Introduction
1. The Consumer Council welcomes the Civil Justice Reform - Interim Report and Consultative Paper (the "Interim Report") prepared by the Chief Justice's Working Party on Civil Justice Reform (the "Working Party"). The Interim Report is a significant step towards improving consumer access to the civil justice system in Hong Kong.
2. In handling consumer complaints, we have come across shortcomings of the present system as identified in the Interim Report. These are issues relating to the system's speed in resolving disputes, cost-effectiveness and complexity.
3. Many of the reform proposals put forward in the Interim Report are procedural and are mainly of interest to legal practitioners. In this submission, the Council offers its observations on issues more directly related to consumer concerns.
Overriding objective and Case Management
4. The Council supports in principle the proposal to adopt an explicit overriding objective of dealing with cases justly with a comprehensive case management approach for the civil justice system. We hope that the proposal will achieve its aim of expediting the legal process without compromising justice.
5. Case management addresses the problem of procedural distortions of the present adversarial system and contributes much to expediting a case to trial. However, there may be litigants who file claims without any serious intention of going to trial; they do so for preserving their rights or pressing for settlement. The proposed case management approach may force such litigants to proceed quickly to trial, thus incurring legal expenses which may otherwise be saved. The Council hopes that the Working Party will study the impact of the new proposal on this type of litigants.
Multi-party litigation
6. The Council welcomes and fully supports a procedural scheme to deal with multi-party litigation subject to further investigation of schemes in other jurisdictions including the U.S. class action scheme and the U.K. group litigation order scheme.
7. There is pressing need to reform the present system to adjudicate, more efficiently and justly, large number of similar cases with aggregate claims of substantial amount but of small claim value on an individual basis. In a video shop case, the Council has recorded a total of 4,577 complaints with value of each claim ranging from $10 to $15,100. A more recent kindergarten case gives rise to 112 complaints with value of each claim ranging from $3,800 to $12,200.
8. In introducing a multi-party system there is a need to look at issues including the representation of a definite group, the most cost-effective mode of proceedings, the binding effect of judgment in one case on the other similar cases, the mechanism for any settlement attempt, and the binding effect of any settlement on future member of any of the group.
9. Also, in other jurisdictions, certain public-interest organizations or groups are given standing in court to bring action for worthy causes . The Council is of the view that Hong Kong may benefit from a similar arrangement. Currently the Council is seeking the right to apply for injunctive and declaratory relief for better protection of consumer interests. This is closely related to the proposal for adoption of a procedural scheme dealing with multi-party litigation. The Council urges the working group to study (1) the right to sue conferred on consumer groups or public bodies in other jurisdictions; and (2) how such schemes may be applied in Hong Kong for improvement of consumer protection.
Transparency as to costs
10. The Council recognizes that transparency as to costs is vital for consumers in making an informed choice, improving bargaining position and planning financial exposure in litigation.
11. To inform clients about costs is currently an ethical duty of solicitors enforceable by self-regulatory sanction. The introduction of a statutory duty to disclose the basis and estimate of costs, as exemplified by the Australian jurisdictions, with appropriate sanctions for breach would, in principle, further promote transparency of costs. The Council views further that it is important to stipulate in practical terms the extent and regularity of such disclosures, in consultation with the legal professions.
12. The Council agrees that public access to information as to the pricing of legal service is conducive to market transparency. However, consumers should be made aware that charging rate is not the only factor in considering the choice of lawyers. Experience, competence and expertise are equally, if not more, important factors.
13. The Council recognizes that disclosure of costs by the opposing party in the litigation will reduce uncertainty of potential financial exposure. It may, however, encourage the more resourceful party to engage more senior legal professionals, using the higher fees as a means to exert undue pressure on the other side.
14. The Council emphasizes that information on costs, be it given by solicitors to their own clients or prospective clients, by litigants to the opposing parties or by the legal service industry to the general public, must be accurate, comprehensive, reliable, realistic and current.
