b) Any party who has been addressed in a Case Management Summons must so far as
practicable, also apply for any order or direction which he requires from the Court which
are capable of being dealt with on an interlocutory application, i.e. he must list the
directions/orders which he requires in order to take the action to trial and any other
interlocutory application(s) which he intends to make. He should give notice of the same
at least 7 days before the time fixed for determination of the Summons. (Order 25 Rule
7).

(c) Therefore, when the Case Management Summons is determined, the parties should
consider and apply for such directions/orders as could be reasonably contemplated at the
time, by reference to the parties’ pleaded case or otherwise. If, due to subsequent
developments in the case or for any other reason, further directions/orders are required
after the Case management Summons has been determined, parties are obliged to take
immediate steps to take out a summons to seek such directions/orders. Such application
should be by way of summons and 2 days’ notice should be given. (Order 25 Rule 7(3)).

(9) At the determination of the Case Management Summons

(a) Order 25 rule 4 provides: “… the Court shall endeavour to secure that the parties make
all admissions and all agreements as to the conduct of the proceedings which ought
reasonably to be made by them and may cause the order on the summons to record any
admissions or agreements so made, and (with a view to such special order if any, as to
costs as may be just being made at trial) any refusal to make any admission or
agreement.” Therefore, the parties should not unreasonably withhold their consent or
agreement to any direction/order granted by Court. Otherwise, such conduct may be
recorded and they may be penalised as to costs.

(b) In order to assist the Court to consider all interlocutory matters that ought to be
considered when determining the Case Management Summons and to enable it to
properly deal with the Summons, it is the duty of all parties to the action and their legal
advisers to give all such information and produce all such documents as the Court may
reasonably require. (Order 25 rule 6.)

(c) Pursuant to Order 33 rule 4, “in any action begun by writ, the Court shall by order
determine the place and mode of trial.”

(d) However, unless the parties agree otherwise, the Court shall not make an order as to the
place and mode of trial until all the matters that are required to be dealt with at the
determination of the Case Management Summons have been dealt with (see Order 25
rule 2(4) and note that pursuant to Order 25 rule 2(5), such rule does not apply if the
action is ordered to be transferred to the District Court or some other court).

(10) Failure on the parties part to file TQ or take out Case Management Summons

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 (a) If the Plaintiff does not file a questionnaire or take out a Case Management Summons,
the Defendant may take out a Case Management Summons or apply to dismiss the action.
Order 25 R1(4)

(b) If the Defendant does not file a TQ or the case involves a litigant in person, Plaintiff shall
take out a case management summons PD 5.2, para 17.

(c) Parties failing to file TQ shall expect to face adverse costs order. In Sherryknoll
Enterprises Ltd and Ors v Grand Power Ltd HCA 1599/2009, 6 September 2010 where
both parties failed to file TQ and Mediation Certificate before taking out a case
management summons, Court ordered that costs between solicitors and clients for both
parties be disallowed.

C. Listing Questionnaire (“LQ”) and CMC

(1) Where directions are given for a CMC,

(a) each party must file a listing questionnaire not later than 7 days before the date fixed for
the CMC in the form of Appendix C to PD 5.2. (See Appendix 4 of this outline) to assist
the Master in giving appropriate directions (PD 5.2, para 24).

(b) The Plaintiff shall prepare and lodge with Court not less than 3 clear days before CMC a
CMC bundle containing pleadings, witness statements, expert reports and draft index of
document bundle (para 26, PD 5.2).

(2) Purpose of CMC is to review compliance of Orders given -

(3) At CMC, the Court expects the parties to have complied with the timetable laid down by the
Court. The Court will not grant further extension of time for compliance unless sufficient
grounds are given and even if given, will likely grant an extension subject to an unless Order
(para 29, PD 5.2).

(4) CMC is a milestone date and is a critical stage of proceedings. It is not a second opportunity for
parties to ask for direction which they could have sought at CMS (para 28, PD 5.2). If further
interlocutory applications are made at CMC, the parties are expected to indicate accurately and
fully the extent of the application (para 30, PD 5.2).

(5) However, the later and closer to trial an application is made, the less likely the Court will
entertain it (para 31, PD 5.2) see Chok Yick Interior Design and Engineering Co. Ltd, Supra.

(6) At CMC, Court will:

(a) review steps parties have taken, in particular, compliance of previous orders

(b) fix timetable for steps to be taken between CMC and date of trial (which must include a
PTR date or trial date/period)

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 (c) record all admissions or agreements by the parties

(d) ascertain parties’ attempt or intention to undergo ADR

(e) adjourn the CMC to another date, fix a PTR or fix a trial date/period

See Appendix 5 of this outline for a sample CMC Order

D. Pre-trial Reviews (PTR)

(1) Normally be held 8 to 10 weeks before trial or beginning of trial period. It is generally heard
before a Judge (PD 5.2, para 33)

(2) Not less than 3 clear days before the PTR, Plaintiff to lodge with Court an updated bundle (PD
5.2, para 35). The bundle, where possible, should be a CMC bundle updated and reused (PD 5.2,
para 26)

(3) At PTR Court will

(a) fix the starting date of trial if a trial period has been fixed

(b) confirm or vary estimated length of trial

(c) give further directions needed provided that such directions will not impinge upon the
trial date

(d) give directions relating to trial under O35 r3A – i.e. Court may make order to limit time
to be taken in examination of witnesses, number of witnesses to be called, making
submission, etc (PD 5.2, para 36)

See Appendix 6 of this outline for a sample PTR Order

E. Variation of Case Management Timetable – Milestone date and non-milestone date

(1) The case management timetable set by the Court may be varied. The Court may of its own
motion or upon application give further case management directions or vary any timetable fixed:
O 25 r 1B (1).

(2) The applicable procedure depends on whether the date to be varied is a milestone date or a non-
milestone date. A milestone date is a date which the Court has fixed for a case management
conference, a pre-trial review, the trial or the period fixed by the Court in which the trial is to
take place. A non-milestone date is a date or period fixed by the Court which is not a milestone
date. O25 r1B(8).

(3) A non-milestone date may be varied by way of consent summons. O 25 r 1B (4).

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(4) If there is no consent, the requesting party may apply for variation, but the court shall not vary
any non-milestone dates “unless sufficient grounds have been shown” by the applicant: O 25 r
1B (5) and (6).

(5) If the variation will necessitate a change to the trial date/period, the court shall not vary the non-
milestone date whether or not sufficient grounds have been shown: O 25 r 1B(7).

(6) The Court shall not vary a milestone date unless there are exceptional circumstances justifying
the variation: O 25 r 1B (3).

(7) PD 5.2 para 42: “late instructions from client, change in the team of lawyers, the absence of
prejudice to the other party which cannot be compensated for by costs will NOT be treated as
exceptional circumstances.”

F. Failure to attend a CMC/PTR

(1) If the plaintiff or the Defendant who has made a counterclaim does not appear on a case
management conference or a pre-trial review, the Plaintiff’s claim or the Defendant’s
counterclaim shall provisionally be struck out: Order 25 rule 1C.

(2) A party has 3 months within which to apply to the court for reinstatement (O25 r1C (3)), and
must be able to satisfy the court that there are good reasons for restoration of the claim or
counterclaim (O25 r1C(5)). The Court may allow restoration with or without conditions or may
disallow restoration (O24 r1C(4)). If the Court refuses to restore the claim, the claim or
counterclaim will stand dismissed upon expiry of 3 months from date of CMC/PTR with a costs
order against the party whose claim or counterclaim has been dismissed. (O25 r1C(6)).

“The Court will not lightly accede to the request of a defaulting party to restore an action without
sufficient explanation and consideration of the merits. This was to maintain the integrity of the
timetable laid down by the Court or the rules and to ensure that a matter without merits should
not continue”.

(3) The application should be dealt with in three stages:-

(a) first, there was the threshold of showing ‘good reasons’;

(b) then the Court would consider whether, as a matter of discretion, it should grant the
restoration;

(c) if it decided to restore the claim, the Court may consider conditions to be imposed.

World Chinese Business Investment Foundation Ltd. & Ors v Shine Rainbow Marketing Ltd. &
Ors [2010] 2 HKC 294, Registrar Au-Yeung (as she then was)

G. Failure to comply with case management directions

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Ip Sau Lin v. Hospital Authority [2009] 2 HKC 383 (DCEC 584/2007, 9 April 2009), per District Judge
Marlene Ng

(1) “… disobeying court imposed case management directions and timetable without good reason is
not only breach of court order, which of itself is no light matter, but is also a serious subversion
of the entire case management system envisaged by the CJR.”

(2) Parties/practitioners are expected to be proactive and inform the court if there is any anticipated
non-compliance of court-ordered case management directions or timetable before the court
deadline, or alternatively to inform the court promptly of any actual non-compliance
immediately upon the expiry of the deadline, and, where appropriate, seek remedial directions
(such as extensions of time). Inter-partes court directions (such as the filing/exchange of witness
statements, for restoring the case for directions hearing, or for making joint written application
on or before a specified deadline) bind both parties, and consequently this burden rests not only
on the defaulting party but also the other party(ies) involved.

(3) “… the court does not smile kindly on party-driven litigation that (a) keeps the court in the dark
of any delay due to anticipated or actual non-compliance and/or (b) fails to seek remedial
directions on good and sufficient grounds in a timely manner.”

A party who fails to comply with case management directions will expect sanctions including:

 Costs sanctions

 The payment by a defaulting party of a sum of money into court as security for the other party’s
claim or its costs (see O1B r1(3) and (4) and O2 r3)

 Self-executing “unless orders” which take effect automatically upon non-compliance without the
need for a further application, unless the defaulting party applies to court for relief (O2 r4 and 5)

 Wasted costs orders being made against legal representatives (O62 r8)

2. Sanctions for Non-Compliance

A. What are the Sanctions?

(1) Non-compliance with a court order or direction may result in a costs order against the defaulting
party.

(2) Non-compliance with the rules and court orders without a good reason can result in the court
ordering a party to pay a sum of money into court having regard to the principles of
proportionality, namely, amount in dispute and the costs incurred or likely to incur: Order 2,
rule 3. Money paid into court under such orders is thereafter held as security for any sum
payable to any other party in the proceedings.

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 In the case of Lee Wai Ming v Chan Che Ming DCPI 1719/2008, 19 August 2009, the Court
held that:

“(a) it would only be in an exceptional case (if ever) that a court would order security for
costs if the order would stifle a claim or an appeal;

(b) in any event,

(i) an order should ordinarily be made ONLY IF the party concerned can be shown
to be regularly flouting proper court procedures or otherwise to be demonstrating
a want of good faith -- good faith being understood to consist…of a will to litigate
a genuine claim or defence (or appeal) as economically and expeditiously as
reasonably possible in accordance with the overriding objective; and

(ii) an order will not be appropriate in every case where a party has a weak case. The
weakness of a party’s case will ordinarily be relevant only where he has no real
prospect of succeeding.”

(3) The court’s express powers to give procedural directions of its own motion can be backed by
self-executing sanctions, which automatically apply upon failure to comply unless the defaulting
party obtains relief with 14 days of the failure: Order 2 rule 4. E.g. an “unless” order

(4) Wasted costs orders against legal representatives under O62 r8 (see outline on “costs”) below.

B. Application for relief

(1) Any application for relief must be supported by evidence, and in deciding whether to grant relief
O 2 r 5(1) provides: the Court shall consider all the circumstances including

(a) the interests of the administration of justice;

(b) whether the application for relief has been made promptly;
(c) whether the failure to comply was intentional;
(d) whether there is a good explanation for the failure to comply;
(e) the extent to which the party in default has complied with other rules or court orders;
(f) whether the failure to comply was caused by the party in default or his legal
representative;
(g) in the case where the party in default is not legally represented, whether he was unaware
of the rule or court order, of if he was aware of it, whether he was able to comply with it
without legal assistance;
(h) whether the trial date or the likely trial date can still be met if relief is granted;
(i) the effect which the failure to comply had on each party;
(j) the effect which the granting of relief would have on each party.

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(2) Relief from sanctions is not likely to be granted lightly and any party who fails to comply with
the unless order runs a significant risk that he will be refused relief. It is vitally important to the
administration of justice that the rules of procedure are observed.

(3) On the other hand, the Court must bear in mind that, where the effect of the sanction is to
preclude a trial on the merits, the effect is to deprive the applicant of access to the Court.

(4) When the court makes an order on an interlocutory application before a case management
summons or before it has given directions relating to the management of the case it may specify
the consequences of failure to comply. Where an order is made after a case management
summons or after it has given directions the court is required to specify the consequences of
failure to comply with the order unless there exist ‘special circumstances which render it
inexpedient to do so’. Any such consequence must be guided by what is ‘appropriate and
proportionate’ in relation to the non-compliance: see Order 32 rule 11B.

3. Preparation for Trial

Order 25 rule 3 requires the Court to look at certain matters of evidence at the determination of the Case
Management Summons - including Order 38 rules 2 to 7 and Part III and Part IV of Order 38. The usual
directions which the Court would make in routine actions concerning evidence, where appropriate,
would include directions for the filing and service of List of Documents, directions concerning the
exchange of witness statements and directions and orders in relation to expert evidence.

A. Exchange of Witness Statements

(1) The principle of orality and witness statement

(a) Order 38 rule 1 RHC provides that in an action begun by writ, any fact to be proved at
trial by the evidence of witnesses shall be proved by the examination of the witnesses
orally and in open court – principle of orality.

(b) Order 38 rule 2A (2) RHC further provides that: “At the determination of a case
management summons in an action commenced by writ the Court shall direct every party
to serve on the other parties, within such a period as the Court may specify, written
statements of the oral evidence which the party intends to adduce on any issues of fact to
be decided at the trial.”

(2) Order for exchange of witness statement

(a) The powers of the Court to order parties to exchange witness statements must be
exercised “for the purpose of disposing fairly and expeditiously of the cause or matter
before it, and saving costs.” (Order 38 rule 2A (1) RHC).

(b) When making an order for the exchange of witness statements, the Court should also
have regard to all the circumstances of the case, including but not limited to:

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 “(i) the extent to which the facts are in dispute or have been admitted;
(ii) the extent to which the issues of fact are defined by the pleadings; and
(iii) the extent to which information has been or is likely to be provided by further and
better particulars, answers to interrogatories or otherwise.”
(Order 38 rule 2A (1))

(3) Contents of a witness statement:

(a) It should include the material facts and evidence in support of a party’s case which the
witness is able to prove of his own knowledge.

(b) It must be full and complete.

(c) It must be “the truth, the whole truth and nothing but the truth”.

(d) It must not contain any evidence which is not admissible at trial.

(e) It must be confined to matters of fact and must not contain any expressions of opinion.

(f) It should contain all the evidence which the witness is expected to give, were he to be
examined orally at trial.

(4) Formalities of a witness statement

(a) Read Order 38 rule 2A (4) RHC and list out the formalities of a witness statement.
Note that under Order 38 rule 2A (4) (a) RHC witness statements must be verified by a
statement of truth in accordance with Order 41A.

(5) Use of witness statements: Order 38 rule 2A(6), RHC:

(a) “Subject to paragraph (9), where the party serving a statement under this rule does not
call the witness to whose evidence it relates, no other party may put the statement in
evidence at the trial.”

(b) Order 38 rule 9 RHC deals with the use of depositions as evidence in a trial. Therefore
unless a witness is giving evidence by way of deposition (i.e. examination of a person on
oath before a Judge, an officer of the Court or any other person at any place other than at
trial) which is ordered to be admissible as evidence at a trial pursuant to Order 38 rule 9
RHC, his witness statement cannot be used as evidence by other parties in the trial if he is
not called to give evidence at the trial by the party serving his statement. This is because
due to the principle of orality, a witness statement itself does not form the evidence of a
case. Therefore, witness statements which have been exchanged are not put in evidence
by the fact of the exchange. The information in a witness statement remains confidential
until the witness makes the statement in public by verifying it on oath in the witness box.

(c) If a witness is called to give evidence at the trial:

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 “(i) except where the trial is with a jury, the Court may, on such terms as it thinks fit,
direct that the statement served, or part of it, shall stand as the evidence in chief of
the witness or part of such evidence;

(ii) the witness may with the leave of the Court –

 amplify his witness statement; and

 give evidence in relation to new matters which have arisen since the
witness statement was served on the other party;

(iii) whether or not the statement or any part of it is referred to during the evidence in
chief of the witness, any party may put the statement or any part of it in cross-
examination of that witness.”

(Order 38 rule 2A (7) RHC).

(d) Therefore, if a witness is called to give evidence, a Court may order a witness statement
to stand as evidence in chief (which is usually the case). In absence of such direction, the
party calling the witness must elicit his evidence by oral examination in chief in the usual
way as provided in Order 38 rule 1 RHC.

(e) Order 38 rule 2A(7A) makes it clear that: “The Court may grant leave under paragraph
7(b) only if it considers that there is good reason not to confine the evidence of the
witness to the contents of his witness statement.”

(f) Thus, the oral evidence given by a witness at trial should not cover those matters which
are not already included in his witness statement, unless so allowed by the Court.
Therefore, when preparing a witness statement, it is important to include all the factual
matters which the witness would be attesting to at the trial of the matter.

(6) Failure to comply with orders re witness statements

(a) It should be noted that the Court has power to dismiss the action or strike out a Defence
and Counterclaim if parties are in default in relation to an order for exchange of witness
statements. See Chow Kwok Fai v Waysuntone Communication Ltd [1997] 3 HKC 628
where it was held that the Court has jurisdiction to make an “unless order” that unless the
Defendant served its witness statements within 14 days, its defence and counterclaim be
struck out. (Also see Kai Yip Air-Condition Engineering Co. v Ma Hei Sun [2001] 3
HKC 458.)

B. Expert evidence

Order 38 rule 4 RHC and Part IV of Order 38 RHC.

(1) Function of an expert

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 (a) The function of an expert is to assist the Court on the subject of his own expertise. The
expert should possess specialist knowledge and if such specialist knowledge is relevant to
an issue in dispute in the action, an expert may be called to testify on such matter.

(b) The expert should be independent of the parties and the expert’s duty is to assist the
Court and his duty to the Court overrides any obligations to the person from whom he has
received instructions or by whom he is paid (see Order 38 rule 35A).

(c) Section 58(1) of the Evidence Ordinance (Cap. 8) provides that:

“(i) Subject to any rules, where a person is called as a witness in any civil
proceedings, his opinion on any relevant matter on which he is qualified to give
expert evidence shall be admissible in evidence.”

(2) When can parties adduce expert evidence?

(a) Except with the leave of the Court or where all parties agree, no expert evidence may be
adduced unless a party seeking to adduce expert evidence has made an application under
Order 38 rules 37 or 41 for directions, and complied with the directions given: Order 38
rule 36. (leave is required)

(b) Under Order 38 rule 37 RHC where a party makes an application to the Court for leave to
adduce oral expert evidence, unless the Court considers there are special reasons, it
should direct that the substance of the expert evidence be disclosed in the form of an
expert report to the other parties within a given time period. Therefore, at an application
for leave to adduce expert evidence, the party adducing the expert evidence would
normally also seek for a direction that an expert report from the expert in question be
filed and served within a time set by the Court.

(c) Order 38 r41 applies to expert evidence contained in a statement which a party may wish
to use because the maker of the statement is not able to or does not wish to give oral
evidence at trial. In that case the party must apply under r41 and procedures at Part III of
Order 38 relating to hearing evidence be followed.

(3) Under what circumstances would Court grant leave to adduce expert evidence?

(a) The general test is: necessity, relevance and probative value: see e.g. Ip Sau Lin v.
Hospital Authority [2009] 2 HKC 383 (DCEC 584/2007, 9 April 2009)

(4) Appointment of experts

(a) The Court can order the parties to appoint a single joint expert upon application by at
least one of the parties, even if a party disagrees with such appointment, upon giving
the party an opportunity to be heard and to show cause why the order should not be made,
and if it is satisfied that it is in the interests of justice to do so after taking into account all

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 the circumstances of the case including the matters specified in rule 4A (5), that the other
party’s refusal to agree to a single joint expert is unreasonable in the circumstances:
Order 38 r4A

Where the parties are unable to reach an agreement on who should be appointed as the
joint expert, the court may select an expert from a list identified by the parties.

(b) Where the parties appoint their own experts, the Court can order the experts appointed by
each of the parties to meet on a “without prejudice” basis before or after disclosure of
their reports in order to identify the parts of their evidence which are in issue; when such
meeting takes place, the experts may prepare joint statements indicating their agreements
and disagreements.

(c) The parties may apply for the appointment of a Court expert, instead of separate experts
for each party to give expert evidence on the same expert issue. See Order 40 RHC

4A. Evidence by single joint expert

(O. 38, r. 4A)

(1) In any action in which any question for an expert witness arises, the Court may, at or before the trial
of the action, order 2 or more parties to the action to appoint a single joint expert witness to give
evidence on that question.
(2) Where the parties cannot agree on who should be the joint expert witness, the Court may-
(a) select the expert witness from a list prepared or identified by the parties; or
(b) direct that the expert witness be selected in such manner as the Court may
direct.
(3) Where an order is made under paragraph (1), the Court may give such directions as it thinks fit with
respect to the terms and conditions of the appointment of the joint expert witness, including but not
limited to the scope of instructions to be given to the expert witness and the payment of the expert
witness’s fees and expenses.
(4) Notwithstanding that a party to the action disagrees with the appointment of a single joint expert
witness to give evidence, the Court may, subject to paragraph (6), make an order under paragraph (1) if
it is satisfied that it is in the interests of justice to do so after taking into account all the circumstances of
the case.
(5) The circumstances that the Court may take into account include but are not limited to-
(a) whether the issues requiring expert evidence can readily be identified in
advance;
(b) the nature of those issues and the likely degree of controversy attaching to the
expert evidence in question;
(c) the value of the claim and the importance of the issue on which expert
evidence is sought, as compared with the cost of employing separate expert
witnesses to give evidence;
(d) whether any party has already incurred expenses for instructing an expert who
may be asked to give evidence as an expert witness in the case; and
(e) whether any significant difficulties are likely to arise in relation to-
(i) the choosing of the joint expert witness;

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 (ii) the drawing up of his instructions; or
(iii) the provision to him of the information and other facilities needed to
perform his duties.
(6) Where a party to the action disagrees with the appointment of a single joint expert witness to give
evidence, the Court shall not make an order under paragraph (1) unless the party has been given a
reasonable opportunity to appear before the Court and to show cause why the order should not be made.
(7) Where the Court is satisfied that an order made under paragraph (1) is inappropriate, it may set aside
the order and allow the parties concerned to appoint their own expert witnesses to give evidence.

(5) Code of Conduct of Experts

(a) Part IV of Order 38 RHC emphasises the independent role of an expert in court
proceedings with the introduction of a Code of Conduct for Experts and experts have to
agree to be bound by such code. See Order 38 rules 35A, 37A, 37B, 37C RHC and
Appendix D to RHC.

(b) Order 37C provides that an expert’s evidence will not be admissible unless it contains a
declaration that he has read an approved code of conduct and agrees to be bound by it;
that he understands his duty to the court and that he has and will continue to comply with
that duty.

Order 38 r37A provides that an expert report must be verified by a Statement of Truth in
accordance with Order 41A.

4. Trial Procedures

(1) Order of Speeches

(a) The plaintiff shall begin by opening his case. The plaintiff then calls his witness(es) who are in
turn examined, cross-examined by the defendant and re-examined by the plaintiff.

(b) If the defendant elects to adduce evidence (which is often the case), then the defendant may open
his case. The defendant then calls his witnesses who are in turn examined, cross-examined by the
plaintiff and re-examined by the defendant.

(c) The defendant then closes his case and the plaintiff may then make a speech in reply.

(d) If the defendant does not elect to adduce evidence, then after all the plaintiff’s witnesses have
given evidence, the plaintiff closes his case and the defendant shall then state his case (Order 35
rules 7(1) to (4) RHC).

(e) Where the burden of proof of all the issues lies on the defendant, the order of speeches as set out
herein would be reversed (Order 35 rule 6 RHC).

(f) Read Order 35 rule 7(5) for the order of speeches where there is more than one defendant.

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(g) After all parties have closed their cases, the trial judge can give judgment straight away although
it is quite often for trial judges to reserve judgment. When his judgment is ready, the trial judge
would call upon the parties to attend Court so that judgment could be read out or the Court may
simply hand down the written judgment to the parties. The trial judge must give reasons for his
decision (Order 42 rule 5B).

(2) Order 35 rule 3A gives the Court the power to limit (i) the time to be taken in the examination,
cross examination and re-examination of a witness, (ii) the number of witnesses, (iii) the time
taken to make oral submissions, (iv) the time taken by a party to present his case, and (v) the
time taken by the trial. Such directions may be made at any time before or during trial.
However, such directions must not detract from the principles that each party is entitled to a fair
trial and that each party must be given a reasonable opportunity to lead evidence and cross-
examine witnesses.

(3) Order 35 rule 3A (2) sets out the matters which the Court shall have regard to when making such
directions.

5. Judgment

Read Order 42 RHC.

(1) Pursuant to Order 35 rule 10 RHC, at the conclusion of the trial of the action, the judicial clerk or
other officer in attendance at the trial should make a certificate to certify every finding made by a
jury (if the trial was by jury), the judgment given by a judge and the order made by the judge as
to costs.

(2) Notwithstanding the certificate made by the judicial clerk, the party seeking to have judgment
entered must draw up the judgment and present it to the Registry for entry (Order 42 rule 5(2)
RHC).

(3) A judgment takes effect from the day of its date and the judgment shall be dated as of the day it
is pronounced, given or made, unless the Court otherwise directs (see Order 42 rule 3 RHC).

(4) Therefore, a judgment takes effect on the date it is pronounced, even if it is drawn up and entered
on a later date or even if the reasons of the judgment may not be given until a later date.

6. Costs

Read Parts I and II of Order 62 RHC and Order 62 rules 1 to 11A

A. General points

Costs include fees, charges, disbursements, expenses and remuneration: O62 r1 (1)

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A party is not entitled to recover his costs of any proceedings from another party unless there is a court
rule or an order to that effect from the Court (Order 62 rule 3(1) RHC).

Costs may be dealt with by the Court at any stage. Usually, at the conclusion of the trial and often,
during the interlocutory stages of proceedings when interlocutory applications are being made, the Court
will make orders as to the costs of the action or the costs of the particular interlocutory application.

Section 52A (1) of the High Court Ordinance (Cap. 4): The Court therefore has absolute discretion when
making costs orders in respect of an action.

It should be noted that the conventional rule adopted by the Court is that costs should normally follow
the event (see Order 62 rule 3(2) RHC), i.e. the successful party should be awarded his costs of the
proceedings.

However, under the CJR, Order 62 rule 3(2A) is added to give the Court power to order “costs to follow
the event or make such other order as it sees fit” when dealing with interlocutory proceedings.

