OLN

Private Client

How to Settle Civil Disputes: Use of Mediation

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Something must have gone wrong before parties commence civil litigation, whether the problem arises from breach of contract, unpaid invoices, or differing interpretations of terms of the contract. As civil litigation is costly, time-consuming, unpredictable, and at times excruciating for the parties’ peace of mind, it is not uncommon for parties to compromise and settle the civil dispute midway in the litigation proceedings. 

After years of advising and settling civil disputes, this series hope to shed light on the dos and don’ts for parties when they enter into settlement negotiations, and when they eventually sign and execute the settlement agreement.

When parties are in a dispute actively considering for settlement, mediation stands out as a viable and pragmatic process to resolve conflicts while reducing the burdens of prolonged litigation.

Mediation

Mediation is a structured process in which one or more impartial individuals, without adjudicating a dispute or any aspect of it, assist the parties in identifying the issues in dispute, exploring and generating options, communicating with one another and reaching an agreement regarding the resolution of the dispute[1].

Benefits of Mediation

  1. Without prejudice privilege

As codified under section 9 of the Mediation Ordinance (Cap. 620), a mediation communication may be admitted in evidence in any proceedings (including judicial, arbitral, administrative or disciplinary proceedings) only with leave of the Court or tribunal.

The without prejudice privilege allows parties to negotiate freely without fear that their discussions can be used against them in court, encouraging open and honest dialogue. 

  1. Confidentiality

The process of mediation is strictly confidential.

As provided under section 8 of the Mediation Ordinance (Cap. 620), a person must not disclose a mediation communication, except for limited exceptions (e.g. consent of all relevant parties, content of mediation communication is already in the public domain, or disclosure is required by law).

The confidential nature of the mediation ensures that sensitive details remain private, protects the emotional well-being and prevent the public exposure often seen in trials. Confidentiality also affords parties a safety net to frankly disclose their concerns and objectives of the settlement proposal.

  1. Impartiality of the mediator 

The mediator must be impartial and conflict-free. The impartiality of the mediator ensures that all parties would be treated fairly, thereby encouraging honest and open dialogue in the process. The mediator will also actively manage the process, such that the more vulnerable party would not be undermined by the stronger party.

  1. Expertise of the mediator

As parties have the flexibility to decide who to appoint as mediator, mediation offers a distinct advantage by allowing parties to select an industry expert as the mediator, ensuring the facilitator has specialized knowledge relevant to the dispute. 

This expertise enables the mediator to better understand the technical or sector-specific issues at play, fostering more informed discussions and credible solutions that resonate with both sides. For instance, in a construction dispute, a mediator with engineering experience can grasp the nuances of project delays or defects, helping parties navigate complex claims more effectively. By choosing a mediator with the required industry insight, parties can achieve a more tailored and efficient resolution, making mediation a highly beneficial option for settlement.

  1. Costs and time involved 

Costs involved in the mediation process are significantly lower than litigation, addressing financial strain and opportunity costs of scarce resources, making mediation a practical choice halfway through a costly legal battle. Uncertainties and risks of litigation could also be managed.

Conclusion

Mediation should be seriously considered for dispute resolution due to its compelling advantages, including the without prejudice privilege that encourages open negotiation without legal repercussions, confidentiality that safeguards sensitive information from public exposure, the impartiality of the mediator that ensures a fair process, the expertise of the mediator that brings specialized insight to complex issues, and the reduced costs that alleviate financial strain. These benefits collectively provide a practical and humane alternative to litigation, making mediation an effective pathway to settlement that preserves relationships, optimizes resources, and promotes fair outcomes.

Should you have any enquiries regarding civil litigation and commercial agreements, please contact our firm. 

Disclaimer: This article is for reference only. Nothing herein shall be construed as Hong Kong legal advice or any legal advice for that matter to any person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.

[1] Department of Justice. “Mediate First for a Win-Win Solution” 

How to Settle Civil Dispute: Human Cost at Stake

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Something must have gone wrong before parties commence civil litigation, whether they arise from breach of contract, unpaid invoices, or differing interpretations of terms etc. As civil litigation is costly, time-consuming, unpredictable, and at times excruciating, it is not uncommon for parties to compromise their case, and to settle the civil dispute midway in the proceedings.

