District Court Guidance Note on Case Settlement Conferences (Part 2) – Some Concerns

Part 2

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. 

Mediation Confidentiality/Privilege

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 to 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 something of a surprise to many practitioners in Hong Kong.

Costs

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.

Going Forward

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 look out and to stay abreast of matters, in order to reduce the prospect of any unwelcome surprises. 

– David Smyth, Senior Consultant and Accredited Mediator

– Charles Allen, Partner and Accredited Mediator, RPC

Jurisdictions

Senior Consultant and Accredited Mediator, RPC

A commercial disputes lawyer with over 35 years' experience, David has extensive experience in handling the defence of professional indemnity, financial lines and other special risks claims as well as advising insurers in relation to such claims.

David has worked on the defence of claims in various jurisdictions including England, Hong Kong, Singapore, Malaysia, the PRC, Taiwan, Bermuda and the BVI.  He also has significant experience in handling regulatory and disciplinary matters.

He has considerable experience providing general risk management advice to professionals such as accountants, solicitors, insurance brokers, surveyors and stock-brokers. 

Most recently, he has been developing a practice as a commercial mediator. David is accredited as a mediator by both the Centre for Effective Dispute Resolution (CEDR) and the Hong Kong Mediation Accreditation Association Limited (HKMAAL).

Partner and Accredited Mediator, RPC

Focusing on commercial disputes, Charles Allen is a solicitor advocate supporting clients in domestic and cross-border litigation as well as in international arbitrations across numerous jurisdictions.

During the course of more than 20 years of practice in Asia, Charles has been involved in a wide range of disputes before the Hong Kong courts as well as in other jurisdictions around the region, including China, Singapore and India. 

Charles also specialises in domestic and international arbitration across a range of industries and has extensive experience under various rules including HKIAC, ICC, LCIA, UNCITRAL and LMAA. He has handled numerous institutional and ad hoc arbitrations as counsel, and has also sat as arbitrator.

Among others, Charles is on the arbitrator panels of the Hong Kong International Arbitration Centre and the Law Society of Hong Kong. He is a Fellow of the Chartered Institute of Arbitrators.

Charles is a versatile and "very sharp and tactical lawyer" who represents clients on a variety of commercial disputes. He acts for a range of clients, including individuals, private and listed companies, multinationals, conglomerates and financial institutions.

He is dual qualified in Hong Kong where he has higher rights of audience in civil matters.