OLN

commercial agreements

How to Settle Civil Disputes: Use of Mediation

by

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

by

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?

by

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.

How to Settle Civil Disputes: Importance of Tomlin Order

by

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. 

An important piece of consideration is to consider settling the civil action in Hong Kong by way of Tomlin Order. 

The nature of Tomlin Order 

In Hong Kong, Tomlin Orders are governed by the Rules of the High Court (Cap. 4A) and the Rules of the District Court (Cap. 336H). 

Provided under O.42 r.5A(2)(b)(iii) of the Rules of the High Court (Cap. 4A) and O.42 r.5A(2)(b)(iii) of the Rules of the District Court (Cap. 336H), Tomlin Order is a form of consent order which allows the parties to stay the proceedings upon the mutually agreed settlement terms which are scheduled to the Order but the terms of which do not otherwise form of the Order itself. 

Accordingly, Tomlin Order enables the parties to stay the proceedings, preserving the option to return to Court to enforce the settlement terms if one party fails to comply. This avoids the need for new legal action, making it an attractive option for settling a civil dispute. 

Further, the schedule, being a separate contractual agreement, can include terms that go beyond the ordinary terms typically ordered by the Court, and even go beyond the scope of the original dispute in the proceedings. 

In the Hong Kong case Shum Ho Seung v. Shum Foo Hang (As the Administrator of the Estate of Shum Kwok Hang, Deceased (18/12/2017, HCMP 3134/2016) [2018] 1 HKLRD 434, the Court clarified that it lacks general power to vary the terms in the schedule unless specific provisions for variation are included in the Order itself, or contractual law justifies it. In practice, the standard wording of a Tomlin Order in Hong Kong may include phrases like “all further proceedings be stayed except for the purpose of carrying into effect the terms of settlement,” with liberty to apply for enforcement. 

Here are the key benefits of settling a case via a Tomlin Order in Hong Kong: 

1. Enforceability without separate legal action 

If one party breaches the settlement terms in the schedule, the other can apply to the court to enforce the terms scheduled to the Tomlin Order directly, without starting a new legal action. 
 
For example, if a Defendant fails to pay an agreed sum as provided under the schedule to the Tomlin Order, the Plaintiff can seek enforcement by applying to a Judge/Master as appropriate. 
 
This is a way a more efficient and costs-saving route than settling the civil dispute by way of a separate settlement agreement, whereby generally, if a party breaches the terms of the settlement agreement, the other party will have to bring a fresh claim.

2. Flexibility in Settlement Terms 

The schedule can include terms which go beyond what the Court would typically impose in a judgment, e.g. ceasing certain actions not directly related to the original proceedings. In contrast, the terms which parties could enter by way of Consent Judgment (without Court’s leave) would be more limited under the straight statutory rules.
 
3. Preservation of Finality with Flexibility 

The stay of proceedings means the case is “paused”, but not dismissed. If the terms are fulfilled, the dispute ends without a full trial. On the other hand, if the settlement terms are breached, the innocent party can either enforce the scheduled terms or, in some cases, lift the stay to resume litigation (depending on how the Order is drafted). This balances closure with a safety net as opposed to a full withdrawal/dismissal, which may leave a party vulnerable if the other reneges. 

Conclusion 

The Tomlin Order must be carefully drafted to ensure enforceability and to prevent any pitfall compromising a party’s rights and interest. In summary, a Tomlin Order in civil litigation offers enforceability without separate legal action, flexibility, and preservation of finality with flexibility, making it ideal for parties seeking a practical binding settlement. For specific advice, as each case depends on its own facts, please consult a solicitor. 

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: Importance of Payment by Instalment Clause

by

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.

An important consideration is to consider having payment of settlement sum by instalments. In our experiences, this option has proven to be a game-changer, enabling parties to reach amicable resolutions more effectively. The practical benefits of having payment by instalment clauses in your settlement agreement are listed below:-

1. Alleviating Financial Flexibility for the Paying Party

When a party is required to pay a large settlement amount upfront, it can strain its cash flow, potentially forcing them to reject the settlement entirely.

By having payment by installment clauses in the agreement, the paying party gains room to better manage its finances. This flexibility can make the difference between a stalled negotiation and a signed deal, as it allows the debtor to commit to a resolution without jeopardizing their operational stability.

For instance, a small business facing a HK$1,200,000 settlement sum might struggle to pay it all at once. Spreading that amount over 12 monthly installments of HK$100,000, however, transforms an overwhelming burden into a manageable expense. This practicality often encourages parties to agree rather than prolong the dispute through litigation.

2. Ensuring enforceability of the Settlement Agreement

In cases involving a one-off payment, the settlement agreement carries a heightened risk of being contested down the line, as the paying party may later claim they were misled, poorly advised, or coerced into accepting the terms under economic duress—arguments that could potentially unravel the deal in court. A lump-sum payment, often made under pressure to resolve a dispute quickly, can leave the payor feeling cornered, especially if their financial situation deteriorates shortly after, prompting them to challenge the agreement’s validity by asserting they had no real choice but to comply at the time.

In contrast, a payment-by-instalment clause significantly mitigates this risk by spreading the financial obligation across multiple, manageable payments over an extended period, creating a built-in mechanism that strengthens the agreement’s practicality.

As long as the paying party adheres to some of the instalment schedule (i.e. making certain payment instalments), it is arguable that it effectively elects to affirm to the terms. This repeated compliance undermines any later attempt to overturn the agreement, as it creates a hurdle for the payor to convincingly argue misrepresentation or economic duress when their actions over months or years have indicated voluntary commitment.

By reducing the immediacy of the financial burden and providing a track record of commitment, such clause discourages post hoc legal challenges, offering both parties greater certainty in the resolution process.

3. Building Trust between Parties

Incorporating instalment payments into a settlement agreement can help build trust between parties. The paying party’s commitment to making regular payments reflects reliability and good faith, while the receiving party can appreciate the structured approach to fulfilling the agreement. The continued fulfillment of payment instalments can serve as a positive spiral for both parties to develop trust and positive interactions moving forward.

4. Preserving Business Relationships

Many business disputes occur between parties with ongoing or potential future dealings—suppliers and clients, partners, or vendors. A lump-sum demand can sour these relationships irreparably, whereas an installment plan demonstrates mutual accommodation. By agreeing to terms that work for both sides, the parties signal a willingness to maintain civility and cooperation, which can pave the way for future collaboration once the dispute is resolved.

Conclusion

Incorporating payment by installment into settlement agreements is more than a financial workaround—it’s a strategic tool that bridges gaps, builds trust, and expedites resolutions. For the paying party, it offers a lifeline to meet obligations without crippling their operations. For the receiving party, it ensures compensation with manageable risk. This approach transforms disputes from adversarial standoffs into opportunities for mutually agreeable solution.

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.