Mediation - Recent Court Decisions in Hong Kong

Introduction

• Meditation is a voluntary process where the parties agree to appoint an objective third party (the mediator) to help to resolve the problem out of court. This method of alternative dispute resolution is designed to save time and costs of litigation.
• Since 1 January 2010, solicitors acting for parties are required to file in Court a Mediation Certificate at the same time as the Timetabling Questionnaire. Solicitors are expected to have advised their clients of the possibility of the Court making an adverse costs order where a party unreasonably fails to engage in mediation (see Practice Direction 31 – Mediation)¹
• Here is a link to Practice Direction 31:
  http://legalref.judiciary.gov.hk/lrs/common/pd/pdcontent.jsp?pdn=PD31.htm
• A Mediation Certificate is a document explaining to the Court whether mediation has been attempted and if not, the reasons for not doing so. A Timetabling Questionnaire contains information and estimates concerning the case with a view to facilitating case management by the Court.
• There have been a number of cases in the last eighteen months which show the Court’s approach to mediation.

Recent trends

Is mediation truly voluntary?

• On a very broad level many of the recent cases have attempted to reiterate the voluntary nature of mediation.
• In Pradeep Ramchandra Ghatge v Mukesh Kumar Adukia [2011] HKEC 463, the District Court refused to accede to the request of the Plaintiff for an order that the Defendants proceed with mediation. The Court stated that “for an order relating to mediation to be meaningful, the parties must be willing to be engaged in such an activity. Mediation is a voluntary process.”
• Having said that, parties are expected to have considered attempting mediation at an early stage of legal proceedings.
• In Faith Bright Development Ltd v Ng Kwok Kuen [2010] 5 HKLRD, Registrar Lung of the High Court stated that if the parties could agree to mediate at the Timetabling Questionnaire stage in proceedings, then it would remove the need for many lengthy and costly steps in the litigation process such as witness statements and expert reports. Implicitly, parties are expected to have attempted or arranged mediation before filing the Timetabling Questionnaire.
• Registrar Lung has prepared a checklist to assist solicitors for the preparation of the Case Management Summons. A Case Management Summons is an application to the Court for case management directions when the parties are unable to agree on the directions.
• The following is an extract of the checklist that relates to mediation:
  • Solicitors are reminded to advise clients on costs and to seek information from the Mediation Information Centre at the High Court Building, which is free of charge.
  • Discussion with the solicitor of the other party or parties on the issues of disputes and the best course to take for the resolution of clients’ disputes.
  • Timetable for parties to make arrangement for mediation.
  • Should there be a short stay of the proceedings? If so, for how long? If not, what are the reasons?
  • The further conduct of the proceedings and the best course to take in order to save time and costs if mediation fails.

Stay of proceedings pending mediation?

• Practice Direction 31 provides that the Court may, on the application of one or more of the parties or of its own motion, stay the proceedings or any part thereof for the purpose of mediation for such period and on such terms as it thinks fit, bearing in mind the importance of avoiding, so far as possible, disruption to the milestone dates and of avoiding, save in exceptional circumstances, any postponement of the trial dates.
• In the Faith Bright Development case, Registrar Lung granted a stay in proceedings to allow the parties to mediate.
• In Resource Development Ltd v Swanbridge Ltd [2010] HKEC 841, Registrar Lung considered that when deciding if a stay was required the following question should be asked: "What is the practical effect of a stay of the proceedings?”
• The conclusion drawn is that whether a stay in proceedings is necessary will depend on the particular facts of the case. The Court refused to grant a stay in proceedings in the Resource Development case as the parties were much further along the litigation process and were ready for trial. This can be contrasted with the situation in the Faith Bright Development case as the parties were only in the early stages of litigation.

Choice of a mediator

• If the parties are unable to reach agreement on certain proposals of mediation, they can make a joint application to the Court to resolve their differences (see Practice Direction 31 paragraph 13(1)).
• In Upplan Co Limited v Li Ho Ming (HCA 1915/2009), Registrar Lung attempted to set a standard approach for choosing a mediator when the parties were unable to agree on the choice of a mediator.
• First, the Court will consider all the relevant objective data, in the following priority:
  1. the nature of the matter and the issues for mediation;
  2. the amount involved and the importance of the matter to the parties;
  3. the mediators’ knowledge and experience in respect of the issues in order to determine whether the mediators are the appropriate persons to deal with the issues concerned;
  4. the experience of the mediators in mediation;
  5. the other relevant experiences such as that of legal practice, arbitration or social experience;
  6. the fees and expenses for the mediation;
  7. the availability of the mediators, bearing in mind that mediation will be taking place near the trial; and
  8. other relevant factors.
• Second, on the materials and information before it, the Court will make an assessment of the nominated mediators to determine, on the balance of probabilities, who will most likely be able to conduct the mediation smoothly, successfully and economically.
• Third, the Court will make its rational and dispassionate decision accordingly.
• Although this is a standard approach, the emphasis placed on the objective criteria will differ from case to case depending on the circumstances. The Court will call for an element of flexibility to be exercised when considering these objective criteria. For example in the Swanbridge case the Court stated that the mediators were equal in everything but cost, the price charged by each mediator would become the most important factor in making their decision.

What is the minimum level of participation in mediation?

• Registrar Lung has also considered the minimum level of participation. In Hak Tung Alfred Tang v Bloomberg LP [2010] HKEC 1227 and in the Resource Development case, the parties made applications under Practice Direction 31 for the Court to decide on a minimum amount of time that each party should commit to the mediation process.
• In both cases, Registrar Lung accepted that the minimum level of participation should be left to the discretion of the mediator. He referred to the proposed direction in footnote 4 of Appendix C of Practice Directon 31, which provides that the participation can be up to and including at least one substantive mediation session (of a duration determined by the mediator) with the mediator.
• The Court emphasised that the whole purpose of having the minimum level of participation is to ensure that parties are going to undertake the mediation in a sincere manner. The Court should not impose anything that is more than necessary for the parties to participate as mediation is voluntary and any party may decide to terminate it at any stage of the mediation. To make an inflexible direction about the minimum level of participation may germinate other unnecessary disputes between the parties.
• This indicates that the Court is unwilling to intervene in this matter as the level of mediation which is required to successfully mediate will vary substantially from case to case and will entirely depend on the reasonableness of the parties involved.
• The Registrar stated that parties who agree to adopt mediation to resolve their disputes should adopt a more flexible and cooperative attitude in the arrangement of the mediation so as to save time and costs. Whether one party is acting reasonably in the mediation is something for the determination of a trial judge when he/she has to determine the costs of the matter.

Commentary

Registrar Lung has been keen and proactive in giving directions on mediation and case management. Whilst mediation is still developing in Hong Kong and directions or clarifications from the Court are welcome, it is important for parties in litigation to be given liberty to attempt mediation at their own pace and wishes. After all, mediation should be voluntary and flexible.

Tanner De Witt is experienced in providing partners to act as mediators and in acting for parties in mediation. We have experienced mediators and litigators in our Dispute Resolution Department. Our approach to dispute resolution is pragmatic, sensible and cost effective.

Please contact Mark Side or Pamela Mak if you need legal advice on litigation, mediation or arbitration. You are welcome to contact us if you wish to be considered to be appointed as a mediator for our clients.

July 2011