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Jane Moir

Litigators in Hong Kong have never had it so good.

 With corporate problems and restructurings on the rise, the boom times for corporate lawyers advising on expanding empires are being replaced by demand for damage control experts.

  While lawyers acting for Hong Kong's big deal makers have more spare time, the litigators, on the other hand, are working overtime.

 As creditors chase debts amid a general sentiment of either 'can't pay' or 'won't pay', writs are flowing into the High Court at a substantially higher rate since the economic downturn started.

 The amounts involved at present are mostly at the smaller end although lawyers predict the numbers could be about to get bigger.

 Unpaid sums, credit card debts, botched deals, undelivered goods, rent arrears, cashless mortgage owners - there lies the woes of the struggling individuals and companies increasingly unable to stay out of the red.

 Their often equally struggling creditors are apparently champing at the bit to get on with legal proceedings.

 If one house of cards collapses, the pressure is on for other creditors to follow suit.

 Listed company GKC Holdings, for example, has been inundated with High Court writs since the cracks started to appear months ago.

  Figures show that between January and September this year, 16,790 action suits were filed at the High Court's registry, a 40 per cent increase on the same period last year.

  The hardline debt-conscious are chasing paltry sums - the lowest spotted so far was for a comical $500 in unpaid rent.

 The cost of simply filing the writ at the High Court to launch proceedings to recoup this $500 is more than $1,000. If this action succeeded, however, immediate repossession of the premises could be granted.

  Another category of law suit - miscellaneous proceedings - shows a similar trend.

  The list of claims in this category is noteworthy for increasingly reflecting the misfortunes of defaulting mortgage owners. Daily, there are scores of them.

  Again, in the first nine months this year, 5,131 miscellaneous proceedings were filed at the High Court, compared with 3,246 for the same period last year - a 37 per cent increase.

 A leap of 30 per cent has been seen in the number of commercial actions filed during the same period, compared with last year.

  Hong Kong is a case in point that in any recession anywhere, people will opt to stall their debts, according to Johnson Stokes & Master partner Nick Hunsworth.

 While in the past, one bank or company would file 20 writs a month, now they are all filed in a single day.

 For many, the recovery of debt is a matter of policy, recession or not.

  Legal costs, however, are mounting.

 The fee for merely drafting and filing the writ could be in the region of $5,000 to $10,000.

  For the big players, however - the tycoons, the large corporations, the multinationals - jumping into the legal jungle is a last resort, a much-deliberated and cost-conscious option.

  'The storm clouds are gathering,' says Linklaters litigation consultant Michael Bennett.

  Claims up to hundreds of millions of US dollars could be just around the corner.

  An example: swap transactions. Companies which have to deliver more than originally anticipated are getting into hot water.

 Mr Bennett said taking legal action over a cross-section of jurisdictions could be 'throwing good money after bad'.

 'You're talking about litigation that could go on for years and years.'  He said Linklaters was being consulted on 'potential problems' faced by larger companies and the question of which jurisdiction would be the best for their legal action.

  'We're finding a lot of clients are saying, 'if we're going to press the button, where's the best place to proceed?'. It depends where the assets are.'   If clients choose to issue proceedings, 'they have to have a reality check,' Mr Bennett said.

  The heavier workload in the courts is making it increasingly difficult to get a time slot. A four-day hearing is often just not possible.

  Even smaller 15-minute sessions for directions are becoming difficult to obtain.

 Despite the cons, the litigation timetable is ticking for these larger companies, he concedes.

  'There's always a time lag between the recession hitting and litigation getting off the ground,' Mr Bennett said.



Boom time for litigators as debts go bad all over