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Digest: Geotechnical Baseline Reports - Their Use & Abuse in Hong Kong Welcome

This document summarizes an issue of the ADR Digest, which discusses alternative dispute resolution. It includes several articles on topics related to construction contracts and dispute resolution. Specifically, it discusses the use and potential abuse of Geotechnical Baseline Reports in construction contracts in Hong Kong. These reports are intended to allocate risk for adverse ground conditions between the owner and contractor, but there are concerns they do not always provide clear or measurable baselines for contractors to rely on in their bids. The document also previews additional articles in the issue on expert witness immunity and the cost implications of refusing to mediate.

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0% found this document useful (0 votes)
60 views8 pages

Digest: Geotechnical Baseline Reports - Their Use & Abuse in Hong Kong Welcome

This document summarizes an issue of the ADR Digest, which discusses alternative dispute resolution. It includes several articles on topics related to construction contracts and dispute resolution. Specifically, it discusses the use and potential abuse of Geotechnical Baseline Reports in construction contracts in Hong Kong. These reports are intended to allocate risk for adverse ground conditions between the owner and contractor, but there are concerns they do not always provide clear or measurable baselines for contractors to rely on in their bids. The document also previews additional articles in the issue on expert witness immunity and the cost implications of refusing to mediate.

Uploaded by

tsuak
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
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You are on page 1/ 8

Partners in Alternative Dispute Resolution

Digest
Issue 13

Spring 2011

In this issue:
1 Welcome
1 Geotechnical Baseline Reports - Their Use & Abuse
in Hong Kong

7 ADR Analysis: The Cost Implications of an


Unreasonable Refusal to Mediate
8 ADR Diary

4 Hired Guns Bite the Dust?

Welcome
In this edition of the ADR Digest, James Longbottom
reviews how the traditional allocation of risk for adverse
ground conditions has been affected by the introduction of
Geotechnical Baseline Reports into some MTRC and Hong
Kong Government contracts. Whilst the introduction of this
innovative approach has seen Government shouldering an
increased risk for adverse ground conditions, the reverse
situation (either intentionally or unwittingly) has arguably
occurred on some MTRC contracts.
We are pleased to have Ian Cocking, Partner and Head of
Construction of Clyde & Co as our guest writer. Ian considers
the recent controversial (and some would say surprising)
judgment given in Jones v Kaney [2011] UKSC13, in which the
experts immunity has been removed by a majority decision of
the UKs Supreme Court.
Finally, our ADR Analysis series considers the cost implications
of an unreasonable refusal to mediate. In the recent Hong
Kong case of Golden Eagle International (Group) Ltd v GR
Investment Holdings Ltd HCA 2032/2007 the courts have
shown a willingness to impose taxation sanctions in such
scenarios.

Patrick J ONeill
Director

Geotechnical Baseline
Reports - Their
Use & Abuse
in Hong Kong
By James B Longbottom BSc(Hons) LLB(Hons) PgD(Law)
FRICS FHKIS FCIArb RPS - Managing Director, ADR Partnership
Limited

Introduction
Historically, the allocation of the risk of adverse ground
conditions by the MTR Corporation (MTRC) and the Hong
Kong Government has been diametrically opposed.
On the one hand, MTRC in Clause 38 of its Conditions of
Contract and in line with international practice has accepted
the risk of adverse ground conditions which could not
reasonably have been foreseen by an experienced contractor
at the time of tender. These words attribute an objective
degree of foresight on the contractor and whilst there is no
authority on the application of these words, the authors
of Keating on Construction Contracts suggest that the
question is whether it is reasonable to expect a contractor,
assuming him to be experienced, to have foreseen a
particular condition or obstruction. Whether something
could have been foreseen must take into account all the
available sources of information.1
The advantage of allocating the risk of adverse ground
conditions in this way is that the contractor is able to
submit a more precise and competitive bid without high
contingency factors.2
Conversely, the Hong Kong Government in Clause 13 of its
General Conditions of Contract has placed the risk of
adverse ground conditions entirely with the contractor,
even where the contractor is misled by insufficient or
inaccurate information given to him by Government. The
Grove Report (1998) notes that Contractors regard this
provision of the GCC as the most repugnant of all. 3
ADR Digest 1

This article considers how this traditional allocation of risk has


been affected by the introduction of Geotechnical Baseline
Reports (GBR) into some MTRC and Government contracts.
ADR Partnership has experience of both forms from having
advised on their commercial ramifications in tenders and in
having prepared claims for adverse ground conditions.

