The Role of Mediation in Personal Injury Claims: How to Avoid a Trial in Hong Kong

Disclaimer: This article does not constitute legal advice. Consult a solicitor for your specific case.

Since 1 January 2024, the Court of First Instance and the District Court have required all parties in personal injury actions to file a Mediation Certificate at the time of setting down for trial. This procedural rule, embedded in Practice Direction 31, means a litigant cannot simply ignore mediation. If a party refuses to mediate without a reasonable explanation, the court can impose costs sanctions, even if that party ultimately wins the case. For an injured claimant or an employer facing a compensation claim, this shift is decisive. The cost of a trial in Hong Kong — measured in legal fees, court time, and emotional toll — now carries a procedural penalty for unreasonably refusing to negotiate. Mediation is no longer an optional courtesy; it is a compulsory step in the litigation process that can determine who pays the final bill.

Why Mediation Has Become the Default Route in Hong Kong Personal Injury Cases

The Costs Sanction Under Practice Direction 31

The legislative foundation for mandatory mediation consideration in personal injury claims is Practice Direction 31 (PD 31), issued by the Chief Justice. PD 31 applies to all civil proceedings in the District Court and the Court of First Instance, including claims under the Employees’ Compensation Ordinance (Cap. 282) and common law negligence claims for traffic accidents or medical malpractice.

The critical provision is paragraph 5. A party who unreasonably refuses to participate in mediation may face an adverse costs order, even if that party obtains judgment in its favour. This is a fundamental departure from the traditional rule that “costs follow the event.” The Court of Appeal in H v W (2013) 4 HKLRD 1 established that the court retains discretion to penalise a winning party for unreasonable conduct in the mediation process. The burden of proving reasonableness lies on the party that refused mediation.

For the claimant, refusing mediation means risking a reduction in damages awarded if the court finds the refusal was unreasonable. For the defendant, usually an insurer or employer, the risk is an indemnity costs order — potentially covering the claimant’s full legal fees — rather than the standard party-and-party costs.

The Timing of Mediation in the Litigation Timeline

Step 1: The parties exchange pleadings (Statement of Claim, Defence, and any Reply).

Step 2: The court issues directions for discovery of documents and exchange of medical reports.

Step 3: At the Case Management Conference, the judge will ask whether mediation has been attempted or is scheduled. A party who has not even considered mediation at this stage is at risk.

Step 4: When setting down for trial, each party must file a Mediation Certificate (Form 1 under PD 31). The certificate must state whether the party has agreed to mediate, has refused to mediate, or has attempted mediation and failed. If the party has refused, the certificate must set out the reasons.

The court will not accept a belated offer to mediate after the certificate is filed as a cure for an earlier unreasonable refusal. The deadline is the date of filing the certificate.

The Mediation Process for Personal Injury Claims: A Step-by-Step Guide

Step 1: Choosing a Mediator

The parties can agree on a mediator. If they cannot, the court may appoint one from the panel maintained by the Hong Kong Mediation Accreditation Association Limited (HKMAAL). For personal injury claims, a mediator with experience in personal injury law and insurance practice is preferable.

The mediator’s role is facilitative, not evaluative. The mediator does not decide who is right or wrong. The mediator helps the parties identify their interests, assess the strengths and weaknesses of their cases, and explore settlement options. The mediator cannot impose a settlement.

Step 2: Preparing for the Mediation Session

Each party must prepare a Mediation Bundle. This bundle should contain:

• The pleadings
• The medical reports (both the claimant’s and any independent expert reports)
• The quantum schedule (a breakdown of the claimed damages)
• Any liability evidence (e.g., police reports, accident investigation reports, CCTV footage)

The bundle is confidential to the mediation. It cannot be used in court if the mediation fails, unless the parties agree otherwise.

The claimant should prepare a realistic settlement range, taking into account the likely court award after deductions for contributory negligence (if any) and the costs risk of proceeding to trial. The defendant (insurer) should prepare a realistic offer, considering the same factors.

Step 3: The Mediation Session

The session typically lasts one full day. It is held at a neutral venue, often the mediation centre at the Hong Kong International Arbitration Centre (HKIAC) or a private mediation firm.

The format is:

• Joint session: The mediator explains the process. Each party makes an opening statement.
• Private caucuses: The mediator shuttles between the parties in separate rooms. Offers and counter-offers are exchanged through the mediator. The content of these caucuses is confidential.
• Closing: If settlement is reached, the mediator drafts a Settlement Agreement, which is signed by both parties. If no settlement is reached, the mediator may issue a certificate of non-settlement.

