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Settling commercial disputes in Hong Kong

Before resorting to litigation in the courts, the parties in dispute should consider if there is another way to resolve the issues amicably (through alternative dispute resolution procedures such as mediation). Bringing a dispute before the court should be considered as a last resort when all other options have been tried and have failed. While it remains possible for parties to litigation to negotiate an amicable settlement at any stage of the litigation, before the judgment is given, significant costs are likely to have been incurred by then. If despite their best efforts an amicable settlement is not possible, there are two options to consider before commencing commercial litigation.
 
Small Claims Tribunal
 
The Small Claim Tribunal (« SCT ») offers a fast, efficient and low-cost way to sue and recover small amounts claimed in a commercial dispute. It is relatively easy to start a small claim as the rules and procedures are less strict than before other courts. No legal representation is allowed before the SCT, and any legal costs that are incurred in small claims are not recoverable (even by the winning party).
 
The SCT handles various small claims including debt recovery, service charges, damage to property and/or consumer claims, but does not have jurisdiction to hear claims related to wages, land possession, alimony, libel and slander.
 
Monetary claims before the SCT cannot exceed HKD50,000. Claims in excess of HKD50,000, cannot be divided into several separate claims below the HKD50,000 limit in order to bring it within the SCT limit. However, a claim exceeding HKD50,000 can still be pursued before the SCT, if the excess over HKD 50,000 is abandoned by the claimant. Alternatively, the claimant can pursue a claim in excess of HKD50,000 before the District Court which has jurisdiction subject to an upper limit of  HKD 1 million.
 
In addition to defending the claim made against him, a defendant can pursue a counterclaim against the claimant in respect of certain causes of actions related to the initial claim. Should the counterclaim exceed the monetary limits or otherwise fall outside the scope of the SCT's jurisdiction; the whole case (i.e. claim and counterclaim) will be automatically transferred to the District Court.
 
The party losing before the SCT is in principle required immediately comply with the judgment and pay the award accordingly. If it fails to comply with the judgment, the winning party may seek to enforce the judgment through the Bailiff's Office of the Judiciary Tribunal.
 
A party that is not satisfied with a judgment may apply to the SCT for review, or appeal to the Court of First Instance of the High Court (“CFHC”). In such case, the parties are entitled to legal representation. The legal costs can be substantial.  A refusal by the CFHC to grant leave to appeal is final but if leave to appeal is granted by the CFHC accepts to grant leave, then further appeal can be made to the Court of Appeal where the decision is final and binding.
               
District Court
 
The District Court (« DC ») has limited jurisdiction over criminal and civil matters.   
 
Contracts, quasi-contacts or tort claims can be brought before the DC if the amount claimed is over HKD 50,000 but less than HKD 1 million.
 
A claim that does not exceed HKD 1 million, but the defendant counterclaims more than HKD 1 million, the claim and counterclaim is transferred to the CFHC. However, unlike proceedings before the SCT, the DC has the discretion to continue to hear the claim for good reason and (in such case, only the counterclaim is transferred).
 
If the claim exceeds HKD 1 million, it can still be heard by the DC provided that the excess is waived. This can be a practical strategy for a claimant when the excess amount is insignificant, considering that the legal costs before the CFHC are much higher than before the DC.
 
In addition, the DC also has exclusive jurisdiction over employees' compensation cases, recovery of land or premises, distress to recover arrears of rent, sex/disability/family discrimination cases, matrimonial cases, as well as claims in equity.
 
Because the value of claims before the DC and CFHC is much higher and procedures are more complex than before the SCT, legal representation (via a lawyer) is allowed. While legal assistance is not compulsory it is strongly recommended to comply with strict procedural requirements and ensure the best presentation of a party’s case. A party can apply for legal aid in civil cases at the Legal Aid Department and Public Enquiry Service Centers of District Offices. When one or all of the parties are not legally represented, the court usually issues a notice of hearing to give the parties the necessary directions to ensure the just and proper disposal of the action.
 
In the event a party is not satisfied with a judgment of the DC, it can first apply to the judge for leave to appeal to the Court of Appeal of the High Court. If leave to appeal is refused, the party seeking to appeal may apply directly to the Court of Appeal. Unlike before the SCT, no further appeal is possible.
 

Small Claims Tribunal
 
1. Maximum amount claimed: HKD 50,000

2. Scope of compentence:
  • debts; 
  • service charges; 
  • damage to property; 
  • sale of goods; 
  • consumer claims (e.g. claims in relation to goods or services).       
3. Legal representation: Not allowed
 
4. Review: Yes

5. Appeal:
  • Court of First Instance of the High Court;
  • Court of Appeal
6. Execution of judgment: Enforcement through the Bailiff's Office of the Judiciary Tribunal
 
District Court (civil jurisdiction)
 
1. Maximum amount claimed:
  • > HKD 50,000
  • < HKD 1 million
2. Scope of competence:
  • contracts; 
  • quasi-contracts; 
  • torts (including personal injuries); 
  • recovery of land and premises (for which the annual rent does not exceed HKD 240,000);
  • claims in equity such as administration of estate of a deceased person, trust, mortgage, specific performance, maintenance of infant, dissolution of partnership, relief against fraud or mistake. The maximum amount claimed is limited to HKD 3 million where the proceedings relate to land or HKD 1 million if no land is involved;
  • employees' compensation cases (no limit on the amount claimed);
  • sex discrimination, disability and family status discrimination cases;
  • matrimonial cases including divorce, maintenance, custody and adoption of children.
3. Legal representation: Allowed but not compulsory (legal aid available)
 
4. Review: No

5. Appeal:
  • Apply to the judge for interlocutory judgments, non-interlocutory judgments or orders
  • Court of Appeal of the High Court if the judge refuses to grant leave to appeal
6. Execution of judgment: Enforcement through the Bailiff's Office of the Judiciary Tribunal

July 2016

Rosemont in Hong Kong can assist you with these proceedures. Any further inquiries, please contact us.