What is a Geotechnical Baseline Report?


The GBR provides a contractual statement of the ground
conditions anticipated (or to be assumed) to be encountered
during underground and subsurface construction. This
contractual statement is referred to as the baseline and is an
interpretation of the available site investigation information
(e.g. geological setting, borehole logs, laboratory tests and the
like). This site information is normally compiled in a document
referred to as the Geotechnical Data Report (GDR) which may
also be included as a contract document. In the event of a
conflict or ambiguity the GBR takes precedence over the GDR.
The contractor is deemed to have taken account of the GBR in
his tender and the risk of adverse ground conditions
encountered during construction are allocated as follows:
- ground conditions more adverse than the baseline are
accepted by the employer; i.e. the employer agrees to
compensate the contractor for any additional cost or delay;
and
- ground conditions consistent with or less adverse than the
baseline are accepted by the contractor.

What is the Contractual Mechanism for


Making a Claim?
MTRC and the Hong Kong Government use different
approaches in incorporating GBRs into their contracts.
In MTRC contracts, Clause 38 is retained and the GBR provides
a baseline as to what could not reasonably have been foreseen
by an experienced contractor.
Therefore, the contractor is still required to make a claim for
any adverse ground conditions under Clause 38; however, the
engineer is required to take account of the GBR in making a
decision as to whether the adverse ground conditions could
reasonably have been foreseen. Where the GBR is silent on a
matter (e.g. there are no baseline parameters because the
ground conditions differ from those ordinarily encountered),
then there is still an independent duty under Clause 14
(inspection of the site) for the contractor to have satisfied
himself as to the nature of the sub-surface, subsoil and the
like, however, only insofar as it is practicable and this would be
taken into account as to whether something could reasonably
have been foreseen.
The Hong Kong Government, who has traditionally placed the
risk of adverse ground conditions on the contractor, has
incorporated the GBR by replacing its original Clause 13 with
a special condition of contract. Essentially, the revised clause
provides that if the engineer agrees that the ground
conditions are worse than the GBR and necessitate a change
in the selected construction methods, design, resources and/
or temporary works then the engineer shall, subject to certain
conditions, value the changes necessary to deal with the
ground conditions and grant any extensions of time.

What Baseline Parameters Should be Used?


Suggested guidelines for preparing GBRs have been prepared
2 Spring 2011

by the Technical Committee on Geotechnical Reports of the


Underground Technology Research Council (UTRC).4
The objective of the GBR according to the UTRC is to;
translate the results of the geotechnical investigations and
previous experience into clear descriptions of anticipated
subsurface conditions upon which bidders may rely.
Accordingly, the baseline statements should generally be
quantitative geotechnical parameters that are relevant to the
contractors methods of construction, production rates,
temporary works design and the like.
The baselines should, therefore, where possible, comprise of
geotechnical parameters expressed as maximum values,
minimum values, average values and histograms of distribution
values, or combinations thereof. For example, it may be
anticipated in a given reach of a tunnel that the average
strength of the rock is 150MPa and the range is from 100MPa
to 200MPa. The average strength provides a clear baseline by
which to measure conditions actually encountered and the
range an indication of the level of risk that the contractor
assumes in its tender.

Their Abuse
The problem with GBRs in Hong Kong is that they do not
always provide a clear description of ground conditions on
which tenderers may rely or properly consider how the
baselines are to be measured. Some examples of these
problems are as follows:
The baseline parameters are not measureable during
construction
The baseline parameters should be measureable or verifiable
considering the methods of construction employed. Where
it is not always possible to provide definitive comparisons
with the baseline then a practical approach should be taken
to the task in hand.















For example, an obvious difficulty is encountered with tunnel


boring machines (TBM) which provide little or no access to
the workface. In such circumstances, the quality of the rock
mass and characteristics of discontinuities can only be
determined from the chippings after the material has been
through the rock crusher and into the conveyor or slurry
system. Therefore, procedures need to be applied to sample
and jointly agree the material being encountered. For
instance, the presence of angular chips would indicate highly
fractured rock with closely spaced joints, whereas, flat
elongated and sub-rounded chips would indicate bedrock
with widely spaced joints where the cutters created stress
fractures in the rock, causing it to chip away from the rock.
The agreed procedure would thus need to determine the
proportions of the different types of the chips and how
they relate to the joint spacing of the bedrock.

