The Hong Kong Court of Appeal recently addressed refusals to mediate in Incorporated Owners of Shatin New Town v Yeung Kui [2010] HKEC176, where the losing party sought to vary a cost order contending that each party should bear its own costs as the winning party had unreasonably refused to mediate. In the Court of Appeal's view, the case was one which ultimately involved a decision on a point of law, and therefore the refusal to mediate was reasonable and not one which should incur costs sanctions.
Facts
In the dispute, the losing party had asked the Lands Tribunal to direct the parties to mediate. The winning party submitted that it was not prepared to participate in the mediation as, in its view, any mediation may not resolve the dispute between the parties but could very well delay it. Moreover, given the dispute concerned the interpretation of a Deed of Mutual Governance, it was in the collective interest of both parties to resolve the dispute formally as soon as possible. According to the Hong Kong practice direction of pilot schemes for building management cases, parties are encouraged to resolve their disputes by alternative means such as mediation. The unreasonable failure by the parties to make a good faith to attempt to mediate will be taken into account by the Lands Tribunal in deciding costs. However, if a party has a reasonable explanation for non-participation he should not suffer any adverse costs order.
Decision
In the Court of Appeal's view, the case was one which ultimately involved a decision on a point of law, namely the correct interpretation of the terms of the Deed of Mutual Governance. The Court of Appeal therefore considered that the refusal to mediate was reasonable and not one which should incur costs sanctions. In making its decision, the Court of Appeal also considered relevant the fact that the winning party's counsel had proposed to settle but the offer was turned down by the losing party's counsel. This case illustrates how the Hong Kong courts will consider refusals to mediate. Where a case ultimately involves a decision on a point of law on which a judgment is required, parties may refuse to mediate and proceed to trial to save overall time and costs.