After years of advising and settling civil disputes, it is hoped that this series can shield light on the dos and don’ts for parties when they enter into settlement negotiation, and when they eventually sign and execute the settlement agreement.

However, what are the relevant factors in play in deciding whether settling is the right move?

One crucial, but often overlooked, factor is the human costs involved.

  1. Opportunity costs of scarce resources and time invested in the litigation

Aside from financial resources, litigation demands time, emotional energy, and focus, often pulling one away from family, work, or health. Especially for private clients, it is no exaggeration that litigation is like their “second job”.

The energy, finances, and focus devoted to a prolonged legal battle may detract from other personal or professional opportunities, making settlement a strategic choice to reclaim those resources and redirect them more productively.

Settling a civil dispute could therefore provide peace of mind to one, allowing you to reclaim your life sooner and to prioritize over other aspects of life.

  1. Interest of family members and loved ones

In deciding whether to settle a case, one important factor to consider is the interest of family members and loved ones, who may be deeply affected by the litigation’s demands. The emotional strain, time commitment, and financial pressures of continuing the case could place a heavy burden on relationships, often making settlement a more compassionate option to prioritize their well-being and restore balance.

For instance, a parent with a young child requiring funds to study abroad may be willing to accept a lesser but immediate settlement sum, in the hope of improving the financial situation of one’s household for upcoming needs. 

  1. Harmony among family members or business partners

It is essential to acknowledge that litigation severely damages the harmony and trust once built among family members or business partners.

The litigation process often unearths painful accusations, long-term grudges, and divides loyalties, leaving behind a legacy of resentment and fractured bonds. Testifying against one another in Open Court marks a point of no return, as parties are usually destined to part ways forever.

Settlement could therefore serve a viable path to prioritize reconciliation and preserve the relationship over the adversarial toll of litigation.

  1. Prevention of emotional turmoil

The uncertainties and risks of litigation bring huge amount of stress to the litigants, especially the case of private client. It is not uncommon to see litigants suffering from insomnia in the nights leading up to trial or even being diagnosed with mental disorder thereby warranting therapy and medication.

Moreover, bringing up sensitive details and trauma into open trial may heighten the emotional turmoil for the litigant involved. The public exposure of personal struggles and traumatic experiences could intensify distress. It would be difficult for a litigant to move on to the next stage of his/her life if he/she is required to testify in open Court the past trauma and be exposed to intimating cross-examination from the opponent’s counsel. 

The stress and anxiety may make settlement a preferable option to alleviate this burden and promote mental well-being.

Conclusion

In deciding whether to settle a case, the human costs of litigation, encompassing the opportunity costs of scarce resources and time invested, the interests of family members and loved ones, the potential disruption of harmony among family members or business partners, and the need to prevent emotional turmoil must be carefully weighed. These factors highlight the profound personal toll of continuing a legal battle, often making settlement a more humane and practical option to mitigate these impacts and foster a healthier resolution for all involved.

Should you have any enquiries regarding civil litigation and commercial agreements, please contact our firm. 

Disclaimer: This article is for reference only. Nothing herein shall be construed as Hong Kong legal advice or any legal advice for that matter to any person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.

How to Settle Civil Dispute: Is the Case Worth Pursuing?

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Something must have gone wrong before parties commence civil litigation, whether the problem arises from breach of contract, unpaid invoices, or differing interpretations of terms of the contract. As civil litigation is costly, time-consuming, unpredictable, and at times excruciating for the parties’ peace of mind, it is not uncommon for parties to compromise and settle the civil dispute midway in the litigation proceedings. 

After years of advising and settling civil disputes, this series hope to shed light on the dos and don’ts for parties when they enter into settlement negotiations, and when they eventually sign and execute the settlement agreement. 

However, what are the relevant factors in play in deciding whether settling is the right move?

Two key factors are costs and financial affordability.

Parties may face significant financial strain as legal costs accumulate rapidly. It becomes critical to evaluate expected future legal expenses against available financial resources to determine whether continuing the case is sustainable or if settlement options should be explored.

1. Incurred and Expected Future Legal Costs: counting the Price of Persistence

Litigation could be costly. By the time the litigation has already progressed to the mid-stage, it is certain that parties may have already spent nonnegligible sums for legal costs, filing fees, and fees for expert reports.

The next pertinent question then becomes: how much more legal costs and disbursements will be incurred?  