Taxation
15. The Council agrees that the present taxation process is disproportionately expensive. We welcomes reforms that are directed at avoiding taxation in appropriate cases, streamlining the taxation procedures and enforcing higher standards of practice with a view to saving taxation costs.
16. Facilitating reasonable challenge of bills of legal costs by consumers through taxation enhances market transparency, improves consumers' understanding of the legal professional charges and protects them from being levied unreasonable fees. Consumers' awareness of the taxation process, availability of taxation at reasonable costs, user-friendliness of taxation to lay people are issues that should also be addressed.
Costs orders
17. The Council notes the shift of emphasis from "costs follow the event" and "costs in any event" to the flexible use of costs awards throughout the proceedings and the court's consideration of the reasonableness of the parties' conduct before and during the proceedings. This is in the interest of consumers, and will encourage reasonable litigation behaviour and avoid unnecessary costs.
18. Moreover, the Council supports the proposed widening of the court's power to make wasted costs orders against solicitors and the proposed extension of such power to cover barristers.
19. Judges will play a key role in this more active approach. Needless to say it is important to provide familiarisation/training to enable them to be fully aware of the new standards and concepts under the proposed reforms.
Problem relating to time-based costs
20. There is a fundamental problem relating to costs which stems from the fact that legal professionals are remunerated on basis of time spent for the representation of clients in legal proceedings. Hence the longer a case drags on, the more fees the legal professional may receive to the disadvantage of the client (who presumably in most cases prefers speedy resolution of the case). For this reason, it is spelt out in professional codes that legal professionals must act in the best interest of their clients and mechanisms exist in the Law Society and Bar Association to review complaints against their members. Moreover, the present proposals relating to taxation procedure and cost orders should be able to address, to a certain extent, such a problem.
21. However, consumers may still encounter difficulties in the following scenarios:
- When consumers are dissatisfied with or doubtful about their lawyer's conduct of their cases, they may find it difficult to obtain a second legal opinion without paying off their first lawyer and incurring additional fees for their new lawyer to examine the case all over again from the beginning.
- Taxation only deals with the reasonableness of professional fees and related charges. It does not, however, examine the course of action taken/advice given. It offers little help for consumers to ascertain whether or not their lawyer has used procedural tactics which escalate legal fees but are unnecessary for speedy resolution of their case.
22. The Council welcomes the Working Party's proposals to increase costs transparency, improve the present taxation process and reform the approach of grant of costs orders. The Council seeks the Working Party's consideration of further effective measures if any to assist consumers in the mentioned scenarios, for example, the adjudicating judge / taxation master to refer cases which may involve professional misconduct to the relevant professional bodies; the Government to review the current law relating to lien to see whether it is working too much in favour of the professionals; the Government to study the U.K.'s conditional fee agreement system and the U.S. contingency fee system (paragraph 36 refers).
Benchmark costs
23. Despite the positive effects that may be brought about by the compilation of benchmark costs, it may have drawbacks on market competition.
24. Compilation of benchmark costs may by default become a form of price fixing. Where market competition is used for determining appropriate fee for service levels, proposals that have the effect of fixing prices at a certain level or within a certain range give rise to problems of market distortion.
25. In jurisdictions with competition law, price fixing is not allowed unless exempted by law or by the relevant competition authority. A process of weighing the potential detriments to consumer welfare against the potential public benefits is employed to determine whether exemption should be granted. Those who argue for price fixing have to clearly indicate the probability of public benefits. Importantly, any price fixing mechanism is subject to a clearly defined review process. This could be as simple as setting a timetable for review, or that any future material change of circumstances would mean a review of the exemption. Moreover, the price fixing mechanism itself would be created in a way to avoid market distortion as little as possible.
26. Notwithstanding the absence of competition laws in Hong Kong, the fact that price fixing distorts the efficient functioning of markets means that the same basic principles as to public debate on appropriate price fixing mechanism and appropriate review mechanism need to be observed.
27. Furthermore, it is also the concern of the Council that benchmark costs may eventually become the floor rather than the ceiling, thus defeating the purpose of restraining costs.
