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Students must not copy this document or disclose or otherwise share this document or its
contents with third parties. In particular, uploading this document to the internet is strictly
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The Chinese University of Hong Kong

Faculty of Law
Term Two 2022-2023 Take-home Assignment 3 - An Essay

Course code and title : LAWS6055 Principles of Mediation

Start date : 14 March 2023
Submission deadline : 18 April 2023, 11:00 pm

This paper has FIVE (5) pages (including this cover page).
This is a TAKE HOME assignment - An Essay counting for 50% of the final mark for this
course.

Instructions to candidates:
1. This assignment consists of THREE (3) questions. Answer ALL questions.
2. Use no fewer than 2,500 but no more than 3,000 WORDS IN TOTAL for the THREE
(3) questions. The word count must be indicated in your answer paper.
3. Your answers must be typed using a computer and in English.
4. Your answer paper must show your student ID on the front page. You must not make any
reference to your name in your answer paper.
5. You may not discuss or collaborate with another person when completing this assignment.
6. Your answers must be your own work. You may consult any sources in preparing your
answer paper. Sources are not restricted to those discussed in class. When you use sources,
cite them adequately for identification. You are expected to know and abide by the
University’s plagiarism policy. Copying another person’s work or using language or ideas
without proper attribution is subject to disciplinary action, as appropriate, and can lead to
your failure of the course.
7. Submission of your answer paper: You must submit your answer paper in PDF format
electronically to the Blackboard course site for the above course by 11:00pm, 18 April
2023.
8. Submission of your duly signed VeriGuide Receipt: By 11:00pm, 20 April 2023, you
must
(i) upload your answer paper to the CUHK VeriGuide system at
https://academic2.veriguide.org/portalcuhk/;
(ii) duly sign the receipt issued by the VeriGuide system containing a declaration of
honesty statement (the VeriGuide Receipt); and
(iii) upload the duly signed VeriGuide Receipt to the Blackboard course site.
9. If either the answer paper or the VeriGuide Receipt is submitted after the applicable
deadline or if the VeriGuide Receipt is not duly signed, the answer paper will receive a
mark of zero and a grade of F. No late submission will be accepted.

Page 1 of 3
 The copyright of this question paper belongs to The Chinese University of Hong Kong.
Students must not copy this document or disclose or otherwise share this document or its
contents with third parties. In particular, uploading this document to the internet is strictly
prohibited.

Formatting Requirements
1. Times New Roman font;
2. Body: 12-point type; footnotes: 10-point type;
3. 1-inch margins, top and bottom, left and right;
4. 1.5 line spacing;
5. Footnotes and page numbers at the bottom of the page;
6. Your student number BUT NOT YOUR NAME clearly marked in the header on page 1;
7. If footnotes are required, citations should be in accordance with the “Faculty of Law Legal
Citation Style Guide” as shown in the CUHK Law Library website:
https://libguides.lib.cuhk.edu.hk/ld.php?content_id=9965973.

***************************************************************************

Daisy is one of the partners of a garment trading company known as Cool Fashion Co Ltd
(“Cool Fashion”). Daisy owns 60% of the shares in Cool Fashion, while her partner, Tina,
holds 40% of the shares. Tina has entrusted all the daily operations of Cool Fashion to Daisy
and has not been actively involved in the company. The business of Cool Fashion has been
sound, and Tina has been receiving payment of dividends every year.

Eighteen months ago, Cool Fashion received a purchase order from a US customer, Super
Young (“Super Young”), to produce 100,000 pieces of polo shirts (“Shirts”) (to be delivered
in 5 batches, each batch of a different colour) for the Spring-Summer collection. The order
specified the measurements of each size of the Shirts, the fabric, the colour of the double stripes
at the collar and the sleeves, as well as the types of buttons. Super Young also requested that
the colours of the five batches of Shirts comply with the Pantone colour provided to Cool
Fashion. In addition, all the Shirts supplied by Cool Fashion must be inspected and certified by
a third-party inspector that they have complied with the requisite quality.

Cool Fashion has been engaging a garment manufactory in Dongguan in Mainland China,
known as Champion Garments (“Champion Garments”), for the production of clothing items
since eight years ago. Upon receiving the order from Super Young, Daisy spoke with the
manager of Champion Garments, Wang, many times on the phone and reiterated the
importance of complying with all the specifications designated by Super Young.
Notwithstanding that a final written contract with Champion Garments was made, the
specifications of the Shirts were left out of the contract. It was provided in the contract that the
invoice sum for each batch of Shirts was HK$1,000,000, whereby Cool Fashion had to pay
HK$500,000 as a deposit for each batch of goods before production began.

Unfortunately, the first two batches of the Shirts were certified as failing to meet the
specifications. According to the inspection report, the colour of the Shirts did not match the
Pantone colour, the length of the sleeves was shorter than required, and the fabric used did not

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LAWS6055 Principles of Mediation Term Two 2022/23_An Essay

 The copyright of this question paper belongs to The Chinese University of Hong Kong.
Students must not copy this document or disclose or otherwise share this document or its
contents with third parties. In particular, uploading this document to the internet is strictly
prohibited.

meet all the requirements. Super Young refused to accept delivery and indicated its intention
to terminate the contract with Cool Fashion if it could not resolve the quality issues of the
goods.

