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Jane Moir

ANDRE CHOURAQUI  is a relieved man. He has just completed the financial equivalent of a sky dive. It was an exceptional display of high-risk behaviour and for 18 months the French trader diced with debt. He filed a lawsuit.

It seemed logical at the time. Mr Chouraqui is the managing director of Darton, a company that exports gifts and sundry. The firm was looking to take on additional office space and he contacted his landlord.

An agreement was struck to lease Mr Chouraqui space in the AIA Tower in the New World Centre, Kowloon. He paid a deposit of HK$302,118 as set out in a letter of agreement.

The trader never signed a formal tenancy contract, however, and decided to back out of the deal. He asked for his deposit back. The landlord refused. Mr Chouraqui sued.

When the case went to the District Court, Mr Chouraqui came up against an impressive legal team: two barristers, including leading Senior Counsel Neville Sarony, and a number of solicitors.

The implications of what he was doing hit him: his landlord was a subsidiary of New World Development so he had taken on a very big fish. The other side could afford the best. He was on a budget.

Even at the District Court stage the cost of taking on the property developer was likely to outstrip his claim if Mr Chouraqui lost. And he did.

After a lengthy consultation with his Tuen Mun lawyer, the trader appealed. The court overturned the ruling and found that the New World subsidiary, Hong Kong Island Development, had failed to give any consideration - ie, something in value - in return for the deposit.

Mr Chouraqui's respite was short-lived, however. The developer wanted to fight the battle at Hong Kong's highest court. At this stage, the French trader ran the risk of a daunting legal bill if the other side won.

The landlord went back to the Court of Appeal. The judges threw out a bid to take the case to the Court of Final Appeal, saying: 'First of all, not only is the amount of the claim small, but this court is by no means satisfied that a point of great general or public importance arises . . .'

This, however, was not the end of the line. The property developer took the case directly to the Court of Final Appeal. It took less than a day for the court to throw out the appeal.

'With such a small amount of money, it ends up in the Court of Final Appeal?' Mr Chouraqui asks.

The real peril for the trader lay in the price-tag. Had he lost, Mr Chouraqui would be forced to foot the bill for a large chunk of the developer's legal costs. It would have vastly outstripped the original HK$302,118 claim.

'They thought I would always give up because my legal fees were becoming astronomical,' the trader says. 'In France, you cannot go into millions in legal fees. If you can't afford it, if there is a special case, you can get help from the government.

'My only concern is that it is the reason many people in Hong Kong . . . they never go to fight because they don't want to go to court.'

A judicial think-tank recently attempted to broach the issue of costs by scrutinising 1,113 legal bills submitted to court for examination in the space of a year (1999-2000).

Previously, most information relating to the charges had been anecdotal. Lawyers are reluctant to disclose the figures - either because of client confidentiality or professional privilege, or fear of being undercut by competitors.

The think-tank stressed that although the information constitutes rare 'hard evidence' of fees charged in Hong Kong, it is of limited value. It nevertheless gives a clue to the levels involved.

For example, in cases involving claims of less than HK$120,000, the total costs sought by parties ranged from HK$11,800 to a staggering HK$2.46 million. The median was HK46,400.

The study showed that even those on the winning side are receiving a nasty sting in the tail.

The working party, chaired by Mr Justice Patrick Chan Siu-oi,  found the situation of legal fees in lawsuits involving up to HK$600,000 to be 'dramatically disproportionate'.

'Many claimants, even when successful, had to pay more by way of legal fees and expenses than the sums they recovered,' says the working party report.

The imbalance is less dramatic at the higher end of the scale, but it is still there - for example, cases involving up to HK$3 million in claims involved legal bills of about 16 per cent of the amount recovered. This was despite the fact that many of these cases were concluded short of trial. In cases involving less than HK$120,000 moreover, 58 per cent ended in a default judgment - where a defendant has failed to even respond to a lawsuit.

In gross terms, the study gave an invaluable insight. There were slightly more than 1,000 bills scrutinised and the total costs came to HK$249 million. This represents only one side.

'If one assumes that the other side was also represented and involved one set of costs, that figure may roughly be doubled to arrive at overall costs of about HK$500 million,' the report says.

By comparison, the entire expenditure for the Judiciary during the same year amounted to HK$928 million.

The think-tank has put forward proposals to streamline the litigation process - in particular, stricter management of cases by judges - and in turn hopefully bring down legal fees.

It also hopes to curtail abuses in the system which draw out the litigation process and increase costs.

Yet initiatives aimed at a more immediate reduction in costs for smaller lawsuits - by increasing the jurisdiction of the District Court to HK$600,000 - have already been met with scepticism.

Litigation partner Martin Rogers believes a shift in caseload to the lower court is futile without a radical overhaul of the rules: 'I was disappointed the District Court rules were amended to make them more like the High Court rules.

'If the little people are to benefit, you really want to start at the District Court and rip them [the rules] up.'

Others feel that without a cap on the costs that can be charged or a shift to a contingency fee system in certain cases - where the lawyer takes a cut of the winnings or leaves empty-handed in defeat - the sandwich classes will remain reluctant to litigate.

'That's why shareholders don't put forward their rights. The civil deterrent, having to pay compensation or punitive damages . . . and so the only real detriment is the regulatory side, which is minimal,' says corporate governance lobbyist David Webb.

'You have got to have millions and millions of dollars of investments at stake to make it worth pursuing someone.'

Mr Chouraqui says he would think twice about litigating in Hong Kong again. 'I have to be more careful in the future. I'm not a lawyer, I'm a trader, I'm not versed in the law.'

In particular, nothing prepared him for the potential consequences. 'You know in France, we call it grosse artere.'

Graphic: bill12gbz



Dicing with debt