Law reform commission backs class action suits

The Law Reform Commission is proposing that Hong Kong allow class action lawsuits, which permit a large group of people to bring a single suit.

The commission said the proposal would widen access to justice but recommended a 'cautious' approach, phasing them in to avoid encouraging a flood of unnecessary litigation. The system should start with consumer cases, 'which would bring within the net potentially the largest segment of cases suited to class actions', it says in a report released yesterday.

Class actions suits, organised by a group of people with the same legal problem and whose claims raise the same questions of law or fact, are most common in the United States, where a string of multibillion-dollar lawsuits against the tobacco industry made headlines.

Connie Lau Yin-hing (left), chief executive of the Consumer Council, welcomed the proposal. 'With the mechanism in place, consumers won't have to fight legal battles with big corporations individually,' she said.

The commission says 35 of 61 submissions on the issue favoured such a mechanism, while the rest were against it or had reservations.

To avoid unnecessary suits and those without merit, the commission recommends class actions should only be accepted if they have been certified by a court, as is the case elsewhere. It recommends that an opt-out approach should be used, meaning those who are defined by the court to be of the same class would automatically be bound by the class action unless they opted out.

The report says a funding system to allow people with few resources to launch class actions would be needed.

'It is generally accepted that a class action regime would achieve little unless there were mechanisms in place to enable plaintiffs with limited funds to take proceedings,' the chairman of the commission's class actions subcommittee, Anthony Neoh, says. 'As a comprehensive funding mechanism is unlikely to be put in place in the short term, the Consumer Council's HK$18 million Consumer Legal Action Fund should be properly injected with resources to make it readily available to fund class actions brought by consumers.'

A campaigner for corporate governance, David Webb, doubted the fund's usefulness, noting that only three out of 143 applications to it were approved in 2009-10.

The Department of Justice said it would take six months to assess the report and decide what to do.