“Fraud exception” abolished under the summary judgment regime in Hong Kong

Jan 2022

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From 1 December 2021, a claimant can make an application for summary judgment in Hong Kong High Court and District Court cases, notwithstanding an allegation of fraud.

What is summary judgment, and how summary is it anyway?

In short, a summary judgment application enables a claimant to obtain judgment against a defendant without the time and expense of going through full length proceedings trial. It is usually only for cases where the defendant has no defence to the plaintiff’s claim.[1] However, when a case involves serious and complex factual disputes, a defendant can defeat a summary judgment application by showing there is a triable issue or an arguable defence against the claimant’s application.  Through a summary judgment, a claimant can avoid discovery, witness statements, expert reports, pre-trial conferences, and trial.

Although this is a “summary” process, it may still take anywhere from 6 to 18 months to see through, depending largely on interlocutory applications and Court and Counsel diaries.

What is the recent change?

Prior to 1 December 2021, a claimant could not have sought summary judgment if its claim was based on an allegation of fraud. The Hong Kong Courts have historically adopted a ‘wide/liberal’ meaning of fraud.[2] Accordingly, fraud victims in Hong Kong have typically been barred from relying on the summary judgment procedure to dispose of cases quickly and must go through a full trial to be granted remedies even if the other party had no defence.

The Judiciary has recently reviewed the appropriateness of the fraud exception in Hong Kong’s modern litigation landscape after the remarks made by the Hon Mr Justice Lam VP (as he then was) in the judgment of Zimmer Sweden AB v KPN Hong Kong Limited & Brand Trading Ltd [2016] 1 HKLR 1016 (“Zimmer”) (see Legislative Council Panel on administration of Justice and Legal Services paper dated 12 August 2021 on “Proposed Amendments to the Rules of the High Court and the Rules of the District Court to Remove the “Fraud Exception Rule” – link here).  As stated in that Paper, the following factors support the removal of the fraud exception:

  • Historically, the fraud exception was linked with the right to have a trial by jury in a fraud case. However, in Hong Kong (and indeed, in England), there is no right to trial by jury in fraud cases;
  • The modern litigation environment in Hong Kong does not justify the fraud exception rule as observed in Zimmer;
  • It is questionable whether arguments that support the fraud exception warrant the deprivation of a claimant’s right to seek summary judgment. The Judiciary notes that the removal of the fraud exception does not mean that summary judgment would be granted in fraud cases where there are triable issues of fact or law or serious defences;
  • Lastly, the fraud exception was abrogated in England in 1992.

What does this mean for clients?

The amendments alleviate the lengthy trial wait time that have affected the Hong Kong Courts in recent years. Before the amendments, many cases involving fraud claims that could have been resolved quickly had to go through trial stage, consuming valuable resources and time from the courts and lengthening the waiting period before a claimant could obtain damages.

That said, as discussed, the usual criteria application to granting summary judgment continues to apply, and a claimant must demonstrate to the court that the other party has no defence before a summary judgment is granted.

[1] Man Earn Ltd v Wing Ting Fong [1996] 1 HKC 225

[2] Pacific Electric Wire & Cable Co Ltd v Harmutty Ltd & Ors [2009] 2 HKC 330 and Zimmer Sweden AB v KPN Hong Kong Ltd & Anor (No 2) [2016] 2 HKC 282

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