Since 1 December 2021, the Rules of the High Court (Cap. 4A) and the Rules of the District Court (Cap. 336H) have been amended to abolish the fraud exception rule in Hong Kong. The amendments have enlarged the scope of summary judgments to cover an action begun by writ, which includes a claim based on an allegation of fraud.
Upon the implementation of the legislative changes, a party with a claim based on an allegation of fraud will be able to apply for summary judgment at an early stage of the proceedings without a full trial, on the basis that the other side has no defence. This change is welcome as it provides a litigant with a more time-efficient and cost-effective way to dispose of legal proceedings.
KEY TAKEAWAYS
- Before 1 December 2021, a writ action with a claim based on an allegation of fraud was excluded from the scope of summary judgment proceedings. This was commonly known as the fraud exception rule.
- The fraud exception rule was repealed on 1 December 2021. Parties whose claims are based on allegations of fraud now have an expedited option to dispose of the proceedings in a case where the counterparty has no defence.
- The removal of the fraud exception rule does not mean that summary judgment will be granted in cases where there are serious defences or triable issues of fact or law. The court will continue to apply the usual criteria for assessing if an application for summary judgment should be granted.
- Litigants should seek advice when seeking summary judgments in complex litigation, and should draft their claims in a succinct and concise manner. Parties need to be cautious when alleging complicated facts, as the complexity of issues raised could increase the risk of triable issues of fact or law.
The amendment rules are an important development and provide litigants with a higher degree of certainty that their cases will not be excluded from the summary judgment proceedings because of some elements of fraud or dishonesty in their allegations. However, applicants still need to satisfy the court that the counterparty has no defence to the applicant’s claim or counterclaim.
This usually involves analysing questions of fact and/or law, which a party should carefully consider before making any application for summary judgment. Litigants who intend to seek summary judgment should seek advice and be cautious when pleading complicated facts, as the complexity of their case may increase the risk of triable issues of fact or law.
Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Howard Wu (Shanghai) at howard.wu@bakermckenzie.com
