WU YIM KWONG KINDWIND v. MANHOOD DEVELOPMENT LTD

DCCJ 3839/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3839 OF 2012

------------------------

------------------------

________________________

DECISION

________________________

Introduction

1.  By my judgment dated 31 December 2014, I dismissed the claim of the plaintiff and the counterclaim of the defendant.

2.  I was of the view that the defendant remained the substantial winner of the case. I therefore made an order nisi that the plaintiff should bear 80% of the defendant's costs of this action.

3.  By a summons taken out by the plaintiff, the plaintiff sought to vary the order nisi to the effect that there be no order as to costs of this action.

The plaintiff's grounds

4.  The plaintiff based his application on the following circumstances :-

(a) By the Timetabling Questionnaire ("TQ") dated 2 April 2013 filed by the defendant's solicitors, the defendant stated that he "is not willing to settle the case by ADR";

(b) the plaintiff in his TQ dated 2 May 2013 indicated that he was willing to settle the case by ADR. A mediation certificate was filed on 16 May 2013;

(c) the plaintiff restated his willingness to mediate in another TQ dated 9 August 2013;

(d) the defendant again indicated that he was not willing to settle the case in a TQ dated 12 August 2013;

(e) in the defendant's mediation certificate dated 19 August 2013, he again stated that he was not willing to attempt mediation.

(f) by a mediation notice dated 10 April 2014, the plaintiff proposed to appoint a mediator;

(g) by a letter dated 16 April 2014, the defendant refused mediation and stated that there "is really no room for settlement".

The defendant's opposition

5.  Mr Kwong for the defendant submitted that the plaintiff's claim is not for money, otherwise, there might be room for negotiation over the size of the sum claimed or contested and ultimately paid.

6.  Mr Kwong further highlighted the uncooperative attitude of the plaintiff after the discharge of an ex parte injunction by Deputy District Judge Dawes on 13 November 2012 with costs to the defendant. The defendant's solicitors wrote 6 letters to the plaintiff's solicitors for the purpose of agreeing costs in lieu of taxation which were all not responded to.  It was against this background that the defendant made known to the court that he had no intention to settle the case and was not willing to attempt mediation.

7.  Mr Kwong submitted that the defendant has reasonable ground not to engage in mediation.

8.  Mr Kwong's submission ended with a note that the plaintiff had not made any offer of settlement during the course of the litigation.

The legal principles

9.  Paragraph 4 of Practice Direction 31 ("the PD") provides:

"In exercising its discretion on costs, the Court takes into account all relevant circumstances. These would include any unreasonable failure of a party to engage in mediation where this can be established by admissible materials. Legal representatives should advise their clients of the possibility of the Court making an adverse costs order where a party unreasonably fails to engage in mediation."

10.  Paragraph 5 further provides:

"The Court will not make any adverse costs order against a party on the ground of unreasonable failure to engage in mediation where;

(1) The part has engaged in mediation to the minimum level of participation agreed to by the parties or as directed by the Court prior to the mediation in accordance with paragraph 13 of this PD.

(2) A party has a reasonable explanation for not engaging in mediation. The fact that active without prejudice settlement negotiations between the parties are progressing is likely to provide such a reasonable explanation. However, where such negotiations have broken down, the basis for such explanation will have gone and the parties should then consider the appropriateness of mediation. The fact that the parties are actively engaged in some other form of ADR to settle the dispute may also provide a reasonable explanation for not engaging in mediation in the meantime."

11.  Lam J (as he then was) in Golden Eagle International (Group) Ltd v GR Investment Holdings Ltd [2010] 3 HKLRD 273 at para 44 held that under Practice Direction 31, the party refusing mediation bears the burden of providing a reasonable explanation.

Discussion

12.  Since the implementation of Civil Justice Reform in 2009, civil proceedings have to be proceeded in line with the underlying objectives under Order 1A rule 1 of the Rules of the High Court and the District Court. An important feature of the underlying objectives is to facilitate the settlement of disputes. Alternative dispute resolution procedure ("ADR") in the form of mediation is encouraged to be used by the parties to achieve that end.

13.  It should be noted that settlement negotiations between the parties do not amount to ADR: see para 3 of the PD.

14.  Here, it is the common ground that the defendant refused to mediate during the course of the litigation. By virtue of the holding of Lam J (as he then was) in Golden Eagle (supra), the defendant bears the burden of providing a reasonable explanation.

Nature of the claim

15.  The main thrust of the defendant's argument is that the nature of the claim, namely, adverse possession of 2 lots of land, is such that it is not possible to come to a compromise.

16.  With respect, the view taken by the defendant or its solicitors is too simplistic.

17.  The fact that the subject matter of the dispute is 2 pieces of land is no bar to a compromise. I can at once think of different scenario whereby a compromise can be reached. To name a few, the plaintiff may agree to purchase of the subject land from the defendant at an agreed price; the parties may agree to split the ownership of the 2 pieces of land; or the defendant may agree to pay the plaintiff a sum of money in return for the discontinuance of the action.