B. Meaning of some common orders for costs:

(1) Costs in the cause – a costs order made at interlocutory proceedings which means that the costs
of those proceedings are to be awarded according to the final award of costs in the action.

(2) Plaintiff’s (or defendant’s) costs forthwith – means that the plaintiff (or the defendant) is to
have the costs of the interlocutory proceedings without waiting for the final decision in the action
and payment of the costs could be enforced immediately: Big Boss Investment Limited v So Lai
Kei & So Chun Wing Daniel [2010] 1 HKLRD 793; HCA 2184/2009, 29 January 2010.

(3) Plaintiff’s (or defendant’s) costs in any event – means that the plaintiff (or the defendant) is to
have the costs of the interlocutory proceedings irrespective of who wins or loses when the case is
finally decided or settled. However, he is not entitled to receive or tax those costs until after the
case is finally decided.

(4) Plaintiff’s (or defendant’s) costs in the cause – means that the plaintiff (or the defendant) is to
have the costs of the interlocutory proceedings if judgment is given in his favour but he shall not
be liable to pay the costs of the other party in respect of the interlocutory proceedings if
judgment is given in favour of the other party.

(5) Costs reserved – means that costs of the interlocutory proceedings will be dealt with later, but if
the Court does not specifically make an order dealing with such costs by the conclusion of the
action, it means no party will be entitled to this set of costs.

(6) No order as to costs – means that each party will bear his own costs.

(7) Taxed costs – means costs taxed in accordance with the taxation provisions provided for in the
relevant rules of the Court.

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(8) Fixed costs – means costs determined in relation to particular proceedings in accordance with
prescribed scales. E.g. the Plaintiff is only entitled to fixed costs of $10,000 (if legally
represented) for entering default Judgment in the CFI against the Defendant for failing to file a
Notice of Intention to defend. O62 Second Schedule, Part 1.

(9) Certificate for counsel – pursuant to Order 62, Part II of the First Schedule para 2(3), “No costs
shall be allowed in respect of counsel appearing before a master in chambers, or of more
counsel than one appearing before, master in open court or a judge or the Court of Appeal,
unless the master or judge or the Court of Appeal, as the case may be, has certified the
attendance as being proper in the circumstances of the case.” Therefore, if counsel is instructed
to appear before a master in chambers or if more than one counsel were instructed to appear
before a master in open court or a judge or the Court of Appeal, the fees of counsel(s) would not
be allowed unless counsel requests for and the master or judge or Court of Appeal in question
grants a “certificate for counsel” (N.B. The provision is different in the District Court, which
provides that No costs shall be allowed in respect of counsel before the District Court unless
there is a certificate for counsel or unless the amount recovered (if counsel is acting for the
plaintiff) or the amount claimed (if counsel is acting for the defendant) is more than $150,000:
see RDC Order 62, Part II of the First Schedule )

C. Different Basis of costs/taxation

(1) Apart from determining the liability of the costs (i.e. who is to pay the costs of the action or the
interlocutory proceedings), the Court also has an absolute discretion as to the basis upon which
costs are taxed.

(2) Where costs are ordered to be paid to a party, that party is entitled to have his taxed costs (Order
62 rule 9(1) RHC). Taxation usually occurs, upon the application by the party entitled to his
costs, after the conclusion of the proceedings.

(3) It should be noted that even if a party is successful in the action and is awarded costs in his
favour, he will not recover 100% of the costs which he has expended for the proceedings. The
amount of costs he would be able to recover would depend on the basis on which the costs are to
be taxed. Any costs which are not recoverable would be borne out of the party’s own pocket.
The usual basis upon which costs are ordered are set out below:

(a) Party and party basis – this is the usual basis upon which costs would be ordered.
Unless the costs order specifies the costs to be paid on another basis, costs must be taxed
and/or paid on party and party basis. On such basis, such costs as are necessary or proper
for the attainment of justice or for enforcing or defending the rights of the party whose
costs are being taxed. The costs that are allowed are all that are necessary or proper to
enable the adverse party to conduct the litigation and no more.

(b) Common fund basis – this is more generous than party and party basis and includes a
reasonable allowance in respect of all costs reasonably incurred. In order to justify an
order for costs on the common fund basis, the case has to have some special or unusual
feature. Where the case is settled or compromised in favour of an infant or patient

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 plaintiff, it is the general practice of the Court to award costs on a common fund basis so
that the Court can be reasonably sure of the adequacy of the settlement to the infant.
Where the case involves an infant or patient Plaintiff proceeds with trial, the Court would
consider if the case possesses special or unusual feature before common fund basis is
awarded.

(c) Indemnity basis – all costs are to be allowed except those unreasonably incurred or of an
unreasonable amount. Any doubts as to whether the costs were reasonably incurred or
were reasonable in amount shall be resolved in favour of the receiving party. Read the
Court of Appeal’s decision in Choy Yee Chun (The representative of the estate of Chan
Pui Yiu) v Bond Star Development Limited [1997] HKLRD 1327 and the Court of Final
Appeal’s decision in Town Planning Board v. Society For The Protection Of The
Harbour Ltd [2004] 2 HKLRD 95.

(d) It should also be noted that where there has been a contractual right to indemnity costs
(i.e. where the parties have agreed, for example, under a mortgage deed, that any legal
costs expended by the mortgagee bank to recover outstanding amounts due under the
mortgage to be payable by the mortgagor to the mortgagee bank on an indemnity basis),
the Court’s discretion as to costs should ordinarily be exercised so as to reflect that
contractual right (Gomba Holdings (UK) Ltd & Others v Minories Finance Ltd &
Others (No.2) [1993] Ch 171, affirmed by the Hong Kong Court of Appeal in Chekiang
First Bank v Fong Siu Kin & Another [1997] 2 HKC 302 ).

(e) Note also that the Court may order indemnity costs under Order 22 (sanctioned offer and
sanctioned payment)

(f) Solicitor and own client basis – this basis is generally adopted on the taxation of a
solicitor’s bill to his own client. Costs allowed include all costs except insofar as they are
of an unreasonable amount or have been unreasonably incurred.

D. Summary assessment of costs

Under Order 62 rule 9A RHC the Court can make a summary assessment of costs by ordering a party to
pay a sum of money to another part in lieu of taxation after it has determined an interlocutory
application at any stage of the proceedings.

The Court may also make provisional summary assessment of costs by ordering a sum to be paid but
subject to either party’s right to have the costs taxed pursuant to rules 9A (2) and (3), but the party who
insists on such taxation would be at risk as to a special order for costs of the taxation and other possible
sanctions in the event that the taxation does not result in a proportionate benefit to him (see rules 9A (4)
and (5)).

Practice Direction 14.3 on Costs makes it clear that the court will give preference to summary
assessment or provisional summary assessment of the costs of interlocutory applications unless there is
good reason not to do so.

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If the Court makes an order under rule 9A for the payment of a sum of money in lieu of taxed costs,
payment would have to be made within 14 days or within the period specified by the Court when
making the order (rule 9B). Summary assessment is not allowed in all cases and the rule 9C sets out the
cases where summary assessment of costs would not be allowed.

Order 62 rule 9D (2) also provides that the Court may make an order for taxation of costs at an earlier
stage so that taxation need not necessarily be at the conclusion of the action.

E. Costs arising from misconduct or neglect and wasted costs orders

(1) Costs arising from misconduct or neglect O62 r7

(a) where something is done or an omission is made improperly or unnecessarily by or on

behalf of a party and in such cases, the Court can penalise that party by bearing the costs
of the improper or unnecessary act, i.e. that party would have to bear his own costs and
pay the other party his costs in relation to the improper or unnecessary act. Rule 7(2) sets
out the factors which the Court would have to regard, notably, including the underlying
objectives set out in O1A, when considering an order under Rule 7(1).

(2) Wasted Costs Order O62 r8 and PD 14.5

(a) The Court may make a wasted costs order against the legal representative only if

(i) the legal representative, whether personally or through his employee or agent,
has caused a party to incur wasted costs as defined in S.52A(6) of the Ordinance;
and

(ii) it is just in all circumstances to order the legal representative to pay such costs.
O62 r8

(b) “Legal representative” means Solicitor or Counsel conducting litigation on behalf of a

party S.52A (7) HCO, S.53 (6) DCO.

(c) Wasted costs is defined under section 52A (6) of the High Court Ordinance to mean any
costs incurred by a party as a result of:

(i) An improper or unreasonable act or omission; or

(ii) Any undue delay or other misconduct or default

on the part of the legal representative. The conduct need not involve criminal activity or
dishonesty. However, a mere mistake or error of Judgment is generally not sufficient.
Such conduct should involve a failure on the part of solicitor to fulfil his duty to the
Court and to realize his duty to aid in promoting his own sphere the cause of justice (see
KB Chau & Co. (a firm) v China Finance Trust and Investment Corp & Anor [1995] 2
HKLR 19).

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(d) Rules 8, 8A, 8B, 8C and 8D provide guidance for the exercise of the Court’s discretion
and discourage disproportionate satellite litigation. The rules provide that applications
for wasted costs orders should generally not be made or entertained until the conclusion
of the proceedings (see Order 62 rule 8A(4)). The rules also make it clear that it is
improper to threaten wasted costs proceedings with a view to pressurising or intimidating
the other party or his lawyers and that the party who wishes to put the other side’s lawyer
on notice of a potential claim for wasted costs against them should not do so unless he is
able to particularise the misconduct which is alleged to have caused him to incur wasted
costs. (See Order 62 r8C)

(e) A solicitor or counsel should not assist in commencing an action which he knows to be
false and which has no chance of success: Ma So So v Chin Yuk Lun [2004] 3 HKLRD
294.

The CFA in that case, has explained the jurisdiction of the Court to make wasted costs
order as follows:-

(i) The Court’s jurisdiction is compensatory. However, jurisdiction becomes punitive

if obligation to pay costs is shifted upon the solicitor.

(ii) Court should only exercise power where improper conduct or misconduct found
in proceedings, as distinguished from non-contentious matters.

(iii) It should be confined to questions which are apt for summary determination only.

(iv) 1. When client applies for wasted costs order against his own solicitor,
there is an implied waiver of legal professional privilege.

2. When a party claims costs against the other party’s solicitor, no waiver will
be implied and in such circumstances, the Court must make full allowance
for a solicitor’s inability to tell the Court the whole story.

(v) The jurisdiction ought to be exercised only if it can be established that there has
been a dereliction of duty as solicitor.

(vi) The applicant must establish a casual relationship between the acts of the solicitor
and the wasted costs incurred.

PD 14.5, para 3: The general principles of Ma So So are likely to be relevant where

wasted costs orders are sought.

(f) A wasted costs order may

(i) disallow costs between the legal representative and his client; and

(ii) direct the legal representative to

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 repay to his client costs which his client is ordered to pay to the other
parties
 Indemnify other parties against costs incurred by them

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SEMINAR 8: SETTLEMENT, ADR, SANCTIONED OFFER AND SANCTIONED PAYMENT

Read Orders 22, 62 rr.5 (d) and 10, O.42 r.5A and O.80 rr. 10 and 11 of the Rules of the High Court
(“RHC”)

Read Chapter 13 (“Settlement”) and Chapter 22 (“Alternative Dispute Resolution”)

1. How are settlements reached?

(a) By other methods of alternative dispute resolution (“ADR”)

Supply Chain & Logistics Technology Ltd v NEC Hong Kong Ltd
 Unreasonable refusal to participate in mediation even after the court suggested the parties
to do so is a conduct relating to the litigation that should be taken into account when the
court deals with question of costs.

2. Procedural Safeguards for Settlement Negotiations

(a) Negotiations conducted through lawyers

o Lawyers acting for the parties have ostensible authority to settle the case on their client’s
behalf.

o One party need not make enquiries about whether the other party’s lawyer has actual
authority to make the settlement in question. In Waugh v HB Clifford & Son Ltd: “A
party on one side of the record and his solicitor ought usually to be able to rely without
question on the existence of the authority of the solicitor on the other side of the record”.

o EXCEPTION: if the settlement introduces extraneous subject matter then the other
party’s solicitor should be put to proof of his authority.

o For example, if the disputes between concern the parties concern an alleged breach of
contract but the settlement terms proposed include the sale of the defendant’s flat to the
plaintiff.

o It is important to appreciate the difference between ‘ostensible’ and ‘actual’ authority to

compromise a claim on behalf of a client.

o Obtain clear instructions from client as to whether one is authorised to conclude the
settlement as one’s client may be bound by an agreement that has been entered by the
other side relying on the solicitors’ ostensible authority.

o Any lack of actual authority to settle may cause problems between a lawyer and his own
client, and may lead to a professional negligence claim.

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 o Must always therefore clarify with your client (usually in writing) the precise extent of
your authority to conclude a settlement on their behalf.

(b) Lay clients conducting negotiations

o A party may settle an action without the knowledge or intervention of his solicitor on
record (The Hope (1883) 8 PD 144, CA).

o Kwan Siu Man Joshua v Yaacov Ozer: it was alleged that a verbal settlement
agreement was made by the parties at a 10 minutes’ chance meeting outside the lift
lobby. This allegation (and the agreement) was accepted by the trial judge and confirmed
by Court of Appeal but overturned by the CFA.

o Lui Che Woo v Wong Si Ling: it was claimed by the defendant, on the first day of a five-
day trial, that a settlement had been reached between the parties in the absence of their
lawyers at various meetings and discussions. The plaintiff admitted the existence of the
meetings but strongly denied having reached any settlement. The defendant successfully
vacated the trial dates to cater for his key witness to testify on the issue of the alleged
settlement.

o The lesson to learn from these cases is that your client should be made fully aware of the
risks of any direct discussions with the other side and the importance of informing you of
the same.

(c) ‘Without prejudice’ and ‘subject to contract’ negotiations

o ‘Without prejudice’ correspondence and discussions (made orally or in writing) are those
genuinely aimed at facilitating settlement of a case.

o The ‘without prejudice’ rule prevents any party from unilaterally referring to these
‘without prejudice’ communications in evidence at trial, or from using them to establish
an admission – see Unilever plc v The Proctor & Gamble Company [2001] 1 All ER 783

o EXCEPTIONS: evidence of ‘without prejudice’ communications may be admissible, for

example, in deciding the following issues:

1. whether a settlement has been reached at all

2. whether a concluded settlement should be set aside on grounds of fraud/
misrepresentation
3. where w/p correspondence is being used as a ‘cloak’ for perjury or blackmail
4. whether any delay on the part of a plaintiff in prosecuting an action was due to
ongoing settlement negotiations (and is therefore excusable) [Unilever v
Proctor & Gamble, ibid]

o When an offer marked ‘without prejudice’ is accepted by the opposite party, the
acceptance should be made by an open letter.

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 o Once the offer is accepted, the settlement is concluded and that the whole chain of
without prejudice correspondence will no longer be privileged and can be referred to at
any subsequent court hearings as evidence of a settlement.

o Labelling discussions ‘subject to contract’ may avoid a binding settlement being

concluded before all details are sorted out. No settlement will then be concluded until it
has been reduced into writing and signed by all the parties (see Darton Ltd v Hong Kong
Island Development Ltd [2001] 4 HKC 575 CA).

o Making negotiation ‘subject to contract’ has the advantage of avoiding unnecessary

disputes arising from conflicting recollection/assertions between the parties as to whether
any binding settlement has been concluded and the terms thereof.

o For example, in Orient Bright International Ltd v Hiang Kie Hong Kong Ltd the court
had to consider the conflicting recollection of the solicitors for the parties and construe
the without prejudice correspondence in order to decide whether a binding settlement was
reached. The court also had to decide whether the form and manner as to how the
settlement could be enforced was a material term which had to be agreed by the parties
before a binding settlement could be formed.

3. Alternative Dispute Resolution (ADR)

(b) Types of ADR

o Under the Practice Direction 31 on Mediation, the judiciary basically focuses solely
on mediation when it refers to ADR.

(c) The advantages and disadvantages of ADR

o The first stage will be for you and your client to consider the merits and shortfalls of
ADR generally. It will then be necessary to decide what form of ADR to choose.
Then you seek to discover if the other side is prepared to use it too.

1. Control – in litigation, or arbitration, the parties surrender control of their dispute to the
court (or other tribunal). In ADR, they do not because any resolution requires their
consent.

2. Flexibility – litigation or arbitration has more rigid procedures while the procedure for
ADR can be very flexible to cater for the needs of the parties or to suit the circumstances
of the case or the nature of disputes.

3. Broader interest and creativity -- litigation or arbitration focuses on the parties’ legal
rights and the legal remedies. ADR aims at a resolution that takes into account the
parties’ interests and the terms of compromise can go beyond the scope of the disputes
between the parties can be very creative to suit the parties’ need.

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4. Privacy – litigation, with a few exceptions, is public whereas ADR is private.

5. Speed – litigation can be very slow. This is due, in part, to the courts’ procedural
timetable, which is beyond the parties’ control. ADR proceeds at a speed and in a manner
controlled by the parties.

6. Cost – ADR costs are generally much lower than those of litigation. If ADR does not
produce a settlement, its costs will be added to those of the litigation but there may still
be a costs saving if the issues to be dealt with at trial have been narrowed.

7. Attitude – litigation is adversarial. This can lead to unproductive behaviour including

‘tactical’ court applications. ADR has a consensual, ‘problem-solving’ approach. This
saves the time, costs and stress caused by litigation.

8. Expertise – in litigation, the judge may be unfamiliar with the technical issues upon
which the dispute may turn (eg engineering) which could effect his decision and result in
an appeal. In ADR, the parties can choose someone who is an expert in the field.

9. Relationships – There is always a winner and a loser in litigation or arbitration. ADR

enhances the possibility of the parties having a business relationship in the future or,
alternatively, ending it amicably.

10. Risk – ADR avoids the danger of losing at trial, with the attendant loss of money
(damages and/or costs) and reputation. It also allows the parties to test the merits of their
respective cases in a relatively ‘risk free’ environment – which in itself often leads to a
more realistic assessment of the claim and its settlement.

11. Focus – an ADR lasting just one or two days or comprising a limited number of
submissions means that the parties must focus on the main issues and their real goals. The
intensity of the effort that is often required, and the conclusions (or even ‘revelations’)
reached, often increases the chances of settlement.

12. The third party – the neutral person will have the skill to evaluate the issues from a
neutral perspective and – in mediation – to help the parties reach a settlement.

o There are, of course, some situations where litigation (or arbitration) may be more
appropriate than ADR. The disadvantages of ADR include:

(1) Precedent – ADR is unsuitable when one wishes to set a precedent or clarify an
important legal principle, for example, the scope of an auditor’s duty (if any) to
the shareholders of a company which he has audited.

(2) Coercive power – court can exercise coercive powers over the parties and may
grant injunctive relief (sometimes even on an ex parte basis). ADR is therefore
unsuitable when one party needs to invoke such coercive powers of the court.

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 (3) Equality – the court rules direct the court to ensure that the parties are treated
fairly. The neutral third party in ADR may not be in a position to address any
power imbalances. Whilst there are power imbalances in most situations (and so
this is not normally a reason in itself to avoid ADR), there may be situations
where the imbalance is so great that an equitable agreement cannot be reached.

(4) Reputation – one or both parties may need to have their stance publicly validated
for reasons other than setting a legal precedent, for example, their commercial
credibility. Such validation will come more readily from a judgment at trial or a
binding decision of an independent arbitrator than from a (usually) confidential
settlement agreement.

(5) Forum – in litigation, the judge is an experienced and independent lawyer who
follows publicly prescribed rules of evidence, law and procedure in an objective
fashion. In ADR, the neutral third party may not.

(6) Attitude – ADR may be unsuitable if there are allegations of bad faith or a lack of
trust between the parties. One may be subject to abuse by an unscrupulous party.

(7) Disclosure – unless the parties have already served them, there are no pleadings,
discovery, witness statements or experts’ reports (with statements of truth) and no
cross-examination in most forms of ADR. ENEs and mini-trials may involve
some of these documents but the formal rules of evidence are unlikely to be
applied.

5. Mediation and CJR

(a) The new Order 1A

o The new underlying objectives in Order 1A include that the courts should ‘facilitate
the settlement of disputes’.8 This provision is adopted from the English CPR Part
1.4(2)(e) and (f). ‘Facilitating settlement’ is commonly understood to include
encouraging the parties to try ADR, usually mediation.

o In addition, under Order 1A rule 4(2)(e), the court’s active case management
includes ‘encouraging the parties to use an alternative dispute resolution procedure
if the Court considers that appropriate, and facilitating the use of such a
procedure’, and Order 1A rule 4(2)(f) adds ‘helping the parties to settle the whole
or part of the case’.

o The new Practice Direction 5.2 on case management also comments, at paragraph 3,
that the court will ‘encourage parties to compromise their disputes’. Finally, it is
important to appreciate that under Order 62 rule 5(1)(aa), the court, when exercising
its discretion as to costs, shall take into account the underlying objectives set out in
8
RHC and RDC O 1A r 1(e)

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 Order 1A rule 1 to such extent, if any, as may be appropriate in the circumstances.
This gives the court the power to impose cost sanctions if a party refuses to attempt
mediation.9

(b) Practice Direction 31 on Mediation

o This augments the provisions in the RHC and RDC. The aim of Practice Direction
31 on Mediation (‘Mediation PD’) is stated to be ‘to assist the court to discharge
the duty in question’ (i.e. the duty to encourage the parties to use ADR if it considers
it appropriate and to facilitate its use) (see paragraphs 1 and 2 of the Mediation PD).
It is quite clear, therefore, that the courts will take a proactive approach to the use of
mediation.

o Interestingly, ADR is actually defined in the Mediation PD as ‘a process whereby

the parties agree to appoint a third party to assist them to settle or resolve their
dispute’. It goes on to state: ‘Settlement negotiations between the parties do not
amount to ADR’ (paragraph 3).

o The Mediation PD applies to all cases in the Court of First Instance or District Court
which are commenced by a writ except for those expressly excluded and referred to
in its Appendix A, for example, proceedings in the Construction and Arbitration
List.

o The Mediation PD adds that ‘The parties and their legal representatives have the
duty of assisting the court’ to discharge this duty (paragraph 1) and that ‘In
exercising its discretion on costs, the court takes into account all relevant
circumstances. These would include any unreasonable failure of a party to engage
in mediation where this can be established by admissible materials’ (paragraph 4).

o The court will not make an adverse costs order for unreasonable failure to engage
in mediation if the miscreant party has previously engaged in mediation to ‘the
minimum level of participation agreed by the parties or directed by the court’ or if it
has a ‘reasonable explanation for not engaging in mediation’ (paragraph 5).

o The Mediation PD makes a distinction between those cases in which all the parties
are legally represented and those in which one or more are not. Part II deals with the
former and Part III with the latter.

o Part II starts with a statement that the parties (or their solicitors) must file a
Mediation Certificate at the same time as the Timetabling Questionnaire referred to
in Order 25 rule 1. The form is set out in Appendix B to the Mediation PD. It is to be
signed by the solicitors and the parties and expressly provides, among other things,
that:

i. the solicitors have explained mediation to the party;

9
Also see the Mediation Practice Direction, para 4.

138
 ii. the client understands what has been explained to it;
iii. whether the party intends to attempt mediation or, if not, why not (note: the
reasons for not doing so may be included in a separate sealed statement if they
consist of privileged information).

o If a party wishes to attempt mediation it should serve a mediation notice on the other
parties (paragraph 10). The form of the mediation notice is in Appendix C to the
Mediation PD and it should state:

i. the rules under which the mediation will take place;

ii. the mediator to be appointed;
iii. the venue and costs of the mediation (and a proposal for their payment);
iv. when the mediation should take place;
v. the ‘minimum level of participation’ expected.

o The other party is to respond to the mediation notice by way of a mediation

response within 14 days of receiving the former (paragraph 11). The form of the
mediation response is found in Appendix D. It should state:

i. whether the respondent agrees to mediation or, if not, why not;

ii. whether the rules are agreed;
iii. whether the mediator and venue are agreed;
iv. the ‘minimum level of participation’;
v. whether the payment proposals are agreed.

o Any issues regarding the mediation which are not agreed are to be discussed and
agreement on the same should be recorded in a mediation minute signed by the
parties (paragraph 12). The parties may ask the court to assist them in this process
(paragraph 13). The mediation notice and response are to be filed at the same time as
being served on the other party or parties, and any mediation minute should also be
filed within three days of it being signed by all concerned (paragraph 15). The
parties may apply for a stay of the proceedings for the purposes of the mediation as
one will not be granted automatically (paragraphs 16–17).

o Hak Tung Alfred Tang v Bloomberg Lp (A Firm) & Another: minimum level of
participation, adopt the standard term in Appendix C of the Practice Direction, viz:
“the parties shall participate in the mediation up to and including at least one
substantive mediation session (of a duration determined by the mediator) with the
mediator.”

o Part III of the Mediation PD states that, in cases involving at least one unrepresented
litigant, the court may consider at ‘suitable stage’ in the proceedings whether
mediation is appropriate and make directions that the parties follow the procedure
set out in Part II (subject to any necessary modifications).

(c) What is mediation?

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 o See also the recent decision by Rogers VP in S v T [2010] 4 HKC 501 who affirmed
the confidential nature of mediation and refused to allow evidence emerged in the
course of a mediation to be admitted as evidence for the court proceedings. Rogers
VP said at paras 3-4:

It is wholly wrong for any party, of their own motion, to refer to what was said or not
said or arose out of mediation, unless and until, a concluded agreement has been
reached in the mediation which encompasses what may be disclosed and not
disclosed.

o Note however the exceptions to without prejudice negotiations as explained in

Unilever v Proctor & Gamble above, which may similarly be applicable to
mediation.

