Hong Kong: Alternative to Class Action – Representative Proceedings

Feb 2021

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Hong Kong’s position – representative proceedings as an alternative to class action

On 28 May 2012, the Law Reform Commission of Hong Kong published a Report on Class Actions (Report), introducing class action regime as one of the law reform initiatives in Hong Kong.

Though a class actions regime is yet to be established in Hong Kong, the Department of Justice (DOJ) has, over the past several years, set-up a cross-sector Working Group to study the Report and to provide recommendations on the way forward for establishing a class actions regime in Hong Kong.

At the time of writing, the only mechanism in lieu of class action available in Hong Kong  is representative proceedings, as provided for under the Rules of High Court (Cap. 4A) (RHC).[1] Representative proceedings/class actions are distinct from general multi-party proceedings (for example, where there are 10 co-plaintiffs joined to a proceeding), as representative proceedings are used in situations where it would be infeasible to name each and every party joined to the proceedings.[2] Where an individual’s claim is too small and may not be worthy of the expense and trouble of suing, under permitted circumstances, he or she may still seek access to justice by aggregating his/her claim with other individuals’ claims in a representative proceeding.[3]

O.15, r.12 of RHC is the main provision governing representative proceedings in Hong Kong

Representative proceedings are commenced under O.15, r.12(1) of RHC, “where numerous persons have the same interest in any proceedings, proceedings may be begun by or against any one of those persons as representing those persons.”

However, proceedings concerning the (i) estate of a deceased; (ii) property subject to a trust; or (iii) construction of a written instrument, are subject to a different set of rules.[4]

Only parties with “same interest’’ can bring a representative proceeding

The “same interest” requirement

To satisfy the “same interest” requirement under O.15, r12 of the RHC, case law has indicated that all   members of the represented group must: [5]

  • have a “common interest”; and
  • have a common grievance; and
  • the relief in its nature is beneficial to all whom are represented.

The first limb of the 3-fold test only requires members within the represented group to share a “common interest” (ie. issue that is common to all members). Accordingly, members who have different degrees of interest in the proceedings may still satisfy this point.[6]  “Common interest” could also be shared in cases where there are separate contracts and/or separated defences among members of the represented party..[7]

“Numerous persons” requirement

The RHC do not prescribe a minimum number of persons required in a representative proceeding.

However, potential applicants should be aware of the purpose of representative proceedings is to “facilitate disposition of cases where naming all parties would make the proceedings unmanageable”.[8]

As a guide, Hong Kong case law has indicated that a  syndicate of only 3 entities is unlikely to satisfy the “numerous persons” requirement.[9] 5 persons will not qualify as “numerous persons” for the purposes of a representative proceeding.[10] At the time of writing, there is no Hong Kong case law on the minimum number of individuals required for representative proceedings, however as reference, it is unlikely for 5 persons to qualify as “numerous persons” in a representative proceeding.[11]

The Court can also assess the eligibility of the representative plaintiff/ defendant during the representative proceedings, particularly when a case has developed in a way that would lead to material changes in position of the parties.[12]

Representative proceedings are generally heard in District Court or High Court

Representative claims valued over HK$75,000 but under HK$3 million are heard in the District Court. The rules governing representative proceedings in the District Court are found in O.15, r.12 of the Rules of the District Court (Cap. 336H). These rules are similar to the RHC.

Representative claims valued HK$3 million or above are heard at the High Court.

The Small Claims Tribunal can also hear representative claims that are valued under HK$75,000.[13]

There is no specific limitation period to commence representative proceedings

The Limitation Ordinance (Cap. 347) provides different limitation periods depending on the nature of the action being brought.

Generally, the limitation period for tortious/contractual claims is 6 years, where personal injury is involved, the limitation period is shortened to 3 years.[14]  No other special limitation rules apply to representative proceedings.

Leave is not required before or after action has begun 

Representative plaintiff(s) (ie. a person or persons claiming to represent numerous other persons in a representative proceeding under O.15, r.12 (1) of the RHC) may commence action against the defendant(s) anytime within the limitation period by way of issuing a writ of summons together with the statement of claim.

This could be done so without leave of the Court. It is generally accepted that a representative plaintiff may be self-elected, and the consent of those represented is not necessary.[15]

The writ of summons should contain the class of members seeking to be represented so that every person represented (though not named) will be regarded as a party to the proceedings. Only the representatives are parties to the proceedings though members of the represented class are bound by the proceedings.

The court has the power to add any party to the proceedings or substitute the representative plaintiff/defendant as it deems necessary.[16]

Usual remedies in civil proceedings available to representative proceedings

Depending on the nature of the claim, parties to representative proceedings can claim the usual remedies available in in civil proceedings.

Some examples of relief sought include:

  • a declaratory relief (eg. a declaration that all members of the class represented are entitled to claim damages);[17]
  • lump sum damages paid by the defendant (where the class members have agreed to the quantum of damages or agreed to distribution of damages on pro-rata basis);[18]
  • injunction; or
  • setting aside contracts on grounds of duress and misrepresentation.

