Law and Practice
1. Identifying Assets in the Jurisdiction
1.1 Options to Identify Another Party's Asset Position
There are various options presently available in Hong Kong to identify the asset position of another party by conducting the following public searches either in person or online at the relevant departments of Hong Kong:
- business registration search at the Inland Revenue Department;
- company search (including directorship search) at the Companies Registry;
- land search at the Land Registry;
- trade mark registration search at the Trade Marks Registry; and
- vehicle search at the Transport Department.
Apart from the above publicly available information, freezing orders and ancillary asset disclosure orders are also available by making applications with basis to Hong Kong courts.
A party can also instruct private investigators or external companies to compile search reports which would comprise information which is not publicly available through their own database. For example, a party can instruct them to:
- conduct a landed property transaction search to determine if a party has been involved in any landed property transactions in Hong Kong, so that the relevant land search can be conducted against the property identified to ascertain if the party owns such property; and
- conduct a marriage search to identify the name of a party's spouse if there is any suspicion that the spouse is holding any assets for such party.
2. Domestic Judgments
2.1 Types of Domestic Judgments
The following types of domestic judgments are available in Hong Kong.
A default judgment is a judgment without a trial. It is available where a defendant has failed to file an acknowledgment of service or a defence. It applies where the claim is for liquidated damages, unliquidated damages, detention of goods or possession of land, but not where the claim is not squarely within the four types above.
The defendant may apply to the court to set aside a default judgment after default judgment has been entered against the defendant. This is done by way of summons to a master supported by an affidavit. The rationale behind this is that a default judgment is obtained by reason of the defendant's failure to adhere to the procedural rules, but not on the basis of the court's adjudication of the matter after considering the merits.
When setting aside default judgments, the court distinguishes between an irregular judgment and a regular judgment.
The following scenarios give rise to irregularity:
- bad or ineffective service of the writ;
- premature judgment entered before there had been actual default; or
- where the judgment was obtained fraudulently.
Where the default judgment is obtained irregularly, a defendant is entitled as of right to set aside the judgment.
On the contrary, a defendant is not entitled as of right to set aside a regular default judgment. Instead, the defendant must demonstrate that his or her defence has a real prospect of success. Although not a prerequisite, it is good practice for the defendant to provide a reasonable explanation for his or her default.
A summary judgment is a judgment without a trial. It is available where a defendant has no defence to a claim - ie, if the defence is "inherently unbelievable" or "practically moonshine", or if the defendant has failed to raise a triable issue or question. It applies to every action begun by writ other than:
- an action which includes a claim by the plaintiff for libel, slander, malicious prosecution, false imprisonment or seduction;
- an action which includes a claim by the plaintiff based on an allegation of fraud;
- an Admiralty action in rem.
Summary judgment can be ordered either by the court on its own initiative or upon the litigating party's successful application. A litigating party includes a defendant making a counterclaim. It is within the court's power to enter summary judgment on all or part of the claim or grant leave (with or without conditions) for the defendant to file a defence.
If, however, the defendant succeeds in demonstrating cause against a summary judgment, leave can be granted to the defendant to defend the action either conditionally or unconditionally. The decision whether to grant unconditional or conditional leave is a matter of degree. To secure an unconditional leave to defend, triable issues must be shown, and it must be proven that the defendant's evidence is capable of reasonable belief, and that he or she has a fair or reasonable probability of presenting a real or bona fide defence. Otherwise, where a triable issue has been proven but there is evidence suggesting that the defendant's defence is a sham, or that there is little or no substance in his or her defence, then the court will only grant a conditional leave to defend (eg, the defendant may be required to put up a security).
A final judgment can be obtained for all types of actions, including a claim for a specified amount of money, injunctive relief, specific performance or declaratory relief.
2.2 Enforcement of Domestic Judgments
Domestic judgments, including judgments which are pending appeal (without a stay), are enforceable. However, where the judgments are pending appeal, usually the judgment debtor will apply to the court for a stay of execution of the judgment before the appeal.
The following options and procedures are generally available and involved for enforcing a domestic judgment in Hong Kong.
