Dear all,
Mediation costs & stay of proceedings pending Mediation
I am Natalia Cheung, a Hong Kong International
Arbitration Centre (HKIAC) Accredited Mediator and a practising solicitor in
Hong Kong.
I would like to share with you information on the
principle laid down by the Hong Kong High Court in CY FOUNDATION GROUP LIMITED v LEONORA YUNG and 11 Others (HCA 933/2011) on deciding
the following issues:
(1) how the fees and costs of mediation are to be
shared between the parties;
(2)
whether there should be an interim stay of the proceedings pending mediation
1st issue: Apportionment of mediator’s fees and
mediation costs
In that case, the
plaintiff proposed that the mediator’s fees and the costs of mediation should
be shared and paid by the plaintiff and defendants equally, such that each
party should beresponsible in equal shares for 1/13 of the whole amount of
fees and costs and such costs should not be recoverable as costs of the
proceedings against the losing party (or parties) if mediation fails.
The
defendants disagreed and suggested that the plaintiff on one side and the 1st to 12th
defendants on the other side should
bear half of the fees and costs of mediation, and if the mediation fails, it should be costs in
the cause.
The Court held that the in apportioning mediation fees and cost among the parties for the mediation
service rendered, reference should be made to the value of
the stake of the parties in mediation and the service rendered by the mediator
to the parties on a broad brush basis. It is not appropriate to bog down to detail of time and work for each
of the parties served by the mediator as this will lead to unnecessary satellite disputes among the parties.
The Court held that the plaintiff’s proposal has not taken into account
the value of the plaintiff’s claims and value of its stake in mediation, namely, the aggregate of its claims against all
the defendants, and the fact that
the mediator may have to attend the parties individually as each party may have
his or her own interest for settlement.
The Court also held that the costs for mediation should be in the cause of
the proceedings as it is closely connected with the litigation, citing para.
89-94 of Judgment in Chun Wo Construction & Engineering
Co. Ltd. Fujita Corporation Henryvicy Construction
Co. Ltd trading as Chun Wo-Fujita-Henryvicy Joint Venture v. China Win
Engineering Ltd. HCCT 37/2006)
“89. Section 52A of the
High Court Ordinance empowers the court to determine the costs of and
incidental to all proceedings the Court of First Instance. The issue is whether
costs of the mediation can be regarded as costs incidental to the legal
proceedings…..
92. As a matter of
principle, for the purpose of deciding whether some costs should be regarded as
costs incidental to legal proceedings,
I fail to see any valid distinction between costs
incurred on negotiations and costs incurred in mediation. Both are alternative
means to settle a civil dispute that would otherwise be litigated.
93. In Vellacott v Convergence Group plc [2007]
EWHC 1774 (Ch) Rimer J (as he then was) held that the costs of a failed
post-action mediation were costs incidental to the court proceedings. The
English Court of Appeal made a similar order in Eagleson v Liddell [2001] EWCA Civ 155.
94. It is a question of
fact whether a mediation is so closely connected with a piece of litigation
such that the costs of mediation can properly be described as costs incidental
to a set of legal proceedings. If a mediation takes place a long time ago
before parties commence legal proceedings, the court may be slow to conclude
that the costs of such a mediation should be taxable as costs incidental to the
legal proceedings, see Lobster Group
Ltd v Heidelberg Graphic Equipment Ltd [2008] EWHC 413 (TCC), 6 March
2008.”
On the above basis, the Court decided that the defendants’ suggestion should
be accepted. The Court ordered that:
(i) the
fees and cost of mediation shall be borne by the plaintiff and the defendants
as to one half of the total amount to be paid by the plaintiff and the other
half by the defendants in equal shares, and
(ii) the
costs of mediation, if failed, shall be the costs in the cause.
2nd issue: Interim stay of
proceedings pending mediation
The defendants asked for an interim stay of 90 days
pending
mediation for saving costs while the
Plaintiff did not request for a stay at all.
With reference to paragraph 10 of Resource Development Limited v. Swanbridge Limited HCA1873/2009, the Court
held that in considering whether
a stay should be ordered, it has to take into account what practical benefit there would be if
the proceedings were stayed.
The Court satisfied that there were practical benefits for the parties in granting a
stay of the proceedings pending mediation as the mediation, if successful, would save the substantial costs of the 13
parties for preparing their respective witness statements.
The Court therefore ordered
that there be an interim
stay of the proceedings from the date of filing and serving the Mediation
Minutes until conclusion or termination of mediation.
For further information on mediation, please contact Ms. Natalia Cheung
[(852)-6777 5767]
E-mail: natalia@plaw.hk
Natalia Cheung
HKIAC Accredited Mediator & Hong Kong Solicitor
Pang Kung & Co., HK Solicitors & Notaries & Civil Celebrants of Marriages
Disclaimer: The above is for your information and reference only. The contents do not
constitute legal advice or a substitute for legal advice in individual cases.
