G. Stay of court proceedings in favour of mediation

G. Stay of court proceedings in favour of mediation 

In Hong Kong, the court may stay, adjourn, or otherwise manage court proceedings to provide parties with an opportunity to mediate. A “stay” means that the legal proceedings are put on hold, either until a specified date or until a specified event occurs, such as the completion or termination of mediation. However, a stay for mediation is not automatic and remains entirely a matter for the court’s discretion. 

The Mediation Ordinance (Cap. 620) does not grant the Court a specific power to stay proceedings. Instead, the Court’s authority is derived from its inherent jurisdiction and its statutory case management powers under Order 1B, rule 1(2)(e) of the Rules of the High Court (Cap. 4A) or the Rules of the District Court (Cap. 336H). Practice Direction 31 (“PD 31”) further integrates these powers into the civil justice system to ensure settlement is facilitated as part of active case management. 

The court’s discretion 

The court will consider whether a stay for mediation serves a useful and practical purpose. The court will not normally grant a stay merely because the word “mediation” is mentioned. 

In deciding whether to grant a stay, the court applies a “practical benefit” test, considering matters such as: 

• whether mediation has a real prospect of assisting settlement; 
• whether the stay may save costs; 
• whether the application is made at an early or late stage; 
• whether important procedural deadlines have already been fixed; 
• whether a trial date has already been set; 
• whether the stay would cause unfair delay or prejudice; and 
• whether the parties have already had a proper opportunity to mediate. 

A stay is more likely to be granted at an early stage of proceedings, for example before discovery, exchange of witness statements or preparation for trial. At that stage, mediation may save significant legal costs and court time. 

On the other hand, if the case is already ready for trial, the court may be reluctant to grant a stay if it would serve little practical benefit or would disrupt the trial timetable. 

Case management and milestone dates 

Under the Civil Justice Reform, the court has a duty to manage cases actively and to further the underlying objectives of civil procedure. These objectives include dealing with cases justly, cost-effectively and expeditiously. 

The court may encourage parties to use alternative dispute resolution, including mediation, where appropriate. It may also make directions to facilitate mediation. 

However, the court will also be concerned to preserve the litigation timetable. In particular, the court will try to avoid unnecessary disruption to milestone dates, including dates fixed for: 

• a Case Management Conference; 
• a Pre-Trial Review; and 
• the trial, or the period during which the trial is to take place. 

The court is especially reluctant to adjourn a fixed trial date simply because the parties wish to attempt mediation at the last minute. If trial is imminent, the court may require the parties to mediate while continuing to prepare for trial, instead of staying the proceedings altogether. 

A trial date will normally be postponed only for good reason, and late applications for adjournment may be viewed critically. 

Application for a stay for mediation 

Parties seeking a stay should generally apply by way of a case management summons under Order 25 of the Rules of the High Court or Rules of the District Court, ideally following the service of a Mediation Response. The application should be supported by an affidavit exhibiting the Mediation Certificate, Notice, Response, and Minute, alongside an estimate of the expected duration of the proposed mediation. 

In appropriate cases, the court may also raise mediation of its own motion and make suitable case management directions. PD 31 supports the use of mediation and provides a procedural framework for parties to indicate whether they are willing to mediate. 

In practice, the court may order: 

• a short stay of proceedings for mediation; 
• an extension of procedural deadlines; 
• a direction that mediation be attempted by a certain date; 
• a further case management hearing after mediation; or 
• mediation to take place in parallel with ongoing preparation for trial. 

The order may specify that the stay lasts until a particular date, or until the mediation has been concluded or terminated. 

Enforcement of contractual mediation clauses 

Sometimes, a contract contains a dispute resolution clause requiring the parties to attempt mediation before starting court proceedings. This is often called a multi-tiered dispute resolution clause. 

For example, the contract may require the parties to: 

1. negotiate first; 
2. then attempt mediation; and 
3. only then commence litigation or arbitration. 

If such a clause is sufficiently clear and certain, the court will generally give effect to it. The court may stay proceedings commenced in breach of the clause so that the agreed mediation step can take place. 

The reason is that commercial parties are generally expected to honour the dispute resolution procedure they have agreed in their contract. 

However, the clause must be sufficiently certain to be enforceable. A vague clause which merely says that parties should “try to resolve disputes amicably” may not be enough. The court will look at the wording of the clause, including whether it clearly identifies a mandatory process and when that process has been completed or exhausted. 

Where there is a valid contractual requirement to mediate before litigation, the party who started proceedings without complying with it may have to explain why the proceedings should not be stayed.