Alternative Dispute Resolution ("ADR")
28. The Council agrees that a court-annexed mediation scheme is an attractive proposal to provide a simpler, cheaper, quicker, more flexible and custom-designed approach for resolving disputes. The Council suggests that a pilot scheme for a few well-defined classes of cases should be implemented before a full-scale reform on ADR is launched.
29. However, it is noted that the advantage of mediation in saving costs depend on the reaching of a settlement. Failing a settlement, the parties have to go back to litigation and the mediation costs will become added costs. This is of more concern if mediation is made mandatory before litigation; mediation costs are inevitable even in cases where the parties are determined not to settle.
30. Parties to arbitration may be legally represented. It is therefore advisable to extend legal aid to arbitration so that the underprivileged will have the benefits of legal aid especially if the other party is represented.
31. Moreover pro bono legal advice and mediation services should be provided to unrepresented litigants and the underprivileged; this would encourage them to resort to mediation before going for litigation.
32. The Council recommends that any ADR reforms to the present system should ensure that the ADR services for consumer cases (e.g. the services of the mediator or arbitrator, the ADR venue) are provided to consumers free of charge.
Further issues of consumer concern
33. The Consumer Council appreciates that the scope of the Interim Report is limited by the Working Party's terms of reference. Nevertheless, the Council would like to take the opportunity to highlight other issues of consumer concern.
District Court and Small Claims Tribunal
34. While the Interim Report proposes reform to procedures in the High Court, a large number of consumer cases fall within the jurisdictions of the District Court and the Small Claims Tribunal. Some problems identified in the Interim Report are equally applicable to the said two lower courts.
35. The Council is aware that a review has been initiated with the District Court, and urges that a similar exercise be conducted on the Small Claims Tribunal where most of the consumer disputes are being heard. [1]
Unrepresented litigants
36. Whilst unrepresented litigants exert pressure on the current legal system, it reflects a problem of consumers' access to justice. The Council views that the most effective way to deal with those litigants is for them to have legal representation. The U.K.'s conditional fee agreement system or the U.S. contingency fee system might solve the problem although it may have other implications. It is recommended that the Government should study the experience of other jurisdictions for devising a system most suitable for Hong Kong. In the meantime, the Council urges the Law Society to explore the feasibility of solicitors' provision of free legal representation in deserving cases.
37. "Unbundled legal assistance" may have its own problems e.g. not all the unrepresented litigants may have the time or education level required to conduct litigation effectively on their own. It is, however, a possible short-term solution to the current problem if no other alternative is available.
38. The court from time to time may invite amicas curiae (a friend of the court) to assist the court. The Council has been involved in a case recently where there a large number of unrepresented litigants with an issue of important public interest . The outcome of this case has since become a precedent under a consumer interest-related ordinance. The Council urges the court to extend, if appropriate, more invitations to amicas curiae in deserving cases. Moreover, in appropriate cases the court may also consider inviting submission of Brandeis brief (a brief containing economic and social surveys and studies in addition to legal principles) from parties interested in the proceedings.
Education
39. The public may expect the civil justice system to administer justice in such a way that the bad will be punished and the good awarded. They may not understand that the system is pragmatic in resolving disputes; however rightful a party's case may be , if the party persists in litigating the case despite reasonable settlement offer, that party will be penalized for costs.
40. From a broader perspective, this highlights the need to improve public understanding of the civil justice system, in particular, its costs implications to litigants.
Conclusion
41. The Consumer Council fully supports the Working Party's proposed reform towards improving consumer access to the civil justice system. For successful implementation of the recommendations, adequate manpower resources, support of and familiarization / training programmes for the judiciary and legal professionals would be essential.
42. The Council appreciates that many of the proposals relate to technical procedural rules concerning the legal professionals. While the inputs of the legal profession are very important in shaping a practical and feasible reform to the present system, the Council hopes that the Working Party will also address consumer concerns such as user experiences/expectations as much as possible. The Council also urges the Government to address the consumer issues highlighted in this submission which are outside the scope of the Interim Report.
1. Please see Appendix 1 for recent development in Australia.
