Sorry Seems to be the Hardest Word

The Hong Kong Department of Justice’s Steering Committee on Mediation has recently published a consultation paper reviewing the legal implications of offering apologies in the context of disputes.

They recommend enacting legislation to encourage disputing parties to apologise without fear of incurring legal liability. The aim is to enhance the chances of early settlement and thus reduce recourse to formal legal action.

But will this deliver the desired goals, and what are the knock-on effects? Julian Copeman, May Tai and Gareth Thomas, who earlier this year surveyed close to 100 clients on the use of mediation in Hong Kong1, highlight the pitfalls such legislation may pose.

The Proposals

An “Apology Ordinance”, if enacted in the manner recommended in the consultation paper, would have far-reaching consequences for users of dispute resolution services and their advisors.

The legislation would render inadmissible all forms of apology (both “partial apologies” which express regret, and “full apologies” which admit liability) from “civil proceedings”. This includes all non-criminal court actions of course, but also tribunals (including arbitral and disciplinary proceedings).

The Steering Committee recommends that apologies should not constitute acknowledgements of rights of action for tolling purposes under the Limitation Ordinance. They also recommend that apologies should have no impact on insurance coverage (for example, by voiding cover through an admission of liability).

Apologies certainly can enhance the chances of settlement, when made in the right circumstances and at an appropriate time. However, apology legislation does not appear to be the most effective way to achieve this goal. The perceived upsides (encouraging morally correct behaviours which in turn enhance settlement) appear to neither be established by precedent nor outweigh the practical downsides.

Apology legislation, if passed in Hong Kong, could serve to:

  • complicate matters for users of dispute resolution processes and their advisors; and
  • detract from the already wide scope to offer apologies (both partial and full) “safely” in the context of Alternative Dispute Resolution (“ADR”) processes, which are confidential and privileged.

Flawed Rationale

Apology legislation in various guises has been enacted in many common law jurisdictions, including the US, Canada, Australia and the UK. However, there is very limited empirical evidence that it has had positive effects.

Academic research conducted in 1987 and 1990 – before the mainstream advent of ADR – is relied on to assess the positive impact of apologies on settlement. More recent literature in fact suggests that apology legislation has not changed cultures, and has been sparsely and inconsistently interpreted by the courts.

A 2012 article cited in the Consultation Paper describes the Canadian legislation (which covers full apologies and mirrors the legislation recommended for Hong Kong) as “almost incognito”. A similar issue exists in Australia too, according to a 2013 article.

Whilst these countries have separate state and territory legislation, the failure of such legislation to change behaviours cannot be explained simply by reference to the federal status of these jurisdictions.

More recent research showing the efficacy of apologies in reducing subsequent legal suits is restricted to the US healthcare sector. In almost all of the cited US states, only limited legislation has been enacted (applicable to partial apologies only, usually within the context of medical malpractice). Some have no apology legislation at all, and cite hospital programmes and policies (as opposed to legislation), as being key.

This suggests that far-reaching legislation is unnecessary to increase the use and efficacy of apologies in appropriate cases. Rather, sector-specific provisions may be sufficient and effective.

The potential application to all forms of civil proceedings (including all tribunals) is also flawed. Support for apology legislation and the circumstances where it has been shown to be helpful is limited. One can see the benefit an apology may serve in a personal injury context, or in a case of alleged medical negligence. However, extrapolating this to the full gamut of disputes (excluding criminal claims), seemingly for the sake of consistency, is undesirable. Such a course presupposes that complainants in all disputes desire an apology. In fact, in practice, it will usually apply in only a limited number of disputes. Whilst it is certainly the case that apologies can unlock other types of dispute (including commercial cases, as successful mediations show), it is disproportionate to apply apology legislation to all forms of dispute.

Complicating the Issue

Legislation should seek to simplify, not complicate matters for those seeking access to justice. A clear definition of “apology“ would seem necessary to remove legal uncertainty. Jurisprudence from other jurisdictions shows that there is no “fail safe” definition that will prevent disputes.

A wide definition and scope is recommended for Hong Kong to enhance clarity, but it is unlikely that this will be the outcome. In fact, satellite litigation is the likely consequence, rather than a reduction in recourse to the courts.

