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Civil litigation now less of a headache

A recent change that allows the District Court and Small Claims Tribunal to hear cases of higher monetary value is welcome news as it enhances access to justice for the public, writes Boase Cohen & Collins Partner Alex Liu.

Hong Kong, 14 January 2019: The rule of law is one of Hong Kong's greatest strengths. Everyone in this city is equal before the law and everyone has access to the justice system. That said, most individuals would hope they never have to use that access because being involved in a legal action, whether as plaintiff or defendant, is usually stressful. Concerns about the outcome of any given case are exacerbated by worries over costs, particularly if a case is complicated and time-consuming.

So it is welcome news that, effective from 3 December 2018, the District Court (DC) and Small Claims Tribunal (SCT) are authorised to hear cases of higher monetary value. It means fewer cases will be sent up to the Court of First Instance (CFI) – which is part of the High Court – where litigation costs are significantly greater. In short, this development enhances access to justice for the public.

Among a string of changes, the general financial limit of the civil jurisdiction of the DC has increased from HK$1 million to HK$3 million while the SCT limit has gone up from HK$50,000 to HK$75,000. The last adjustment to the jurisdictional limit of the DC was in 2003, when it was increased from HK$600,000 to HK$1 million. Before that, in the year 2000, it went up from HK$120,000 to HK$600,000.

Why have these latest changes been implemented? Factors include the respective caseloads of the DC and CFI, which are affected by economic and business conditions, and of course inflation.

In recent years, the total caseload of the CFI and the DC taken together has largely been stable – 39,800 cases in 2010 and 41,300 cases in 2016, representing a moderate increase of about 4% over six years. However, delve deeper and the statistics show that in the CFI, the number of civil cases filed from 2011 to 2016 shot up 22%. In the same period, there was a 2% drop in the total number of civil cases filed in the DC.

The increase in the CFI caseload was particularly significant in respect of mortgage claims, personal injuries (PI) cases and other civil actions. These cases rose by 70% from 2011 to 2016 and, by the latter year, represented 29% of the CFI’s total caseload. Therefore, increasing the DC’s jurisdictional limits not only eases pressure on the CFI, it allows the higher court to concentrate on handling civil cases of greater claim amounts which, as well, are often more complex.

Meanwhile, the DC’s capacity to cope with an increased workload and more complicated cases has improved since the last review 15 years ago. The DC has built up experience in handling more substantive civil litigations, case handling has been streamlined, civil procedure rules have been revamped to be largely comparable with those of the CFI, and the Judiciary has made on-going efforts to enhance the judicial skills and knowledge of judges and judicial officers.

Not only does the increase in the DC’s civil jurisdictional limits allow more litigants to file their claims –especially PI and mortgage actions – thanks to the DC’s lower litigation costs, the move also addresses disproportionality between the amount of a claim and the related costs, thereby ensuring fairer administration of justice.

The Judiciary believes the effects of these changes will be significant. In the CFI, it predicts decreases of 8% in the number of civil cases, 10% in paper applications processed, 13% in interlocutory hearings and 20% in the number of trials. These decreases are expected to be more pronounced in PI and mortgage claims.

Correspondingly, all these categories will increase in the DC – civil cases by 8%, paper applications processed by 12%, interlocutory hearings by 33% and trials by 27%. Again, PI and mortgage claims will be to the fore. The Judiciary is confident the DC can handle the increased workload. It points out that PI cases are usually dealt with on well-established legal principles while the mortgage claims offloaded by the CFI should be similar in nature and complexity to those already handled by the DC.

As for economic factors behind the increase, per capita gross domestic product increased by about 82% between 2003 and 2016 while the cumulative inflation rate during the same period was 41%.

Other changes effective since 3 December include: increasing the financial limit for land matters of the DC from HK$240,000 to HK$320,000 in terms of the annual rent or the rateable or annual value of the land; increasing the limit for the equity jurisdiction of the DC where the proceedings do not involve or relate to land from HK$1 million to HK$3 million; and increasing the limit for the equity jurisdiction of the DC where the proceedings wholly involve or relate to land from HK$3 million to HK$7 million.

In welcoming all these developments, it is worth noting Hong Kong Bar Association concerns about the increased workload for the DC and the need for the quality of judges hearing these higher value cases to be carefully monitored. Certainly, there is a need to bolster resources – judges, judicial officers and support staff – to cope with the additional work.

As stated at the outset, involvement in legal action can be stressful. At least these sensible and logical changes implemented by the Judiciary and formally endorsed by the Legislative Council enhance access to our legal system and, hopefully, ease a few worries.

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Litigation costs are significantly lower in the District Court compared with the Court of First Instance.