(d) Costs sanction for refusal to mediate

o There is a long line of English authorities in which the English courts have imposed
such cost sanctions upon those parties who have been unwilling to entertain the
possibility of ADR, especially mediation. In Dyson v Leeds City Council [2000] CP Rep
42, Ward LJ stated that:

… the court has powers to take a strong view about the rejection of the encouraging
noises we [the courts] are making [about ADR], if necessary by imposing eventual
orders for indemnity costs or indeed ordering that a higher rate of interest be paid on
any damages.

o In Dunnett v Railtrack plc [2002] 2 All ER 850, if parties turned down ADR out of
hand they could suffer the consequences when costs come to be decided. Here, the
defendant, Railtrack, had felt that there was no benefit in resorting to ADR.
Although it was successful at trial and upon appeal, and had even made a Part 36
payment (i.e. a sanctioned payment) into court which the plaintiff turned down, no
order for costs was made in its favour.

o Yet it would be wrong to assume that the English courts take a purely ‘all or nothing’
view of ADR. Hurst v Leeming [2003] 1 Lloyd’s Rep 379, it was held that a barrister
was justified in refusing to mediate a professional negligence action where the attitude
and character of the plaintiff made it most unlikely that the mediation would succeed.
The court stated that this was an exceptional decision reflecting how seriously disturbed
the plaintiff’s judgment was in relation to the case. A proposal of mediation could only
be rejected if such mediation had no realistic prospect of success. That was the situation
in this case and, therefore, the defendant was accordingly not penalised in costs for his
refusal to contemplate ADR.

o In Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002, the Court of
Appeal reviewed the preceding English case law on ADR and held that the burden

140
 was on the unsuccessful party to show why the successful party should be deprived
of its costs for refusing to agree to ADR. It had to be demonstrated that the
successful party had acted unreasonably in refusing to agree to ADR. In deciding
whether a party had acted unreasonably, the court was to remember the benefits of
ADR over litigation and have regard to all the circumstances of the particular case.
Relevant factors include:

(1) the nature of the dispute;

(2) the merits of the case;
(3) the extent to which other settlement methods had been attempted;
(4) whether the costs of ADR would be disproportionately high;
(5) whether any delay in setting up and attending the ADR would have been
prejudicial;
(6) whether the ADR had a reasonable prospect of success.

o The principles and approach to be adopted in Hong Kong under our CJR have
however not yet been fully argued or authoritatively decided. See however the
recent decision of Lam J in Golden Eagle International (Group) Ltd v GR
Investment Holdings Ltd [2010] 3 HKLRD 273 [2010] 5 HKC 317, who refused to
follow Halsey, but held that the willing party does not carry any burden to show that
mediation has a reasonable prospect of success. See also Ansar Mohammad v
Global Legend Transportation Ltd HCPI1057/2007, 23 November 2010 (Master
Levy) which followed Lam J’s judgment and deprived the successful defendant 20%
of its costs for its unreasonable refusal to respond to the plaintiff’s suggestion for
mediation (which suggestion was made shortly before the CJR came into effect).

o Another factor to take into account is whether a successful party had refused to
agree to ADR despite the court’s encouragement: see e.g. Supply Chain &
Logistics Technology Ltd v NEC Hong Kong Ltd HCA 1939/2006, 29 January
2009, Lam J at para 14

4. Procedural Devices to Put Pressure on Opposing Party to Bring About Settlement

Under CJR

(a) Background and principal changes

o The key features of our new Order 22 under the CJR are as follows:

(1) For the first time, a plaintiff may make a sanctioned offer of settlement, putting the
defendant who rejects that offer at risk of paying part or all of the judgment award at
an enhanced interest rate of up to 10% above the judgment rate, and legal costs on
an indemnity basis plus enhanced interest thereon.

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 (2) A defendant may make a sanctioned payment or a sanctioned offer, which is
similar to the earlier regime of payment into court and Calderbank offer. The key
difference is that in case the plaintiff cannot obtain a judgment more favourable than
the sanctioned payment or offer, he will now face more severe consequences.
Instead of paying the defendant’s costs on a party-and-party basis, under the new
regime the plaintiff is at risk of paying the defendant’s costs on an indemnity
basis plus enhanced interest thereon, and of being disallowed part or all of the
discretionary interest which would otherwise be awarded on the judgment
award.

(3) Where an offer by a defendant involves a payment of money to the plaintiff, the
offer must be made by way of a sanctioned payment instead of a sanctioned offer.

(b) When and how can sanctioned offers and payments be made?

o A sanctioned offer or sanctioned payment may be made at any time after the
commencement of the proceedings but may not be made before action (O 22 r 3(3) and O
22 r 5(6).)

o Although a sanctioned offer or sanctioned payment can be made at any time before trial
or judgment, in general, it should be made not less than 28 days before the
commencement of the trial. Otherwise, it may not carry the stipulated sanctions of
indemnity costs and enhanced interest.10 It appears that a sanctioned offer or sanctioned
payment cannot be made after judgment in appeal proceedings (cf. The UK CPR which
expressly provides that a Part 36 offer ‘may be made in appeal proceedings’.)

o The mechanics involved in making a sanctioned offer or payment are set out in the new
Order 22.

o Care: if those procedures are not followed properly, the offer or payment in question will
not take effect as a ‘sanctioned’ offer or payment, and so will not attract the
consequences set out in Order 22 (unless the Court orders otherwise) [O.22 rr. 2(4), 3(1)
and 4].

(i) Sanctioned payments

o Sanctioned payments may be used only by defendants, when offering a monetary

settlement.

o Briefly, the procedure for making a sanctioned payment will be as follows:

- After making the payment into court, the defendant will need to file with the
Court a Notice of Payment in the prescribed form [O.22 r. 8(2)].

10
See the discussions on ‘The latest date on which the offeree could have accepted the offer without leave’ below

142
 - The defendant must serve the Notice on the plaintiff (and, in legally-aided
cases, with the Director of Legal Aid) [O.22 r. 9].

- A sanctioned payment will be regarded as having been made, when the Notice
is served [O.22 r. 12(2)]

(ii) Sanctioned offers

o Generally speaking, under the new regime, sanctioned offers to settle may be made
either by a plaintiff (for any type of claim) or by a defendant (for settlement offers
not involving the payment of money) [O.22 rr 3, 4]

o Briefly, the procedure will be as follows:

- The sanctioned offer must be made in writing. Though there is no prescribed

form for sanctioned offer, the detailed requirements set out in O 22 r 5 must be
followed.

- The sanctioned offer will be regarded as having been made on the date on
which it is served [O.22 r 12(1)]

(c) Clarification of a sanctioned offer or payment

o If the terms of the sanctioned offer or Notice of Payment are unclear, the receiving party
will have 7 days within which to seek clarification [O.22 r.14(1)] .

o If the other party does not provide the clarification requested within a further 7 days, the
receiving party will have the right to apply to the Court for an order requiring him to do
so [O.22 r.14(2)].

(d) Procedure for accepting a sanctioned offer or payment

o A sanctioned offer or payment should be accepted by serving a written notice of

acceptance on the other party [O.22 r.15(1) and 16(1)]

o Leave of the Court may be required to accept a sanctioned offer or payment, depending
on when it was made:

(1) If the sanctioned offer or payment is made 28 days or more before trial:

- it will remain open for 28 days, and will be capable of acceptance at any time
within that period without leave of the Court [O.22 r.15(1) and 16(1)];
- Even if the 28 day period for acceptance has since expired, it can still be
accepted without leave if the parties can agree on liability for costs. If the

143
 parties cannot agree on liability for costs, leave of the Court will be required
to accept. [O.22 r.15(2)(b) and 16(2)(b)]

(2) If the sanctioned offer or payment is made less than 28 days before trial, it can be
accepted without leave, provided the parties can agree on liability for costs. If the
parties cannot agree on liability for costs, leave of the Court will be required to
accept [O.22 r.15(2)(a) and 16(2)(a)]

(3) Note however that where the proceedings involve a claim by or on behalf of a
person under disability (i.e. an infant or a mentally incapacitated person), the
sanctioned offer or payment may be accepted only with the leave of the court and
the money in court may not be paid out except in pursuance of an order of the court.
[O 22 r 19]

(e) Consequences of acceptance

o Where a defendant’s sanctioned offer or sanctioned payment is accepted, the plaintiff

is entitled to his costs of the proceedings up to the date of serving notice of acceptance,
unless the Court otherwise orders (see O 22 r 20(1)).
o Where a sanctioned offer or a sanctioned payment only relates to part of a claim and the
plaintiff abandons the other parts of the claim at the same time as accepting the offer
or payment, he will be entitled to his costs of the proceedings up to the date of serving
notice of acceptance, unless the Court otherwise orders.
o However, if the plaintiff does not abandon the other claims, the rule provides that unless
the parties have agreed on costs, the liability for costs shall be decided by the court. [O 22
r 22(3)(c)]

o Similarly, where a plaintiff’s sanctioned offer to settle the whole claim is accepted by
the defendant, the plaintiff is entitled to his costs up to the date upon which the defendant
serves notice of acceptance, unless the Court otherwise orders (see O 22 r 21). The
plaintiff’s costs are usually deemed to include any costs attributable to the defendant’s
counterclaim or set-off if the sanctioned offer or payment states that it takes these into
account.

o Under Order 22 rule 22(1), the claim is stayed when a sanctioned offer or payment
(relating to the whole claim) is accepted. The stay is upon the terms of the offer and
either party may apply to enforce those terms without the need to commence new
proceedings. If a sanctioned offer has been accepted and there has been a subsequent
breach of its terms, a party may claim the remedy for that breach by applying to the Court
without the need to commence new proceedings.

(f) Consequences of Non-acceptance

o If a sanctioned offer or payment is rejected (or not accepted) the claim will proceed in the
normal way to trial or until it is eventually settled. The consequences at trial are dealt with by
Order 22 rules 23 and 24.

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o RHC and RDC O22 r23: if P fails to obtain a judgment better than sanctioned payment or a
judgment more advantageous than sanctioned offer, court shall make the following orders in
favour of D unless it considers it unjust to do so:
(a) Disallow all/part of any discretionary interest payable on whole/part of sum awarded to P
for some/all period after the latest date on which the payment or offer could have been
accepted without requiring leave of court
(b) D be awarded his costs on indemnity basis after that date, and
(c) Interest be awarded on those costs at rate not exceeding 10% above judgment rate

o So, by way of example, if the plaintiff wins at trial but does not ‘beat’ the sanctioned offer or
payment (e.g. the offer on 1 May 2010 is $1,000,000 and the judgment on 20 November
2010 is $950,000), the normal order (unless the court considers it unjust) is that:
(1) the plaintiff may not be awarded all his interest on the damages
(2) he may have to pay all the D’s costs incurred after 29 May 2010
(3) the defendant’s costs under (2) may be taxed on the indemnity basis and may carry an
enhanced interest rate

If the plaintiff wins and ‘beats’ the offer he will normally be awarded his costs in the usual
way.

o O22 r24: where D is held liable for more than the proposals contained in P’s sanctioned offer
or judgment against D is more advantageous to P than the proposals contained in sanctioned
offer, court shall make the following orders unless it considers it unjust to do so:
(a) Interest be awarded on the whole/part of any sum of money (excluding interest) to P at a
rate not exceeding 10% above judgment rate for some/all of the period after the latest date
on which D could have accepted the offer without requiring leave of court
(b) P be entitled to his costs on indemnity basis after that date, and
(c) Interest be awarded on those costs at a rate not exceeding 10% above judgment rate

o So, if the plaintiff claims $2,000,000, offers to settle for $1,500,000 and is awarded
$1,700,000 at trial he may:

(1) receive enhanced interest on $1,700,000 running from when the defendant could have
accepted his sanctioned offer without leave
(2) receive all his costs from the date the defendant could have accepted the offer both on
the indemnity basis and with enhanced interest.

o Amoi Electronics Co Ltd v Kin Cheung Transportation (Hong Kong) Co Ltd the Court held
that the defendant “had to take the consequences of having been beaten by a sanctioned offer
which it had declined to accept” and that the type of order requested by the plaintiff “had to
be made unless the court considered it unjust to do so”. The Court therefore awarded interest
on the sum awarded at USD prime rate plus 1% up to 28 days after the sanctioned offer
was made and thereafter at 2% over the judgment rate, plus indemnity costs (with interest on
such costs at 2% over judgment rate).

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Shih Pik Nog v G2000 (Apparel) Ltd [2011]

it was held that the power to order enhanced interest on costs as from the latest date when the offer could
have been accepted is not penal in nature but compensatory. Hence, if legal costs are not actually
paid by the receiving party before the judgment (e.g. the solicitor only requires payment of costs from
his privately funded client at the end of the proceedings), then the rationale for awarding interest on
costs would not apply and an order for enhanced interest on costs incurred after the last date of
acceptance would produce an unjust windfall for that party. In such a case, the court ought not to award
any interest on costs. The court therefore held that it is incumbent on the party seeking interest on costs,
be that party a plaintiff or a defendant, to state, in his supporting affidavit, the amount of
disbursements, costs, and costs on account paid to his solicitors during the period commencing
from the last date of acceptance up to the date of the supporting affidavit, and the date(s) of
payment. Upon sight of this information, the court can then decide whether and how it should make an
order for enhanced interest during the relevant period. If costs and disbursements have actually been
paid, the court can award interest either at the full enhanced rate from the actual dates of payment or
adopt a broad-brush approach to award interest on the total amount of indemnity costs at half of the
enhanced rate during the whole of the relevant period. The former approach would be suitable for
cases where there have only been a few payments and the latter approach for cases where there
have been multiple payments spanning a long period of time. The court further held that interest at
the enhanced rate should only be ordered up to the date of judgment, and thereafter the receiving
party should simply be entitled to interest on the whole judgment debt (including the costs) at the
judgment rate from the date of judgment until date of payment (cf the subsequent judgment of Deputy
District Judge R. Yu in Poon Yiu Cheung v World Mastery Technology Ltd DCCJ632/2005, 30
September 2011, who took the view that the court does have jurisdiction to award post-judgment
interest at enhanced rate until payment and whether to order post-judgment interest at the enhanced rate
is a matter of discretion.)

o Latest date on which offeree could have accepted offer without leave:

1) if sanctioned offer or payment is made not less than 28 days before trial in normal situation,
latest date on which it could be accepted without leave of court is the end of the 28 days
period of acceptance;

2) if SO or SP is made less than 28 days before trial, there is no latest date and court cannot
impose any sanctions under O22.

3) Situations where leave of court is required (person under disability Ds sued jointly under O22
r18(2) ): no latest date where offeree could accept offer “without leave”, no sanctions
awarded.

o Enhanced interest rate: court may adopt either of following approach

1) The court will at a starting point award 10% above judgment on whole of judgment sum, then
evaluate whether effect of doing so will be injustice or result in disproportionate disadvantage to
offeree

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2) Court will regard enhanced interest as compensatory but not penal and fix uplift rate according to
circumstances of particular case to best reflect fair compensation to offeror

o calculating whether a sanctioned offer or payment has been ‘beaten’: it is important to

appreciate that under Order 22 rule 26 any such offer or payment is to be treated as inclusive
of all interest until the last date on which it could be accepted, unless the contrary is
stated (in which case the offer or payment notice must state whether interest is offered and
the amount offered, the rate or rates offered and the period or periods for which it is offered).

o Hence, the Court will need to take interest into account when deciding whether a
sanctioned offer or payment has been beaten, and it will do so in a normal case by calculating
the amount awarded at trial, and adding to that sum the amount of interest which the Court
would have ordered, as at the last date on which the sanctioned offer or payment could have
been accepted. This total will then be compared with the total amount of the sanctioned offer
or payment to assess whether the latter has been ‘beaten’.

(g) Circumstances in which it may be ‘unjust’ to apply the usual sanctions

o When considering whether it would be ‘unjust’ to apply the usual sanctions under Order
22, the Court will take into account all the circumstances, including:

- the terms of any sanctioned offer;

- the stage in proceedings when any sanctioned offer was made;
- the information available to the parties at the time the offer was made; and
- the conduct of the parties with regard to giving or refusing to give information
to enable the offer to be made or evaluated. [O.22 r.23(6) and 24(5)]

o Key test is not whether it is reasonable for the offeree not to accept the sanctioned offer
or payment, but whether it is unjust to order the specified consequences. For example,
in the case Matthews v Metal Improvements Co Inc [2007] EWCA Civ 215, In that case
if the claimant wished to await certain investigation results before deciding whether to
accept the Part 36 payment, his legal advisers should have asked for a stay of
proceedings.

o If a party withholds material information which would have enabled the other side
properly to evaluate the offer, the Court may decline to order the costs consequences set
out in the new Order 22 [Final Report paragraphs 304 – 308; Lord Woolf’s judgment in
Ford v GKR Construction (Practice Note) [2000] 1 WLR 1397 at page 1403]

o Effect of amendment of pleadings: A party’s case may not be sufficiently pleaded at the
time the sanctioned offer or payment is made, and the true nature of its case only
becomes apparent later, after it has amended its pleading. Any costs sanctions which
would otherwise have arisen out of the other party’s rejection of the sanctioned offer or
payment (under the new Order 22) will then only run from the date of the amendment

147
 [Final Report paragraph 309; Factortame Ltd v Secretary for the Environment,
Transport and the Regions [2002] 1 WLR 2438]

(h) Costs consequences where formal requirements of new Order 22 are not followed

o Strictly speaking, for the costs sanctions set out in the new Order 22 to apply, sanctioned
offers and payments will need to comply with the formal requirements of that Order
[Order 22 rr.2(4), 3(1) and 4]

o However, the Courts may overlook purely technical errors, which are obvious on the face
of the offer letter or Notice of Payment itself (as the English courts have done in
Hertsmere Primary Care Trust v (1) Estate of Balasubramanium Rabindra-Anandh (2)
Ketheeswary Rabindra-Anandh [2005] EWHC 320 (Ch))

o The Court will also have a residual power to take non-complying offers into account
when exercising its general discretion on costs [Final Report paragraphs 317 - 321 and
Order 22 rule 2(4)].

(i) Withdrawing or reducing a sanctioned offer or payment

o A sanctioned offer or payment will need to remain open for 28 days from the date it is
made, unless the Court gives leave to withdraw it earlier [O.22 rr.7 and 10].

o After that 28-day period has expired, the offeror will be able to withdraw or reduce the
offer or payment at any time without leave.

o If it is not withdrawn, it can still be accepted providing:

- the parties can agree on liability for costs OR

- the court gives leave to accept

o The new Order 22 states that if a sanctioned offer or payment is withdrawn, it will not
have the consequences set out in that Order [O.22 r 7(5) and r 10(4)].

o However, even if the withdrawn sanctioned offer or payment does not have the
prescribed consequences (i.e. indemnity costs and enhanced interest), it is arguable that
the court may still take it into account when exercising its general discretion on
costs. For example, see the English CA case of The Trustees of Stokes Pension Fund v
Western Power Distribution (South West) plc [2005] EWCA Civ 854, where it was
successfully argued that even after the offer in question was withdrawn, the respondent
whose withdrawn offer was better than the judgment award was entitled to costs as from
the date when the offer should reasonably have been accepted.

(j) Illustration through a case study

148
 o As can be seen above, the consequences following a sanctioned payment or offer will
vary, according to:

- which party is making the sanctioned offer or payment

- whether it is accepted or rejected
- whether that offer or payment relates to the whole or part of the claim; and
- other relevant circumstances.

o To illustrate the normal consequences when both parties have made sanctioned
offer/payment, let us look at how the new regime will work in the context of a simple
case study.

Case study: Perfect Paints’ HK$2 million claim

Perfect Paints Ltd (“P”) sues Dodgy Design Ltd (“D”) for HK$2 million
in unpaid invoices. D then makes a sanctioned payment into court of
HK$1,600,000 on 2 May 2010. P does not accept that sanctioned
payment, but instead makes a sanctioned offer of HK$1,800,000 on 2
June 2010. Put at its simplest, D has therefore offered to pay P
HK$1,600,000 to settle the case, and P has said that it will accept
HK$1,800,000 from D to settle.

Alternative 1: Sanctioned offer or payment is accepted by P or by D

If either:

(a) P agrees to accept D’s offer of HK$1,600,000 (which D

has paid into court by way of sanctioned payment); or

(b) D agrees to pay to P the HK$1,800,000 required by P’s

sanctioned offer;

then the action will be stayed [O.22 r.22(1)], and D will have to pay P’s
costs on a part and party basis up to the date on which the notice of
acceptance was served [O.22 r.20(1) and 21(1)]

Alternative 2: P wins the case at trial on 2 February 2011 but recovers

less than D’s sanctioned payment of HK$1,600,000

If P wins the case, but is awarded less than D’s sanctioned payment of
HK$1,600,000, then the Court shall (unless it considers it unjust to do so)
order:

(a) P be disallowed all or part of any discretionary interest otherwise

payable on the whole or part of the judgment sum for some or all

149
 of the period after 30 May 2010 (i.e. the latest date on which the
sanctioned payment could have been accepted without leave)
[O.22 r 23(2)];;

(b) D to pay P’s costs on a part and party basis up to 30 May 2010
(based on the “costs to follow the event” rule);

(c) P to pay D’s costs from that date onwards [O.22 r 23(3)];

(d) That D’s costs should be assessed on an indemnity basis [O.22 r

23(4)(a)];

(e) That P should pay enhanced interest on D’s costs (at up to 10%
above judgment rate) [O.22 r 23(4)(b)].

This type of ‘split’ costs order reflects the fact that P has won the case
(and was therefore justified in bringing it in the first place) but also
reflects the reality that P has unnecessarily prolonged the litigation by
unjustifiably refusing to accept D’s sanctioned payment.

Alternative 3: P wins the case and recovers HK$1,700,000

In this alternative scenario, P wins the case and recovers HK$1,700,000.

P has therefore beaten D’s sanctioned payment of HK$1,600,000, but not
P’s own sanctioned offer of HK$1,800,000.

In these circumstances, P did not act unjustifiably by failing to accept D’s

sanctioned payment, and equally D did not act unjustifiably by failing to
accept P’s sanctioned offer. Both the sanctioned offer and the sanctioned
payment are therefore neutral for costs purposes. P will therefore recover
his costs of the action, in the usual way, as if the sanctioned offer and
payment had not been made.

Alternative 4: P wins the case and recovers HK$1,900,000

In this alternative scenario, P wins the case and recovers HK$1,900,000,

thereby beating not just D’s sanctioned payment, but also P’s own
sanctioned offer.11

In these circumstances, the Court shall (unless it considers it unjust to do

so) order D to pay:

(a) the principal sum of HK$1,900,000 awarded to P on winning the

11
Note that the plaintiff will be regarded as having bettered his own sanctioned offer if the defendant is held liable for more than the
proposals contained in that offer, or if the judgment against the defendant is otherwise more advantageous to him: Order 22 rule
20(1)

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 case;

(b) interest at the normal discretionary rate on the whole or part of

that principal sum up to 30 June 2010, and thereafter at an
enhanced rate (at up to 10% above judgment rate) [O.22 r.24(2)];
plus

(c) costs on a party and party basis up to 30 June 2010, and thereafter
on an indemnity costs [O.22 r.24(3)(a)]; plus

(d) enhanced interest on those indemnity costs (again, at up to 10%

above judgment rate). [O.22 r.24(3)(b)]

Note that the date from which interest and indemnity costs will run is the
latest date on which the defendant could have accepted the sanctioned
offer, without requiring leave of the Court. The Court should award
interest at the normal discretionary rate on the principal sum before that
date.

It is easy to see, therefore, how punitive these new costs and interest
sanctions will be for a defendant who unjustifiably refuses to accept a
plaintiff’s sanctioned offer, and therefore how a well-pitched sanctioned
offer from a plaintiff will bring tremendous pressure to bear on
defendants to settle.

Alternative 5: P loses the case

If P loses the case, P will usually be ordered to pay D’s costs of the
action following the normal “loser pays the winner’s costs” rule. But as
P has also failed to obtain a judgment better than D’s sanctioned
payment, the Court shall (unless it considers it unjust to do so)12 order:

(a) P to pay D’s costs on a party and party basis up to 30 May 2010,
and thereafter on an indemnity costs [O.22 r 23(4)(a)];

(b) That P should pay interest on D’s indemnity costs (at up to 10%
above judgment rate) for any period as from 30 May 2010 [O.22 r
23(4)(b)].

5. Settlements by Infants and Mental Patients

12
Order 22 rule 23

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 o Where money is claimed on behalf of an infant or mental patient, the court must approve
any settlement, compromise, payment or acceptance of money paid into court [Order 80
rule 10].

o If settlement is reached before proceedings issued, it is also desirable, though not

mandatory, to seek the court’s approval (otherwise the settlement may not be legally
binding on the party under disability). The proper procedure is for plaintiff to issue an
originating summons seeking court’s directions and approval of settlement [Order 80 rule
11].

o Court may also give directions regarding the investment and use of the settlement monies
[Order 80 rule 12].

o Court will normally require counsel’s opinion on the adequacy of the settlement, before
granting approval.

o An approval procedure is set out in revised PD 18.1 Part X (previously paras 20.1-20.8).
Unless ordered otherwise, the proper order for costs in respect of such compromised
proceedings is on a common fund basis (see PD 18.1 para 189). Also see the recent
decision in So Long Him v Ho Kai Lun DCPI 1632/2008, 10 February 2009 on the
process to be followed when seeking the courts’ approval.

o The solicitor/ counsel to the person under a disability owes a duty to its client (i.e. the
person under the disability) independently of the person giving the instructions (i.e. the
next friend) [Re YCK, HCMP 2878/2004 9 Feb 2006; Re CK HCMP 1150/2006 4 Aug
2006 – should read these cases]

o Where the legal representative detects a possible conflict between the interests of the
person under disability and the next friend, he should:

- bring the matter to the attention of the court, and

- (in cases involving mentally incapacitated persons) consider applying under
Part II of the Mental Health Ordinance for appointment of a committee to
oversee investment and disposal of the settlement sums

6. Agreeing Settlement Terms

o Important to fit the settlement method to the circumstances: key question is “what will
happen if one of the parties defaults under the settlement terms?”

(a) Can client carry out its obligations under the settlement agreement?

o Vital to ensure client can carry out its obligations under the settlement agreement: see
Kai Fung Engineering Co v Plasteel Hong Kong Ltd [1983] 2 HKC 526, where
plaintiff’s failure to comply with its undertaking in the settlement agreement to deliver-up

152
 goods meant it was unable to enforce judgment on the defendant. If one did not comply
with his obligation in the first place, he cannot enforce the settlement.

o See also Ng Yiu Ming v Leung Yee (unreported) HCMP 1730/99, 8 November 1999,
where plaintiff again denied enforcement because court held it had failed to comply with
its own obligations under the consent order.

o Court may exercise discretion to grant extension of time under O3 r5 for the compliance
of P’s obligations.

(b) Additional claims between the parties

o If a claim was not raised in the settled proceedings, but could and should have been so
raised, any fresh action on such a claim may be struck-out as an abuse of process
[Johnson v Gore Wood & Co [2001] 1 All ER 481 HL]. Make clear, therefore, whether
the settlement is intended to bring an end to client’s all possible claims.

