Jurisdiction - Hong Kong
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Hong Kong – Class Action Reform.

19 Juy, 2012

In May 2012, the Law Reform Commission published a report proposing that a mechanism for class actions should be adopted in Hong Kong.

 
Current Law
 
Under the existing law, the sole machinery for dealing with multi-party proceedings in Hong Kong is a rule on representative proceedings under the Rules of the High Court, which was criticized as restrictive and inadequate by the Chief Justice’s Working Party on Civil Justice Reform in its Final Report in 2004.
 
What is a Class Action?
 
In a class action, a representative plaintiff sues on behalf of himself and all other persons (“the class”) who have a claim in respect of the same (or a similar) alleged wrong and whose claims raise the same questions of law or fact. The need for such a mechanism typically arises where a large number of persons have been adversely affected by another’s conduct, but each individual’s loss is too small to make undertaking individual litigation economically viable. Such circumstances may arise in cases relating to, for example, consumer protection (such as product 
liability and consumer fraud), investor protection (such as securities fraud) or personal injury (such as food poisoning).
 
Key Recommendations
 
The Law Reform Commission made the following recommendations in its report:
 
Certification by the court
 
  • Class actions would only be allowed to continue as class actions if they have been so certified by the court.“
 
opt-out” approach for Hong Kong plaintiffs
 
  • Members of the class from Hong Kong, as defined in the court order, would be automatically bound by the class action unless they “opt out” within the time limits and in the manner prescribed by the court order.
 
“opt-in” approach for non-Hong Kong plaintiffs
 
  • Parties from outside Hong Kong would not be included in the class action unless they take active steps to “opt in” to the action.
 
Phased implementation
 
  • The regime would begin with tortious and contractual claims made by consumers in relation to goods, services and immovable property (“consumer cases”), and in light of the experience gained, the regime may be extended to other cases.
  • The extension of the District Court jurisdiction to hear class actions should be deferred for a period of at least five years until a body of case law of the Court of First Instance on the new procedures has been established.
 
Contingency fees
 
  • There was no change to the recommendation, as set out in the 2007 Law Reform Commission Report on Conditional Fees, that contingency fee arrangements should not be adopted in Hong Kong.
 
Safeguards
 
  • The court would be empowered to order security for costs in appropriate cases to avoid abuse of the process of the court and an impecunious plaintiff acting as the class representative.
  • The court’s criteria for certifying the case based on the “adequacy of the representative” would include, inter alia, the representative claimant’s financial standing and its ability to fund the action and meet any adverse costs award.
 
Next Steps
 
The Hong Kong government has said that it will take six months to assess the report; hence it is likely that the class action regime will not be established for some time. The proposed regime, if adopted, is likely to have a significant effect on resolving product liability disputes. Securities fraud will not be covered within its scope but instead will continue to be pursued by the SFC. 
 
For a copy of the report, please follow the link: http://www.hkreform.gov.hk/en/docs/rclassactions_e.pdf. 

 

 

For further information, please contact:

 
Venantius Tan, Partner, Morrison & Foerster
vtan@mofo.com
 

 

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