18.  Golden Eagle (supra) is a case concerning the construction of an agreement. Lam J (as he then was) at para 26 was of the view the dispute was an one-off dispute that did not raise any point of law the determination of which would provide guidance for the future. His Lordship saw nothing which can justify the defendant's refusal to mediate.  

19.  Save for the fact that the nature of the claim is different from Golden Eagle, I am of the view that the reasoning of His Lordship applies equally to the present case.

20.  For this reason, I do not accept that the defendant's explanation for refusing to mediate based on the nature of the claim.

Attitude of the plaintiff

21.  Another reason put forward by the defendant is the uncooperative attitude of the plaintiff in relation to a costs order.

22.  There is little doubt that the plaintiff was not responding to the repeated request of the defendant to agree on costs in lieu of taxation. The attitude of the plaintiff was indeed counter-productive.

23.  However, does it justify the defendant adopting a similar attitude in response?

24.  Litigants must bear in mind that the purpose of the civil proceedings they are engaged in is to resolve a dispute between them. To that end, those involved in litigation should be prepared to explore all possible means of resolving the dispute. More often than not, they may be required to set aside the animosity they may have towards their opponent. Even if the attitude of the opponent has unnecessarily aroused hard feeling, he must not be overwhelmed by such feeling. Or else, the litigation process would be used as the venue of venting their grievances instead of resolving the dispute. Such misuse of the resources of the judicial system should be avoided as far as possible.

25.  Under Order 1A rule 3 of the Rules of the District Court, both the parties to the proceedings and their legal representatives have a duty to assist the court to further the underlying objectives under rule 1. So, in a situation where the lay client is harbouring animosity towards the opponent and is therefore adopting an antagonistic stance, the legal representative is still obliged to advise his client the need to comply with the underlying objectives under rule 1. The legal representative is further obliged to advise his lay client the possibility of the court making an adverse costs order in case of failing to provide a reasonable explanation for refusing to mediate: see para 4 of the PD.

26.  Coming back to the present case, although the plaintiff did not respond to the request to agree on costs, the defendant may still proceed with taxation. The conduct of the parties in the taxation process is governed by Practice Direction 14.3.

27.  Therefore, I can see no reason for the defendant to be affected by the attitude of the plaintiff. Even if the defendant was unhappy with the plaintiff, its legal representative should have advised it the avenue it was entitled to pursue. In my view, the taking of a tit for tat stance by the defendant is totally unnecessary.

28.  For the above reasons, I do not accept the attitude of the plaintiff as complained of by the defendant is a reasonable explanation for refusing to mediate.

No offer of settlement from the plaintiff

29.  The final explanation offered by the defendant is that throughout the litigation process, no offer of settlement was made by the plaintiff.

30.  Negotiation for settlement involves the making of offers by both parties. The process is mutual. Whilst the complaint of the defendant may be true, it cannot be denied that the converse is also true. Therefore, putting the blame on the plaintiff alone is unjustified.

31.  More importantly, settlement negotiation is not the same as ADR: see para 3 of the PD. It cannot be taken as the replacement of mediation. Further, where settlement negotiation has broken down, the parties should consider the appropriateness of mediation: see para 5(2) of the PD.

32.  As Lam J (as he then was) in Golden Eagle (supra) at para 36 pointed out, one must not assume that the process of mediation would not bring about changes in attitudes. Therefore, even if the plaintiff did not take the initiative of commencing settlement negotiation, it cannot be taken as an indication that he was not willing to settle and that any attempt to mediate would be a waste of time. In this regard, I note that the plaintiff had in fact indicated his willingness to mediate in various TQ which was however rejected by the defendant.

33.  As such, I do not accept the lack of settlement offer from the plaintiff is a reasonable explanation for refusing to mediate.

Exercise of discretion

34.  In conclusion, I hold that none of the explanations put forward by the defendant is reasonable explanation for refusing to mediate. It follows that an adverse costs order should be made to reflect the inappropriate conduct of the defendant.

35.  In Kwan Wing Leung v Fung Chi Leung, DCPI 2489/2013, 15/9/2014, after negotiation failed to yield result, the defendant refused to mediate. Deputy District Judge Anthony Chow deprived the defendant's entitlement to costs.

36.  Bearing in mind that the defendant had done nothing in compliance with the underlying objectives of Order 1A rule 1, the appropriate exercise of discretion should be against the defendant.

Order

37.  Accordingly, the costs order nisi is varied to the effect that there be no order as to costs of this action.

Costs of the summons

38.  Costs should follow the event. The plaintiff shall have the costs of the summons.

39.  By summary assessment, I order that the defendant shall pay the plaintiff costs of the summons in the sum of $37,500.