(c) Effect of settlement on claims against non-parties

o If A brings a claim against B, and later settles that claim against B, can A later bring an
action against C in respect of the same loss?

o Depends on whether the settlement sum received by A is intended to be in full

satisfaction of the claim/ represent the full measure of A’s loss [Jameson v Central
Electricity Generating Board [2000] 1 AC 455; Heaton v AXA Equity and Law Life
Assurance Society plc [2002] 2 AC 329]. If it is so intended, A cannot claim against C
in respect of the same damage, because it has not suffered any loss.

o Question must be answered by reference to terms of settlement agreement in context of

the factual matrix of a given case.

o If settlement between A and B is not in full satisfaction of A’s claim, and A therefore
does have a continuing claim against C, then C can still claim a contribution against B
(even though B has settled with A): section 3(3) of Civil Liability Contribution
Ordinance (Cap.377).

o To protect itself against this type of third party claim in respect of the same cause of
action, B should:

- Ensure the settlement agreement specifies that the settlement sum is in full
satisfaction of A’s claim (although this by itself may not be sufficient, as the
court may look at the factual matrix of a given case)
- Obtain an undertaking from A not to pursue any claim against C in respect of
the same subject matter OR
- Obtain an indemnity from A against any liability attaching to B following any
claim for contribution

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 [See Heaton v AXA Equity and Law Life Assurance Society plc, above]

(d) Other settlement terms

o Consider with client:

- Whether to include confidentiality clause

- Who should bear the costs of the proceedings to date, including how previous
costs orders on interlocutory applications should be dealt with (see e.g. Lee
Man Kit v Tai Wai Wah HCA 1504/2008, Lam J, 14 September 2009 for an
illustration of a case where the absence of an express stipulation led to
unnecessary court hearing)
- When and how any payment out of court should be made

7. Documenting Settlements

o There are a number of different ways in which parties commonly document their
settlement:

- Settlement agreement without court order

- Consent judgment in favour of the plaintiff
- Consent order for dismissal/ discontinuance/ stay
- Tomlin order

(a) Settlement Agreement (without court order)

o Often used where the case is settled without formal proceedings having been commenced

o If the compromise is given in return for a promise by the other party to fulfill its
obligations under the settlement agreement, the original cause of action will be
discharged [Green v Rozen]. The settlement is enforced by an action for breach of the
Settlement Agreement itself.

o If compromise given in return for performance of acts promised under the settlement
agreement, the original cause of action will not be discharged until those acts are
performed (and the innocent party can either sue on the settlement agreement or
continue with the original cause of action): Lam Fung Ying v Ho Tung Sing [1993] 2
HKC 436.

o May be difficulties enforcing settlement agreement, where there are disputes as to the
existence/ validity of that agreement: READ Lam Fung Ying v Ho Tung Sing [1993] 2
HKC 28, CA.

(b) Consent judgment in favour of the plaintiff

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o Used either in place of, or in addition to, a settlement agreement (see above).

o Consent judgment will be entered for P, either:

- for the settlement amount; OR

- for the full amount of P’s claim (plus costs) with a stay of proceedings for so
long as D complies with the terms of the settlement (for example by making
timely repayments)

o Court must have jurisdiction to grant the terms of the settlement which have been agreed
upon

o Advantage: if D defaults, P can execute and enforce the judgment award without
bringing separate proceedings.

(c) Consent order for dismissal/ discontinuance/ stay of original action

o Dismissal: P cannot pursue the same cause of action in fresh proceedings, even if D
defaults on the settlement terms. P can only sue for breach of the settlement
agreement.

o Discontinuance or withdrawal: the original action is brought to an end. However, a fresh

action may be brought on the same cause of action provided the settlement agreement
itself does not have the effect of discharging the cause of action [Green v Rozen, above]

o Stay: the original action is still alive, and the stay may be lifted by the court in
exceptional circumstances.

(d) Tomlin order

o A form of consent order: see Order 42 r 5A(2)(b)(iii),

o Form of order: “It is ordered that all further proceedings in this action be stayed upon
the terms of the settlement agreed between the parties set out in the schedule hereto [or a
letter dated xxxx] except for the purpose of carrying this Order and the said terms into
effect for which purpose the said parties are to be at liberty to apply”

o On default, the innocent party need not bring a new action, but must apply to the court
to enforce the agreed terms.

o Useful where:

- the agreed terms are more complex than the simple payment of money
- those terms go beyond ambit of original dispute [see EF Philips Clarke
[1970] Ch 322]

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 o Agreed terms are usually set out in the schedule to the Tomlin Order, or (where the terms
are particularly confidential) in another document referred to but not attached to the
Order.

o Not all settlement terms need to be contained in a schedule to the Order [Horizon
Technologies International Ltd v Lucky Wealth Consultants Ltd [1992] 1 WLR 24]

o Court may refuse to enforce terms in exceptional circumstances (e.g. if unconscionable:

Green v Rozen, above; Tsang Iu Hung v Tsang Tak Wah [1993] 2 HKC 471)

(e) Is leave of the Court required to obtain a consent judgment or order?

o Not if the terms of the settlement fall within Order 42 rule 5A – READ THIS

o If the terms of the settlement fall outside O.42 r.5A, the parties must apply by consent
summons for the court’s approval.

8. Notifying Court of Settlement

o If case has been set down for trial, inform Court Registry or Judge’s clerk of settlement
or likely settlement [O.34 r.8(2) and (3)]

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SEMINAR 9: ENFORCEMENT OF JUDGMENTS

 Read Orders 44A and 45-52 of the Rules of the High Court (“RHC”)
 Read Chapter 19

1.1 Date from which judgment takes effect

 Order 42 rule 3(3): A judgment takes effect from the date it is pronounced even though the
reasons for the judgment may be given later.
 Order 46 rule 6(4)(a)(i): A judgment cannot generally be enforced until it has been formally drawn
up and entered.
 Order 45 rule 14: albeit the court has the power to order immediate execution at the time of giving
judgment.

1.2 Service of the judgment

 Service of the judgment is NOT a prerequisite to enforcement

 EXCEPTION: In the case of a judgment requiring a person to do an act (i.e. a ‘mandatory order’),
Order 45 rule 7 requires that the order be personally served on the judgment debtor where
enforcement is sought by writ of sequestration or order of committal.

1.3 Limitation period

 The 12-year limitation period prescribed by s 4(4) of the Limitation Ordinance (Cap 347) applies
only to an action on the judgment
 But does not apply to an application to enforce a judgment by execution (see National Westminster
Bank v Powney [1990] 2 All ER 406).
 Section 4(4) however further provides that no arrears of interest in respect of any judgment debt shall
be recovered after the expiration of six years from the date on which the interest became due.

 Order 46 rule 2 (1)(a): If six or more years have elapsed since the date of the judgment, leave of
the court is required to issue a writ of execution.

 Patel v. Singh [2002] EWCA Civ 1938: The court must start from the position that the lapse of six
years may, and will ordinarily, in itself justify refusing leave to issue the writ of execution,
UNLESS the judgment creditor can justify the granting of permission by showing that the
circumstances of his or her case takes it out of the ordinary.
 BP Properties v Buckler [1987] EGLR 168, 171: the court will not grant leave unless it is
demonstrably just to do so.
 N.B. the English cases may be distinguishable on the ground that the limitation period for suing on
a judgment debt was reduced to six years under the English Limitation Act 1980, but the
limitation period in Hong Kong remains 12 years.

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 In Hong Kong if leave to execute a judgment more than six years but less than 12 years is to be
refused, the judgment creditor may simply bring a fresh action on the judgment, and so it is
arguable that setting a high hurdle for leave is not appropriate in Hong Kong.

2. Determining the Available Methods of Enforcement

2.1 Judgment for the payment of money, OTHER THAN a judgment for the payment of money into
court

Under Order 45 rule 1(1), these may be enforced by:

a) a writ of fieri facias
b) garnishee proceedings
c) a charging order
d) the appointment of a receiver
e) in the case of Judgment to do any act within a specified time or abstain from doing any act, by an
order for committal and writ of sequestration

2.2 Judgment or order for the payment of money into court

Under Order 45 rule 1(2), these may be enforced by (only D and E of above):
a) the appointment of a receiver
b) in the case of a Judgment to do any act within a specified time or abstain from doing any act, by an
order for committal and a writ of sequestration

2.3 Judgment for possession of land

Under Order 45 rule 3, these may be enforced by:

a) a writ of possession
b) in the case of Judgment to do any act within a specified time or abstain from doing any act, by an
order for committal and a writ of sequestration

2.4 Judgment for the delivery of goods

Under Order 45 rule 4(1), a judgment that does not give the defendant the option of paying the assessed
value of the goods may be enforced by:
a) a writ of specific delivery to recover the goods
b) in the case of 2(e) above, by an order for committal or writ of sequestration

Under Order 45 rule 4(2), a judgment that gives the defendant the option of paying the assessed value of
the goods may be enforced by:
a) a writ of delivery to recover the goods or their assessed value
b) if the court orders upon application by summons, by writ of specific delivery
c) in the case of 2(e) above, by writ of sequestration

2.5 Judgment to do or abstain from doing any act

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Under Order 45 rule 5, this may be enforced by an order for committal or by writ of sequestration, but
only with the leave of the court

3. Provisional Remedies

3.1 Post–judgment Mareva Injunction

 Under s 21L (1) of the High Court Ordinance, the Court of First Instance has the power to grant an
injunction in all cases where it appears to the court just and convenient to do so.
 See s 52(1) DCO for the more limited jurisdiction of the District Court (see also IPL Research Ltd
And Another v Lam Man Wah Vinton HCA 2481/2007, Saunders J, 10 June 2009)

 Mareva injunction may be granted to a judgment creditor after he has obtained a judgment,
 Provided there is a real risk that the judgment debtor may dispose of his assets to avoid execution
(see e.g. Stewart Chartering Ltd v C & O Managements SA [1980] 1 All ER 718).
 As to the law and procedure, see Seminar Six on Interlocutory Applications.

3.2 Prohibition Orders under Order 44A

(a) Jurisdiction

 The court’s jurisdiction to make a prohibition order, prohibiting the debtor from leaving Hong
Kong is derived from s 21B (1) of the HCO and s 52E (1) of the DCO.
 A prohibition order may be made either before or after judgment.
 This seminar is concerned only with post-judgment prohibition orders (see Seminar Six for pre-
judgment prohibition order)

(b) Principles governing the making of prohibition orders

3 categories under S 21B (1) HCO:

(i) a judgment for the payment of an amount to be assessed;
(ii) a judgment requiring the delivery of any property or the performance of any act; and
(iii) a judgment for a specified sum of money

Case (i) and (ii): s 21B (2) of the HCO sets out 2 conditions which must be satisfied in order for a
prohibition order to be granted. They are:
a) that there is probable cause for believing that the debtor is about to leave Hong Kong, AND
b) that for this reason, satisfaction of the judgment or order is likely to be obstructed or delayed

1. NO requirement that the judgment creditor must establish that the debtor is intending to leave Hong
Kong permanently.
2. The creditor need only show that
1. the debtor’s departure is imminent, and
2. By reason of that, any judgment against him is likely to be obstructed or delayed (see
HBZ Finance Ltd v Glory Products HCA 5893/2000, 30 August 2000, Suffiad J).

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Case (iii)
 Mandatory conditions specified by s 21B (2) do not apply.
 However, a prohibition order will only be granted where there is some evidence that enforcement of
the judgment will be impeded in some significant way if no prohibition order were made (see
AVCO Financial Services (Asia) Ltd v Topma Electronics Ltd [1999] 4 HKC 193, CFI).

(c) Procedure

 Application is made ex parte, by affidavit (see Order 44A rule 2).

 As with all ex parte applications, the applicant is under a strict and continuing duty to make full
and frank disclosure.

 Note that this duty is continuous and it extends to relevant information that comes to the notice of
the applicant after the order has been granted but before it has been served.
 Where this happens, the applicant must seek a further appointment before the judge who granted the
order and inform him of the fresh information (see Auto Treasure Ltd v Pyramid International (a
firm) (CACV 24/1992, 22 May 1992)).

 Upon the hearing of the matter, the court may make an order subject to such conditions as it
thinks fit, including a condition that the order shall have no effect if the judgment debtor satisfies the
judgment or provides such security as the court orders (see s 21B(4) (b) HCO).

The order must be in the prescribed form in App A, Form 106.

(d) Service and duration of the order

Under s 21B (6) HCO, a sealed copy of the order must be served on:
a) The Director of Immigration
b) The Commissioner of Police
c) The judgment debtor, if he can be found

Once the Director of Immigration has been served, he will place the name of the debtor on the ‘stop list’.

 A prohibition order lapses on the expiry of one month

 But the court may extend the order so that it operates for a maximum period of three months: s
21B (5) HCO, s 52B(5) DCO.
 After the expiry of the three-month period, the court may issue a fresh prohibition order if
appropriate (see Hong Kong Industrial and Commercial Bank Ltd v Wong Siu Leung Tammy & Ors
[1986] HKC 101 (CA)).

(e) Effect of the order

By s 21B (7) HCO; s 52E (7) DCO, if the judgment debtor (after having been served with the order or
otherwise informed of its effect) attempts to leave Hong Kong, he may be arrested by any
immigration officer, police officer or bailiff.

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As to the procedure following arrest, see s 21 B (8)(a)(i) HCO; s 52E(8) DCO.

An attempt to leave Hong Kong is a breach of a prohibition order and constitutes a contempt of
court, see Sino Wood Investment Ltd v Wong Kam Yin [2006] 1 HKLRD 176; [2006] 1 HKC 1, CFA,
overruling the Court of Appeal at [2004] 2 HKLRD 1053, CA.

(f) Discharge of order

Once the judgment debtor has made payment of the monies due, the usual practice is for the prohibition
order to be discharged by consent. Provision is also made in Order 44A rule 4 for the application for
the discharge of the order.

4 Oral Examination of the Judgment Debtor Under Order 48 and Order 49B

4.1 Introduction

In Hong Kong, there are two overlapping procedures whereby the judgment debtor is obliged to attend
before the court and be examined as to his income and assets.
 Where the debtor is a body corporate, application must be made under Order 48 for the
examination of an officer of the company.
 The overriding purpose of orders for the examination of judgment debtors is “to enable a judgment
creditor to come to an informed decision as to how best to enforce the judgment which he has
obtained” (Bloomsbury International Ltd v Nouvelle Foods (Hong Kong) Ltd [2005] 1 HKC 337 at
334F.)

4.2 Differences between O48 and O49B

The table below is taken from Booth, Enforcing Judgments in Hong Kong (Hong Kong, Singapore,
Malaysia: LexisNexis 2004), pp 33-34.

Order 48 Order 49B

1. Available in respect of judgments for the 1. Available only in respect of judgments for the
payment of a specified sum of money13 and where payment of a specified sum of money18
any difficulty arises in or in connection with the
enforcement of any judgment or order other than
for the payment of money.14

2. Where judgment debtor is a body corporate, 2. Applies only to natural persons19

judgment creditor may apply for examination of
any of its officers15

3. No provision for arrest of judgment debtor 3. Judgment debtor may be arrested prior to
prior to examination examination if there is reasonable cause for
13
RHC and RDC O 48 r 1.
14
RHC and RDC O 48 r 2.
15
RHC and RDC O 48 r 1(1).

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 believing that he will not comply with the order
for examination20

4. No provision for the making of a prohibition 4. Prior to the examination, the court may make a
order, prohibiting the debtor from leaving Hong prohibition order, prohibiting the judgment debtor
Kong prior to the examination from leaving Hong Kong21

5. No provision for arrest of judgment debtor if 5. Judgment debtor may be arrested if he fails to
he fails to attend the examination attend the examination22

6. Scope of examination is limited to what debts 6. Scope of examination is wider as the debtor is
are owing to the judgment debtor and what obliged to make full disclosure of all his assets,
property or other means he has to satisfy the income and expenditure and of the disposal of the
judgment.16 same.23

7. Ambit of discovery is limited to books or 7. Ambit of discovery is wider as the court may
documents in the possession of the debtor and order production of such documents or records as
relevant to the questions specified in Order 48 it may specify.24
rule 1(1).17

8. No provision for examination of the judgment 8. Judgment debtor is examined on oath25

debtor on oath

9. If the hearing is adjourned, no power to order 9. If the hearing is adjourned, the court has the
the imprisonment of the judgment debtor until the power to order the imprisonment of the judgment
hearing is resumed. No power to make a debtor until the date of the resumed hearing.
prohibition order. Alternatively, the court may make a prohibition
order, prohibiting the debtor from leaving Hong
Kong.26

4.3 Procedure

 Under both Order 48 and Order 49B, application for an order for oral examination is made ex parte
by affidavit.
 A sealed copy of the order, indorsed with the appropriate penal notice and appointment time is
served on the judgment debtor.
16
RHC and RDC O 48 r 1(1)(a) and (b)
19
RHC and RDC O 49B r1(1).
18
RHC and RDC O 49B r 1(1).
17
RHC and RDC O 48 r 1(1).
20
RHC and RDC O 49B r 1(1)(b).
21
RHC and RDC O49 B r 1(2).
22
RHC and RDC O 49B r 1(3).
23
RHC and RDC O 49B r 1A(2).
24
RHC and RDC O 49B r 1(1)(a).
25
RHC and RDC O 49B r 1A (1).
26
RHC and RDC O 49B r 1A (3).

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 Penal notice: warn the debtor of the consequences of non-appearance at the examination.
 If he fails to attend the examination, this is contempt, punishable by order of committal. For the form
of penal notice, see Order 45 rule 7(4)

Before the examination is conducted, the court will usually hold an initial hearing (‘call-over’) where it
will give standard directions (subject to modifications to suit a particular case) and fix a date for the
examination itself. The directions include directions to the debtor as to the type of documents he will be
required to produce on the day appointed for examination.

Note that given the court master’s busy schedule, it may take a couple of weeks before a call-over
hearing may be fixed and another couple of months before the substantive examination hearing may be
conducted. It is also a rather costly exercise to prepare for and conduct an effective oral examination,
particularly if the debtor is not cooperative or forth-coming in his response.

4.4 Nature and scope of examination

Examination under both Orders takes place in open court before a Master.

(a) Order 48

Order 48 r 1(1) provides that the debtor may be examined on: （Scope）
a) whether any, and if so, what debts are owing to the debtor, and
b) whether the debtor has any, and if so, what other property or means to satisfy the judgment

The term ‘means’ in Order 48: ‘denotes not only existing property or assets but also resources or
sources whereby assets or property may become available for satisfaction of the judgment debt…
The term ‘means’ does not connote other possible methods by which the judgment debtor may obtain
satisfaction of the judgment debt. It is the means of the debtor which are the subject of examination’
(see McCormack v National Australian Bank (1992) 106, ALR 647 at 649).

See also Bloomsbury International Ltd v Nouvelle Foods (Hong Kong) Ltd [2005] 2 HKLRD 64; [2005]
1 HKC 337. Note also that in this case the court expressed doubts as to the decision reached by Master
Kwan in Hua Chiao Commercial Bank v Alpha Plus International Development Ltd [2001] 2 HKC 54
where she ruled that the term ‘means’ refers to existing assets that are instantly or currently available to
the judgment debtor.

It has been held that an examination under Order 48 is intended not only to be an examination, but to be
a cross examination and that of the severest kind (see Republic of Costa Rica v Stromsberg (1880) 16
Ch D 8, CA, per James LJ). However, the scope of examination is limited, by the wording of Order 48
to the two specific matters mentioned above.

 Under Order 48 r 1(1), the court may order production of any books or documents in the possession
of the debtor relevant to the two specific matters detailed above.

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 The court will not generally order directors of a judgment debtor company to produce books that do
not belong to them or the judgment debtor, but to another legal entity, see Chung Fai Engineering
Co (a firm) v Maxwell Engineering Co Ltd (HCA 10504/1996, 16 March 2001, Sakhrani J).

(b) Order 49B

Order 49B r1A (2) imposes a specific obligation on the debtor to “make a full disclosure of all his assets,
liabilities, income and expenditure and of the disposal of any assets or income and shall, subject to the
directions of the Court, answer all questions put to him”.

N.B. under Order 49B only (NOT for O 48!):

a) the debtor may be arrested to secure his attendance at the examination: Order 49B rule 1(1)(b);
b) prior to the examination, the court may make a prohibition order, prohibiting the debtor from leaving
Hong Kong: Order 49B rule 1(2);
c) the debtor may be arrested if he fails to attend the examination: Order 49 rule 1(3);
d) if the hearing is adjourned, the court has the power to order the imprisonment of the debtor until the
resumed hearing: Order 49B rule 1A(3)(b); and
e) If the hearing is adjourned, the court may make a prohibition order: Order 49B rule 1A(3)(a).

In practice, an oral examination of a judgment debtor (other than of an officer of a corporate debtor,
which can only be made pursuant to Order 48) will be sought under both Order 48 and Order 49B so that
there is no need to draw any distinction between the court’s powers under the two Orders.

4.5 Court’s powers following an examination under either Order 48 or 49B

(a) Imprisonment

Under Order 49B rule 1B(1), the court may order the imprisonment of the debtor for up to a period of 3
months if satisfied that the judgment creditor has established that the debtor:
a) is able to satisfy the judgment in whole or in part;
b) has disposed of assets with a view to avoiding satisfaction of the judgment debt; OR
c) has wilfully failed to make a full disclosure of assets or to answer any questions put during the
examination

 The court must be satisfied beyond reasonable doubt that one of the grounds specified above has
been established since the proceedings are analogous to proceedings for contempt, see Bank of India
v Murjani (CACV 12/1991, 1 May 1991).
 For examples of the exercise of the court’s discretion, see Ferryhill International Ltd v Mahmoud
Aziz [1997] 4 HKC 383, CA and OSK Asia Futures Ltd v Lam Chi Bin (CACV 294/2002, 2 May
2003; leave to appeal to the CFA was dismissed in FAMV 1/2004)
 Note that the court’s power to order imprisonment under this rule does not apply to a director or
other officer of the judgment debtor, where the judgment debtor is a company, see Hua Chiao
Commercial Bank v Alpha Plus International Development Ltd [2001] 2 HKC 54. (NO Corporate
Imprisonment!)

(b) Payment by instalments

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By virtue of Order 49B rule 1B(2), if after completion of the examination, the court is satisfied that the
debtor is able or will be able to satisfy the judgment debt in whole or in part by instalments, it may
order that the judgment debt be paid by instalments, or in such manner as the court thinks fit.

 If the debtor defaults in an order for payment by instalments, the creditor may apply, on two clear
days notice, for an order for the imprisonment of the debtor, see Order 49B rule 1B(3)(a).

5. Writs of Execution

5.1 Introduction

There are four separate writs of execution. They are:

a) the writ of fieri facias (‘fi fa’)
b) the writ of possession (for land)
c) the writ of delivery (of goods)
d) the writ of sequestration

In addition, there are two further writs in aid or supplementary to the main writs. They are:
e) the writ of assistance
f) the writ of restitution

Which writ may be employed will depend solely on the nature of the judgment sought to be enforced.

5.2 Writ of Fieri Facias under Order 47

(a) Introduction

One common means of enforcing a judgment or order for the payment of money (other than a judgment
for the payment of money into court) is by writ of fieri facias.
 The writ requires the bailiff to seize such of the goods, chattels and other property of the debtor as
are reasonably sufficient to satisfy the judgment debt together with interest and the costs of the
execution.

 If the debtor fails to make payment, the goods will be sold, usually by public auction, and the
proceeds of sale handed to the creditor, after deducting the expenses of the execution. Any surplus
remaining will then go to the debtor.

(b) Procedure

The writ must be in one of the forms prescribed by the Rules: see App A, Forms 53-54. 56-57 and 63

The creditor MUST attend court with:

a) a praecipe or request for the issue of the writ
b) 3 copies of the writ, duly completed
c) a sealed copy of the judgment

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d) the requisite filing fee
e) deposit to cover the bailiff’s travelling expenses
f) security guard fees

The writ is issued on being sealed by the Registrar (see Order 46 rule 6(1)). Upon issue, the creditor will
collect the writ and deliver the same to the Chief Bailiff.

(c) Property liable to be attached and sold

Under s 21D(1) HCO, the following property is liable to be attached and sold: ‘land, goods, money,
bank notes, cheques, bills of exchange, promissory notes, Government stock, bonds or other securities
for money, debts, shares in the capital or joint stock of any company or corporation, (other than a
private limited company within the meaning of section 29 of the Companies Ordinance (Cap 32)) and
all other property whatsoever, whether movable or immovable, belonging to the judgment debtor and
whether the same is held in his own name or by another person in trust for him or on his own behalf’.

Detailed provisions for the seizure and sale of land are laid down in Order 47 rule 7. However, this is
rarely, if ever, invoked. By far the most common method of execution against land is by charging order
under Order 50.

*As to items EXEMPTED from attachment and sale, see proviso to s 21D (1) HCO (For District
Court, see s 68B DCO): “the tools (if any) of the trade of the judgment debtor and the necessary
wearing apparel and bedding of him and his family dependent on and residing with him, to a value,
inclusive of tools and apparel and bedding, not exceeding $10,000 in the whole.”

(d) Third party interests and relief by way of interpleader under Order 17

What is the position where the goods seized are owned by a third party or a third party makes a claim
to the proceeds of sale?

 Under Order 17 rule 1, where a claim is made to the goods seized or to the proceeds of sale, the
bailiff may apply to the court for relief by interpleader, so that the court can determine who has
title to the property, or who is entitled to the proceeds of sale. Interpleader proceedings are governed
by Order 17.

(e) Stay of execution by writ of fieri facias under Order 47 rule 1(1).

Where a judgment is given or an order made for the payment by any person of money, and the Court is
satisfied, on an application made at the time of the judgment or order, or at any time thereafter, by the
judgment debtor or other party liable to execution that the applicant is unable from any cause to pay
the money, then, notwithstanding anything in Order 47 rule 3, the Court may by order stay the
execution of the judgment or order by writ of fieri facias either absolutely or for such period and
subject to such conditions as the Court thinks fit. An order staying execution under this rule may be
varied or revoked by a subsequent order.

5.3 Writ of possession under Order 45 rule 3

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A judgment or order for the possession of land may be enforced by a writ of possession, see Order 45
rule 3(1) (a). See App A, Form 66 and 66A.

(a) Procedure

Leave of the court is required

EXCEPT:
a) where the judgment or order is a mortgagee action to which Order 88 applies, and
b) where the order for possession is obtained against trespassers under Order 113

The application for leave to issue the writ is made ex parte by affidavit, see Order 47 rule 3(3). The
procedure is now prescribed by Practice Direction (see Practice Direction 16.4).

The affidavit in support MUST show that:

a) notice of the proceedings in both Chinese and English addressed to all persons in actual occupation
of the land of the land has been posted for 3 successive days upon the main door of the premises, and
b) that a minimum of 4 clear days has elapsed from the third day the notice was posted

N.B. If the judgment also involves the payment of money and valuable properties belonging to the
judgment debtor may be found inside the premises, one may apply for a writ of possession and fieri
facias combined.

(b) Delivery of possession

Execution of the writ is carried out by the bailiff who is under a duty to deliver complete and vacant
possession of the premises to the judgment creditor. For premises with occupants, the bailiff will adopt a
3-step procedure in order to executive the writ (First visit to post up a Notice to Quit to the occupants;
second visit for a situation review; and third visit to break open the door with the locksmith). For
vacated or abandoned premises, provided that the judgment creditor has filed a proforma undertaking of
indemnity to the bailiff, the bailiff will execute the writ on his first visit (see Law Soc Circular 06-599
(PA)).