It is difficult to see how litigation can be avoided in circumstances where the proposed legislation renders admissions not admissions, acknowledgements not acknowledgements for limitation purposes, and acceptances of liability not such for insurance purposes.

Despite advances in ADR (particularly mediation) in the territory, Hong Kong remains a litigious jurisdiction, and apology legislation could add fuel to the fire.

The effect of apology legislation on limitation also complicates matters. This focuses on reducing perceived disincentives to offering apologies (time being extended for limitation purposes), rather than the effects such a provision may have.

As has been seen in Canada, detailed legislation would be needed to address tolling. In circumstances where there appears to be little recent evidence that apology legislation enhances settlement, interfering with the Limitation Ordinance is undesirable.

Likewise, the recommendation that apologies (even those admitting liability) should have no effect on insurance coverage, has potentially wide ramifications.

In practice, insurers in Hong Kong tend to agree apologies only in limited circumstances (for example where there has been a clear breach). In complex claims in particular, insurers are likely to counsel against (early) “without prejudice” apologies.

Apologies have worked successfully in conjunction with insurers under the Disclosure, Apology and Offer (“DA&O”) model adopted in some US medical disputes. Physicians and health care organisations are given the opportunity to apologise without fear of their words being later used against them in court. Organisations then work with their liability insurers to give patients a fair and timely offer of financial compensation. However, in these cases, compensation is generally only offered when a root-cause analysis clearly demonstrates that the health provider or system is at fault for a preventable event.

Abuse

The legislation could easily lead to “hollow” or tactical apologies that seek to pressurise complainants/plaintiffs to settle on less advantageous terms.

A (potential) defendant is safe in the knowledge that there will be no legal downsides in admitting fault. A complainant/plaintiff, on the other hand, armed with an open admission of fault by his or her counterparty, is likely to be very surprised to learn that they cannot use this to their advantage should the dispute not settle.

It is one thing to offer a without prejudice admission as its status should be clear. Apology legislation leaves the complainant/plaintiff to adduce evidence of fault in other ways. This does not present justice and is likely to decrease faith in the system, rather than enhance it.

A further issue is presaged in the Apologies (Scotland) Bill and concerns statements of fact presented in a (written) apology, and how these should be treated. Admissible or inadmissible?

The Scottish legislature is in favour of making them inadmissible. This again is open to abuse and may further stifle a complainant’s/plaintiff’s claim. However, the alternative, where only the statements of fact (in a letter) are admissible, but the accompanying apology/admission of liability is not, is equally unpalatable.

This issue highlights the complexities of apology legislation and the scope for confusion and satellite legislation.

Isn’t ADR the answer?

ADR processes are protected by “without prejudice” privilege and enjoy confidential status. Anything said or done, or documents created for their purpose, cannot be relied upon in subsequent litigation or arbitration (except in very limited circumstances).

The Hong Kong Mediation Ordinance, in particular, fully protects confidentiality of communications made for the purpose of a mediation. Outside ADR, without prejudice privilege also attaches to negotiations and communications conducted with a view to settlement.

It seems, therefore, that rather than enacting new legislation, efforts should focus instead on improving understanding of, and support for, ADR processes. More certainly, much still needs to be done to bridge the “knowledge gap” amongst ADR users, but enacting apology legislation is unlikely to enhance recourse to ADR.

A better approach is to rigorously emphasise the myriad ADR processes (some general, others sector-specific) available in the territory, to bring forward the use of ADR (and apologies where appropriate) in all disputes.

In tandem, piloting apology provisions in practice areas where apologies have been shown to be helpful (such as medical malpractice) may be beneficial.

 


1. See Client Perspectives: Mediation in Hong Kong Five Years On, published in the April 2015 edition of Hong Kong Lawyer (http://www.hk-lawyer.org/en/article.asp?articleid=2801&mid=&sid)

 Managing Partner, Herbert Smith Freehills,

Mr. Copeman has over 20 years of dispute resolution experience in England, Hong Kong and elsewhere in all forms of international dispute resolution, particularly in major commercial disputes involving corporate and shareholder disputes, banking and financial matters, cross-border fraud litigation and technology disputes.

China Managing Partner, Herbert Smith Freehills (Hong Kong)

May is managing partner of our Greater China offices. She specialises in cross-border China-related and regional Asian disputes and contentious regulatory matters.

Partner, Herbert Smith Freehills (Hong Kong)