"Suing on Behalf of Consumers: the Hong Kong Experience"
by
Dr. John D Ho
Vice-Chairman, Consumer Council

2. Many consumer disputes fall within the jurisdictional limit of the Small Claims Tribunal, which is supposedly the most user-friendly of all judicial tribunals, in that formality is kept to a minimum and representation by lawyers is not permitted. However, a business that has lost at the Tribunal level may escalate the battle by taking an appeal to the Court of First Instance of the High Court, thereby increasing the financial risk for the complainant. A consumer contemplating legal action must take this very real and unpleasant contingency into account.
   
   
3. Unlike in the U.S., there is no provision for class actions nor contingent lawyers' fees in Hong Kong. In appropriate cases, the Consumer Legal Action Fund ("CLAF") may come to the rescue. In cases where CLAF agrees to provide assistance, at least the consumer's hurdle to justice is lowered by the alleviation of the financial constraint.
   
   
4. However, although CLAF can be invaluable for consumer protection in some cases, in many others it does not provide an effective or efficient solution. First, under current law, the aggrieved consumer is the only party with standing to sue. In a typical situation, when a consumer takes a complaint to the Consumer Council, the Council "intervenes" by mediating with the business. If satisfactory settlement is not reached, it is up to the complainant to take legal action. Neither the Consumer Council nor CLAF can help if he is unwilling to spend the necessary time and effort. Unlike the Equal Opportunity Commission, for example, which has specific legislation giving it power to take legal action in its own name, the lack of similar powers for the Council under the Consumer Council Ordinance is a major obstacle to public interest litigation in the consumer protection arena.
   
   
5. Even with financial assistance from CLAF, many consumers do not pursue justifiable claims when the amount of the individual claim involved is not commensurate with the time and effort they would have to spend. The result is, of course, these cases will never have their day in court.
   
   
6. Second, the present system is ill equipped to deal with cases where the number of complainants is large. A case in point is the 1998 case where the now defunct KPS unilaterally varied its contract with consumer for prepaid coupons. Under what was called the "Burn Coupons Scheme", KPS introduced an expiry date for the coupons. Consumers holding these coupons suffered losses because they were supposed not to ever expire when they were purchased. The records of the Council showed that as at 4^th August 1998 2,443 complaints were received (this number of course did not include consumers who chose not to complain). The average amount of loss for those who complained was $642. To take action at the Small Claims Tribunal, each complainant would have to provide a certified copy of a company search record showing the registered office (if the business was a limited company) or business registration record showing the principal place of business (if it was a partnership or sole proprietorship). In the KPS case, the Small Claims Tribunal, upon request by the Council, cooperated by allowing the use of photocopies of these documents supplied by the Council. Still, the Registrar of the Small Claims Tribunal expressed concern that the Tribunal would be unable to cope with such an upsurge of cases, even as some 800 consumers were looking to the Consumer Council to bring representative actions on their behalf. In cases such as this where large numbers of complainants are involved, problems associated with the enormity of numbers are not solved by representative actions. The case of each complainant must be examined to ensure that the representative plaintiff and the class represented have the same interests at stake, and expenditure of time, effort and money multiplies with the number of complainants. In any case, the would-be fruits of the legal action will be shared by the consumer community at large, rather than reaped by the representative(s) personally. His financial incentive to remain in the action will be dwarfed by the pressures of time and effort that must be borne. Unless his persistence is sustained, perhaps by a sense of civic duty, he may withdraw any time, thereby throwing the cause into chaos.
   
   
7. Mainly as a result of these obstacles, there have been very few cases, if at all, brought under the Unconscionable Contracts Ordinance and the Control of Exemption Clauses Ordinance, despite the legislative intent to protect consumers behind these ordinances. It is not surprising that many businesses virtually discount the threat of potential legal action by consumers.
   
   
8. To protect the interests of consumers effectively and efficiently, the Council is seeking the right to apply in its own name for injunctive and declaratory relief to defend consumer interests and protect consumer rights. The legal powers sought will be restricted to applying for injunctive and declaratory relief, which will serve to prevent losses to consumers before they are incurred. It is conceivable that the Council will take legal action in appropriate cases under these powers even before there are complaints, for example, where a business takes advantage of its superior bargaining position and the lack of competitive alternatives to insert unconscionable terms and conditions into contracts with consumers.
   
   
9. Legislation empowering the Consumer Council to sue in its own name for injunctive and declaratory relief should be welcome because it will be cost effective. In the KPS case, if the Council could have applied for declaratory relief, money, time and effort in dealing with and collecting facts from over 4,500 complainants and 800 applicants for CLAF assistance in respect of a representative action could have been saved. This would have benefited not only the Council but also the complainants as well as consumers affected but chose not to complain.
   
   
10. Of course, the Council will exercise such powers in the prudent manner that has characterized the discharge of its other functions under the Consumer Council Ordinance. If the Council is granted such powers, it will not be the first consumer organisation to be so empowered. Precedents can be found in other jurisdictions like Brazil, Korea and throughout the European Community. It is even recognized in some jurisdictions that such powers are so vital to the welfare of consumers, and indeed of the economy as a whole, that legislation provides that costs are not assessed against the consumer organisations even when their legal actions fail. In the case of Hong Kong, the Council will be the appropriate trustee of such powers. We have the necessary experience, expertise and access to information required to distinguish the meritorious cases from the unmeritorious ones. Preventing injury and loss to consumers will help build their confidence in the goods and services they are supplied, as well as prevent drawn out court battles which must be fought if consumers can take legal action only after suffering losses or injuries.