An alternative approach to this problem is considered by


Freeman et al in Geotechnical Baseline Reports A Review;
In some cases, it is better to baseline the end result, such as
groundwater inflow into the tunnel, rather than a soil/rock
property, such as permeability, which may vary widely and is
difficult to measure in the field during construction. In Europe,
partly to overcome these limitations, TBM boreability
parameters (i.e. penetration rate and cutter wear) are
sometimes used to classify the rock mass; however, these
parameters can be difficult to interpret if machine operation
becomes an issue. 5

The baseline parameters are meaningless


The baseline parameters should be meaningful and relevant
to the contractors methods of construction.














For example, a standard penetration test (SPT) N value


provides an indication of the relative density of the ground.
This test is relevant to driving sheet piles in that it is difficult
to drive piles through soil with SPT N values greater than 60
using a vibratory hammer. The implications are that if sheet
piles cannot be driven using a vibratory hammer then a
more costly and timely method may have to be considered;
e.g. powerful pile hammers or preboring. A properly
considered GBR might, therefore, provide percentages of
different anticipated ranges of SPT N values at different
locations of the site with a view of enabling the tenderer to
properly quantify the different methods that might be used
to install the sheet piles. However, we have seen SPT N
values expressed as a range covering all possible values that
might be encountered on the site.

Similarly, we have seen Rock Quality Designations (RQD) with


baseline parameters of 0 to 100%! A RQD is a measure of the
degree of jointing or fracture in a rock mass, measured as a
percentage of the drill core over a predetermined length. By
expressing a full range of RQD percentages there is essentially
no baseline and the contractor arguably assumes the full risk
of any conceivable degree of jointing or fractures in rock mass.

Interestingly, the UTRC recommends that the GBR should as


part of its construction considerations include potential
sources of delay. Thus, we have seen statements in Hong
Kong GBRs such as;

The following possible sources of delay shall be considered by


tenderers in their tender
followed by a generic list of every conceivable head of claim
that might arise, e.g;
higher rock head or stronger rock than anticipated.




It is suggested that this obligation must be limited to the


contractor considering such possible sources of delay in its
risk register or similar and not the time and cost effects of
the delay. Any other interpretation would clearly defeat the
whole purpose of the GBR.

The baseline parameters do not reflect the anticipated


ground conditions
The baseline parameters should be realistic and should reflect
ground conditions that could reasonably be expected to be
encountered, since it is where the baseline is set that
determines the allocation of risk for adverse ground
conditions.






Nevertheless, in Hong Kong there appears to be a distinct


tendency to artificially set baselines higher than what is
reflected in the site investigation data. For example, we have
seen the baseline parameters for the rockhead level specified
at 10-15 metres lower than the level derived from borehole
logs and rock strengths artificially increased without any
justification. The possible consequences of this are:

- The tender price is increased because more risk is allocated


to the contractor;
- The employer pays for a contingency that may not actually
be encountered;

- The contractor makes a claim that the baseline is not


realistic. In this respect, a non-binding dispute review
board in the USA has strongly criticized an employer for
setting a baseline higher than derived from the site
investigation data as a stratagem to protect the owner,
not a proper baseline bid. 6




Either way, this at first blush is simply a move back to the


Hong Kong Governments traditional approach in allocating
the risk of adverse ground conditions entirely with the
contractor. In this regard, the GBR provides a false sense of
security to the contractor that the ground risk is being shared.

Conclusions
GBRs provide an innovative approach not seen before in
Hong Kong to the administration of differing site condition
clauses and the allocation of risk. In particular, the Hong Kong
Government should be commended for shouldering an
increased risk for adverse ground conditions on some of its
contracts and moving away from the repugnant Clause 13.
However, to properly evaluate whether ground conditions have
changed, these GBRs should provide a meaningful, reasonable
and realistic interpretation of the available site investigation
data. Unfortunately, whilst most GBRs in Hong Kong cite the
UTRC guidelines for Geotechnical Baseline Reports for
Construction 4 very few of them seem to have taken its
recommendations to heart. This has left some contractors on
MTRC contracts assuming potentially more risk than would
otherwise have been the case if there was no GBR. It is not
clear whether this re-allocation of risk is an intended policy
decision or simply a result of overzealous consultants.
Either way, if contractors are to properly protect their interests
then they should not automatically assume that the GBR
meets the objectives of the UTRC. Nor should contractors
assume that a consistent approach is taken by employers (or
their consultants) in preparing the GBR and setting the
baselines. Instead, the GBR should be comprehensively
reviewed at tender stage, both technically and contractually,
to identify potential risks and opportunities.