To salvage the situation, Daisy immediately sent several staff members to Champion Garments
to supervise the production of the last three batches in order to ensure that all the specifications
of Super Young were fully met. At the same time, Champion Garments had to make the
necessary modifications in the production of the Shirts. Hence, all the workers had to work
overtime, and a lot of part-time workers were engaged in order to ensure that the deadline for
delivery of the goods could be met. Wang, therefore, required Daisy to pay an additional sum
of HK$500,000 (“Deposit”) to meet the extra labour and material costs on top of the initial
invoiced amount. Although Daisy considered that Wang was unreasonable and this additional
Deposit stressed the cash flow of the company, she reluctantly accepted it so that the production
of the next three batches of Shirts would go smoothly. She hoped the Deposit could be
recovered after Champion Garments shipped the goods.

Super Young accepted the last three batches of the Shirts, and the order was finally completed.
However, the first two batches of Shirts were still in the warehouse of Champion Garments.
There was no provision in the contract with Champion Garments that Cool Fashion could
refuse to pay when Super Young rejected the goods. Hence, Daisy was still obliged to pay
HK$2,000,000 to Champion Garments for the first two batches, while Wang still held on to the
Deposit. Wang also asked Daisy to remove the Shirts from the warehouse within one month
and threatened to impose charges on the use of the warehouse if she failed to do so.

Daisy was furious with Wang; despite the long-standing business relationship between the two
companies, he showed little sincerity in helping her solve the problem. While the issues with
the order of Super Young remain unresolved, Cool Fashion stopped placing orders with
Champion Garments. Daisy also requested Wang to give her time so that she could find an
alternative buyer for the Shirts. After six months, Daisy finally got a buyer from Mexico to
purchase the Shirts at HK$300,000.

However, when Daisy was about to arrange the shipment of the Shirts, she was told by Wang’s
assistant that the Shirts were sold because the goods were kept too long in the warehouse.
Although Daisy did not receive notification before the sale by Champion Garments, she had
no choice but to cancel the order and return the money to the Mexican buyer.

To Daisy’s surprise, two weeks later, she received a letter from the solicitors acting for
Champion Garments. She was informed that the Shirts were, in fact, still in the warehouse of
Champion Garments, and she was demanded to remove the goods within 14 days. Daisy was
shocked because it seemed that Wang had been playing games and giving her misleading

Page 3 of 5

LAWS6055 Principles of Mediation Term Two 2022/23_An Essay

 The copyright of this question paper belongs to The Chinese University of Hong Kong.
Students must not copy this document or disclose or otherwise share this document or its
contents with third parties. In particular, uploading this document to the internet is strictly
prohibited.

information, which made her lose the chance of reducing her loss. She was so upset that she
refused to speak with Wang anymore.

Thereafter, Daisy instructed her lawyer to commence legal proceedings in court, claiming (i)
the return of the Deposit of HK$500,000; (ii) the cancellation of the orders for the first two
batches of goods and the return of the deposit in the sum of HK$1,000,000; (iii) damages; (iv)
interest and costs. It is estimated that each party will spend legal costs in the sum of
HK$1,000,000 to bring this case to a full trial, which will last for 3 to 5 days.

Champion Garments invited Daisy/Cool Fashion to mediate the disputes.

Please answer ALL three questions below:

1. Daisy does not trust Wang/Champion Garments. She is concerned that Champion
Garments may not perform the terms of the settlement even when she can make a deal
in the mediation. Please advise Daisy if Cool Fashion is obliged to mediate. What are
the possible consequences that Cool Fashion will face if it refuses to mediate? (20
marks)

2. Assuming that Daisy decides to attend mediation with Champion Garments, please
draft a mediation plan for Cool Fashion which contains (i) the key interests of each
party; (ii) the alternatives of each party if the dispute is not settled at the mediation; (iii)
an agenda which includes the issues (e.g. factual, legal or business etc) which have to
be dealt with at the mediation; (iv) information that has to be obtained from and/or
shared with Champion Garments; (v) your suggestions on the mode and use of the
mediation process, including if there will be a joint session with Wang and the use of
private sessions with the mediator (50 marks).

3. Two days before the mediation, Cool Fashion received several new orders from Super
Young. It was estimated that the value of these orders would be at least HK$15 million.
According to Daisy, she might not have time for the litigation against Champion
Garments for the rest of the year. At the same time, she was concerned about finding
another manufactory in southern China to replace Champion Garments in a short time
because many manufactories closed down in Mainland China during COVID.

Hence, Daisy considers that the business relationship with Champion Garments can be
re-started if Champion Garments is able to:

(i) return the Deposit in full;

(ii) accept a discounted payment (at least 40%) for the invoices of the two batches
of Shirts and dispose of the goods in the warehouse at its own costs. Champion
Page 4 of 5

LAWS6055 Principles of Mediation Term Two 2022/23_An Essay

 The copyright of this question paper belongs to The Chinese University of Hong Kong.
Students must not copy this document or disclose or otherwise share this document or its
contents with third parties. In particular, uploading this document to the internet is strictly
prohibited.

Garments can keep the proceeds of the sale for settlement of the outstanding
payment of the invoices;
(iii) give a discount on the orders placed by Cool Fashion (between 5% to 10% on
the invoiced sum) within 12 months after the settlement agreement is signed
(Daisy said that the discount is negotiable, but this term is necessary because it
is symbolic of conciliatory gestures by Champion Garments for the hassle that
it created for the previous orders of Super Young).

Please advise Daisy how the above terms will fit into the strategy at the
mediation, including, but not limited to (a) the information that Daisy needs to
obtain from Champion Garments before proposing the above terms; (b) when
and how the terms can be proposed; and (c) how you will use the mediator for
putting forward the proposal. Explain your answers. (30 marks)

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LAWS6055 Principles of Mediation Term Two 2022/23_An Essay