In Part 1, we set out the background to the Guidance Note and referred to some of its provisions. At the time of writing, there are several concerns.
WITHOUT PREJUDICE CORRESPONDENCE/NEGOTIATIONS
According to the Guidance Note (paras. 10(d) and 14(a)), the parties should include copies of their prior without prejudice correspondence in a "CSC Bundle" to be delivered to the court for its consideration. While this requirement is not necessarily (on its face) a violation of the principle that communications made for the purpose of settlement are inadmissible in evidence, it is likely to come as a surprise to parties who never anticipated their discussions being revealed to a court official under any circumstances. The legal justification for this is not explained and is far from clear. The assumption appears to be that the parties should take comfort from the fact that a CSC is conducted on a without prejudice basis and the CSC Bundle will not be retained by the court.
As noted, the Master's role is to assist the parties in achieving a settlement. The Guidance Note does not specify what techniques the CSC Master should employ for this purpose, or what (if any) training he or she will have.
The Guidance Note does entitle the CSC Master, however, to review and evaluate "the process of any [prior] without prejudice negotiation … and mediation" (para. 15(c)). It is unclear how this provision fits in with the confidentiality of "mediation communications" or with "mediation privilege", which are important to the mediation regime in Hong Kong (and are selling points in the government's push to promote Hong Kong's ADR and dispute resolution credentials).
The practical value of considering earlier negotiations, as opposed to focusing on the merits, is also unclear. As any experienced mediator knows, there are certain dynamics to a mediation that are essential if it is to work and much depends on the timing of any discussion, such that the approach is right in terms of the parties’ mindset. For example, at a mediation a party might have chosen to share certain information confidentially with the mediator allowing him or her to take such information into account when considering and proposing potential settlement options. There might, however, be very good legal or strategic reasons why a party would not wish to share the same confidential information with a CSC Master, who would presumably (although, this is not spelt out) have to share it with the other party. How would dynamics like this play out at a CSC? A CSC is not a mediation and the CSC Master is not performing the role of a mediator.
The CSC Master's ability to review without prejudice materials, and to consider an earlier mediation process (without the parties' prior agreement), may even lead to disputes and (contrary to what is intended) adversely affect settlement and mediation opportunities in the District Court.
ATTENDANCE OF PARTIES AND RIGHT OF REPRESENTATION
The parties or their representatives must attend the CSC, together with their lawyers (if any). The Guidance Note, however, gives the court a wide discretion to restrict the legal representatives' role at a CSC (paras. 13 and 15(a)), and there is a pointed indication that legal representatives must be "able to fulfil their duties to facilitate settlement". These provisions may come as a surprise to many practitioners in Hong Kong.
The standard practice will be to treat the costs of the CSC as costs in the cause (para. 17). This does not impact the CSC Master's general discretion on costs, however, and (in particular) his or her entitlement to consider "a party's conduct at the CSC".This raises the spectre of a party potentially being penalised simply because, in the court's view, there was an unreasonable refusal to consider or accept a settlement proposal.
According to a Law Society Circular (20-541(PA)), dated 27 October 2020, the Guidance Note takes effect on 2 January 2021. It appears clear that the pertinent provisions of the Guidance Note (dealing with, for example, legal representation and without prejudice communications) have not been endorsed by the relevant Law Society committees.
The President of the Law Society, in her letter to the Society's members dated 23 October 2020, commented:
"… We have not been consulted on the Guidance Notes and the relevant Law Society Committees have not endorsed them. As concerns have been raised, we will keep a close watch on this matter."
Practitioners and litigants involved with civil disputes in the District Court might be well-advised to keep a lookout and to stay abreast of matters, in order to reduce the prospect of any unwelcome surprises.