5.4 Writ of delivery of goods under Order 45 rule 4

A judgment for the delivery of goods may take one of two forms as follows:
(a) a judgment for the delivery of goods which gives the debtor the option of paying the assessed value
of the goods; or
(b) a judgment for the delivery of goods which does not give the debtor the option of paying the
assessed value of the goods.
Accordingly, the precise remedy available will depend on the form in which the judgment is made.

In the case of (a), the judgment may be enforced by:

(i) a writ of delivery to recover the goods or their assessed value; or
(ii) by a writ of specific delivery, if the court so orders.

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In the case of (b), the judgment may only be enforced by a writ of specific delivery.

5.5 Writ of sequestration and Committal Proceedings under Order 45 rule 5, Order 46 rule 5 and
Order 52

(a) Nature and scope of order

 The writ of sequestration is a process of punishing contempt by proceeding against the property of
the person in contempt (‘the contemnor’).
 Another way of punishing contempt is by way of committal proceedings against the person of the
contemnor.

Under Order 45 rule 5(1), two categories of judgment may be enforced by writ of sequestration and/or
committal proceedings. They are:
a) those that direct the judgment debtor to do an act within a specified time, whether such time is
expressly specified by the original judgment, or by a subsequent order (a mandatory order); and
b) those that command the debtor to abstain from doing an act (a prohibitory order)

 In civil contempt, liability is strict in the sense that an intention to interfere with or impede the
administration of justice is not required.
 Not necessary to prove that the alleged contemnor appreciated that his conduct would constitute a
breach of the order, as liability for civil contempt does not depend on a contumacious intent.
 The fact that the act or omission is bona fide and based on legal advice is NOT a defence. The
above factors may however be relevant as mitigating factors.
 All that has to be shown is that:
a) the alleged contemnor knew the facts which gave rise to the contempt and
b) the disobedience is “more than casual or accidental and unintentional.”
 Kao, Lee & Yip (a firm) and Donald Koo Hoi-yan & Others (2009): “But when an act or omission
in breach of a court order is done or made consciously, voluntarily and unaffected by any
mistake – that is, not casually, or accidentally or unintentionally – it is immaterial that the breach
was committed in reliance on a third party’s advice, even legal advice.”
(b) Contemnor being a corporation

 Where the judgment or order is against a body corporate, both the body corporate and its officer may
be held to be in contempt.
 A director of a company can be liable for contempt committed by the company in two ways, either
(1) under Order 45 rule 5(1) or (2) as a person aiding and abetting the contempt (see Nicolas
Pappadis v. Chan Shing Sheung Barry [1989] 2 HKLR 511, per Hunter JA at pp.518-519; Excel
Noble Development Ltd v. Wah Nam Group Ltd [2001] 4 HKC 148, per Rogers VP at pp.155-156).

 Under the second criteria (as a person aiding and abetting the contempt), personal misconduct on
the part of the director must be proved.
 Under the first, there is no need for any moral blame.
 AG for Tuvalu v. Philatelic Distribution Corp [1990]:

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 Director is under a duty to take reasonable steps to ensure that the order or undertaking is obeyed,
and if he wilfully fails to take those steps and the order or undertaking is breached he can be
punished for contempt.

Basically, the director’s obligation is to use his position to secure compliance with the order. His
liability is however not absolute. In general, the director:

“has a personal duty (a) to find out exactly what have to be done by the company to comply
with the order; (b) to see that such things are done properly and in accordance with the time set
out in the order, whether by delegating the task to other employees of the company or by
themselves personally; and (c) in the case of delegation, to ensure that the employees understand
the requirements of the order and do the things properly within the time set out in the order; and
to supervise the staff to ensure that they did carry out their instructions properly and timely.”
Per Deputy Judge Poon (as he then was) at para 34 in Fonfair Co Ltd v UDL Management Ltd
(HCA 2002/2001, 24 November 2006)

If Contemnor is a body corporate, the contempt may be punished by:

a) sequestration against the property of the company;
b) sequestration against the property of a director or other officer of the company;
c) committal against the company (but no imprisonment can be imposed);
d) committal against a director or other officer of the company.

 As the liability of a director for his company’s breach is dependent upon his carrying out his own
responsibilities as a director of the company, the law requires certain procedures to be followed:
a) the director must be fully aware of the terms of the order with which the company must comply;
b) the director must have that knowledge at a time when he can use his position as director to secure
compliance; and
c) the director should be aware that, if he does not so use his position, steps may be taken against
him personally to enforce compliance.

See the Excel Nobel case, per Rogers VP at p.157E to H, as summarised by Deputy Judge Poon (as he
then was) in the Fonfair case.

(c) Formalities

Before a mandatory or prohibitory order can be enforced by writ of sequestration or committal, the
procedural requirements laid down in Order 45 rule 7 must first be complied with.

1) The original judgment or order must have been endorsed with a penal notice, setting out the
consequences of a failure to obey the order. For the form of penal notice, see Order 45 rule 7(4)

2) The order must have been served personally on the judgment debtor.

 Order 45 rule 7(6): prohibitory orders may still be enforced in the absence of personal service if
the court is satisfied that, pending such service, the debtor had notice of the order either:
a) by being present when the order was made; or

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 b) by being notified of the terms of the order, whether by telephone, telegram or otherwise

 Citybase Property Management Ltd v Kam Kyun Tak (No 1) [2003]: in order for the court to
exercise its discretion under Order 45 rule 7(6), not only was it essential for the contemnor to have
been notified of the terms of the order but also of the consequences of his failure to comply with
the order.

 Order 45 rule 7(7): the court is given express power to dispense with personal service of the order,
if it thinks it just to do so.
 While there is no express provision to dispense with the penal notice, the Court of Appeal has
held that the court does enjoy such a power.
 Power to dispense with personal service and/or penal notice is exercisable to both mandatory and
prohibitory orders, see Excel Noble Development Ltd v Wah Nam Group Ltd [2001] 4 HKC 148,
CA.

Kao, Lee & Yip (a firm) v Donald Koo Hoi-yan & Others (2009): Although the procedures governing
committal for contempt are strictly enforced when needed to safeguard the liberty of an alleged
contemnor, the discretionary power to dispense with a procedural requirement is available in
appropriate case.

Nicholls v. Nicholls [1997]: In determining reflecting requirements of justice, the court must not only
take into account the interests of the contemnor but also the interests of the other parties and the
interests of upholding the reputation of civil justice in general. The court itself has a very substantial
interest in seeing that its orders are upheld.
While the procedural requirements in relation to applications to commit and committal orders are there
to be obeyed and to protect the contemnor, if there is non-compliance with the requirements which does
not prejudice the contemnor, to set aside the order purely on the grounds of technicality is contrary to
the interests of justice.

(d) Procedure

In the case of a writ of sequestration:

a) One must apply to a judge by motion for leave: Order 45 rule 5(1)(b) and Order 46 rule 5(1).
b) The notice of motion must state the grounds of the application and be accompanied by a copy of the
supporting affidavit: Order 46 rule 5(2).
c) The notice of motion and affidavit in support must be served personally on the debtor, but the court
may dispense with such a service: Order 46 rule 5(2) and (3).
d) The application is normally heard in open court: Order 46 rule 5(4).

In the case of an order for committal:

a) An application for leave must be made ex parte to a judge, and must be supported by a statement
setting out the contemnor’s particulars and the grounds, with facts verified by an affidavit: Order 52
rule 2(2).
b) The application for leave is usually determined on papers without any hearing: Order 52 rule 2(4).
c) After leave is granted, the application for an order of committal shall be made by motion to a judge.
The notice of motion, accompanied by the earlier statement and affidavit in support for the leave

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 application, must be served personally on the debtor, but the court may dispense with such a service:
Order 52 rule 3.
d) The application is normally heard in open court: Order 52 rule 6.

(e) Form and effect of the writ of sequestration

A writ of sequestration is distinctive from the other writs of execution in that it is not addressed to the
bailiff but, instead, to at least four commissioners (called sequestrators) who are nominated by the
judgment creditor. The writ is in the form of App A, Form 67.

 On receipt of the writ, the sequestrators’ duty is to enter upon the contemnor’s property and to take
possession of all his real and personal property and to detain the same until the contemnor has
purged his contempt.
 Property sequestered cannot be sold without leave of the court.

5.6 Writs in aid of execution

There are two writs in aid of execution to the main writs, namely, the writ of assistance and the writ of
delivery. Although both of these writs themselves are writs of execution, they are supplementary
rather than primary writs, their function being to assist in the obtaining of the satisfaction of a
judgment where satisfaction cannot be obtained by the ordinary writs of execution.

 These writs are almost obsolete now and are governed by the common law, subject to various
statutory modifications.
 Leave is always required for the issue of either of the writs.

6 Garnishee Proceedings Under S 21 HCO and Order 49

6.1 Introduction

 Garnishee proceedings are a process by which a judgment for the payment of money (other than a
judgment for the payment of money into court) may be enforced by the attachment of debts due or
accruing due to the judgment debtor.
 By this process, the court may order a third person (the ‘garnishee’) to pay directly to the judgment
creditor (the ‘garnishor’) the debt that the garnishee owes to the judgment debtor.

6.2 Conditions for Instituting Garnishee Proceedings

Under Order 49 rule 1, garnishee proceedings are available if the following three conditions are
satisfied:
a) the garnishor has obtained a judgment for the payment of money amounting to at least $1,000
against the judgment debtor;
b) there is a debt due or accruing due from the garnishee to the judgment debtor, AND
c) the garnishee is within the jurisdiction

(a) Bank accounts

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 The judgment debtor’s account with a bank is the most common target for garnishee proceedings.
 However, the garnishee order is subject to the bank’s right of set off against any liability owed by
judgment debtor to the bank (e.g. under an overdraft facility).
 Garnishee order will only attach the credit balance in the debtor’s account at the time of service of
the order nisi.
 If monies are paid in after this date, a further order is required to attach such monies, see
Heppenstall v Jackson [1939] 2 All ER 10.

Deposit accounts: (s 21(1) of the HCO) judgment creditor may attach such funds by way of garnishee
proceedings: see e.g. Panyu Chemicals Import & Export Corporation v Sun Wai Man

 Joint Account: An account held jointly by the judgment debtor with another person CANNOT be
attached by garnishee proceedings: Hirschorn v Evans [1938].

(b) Foreign Debts

 The court should not generally make a garnishee order in relation to a foreign debt (i.e. debt
agreed to be payable in a foreign jurisdiction even though the garnishee debtor may be within the
jurisdiction), see [2003] 3 All ER 465, HL; Kuwait Oil Tanker Company SAK v UBS AG [2003] 3
All ER 501, HL.

 In theory, the court may have the jurisdiction to make such an order if it can be shown that by the
law applicable in that foreign country, the garnishee order would be recognised as discharging
pro tanto the liability of the third party garnishee to the judgment debtor, but it is doubtful
whether this can be shown in practice (Societe Eram Shipping Co Ltd v Compagnie Internationale
de Navigation)

(c) Debts expressly EXEMPTED from attachment

Even where there is a debt due or accruing due, the judgment creditor may still be unable to take
garnishee proceedings if the debt is one that is expressly exempted from attachment by virtue of
specific legislative provisions to that effect.

 See s 66 of the Employment Ordinance [Cap 57], which prohibits the attachment of any wages
due to employees.
 See also s 12 of the Pensions Ordinance [Cap 89], which provides that a pension, gratuity or other
allowance is not liable to attachment unless the debt is one that is owed to the Government

6.3 Procedure

The procedure for obtaining a garnishee order absolute is similar to that of obtaining a charging order
and consists of two stages, i.e.
1) application for an order nisi or interim order, followed by
2) an inter partes hearing where the court determines whether or not to make the order absolute.

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(a) Application for order nisi

Under Order 49 rule 2, application for a garnishee order nisi is made ex parte by affidavit. The
affidavit must:
a) state the name and last known address of the judgment debtor;
b) identify the judgment to be enforced and the amount unpaid at the time of the application;
c) state that to the best of the deponent’s information and belief, the garnishee is within the jurisdiction
and is indebted to the judgment debtor, giving the sources of information and belief; and
d) (where the garnishee is a bank having more than one place of business) state the name and address of
the branch at which the debtor’s account is believed to be held, or that this information is unknown.
The affidavit together with the draft order are filed in the Registry and placed before a Master. If the
Master is satisfied, he will grant a garnishee order nisi, specifying a time and place for further
consideration of the matter and, in the meantime, attaching the debt specified in the order.

(b) Service of order nisi

Under Order 49 rule 3(1), the order nisi must be served on the
 garnishee personally at least 15 days before the date appointed for further consideration of the
matter, and,
 On the debtor at least 7 days after the order has been served on the garnishee and at least 7 days
before the inter partes hearing.

Upon service of the order nisi, the order charges or freezes the debt, preventing the garnishee from
making payment of the debt to the judgment debtor or to any other person, see Gailbraith v
Gailbraith [1910] AC 508, HL, Karaha Bodas Co LLC v Perusahaan Pertambangan Minyak Dan
Gas Bumi Negara (Pertamina) (No 4) [2005] 1 HKC 182.

(c) Order absolute

Upon further consideration of the matter, if the garnishee disputes liability, the court may summarily
determine whether the order should be made absolute, or, in the case of a substantial dispute, the
court may give directions that the matter at issue between the parties be tried, see Order 49 rule 5.

6.4 Discretionary power to make order absolute

Since garnishee proceedings are essentially an equitable remedy, the court may decline to make the
order absolute where the order would result in injustice or prejudice to some person other than the
judgment debtor.

Rooke v HV Construction Services Ltd [1998]: the key issue to be addressed by the court in exercising
its discretion is whether there is any reasonable ground why the order absolute should not be
made.
 In the absence of such a reasonable ground, the order must be made absolute.
 The burden is on the judgment debtor to show why the orders nisi should not be made absolute.

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 The court will decline to make the order absolute where the judgment debtor is insolvent or
likely to become insolvent since the effect of the order absolute may be to give a preference to the
judgment creditor over the debtor’s other unsecured creditors: Roberts Petroleum v Bernard
Kenny Ltd [1983] 2 AC 192, HL; Chellic Indstries v Datacom Wire and Cable Co Ltd [2000] 1 HKC
646.

6.5 Effect of the garnishee order

A garnishee order is a proprietary remedy which operates by way of attachment against the property of
the judgment debtor.
 The making and service of the garnishee nisi give rise to an equitable charge over the third party
debt in favour of the judgment creditor: see e.g. Karaha Bodas Co LLC v Perusahaan
Pertambangan Minyak Dan Gas Bumi Negara (Pertamina) (No 4) [2005] 1 HKC 182.

 Once made absolute, the garnishee becomes liable to pay to the judgment creditor the amount
due from him to the judgment debtor, or as much as may be sufficient to pay the judgment debt
and the costs of the garnishee proceedings, see Order 49 rule 1(1).
 If the garnishee fails to comply with the order, payment may be enforced in the same manner as any
other order for the payment of money, see Order 49 rule 4(2).

7. Charging Orders Under S 20(1) HCO and Order 50 (Equitable)

7.1 Introduction

Under s 20(1) of the HCO, the court has the power to impose, for the purpose of enforcing a judgment
for a sum of money, a charge upon certain specified property of the judgment debtor for securing
the payment of any money due under such judgment.

For District Court, see corresponding provisions in s 52A DCO.

7.2 What may be charged

The property which may be charged is specified in s 20A (2) (a)-(c) of the HCO and includes:
a) land
b) securities
c) funds in court

 A charge may be imposed on any interest in the property, even if the debtor holds the property
jointly with another.
 A charge may only be imposed, however, where the property to be charged is beneficially owned by
the judgment debtor. See Ho King Yim v. Lau King Mo [1980] HKLR 42 (CA) as to the Vendor’s
interest after the signing of the sale and purchase agreement but before assignment.

Problem may arise in case of matrimonial home registered in the joint names of the debtor and his/her
spouse, and the court may need to deduce the couples’ intention from the available evidence before

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 the court: See e.g. the decision in Ko Sha Lam v Kei Fong (HCA 3971/2000, 20 June 2007, Deputy
Judge To)

 Where the property in question is already subject to a prior equitable charge so that the judgment
debtor only holds the equity of redemption, this is an interest capable of being charged, see
Bank of China (Hong Kong) Ltd v Kanishi (Far East) Ltd [2002] 2 HKLRD 52, Ma J.

7.3 Procedure

(a) Application for order nisi

Like garnishee orders, charging orders follow a two-stage process.

1) application for an order nisi or interim order, followed by
2) an inter partes hearing where the court determines whether or not to make the order absolute.

 Application for a charging order nisi is made ex parte by affidavit.

 Under Order 50 rule 1(3)(a)-(d), the affidavit in support must:
a) identify the judgment or order sought to be enforced
b) state the name of the judgment debtor and of any other creditor of his whom the applicant can
identify
c) give full particulars of the interest on which it is sought to impose a charge; and
d) verify that such interest is owned beneficially by the debtor

If the Master is satisfied that a sufficient cause for the order is made on the affidavit, he will grant a
charging order nisi, specifying a time and date for the inter partes hearing and, imposing a charge
on the property specified in the order until that date. See App A, Form 75.

(b) Service of order nisi

Detailed provisions specifying when and upon whom the order nisi must be served are contained in
Order 50 rule 2.
 Copies of the order and the affidavit in support must be served on the judgment debtor at least 7
days before the date of the inter partes hearing, see Order 50 rule 2(1) (a) and 2(3).

 Note the requirements as to service where the order relates to securities (other than securities in
court) and to funds in court, see Order 50 rule 2(1) (b) and (c).

 For example, if a charging order nisi is obtained over the judgment debtor’s shareholding in a
limited company incorporated in Hong Kong, the order nisi shall also be served on that limited
company, in which case until such order is discharged or made absolute, the company shall not
permit any transfer of those shares specified in the order or pay any dividend except with the
authority of the court (see O 50 r 5(2))

7.4 Discretionary power to make order absolute

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As with a garnishee order, the court’s power to make a charging order absolute is discretionary.
 In exercising its discretion, the court is required by s 20(3) of the HCO to consider all the
circumstances of the case, and in particular the following:
a) the personal circumstances of the debtor, and
b) whether any other creditor of the debtor would be likely to be unduly prejudiced by the making
of the order

 Burden is on the judgment debtor to show why the order nisi should not be made absolute (As with a
garnishee order).
 The court will decline to make the order absolute where there the debtor is or is likely to become
insolvent and the order absolute would have the effect of giving the judgment creditor priority
over the debtor’s other unsecured creditors, see Roberts Petroleum v Bernard Kenny Ltd [1983] 2
AC 192, HL and see also Wardley Ltd v Aik San Realty Ltd [1985] 2 HKC 695. (similar to
garnishee order)

Over-Security
 The court may refuse to make the order absolute if there is over-security.
 But as the burden is on the judgment debtor to show cause, the debtor must produce sufficient
evidence to show this, see Chan Miu Cheung v Prague Enterprises Ltd (HCA 2200/1985, 25 March
1999, Yuen J).
 It has been suggested that “it is not a proper exercise of discretion to make a charging order on an
asset of considerable or substantial value in respect of a relatively small debt payable by the debtor
(Robinson v Bailey [1942] 1 Ch 268, 271).” (per Yuen J at para 39 of the Prague Enterprises case).
 However, the facts of the Robinson case were rather extreme (where a charging order over property
worth over £3,000 for £50 yearly future payment was refused). It is submitted that one should not
elevate such a suggestion into a hard and fast rule, given the need for the court to take into account
all the circumstances the case under 20(3) of the HCO.

 the fact that the judgment debtor only holds a negative equity in the asset to be charged is not
normally a factor to be taken into consideration at this stage of the proceedings, see Ip Hon Nam
v Chan Moon Kau [2002] 2 HKC 220.

7.5 The charging order absolute

Once made absolute, the charging order must be in the prescribed form: see App A, Form 76.
 The charging order absolute will secure not only the judgment debt but also interest payable on
the judgment debt, see Ezekiel v Orakpo [1977].

Service
 If the court makes the charging order absolute, Order 50 rule 5(3) provides that a copy of the order
including a stop notice in a specified form must be served on the person or body specified in Order
50 rule 2(1)(b) as may be appropriate i.e. on the company, Registrar or Unit Trust Registrar.

(a) Effect of charging order on land

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Section 20B(2) of the HCO provides that the Land Registration Ordinance [Cap 128] applies in relation
to charging orders as it applies in relation to other orders or writs issued or made for the purpose of
enforcing judgments.

 If the charging order relates to land, it should be registered at the Lands Registry.
 A charging order takes effect, for the purposes of priority, from the day after the date of its
registration.
 Thus, for example, where A obtains a charging order on 5 May but registers it on 3 June and B
obtains a charging order on 19 May but registers it on 26 May, B’s charging order will take priority
over A’s charging order since it was registered first.

(b) Effect of charging order in relation to securities out of court

 Section 20B(3) of the HCO provides that a charge imposed by a charging order shall have the like
effect and shall be enforceable in the same manner as an equitable charge created by the debtor
by writing under his hand.
 This means the creditor may enforce the order by applying to the court for an order for the sale of the
charged property or by appointing a receiver.

 the court has the power to make an order for the sale of shares in a private limited company
although they do not appear in the list of items liable to attachment and sale set out in s 21D(1) of
the HCO, see Timmar Co Ltd v Erwin Hardy Corpn Ltd [2001] 3 HKC 55.

7.6 Enforcement by Sale

In order to obtain an order for the sale of the charged property, the judgment creditor must commence
separate proceedings. These proceedings are commenced by originating summons, supported by an
affidavit. O 88 governs the proceedings.

8. Appointment of Receiver By Way of Equitable Execution under S 21l (1) HCO and Order
51

8.1 Introduction

The appointment of a receiver in equitable execution had its origins in the Court of Chancery. It was
used to assist a judgment creditor in enforcing a money judgment where the debtor had interests in
property that could not be reached by the common law writs of execution.

8.2 Jurisdiction

Under s 21L (1) of the HCO, a receiver may be appointed in any case where it appears just or convenient
to do so. For District Court, see s 52B (5) DCO.

It has been suggested that the jurisdiction to appoint a receiver is a flexible and developing jurisdiction,
to be considered in the same light as developments relating to Mareva injunctions, since it derives

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 from the same section of the legislation as the power to grant injunctions, see Soinco SACI v
Novokuznetsk Aluminium Plant [1997] 3 All ER 523.

Thus, a receiver may be appointed in respect of a debt which will become due to the judgment
debtor in future, see Soinco SACI v Novokuznetsk Aluminium Plant [1997] 3 All ER 523; Karaha
Bodas Company LLC v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina)
(No 3) [2004] 3 HKC 608.

8.3 Procedure

The procedure for the appointment of a receiver is governed by Order 30.

 The application is made, without leave, by summons to a Master or, upon motion, see Order 30 rule
1(1).

8.4 Role of Receiver

The main role of the receiver is to apply the income or monies received in or towards satisfaction of the
judgment debt.

A receiver will be entitled to such proper remuneration as may be authorised by the court, which may be
fixed by reference to a scale fee or appropriate rate of professional charges, see Order 30 rule 3.

A receiver must submit accounts to such parties at such intervals as the court may direct, see Order 30
rule 5(1).

Note however that this procedure is a very costly exercise and so should not be taken lightly.

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SEMINAR 10: APPEALS

1. Introduction

 The right to appeal is created by statutes

 No common law right or inherent jurisdiction to entertain an appeal

2. Appeals from Master to Judge in Chamber

Appeal from the decision of a Master on interlocutory matters:

 generally goes to the Judge in chambers of the same court (DC or CFI) as of right
 with an appeal period of 14 days from the decision (O 58 r 1)
 The appeal takes the form of a hearing de novo, i.e. by way of an actual rehearing of the
application as if it came before him for the first time.

Evans v Bartlam:
 Where there is a discretionary jurisdiction given to the court or a judge, the judge in chambers is
in no way fettered by the previous exercise of the master’s discretion.
 His own discretion is intended by the rules to determine the parties’ rights: and
 He is entitled to exercise it as though the matter came before him for the first time.
 He will, of course, give the weight it deserves to the previous decision of the master: but he is in
no way bound by it.”

3. Appeals to the Court of Appeal

An appeal from the decision of a Judge (whether of the DC or CFI, whether on interlocutory or final
matters) generally goes to the Court of Appeal.

3.1 Right to Appeal

 An appeal lied as of right to the Court of Appeal from every judgment or order of the Court of
First Instance in any final civil cause or matter: s 14(1) HCO.
 Main exception: leave is required for an appeal purely against a costs order (s 14(e) HCO).

 For decisions made after 2 April 2009, leave will be required for appeal against the Court of First
Instance’s decisions on interlocutory matters.
 EXEMPTED: cases where the interlocutory decision is decisive of a party’s substantive rights
(e.g. summary judgment, order striking out an action, an order refusing to set aside a default
judgment)
 And also specifically exempted cases (e.g. orders for imprisonment or contempt, refusals of
habeas corpus): revised O 59 r 21
 Appeals judgment/order from DC to CA: leave is generally required (whether final or
interlocutory): s 63 DCO, note also the exceptions under s 63(3).

3.2 Application for Leave to Appeal

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In case leave is required, it will be granted if the court is satisfied that
s14AA of HCO
(a) the appeal has a reasonable prospect of success; OR
(b) there is some other reason in the interests of justice why the appeal should be heard

 reasonable prospect of success: something more than a prospect of success which is “not
fanciful”, but without having to be “probable”

SMSE v. KL [2009] 4 HKLRD 125, 129 at para.17:

 leave to appeal is not to be lightly granted
 Reasonable prospect of success: prospects of succeeding must be ‘reasonable’ and therefore more
than ‘fanciful’, without having to be ‘probable’ 

Ho Yuen Ki Winnie v. Ho Hung Sun Stanley

 merely showing that the appeal is ‘arguable’ and ‘not fanciful’ would not be sufficient
 reasonable prospects requires something more and, in that regard, some assistance may be derived
from the test applied when setting aside a default judgment (seminar 3)

 Leave should as far as practicable first be sought from the Judge whose decision is being appealed.
 The time period for seeking leave is
 14 days for decisions on interlocutory matters (not involving a determination of a party’s
substantive rights) and
 28 days for final decisions or interlocutory decisions determining a party’s substantive rights.
 If leave is refused by the Judge, the party may further seek leave from the Court of Appeal within
14 days of the refusal (see revised O 59 rr 2A-C, 4 and 21 RHC and revised O 58 rr 2 and 4 RDC).

3.3 Nature of the Appeal

 The hearing of an appeal to the Court of Appeal is “by way of rehearing”.

