Summary judgment applications: fraud exception rule to be abolished with effect from 1 December 2021

A plaintiff (or a defendant in a counterclaim) in an action begun by writ may apply for summary judgment against the other party on the basis that the other party has no defence.  This summary judgment procedure enables the plaintiff (or the defendant) to obtain judgment at an early stage in the proceedings without a full trial, thereby minimising costs.  However, it does not apply to certain actions such as an action which includes a claim based on an allegation of fraud (i.e. the fraud exception rule).

Following remarks made by the Honourable Mr. Justice Lam VP (as he then was) in the Court of Appeal case of Zimmer Sweden AB v KPN Hong Kong Limited [2016] 1 HKLRD 1016 questioning the continued existence of the fraud exception rule in Hong Kong’s modern litigation landscape, the Judiciary has reviewed the appropriateness of keeping this exception in Order 14 of the Rules of the High Court (Cap. 4A) and the Rules of the District Court (Cap. 336H) and recommended that legislative amendments be introduced to remove the fraud exception rule.

According to the Legislative Council Brief issued by the Judiciary Administration in August 2021, justifications in support of the removal are as follows:

  • there is no practical need to retain the fraud exception rule as there is no right to jury trial in fraud cases in Hong Kong;
  • the fraud exception rule cannot be justified in the modern litigation environment in Hong Kong (as stated in the Zimmer case);
  • it is questionable whether the potential vindication of a defendant on an alleged fraud claim at trial warrants a plaintiff to be deprived of his right to seek summary judgment, even in cases where the defendant only puts forward a token defence, thus obliging the plaintiff to incur expenses for a full trial in order to obtain relief;
  • the fraud exception rule had been abrogated in England since 1992.

Following the gazette of the Rules of the High Court (Amendment) Rules 2021 and the Rules of the District Court (Amendment) (No. 2) Rules 2021 to remove the fraud exception rule on 20 August 2021, they were tabled at the Legislative Council for negative vetting on  25 August 2021.  Subject to completion of the applicable legislative process, the amendments will come into operation on 1 December 2021.

It is worthwhile to note that the removal of the fraud exception rule does not mean that summary judgment would be granted in fraud cases where there are serious defences or triable issues of fact or law. The usual criteria applicable to granting summary judgment continues to apply.

17 September 2021
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