This is a court order which imposes a charge on any property or securities owned by the judgment debtor to secure the payment the judgment debt. An application for a charging order involves two stages: (i) charging order nisi on ex parte basis (ie, without notice to the other party); and (ii) charging order absolute on inter partes basis (ie, the other party is notified of the hearing).
Firstly, the judgment creditor may apply ex parte with a supporting affidavit to a master in chambers for an order to show cause. The charging order nisi granted shall then be registered immediately with the Land Registry if the charging order is over a landed property, in order to put any third party on notice of the same. A sealed copy of the charging order nisi which specifies the hearing time and date of the return date hearing for further consideration shall then be served on the judgment debtor.
At the inter partes hearing stage, a master in chambers will determine if the charging Order Nisi should be made absolute. The charging order absolute granted should be immediately registered against the landed property with the Land Registry.
After the granting of the charging order absolute, the judgment creditor can make an application for an order for sale of the charged property, assets or securities. The judgment debt can then be discharged using the sale proceeds.
The judgment debtor will be cross-examined on oath by the registrar or such officer as the court may appoint to obtain information on his or her assets. The judgment creditor may apply ex parte with a supporting affidavit to a master in chambers. A sealed copy of the order (which is endorsed with a penal notice stating that if the judgment debtor fails to attend the examination without good cause, the judgment debtor may be arrested and brought before the court for examination) shall be personally served on the judgment debtor ordered to attend the examination. The oral examination will usually be heard by a master in open court.
After the oral examination, and depending on the facts of the case, the following orders can be made by the master:
- an order that the judgment debtor satisfy the judgment debt;
- an order for discovery of further documents;
- an order for further examination; or
- an order for imprisonment.
Writ of Execution and FIFA
A bailiff will seize and sell the judgment debtor's property to repay the judgment debt. The judgment creditor shall first issue a writ of execution. Examples of such writ include:
- a writ of fieri facias - FIFA (to obtain the judgment debt);
- a writ of possession (to obtain repossession of the land);
- a writ of delivery (for the delivery of goods); and
- a writ of sequestration (to enforce judgments that require a person to perform an act within a specified time or abstain from performing any act).
For certain writs of execution, the judgment creditor must apply for leave before issuing the same. After the writ of execution is issued, the judgment creditor is required to make appointment with the Bailiff Office of the Bailiff Section to arrange execution. In case of a FIFA, the bailiff may seize the goods and chattels on the judgment debtor's premises to repay the judgment debt.
This requires a third party (usually a bank) which owes money to the judgment debtor to pay the money owed directly to the judgment creditor. An application for a garnishee order involves two stages - (i) garnishee order nisi on ex parte basis, and (ii) garnishee order absolute on inter partes basis.
First, the judgment creditor may apply ex parte with a supporting affidavit to a master in chambers. A sealed copy of the garnishee order nisi which specifies the hearing time and date shall then be served on the judgment debtor.
The garnishee order nisi becomes effective after it is duly served on the bank, meaning that the bank will be prevented from advancing any repayment of debt owed to the judgment debtor.
At the inter partes hearing, a master in chambers will determine if the garnishee order nisi should be made absolute. Usually, a garnishee order absolute will be made where the bank does not challenge its liability to pay the debt owed to the judgment debtor, or where the bank is absent in the hearing. The bank will then be ordered to pay the money held in the judgment debtor's account(s) directly to the judgment creditor.
This will wind-up the judgment debtor company or bankrupt an individual judgment debtor so that the trustee-in-bankruptcy or liquidator (as the case may be) is empowered to look into the assets and affairs of the judgment debtor.
A judgment debtor is deemed unable to pay its debts if execution of the judgment debt against the judgment debtor is unsatisfied in whole or in part. To commence winding-up/bankruptcy proceedings, the most common ground is to demonstrate that the judgment debtor is insolvent by issuing a statutory demand for payment within 21 days, failing which, the judgment creditor may proceed to present a petition. The court will hear the petition and, if satisfied, grant a winding-up/bankruptcy order. The trustee-in-bankruptcy or liquidator shall be appointed to administer and look into the affairs and assets of the bankrupt, and to distribute the assets to repay the debts according to the priority of the unsecured creditors based on the proof of debt.