Whilst it must be acknowledged that the length of the litigation process itself is uncertain and unpredictable (as it also depends on the actions taken by the opposing party), it is appropriate to consult your solicitor to give an estimate of the costs exposure going forward, based on certain reasonable assumptions.

For instance, in the midway of the litigation, when the witness statements have already been exchanged and parties have also indicated their estimated length of cross-examining the opponent’s witnesses, it is possible to arrive at the number of trial dates to be set down should leave be given. Based on the number of trial dates, it is possible for the legal costs to be estimated in so far as the trial is concerned. 

Armed with the estimated legal costs for the trial, the party could then have a better estimate of the costs that lie ahead. High legal costs could erode the recovery of damages. Weighing incurred and estimated legal costs ensures you’re not throwing good money after bad.

2. Financial Resources: can one afford the fight

Based on the estimated legal costs to be incurred, one could then assess whether one’s financial resources suffice to sustain the upcoming legal costs.

For private clients, draining personal funds may jeopardize daily living expenses or long-term goals like retirement. For businesses, prolonged legal battles could divert valuable financial resources from investment or other more productive activities.

Settlement therefore offers certainty and finality to the dispute, albeit at a lower payout.

Conclusion

In deciding whether to settle a case, incurred and expected costs as well as financial affordability are indispensable considerations to factor. The mounting legal expenses incurred through the process, combined with the litigant’s financial resources, often necessitate a pragmatic evaluation of whether continuing litigation is viable or if settlement offers a more sustainable resolution.

Should you have any enquiries regarding civil litigation and commercial agreements, please contact our firm. 

Disclaimer: This article is for reference only. Nothing herein shall be construed as Hong Kong legal advice or any legal advice for that matter to any person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.

What to do if there is issue regarding Testamentary Capacity?

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BACKGROUND

In our last article, ENSURING TESTAMENTARY CAPACITY FOR AGED AND INFIRM TESTATORS, we have discussed the importance of ensuring testamentary capacity for aged and infirm testators in the will-making process. The next issue then becomes: if we consider that there is issue regarding testamentary capacity, what should we do?

WHAT TO DO IF THERE IS ISSUE REGARDING TESTAMENTARY CAPACITY?

If your solicitor has concerns or doubts about your testamentary capacity, it is always advisable to instruct a medical practitioner to assess testamentary capacity. Whilst it is not necessary for the doctor tasked to be a specialist doctor with experience in diagnosing or treating of mental disorder or mental handicap or to be an Approved Doctor under s. 2(2) of the Mental Health Ordinance (Cap. 136), nevertheless, engaging a mental health expert, especially a psychiatrist, is always preferred and advised.

Usually, the psychiatrist will consider:[1]

1. Understand

Whether you are able to understand the information relevant to decision concerned:

  • Nature and purpose of the will
  • Risks and benefits of executing the will
  • Risks of not signing the will
  • Alternative and their risks and benefits

2. Retain

Whether you are able to retain the information long enough to make an effective decision;

3. Believe

Whether you are able to believe the information and to apply information realistically to own situation;

4. Weigh

Whether you are able to weigh the information in the balance to arrive at a choice – i.e. making a decision based on all the relevant factors (risks, benefits, short term outcomes, and long-term outcomes)

5. Express

Whether you are able to express the choice, through verbal or non-verbal means

If the psychiatrist considers there is testamentary capacity on the testator’s part, it is advisable to adhere to the “Golden Rule”, i.e. to have the psychiatrist to serve as a witness to your will.

HOW CAN OLN ASSIST?

At OLN, we provide initial consultation service regarding wills drafting. Our solicitors are experienced in assessing if the testator has the requisite testamentary capacity. In case of any issue, OLN can arrange mental health specialist doctor to assist in conducting an assessment for client to ascertain his/her testamentary capacity. If you have any questions on the above, please contact our Partner Mr Jonathan Lam or our Associate Mr Dexter Yuen.

[1] Dr. Gabriel B K Hung, “Framework for clinical assessment of mental capacity in older adults” (The Hong Kong Mortgage Corporation Limited, presentation material for HKMC Seminar dated 28th July 2013), available at https://www.hkmc.com.hk/files/page/82/2.%20Framework%20for%20clinical%
20assessment%20of%20mental%20capacity%20in%20older%20adults%20%20Dr.%20Gabriel%20Hung.pdf accessed at 3rd January 2025.