In cases where a representative plaintiff succeeds in his claim to the declaratory relief sought, each member of the class will still need to bring his/her own action separately to prove the damage/loss suffered by him from the date when the cause of action arose.[19] This is particularly so when the damage sought among each member of the represented group is different.[20]

Judgment is only binding on the represented parties

A judgment handed down in a representative proceeding is only binding on all members of the represented group. The judgement cannot be enforced against any person that is not to a party to the proceedings without leave of Court.[21]

Costs and funding of representative proceedings

While represented parties (ie. class members) are bound by the eventual decision in the case, they are not liable individually for the cost.[22] This position may change if a new scheme for multi-party litigation is adopted as recommended by the 2009 Civil Justice Reform.[23]

In terms of funding representative proceedings:

  • there are currently no special rules in Hong Kong. However, contingency fee arrangements are generally not permissible in contentious proceedings in Hong Kong.[24]
  • third party funding in litigation is only allowed in limited circumstances : (i) when the third party also has a legitimate “common interest” in the litigation; (ii) it is for the purposes of promoting access to justice; or (iii) in cases of insolvency proceedings.
  • parties in a representative proceeding may apply for government funding upon satisfaction of the requirements under the Legal Aid Ordinance (Cap. 91).[25]

Future development of class action regime in Hong Kong

Over the years, the Law Reform Commission has recommended an incremental approach in implementing the class action regime in Hong Kong, starting only with consumer cases –dealing strictly with actions that are within the ambit of the Consumer Council of Hong Kong and then extending to cases in other sectors in the coming years.[26]

At the time of writing, there are only a few representative cases reported in Hong Kong. For example:

Ng Hing Yau v City Noble Developments Ltd [2017] HKEC 2470

Where an action was commenced by the 1st and 2nd plaintiffs, suing for their own rights and on behalf of 468 other owners (and former owners), in a proceeding concerning a mixed use residential and non-domestic building.

TND Group Ltd v Lau Chiang Chu, Vivian [2010] 5 H.K.L.R.D. 330.

The 1st defendant was the Honorary Secretary General and Treasurer of the Asian Bowling Federation (“ABF”), an association of members. The plaintiff, TND Group Ltd sued the 1st defendant on their own behalf and on behalf of the members of ABF over a contractual dispute.

Lai Hoi Ping and Another v. Persons Occupying Portions of Nathan Road Near To and Between Argyle Street and Dundas Street to Prevent or Obstruct Normal Vehicular Traffic From Passing and Repassing The Occupied Areas and Others

The plaintiffs were seeking an injunction against people occupying the street. Lai Hoi Ping sued on his own behalf and on the behalf of all other members of Hong Kong Taxi Association (approximately 400 members), whereas Tam Chun Hung sued on his own behalf and on behalf of all other members of Taxi Drivers and Operators Association (approximately 10,900 members).

 

[1] Para. 3 of the Report – Executive Summary.

[2] The spirit of a representative proceeding is to “facilitate disposition of cases where naming all parties would make the proceedings unmanageable”. See also Ng Hing Yau v City Noble Developments Ltd [2017] HKEC 2470 para 8, citing RJ Flowers Ltd v Burns [1987] 1 NZLR 260.

[3] Para. 8.75 and 9 of the Report.

[4] O.15, r.13 of RHC.

[5] Ng Hing Yau v City Noble Developments Ltd [2017] HKEC 2470 para 11.

[6] Ng Hing Yau v City Noble Developments Ltd [2017] HKEC 2470 para 12.

[7] Para. 1.13 to 1.16 of the Report.

[8] Ng Hing Yau v City Noble Developments Ltd [2017] HKEC 2470 para 8, citing RJ Flowers Ltd v Burns [1987] 1 NZLR 260.

[9] Malayan Banking Berhad v China Insurance Co. Ltd [2003] HKEC 708.

[10] Re Braybrook [1916] WN 74.

[11] Re Braybrook [1916] WN 74.

[12] Hong Kong Kam Lan Koon Ltd v Realray Investments Ltd [2005] 1 HKC 565 para 17.

[13] s.21 of the Small Claims Tribunal Ordinance (Cap. 338).

[14] s.4 of the Limitation Ordinance (Cap. 347).

[15] Para. 15/12/7 of Hong Kong Civil Procedure 2021. See also Sung Sheung- hong v. Leung Wong Soo- ching [1965] H.K.L.R. 602.

[16] O.15, r.6 of RHC.

[17] Para. 15/12/4 of Hong Kong Civil Procedure 2021. See also Prudential Assurance Co Ltd v Newman Industries [1981] Ch 229.

[18] EMI Records [1981] 1 WLR 923 (Ch) and Morrison Steamship Co Ltd v Greystoke Castle (Cargo Owners) [1947] AC 265.

[19] Para. 15/12/4 of Hong Kong Civil Procedure 2021. See also Electrical, Electronic, Telecommunication and Plumbing Union v Times Newspapers Ltd [1980] Q.B. 585.

[20] Prudential Assurance Co Ltd v Newman Industries [1981] Ch 229, cited in Chiu Luen Public Light Bus.

Co Ltd v Persons unlawfully occupying or remaining on the public highway [2014] 6 H.K.C. 298 [40]; and TND Group Ltd v Lau Chiang Chu, Vivian [2010] 5 H.K.L.R.D. 330.

[21] O.15, r.12(3) and r.12(4) of RHC.

[22]  The Owners of Cargo Lately Laden on Board The “Cr Pointe Noir” v The Owners of The Ship “Cr Pointe Noire” and Another [1994] HKEC 590 para 19, citing Moon v Atherton [1972] 2 QB 435.

[23] See para. 15/12/41 of Hong Kong Civil Procedure 2021. It is also noted that the equivalent group litigation provisions in UK allows for common costs to be ordered and shared among group litigants in equal shares.

[24] s.64 of the Legal Practitioners Ordinance (Cap. 159).

[25] s.8(1) and s.9(e) of the Legal Aid Ordinance (Cap. 91).

[26] Para. 1.37 of the Report.

 

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