For further information contact:


[email protected]

Footnotes:
1. Keating on Construction Contracts, Eighth Edition, page 981.
2. Bramble BB and Callahan MT, Construction Delay Claims, Third
Edition, pages 2-46.
3. Grove J B (1998), Consultants Report on Review of General
Conditions of Contract for Construction Works, The Government of
the Hong Kong Special Administrative Region.
4. Underground Technology Research Council (UTRC), 2007,
Geotechnical Baseline Reports for Construction, Technical
Committee on Geotechnical Reports of the UTRC, American Society
of Civil Engineers.
5. Freeman T, Klein S, G Korbin and Quick W (2009), Geotechnical
Baseline Reports - A Review, Jacobs Associates.
6. Gould J P (1995), Geotechnology in Dispute Resolution, Journal of
Geotechnical Engineering, page 532.

- The employer is allocated less risk and secures this under


competitive tendering; and/or
ADR Digest 3

Hired Guns
Bite the Dust?

By a majority of 5:2, the Supreme Court allowed the appeal. The


main reasons given by the majority for abolishing the immunity
were as follows:

By Ian Cocking, Partner and Head of Construction for Hong


Kong & China of Clyde & Co

1. Analogy with the position for advocates. In Hall v Simons


[2002], the House of Lords swept away the advocates
immunity from liability in negligence (both in court and out
but not their immunity from claims for defamation).
However, in that case a distinction was drawn between
advocates and expert witnesses. The Supreme Court has
now held that that distinction is no longer tenable since both
undertake a duty to provide services to the client.

Introduction
Traditionally, all witnesses enjoyed a general immunity
from being sued for the evidence they gave. Therefore no
matter what an expert said in court, he could not be sued
by his client. The position has changed recently. This article
concerns a controversial (and some would say surprising)
judgment given on 30 March 2011, Jones v Kaney [2011]
UKSC13, in which the experts immunity has been removed
by a majority decision of the Supreme Court, which is the
highest court in the United Kingdom. This controversy is set
to rage and divide opinions the world over. At its core are a
number of sweeping assumptions about experts. For the
reasons explained below, it is to be hoped that the Hong
Kong courts will consider carefully the dissenting opinions
of Lord Hope and Lady Hale before implementing the same
changes here. I will also discuss the practical implications of
this change in law, which could be very significant both for
experts and those seeking their assistance.

Jones v Kaney
The facts of this case are straightforward. The appellant
was injured in a road traffic accident. His solicitors
instructed the Respondent, a consultant clinical psychologist.
In due course a district court ordered thatthe Respondent
meet with the expert retained by the other side and
prepare a joint statement. That joint statement was
damaging to the appellants claim. It transpired that the
Respondents expert had signed the joint statement even
though it did not reflect what she had agreed because she
had felt under pressure and shehad notagreed with the
statements conclusions. The district judge would not
permit the appellant to change his expert and the appellant
felt obliged to settle the case for less than would have been
achieved had the Respondent not signed the statement.
The appellants claim against the Respondent for
negligence was dismissed at first instance because of the
long-standing principle that expert witnesses are immune
from liability in negligence in relation to the performance of
their duties in that capacity. However, since the issue raised
a point of law of general public importance, the judge
allowed the case to leapfrog to the Supreme Court.

expert witnesses are no


longer immune from suit in
relation to the evidence which
they give in court or for the
views which they express in
anticipation of court
proceedings.
4 Spring 2011