 It is only a rehearing on the documents.
 As described in Powell v Streatham Manor Nursing Home [1935] AC 243 at 249, [1935] All ER 58,
at 60, HL:
“It is perfectly true that an appeal is by way of rehearing, but it must not be forgotten that the Court
of Appeal does not rehear the witnesses. It only reads the evidence and rehears the counsel.
Neither is it a reseeing Court.”
 Rehearing however means that the Court of Appeal re-determines the issues raised as at the date of
the rehearing.
 It has power to consider facts and “changes in law” which have occurred since the decision of
the court below.
 Court of Appeal may grant leave to admit fresh evidence not put before the court below or allow
new points to be taken on appeal.

3.4 Approaches of the Court of Appeal

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(a) Appeal against the exercise of a discretion
 In many circumstances a judge has a discretion as to whether, and in what manner, to exercise his
powers.
 The Court of Appeal must defer to the judge’s exercise of his discretion and must not interfere with a
judge’s discretion merely because it might have taken a different view.
 It will interfere normally only if the
1. judge’s exercise of discretion is based upon a misunderstanding of the law or of the
evidence before the court OR
2. if the judge’s decision is plainly wrong ( see e.g. Hadmor Productions Ltd v Hamilton
[1983] 1 AC 191, [1982] 1 All ER 1042, [1982] 2 WLR 322 (HL), applied in e.g. PCCW-
HKT International Ltd v New World Telephone Ltd [2001] 2 HKC 416, CA)
(b) Appeal against a finding of fact
 Since the appeal is by way of rehearing, the Court of Appeal has jurisdiction to reconsider the
facts and to come to an opposite conclusion from that arrived at in the court below.
 The rehearing is a rehearing on the papers and the Court of Appeal does not rehear witnesses.
The appellate court therefore suffers from an obvious disadvantage of not seeing the trial
witnesses and observing their demeanour.
 Hence, if the decision depends upon a conflict of oral evidence and the evaluation of the
evidence and demeanour of witnesses, the Court of Appeal should generally defer to the opinion
of the trial judge, unless it can be clearly shown that he has fallen into error.

Ting Kwok Keung v Tam Dick Yuen

Principles explained by CFA’s
 In discussing these guiding principles (when the Court of Appeal may properly disturb findings of
fact made by a trial judge and when it ought not to do so)

 The question for the Court of Appeal is whether, even though it does not enjoy the advantages
enjoyed by the trial judge who received the evidence at first-hand, it is nevertheless satisfied that his
conclusion on the facts is plainly wrong.

 The Court of Appeal should intervene if so satisfied.

 But if not so satisfied, the Court of Appeal should defer to the trial judge’s conclusion even if in
some doubt as to its correctness.
(c) Appeal on a point of law
 As can be seen above, the Court of Appeal is generally reluctant to interfere with the exercise of
discretion or the finding of facts by the court below.
 Most successful appeals to the Court of Appeal are therefore based on a point of law.
(d) Taking fresh points on appeal
There is also a general rule that a party cannot take on appeal a point which he did not take in the court
below. As explained by Lord Herschell in The Tasmania (1890) 15 App Cas 223, 225 (followed by the
Court of Final Appeal in Bank of East Asia Ltd v Tsien Wui Marble Factory Ltd (1999) 2 HKCFAR
349, [2000] 1 HKLRD 268, [2000] 1 HKC 1):
 A point not taken at the trial, and presented for the first time in the Court of Appeal, ought to be
most jealously scrutinised.

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  The Court of Appeal ought only to decide in favour of an appellant on a ground there put
forward for the first time, if it be satisfied beyond doubt,
 first, that it has before it all the facts bearing upon the new contention, as completely as would
have been the case if the controversy had arisen at the trial;
 and next, that no satisfactory explanation could have been offered by those whose conduct is
impugned if an opportunity for explanation had been afforded them when in the witness-box.

4 Appeals to the Court of Final Appeal

4.1 Introduction
 An appeal from the Court of Appeal’s decision goes to the Court of Final Appeal.
 No appeal will be admitted unless leave has been granted either by the Court of Appeal or the Court
of Final Appeal (s 23(1) HKCFA Ord).
 The time period for application for leave is 28 days from the judgment below (s 24).

4.2 Appeal as of right

Leave will be granted as of right for an appeal from any final judgment of the Court of Appeal, “where
the matter in dispute on the appeal amounts to or is of the value of $1,000,000 or more, OR where the
appeal involves, directly or indirectly, some claim or question to or respecting property or some civil
right amounting to or of the value of $1,000,000 or more...” (s 22(1)(a) HKCFA Ord.)
It should be noted that the requirement under the first limb (i.e. “where the matter in dispute on the
appeal amounts to or is of the value of $1,000,000 or more”) has been strictly construed to exclude a
claim or an award of unliquidated damages. Even where the unliquidated damages have already been
assessed to have exceeded $1m, that requirement is still not satisfied (see Shum Kam Fai v Lam Chi Wai
FAMV No 38 of 2002, 16 December 2002).

As regards the second limb (i.e. “where the appeal involves, directly or indirectly, some claim or
question to or respecting property or some civil right amounting to or of the value of $1,000,000 or
more...”), the Appeal Committee of the CFA also recently decided that
 WLK v TMC (No. 2): for a claim to fall within the second limb, it must not be a money claim
(whether liquidated or unliquidated), but must be a claim to some particular property or to a
proprietary right of the requisite value.
 It is insufficient if the claim is of some other kind, say one for unliquidated damages, even if it is
incidental to the enjoyment of property rights which are not themselves the subject-matter of the
claim.

China Field Ltd v Appeal Tribunal (Buildings) (No. 1)

 it is only proper to ascribe a value which qualifies for leave as of right to the candidate claim or
question if (i) on the evidence, such value is clearly quantifiable as a value of $1 million or
more; and (ii) the court is satisfied that the Court’s order made upon disposing of the proposed
appeal would take effect by immediately conferring or imposing on the relevant parties a
financial benefit or detriment in the quantified amount.
 It is not enough that one is able plausibly to say that such a financial impact is a likely eventual
result of the appeal.

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  Focus on the value of the claim which is the subject matter of the appeal, but NOT on any
property or right which has some connection with that claim.
 For example, landlord and tenant dispute, focus on the value of the tenancy in dispute; NOT the
capital value of the land
 Held: appeal against a refusal to approve building plans for a redevelopment of land => value of
land irrelevant because even if appeal successful, no immediate financial benefits accrue to the
developer (N.B. leave to appeal granted by discretion on law point of great general or public
importance)

4.3 Appeal by discretion

In respect of a final judgment of less than $1m in value or in respect of an interlocutory judgment, an
appeal lies at the discretion of the Court of Appeal or the Court of Final Appeal if, in its opinion,
the question involved in the appeal is one which, “by reason of its great general or public importance,
or otherwise,” ought to be submitted to the Court of Final Appeal for decision (s 22(1)(b) HKCFA Ord).

The “or otherwise” limb is rarely invoked for granting leave, except in the situation of an unliquidated
claim where it is a matter of the utmost probability or even of virtual certainty that the damages
ultimately awarded will be in excess of $1m.
As leave is to be granted by way of discretion, it is subject always to the grant of leave being justified by
the apparent merits of the appeal.

In Bill Chao Keh Lung v Don Xia [2004] 3 HKLRD 353; (2004) 7 HKCFAR 260, the unliquidated
damages were already assessed as being US$500,000 and so well exceeded the $1m threshold. The
Appeal Committee of the CFA however refused leave and rejected the argument that the Court’s
discretion to grant leave on the “or otherwise” limb in that scenario “should be approached on the
footing that leave should normally be granted unless the grounds of appeal have no realistic prospects
of success”. It emphasised the exceptional nature of the “or otherwise” limb and so required a higher
merits threshold.

4.4 Nature of hearing and approaches in determining appeals

The appeal hearing is by way of a rehearing on the papers. The approaches adopted by the Court of Final
Appeal are similar to those adopted by the Court of Appeal (see above). Moreover, if there are
concurrent findings of fact by the lower courts, the Court of Final Appeal’s usual practice is to decline
to review the evidence for a third time in the absence of special circumstances and will not disturb
such findings merely on the ground that the courts below did not accord appropriate weight to the
evidence (see e.g. Sky Heart v Lee Hysan (1997–98) 1 HKCFAR 318, [1999] 1 HKLRD 100, [1999] 1
HKC 18)

5. Extension of Time for Appeal

 Time limits set out in the statutory provision for appeal are set to facilitate finality in litigation
and so in general have to be complied with.
 The Court however has a discretionary power to extend time to suit the overall justice of an
individual case (see O 3 r 5 and s 24(5) of the HKCFA Ord.)

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In the exercise of its discretion, it is necessary for the court to consider all relevant circumstances of an
individual case. The normal factors to be considered by the court are: (a) the length of the delay, (b) the
reasons for the delay, (c) the chances of the appeal succeeding if an extension is granted, and (d) the
degree of prejudice to the would-be respondent if extension is granted.

Birkenhead Properties & Investments Ltd v Leung Yiu

 Order for possession of land in favour of P (registered owner) against a number of squatters.
Squatters sought leave to appeal out of time.
 Factors considered:
(a) Length of delay: approximately 6 months for A1 and A5 and slightly in excess of 2 years for A17:
“For delay of this order to be countenanced a convincing explanation needs to be forthcoming.”
(b) Reasons for delay: a change in the law cannot be justification for delay. He must show there are
special reasons why he should be allowed to argue that the judgment should not stand.
(c) The chances of the appeal succeeding if the application is granted: “It is here that the Appellants
are on their strongest ground. It is highly probable that the Appellants would succeed on their
appeal if this application is granted. It is not however certain that they would.”
(d) Prejudice: “As a result of the delay which has occurred the Respondent have been deprived of the
fruits of the judgment they obtained for a period of almost 4 years. Even if it were true that there
had been no prejudice this of itself would not justify indulgence being granted to the Appellants.”

Le Pichon JA:
 Extensions of time would invariably defeat that purpose and should not be granted in the absence of
special circumstances.
 Case rests essentially on the prospective appeal’s chances of success. But the merits point is nothing
more than the mirror image of the change in the law point. That alone is insufficient for the reasons
already stated.

In general, time should not be extended only on the ground that an authoritative judgment subsequent to
the decision in question has held the previous understanding of the law to be incorrect. While there
could be exceptional circumstances which would justify an extension of time and a departure from
the principle of finality, the court has emphasised that the circumstances must be so exceptional
that the occasions when they would be held to exist would be very rare (see e.g. HKSAR v Hung
Chan Wa (2006) 9 HKCFAR 614; Lau Luen Hung Thomas v Insider Dealing Tribunal (2009) 12
HKCFAR 955.)

6. Stay of Execution Pending Appeal

6.1 General principles

 May advice D to apply for stay of execution

 A party who has obtained a judgment in his favour should generally be entitled to immediately
enforce the judgment, notwithstanding any pending appeal.

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  An appeal is not to operate as a stay of execution of the judgment of the court below, unless the
court exercises a discretion to order a stay (RHC Ord 58 r 1(4) and Ord 59 r 13; RDC Ord 58 r
3).

 In the exercise of its discretion, it is necessary for the court to consider all relevant circumstances
of an individual case, with the guiding principle that unless a stay can be justified by good
reasons, one will not be ordered.
 In a normal case, one generally needs to satisfy the court firstly, that there is a reasonable
prospect of success in the appeal; and secondly, that the failure to grant the stay would result
in the appeal, if successful, being nugatory.

Wendon Engineering Services Co Ltd v. Lee Shing Yue Construction Co Ltd

para 5 at pp 30-32:
- Exercise of discretion: consider all relevant circumstances, but no stay unless can be justified by
good reasons
- Good reasons normally advanced: failure to grant the stay will result in any successful appeal being
nugatory; need to show at least a reasonable prospect of success
- To decide whether any successful appeal would be rendered nugatory, need to look at nature of the
judgment (monetary judgment vs. injunction or possession order etc)

(1) Merits of appeal were strong

- Ma J: if it can be shown that “it is almost bound to succeed in the appeal, this by itself will almost
invariably tilt the balance in favour of granting a stay” (para 7): only happened in extreme cases,
but not in that case
- “On the other hand, if all that can be demonstrated is that the appeal is arguable or even that good
arguments exist, something more needs to be shown by the appellant in order to obtain a stay of
execution.” (para 8)

(2) appeal would be rendered nugatory because there was a likelihood or even certainty that D would
be financially ruined (D is a substantial company with large projects worth in excess of $650m, but
it needs a continuous cashflow to operate)
- Ma J: not supported by concrete evidence; difficult to understand why a company of such a large
size cannot pay off a judgment debt of $14m; no explanation as to why shareholders are unwilling
to support such a company full of potential and no evidence of inability to borrow has been
adduced

6.2 Conditions
When the court makes an order to stay proceedings pending an appeal, it may put the appellant on terms
(e.g. upon payment of a certain sum into court as security and/or to prosecute the appeal upon a set
timetable).

Jebson & Co Ltd v Watfiled Technology Ltd

- Le Pichon JA: only satisfied that the appeal was arguable.

- After considering the evidence produced by the appellant and looking at the audited accounts of the

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 respondent, accepted that there was an appreciable risk that the respondent would be unable to
repay the judgment sum and interest in the event of a successful appeal.
- Stay of execution ordered on condition that the appellant shall pay into court within 7 days the
judgment sum of around $2m and interests. Also directed that the parties attend court within 7 days
to fix the date for the appeal

6.3 Liability of the appellant if appeal unsuccessful

It should be noted that successfully obtaining a stay of execution pending appeal will subject the
appellant to the risk of paying interest at the judgment rate in the case of a monetary judgment (see RHC
O 59 r 13(2)) or in other cases compensating the respondent for the loss suffered as a result of the stay in
case the appeal is unsuccessful: see Chen & Another v Lord Energy Ltd [2002] 1 HKLRD 495, CFA
for an illustration.

 If monetary judgment, interest at judgment rate (usually higher than commercial lending rate) will
continue to run from date of judgment
 Other cases: may need to compensate the respondent for loss suffered as a result of the stay
 See Chen & Another v Lord Energy Ltd [2002] 1 HKLRD 495, CFA (Case No. 6 of DMs at page
39)
 Judgment for purchaser (P) for specific performance directing the vendor (V) to assign the property
within 28 days
 Stay of execution pending appeal granted
 CFA: V had to compensate P for the loss suffered as measured by the drop in market value during
the stay (amounting to $1.36m; original purchase price was $2.5m)

On the other hand, if there is no stay of execution of a monetary judgment and the judgment award has
been paid by the appellant, upon the reversal of the judgment in a successful appeal, in order to do
complete justice between the parties, the appellate court should normally upon request of the
appellant order the respondent to repay the judgment sum received with interest thereon as from the
date of payment: see Central Electricity Board of Mauritius v Bata Shoe Co (Mauritius) Ltd
[1983] 1 AC 105, cited with approval in Man Ping Nam And Another v Man Fong Hang [2007] 1
HKLRD 763; (2007) 10 HKCFAR 140. The Court of Final Appeal further held that the applicable
interest rate should be the normal discretionary pre-judgment rate (normally at 1% above the HSBC
best lending rate) before the appeal is allowed and thereafter at the judgment rate.

Hence, when acting for the appellant, one should not take it for granted that obtaining a stay of
execution pending appeal is always in the interest of the appellant.

7. Security for Costs of an Appeal

The court has no inherent jurisdiction to order security for costs of an appeal. Any power to order
security for costs must derive from statutes.

The court has no jurisdiction to order security for costs of an appeal from a master’s decision to a judge
in chambers: Perennial Cable (HK) Ltd v Popbridge Industrial Ltd [2000] 1 HKC 564, CFI.

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For appeals to the Court of Appeal, O 59 r 10(5) provides that: “The Court of Appeal may, in special
circumstances, order that such security shall be given for the costs of an appeal as may be just.”

The most commonly recognised ‘special circumstances’ for granting security for costs of an appeal are
where an appellant is impecunious or where he is resident out of the jurisdiction, because a
respondent would have difficulty enforcing an order for costs of the appeal in either situation. See
Chung Kau v Hong Kong Housing Authority & Ors [2004] 2 HKLRD 650 (CA) for a summary of the
principles

8. Admission of Fresh Evidence on Appeal

8.1 The “special grounds” requirement

The appellate court has a discretionary power to receive further evidence. In the case of an appeal to the
Court of Appeal from a judgment after trial or hearing of any cause or matter on the merits, no such
further evidence (other than evidence as to matters which have occurred after the trial or hearing) may
be admitted except on “special grounds” (O 59 r 10(2)).

The classic statement of what amounts to “special grounds” comes from the judgment of Denning LJ
(as he then was) in Ladd v Marshall [1954] 3 All ER 745, at 748, [1954] 1 WLR 1489 at 1491
first, it must be shown that the evidence could not have been obtained with reasonable diligence for
use at the trial;
secondly, the evidence must be such that, if given, it would probably have an important influence on
the result of the case, though it need not be decisive;
thirdly, the evidence must be such which is presumably to be believed, or in other words it must be
apparently credible, though it need not be incontrovertible.

Ladd v Marshall principles being subject always to the discretion of the court to depart from them if the
wider interests of justice so require.

8.2 Applicability to appeals from Master’s decisions and interlocutory decisions of Judges

Under the new CJR rules, this “special grounds” requirement will apply across the board. It is however
not fully settled whether the Ladd v Marshall conditions will be applied with the full rigour in appeals
against interlocutory orders. As recognised by Lord Bridge in Langdale v Danly [1982] 1 WLR 1123
(HL):
 In the situation arising on an appeal to the Court of Appeal from a summary judgment, the
application of these conditions [in Ladd v Marshall] and perhaps the conditions themselves will
require some modification.
 It may well be that the standard of diligence required of a defendant preparing his case in
opposition to a summons for summary judgment, especially if under pressure of time, will not be
so high as that required in preparing for trial.
 The second and third conditions will no doubt be satisfied if the further evidence tendered is
sufficient, according to the ordinary principles applied on applications for summary judgment, to
raise a triable issue.

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  requiring a defendant to use such diligence as is reasonable in the circumstances to put before the
judge on the hearing of the summons, albeit in summary form, all the evidence he relies on in
defence, whereas it would be a great injustice to the plaintiff to allow the defendant to introduce
for the first time on appeal evidence which was readily available at the hearing of the summons
but was not produced.”

See also Hong Kong and Shanghai Banking Corp Ltd v Leung Chi Kit (t/a Leung Pui Form Mould
Works) CACV 261 of 1999, 6 January 2000 (Rogers and Keith JJA) and Chan Yau v Chan Calvin and
Another HCA 666/2007, 11 May 2009 (Sakhrani J).

In a post-Civil Justice Reform case in Bank of China (Hong Kong) Ltd v. Certain Aim Limited [2011] 1
HKC 135; HCMP1272/2007, Deputy Judge Au-Yeung at para 17 emphasized that:

Accordingly, the Deputy Judge favoured the approach of applying the Ladd v Marshall conditions in
the ordinary way even in an appeal from a master’s decision refusing to set aside a default judgment,
though she seemed to have left the question open as to whether in some cases a lesser standard of
diligence is acceptable. The Deputy Judge highlighted that Lord Bridge “does not go so far as to say
that a lesser standard of diligence would be acceptable but only that it may well be acceptable,
especially under pressure of time” (see para 15).

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Questions taken from the Examination Paper for Civil Procedure in May 2011

You should assume that today is 6 May 2011. You should explain your answer and state, if you
consider it necessary, what further information and/or investigations you would need.

Question 1 (10 marks)

So Dai-dai, a chartered accountant, comes to you for advice this morning. On 5 April this year, he was
having an evening walk with his 15-year old daughter, So Siu-siu (who is studying Form 4), along the
Third Street. When they approached the Western Street intersection, So Siu-siu got excited as she saw a
hawker opposite the street selling egg rolls, her favourite. She walked over there but all of a sudden, a
man rushed out from the corner and knocked her down. Her head hit the ground and she suffered
multiple bone fractures and severe head injuries. The man stopped for a second but then immediately ran
away. So Dai-dai yelled loudly to stop the man but to no avail. He immediately called the ambulance to
take her daughter to the hospital. He found a credit card on the floor, which he saw being dropped from
the man at the time of the collision. The credit card is a black platinum card issued by the Hang Seng
Bank bearing the name of Ng Fu-chak.

So Siu-siu spent 3 weeks in hospital and was discharged on 26 April. She suffered laceration with some
permanent disfigurement.

So Dai-dai wishes to sue the man for damages caused to his daughter. He wants to know whether legal
action is viable given that apart from the name, he does not know the address and other details of the
man. Being an accountant, he knows that litigation can be very expensive and risky, and so he wants to
know whether there is any way to minimize his costs exposure.

How should you advise So?

• Potential PI claim by So Siu-siu (an infant) against a man who knocked her down
• Ability to identify the relevant legal and factual issues:
• Main Issues: Pre-action and pre-trial discovery; substituted service; legal aid
• Name of the tortfeasor (Ng Fu-chak) is known from the credit card => possible to issue
proceedings against him (N.B. It is acceptable for students to query whether the credit card
belongs to the tortfeasor or was for example stolen by the tortfeasor; and so suggest first making
further sensible enquires, say, with the police/bank).

• Procedural difficulty: How to serve the Writ on Ng given that we do not know his address?
• Who should know his address and is in a position to pass the Writ to him?
• Discuss order for substituted service by serving the Writ on Ng via Hang Seng Bank.

• Further or alternatively, may discuss obtaining specific discovery from Hang Seng Bank as to the
man’s address.
• Bank is not a likely defendant => pre-action discovery not viable under s41 HCO (or s47A DCO
does not apply)
• Bank not mixed up with the wrong here =>Norwich Pharmacal discovery not applicable against
this mere witness)

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 • How about post-action but pre-trial discovery under s 42 HCO (or s 47B DCO) against the Bank
after issuing the Writ?
• But is discovery of documents relating to address and personal details of Ng “relevant to an
issue arising out of the claim”?

• Father is concerned about legal costs=> discuss legal aid

• If legal aid granted => no costs exposure as any adverse costs order against daughter in case of
an unsuccessful litigation will be borne by the DLA (s16C LAO).
• Means test: exclude father’s resources
• Daughter is still studying Form 4 => seems unlikely that she will have any substantial assets or
income=> likely meets the means test even though father is a chartered accountant.
• Merits test: likely satisfied as there is prima facie negligence on the part of the man in not paying
due attention to passers-by while rushing out from the corner.
• But whether the man is worth suing? May however note that he is a black platinum card holder

• Not enough facts to decide whether action in CFI or DC (also not expect students to know the
level of damages to be awarded in PI cases).
• Credit may be given to any other sensible discussions (e.g. suggest reporting to the police and
see if the police may help to find out the whereabouts of the man; discuss any sensible
investigations before deciding whether to commence proceedings.)

Question 2 (10 marks)

You act for Defective Toys Trading Ltd (“DTT”), which was served yesterday with a Writ of Summons
issued in the Court of First Instance by Toys Garden Inc (“TGI”), a US incorporated company operating
chain toys shops in the US. In the Statement of Claim attached to the Writ, TGI alleged that pursuant to
the contract made between the parties on 2 January 2011, DTT agreed to sell 10,000 sets of Super
Robots (‘the Toys”) to TGI at a total price of $5 million. TGI duly paid 20% deposit to DTT upon
signing of the contract, and the Toys were eventually delivered to TGI in San Francisco on 1 April 2011.
On subsequent inspection of the Toys, it was discovered that the Toys contained certain carcinogenic
chemicals which exceeded the safety standard in the US. TGI therefore rejected the Toys and seeks a
refund of $1 million for the deposit paid plus a claim for loss of profits in the sum of $2 million.

Your instructions are that the Toys were manufactured by Yau Tuk Manufacturing Ltd (“YTM”), a
company incorporated in Hong Kong owning a manufacturing factory in Dongguan, PRC and a
warehouse in Yuen Long, the New Territories. DTT purchased the Toys from YTM for $4 million and
before the Toys were shipped to TGI in San Francisco, samples thereof had been tested by an
independent laboratory in Hong Kong and found to meet the safety standard of both Hong Kong and the
US. While DTT cannot rule out the possibility that some of the Toys delivered to TGI might have
contained the carcinogenic chemicals as alleged, it suspects that TGI is simply making up excuses to
reject the Toys because similar products were introduced by another company into the US market in
March 2011 thereby raising doubts as to the marketability of the Toys. DTT thinks TGI should remain
liable for the outstanding purchase price of $4 million. In any event, if there is any safety problem with
the Toys, DTT believes the responsibility should rest on YTM.

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DTT wishes to know what legal procedures you would recommend it to undertake within the next 2
months.

How should you advise DTT?

• Act for DTT to defend TGI’s claim for refund of $1m and loss of profits for $2m
• Q: Recommended legal procedures within next 2 months
• Main issues: defence and counterclaim; third party proceedings; security for costs
• If DTT wishes to defend TGI’s claim, the first procedure is to file the A/S within 14 days of
service of the Writ (including the day of service) (O 12 r 5). Within 28 days after the deadline for
filing the A/S, DTT has to file a Defence and Counterclaim (see below).
• TGI only paid the 20% deposit=> the $4m purchase price remains outstanding =>counterclaim
for $4m plus interest (may check the sales contract to see if it provides for contractual interest at
a higher rate)

• If there is any safety problem with the Toys, the manufacturer YTM should be responsible.
• In particular, YTM owns a warehouse in Yuen Long and so may be worth suing.
• Hence, should discuss third party proceedings against YTM for contribution or indemnity. Third
Party Notice may be served without leave before service of the Defence (see O 16 r 1(2)), and so
if one wishes to avoid the costs and trouble of obtaining leave, one should serve the Third Party
Notice on YTM before Defence.

• Should discuss also security for costs against P, as it is a company incorporated and based in the
US.
• Bonus for good students who note that D has a counterclaim against P and the issue in the claim
and counterclaim is essentially the same (whether the Toys are defective). As such, the court
may not order any security for costs against P
• Credit may be given any other sensible discussions (e.g. suggest obtaining an expert report to
verify the safety problem of the Toys; discussing steps following the Defence and Counterclaim,
namely P has to file a Reply (if any) and Defence to Counterclaim; settlement negotiations and
mediation etc.)

Question 3 (10 marks)

You act for Ng Siu-sum (“Ng”), who is the defendant in a personal injuries claim. The action was
commenced by Hang Shui-wan (“Hang”), who was a passenger in Ng’s car and was injured in the traffic
accident which occurred on 5 February 2010. Ng forgot to renew his insurance, which expired shortly
before the accident. He is therefore defending the action out of his own fund. In his Defence, Ng denies
that he was negligent and further disputes the extent of injuries caused to Hang by the accident and the
alleged loss and damages.

Ng and Hang are engineers and both of them used to work for Pluto Engineering Co. Ltd (“Pluto”). Ng
left Pluto in 2008 while Hang left Pluto after the accident. Hang claimed that he was not able to go back
to work for a period of at least 18 months as a result of the accident. Hang’s claim is confirmed by a
medical report dated 10 September 2010 from Dr. Daisy Chow in private practice, which was served

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together with the Writ of Summons and which set out in detail the extent of Hang’s injuries to his neck,
back and left knee as a result of the accident.

