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Does saying "sorry" have a role to play in resolving international construction disputes?

ANALYSIS: Lawyers involved in international construction are familiar with an armoury of schemes for avoiding and resolving disputes, including dispute avoidance boards, resolution boards, international arbitration, and others. But does saying "sorry" have a role to play? 04 Sep 2017

Hong Kong's Legislative Council recently passed a bill that encourages the use of apologies as a means of settling disputes. Under the bill an apology does not constitute an admission of fault or liability and is not admissible in evidence, but can still provide a cost-efficient way to ease tensions and resolve disputes for parties to a construction dispute.

In general, an apology is an expression of sympathy or regret, which may be accompanied by an acknowledgement of fault. There are many reasons why someone might choose to apologise, such as feelings of empathy or guilt. Some people may choose to be strategic, and use an apology to placate a potential claimant. However, making apologies can have legal consequences if they are construed as admissions of fault and admitted into evidence. Apology laws are designed to promote dispute resolution by removing this legal barrier.

Apology laws have been enacted in more than 50 jurisdictions, including Canada, England and Wales, the US and Australia, although the extent of protection that the apology law provides varies between jurisdictions.

In New South Wales the apology regime "applies to civil liability of any kind" with the exception of some civil liabilities such as intentional acts done with the intent of causing injury or death. In the Northern Territory on the other hand, the apology law is confined to civil actions for personal injury. In a construction context this could mean that under Northern Territory law an apology for negligence in design work would only be protected and excluded from evidence if the negligence had resulted in personal injury.

Protection depends largely on how "apology" is defined in the legislation. In New South Wales, the Australian Capital Territory and Queensland the definition of apology includes an admission of fault, whereas Victoria specifically states that an apology "does not include a clear acknowledgement of fault". The content of an apology therefore has to be considered depending on the jurisdiction.

Apology laws also vary in the extent to which they protect admissions of fact. This will affect, for example, whether an entire letter of apology is excluded from evidence, or whether certain parts of the letter are found to be admissible because they constitute admissions of fact.

Under the Hong Kong bill for example the definition of "apology" includes "a statement of fact in connection with the matter", so the protection will cover statements of fact.  However, the bill also contains an exception stating that "if in particular applicable proceedings there is an exceptional case (for example, where there is no other evidence available for determining an issue), the decision maker may exercise a discretion to admit a statement of fact contained in an apology as evidence in the proceedings, but only if the decision maker is satisfied that it is just and equitable to do so, having regard to all the relevant circumstances."

Caution is therefore needed when including admissions of fact in an apology.

Finally, insurance contracts often include a clause that prohibits an admission of fault by the insured party without the insurer's consent. To overcome this, the Hong Kong bill says that an apology "does not void or otherwise affect any insurance cover, compensation or other form of benefit". Similar protection does not exist under the Australian apology laws.

Research has shown that apologies can alter perceptions of the dispute and the disputants, improve expectations of future conduct and the relationship between the parties, change negotiation aspirations and fairness judgments, decrease negative emotion and increase willingness to accept an offer of settlement.

Even in a sector like the construction industry, driven by the bottom line, feelings of injustice and anguish often cause people to want to bring proceedings, despite it not being the best economic decision. An apology can help achieve settlement more quickly and amicably because, while a monetary payment in damages can compensate for financial losses, it cannot compensate for feelings of injustice. Particularly, where settlement becomes more likely an apology may push parties closer to accepting a compromise in circumstances where they would not otherwise.

Of course, given the jurisdictional differences, apology makers must be careful to ensure their apology will be protected. Nonetheless, apologising can be a valuable way to help resolve disputes and reduce litigation, even in the toughest commercial context.

Victor Lau is a construction disputes resolution specialist with Pinsent Masons, the law firm behind Out-Law.com