2. There was no basis for assuming that expert witnesses


would be discouraged from providing their services or would
not give full and frank evidence to the court if the immunity
was removed (the so-called chilling factor). It was also not
realistic to anticipate that they would become subject to
vexatious claims. Lord Brown opined that the courts should
be alert to protect expert witnesses against specious claims
by disappointed litigants, not to mention to stamp
vigorously upon any sort of attempt to pressurize experts to
adopt or alter opinions other than those genuinely held.
3. Wasted costs orders and disciplinary proceedings can already
be made against witnesses. There were therefore no longer
any policy reasons for retaining the immunity.
Accordingly, expert witnesses are no longer immune from suit
in relation to the evidence which they give in court or for the
views which they express in anticipation of court proceedings.
Witnesses of fact, however, remain immune from suit.
However the minority judges were unusually outspoken in
delivering their dissenting judgments. In disagreeing with the
majority decision Lady Hale said,
it does not seem to me self evident that the policy
considerations in favour of making this exception to the rule
are so strong that this Court should depart from previous
authorities to make it. To my mind, it is irresponsible to make
such a change on an experimental basis. This seems to me
self-evidently a topic more suitable for consideration by the
Law Commissioner and reform, if thought appropriate, by
Parliament rather than by this Court.
The other minority judge, Lord Hope, Deputy President of the
Supreme Court, concluded his speech by saying,
I doubt whether it is right that we should proceed in this
way only on the basis of assumption, which is really all we
have to go on in this case The lack of a secure principled
basis for removing the immunity from expert witnesses, the
lack of a clear dividing line between what is to be affected by
the removal and what is not, the uncertainties that this
would cause and the lack of reliable evidence to indicate what
the effects might be suggest that the wiser course would be
to leave matters as they stand.

Background
Interestingly, the rule that an expert witness was protected by
a general immunity had not been challenged seriously before.
Immunity had simply been taken for granted by courts at all
levels for a very long time. It was first established in a
defamation claim 400 years ago before the tort of negligence
even existed. This privilege was subsequently extended to all
kinds of claim (e.g. a negligence claim or a claim for breach of
confidence). However the immunity never covered prosecution
for perjury or for contempt of court.

The historical policy reasons for granting immunity to


witnesses may be summarised as follows:
1. To encourage an expert to give full and frank evidence in
accordance with his duty to the court even if it conflicts
with the interests of his client.
2. To promote impartiality, the absence of immunity would
lead to a loss of objectivity and the threat of civil liability
would encourage experts to assert extreme positions
favourable to the client.
3. To protect witnesses who have given evidence in good faith
from being harassed and vexed by unjustified claims.
4. To encourage honest and well meaning persons to assist
justice.
5. To secure that the witness will speak freely and fearlessly.
6. To avoid a multiplicity of actions in which the value or truth
of the evidence of a witness would be tried all over again.
7. To facilitate full and frank discussion between experts and
allow the experts to make proper concessions without fear
to depart from previous positions.
8. To allow the expert to resile fearlessly and with dignity.
9. To encourage more experts to provide their services.
Thus, in Raiss v Palmano [2001] PNLR 21, a claim against a
surveyor was struck out even though he conceded that he did
not have the qualification claimed in his expert report.

Reasons for Taking Away the Immunity


Two reasons were advanced by the Respondent in support of
continued immunity.
The first was that it was necessary to ensure that expert
witnesses will be prepared to give evidence at all.
The majority were unimpressed. Lord Dyson said,
Whether professional persons are willing to give expert
evidence depends on many factors. I am not persuaded that
the possibility of being sued if they are negligent is likely to
be a significant factor in many cases in determining
whether a person will be willing to act as an expert.
Professional persons engage in many activities where the
possibility of being sued is more realistic than it is in relation
to undertaking the role of an expert in litigation
The second ground advanced by the Respondent was that
expert witnesses would be reluctant to give evidence against
their clients interests if there was a risk they would be sued.
This is what has been called the divided loyalty argument. By
drawing close comparisons between experts and advocates,
the majority concluded that the prospect of an action for
negligence was unlikely to tempt an expert to disregard his
duty to the Court.
Lord Dyson went so far as to say that there was no conflict at all.
There is no conflict between the duty owed by an expert to
his client and his overriding duty to the court. His duty to
the client is to perform his function as an expert with the
reasonable skill and care of an expert drawn from the
relevant discipline. This includes a duty to perform the
overriding duty of assisting the court. Thus the discharge

of the duty to the court cannot be a breach of duty to the


client. If the expert gives an independent and unbiased
opinion which is within the range of reasonable expert
opinions, he will have discharged his duty both to the court
and his client. If, however, he gives an independent and
unbiased opinion which is outside the range of reasonable
expert opinions, he will not be in breach of his duty to the
court, because he will have provided independent and
unbiased assistance to the court. But he will be in breach
of the duty owed to his client.