Pleadings have already been closed and the parties have exchanged their List of Documents. In his List
of Documents, Hang discloses no further medical report or documents relating to his injuries.

Ng tells you that on 30 April this year he met an ex-colleague, Minnie, who is still working at Pluto.
Minnie informed Ng that Hang commenced an employee’s compensation claim against Pluto last year
for damages for personal injuries sustained when he was hit on the back by a falling piece of brick
during a site inspection in April 2009, for which he was treated at Queen Mary Hospital. Ng suspects
that some of the injuries which Hang attributes to the traffic accident were actually not caused by the
traffic accident but by the accident which occurred at the site inspection in April 2009.

Early this morning, you receive a notice from the Legal Aid Department, advising you that Hang had
just applied for Legal Aid for this action. When you inform Ng of this notice later this morning, Ng
expresses his concern and says: “Does this mean that Hang has no money? If Hang is worthless, how
would I be able to recover my legal costs when this case concludes? I think it is also important to get
hold of all the relevant documents and information about Hang’s previous injury as soon as possible.
What are the procedural steps open to me to obtain the same? If Hang is playing delaying tactics, is it
possible for me to get the same from others? Please advise me what I should do to best protect my
interest?”
How should you advise Ng?

• Act for Ng Siu-sum to defend a PI claim by Ng’s passenger (Hang Sui-wan)

• Main issues: specific discovery; implication of P’s application for legal aid; problem solving.
• Discuss specific discovery against Hang of all relevant documents relating to Hang’s previous
injury at the site inspection in April 2009
• May cover Hang’s medical records at QMH (and other medical records if Hang has sought
treatment elsewhere); and the documents filed in the employee’s compensation proceedings.

• Also possible to seek third party discovery under O 24 r 7A from the Hospital Authority for the
medical records at QMH and from Pluto for the employee’s compensation proceedings.
• Pros: As they may not have any interest in contesting the application, discovery may be obtained
easier (and perhaps without any opposition and delay)
• Cons: client needs to pay their reasonable costs in the application and in producing the
documents.

• Legal aid application by Hang: client’s concern on unrecoverable costs is misplaced. Under s
16C of the Legal Aid Ordinance, any costs awarded against the aided Plaintiff shall generally be
paid by the Director of Legal Aid. Hence, if client is successful in the action, the fact that P is
legally aided actually works in client’s favour vis-à-vis recovery of legal costs. However, if
client loses the case, it will be client who needs to pay P’s costs.
• Bonus for good students who may point out that there will be an automatic stay for 42 days upon
the filing of the application memorandum, and so any procedural application for
discovery/interrogatories will need to be postponed.

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 • Credit should be given to students who raise any other sensible discussions on other issues (e.g.
interrogatories; checking the merits of client’s defence and considering the desirability of making
a sanctioned payment or discussing settlement).
• On interrogatories, may suggest seeking interrogatories as to whether Hang had sustained injury
during that site inspection and the circumstances and details thereof; the names and details of
hospitals or clinics Hang has received treatment and whether he has been medically assessed or
paid compensation with the details etc. (see e.g. CA’s decision in Hui Sui Hop v Ng Chiu
Constructions Co & Anor [1995] 1 HKC 478)

Question 4 (10 marks)

You receive instructions today to act for Ng Ying-cheung (“Ng”) in place of his former solicitors
Messrs. Saw & Fred. Ng was sued by Tai Yi-lung (“Tai”) early this year in the District Court for
repayment of a loan made on 1 March 2010 in the principal sum of $400,000 plus contractual interest at
the rate of 30% per annum. In his Defence, Ng admitted the loan and the contract but denied liability on
the ground that Tai was a money lender as defined under the Money Lenders Ordinance (i.e. his
“business is that of making loans or who advertises or announces himself or holds himself out in any
way as carrying on that business”) and so the loan contract was unenforceable as Tai was not duly
licensed. In his Reply, Tai denied that he was a money lender. Tai then took out a summary judgment
application. After a contested hearing, on 3 May 2011 the Master held that although as a matter of law a
loan contract might be unenforceable if it was granted by a money lender who was not duly licensed, the
mere assertion by Ng that Tai was a money lender without any objective evidence in support could not
amount to an arguable defence. Hence, the Master granted summary judgment in favour of Tai for
$400,000 plus contractual interest at the rate of 30% per annum as from 1 March 2010 plus costs
assessed summarily at $30,000.

You ask Ng whether he has any evidence to show that Tai was a money lender. Ng shows you a
pamphlet printed by Tai advertising that he would lend money at the most competitive rate. Ng says he
has not given this pamphlet to his former solicitors as they have not asked him for any supporting
evidence. Ng wants to know whether he has a right to appeal, what the deadline is for lodging it, and
whether he can now produce this pamphlet to the court for the appeal.

How should you advise Ng?

• Main issues: procedure for appeal against Master’s decision; fresh evidence on appeal and costs
• As this is a summary judgment granted by a District Court Master, an appeal lies as of right to
the Judge in Chambers by issuing a notice of appeal within 14 days of the decision (deadline: 17
May) and serving the notice within 5 days thereafter: O 58 r 1. An appeal to the Judge in
Chambers shall be heard de novo.
• Under the CJR rules, the “special grounds” requirement for admission of fresh evidence applies
across the board, including an appeal to a judge in chambers => should discuss the three
conditions laid down in Ladd v Marshall and how they apply to the facts of the case.

• First condition: seems that D may have difficulty, as D apparently was in possession of the
pamphlet throughout.

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 • Second condition: likely to be satisfied as the contents of the pamphlet may show that Tai was a
money lender
• Third condition, one may need to obtain more information from client as to when and how he
obtained the pamphlet, and whether it was clear that the pamphlet was published by P or with his
authorization.
• If the Ladd v Marshall conditions are strictly applied, it seems that the court will likely disallow
the admission of the pamphlet as fresh evidence on appeal.

• May highlight that it has not been fully settled whether the Ladd v Marshall conditions will be
applied with the same rigour in appeals against interlocutory orders: referred to cases discussed
in the Seminar Outlines.
• May argue that the fresh evidence should be allowed in the interest of justice as the issue is one
of illegality of the loan and the fault does not lie with the lay client (as it is the fault of the former
solicitors).  
• Credit should be given to students who raise any other sensible discussions on other issues (e.g.
if the appeal succeeds on the basis of the fresh evidence, then the court may require D to pay the
costs before the Master; the possibility of suing the former solicitors for negligence).

Question 5 (30 marks)

You are approached by Shun Chor-yan (“Shun”) this morning to act for him in an ongoing litigation in
the Court of First Instance against Mo Leung-sum (“Mo”). Shun previously acted in person in the
proceedings with the informal assistance of his brother, who was a barrister. Unfortunately, his brother
died of a sudden heart attack early last month and so cannot assist him any further. Moreover, Shun will
soon emigrate to Singapore in a week’s time and so he will no longer be able to handle the litigation
procedures himself, and that is why he wants you to act for him.

Shun is the owner of a hair salon in Central. Before Christmas last year, Mo, one of the top hair stylists
in Shun’s salon, tendered his resignation and left Shun’s employment with effect from 20 January 2011.
Under Mo’s employment contract with Shun dated 1 April 2009, Mo covenanted that within 18 months
after the termination of his employment he would not work as a hair stylist anywhere within 4
kilometers from Shun’s salon. Immediately after 20 January, Mo opened another hair salon in Wanchai,
which is within 4 kilometers from Shun’s salon, and as a result, many of Shun’s clients went to Mo.

Shun commenced proceedings on 27 January 2011 against Mo claiming for damages for breach of the
covenant for the sum of $100,000 per month for 18 months (i.e. $1.8 million in total) and an injunction
restraining Mo from working as a hair stylist within 4 kilometers from Shun’s salon for a period of 18
months. In addition, Shun further claimed for the repayment of $300,000 being a loan previously
granted to Mo on 30 October 2010, plus discretionary interest pursuant to section 48 of the High Court
Ordinance. Mo defended on the basis that the restrictive covenant was legally unenforceable and that the
sum of $300,000 previously paid to him was not a loan but a bonus payment. Shun in his Reply denied
Ng’s allegation.

On 20 February, after a contested hearing, Shun obtained an interlocutory injunction against Mo,
restraining him from working as a hair stylist within 4 kilometers from Shun’s salon up to the
conclusion of the proceedings, upon the usual cross-undertaking on damages given by Shun. The Court

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ordered a speedy trial and that the costs of the interlocutory injunction application be in the cause. As a
result, Mo had to close down his newly operated hair salon in Wanchai. He subsequently joined another
hair salon in Mongkok.

On 24 February, Shun received a letter from Mo’s solicitors, marked “SANCTIONED OFFER”. In the
letter, Mo’s solicitors proposed to settle the entire action by agreeing to pay Shun a sum of $400,000,
plus Mo agreeing to submit to the grant of an injunction that he would not work as a hair stylist within 4
kilometers from Shun’s salon until 30 June 2011. At the end of the letter, it was stated: “This sanctioned
offer is open for acceptance within 28 days of the service hereof. This sanctioned offer is open for
acceptance after the stipulated 28-day period upon your agreement that you will pay our legal costs from
the end of the 28-day period.” Shun did not respond to this offer and continued with the action.

Mutual discovery and exchange of witness statements were completed. In early April, the action was set
down for trial for 3 days. The trial will commence on 15 June this year. This Tuesday, 3 May, Mo’s
solicitors served on Shun a notice of sanctioned payment in the prescribed form in the sum of $300,000
in full and final settlement of all causes of action of Shun. At the same time, Mo’s solicitors requested
Shun to agree within the next 7 days to provide security for costs in the sum of $900,000 on the ground
that they have just received information that Shun will soon emigrate to Singapore.

Shun wants to know how he should respond to Mo’s request for security for costs and the sanctioned
payment and what options are open to him. He does not wish to provide the security as he wishes to
keep more cash for his intended new business in Singapore.

Shun is also worried that Mo will immediately open a salon in Central or Wanchai to compete with his if
he cannot succeed in his injunction claim. Shun says as he will leave the salon business to be managed
by his General Manager after his emigration to Singapore, he is particularly worried that his General
Manager may not be able to cope with the fierce competition from Mo.

Having reviewed the available evidence, your view is that the restrictive covenant is likely not
enforceable as the period and scope of restriction go beyond what is reasonable and necessary to protect
any legitimate interest of Shun. You however take the view that Shun should have little difficulty in
establishing at trial his claim for $300,000 plus discretionary interest as from 20 January 2011. You
estimate that the costs properly and necessarily incurred by Mo in the action so far should be around
$400,000 (including around $100,000 for resisting the interlocutory injunction application) and the
additional costs for the upcoming trial should be around $500,000. You anticipate that your legal costs
for the trial would be around $600,000 in total. Most of the legal costs should be in relation to the
injunction claim, as the claim for $300,000 is quite simple and straight forward.

How should you advise Shun?

• Act for P, who will soon emigrate to Singapore; P previously acted in person
• 27 Jan: P commenced action to claim $1.8 million for damages for breach of covenant, an
injunction for 18 months to enforce the restrictive covenant and a liquidated claim for $300,000
loan.
• 20 Feb: P obtained an interlocutory injunction => D closed down his hair salon in Wanchai

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• Received sanctioned offer on 24 Feb to settle at $400,000 plus injunction until 30 June: not
accepted
• 3-day trial soon commence on 15 June
• 3 May: sanctioned payment of $300,000 plus request for security for costs of $900,000

• P’s concerns and queries: How to respond to D’s request for security for costs and sanctioned
payment; what options are open to him; not wish to provide security since need more cash for
new Singapore business; worried that D will immediately open a salon in Central/Wanchai if
loses the injunction claim
• Lawyer’s assessment: Restrictive covenant likely not enforceable but P should be able to
establish her claim for the $300,000 repayment under the loan plus discretionary interest from 20
Jan.
• Estimated costs: $400,000 for D so far ($100,000 for interlocutory injunction application);
further costs of $500,000 for trial; P’s total costs around $600,000 (mostly on injunction)

• Main issues: Security for costs; Sanctioned Offer and Sanctioned Payment.
• Salient feature to note: Given the interlocutory injunction granted soon after the start of the
proceedings which resulted in the closure of D’s salon in Wanchai, it seems that P’s loss as a
result of the alleged breach of covenant is much reduced. On the other hand, pursuant to his
undertaking when obtaining the interlocutory injunction, P may become liable for D’s loss as a
result of the closure of his salon in Wanchai if the injunction is subsequently discharged.

• Security for costs:

• What’s D’s ground of intended application?
• Any delay in application?
• Can D apply before P has emigrated?
• In the absence of other factors, would the court view it unjust to exercise the discretion in favour
of ordering security against a non-resident plaintiff?
• Any discretionary factors to oppose security?
• Does P have any substantial property of a fixed or permanent nature within the jurisdiction? Note
that P is still continuing with his salon business in Central after his intended emigration (any
need to check with P more details about the financial situation of the salon business (e.g. whether
the shop premises is owned by P, the size of the operation etc).
• How about exploring whether P may consider postponing his emigration to Singapore after
upcoming trial?

• N.B. While another common ground to resist security is that the plaintiff is impecunious and so
the order for security for costs would unfairly stifle a genuine claim, this ground is clearly
inapplicable on the given facts (and indeed contradictory to the earlier mentioned ground and
raising such a ground will also throw doubt on the ability of P to honour the earlier cross
undertaking on damages in obtaining the interlocutory injunction).

• Sanctioned offer/payment and its implications: Students should show a good understanding of
the principles involved and be able to focus on the given facts when applying the principles.
There is no right or wrong answer as to whether P should accept the sanctioned offer/payment,

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 and so in marking the focus is on the students’ ability to explain the pros and cons of different
options.
• Sanctioned offer of $400,000 plus an agreement to submit to the grant of an injunction until 30
June 2011 was made on 24 February.
• Under O 22 r 3(2), must D make the offer of $400,000 by way of a sanctioned payment? Will the
purported sanctioned offer attract the sanctions stipulated under O 22? Does the offer comply
with the requirements under O 22 r 5? Particularly that the wording used may not follow strictly
O 22 r 5(7).
• But does the offer remain a valid contractual offer capable of being accepted now? Can it be
accepted now (look at its term)? Any advantage in accepting it now?

• Sanctioned payment made on 3 May for $300,000

• Seems to be a valid sanctioned payment made more than 28 days before trial on 15 June.
• Discuss and analyse its implications:
• Will it likely beat the judgment award if interest is taken into account under O 22 r 26(1)(b)?
(note the lawyers’ view on loan claim; ad mote the default position on interest under O 22 r 26(1)
(b))
• But what will be the likely consequences if going to trial?
• What costs order will likely be made if P wins on loan claim but loses on injunction?
• Pros and cons of accepting purported sanctioned offer out of time vs sanctioned payment vs. trial
• Any other sensible discussions on other issues

Question 6 (30 marks)

You act for Sit Bun (“Sit”), a wholesaler of golf equipment. On 21 March 2011, you sent a letter before
action on behalf of Sit by fax and by post to Chow Lo Golf Equipment Co (“the Defendant”) claiming
$5 million for unpaid purchase price of 1,000 sets of Superior golf clubs sold and delivered to the
Defendant. The Defendant is a partnership firm carrying on business as a retailer of golf equipment at
Shop 123A, 565 Gloucester Road, Causeway Bay, Hong Kong (the “Shop Premises”). As there was no
response, you issued a Writ on behalf of Sit on 4 April 2011 in the Court of First Instance against the
Defendant and served the Writ on the same day by fax and registered post to the Defendant at the Shop
Premises. As there was no Acknowledgment of Service filed, you obtained on behalf of Sit a default
judgment on 27 April 2011 for $5 million plus interest and fixed costs against the Defendant.

Yesterday, you received from the Post Office via the dead letter post the Writ you previously sent to the
Defendant by registered post on 4 April. Searches done by you and investigation by your private
investigators have revealed the following information:

1. The Defendant has 2 partners, Chow So (“Chow”) and Lo Pin-mun (“Lo”). Chow was the
managing partner and was responsible for running the day-to-day business of the Defendant,
while Lo only occasionally visited the Shop Premises.

2. The Shop Premises was purchased by Chow at the price of $3 million and was registered in
his name free from encumbrances. Its current market value is around $4 million. On 25
March 2011, Chow signed a preliminary sale and purchase agreement to sell the Shop
Premises to a Chup Ping-for, who is unconnected with Chow, at $3.5 million. The formal sale

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 and purchase agreement was signed on 4 April 2011 and duly registered at the Lands
Registry, with 10% deposit paid and with the remaining 90% of the purchase price to be paid
on completion scheduled for 8 May 2011.

3. The Defendant continued to run its business at the Shop Premises until (and including) 6
April 2011. On 7 April, the Defendant closed down its business and vacated the Shop
Premises. The golf equipment then remaining in the Shop Premises was all transported to a
warehouse in Shatin for safe-keeping. It is estimated that the golf equipment is worth
$600,000.

4. The Defendant’s main customer is Golf R Us, a Singaporean company trading in Singapore
with no branch office in Hong Kong. Golf R Us owes the Defendant around $900,000 under
several outstanding invoices.

5. Chow lives in Flat 2A, 24 Oxford Road, Kowloon Tong (the “Kowloon Tong Flat”), which is
rented from a Tai Yip-chu (“Tai”) at a monthly rental of $20,000. Chow gave notice to Tai on
10 April 2011 to terminate the tenancy earlier as from 10 May 2011. Chow has obtained
emigration status in Singapore and will soon emigrate there.

6. Lo currently lives in Flat 15C, Victory Mansion, Victory Road, Wanchai (the “Wanchai
Flat”). Land search records show that Lo and his wife purchased the Wanchai Flat as joint
tenants for $1 million without mortgage in September 2000. Lo has since been residing there
with his wife. The current market value of the Wanchai Flat is around $2 million.

7. Lo has been a golf instructor employed by a Hong Kong company, Greenwood Driving
Range Ltd (“Greenwood”) since January 2010. During weekdays, Lo normally needs to stay
in Shenzhen, PRC to coach the golfers registered in Greenwood’s courses, and he only
returns to Hong Kong and resides at the Wanchai Flat during weekends. Lo’s monthly salary
is $100,000. Lo is owed 4 months’ salary by Greenwood as Greenwood has been in financial
difficulty recently. However, an investor has agreed to invest $2 million into Greenwood at
the end of this month and Greenwood agreed that it would pay all of Lo’s outstanding salary
before 31 May 2011.

Sit is anxious to have the judgment enforced as soon as possible and to recover as much as he can to
minimise his loss.

How should you advise Sit?

• Act for P (Sit Bun) against a partnership firm for $5m unpaid purchase price for goods sold and
delivered
• 21 March: letter before action by fax and post
• 4 April: Writ issued and served by fax and registered post at D’s place of business
• 27 April: Default judgment for $5m plus interest and fixed costs
• 5 May: Writ returned via dead letter post
• List of information on assets obtained from searches and private investigators

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• P is anxious to enforce judgment asap and recover as much as possible to minimise loss
• Main issues: Service and default judgment; enforcement of judgment against individual partners.

• Service and default judgment:

• Service by fax not valid; service by registered post prima facie valid pursuant to O 81 r 3(1)(c);
default judgment not prematurely obtained
• O 13 r 7(3): not to take further steps in enforcing the default judgment
• Does O 13 r 7(3) only apply to service by registered post under O 10 r 1(2)(a) but not O 81 r 3(1)
(c) (but note that actually O 81 r 3(1)(c) refers to service under O 10 r 1(2)(a))
• Any argument that D must have received the faxed Writ and chosen not to accept the registered
mail? Any real defence?
• Note Shop Premises only vacated on 7 April (two days after the posting of the registered mail);
how about earlier letter and purported service by fax?

• Enforcement of the default judgment against firm assets vs individual partners

• Does any of the conditions in O 81 r 5(2) apply?
• Can P apply for leave to execute the judgment against the managing partner Chow by taking out
a Summons to be served personally on him (O 81 r 5(4); note that no suggestion that Chow was
not in HK when the writ was issued).
• But unless and until leave is granted, P cannot execute the judgment against Chow. 
• How about Lo? He is normally in Shenzhen during weekdays=> Probably outside the
jurisdiction when the Writ was issued=> the judgment would not bind him, nor release his
liability, and no execution is possible against him (O 81 r 5(3)). If P wishes to go against him,
fresh proceedings need to be commenced against him.

• O 81 r 5(2) => can only be enforced without leave against the firm’s assets
• golf equipment worth $600,000: writ of fi-fa
• Debt of $900,000 owed by Golf R Us outside HK: Can garnishee order be made if garnishee not
within HK?
• Chow: discuss oral examination; Mareva injunction to prevent, in particular, the balance of the
sale proceeds from being dissipated; viability of charging order on office before 8 May; viability
of Prohibition Order.

• Lo: Does the judgment bind him?

• In any event, any garnishee proceedings on outstanding wages (s 66 of the Employment
Ordinance)? What if the wages are actually paid to Lo’s account?
• Discuss viability of charging order against Lo’s joint interest in the Wanchai Flat.
• But any problem in obtaining order for sale (does the court have any jurisdiction to make an
order for sale given the flat is jointly owned with another person?)
• Any other sensible discussions on other issues

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Questions taken from the Examination Paper for Civil Procedure in May 2010

You should assume that today is 12 May 2010. You should explain your answer and state, if you
consider it necessary, what further information and/or investigations you would need.

Question 1 (10 marks)

You act for Two Dollars Construction Limited (“the Company”), which has instituted legal proceedings
in the District Court against Mo Chin-bei (“Mo”) claiming for HK$300,000 for unpaid fee for
renovation work carried out at the flat owned by Mo. Mo filed in person the prescribed
Acknowledgment of Service Form stating an intention to defend together with a Defence five days ago.
In the Defence, Mo claims that the Company was in breach of the renovation contract as the work
carried out was defective and not up to the required standard. Yesterday, you received notice from the
Director of Legal Aid that legal aid has been granted to Mo to defend the proceedings.

Chong Sau, the director and beneficial shareholder of the Company, is very concerned about legal aid
being granted to Mo. He says Mo owns the flat that he lives, which is free from any mortgage and is
now worth around HK$3 million. On the other hand, the Company is just a one-man business operated
by him with little capital, and he himself cannot afford to buy any flat in Hong Kong. He is therefore
puzzled as to why Mo can be granted legal aid, and he wants to know whether he can also obtain legal
aid to pursue the Company’s claim. He is quite adamant that the quality of renovation work is
satisfactory but he is concerned about the legal costs that need to be incurred to pursue a full-blown
litigation in court. He wants to know if the Company can obtain summary judgment against Mo without
a trial and whether the legal costs incurred can be recovered from Mo if the Company eventually
succeeds in obtaining judgment (with or without a trial) against Mo.

How would you advise Chong?

• Acting for P (with instructions from director/shareholder Chong Sau): Two Dollars Construction
Ltd.
• P’s Claim in DC: $300,000 for unpaid renovation fee
• D (Mo Chin Bei): filed A/S and Defence in person 5 days ago saying that renovation work
defective and not up to standard
• Yesterday: legal aid granted to D
• Client’s concerns:
• Very concerned about grant of legal aid
• D owns flat worth $3m while P company just a one-man business with little capital
• Adamant that quality of renovation work satisfactory

• Client’s express queries:

• Why can D get legal aid
• Whether P can also get legal aid
• Whether summary judgment can be obtained
• Whether legal costs can be recovered if litigation successful
• Main Issues: legal aid, summary judgment and costs

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 • Client Company’s entitlement to legal aid (only available to natural persons)
• Mo’s entitlement to legal aid (merits test and means test)
• Note value of main dwelling excluded from Mo’s total financial resources: see Schedule 2 to the
Legal Aid (Assessment of Resources and Contributions) Regulations
• Query: possibility of Mo concealing his other assets/income; is client aware of any substantial
income/assets of Mo (N.B. Mo can apparently afford $300,000 to carry out renovation to his
flat).
• Summary judgment: note existence of factual dispute and difficulty
• Costs liability of aided defendant under s16C
• Any other sensible discussions (e.g. suggest negotiating with Mo on a without prejudice basis (or
using ADR or making sanctioned offer) for early settlement.)

Question 2 (10 marks)

You act for Tam Pin-yi (“Tam”), who purchased a second-hand car from Wan Bun (“Wan”) for
HK$200,000 this January, and later found out that the car did not actually match the registration
particulars. Tam has obtained from the Transport Department a certification that the car has a Chassis
Number which belongs to another vehicle and so cannot be lawfully driven on the road. You issued a
Writ indorsed with the Statement of Claim on behalf of Tam against Wan in the District Court and sent
the same to Wan by registered post on Tuesday, 4 May 2010 to Wan’s residential address. In the
Statement of Claim, the pleaded cause of action is fraudulent misrepresentation and further or
alternatively repudiatory breach of the implied condition under the Sales of Goods Ordinance. The relief
claimed is a declaration for rescission of the sales contract and the recovery of the price of HK$200,000
and damages for breach for the wasted towage, insurance and licence fees totalling HK$8,400.

Tam suspects that Wan will either not defend the action or may file a simple defence as a delaying
tactics. He wants to know when the earliest date is for him to apply for default judgment against Wan in
case Wan does not file anything in court to defend the action and what type of default judgment he can
obtain. He also wants to know in case Wan files a bare denial defence, whether he can seek and obtain
summary judgment without the need for a trial.

How would you advise Tam?

• Acting for P (Tam Pin-yi)

• This Jan: P purchased second-hand car from D (Wan Bun)
• Later found out from Transport Department mis-match of registration particulars=> car cannot
lawfully be driven on road
• Issued Writ plus S/C in DC pleading fraudulent misrepresentation and repudiatory breach of
implied condition under SOGO and seeking declaration for rescission and recovery of $200,000
price and $8,400 damages
• Served by registered post on Tuesday, 4/5/2010

• P suspects D either not defend or file a simple defence as a delaying tactics

• P’s express queries:
• (1) earliest date for default judgment and type of default judgment if D files nothing
• (2) whether P can seek and obtain summary judgment if D files a bare denial defence

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 • Main issues: default judgment and summary judgment

• Writ posted on 4 May=> deemed date of service under O 10 r 1(3) is 11 May=> deadline for
filing A/S under O 12 is 24 May (i.e. within 14 days after service of the writ (including the date
of service)) => the earliest date for default judgment under O13 is 25 May and under O 19 is 22
June.
• May discuss whether the deemed date is displaced by evidence of actual receipt of the registered
post (and so one may check if there is any receipt from the post office of actual delivery of the
mail).
• Contains declaratory relief => no default judgment under O 13=> P has to proceed as if D “had
given notice of intention to defend” [O 13 r 6(1)] => if no defence filed P may apply under O 19
r 7 (depends on whether facts pleaded in S/C justify a declaration).
• May discuss the option of abandoning the declaratory relief to obtain default judgment under O
13=> final default judgment for liquidated claim of $200,000 and interlocutory judgment for
damages claim of $8,400

• Summary judgment: should discuss the fraud exception under O 14 r 1(2), as there is a pleaded
cause of action on fraudulent misrepresentation.
• CA decision in Pacific Electric Wire & Cable Co. Ltd. v. Harmutty Ltd. [2009] 3 HKLRD 94,
which held that:
– Contrary to any suggestion in previous cases, the “fraud” exclusion was
not restricted to claims for damages for fraud. The exclusion also covers
all actions in which there is “a claim in respect of which the underlying
allegations on which the claim was based constituted an allegation of
fraud”;
– In respect of a writ that contains a number of different claims, as long as
one of those claims is based on an allegation of fraud, O 14 cannot be used
in that case at all.
• May discuss first amending the S/C to drop the fraudulent misrepresentation claim before
applying for summary judgment.

