In a recent case, the Court of Appeal took the opportunity to clarify the lower courts' role when reviewing disputes over taxed costs. In doing so, the Court of Appeal appears to have come to a sensible compromise in allowing some costs that had been approved by the taxing master but disallowed by the judge on review.
The Securities and Futures Commission (SFC) in Hong Kong has been very active in using civil proceedings pursuant to Section 213 of the Securities and Futures Ordinance to seek redress for investors. A recent judgment confirms that the SFC can seek restorative orders not only against parties to impugned transactions, but also against individuals who aid or abet or who are involved.
Integrated bank accounts are very common in financial hubs such as Hong Kong. In addition to sub-accounts categorised by different currencies, an integrated account may also have sub-accounts with other features (eg, credit cards, investments and insurance). A recent case shed light on the approach of the courts to such accounts in the context of enforcement proceedings and rival claims by different judgment creditors.
In Bespark Technologies Engineering Ltd v JV Fitness Ltd the High Court recently took the opportunity to remind liquidators of their duty to give full and frank disclosure when making an ex parte (without notice) application to the court. A failure to do so could have serious consequences, including a refusal to approve the appointment of a liquidator or an order for his or her removal. The duty to be full and frank applies to all ex parte applications, so there are general lessons to be learned.
The Court of First Instance recently considered some of the legal principles surrounding the scope of an auditor's duty to detect alleged irregularities in a company's financial statements and, in appropriate circumstances, to report alleged wrongdoing to the relevant regulatory authorities. The judgment is an interesting review of some of the legal issues involved, including the applicability of the defence of illegality in the context of a claim brought by a liquidator on behalf of a company against its former auditor.
A recent case provides a nice illustration of some of the problems associated with seeking to enforce a judgment debt against money in a bank account. The defendant judgment debtor was a joint account holder together with his brother. The brother successfully applied to discharge a provisional garnishee order obtained by the plaintiff judgment creditor on the basis that, as a matter of law, money held in a joint bank account could not be attached unless both account holders were judgment debtors.
The long-awaited increase in the guideline solicitors' hourly rates adopted for party and party taxation in civil proceedings was announced towards the end of 2017. The new rates came into effect on January 1 2018 and should serve to narrow the gap between successful litigants' incurred and recoverable costs.
Section 740 of the Companies Ordinance can be a powerful tool in assisting shareholders to obtain inspection of a company's documents. Two new cases demonstrate the continued use of Section 740 by shareholders to obtain inspection of corporate documents. While they show that the courts are generally willing to assist shareholders in appropriate cases, the courts will often rein in applications either by limiting the scope of the inspection or imposing conditions to the order granted.
There has been a number of recent cases in Hong Kong in which successful parties have been awarded their costs on a more generous basis against unsuccessful parties – known as an 'indemnity' basis (in contrast to what is commonly called a 'standard' or 'party and party' basis). A recent example in the Court of Appeal is Qiyang Ltd v Mei Li New Energy Ltd. One might be forgiven for sometimes thinking that orders for indemnity costs are a norm, but they are not.
First Asia Finance International Ltd v Tso Au Yim & Yeung appears to be another example of a misconceived claim against a defendant solicitors' firm. In this case, the court held that the solicitors owed no duty of care to the plaintiff company (which was not a client) with respect to the preparation of a settlement agreement. The plaintiff also failed with a claim that it had informally retained the defendant solicitors with respect to the drafting of the settlement agreement.
The Securities and Futures Commission (SFC) has cast a wide net with its use of civil proceedings pursuant to Section 213 of the Securities and Futures Ordinance. Recently, the Court of Appeal dismissed an appeal arising out of the SFC's use of Section 213 proceedings to obtain declarations that three defendants based in Hong Kong had contravened Section 300 of the ordinance by engaging in a deceptive course of business in transactions involving shares listed on an overseas stock exchange.
In Far Wealth Ltd v Lo Ki Mou the High Court dismissed the proceedings as an abuse of process because the plaintiffs could have protected their position by way of a counterclaim in prior proceedings commenced against them by the defendants. While fact specific, it is clear from the judgment that the court was exercising a wide discretion based on the "underlying objectives" of the court rules.
In Competition Commission v Nutanix Hong Kong Ltd a High Court judge recently considered the scope of the 'direct use prohibition' contained in Section 45(2) of the Competition Ordinance, which protects a person who is required to answer questions as part of an investigation by the Competition Commission pursuant to Section 42. The case decides that the protection does not extend to a third party, even where the third party is the subject of the commission's investigation.
Securities and Futures Commission v Sun Min is another recent example of the Securities and Futures Commission using Section 213(2)(b) of the Securities and Futures Ordinance to obtain restitution, in the form of so-called 'restorative' orders, on behalf of counterparties to impugned transactions. What is interesting about this particular case is that the judge expressed some concern as to whether the amount of restoration sought might result in a windfall for the counterparties involved.
Karla Otto Ltd v Bayram is another recent case that has its origins in misappropriated money being transferred from overseas to Hong Kong. The case took several years to get to trial and when it did, the defendants were absent. Whether that absence was a strategic decision on their part or explained by the first defendant's illness became an issue. The case demonstrates that the courts will be careful to scrutinise applications to adjourn a civil trial on the basis of a party's illness.
The High Court of Hong Kong has a wide discretion to grant shareholders access to company documents, pursuant to Section 740 of the Companies Ordinance (Cap 622). The court has been astute in assisting shareholders to protect their legitimate interests by allowing access to company documents while, at the same time, preventing them from launching so-called 'fishing' expeditions. What may amount to fishing, in this context, was recently considered by the court.
The Hong Kong Legislative Council recently passed the Apology Bill with the aim of removing certain legal disincentives for parties to convey an apology in the context of civil disputes. In the footsteps of many overseas jurisdictions which have already adopted apology legislation, Hong Kong is the first Asian jurisdiction to enact this type of legislation, which generally precludes an apology from being taken into account in the determination of fault and liability.
Injunctive relief to freeze a defendant's assets (ie, a Mareva injunction) can extend to third parties under the so-called 'Chabra' jurisdiction where there is good reason to suppose that the assets held by the third parties are in fact assets belonging to the defendant. This jurisdiction is described as exceptional. However, as a recent case demonstrates, while the courts are careful in exercising their jurisdiction in this regard, they will do so in deserving cases.
The Hong Kong Court of First Instance recently ruled that a Chinese state-owned enterprise was not entitled to invoke crown immunity against the execution of a charging order of assets in Hong Kong. The decision provides welcome clarity on the approach that the courts will take in deciding whether, and when, a claim of crown immunity against enforcement of a judgment or an arbitral award might succeed in Hong Kong.
In an age of electronic scams, with money passing through bank accounts in Hong Kong, foreign plaintiffs are increasingly pursuing defendants in Hong Kong to recover their money. In seeking summary judgment, some plaintiffs are careful not to allege fraud on the part of the defendants – rather, their claims may be for the return of money unjustly received by the defendants for no consideration. A recent case is a good example.