Where a judgment creditor is entitled to funds in court, a stop order will prohibit the transfer, sale, delivery out, payment or other dealing with such funds, or any part thereof, or the income thereon.
Where a judgment creditor has an interest in the judgment debtor's securities, a stop order will prohibit the registration of a transfer of such securities, the payment of any dividend or interest in respect thereof, and in the case of a unit trust, any acquisition of, or other dealing with the units by any person or body exercising functions under the trust.
An application for a stop order must be made by summons in the cause or matter relating to the funds in court (ie, in pending proceedings), or, if there is no such cause or matter, by originating summons. The summons must be served on every person whose interest may be affected by the order.
Where a judgment creditor has an interest in the judgment debtor's securities, a stop notice will enable the judgment creditor to be notified of any proposed transfer or payment of such securities. As long as the stop notice has been served and is in force, the entities on which it is served shall not register a transfer of the securities or take any other steps restrained by the stop notice until 14 days after sending notice thereof to the judgment creditor.
An application for a stop notice can be made by filing a notice in the prescribed form with a supporting affidavit. The applicant must then serve an office copy of the affidavit, and a copy of the notice sealed by the court:
- in the case of stock of any body incorporated within Hong Kong, on that body;
- in the case of stock of any body incorporated outside Hong Kong, being stock registered in a register kept in Hong Kong, on the keeper of the register; or
- in the case of units of any unit trust in respect of which a register of unit-holders is kept in Hong Kong, on the keeper of the register.
2.3 Costs and Time Taken to Enforce Domestic Judgments
The costs involved and length of time it takes to enforce a domestic judgment depend on the enforcement action(s) to be taken and whether enforcement is contested. Generally, it would take at least three months at a cost of at least HKD100,000 for an uncontested enforcement action.
2.4 Post-judgment Procedures for Determining Defendants' Assets
The defendant/judgment debtor can be cross-examined under oath to obtain information on what assets he or she holds and where they are located. In addition, where the judgement debtor is wound-up or bankrupt, the liquidator or the trustee in bankruptcy will investigate the assets and affairs of the judgment debtor.
2.5 Challenging Enforcement of Domestic Judgments
A defendant may challenge summary or final enforcement by appealing the judgment and seeking a stay of enforcement. A defendant may challenge enforcement by seeking to set aside the default judgment on the following grounds:
- the defendant was not validly served with the proceedings (eg, a defendant was not physically in Hong Kong when the proceedings were served on him or her, or the proceedings were not served on him or her at their usual or last known address, or the proceedings have been returned to the plaintiff through the post undelivered to the addressee);
- the judgment was entered against a person who was dead or against a company which was dissolved or struck off the Companies' Register at the material time;
- the default judgment has been entered before the expiry of the prescribed time limit for the defendant to serve the acknowledgment of service or the defence;
- where leave is required to enter a default judgment in exceptional cases (eg, against the Government of the Hong Kong Special Administrative Region - SAR), such leave has not been obtained;
- the judgment was obtained by fraud;
- the Hong Kong courts have no jurisdiction over the dispute.
2.6 Unenforceable Domestic Judgments
Generally, all types of domestic judgments can be enforced.
2.7 Register of Domestic Judgments
There is no central register of all judgments in Hong Kong. Certain (reported and unreported) judgments are publicly available online on the website of the Hong Kong judiciary and/or by subscribing to other paid online platforms such as LexisNexis; the court libraries, and the law libraries at certain universities in Hong Kong would also have hard copies of the judgments.
The judgment generally contains the action number, the names of the parties, the date of the hearing, the date of the judgment, the background of the case, the issues in dispute, the submissions made by the parties and the decision made.
Even after a judgment debtor has paid what is owed, he or she is unable to remove the judgment, and the judgment would remain searchable.
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Originally published in Chambers and Partners
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.