Question 3 (10 marks)

You act for Sit Bun (“Sit”), who has successfully obtained a judgment after trial on 3 May 2010 for the
sum of HK$5 million (plus costs to be taxed if not agreed) against Unscrupulous Electronics Limited
(“Unscrupulous”), a limited company incorporated in Hong Kong.

After conducting private investigations, the following information is revealed:

1. Unscrupulous is in the business of manufacturing electronic home appliances. It currently owns a

showroom premises in Causeway Bay, currently valued at HK$3 million. Unscrupulous bought
showroom premises in 2001 free from mortgage. Unscrupulous further rents a warehouse in Tuen
Mun, the New Territories.
2. Unscrupulous has a PRC customer in Dongguan owing Unscrupulous a trade debt of HK$1 million.
3. Unscrupulous has a single beneficial shareholder, Fu Kwai (“Fu”), who is a wealthy businessman
and owns a property in Repulse Bay. The property was purchased by Fu in 2000 for $12.5 million

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 and is free from mortgage.

How would you advise Sit as to the recommended legal procedures for enforcing the judgment?

• Acting for P (Sit Bun)

• 3 May 2010: P obtained judgment after trial for $5m plus costs against D (Unscrupulous
Electronics Ltd)
• Private investigations show:
• D’s business in manufacturing electronic home appliances; owns a showroom premises in
Causeway Bay valued at $3m (bought in 2001 free from mortgage); further rents a warehouse in
Tuen Mun.
• D has a PRC customer in Dongguan owing a trade debt of $1m.
• D’s single beneficial shareholder (Fu Kwai): wealthy businessman and owns a property in
Repulse Bay worth $12.5 million (free from mortgage.)
• Advise P as to the recommended legal procedures for enforcing the judgment

• Need to appreciate that the judgment is against a limited company => no direct claim against the
shareholder per se => no enforcement against Fu or his assets
• Charging order on showroom premises, followed by subsequent application for an order for sale
if necessary;
• May apply for writ of fi fa for the appliances in the Causeway Bay showroom and Tuen Mun
warehouse (may need to first check if the showroom is still in operation and whether there are
valuable goods there);
• Cannot garnishee the PRC customer in Dongguan as he is not within the jurisdiction
• May discuss oral examination against Fu if he is a director or officer (seems likely).
• Any other sensible discussions on other issues.

Question 4 (10 marks)

You act for Mo Hop-tung (“Mo”), who was sued by Luen Ko-yan (“Luen”) in March 2009 for damages
in the sum of HK$3 million for breach of an oral contract. Mo denies the existence of the contract and
disputes the quantum of Luen’s loss. You have taken the view that whether there was a contract will
depend on whether the court believes Luen’s or Mo’s version of events, but that even if liability against
Mo is established, the legally recoverable loss should only be HK$800,000. Hence, upon your advice,
you made a sanctioned payment on behalf of Mo in the sum of HK$850,000 on 2 April 2009 (last year),
which has not been accepted by Luen. The case eventually goes to trial. In a judgment delivered last
Friday, the judge accepted Luen’s version and found Mo in breach of the oral contract. He assessed
damages in the sum of HK$2 million, and granted judgment for that sum together with contractual
interest thereon at 10% per annum as from the date of breach on 1 January 2009 plus costs.

After reviewing the judgment, you maintain your earlier view on quantum and liability. Mo wants to
know whether he has a right to appeal, and if so, how he should proceed with the appeal. He also wants
to have your advice as to the likely Order (including the costs order) that the appellate court will make
(assuming your earlier view is correct).

How should you advise Mo?

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 • Acting for D (Mo Hop-tung), being sued by Luen Ko-yan in March 2009 for $3m damages for
breach of oral contract
• Your view: Whether contract exists depends on whether court believes P’s or D’s version;
legally recoverable loss should only be $800,000
• 2 April 2009: sanctioned payment of $850,000 made, not accepted by P
• Last Friday: after trial Judge accepted P’s version and judgment for P for $2m plus contractual
interest at 10% pa from 1 Jan 2009 plus costs
• Your view after reviewing judgment: same as before
• Client’s queries:
• Any right of appeal and how to proceed with the appeal
• Likely Order (including costs order) that appellant court will make assuming your view is
correct.
• Main issues: Appeal and Sanctioned payment and costs

• Final judgment by a CFI judge => an appeal lies as of right to CA (s 14(1) HCO). An appeal to
the CA shall be by way of rehearing and must be brought by motion (O 59 r 3), and the notice of
motion (called the Notice of Appeal) must be served on all parties within 28 days from the date
of the judgment (i.e. 7 May, last Friday).
• Should discuss the appeal against liability and quantum separately.
• Judge’s finding on liability is one of primary facts (i.e. whose version of events to be believed)
=> CA should generally defer to the opinion of the trial judge, unless it can be clearly shown that
he has fallen into error (see e.g. Ting Kwok Keung v Tam Dick Yuen for an authoritative
discussion as to the guiding principles).
• Quantum: what loss is legally recoverable => whether trial judge commits an error of law?
• May add that it is necessary to study the judgment in detail, and if necessary may also need to
consider the transcript of proceedings.
• Based on the lawyer’s assessment, it seems that the appeal should better be confined to quantum
only, and the likely outcome: allow the appeal and reduce the quantum to $800,000.
• Costs order: distinguish the costs of the appeal and the costs of proceedings below.
• Costs of appeal should generally follow the event => likely awarded to D (if D only appeals on
quantum and wins).

• Costs below: should discuss the impact of the sanctioned payment, which beats the judgment
award of $800,000 (plus about 4 months’ interest from 1 Jan to 30 April at 10% p.a.).
• => sanctions stipulated under O 22 r 23 should follow unless it is unjust to do so (from the facts
given, there seems to be no indication that it is unjust to impose the sanctions, but students may
add that we need more facts on this).
• => normal order is that Mo should still be liable to Luen’s costs on a party and party basis before
30 April 2009 (i.e. 28 days after 2 April 2009), and that Luen should pay Mo’s costs thereafter
on an indemnity basis with interest thereon at a rate not exceeding 10% above the judgment rate.
• Note: sanction under O 22 r 23(2) for disallowing P’s interest applies only to the discretionary
interest to be awarded under s 49 HCO => not apply to any contractual interest awarded in this
case.

Question 5 (30 marks)

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Ching Sing (“Ching”) comes to you for urgent advice. He is the director and 50% shareholder of Ching
Kwong Trading Ltd (“the Company”), and was the Chief Executive Officer (CEO) responsible for the
day-to-day running of the Company until about two weeks ago. He was served personally this morning
with a Mareva Injunction Order and a Prohibition Order, both obtained by the Company against him in
the Court of First Instance today, together with the supporting affidavit sworn by Kwong Tai-wah
(“Kwong”) on behalf of the Company and a generally endorsed Writ of Summons. Kwong is the only
other director of the Company and holds the remaining 50% shareholding.

According to Kwong’s affidavit, he replaced Ching as the CEO of the Company as from 30 April this
year, and he discovered on 6 May that there was a long outstanding payment in the sum of US$500,000
due from one of the Company’s US customers, Debt Dodger Inc. Kwong then telephoned Debt Dodger
Inc’s director, Mr Bush, to chase for payment, and found out from Bush that in accordance with Ching’s
instructions, Bush had already settled the relevant invoice this February by telegraphic transfer to an
account No. 789-123456 at the SAR Bank. Kwong’s subsequent investigation reveals that this account is
in fact Ching’s personal account at the SAR Bank. Kwong therefore believes that Ching has
misappropriated the Company’s funds of US$500,000, and given Ching’s dishonest act and low degree
of morality, Kwong comes to the belief that there is a real risk of Ching disposing of his assets. In
support of the application for a Prohibition Order, Kwong states in his affidavit that upon his recent
investigation, Ching has obtained permanent resident status in Australia and has decided to emigrate
there in early June.

Ching tells you that Debt Dodger Inc did remit the sum of US$500,000 to his SAR Bank account in
settlement of the Company’s invoice, but he says this was done with the prior knowledge and agreement
of Kwong. Ching says he told Kwong this January that he was going to emigrate to Australia in early
June, and so wanted to gradually wind down the business of the Company. He suggested that each of
them should first get back US$500,000 and the most convenient way to do so was to ask some of the
Company’s customers to settle their invoices by direct payment to their respective personal bank
accounts. Ching is adamant on this, though he says there is no documentary proof for his discussion and
agreement with Kwong. Ching however says he has instructed another customer, Credit Worthy Inc, to
settle two invoices in the respective sums of US$200,000 and US$300,000 by telegraphic transfer to
Kwong’s personal account at the Hong Kong Bank in early and late April this year respectively. Ching
says after paying back to the shareholders the total sum of US$1 million in this way, the Company is
now left with very little capital.

Ching says what he has not told Kwong is that he has had an affair with Kwong’s wife and indeed he is
emigrating to Australia with her in early June. Ching suspects that somehow Kwong has discovered this
and so initiated the current proceedings for revenge.

Ching wants your advice as to what legal procedures he should now take. Ching is in particular
concerned about the Prohibition Order, as he does not wish to jeopardize his emigration plan in early
June. Ching says indeed he is meeting Kwong’s wife tonight in Macau for a night there, and so he just
wants to know whether he can still try his luck to board the ferry to Macau this evening. Ching says he
really does not wish to disappoint Kwong’s wife, but he will definitely return to Hong Kong tomorrow
afternoon to deal with the proceedings. Ching also says Kwong only mentions his SAR Bank account in
the supporting affidavit, and so he believes only his account there is frozen. He says the bulk of his

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funds are actually kept at his account with the Hong Kong Bank, and so he wants to know whether he
could now transfer the credit balance there to his bank account in Australia so as to avoid the money
being frozen later in the course of the proceedings. Ching further expresses his wish to mediate with
Kwong instead of litigating in court. He has heard from others that under the Civil Justice Reform
attempt to mediation is being made more or less compulsory, and so he just wonders why Kwong should
be allowed to obtain such draconian court orders against him on behalf of the Company without first
going through mediation and/or without first giving an opportunity for him to respond.

You note that the Mareva Injunction Order and the Prohibition Order are in the standard form. The
Mareva Injunction Order prohibits Ching from dealing with his assets in Hong Kong up to the amount of
HK$3,900,000 (or US$500,000), identifying in particular any money in the account No. 789-123456 at
the SAR Bank. The Prohibition Order is valid for a period of 1 month.

How would you advise Ching?

• Acting for D (Ching Sing), director and 50% shareholder of Ching Kwong Trading Ltd and was
CEO until 2 weeks ago
• This morning: personally served with a Mareva injunction and prohibition order by Company
with supporting affidavit of the other director and 50% shareholder Kwong Tai Wah and
generally indorsed writ
• Kwong: Ching misappropriated Company’s funds of US$500,000 by asking US customer to
settle invoice by TT to Ching’s personal a/c at SAR Bank; Ching got PR status in Australia and
would emigrate in early June.
• Ching: remittance to personal a/c done with prior knowledge and agreement of Kwong; but no
documentary proof; but has instructed another US customer to settle two invoices by TT to
Kwong’s personal a/c in early and late April; Company has very little capital after paying
US$1m to both shareholders in this way; suspects that Kwong is taking revenge as he had an
affairs with Kwong’s wife

• Ching’s concerns:
• About the PO: not wish to jeopardize his emigration plan in early June; want to meet Kowng’s
wife in Macau for a night
• Ching’s queries:
• Whether he can try his luck to board the ferry to Macau this evening
• Whether he can transfer bulk of money kept at Hong Kong Bank to Australia since only SAR
Bank is frozen by Mareva injunction
• Heard from others that under CJR mediation is made more or less compulsory => why Company
can obtain such draconian orders without mediation or first giving him opportunity to respond
• What legal procedures he should now take
• Main issues: Prohibition Order, Mareva Injunction, full and frank disclosure.

• Whether Ching can still try his luck to board the Macua ferry: Unless PO is set aside, any
attempt by Ching to leave HK is a breach of a prohibition order and constitutes a contempt of
court, see Sino Wood Investment Ltd v Wong Kam Yin. By s 21B(7) HCO, if the judgment debtor
(after having been served with the order or otherwise informed of its effect) attempts to leave
Hong Kong, he may also be arrested by any immigration officer, police officer or bailiff.

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• Whether he could now transfer the credit balance at the Hong Kong Bank account to his
Australian bank account: The Mareva Injunction is to cover all his assets up to HK$3.9m, and
so it will be a contempt for Ching to transfer his funds out from any accounts (even if unknown
to P), unless there are funds of not less than HK$3.9m remaining (and Ching may transfer any
excess funds out of his account).

• Any need for mediation before obtaining the Orders: mediation or attempt to mediation is
not made compulsory under the CJR. Indeed, it is generally recognized that mediation may be
inappropriate if one is seeking urgent injunctive relief. It is of course open to Ching to propose
mediation with Kwong in the course of this action, but it takes two to tangle.
• Why Kwong be allowed to obtain such draconian orders without first giving him an
opportunity to respond: Should explain the rationale behind Mareva Injunction and
Prohibition Order, and the need for secrecy (plus perhaps urgency) to justify the ex parte
procedure. May also explain the inter partes procedure that follows and the right to apply to set
aside the ex parte orders at any time on notice.

• What legal procedures he should now take: No fixed answer, but should discuss the viability
of setting aside the Orders based on the given facts.
• May note the Summons day arrangement => likely that the inter partes hearing be held on Friday
in the following week (may ask for an early hearing for discharge if urgency shown).
• Seems from the facts that P has satisfied the existence of a good arguable case and a risk of
dissipation, but there may be a failure of making full and frank disclosure (on the financial
situation of the Company as it has very little capital left, and on the payments by another
customer to Kwong’s a/c of US$500,000 which tends to support Ching’s story).
• Should therefore highlight the need to check if such information has been disclosed in the
supporting affidavit and whether fortification is ordered by the court.
• As to Ching’s story about the prior consent/agreement, it seems unlikely that Kwong will admit
this => it remains a factual dispute to be resolved at trial. If Ching can gather the evidence of the
two TT transfers, it may assist his case, but we still need to see what explanation can be offered
by Kwong. 
• May further note that the action is instituted by the Company, but given that it has only two
equal directors/shareholders it seems that proper board authorization has not be obtained to
sanction the action. Any proceedings instituted without proper authorisation or subsequent
ratification may be stayed by the court with costs of both parties to be borne personally by the
plaintiff’s solicitors (N.B. Proper procedure for Kwong should have been to invoke the
derivative action procedure under Foss v Harbottle: not expected that students know about this in
that exam). 
• Discussion of any other sensible issues.

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Question 6 (30 marks)

Ng Heigh-do (“Ng”) comes to see you for advice today. He returned to Hong Kong this morning from a
10-day business trip in Europe, and was told that a specially endorsed Writ of Summons was issued two
days ago by Ho Kall-hou (“Ho”), a famous singer residing in Shanghai, against Artist Boutique as the
sole defendant. Artist Boutique is a firm owned by Ng and Mo Dai-wai (“Mo”) as partners (with Ng
being the major partner, having 80% interest in the partnership). The Writ was served personally on Mo
as a partner yesterday afternoon.

Artist Boutique has for a number of years operated two retail shops for high-end fashionable clothing,
one in Causeway Bay and the other in Mongkok. Ho visited the Causeway Bay shop on 20 May 2007
and purchased a number of dresses and handbags. As Ho was a celebrity, Mo organized with Prince’s
Cars Ltd for limousine service to drive her to the airport. Unfortunately, on the way there the car lost
control and hit the street lamp, resulting in quite serious injuries to Ho.

In the Statement of Claim, it is alleged that the accident was caused by the negligence of the driver
employed by Prince’s Cars Ltd, and Artist Boutique was vicariously liable by reason of an agent-
principal relationship between it and Prince’s Cars Ltd. Ho claims damages against Artist Boutique for a
total sum of around HK$5 million. Accompanying the Writ was a letter from Ho’s lawyers captioned
“Sanctioned Offer made Without Prejudice Save as to Costs” by which Ho offered to accept from Artist
Boutique a sum of HK$3 million in full and final settlement of her claim.

Ng tells you that Artist Boutique has, before the accident, sought legal advice from another solicitors’
firm (Messrs Law & Law) regarding its legal relationship with Prince’s Cars Ltd under the contract (“the
Contract”) signed between them for the provision of the limousine service. Ng says the Contract was
made in October 2006. In November 2006 Ng gave a copy of the Contract to Messrs Law & Law in
order to seek legal advice regarding Artist Boutique’s potential liability to third parties as a result of any
wrongful act committed by Prince Car’s Ltd in providing the limousine service. Ng says at that time no
accident had occurred and the reason for seeking legal advice was to help the partners consider whether
they should purchase any insurance to cover their potential liability. In December 2006 Artist Boutique
received a written Advice (“the Advice”) from Messrs Law & Law to the effect that the relationship
between Artist Boutique and Prince’s Cars Ltd under the Contract was likely to be one of principal and
agent so that Artist Boutique might be held vicariously liable for the act of Prince’s Cars Ltd.

Ng says that since the financial crisis in 2008 the business of Artist Boutique has been declining. They
closed down the operation of the Mongkok shop in early 2009. In the course of the removal, many of the
firm’s documents kept at the Mongkok shop were lost, and they can no longer locate the original (or any
copy) of the Contract or the Advice. Ng however understands that Messrs Law & Law still retain copies
of the same. Ng thinks that the Contract and the Advice are highly damaging to Artist Boutique and does
not want Ho’s lawyers to see them.

Artist Boutique is now trading at a loss, and so Ng thinks it is likely that they will close down the entire
business of Artist Boutique before the end of this year. Ng however is concerned about his personal
liability as a partner of the firm if Artist Boutique is adjudged liable for Ho’s claim, given that he has
substantial assets in Hong Kong.

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Ng thinks it should be Prince Car’s Ltd instead of Artist Boutique which should be liable for Ho’s claim.
He wants your advice as to what legal procedures Artist Boutique should take within the next two
months in response to the legal proceedings and the sanctioned offer letter. He also wants to know
whether Artist Boutique needs to disclose the Contract and the Advice to Ho in the course of the
proceedings. You have reviewed the relevant documents (including the witness statements taken by the
police concerning the accident, and the medical reports adduced by Ho). You take the view that on the
materials and information presently available, the accident was caused by the negligence of the driver
employed by Prince Car’s Ltd, and the quantum of damages to be awarded by the court should be in the
range of HK$2.6m to HK$3.1m.

How would you advise Ng?

• Acting for Ng Heigh-do, a major partner of D (Artist Boutique) which is sued by Ho Kall-hou, a
famous singer residing in Shanghai
• 2 days ago: Writ issued
• Yesterday afternoon: Writ served personally on Mo Dai-wai, another partner holding 20%
interest
• P visited D;s Causeway bay shop on 20/5/2007 and was seriously injured when being on
limousine service to airport organised by Mo with Prince’s Car Ltd
• S/C: AB vicariously liable for PCL’s negligence because of agent-principal relationship.
• Sanctioned offer accompanied Writ offering to accept $3m in full and final settlement
• Before accident, legal advice sought from another solicitors’ firm regarding AB’s liability
towards TP under the contract with PCL: AB likely to be vicariously liable
• Mongkok shop closed down in early 2009=> could no longer locate Advice and Contract
• AB now trading at a loss and will likely close down its business by end of this year.
• Your view on materials presently available: accident caused by driver of PCL and quantum of
damages in the range of $2.6m to $3.1m
• Ng’s concerns:
• Does not want to disclose Advice and Contract as they are highly damaging
• His personal liability, as he has substantial assets in HK
• PCL should be liable instead of AB
• Ng’s queries:
• What legal procedures AB should take within the next two months in response to the action and
the sanctioned offer

• Main issues: Discovery (litigation and legal advice privilege), enforcement against partners,
sanctioned offer and payment, third party proceedings, security for costs and general procedure
for filing A/S and pleadings.
• Discovery: Both Contract and Advice are relevant to the issue of vicarious liability. Though no
longer in the possession or custody of AB, they are in its power as it has a right to demand its
former solicitors to give back a copy to it.
• Contract clearly not privileged. Advice is privileged on the basis of solicitor/client confidential
communication for obtaining legal advice (N.B. Not on the basis of litigation privilege)=> copy
Contract to be disclosed in discovery, but AB may claim privilege over the Advice.

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• Should also highlight a solicitor’s duty to advise client’s obligation to give discovery of a
relevant document (unless privilege) even if client may consider it harmful (and to cease acting
for client if client insists not to disclose the document)

• The action is against the partnership=> any judgment eventually obtained is enforceable against
the partnership assets without leave, but as AB may soon close down and Ng is concerned about
his personal liability=> should discuss O 81 r 5.
• Writ served on Mo => direct execution could be made against Mo without leave (O 81 r 5(2)(b)).
• Ng was outside HK on a 10-day business trip in Europe and only returned to HK this morning
=> not in HK when the Writ was issued two days ago=> O 81 r 5(3): no execution may be made
against Ng unless he acknowledged service, was served within or outside jurisdiction, and any
judgment obtained against the firm shall not render him liable or release or affect him.

– Bonus discussion: three-year limitation period for PI claim will soon expire => Ho’s
claim against Ng personally will be time-barred unless fresh proceedings are instituted
against him within time or he is being served under O 81 r 5(3). In case P only discovers
this technical problem after judgment is eventually obtained against the firm, and then
has to issue fresh proceedings against Ng, there may be justification for the Court to
exercise its discretion under s 30 of the Limitation Ordinance to override this time limit
by balancing the respective prejudices to P and to D having regard to all the
circumstances of the case and in particular to those factors set out in s 30(3) (e.g. reasons
for the delay and conducts of the parties) (N.B. The practice of the courts has been
regularly to exercise the discretion in favour of P in all cases in which the defendant
cannot show that he has been prejudiced by the delay (see Horton v Sadler [2006] UKHL
27 per Lord Hoffman at § 44 and HK cases referred to in the Seminar Outline.). Ng may
also be at risk personally if Mo is to seek contribution/indemnity from him. N.B. Students
are not expected to be able to deal with these difficult and subtle issues in that exam.

• Depending on whether students appreciate that Ng may still be at risk of being held personally
liable for Ho’s claim, students’ answers as to how the firm should respond to the proceedings
and the sanctioned offer may therefore differ.
• For those who take the view that Ng is not at risk so long as he is careful not to file any A/S
himself on behalf of the firm, one may well come to the advice that from a practical viewpoint
one may just ignore the sanctioned offer or even the action (though one should check the
relationship between Ng and Mo, and see if Ng really does not care whether Mo be held liable
for Ho’s claim. On this, it actually raises an ethical issue of conflict of interest, and whether the
lawyer could represent the firm (which consists of both Ng and Mo), or whether the lawyer
should only act for Ng alone.)

• Assuming that Ng is at risk and/or for other reasons he wishes to deal with Ho’s claim in a
serious manner, then he should be aware of the pros and cons of not accepting the sanctioned
offer.
• The offer sum of $3m is within the range of $2.6m to $3.1m as assessed by the lawyer, though
towards the upper range.

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• If the firm loses on liability and the quantum is assessed to be over $3m => the sanctions of
indemnity costs and enhanced interest should be imposed unless the court considers it unjust to
do so.
• However, one may note that the sanctioned offer is made at a very early stage, and so there may
be argument that the sanctions should not be imposed (The court may take into account: “(b) the
stage in the proceedings at which any sanctioned payment or sanctioned offer was made; (c) the
information available to the parties at the time when the sanctioned payment or sanctioned offer
was made”).
• Students may also suggest making a counter-offer by way of a sanctioned payment of, say,
$2.6m to $2.9m.

• Discuss Third party proceedings against PCL under O 16 r 1.

• Discuss security for costs against Ho under O 23 r 1(a), as Ho is a resident in Shanghai.
• The time for filing A/S and Defence may also be discussed briefly as this will happen within the
next two months
• May note that previously the firm obtained the Advice in order to decide whether insurance be
purchased=> should check if the firm’s liability to HO is covered by insurance=> if so the case
may be taken over by the insurer. 
• Any other sensible discussions on other issues (e.g suggest obtaining a formal advice from
counsel on liability and quantum; double-checking whether P’s offer was made in full
compliance of the sanctioned offer requirements under O 22; ADR etc).

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Q: I have a question regarding Q4 of FE 7 which concerns cost orders. You commented that “costs
arising from misconduct or neglect” need not be discussed because the winning party will be entitled to
costs anyway. Does that mean this cost order would be granted only in favour of the losing party with
respect to improper or unnecessary act done by the winning party?
Another question is - what is the practical benefit of “summary assessment of costs”? Is it ordered on the
initiative of the Court alone or can either party apply for it?

Q: I am writing to enquire on the topics to be covered in the exam.

Firstly, whether the procedure originating summons will be examined?

Secondly, whether O 12 r 8, dispute the jurisdiction of the court, will be examined?

Thirdly, whether O 11, the service of the writ out of jurisdiction, will be examined?

1. Main Issues: Pre-action and pre-trial discovery; substituted service; legal aid
2. Main issues: defence and counterclaim; third party proceedings; security for costs
3. Main issues: specific discovery; implication of P’s application for legal aid; problem solving.
4. Main issues: procedure for appeal against Master’s decision; fresh evidence on appeal and costs
5. Main issues: Security for costs; Sanctioned Offer and Sanctioned Payment.
6. Main issues: Service and default judgment; enforcement of judgment against individual partners.
7. Main Issues: legal aid, summary judgment and costs
8. Main issues: default judgment and summary judgment
9. Main issues: Appeal and Sanctioned payment and costs
10. Main issues: Prohibition Order, Mareva Injunction, full and frank disclosure.
11. Main issues: Discovery (litigation and legal advice privilege), enforcement against partners,
sanctioned offer and payment, third party proceedings, security for costs and general procedure for
filing A/S and pleadings.

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