Judiciary Proposes To Abolish The “Fraud Exception” In Summary Judgment Applications In Hong Kong.

1 September 2021
 

When the Court of Appeal’s decision of Zimmer Sweden AB v. KPN Hong Kong Ltd and another (CACV 172/2015) was handed down in January 2016,  we considered in our blog post (see link) that the judiciary’s recommendation that the Rules Committee review the appropriateness of keeping the “fraud exception” to a summary judgment application came at an opportune time.
 

Over five and a half years later, the Hong Kong Judiciary gazetted the Rules of the High Court (Amendment) Rules 2021 and the Rules of the District Court (Amendment) (No. 2) Rules 2021 (Amendment Rules) on 20 August 2021.
 

The Amendment Rules seek to make summary judgment available for actions begun by writ in the Hong Kong High Court and District Court which include a claim based on an allegation of fraud. The Amendment Rules will be tabled at the Legislative Council on 25 August 2021 for negative vetting, and will come into operation on 1 December 2021 subject to the completion of the relevant legislative process.
 

Justifications
 

The Legislative Council brief relating to the Amendment Rules cites a number of justifications for the Amendment Rules, stating that:
 

1. there is no practical need to retain the “fraud exception” rule from the perspective of the historical link between its English counterpart and the right to have a trial by jury in fraud cases, as there is no right to trial by jury in a fraud case in Hong Kong;

2. Hon Lam VP had observed in Zimmer Sweden that the “fraud exception” rule could not be justified in the modern litigation environment in Hong Kong;

3. it is questionable whether, in relation to the “fraud exception” rule, the justification of the vindication of a defendant at trial if he is alleged of fraud warrants the deprivation of a plaintiff the right to seek summary judgment even in cases where a defendant only puts forward a token defence and thus obliging the plaintiff to incur all the expenses in respect of a full trial to get relief; and

4. in any event, the English counterpart of the “fraud exception” rule has been abrogated in England since 1992.
    

Comment
 

The number of cyber fraud cases has only continued to grow in recent years, so it is encouraging at the least to see that Hong Kong has indeed taken a step forward to abolish the “fraud exception” to make such (and other related) claims accessible to summary judgment.
 

Assuming the Amendment Rules get past negative vetting and come into operation in December 2021 as planned, we are hopeful that plaintiffs will no longer feel deterred from rightfully initiating claims against fraudsters, given they will not necessarily have to go all the way to trial to obtain relief.