Career Advice Legal Case studies for employers

Mediation puts disputing parties on equal footing

The Background
“No one wants to end up as a litigant in a court action. However, if this does happen, one should seize the position of the plaintiff and not the defendant.”

In reality, this kind of pre-action tussle for the preferred position can be avoided more easily via mediation. All disputants are named “the parties to the mediation” and nobody assumes the role of the plaintiff or defendant. All the parties are on an equal footing in this sense, avoiding the usual perception of the plaintiff as the one armed with a sharp spear, and the poor defendant with a thin shield in his hand, trying to save his own life. If this perception of inequality between the roles of plaintiff and defendant is deep-rooted in any party’s mind, it will spur him to take hasty legal action in a bid to be the plaintiff.

More people are becoming aware that mediation is a desirable way of resolving disputes, as it saves time and cost. For example, in situations where two disputants start separate legal proceedings against one another, the cost consequences can be considerably larger than when the issues are dealt with in one single case.

Consolidation of the two cases may be difficult as very often the disputants will try their best to be seen as the plaintiff, the wronged yet apparently strong party. The following discussion is based on a real case – where the concern about being labelled the plaintiff or the defendant gave rise to two litigation cases – to illustrate how mediation may assist in this kind of situation. The content has been edited for the sake of confidentiality.

The Case
An employer and employee who were in dispute started two separate sets of legal proceedings in court against each other. The employee sued the employer for defamation, while the employer brought a lawsuit against the employee for breach of employment contract.

The employee was the employer’s commercial director. Pursuant to the employment contract signed between the parties, there was a clause (a “restrictive covenant”) that prohibited the employee from engaging in the business of woven-garment merchandising and sourcing in the regions of Hong Kong and Macau for a period of six months from the date of the termination of the employment.

In breach of this restrictive covenant, the employee started a business on his own in the same sector as soon as he had resigned from the employer’s company of his own accord. As the ex-employee was running his business on a rather small scale, this was not brought to the ex-employer’s notice until almost three months into the six-month black-out period.

The ex-employer decided to take action to safeguard his interests and to prevent the ex-employee from enticing clients away from the company. The ex-employer sent a company announcement to clients whom the ex-employee had handled during his term of service, stating that with the termination of the employment of the ex-employee, clients could now expect a much more professional service from the new commercial director.

The ex-employee perceived the wording of the announcement as defamatory. More importantly, he believed that the ex-employer would be suing him for breach of restrictive covenant. He was obsessed with the labelling perception of plaintiff and defendant, which spurred him to start a defamation case against his ex-employer in haste, with him wanting to be the plaintiff.

But this ended in a lose-lose situation for both parties. It will be no surprise to note that legal proceedings against the ex-employee for breach of restrictive covenant were started shortly afterwards. Neither party, though, was prepared for litigation in the district court, which drained their resources in both time and cost.

The Alternative
The two separate court actions involved different legal and factual issues, as well as arguments on different points of law. Given this, it would not have been easy to consolidate both cases in the court system and could have led to costs which would be disproportionate to the nature of the disputes. In this particular situation, however, consolidation of the two cases was possible via mediation.

With the consent of all parties, the two court actions were mediated in the same meeting and a settlement reached. The parties expended far less time and money, and suffered far less stress than if they had been involved in two sets of litigation proceedings.

As a final note – and to be precise – I should say that two sets of agreement were reached in settling the two court cases through the mediation hearing, ending with contented smiles on the faces of the parties over the accepted outcome.

Christine Lam is a general accredited mediator of the Hong Kong International Arbitration Centre and a member of the Hong Kong Mediation Council’s General Interest Group.

The information contained in this article should not be relied on as legal advice and should not be regarded as a substitute for detailed advice in individual cases. If advice concerning individual problems or other expert assistance is required, the service of a competent professional adviser should be sought.