Disclaimer: This article is for reference only. Nothing herein shall be construed as Hong Kong legal advice or any legal advice for that matter to any person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.

Ensuring Testamentary Capacity for Aged and Infirm Testators

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BACKGROUND

Population ageing has become a challenge to most metropolitans in the world. Similar to other developed economies such as the United Kingdom and Japan, Hong Kong is also facing a serious problem of aging population. The phenomenon of population ageing is expected to continue, with the median age of Hong Kong’s population estimated to reach 55.5 in 2046[1]. 

As a result, many people have become more open-minded about the discussion of those end-of-life issues, including will preparation and estate planning.

That said, before you rush to instruct solicitor to prepare a will, you must understand that you can only make a valid will when you have testamentary capacity.

But what does it mean to have testamentary capacity? How far does the assessment exercise go?

TEST ON TESTAMENTARY CAPACITY

The principles set out in the UK landmark authority of Banks v Goodfellow[2] remains the standard for determining testamentary capacity in Hong Kong. When being assessed on testamentary capacity, as a testator you must:

  • understand the nature of the act of making the Will and its effects;
  • understand the extent of the property being disposed of
  • comprehend and appreciate the claims to which you ought to give effect.

In Re Estate of Au Kong Tim (Wills: Validity),[3] the Court of Appeal of Hong Kong emphasised the importance of solicitors following this three-limb test, as well as referring to the checklist in the “Assessment of Mental Capacity: A Practical Guide for Doctors and Lawyers” (the “Checklist”) for assessing testamentary capacity.

THE CHECKLIST

According to the Checklist, the three-limb test is particularised as follows:

1. Understand the nature of the act of making the Will and its effects:

You should understand:

  • you will die
  • your Will shall come into operation on your death, but not before
  • you can change or revoke the Will at any time before your death, provided you have the capacity to do so

2. Understand the extent of the property being disposed of:

You should understand and make choices:

  • who should be appointed as executor(s) (and perhaps why they should be appointed)
  • who gets what under the Will
  • whether a beneficiary’s gift is outright or conditional (for example, where the beneficiary is only entitled to the income from a lump sum during his or her lifetime, or is allowed to occupy residential property for the rest of the beneficiary’s life)
  • that if you spend your money or give away or sell your property during your lifetime, the beneficiaries might lose out
  • that a beneficiary might die before you
  • whether you have already made a Will and, if so, how and why the new Will differs from the old one

3. Comprehend and appreciate the claims to which the testator ought to give effect:

Crucially, the judge in Banks v Goodfellow used the word extent, rather than value. There could also be practical difficulties when investments are managed by somebody else, and there are no recent statements or valuations.

In these cases, a reasonableness test should be applied by your solicitors to any estimate you give about the extent of your wealth.

You should understand:

  • the extent of all the properties owned solely by you
  • the fact that certain types of jointly owned properties might automatically pass to the other joint owner, regardless of anything that is said in the will
  • whether there are benefits payable on your death which might be unaffected by the terms of their will (insurance policies, pension rights, etc)
  • that the extent of your properties could change during their lifetime

4. Potential claim of others:

You should be able to comprehend and appreciate the claims to which you ought to give effect. As a testator, you have the right to ignore these claims, despite being up to the extent of being prejudiced or capricious. You must be able to give reasons for preferring some beneficiaries and, perhaps, excluding others. For example possible beneficiaries:

  • may already have received adequate provision from you
  • may be financially better off than others
  • may have been more attentive or caring than others
  • may be in greater need of assistance because of their age, or physical or mental disabilities

HOW CAN OLN ASSIST?

At OLN, we provide initial consultation service regarding wills drafting, as well as advisory work regarding testamentary capacity. Our solicitors are experienced in assessing if the testator has the requisite testamentary capacity. In case of any issue, OLN can arrange mental health specialist doctor to assist in conducting an assessment for client to ascertain his/her testamentary capacity. If you have any questions on the above, please contact our Partner Mr Jonathan Lam or our Associate Mr Dexter Yuen.

[1] Yiu, William and Ng, Kang-Chung, “Hong Kong going grey faster than expected, sparking fears over healthcare, calls for new retirement policies” (South China Morning Post, 17 August 2023), available at https://www.scmp.com/news/hong-kong/society/article/3231335/hong-kong-going-grey-faster-expected-sparking-fears-over-healthcare-calls-new-retirement-policies, accessed on 8 January 2025.