Step 4: The Settlement Agreement

A Settlement Agreement signed at mediation is a legally binding contract. It is enforceable in the same way as any other contract. If a party breaches the agreement, the other party can sue for breach of contract, not for the original personal injury claim.

The agreement should clearly state:

• The total settlement amount
• Whether it is in full and final settlement of all claims (including any future claims for the same injury)
• Whether costs are included in the settlement amount or are to be paid separately
• Any confidentiality obligations

The Practical Benefits of Mediation for Claimants and Defendants

For the Claimant: Faster Compensation and Reduced Stress

The average time from issue of a writ to trial in the District Court for a personal injury claim is 18 to 24 months. In the Court of First Instance, it can be 24 to 36 months. Mediation can occur as early as 3 to 6 months after the claim is filed.

For a claimant who has lost income due to injury, the difference between receiving compensation in 6 months versus 24 months is significant. The claimant also avoids the stress of giving evidence in open court, being cross-examined by the defendant’s barrister, and waiting for a judgment that may be appealed.

Statistically, the Hong Kong Judiciary reported in its annual report for 2023 that approximately 70% of civil cases that proceed to mediation settle at or before the mediation session. The settlement rate for personal injury cases specifically is higher, often exceeding 80%, because the medical evidence is usually the primary factual dispute.

For the Defendant (Insurer/Employer): Control Over Outcome and Costs

For an insurer or employer, the primary benefit of mediation is cost control. A trial involves counsel fees, expert witness fees, and the risk of an adverse costs order that can exceed the damages awarded.

Mediation allows the defendant to settle a claim on its own terms, within a known budget, and without the risk of a runaway jury (Hong Kong has no civil juries in personal injury cases, but the judge’s discretion on quantum still carries uncertainty).

The defendant also avoids the reputational damage of a public trial. For an employer facing an employees’ compensation claim, a mediated settlement is often confidential, preventing other employees from learning the details of the claim.

The “Open Offer” vs. “Without Prejudice” Strategy

A party can make a formal “open offer” before mediation. An open offer is a written offer of settlement that can be shown to the court at the costs hearing if the case proceeds to trial. If the claimant rejects an open offer that turns out to be equal to or higher than the court’s eventual award, the claimant may have to pay the defendant’s costs from the date of the offer.

The “without prejudice” offer made during mediation is confidential and cannot be shown to the court. The mediator’s role is to facilitate the exchange of these without prejudice offers.

The strategic choice is: make a realistic open offer before mediation to protect your costs position, then use the mediation session to negotiate a final settlement.

When Mediation Is Not Appropriate: Exceptions and Alternatives

Cases Involving Fraud or Fundamental Dishonesty

PD 31 paragraph 5(d) provides that a party may be justified in refusing mediation if there is a genuine issue of fraud or dishonesty that goes to the root of the claim. For example, if the defendant has credible evidence that the claimant’s injury is fabricated or grossly exaggerated, mediation may be inappropriate because the defendant intends to expose the fraud at trial.

However, the court will scrutinise this exception narrowly. A mere allegation of fraud is not enough. The defendant must have a reasonable basis for the belief.

Cases Where a Preliminary Point of Law Is Dispositive

If the entire claim turns on a pure point of law — for example, whether the accident arose “out of and in the course of employment” under section 5 of the Employees’ Compensation Ordinance (Cap. 282) — mediation may be premature. The parties may agree to have the legal issue determined by the court first, then mediate the quantum.

Cases Where One Party Is Unrepresented or Has a Mental Capacity Issue

The mediator must ensure that both parties understand the process and can make informed decisions. If the claimant is unrepresented and has a cognitive impairment or psychiatric condition, the mediator may require the claimant to have a litigation friend or a solicitor present before proceeding.

Actionable Takeaways

1. File your Mediation Certificate on time. Failure to do so can result in the court striking out your case or entering judgment against you.

2. Do not refuse mediation without a documented, reasonable explanation. A bare refusal will almost certainly result in an adverse costs order.

3. Prepare a realistic settlement range before the session. Use the medical reports and quantum schedule to anchor your position with evidence.

4. Make an open offer before mediation to protect your costs position. This gives you leverage if the other party rejects a reasonable settlement.

5. Sign the Settlement Agreement only after confirming it covers all heads of claim and costs. Do not leave any term unwritten — the agreement is final and binding.