a. Practice Direction 31: Mediation

a. Practice Direction 31: Mediation

Encouragement of mediation in civil proceedings 

The Judiciary integrates mediation into the civil justice system through Practice Direction 31 (“PD 31”). PD 31 came into effect on 1 November 2014. While the Mediation Ordinance (Cap. 620) provides the statutory framework, PD 31 outlines the operational expectations for litigants.  

Under Order 1A of the Rules of the High Court (Cap. 4A), the court has a statutory duty to further the underlying objective of facilitating settlement by encouraging and facilitating the use of Alternative Dispute Resolution (ADR). ADR is defined as a process where parties appoint a third party to assist them. Direct settlement negotiations between parties do not constitute ADR in this context. 

Under the court’s active case management powers, the court has a role in encouraging parties to consider alternative dispute resolution, including mediation. The court does not force parties to settle their disputes, but it expects parties to consider mediation seriously where it may be suitable. PD 31 also emphasises that the court has a duty to help parties settle their case, and that the parties and their legal representatives have a corresponding duty to assist the court in discharging that duty. Other relevant Practice Directions echo the same general theme of encouraging ADR and settlement. 

Scope and procedural requirements 

PD 31 applies to all civil proceedings in the Court of First Instance and the District Court which have been begun by writ, except for the following proceedings: 

Court of First Instance 

1. Proceedings in the Construction and Arbitration List 
2. Proceedings in the Personal Injuries List 

District Court 

1. Proceedings in the Personal Injuries List 
2. Proceedings in the Equal Opportunities List under the Sex Discrimination Ordinance (Cap. 480), Disability Discrimination Ordinance (Cap. 487) and Family Status Discrimination Ordinance (Cap. 527) 
3. Proceedings to recover tax under the Inland Revenue Ordinance (Cap. 112) 

To ensure mediation is properly considered, PD 31 mandates several procedural steps: 

• Mediation Certificate: Within 28 days of the close of pleadings, alongside the timetabling questionnaire, legally represented parties must file a Mediation Certificate. This document must be signed by both the solicitor and the client. The solicitor certifies that he has explained the availability of mediation, the content of PD 31, and the cost advantages of mediation over litigation. The party acknowledges his understanding of these points and states whether he is willing to attempt mediation. 

• Mediation Notice and Response: A party wishing to mediate serves a Mediation Notice. The respondent must then serve a Mediation Response within 14 days. 

• Mediation Minute: Where parties reached an agreement on the specific details of a proposed mediation, the agreement is reduced to writing in the Mediation Minute. The Mediation Minute has to be signed by both parties or their solicitors, and filed to the court within 3 days after it has been signed. 

• Court directions: If the parties agree in principle to mediate but cannot agree on the practical arrangements, they may apply to the court for directions. The court may assist only in relation to limited matters, namely: the time for serving the mediation response, the mediation venue, timeframe, fees, and the minimum threshold for attempting mediation. However, the court cannot appoint a mediator or determine the rules of the mediation unless the parties are willing to have the court resolve their differences. 

Costs consequences 

A significant feature of the judicial framework is the possibility of costs sanctions. Courts apply a policy of “soft compulsion”, using their discretion over costs to penalize parties who unreasonably refuse to participate in mediation. If a party unreasonably refuses or fails to engage in mediation, the court may take that conduct into account when making costs orders. 

This means that a party may be penalised in costs if it has acted unreasonably in relation to mediation, even if it is otherwise successful in the litigation. Silence in the face of an invitation to mediate is considered unreasonable. Furthermore, refusing to mediate based on “commercial reasons” or a belief that one has a “strong case” is often insufficient to avoid sanctions. 

However, a party will not necessarily be penalised simply because mediation did not result in settlement. PD 31 and related Practice Directions make clear that the court will not make an adverse costs order against a party on the ground of unreasonable failure to engage in mediation where: 

1. The party has engaged in mediation to the minimum level of participation agreed by the parties or directed by the court before the mediation; or 
2. The party has a reasonable explanation for not engaging in mediation. 

A reasonable explanation may include the fact that active “without prejudice” settlement negotiations between the parties are progressing, or that the parties are actively engaged in some other form of ADR to settle the dispute. However, once such negotiations or the ADR process has ceased or failed, that explanation may no longer be sufficient, and the parties should then consider whether mediation is appropriate. 

In other words, if a party has not engaged in mediation to the agreed or court-directed minimum level of participation, and has no reasonable explanation for not doing so, that party may face an adverse costs order. 

The refusing party bears the burden of proving that he did not unreasonably refuse or fail to mediate.