Concerns Raised
One of the concerns raised by the minority was the lack of
evidence pointing either one way or the other, as to the need
to remove the immunity or the consequences of doing so.
Lord Hope regretted the absence of any intervention in the
proceedings by a body with experience across the whole range
of this area of practice such as the Academy of Experts which
could have provided evidence to inform the Court.
I am unwilling to assume that every witness who gives
evidence as an expert belongs to a professional
organisation or engages regularly in court work. Some may
be academics, and some may come forward to give expert
evidence only once in a lifetime. It seems to me that it
would be unwise to assume that they all have insurance
cover against claims for negligence.
To the minority, the question of negligent experts diverted
attention from the consequences for those who are wholly
innocent but are nevertheless exposed to harassment by the
disgruntled or the unscrupulous. To them the question in this
case was whether the reasons which justify immunity for
witnesses generally did not apply to expert witnesses.
Lord Hope disagreed strongly with Lord Phillips and Lord
Dyson and thought there was an obvious conflict between the
duties that the expert owes to his client and those that, in the
public interest, he owes to the court. In his view it was plain
that the paid expert owes duties to the client by whom he is
being paid. Nevertheless when it came to the content of that
evidence, his overriding duty is to the court, not to the party
for whom he appears. His duty is to give his own unbiased
opinion on matters within his expertise. It is on that basis that
he must be assumed to have agreed to act for his client. It
would be contrary to the public interest for him to undertake
to confine himself to making points that were in the clients
interest only and to refrain from saying anything to the court
to which his client might take objection.
As regards the analogy with the removal of the immunity
from advocates, Lord Hope was in no doubt that the witness
and the advocate perform different functions. The duties that
the advocate owes to the court are not as far reaching as the
overriding duty to the court that rests on the expert. His
principal duty is to his client, not to the court.
As regards the reliance placed by Lord Phillips and Lord Dyson
upon the fact that the immunity had been withdrawn from
advocates as an argument for withdrawing it from experts,
Lord Hope said,
I find this disturbing. I do not think that anyone who sat in
Arthur J S Hall & Co v Simons foresaw that removing the
immunity from advocates would be taken as an indication
that it should be removed from expert witnesses too. Yet
here we are a decade later contemplating taking just that
step. There is a warning here, to repeat the old adage, that
one thing leads to another. Removing just one brick from
ADR Digest 5

the wall that sustains the witness immunity may have


unforeseen consequences.
With reference to wasted costs orders and disciplinary
proceedings against experts, the suggestion of the majority
was that the protection of the immunity had been significantly
eroded by these developments.
The minority were not convinced by this argument either. It is
one thing to be liable to a wasted costs order at the instance
of the court itself or to proceedings by a professional body for
professional misconduct,
It is quite another to be at risk of worthless but possibly
embarrassing and time-consuming proceedings by a
disgruntled and disaffected litigant in person.
With regard to whether abolition of the immunity would
deter a significant number of potential experts from giving
evidence, the minority judges felt that without hard
information, it was not possible to assess how much weight
should be given to it. They accepted that there may be some
situations some kinds of case, some kinds of client where
the expert would be reluctant to become involved at all. If that
were to happen it would raise questions as to whether access
to justice for the disadvantaged was being inhibited. This is a
reason for wishing to be cautious before taking a step which,
for all practical purposes, would be irretrievable.

Implications
Despite the assurances of the majority of the Supreme Court,
this decision may well deter expert witnesses from acting,
especially when the provision of expert evidence does not form
the bulk of a practitioners work.
It is clear that the majority took a fairly jaundiced view of
professional experts. However the main justification for
removing the immunity seems to be little more than that
immunity had been removed for advocates. There is scant
reason given as to what is supposed to have actually changed.

Experts will certainly need to be


more cautious about early
opinions and preliminary
reports in case these change
significantly later on.
It is possible that this decision will reduce the tendency of
some experts to act as hired guns, but unlikely. If anything, it
will increase the pressure on experts to stick to their opinions
for fear of being sued for making unnecessary concessions or
compromises.
Experts will certainly need to be more cautious about early
opinions and preliminary reports in case these change
significantly later on.
Contrary to the intent, there is a danger that it will further
professionalise this field of practice and impact the willingness
of experts (or the organisations in which they work) to come
forward to give expert testimony.
6 Spring 2011

Good experts will be even harder to find in some disciplines.


