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How the New Civil Justice Reform Rules will affect the construction industry in Hong Kong

1. Introduction




Following deliberations stretching over a ten year period, a new set of rules for the High Court and the District Court in Hong Kong has been published which will come into force on the 2nd April 2008. Known as the Civil Justice Reform ("CJR") these overhauled rules (the "Rules") are set to change the way parties conduct litigation in Hong Kong and have far reaching implications for construction professionals.

The Rules introduce into Hong Kong some aspects of the English Civil Procedure Rules, which were introduced following a similar root and branch review of the position in England & Wales. The Hong Kong reforms are however selective, "cherry-picking" those aspects of the English reforms which are considered to be successful and suitable for the Hong Kong environment.

In this article we look at the main aspects of the reforms from a practical rather than technical perspective. If any readers are interested in the more technical aspects further details can be found on the Judiciary's website www.judiciary.gov.hk.

The main changes to the rules are as follows:

2. Change in the Courts Approach




Change in the Courts Approach The underlying objectives of the Rules are defined in a new Order 1 A - These objectives underlie the other rules and set out general principles to be adopted in the interpretation and application of the Rules, principally increasing cost effectiveness, ensuring cases are dealt with expeditiously, promoting a sense of reasonable proportion and procedural economy, fairness to the parties, to facilitate settlement of disputes and to ensure the resources of the courts are fairly distributed.

The underlying objectives are reinforced by a new Order 1 B - Case Management Powers which gives the Court far wider powers to manage cases in line with the underlying objectives.

What this will mean to construction disputes is a greater emphasis on case management and the attitudes of judges in the courts to take active control of the court proceedings. For example:

• There will be a greater emphasis on reducing the amount of interlocutory issues before the case goes to trial.
• There will be a greater expectation by judges for parties to comply with the dates. Whilst is it possible for parties to charge intermediate dates for proceedings such as exchange of witness statements, expert reports etc. Judges will be much more reluctant to change the trial date.
• There will be a case management conference (or more than one in complex disputes) where parties will agree or have imposed upon them a timetable and may be asked to estimate the cost of bringing the case to trial.



The result of these new rules is parties will be expected to give accurate predictions for the delivery and timing of the trial (including considering any interlocutory applications), so far more work will have be done at the "front end" by all the parties.

The intention of the front end loading of disputes is to facilitate settlement by forcing parties to fully understand their case and to address issues early rather than the current system where some cases advance through the early stages of the process without anyone really getting to grips with the detail and the last few months before the trial being a flurry of activity.

3. Disclosure




There are also changes to the procedures for discovery and inspection of documents. These enlarge the powers of pre-action discovery.

However, there has been no fundamental change to the underlying principle that discovery of documents relating to a matter in issue including related trains of inquiry should be disclosed. This can be a costly part of the preparation of a case. It may however be that the underlying principles will be operated in smaller and medium size cases to introduce a greater degree of proportionality into this exercise.

4. Streamlining Changes




The Rules will also provide some streamlining changes which are expected to speed up the court process. These including rules which make it more difficult to add new evidence when an appeal is made to a judge from a master.

5. Encouragement of Settlements




One of the most significant changes brought about by the Rules will be the greater emphasis on the early settlement of disputes.

The Rules have introduced a number of new procedures which are intended to encourage the earlier settlement of disputes. These are scattered throughout the Rules and in a new Order, Order 22, which deals with offers to settle and payment into Court. These changes include:

• Greater encouragement of the use of Alternative Dispute Resolution ("ADR") and mediation to resolve disputes.
• A new and radical concept of the Plaintiff making an offer to accept a reduced settlement, which can be taken into account when the costs of proceedings are assessed.
• The simplification of the rules for the assessment of costs, with a view to reducing costs disputes.


6. What about the costs of legal action?




One of the key objectives of the Rules is to reduce the delays and expenses of litigation and this has been done by the courts taking a common sense approach to litigation whereby they have tried to instill a reasonable proportionality objective into the minds of the parties. The courts want to avoid low value disputes generating disproportionally high legal costs.

The Rules have taken a multi pronged approach to this by the following:

• An emphasis on reducing the number of interlocutory issues being brought in front of the court which will result in reduced delays and lower legal costs.
• Dealing will interlocutory issues by paper and not in front of a judge or master thereby negating the need for lawyers and barristers to attend hearings in court.
• The use of joint experts will be encouraged.
• A greater emphasis on case management by judges who will become very resistant to changes in trial dates slipping which will inevitably result in more legal costs.
• Greater emphasis on the early resolution of disputes by encouragement of ADR.
• The Parties understanding that they will now have more significant "up front" costs. It is considered this will encourage clients to settle disputes earlier as they will, understand the timing and cost of the legal process and have greater legal costs at the beginning of their actions.
• Part of the case management by the courts will also include parties being asked an estimate of fees to go to trial. This is so the parties understand early on the full extent of their legal cost in relation to the amount in dispute.


7. What does it mean to the construction industry?




The behavioural changes being adopted in the introduction of the Rules will affect all construction disputes in the following ways:

• Defendants can no longer delay disputes without having to incur significant legal costs and settle just before the cases goes to trial.
• Parties will need to prepare for trials (e.g. preparing witness statements discovery etc) a lot earlier that at present.
• The trial date will be fixed more firmly by the courts and parties will less able to delay proceedings by contesting every point with endless interlocutory applications.
• The use of joint experts for quantum and programming issues rather than experts from both sides and the inevitable "battle of experts" .


8. Conclusion

The introduction of the Rules should be seen as a positive development in the reform of the legal system with an honest attempt by the judiciary to improve the delays and expenses of the legal system in Hong Kong. On the whole the Rules should go some way to achieving these objectives. Only time will tell how successful they will be.