[2] (1870) LR 5 QB 549.

[3] [2018] 2 HKLRD 864.

Disclaimer: This article is for reference only. Nothing herein shall be construed as Hong Kong legal advice or any legal advice for that matter to any person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.

Breaking the Hell’s Gate and the Importance of Funeral Arrangement Clauses

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INTRODUCTION

The local blockbuster movie “the Last Dance” has become a cultural phenomenon in Hong Kong. The movie explores the traditional Taoist practice of “Breaking the Hell’s Gate” through a couple of connected stories and addresses the topic of deathcare in a thematic and touching manner, thereby sparking awareness and discussion about end-of-life planning.

This article aims to discuss how one can ensure one’s wishes regarding funeral arrangements be respected, i.e. the specific ceremonies to be performed, the location and type of the service, and burial or cremation.

PRACTICAL STEPS

  1. CONSULTING FUNERAL DIRECTOR OR RELIGIOUS LEADER
    If you have a particular preference regarding your funeral arrangement, you should first consult a funeral director or religious leader to ensure the eligibility and availability of your wishes. This can be particularly important if you desire a ceremony that reflects your faith, as different faiths and religious believes may have different requirements or formalities regarding holding a funeral arrangement in accordance with that religious practice and tradition.

    Further, regarding burial or cremation, it must be noted that with a growing and ageing population in Hong Kong, there is a greater demand for such facilities in Hong Kong[1]. It is advisable to consider the costs and availability of these facilities and plan ahead during your lifetime in securing them.

  2. COMMUNICATING YOUR WISH WITH YOUR FAMILY MEMBERS
    Once you have made up your mind regarding your funeral arrangement, you should also communicate your wishes with your family members. This is to ensure that your family members understand your preferences. It also provides an opportunity for them to ask questions or to clarify with you in case of any ambiguity.

  3. CONSULTING A LAWYER AND DRAFTING FUNERAL ARRANGEMENTS CLAUSE
    After you have been confirmed your preference regarding funeral arrangement and practice can be catered for, you should then consult a solicitor to draft a specific funeral arrangement clause in order to express your funeral wishes.  Clarity is key so that your executor of your Will can honour your wishes.

LIMITATION REGARDING ENFORCEABILITY OF WILL DISPOSITION

Even though you have already followed the above practical steps, you should note that there is a limitation under the law in Hong Kong, namely that there is no property in a dead body, and that a will disposition regarding disposal of a dead body cannot be legally enforced.

In Re Estate of Lu Han Lung [2010] 3 HKLRD 651, the principles surrounding property in dead body, enforceability of will disposition and funeral arrangement are laid down by the Court as follows:-

  1. There is no property in a corpse;
  2. A man cannot by will dispose of his dead body, and any direction by will or otherwise by the deceased on burial cannot be enforced;
  3. As a starting position, the executor named in a will or the known personal representative (if the deceased passed away without leaving a will) is entitled to the possession of the body and is responsible for its burial;
  4. The right of the surviving spouse or de facto spouse will also generally be preferred to the right of the children;
  5. However, such starting position can be displaced where there are special circumstances;
  6. A person with the privilege of choosing how to bury a body is expected to consult with other stakeholders, but is not legally bound to do so; and
  7. The person with the privilege of organizing the funeral and burial cannot exclude friends and relatives of the deceased from expressing their affection for the deceased in a reasonable and appropriate manner.

It is therefore important for the testator to appreciate and understand that even though he/she can include funeral arrangement clause, such clause is not legally enforceable. However, having funeral wishes documented can serve as guidance and help prevent family disputes.

HOW CAN OLN ASSIST?

At OLN, we provide initial consultation service regarding wills drafting. Our solicitors are experienced in drafting will clauses that could cater one’s wishes and instructions regarding funeral arrangement. If you have any questions on the above, please contact our partner Mr Jonathan Lam or our Associate Mr Dexter Yuen.

[1] “LCQ18: Supply of niches” (Press Releases, 4th May 2022), available at https://www.info.gov.hk/gia/general/202205/04/P2022050400446.htm, accessed at 2nd January 2025.

Disclaimer: This article is for reference only. Nothing herein shall be construed as Hong Kong legal advice or any legal advice for that matter to any person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.