There are significant differences between experts and
advocates, not least, experts have a choice. Experts decide
whether to take on expert assignments with their other work.
It is frequently difficult finding (and persuading) experts in
specialised areas in a small market like Hong Kong.
It is unclear whether the immunity is to be removed in respect
of confidential information. An expert may be placed in a
difficult position if he feels he should reveal information which
the court needs if it is to be told the truth.
The position will be particularly difficult for jointly instructed
experts, who owe duties to each of the parties who instruct
them. As such, they might (as Lady Hale suggested in her
dissenting opinion) be more vulnerable to claims because they
are likely to disappoint at least one of those instructing them.
In the construction context, witnesses frequently come
forward with a mixture of factual and expert evidence. It may
be difficult to determine, for the purposes of the removal of
the immunity, whether those witnesses are covered.
Experts must be extremely careful when making the necessary
investigations and preparations for the giving of their evidence.
In construction cases experts will need to be particularly wary
about the work of teams assisting them in the preparation of
their reports or run the risk of breaching their duty of care by
over delegation.
PI underwriters may also require additional information from
professionals as to the amount of expert witness work they
generally undertake and may consider an increase in premiums
for those for whom this type of work forms a significant
proportion of their time.
Exclusion clauses will undoubtedly be introduced into contracts
to give expert evidence, in which case, (as Lady Hale observed)
we shall be back to where we started.
Lady Hale concluded her opinion by observing that the major
concern is about the effect upon disappointed litigants. The
object of the rule is to protect all witnesses, including experts,
against the understandable but usually unjustifiable
desire of a disappointed litigant to blame someone else for
his lack of success in Court.
So we shall have to see whether the hired guns remain the
hunter or have, in fact, become the hunted.

For further information contact:


[email protected]

ADR Analysis

The Nature of the Dispute


The Defendant alleged that the dispute was not a dispute that
could be easily mediated. However, Justice Lam noted in
Halsey that Dyson LJ gave examples of disputes which may not
be suitable for mediation and noted his Lordships view that,

Partners in Alternative Dispute Resolution

The Cost Implications of an


Unreasonable Refusal to
Mediate

most cases are not by their very nature unsuitable for


ADR. 4

In the Winter 2010 edition of the ADR Digest, the Civil Justice
Reforms and in particular Practice Direction 6.1 were examined
and the greater role mediation is destined to play in the future
processing of legal proceedings, as a result. In the article,
emphasis was placed on the courts ability to impose costs
sanctions when a party unreasonably refuses to attempt
mediation. The recent case of Golden Eagle International (Group)
Ltd v GR Investment Holdings Ltd HCA 2032/2007 shows the
courts willingness to impose cost sanctions in such a scenario.

A Reasonable Belief of a Strong Case

Golden Eagle specifically made reference to Practice Direction 31


(which excludes construction cases); however, similar provisions
to Practice Direction 31 are found in Practice Direction 6.1
(PD-6.1) which covers construction cases. In summary,
PD-6.1 provides that the court may impose cost sanctions
where a party unreasonably refuses to mediate 1, and sets out
how to establish if a party has acted unreasonably 2; it also
requires participating in mediation to the minimum level of
participation agreed beforehand or as determined by the court 3.

Background
In Golden Eagle, the Plaintiff was appointed by the Defendant to
sell shares in a company held by the companys subsidiary. The
contract between the parties provided for the company to
pay the Plaintiff commission based on the share purchase price.
However, disputes arose as to the amount of commission
owed to the Plaintiff.
After the Plaintiff made a sanctioned offer, the Defendant
proposed mediation to which the Plaintiff indicated he was
willing to accept. However, subsequently, the Defendants
solicitors wrote to the Plaintiff advising him that the
Defendant was not willing to mediate. No reason for this
refusal was given. At the pre-trial review, the court enquired
about the Defendants reason for refusing to mediate, and
the Defendant advised that it was for commercial reason.
The court did not consider this a sufficient reason and
requested the Defendant to reconsider mediation accordingly;
however, notwithstanding the courts request the Defendant
did not agree to mediate.
The Plaintiff succeeded at trial and was awarded a sum higher
than its previous sanctioned offer. Costs were sought by the
Plaintiff on an indemnity basis, given that attempts were
made to mediate and which were unreasonably refused by
the Defendant.
To justify its refusal to mediate, the Defendant relied on
various matters identified in the English decision in Halsey v
Milton Keynes General NHS Trust [2004] 1 WLR 3002. The judge
in Golden Eagle, the Honourable Lam J noted that Halsey is
not binding on the courts of Hong Kong, but given the close
affinity of the English courts rules and practices to those of
Hong Kong he should pay great respect and attention to the
judgment.

