The Background

In 2009, Hong Kong’s Civil Justice Reform (CJR) was introduced to encourage parties to utilise alternative resolution procedures to facilitate the settlement of disputes.

According to recent HK Judiciary statistics on mediation for CJR-related cases, there was an increase in the use of mediation between 2011 and 2014. Parallel to this, the number of mediators in Hong Kong doubled between 2011 and 2015,   while the settlement rate for mediation has also risen.   

The statistics show that more disputing parties are seeking mediation than in previous years.

In the example below, two business partners appointed a mediator to deal with their employment-related dispute.

The Case

Julian was an employer in a travel agency, and had known Calvin for a long time, as they had previously worked together in a similar company.

To take advantage of Calvin’s existing clientele, Julian had enlisted Calvin as a working partner. As part of their agreement, Calvin was tasked with booking international flights and hotels for a local corporate client with quite a number of staff.

He worked hard, together with Julian’s self-employed staff, but the client complained about the unreasonably high service fees charged by Calvin and other handling staff.

Julian had to offer a substantial discount to the client, and the fee was greatly reduced and then settled.

Afterwards, there was some disagreement among the staff regarding the allotment of service fees, and the differences could not be settled. They argued with each other, which affected the morale of the company. Later, Julian terminated his working relationship with Calvin. Calvin contended that this was wrongful dismissal of his “employment”.

There were some issues on Calvin’s employment status under his working contract with Julian’s company. Calvin argued that Julian knew his previous salary and convinced him to join his company on a basis comparable with this package. Calvin signed the contract and, other than the commission on client sales, felt he was owed months of unpaid salaries.

Julian denied the allegations and contended that no such promise had been made. Calvin was merely a separate contractor partnering with his company.

Wanting to resolve the dispute, they appointed a mediator, who called both parties in a week later. At first, Julian and Calvin did not want to meet as a group, and the mediator thus met with them individually at first.

After several rounds of negotiation, the case was still in deadlock, mainly due to the parties’ different positions on Calvin’s employment status and the basis for calculating his service fees.

Nearing the end of the mediation process, Julian agreed to contact an affiliated company, with which Calvin was able to work. This seemed to break the deadlock, as both parties agreed that it was most important for Calvin to secure a job. At the same time, Calvin agreed to adopt another calculation mechanism for the outstanding service fees.

The mediation was adjourned, pending the revised calculation of the service fees. The case was fully settled within the following six months.

The Implications

The success of mediation in resolving disputes can be measured by either “success rate” or “settlement rate”.

Success rate refers to whether the mediation resulted in an agreement between the parties. Settlement rate defines success more broadly: it includes mediation which resulted in agreement between parties, and cases that can be disposed of within six months after the mediation.

Taking this view, successful mediation might not solely be defined as resulting in an instant final and binding settlement.

The mediation can still be successful if it helps to clarify the issues in the case, as well as the strengths and merits of each position – and, at a later stage, reaches settlement of the dispute without resorting to litigation. It can also reveal the parties’ underlying interests and motives, and assist them to assess the risks of proceeding to trial.

With this changed perception of the success or benefits of mediation, disputing parties are increasingly more willing to attempt mediation. This is even though they are aware that settlement may not be reached instantly, nor guaranteed.

This article appeared in the Classified Post print edition as Turmoil at travel agency requires tactful touch.