Career Advice Legal Case studies for employers

Stopping fighting friends' garment firm from unravelling

The Background
Anyone who doubts the value of mediation and hesitates to become a mediator should urgently reconsider their position. The job of mediator can be very inspiring. Thanks to its voluntary nature, mediation often brings not only settlement to a dispute, but also harmony to a relationship. The flip side is that mediation’s success hinges very much on the parties’ willingness to honestly appraise their concerns, instead of hanging on to their positions.

A mediator has a very challenging role in helping the parties achieve just that. The following case is perhaps a perfect testimony of how to succeed in the profession of mediation.

The Case
It was 12 hours of mediation filled with rage and tears. The two young entrepreneurs involved in the dispute had once been close friends who shared a common passion. They had agreed to start a garment retail business in the mainland – one would design and supply the garments, while the other would handle marketing and run a retail chain.

Although it took many months of hard work to open their first store, it only took a matter of days, if not hours, for their collaboration to break down. The retailer blamed the quality of the designer’s garments, while his colleague reproached his partner’s marketing strategy. They could not agree who was right or wrong and both sought compensation for franchise fees and consequential losses. Lawyers intervened and threats of litigation ensued. This mediation was the last stand before the beginning of years of legal proceedings.

Settlement in this case seemed impossible as the difference in monetary terms was substantial. Indeed, this situation is not uncommon. Psychology researchers have shown that most parties are overconfident about their own case and tend to adopt an unrealistic position at the negotiation table. This means that any discussions about settlement will likely fall apart if the parties get involved in the numbers game from the outset. This is where a professional mediator adds value to the negotiation table.

Rather than bargaining about their positions, the mediator helped the parties involved appreciate the concerns lying behind the dispute, such as the fact that they were able to make a fully informed decision based on their true needs.

The form of mediation involved in this case adopted the process with which accredited mediators of the HKIAC will be familiar. After the mediator’s introduction, the parties began by giving their respective opening statements in turn. When they spoke of their disputes, they also touched on the times when they had enjoyed their partnership.

However, despite the friendly tone at the outset, the discussion soon grew heated during the joint session that followed. The parties argued about their differences. But under the mediator’s facilitation, they did not discuss their pecuniary expectations at that point. Instead, the discussion centred on matters in the past, many of which they had never had the chance to tell one another about. This included the reasons why they had acted in the way they had and the hardships behind their own stories.

The parties probably wondered why they had to talk history when they were there to negotiate numbers. What they might not consciously have been aware of was that they needed those pieces of information to make a fully informed decision. This included answers to events that had turned on their emotional feelings. These answers alleviated the anger they brought with them into the meeting, which would otherwise have clouded their judgment.

Caucus came after the first joint session. Apart from helping the parties realise the risks they faced, the mediator helped negotiate the case in the best light.

There are two things the parties would not have done in the second joint session had it not been for the mediator’s facilitation. Firstly, they learned to appreciate the importance of addressing the emotional dimensions of their dispute, offering to apologise to each other for the misunderstandings they had not meant to cause. Secondly, one party’s wife was empowered to speak up about the miseries that she and her husband had endured in the past year because of the dispute. The speech was not smooth, as she could not hold back her tears, but her words touched the heart of everyone in the room. She reminded both parties that their dispute had cost them and their families much beyond the amount of money they sought to claim.

The mediator called for a second caucus to let the parties reconsider their proposals. They took into account their emotional burdens, as well as the pecuniary costs of the legal proceedings. Compared to monetary interest, their intangible needs probably affected them more than they realised. The gap did not seem so insurmountable now. In the final joint session, both parties made major concessions. In the end, they not only reached a settlement agreement, but also repaired their damaged relationship.

The Conclusion
This case shows that the power of mediation lies in the process as well as the profession. It is a process that helps parties overcome their emotional hurdles and appraise their interest to make fully informed decisions. This case would not have ended amicably if any step had been omitted. Nor would it have been concluded fruitfully without the involvement of a professional mediator.

To a mediator, there is nothing more rewarding than seeing the parties walking out of the room, chatting amicably and smiling. This is certainly not a scene one can expect to see outside a courtroom.

Anyone with a passion for dispute resolution should consider a career as a mediator.

Vod KS Chan is chairperson of the General Mediation Interest Group of the Hong Kong International Arbitration Centre’s Hong Kong Mediation Council.

Newton Mak is a member of the General Interest Group of the Hong Kong International Arbitration Centre’s Hong Kong Mediation Council.

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.