Justice Lam saw no reasons in the nature of the present


dispute which could justify the Defendants refusal to mediate.

The Defendant also noted in Halsey that Dyson LJ considered


that a partys reasonable belief that he has a strong case may
be a relevant factor in deciding whether he has acted
reasonably in refusing to mediate. However, Justice Lam noted
the reasoning behind Dyson LJs position was,
[to avoid] scope for a claimant to use the threat of costs
sanctions to extract a settlement from the defendant even
where the claim is without merit. Courts should be
particularly astute to this danger. 5
As far as the position in Hong Kong is concerned, Justice Lam
considered this scenario was unlikely to occur since,
1. the costs sanction is only applicable if a party refuses to
mediate. There is no costs sanction if the parties cannot
reach settlement after making a reasonable effort in
mediation;
2. under the Practice Direction 31 [similar to Practice Direction
6.1], the parties can avoid costs sanction after they have
participated in mediation up to the agreed minimum level
of participation;
3. the costs involved in such participation in Hong Kong would
usually not be high enough to encourage such nuisance
claim; and
4. in Hong Kong the costs of mediation can be included as part
of the legal costs and recoverable by the successful party if the
mediation were unfruitful, see Chun Wo Construction &
Engineering Co Ltd v China Win Engineering, HCCT 37 of 2006.6
Justice Lam could not see a reasonable belief of a strong case
in the present dispute and referred to Dyson LJ,
Some cases are clear-cut. A good example is where a party
would have succeeded in an application for summary
judgement 7.

Whether Other Methods of Settlement


Have Been Attempted
The Defendant also made reference to the offer made by the
Defendant to settle the case and which was rejected, and the
Plaintiffs counter-offer, as other methods attempted to settle
the case.
However, Justice Lam found that the offer of the Defendant was,
way off the mark whilst the sanctioned offer of the Plaintiff
indicated that the Plaintiff was sensible and realistic in trying
to achieve a settlement 8.

Whether Mediation has a Reasonable


Prospect of Success
As to mediation having little prospect of success, Justice Lam
noted a point made in Halsey that a party cannot rely on his
own unreasonable attitude (resulting in mediation with no
ADR Digest 7

prospect of success) as a ground to refuse mediation. To this


end, Justice Lam noted that the process of mediation may
change attitudes and referred to Lightman Js observations in
Hurst v Leeming [2003] 1 Ll Rep 379.
Justice Lam also noted that mediation often succeeds where
previous attempts to settle have failed and highlighted Supply
Chain and Logistics Technology Ltd v NEC Hong Kong Ltd HCA
1939 of 2006.
In light of the above, Justice Lam concluded that he did not
regard the wide difference between the parties in the
correspondence as indicating that the mediation would be a
waste of time and efforts 9.

Whether the Cost of Mediation is


Disproportionately High
As to the Defendants argument that the costs of mediation
would be disproportionately high, Justice Lam felt that in light
of the claim and the counterclaim values of RMB 12 million and
RMB 7 million respectively, and considering the nature of the
case, the costs for a reasonable attempt to mediate should
not be regarded as disproportionately high.

In light of the above, the courts will not accept a partys


unreasonable failure to mediate. To this end, parties should
take note and seek advice and strongly consider whether it is
first reasonable to mediate, prior to resorting to litigation.
Whether such cost sanctions will extend to arbitration
proceedings which first do not use mediation is yet to
be seen.
For further information contact:
[email protected]

Footnotes:
1. PD-6.1, paragraph 21.
2. PD-6.1, paragraph 44.
3. PD-6.1, paragraph 42.
4. Paragraph 17 of Halsey.
5. Paragraph 18 of Halsey.
6. Paragraph 29 of Golden Eagle.
7. Paragraph 19 of Halsey.
8. Paragraph 33 of Golden Eagle.
9. Paragraph 37 of Golden Eagle.
10. Paragraph 46 of Golden Eagle.

Summary
Justice Lam could not see any reasonable explanation on
the part of the Defendant for refusing to mediate and he
considered that this was a relevant consideration in assessing
whether a higher basis of taxation should be ordered against
the Defendant in respect of the costs of the action incurred
after the date of the Defendants refusal to mediate 10.

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8 Spring 2011

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