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The Civil Justice Reforms enacted in Hong Kong in 2009 included, for the first time, the idea that in addition to adjudicating disputes the court should also have a more proactive role in settling them. This sentiment is expressed in Order 1A rule 1 of the revised Rules of the High Court, which provides that one of the underlying objectives of the Rules is facilitating the settlement of disputes. Further, Order 1A rule 4 provides that the court is to further the underlying objectives of the Rules by actively managing cases, which includes encouraging parties to use an alternative dispute resolution ("ADR") procedure, if the court considers that appropriate, facilitating the use of such a procedure, and helping the parties to settle the whole or part of a case.
Subsequently, 1 January 2010 saw the coming into force of Practice Direction 31, which created a framework to assist the parties to litigation and the Court in discharging the duty to settle disputes via an ADR procedure, namely mediation. The Practice Direction imposes a duty upon solicitors to file a Mediation Certificate confirming whether or not their clients are prepared to attempt mediation and, if a party is prepared to mediate, the Practice Direction provides a framework by which the terms on which the mediation is to take place are to be agreed. Whilst mediation is not compulsory, the court has power to make adverse costs orders against parties who unreasonably refuse to engage in mediation. Our experience has been that unless the parties are engaged in settlement negotiations or some other form of ADR, which are likely to be regarded as reasonable explanations for not engaging in mediation, the court will expect the parties to embrace the mediation process. There is a high risk that failing to mediate without any sufficient explanation, or any explanation at all, will cause the court to make an adverse costs order against such a party after a subsequent trial (for further commentary on this particular issue, see our article ).
In the two years since Practice Direction 31 came into force, Deacons' Litigation and Dispute Resolution Department has gained considerable experience of the court driven mediation process. In respect of
non-personal injury cases, of cases mediated, 34% settled during the mediation process, 8% settled shortly after an unsuccessful mediation, and in 58% of cases no settlement was achieved, either at the mediation itself or shortly thereafter. Settlement was therefore achieved in 42% of cases mediated. The subsequent settlement of cases after the parties had failed to settle the matter via mediation tends to suggest that even an unsuccessful mediation can focus the minds of the parties towards settlement.
Practice Direction 31 states clearly that the failure of previous settlement negotiations does not absolve the parties from considering the appropriateness of mediation, and indeed our experience has been that the court will encourage the parties to engage in the mediation process even after extensive without prejudice negotiations have failed. Indeed, some of the mediations that we have been involved in, have resulted in a settlement, despite the fact that the differences between the parties apparent during earlier without prejudice discussions, had made settlement look impossible.
Whilst the mediators appointed in the cases in which we have been involved are mainly solicitors or barristers, we have also seen cases where academics or specialists in a particular field (notably construction) have taken appointments as mediators. The hourly rate charged by a mediator can vary considerably, from less than HK$2,000 by a junior barrister to over HK$5,000 for a partner in a firm of solicitors. The potentially high cost of mediators familiarising themselves with the papers relating to a complex case and the involvement of both parties' legal teams can make the cost of the mediation exercise equate to the cost of an interlocutory application.
In summary, notwithstanding the cost of mediation perhaps being higher than was envisaged when the Practice Direction came into force, it can fairly be said that the reasonable settlement rate that we have seen achieved via mediation, which includes the settling of cases where previous without prejudice negotiations have failed to resolve matters, indicates that the Practice Direction 31 regime has been a useful tool in terms of dispute resolution. Further, the potential costs consequences that may ensue should a party fail to mediate and the proactive nature of the courts in seeking to comply with the underlying objective to facilitate the settlement of disputes, means that mediation will have a role to play in almost every commercial litigation case brought in the Hong Kong courts.
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