FOK KA MING v. ST. JAMES' SETTLEMENT

DCEC 48/2025

DCEC 171/2025

(Heard Together)

[2025] HKDC 2100

DCEC 48/2025

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 48 OF 2025

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DCEC 171/2025

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 171 OF 2025

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(Heard Together)

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DECISION

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1.  The respondents respectively in DCEC 48/2025 and in DCEC 171/2025 raise identical applications on costs. By consent, the applications are heard together by me.

2.  Mr Leon Ho, on the instructions of Messrs Au & Associates (“A&A”) acting for both respondents, appears before me for both respondents; Ms Percy Yue, on the instructions of Messrs John W Wong & Co (“JWW&C”) acting for both applicants, represents the applicants to resist the applications.

3.  The relevant facts in relation to both cases are not in dispute, and I set them out as follows.

Facts in DCEC 48/2025

4.  The applicant Madam Fok was employed by St James’ Settlement (“SJC”) as a teacher. On 31 July 2023, when Madam Fok descended a flight of stairs inside the respondent’s premises, she sprained and fractured her right ankle.

5.  On 20 October 2023, JWW&C sent a letter before action to SJC and its insurer (“Falcon”).

6.  On 24 October 2023, Falcon sent a letter in response to the letter before action. It was stated that SJC’s liability to pay employees’ compensation was not in dispute; by engaging JWW&C by then, Madam Fok was accused of escalating the legal costs, contrary to the spirit of the Civil Justice Reform and Practice Direction 18.2 (“PD 18.2”). Falcon asserted that Madam Fok should not be entitled to recover the legal costs incurred.

7.  On 18 January 2024, Madam Fok was arranged to be examined by Dr Chun Siu Yeung. Dr Chun prepared a medical report on 24 January 2024; Madam Fok and JWW&C were not given a copy of Dr Chun’s report.

8.  On 23 February 2024, Falcon put forward an offer to settle Madam Fok’s employees’ compensation claim at $260,000.00 (inclusive of the payment already made by SJC), plus costs to be taxed at the District Court scale. This offer was open for acceptance for 14 days; but Madam Fok did not accept it.

9.  On 7 May 2024, the Medical Assessment Board issued a Form 7. Madam Fok was assessed to have suffered 1% in loss of earning capacity. Absence from duty from 31 July 2023 to 22 April 2024 was assessed as necessary. Madam Fok lodged an objection to the Form 7.

10.  Meanwhile, on 23 May 2024, JWW&C sent an offer to Falcon, indicating Madam Fok’s willingness to settle her claim at $395,000.00 plus costs. Despite Falcon’s requests, JWW&C did not reply to explain the bases of (i) adopting 3% as the loss of earning capacity; (ii) adopting 12 months as the reasonable sick leave; and (iii) claiming $45,000.00 for medical expenses.

11.  On 9 July 2024, the Medical Assessment Board issued a Form 9 after reviewing Madam Fok’s injuries. She was assessed to have suffered from 2% loss of earning capacity; absence from duty was certified necessary for around 9 months from 31 July 2023 to 22 April 2024, and on 2 more days in May 2024.

12.  On 12 July 2024, Falcon put forward another offer to settle Madam Fok’s claim at $300,000.00 (inclusive of payment already made by the respondent) plus costs to be taxed at the District Court scale. Again, this offer was open for acceptance for 14 days; Madam Fok similarly did not accept it within that period. Instead, JWW&C sent another offer to Falcon on 17 July 2024 for settling Madam Fok’s claim at $380,000.00. Her offer was further revised down to $370,000.00 by JWW&C’s letter of 31 October 2024.

13.  On 6 January 2025, JWW&C sent a letter to Falcon to state that Madam Fok was willing to settle her claim at $300,000.00, and to invite Falcon to re-open its offer. Falcon replied on the same day and refused to re-open its offer, unless Madam Fok was willing to pay its costs from 27 July 2024 (ie the day after the 14-day acceptance period lapsed) onwards.

14.  On 8 January 2025, Madam Fok commenced DCEC 48/2025 against SJC to claim employees’ compensation arising out of the work accident she met on 31 July 2023.

15.  On 14 February 2025, SJC put forward a sanctioned payment of $300,000.00, comprising $28,830.00 it paid into court that day, and $271,170.00 it already paid to Madam Fok. The Notice of Sanctioned Payment was accompanied by A&A’s letter of the same date notifying Madam Fok that, if she accepted the sanctioned payment, SJC would apply to the court, invoking the “otherwise” proviso under Order 22 rule 20(1) of the Rules of the District Court, for a costs order that it shall pay her costs at the District Court scale up to 26 July 2024, but she shall pay its costs thereafter.

16.  Madam Fok filed a Notice of Acceptance of Sanctioned Payment on 13 March 2025. In its letter dated 27 March 2025, JWW&C stated that Madam Fok should not be liable for costs incurred after 26 July 2024, as Falcon refused the re-open its pre-action offer when invited to do so on 6 January 2025.

17.  SJC issued a summons on 16 April 2025 to seek an order that Madam Fok shall pay its costs, except that it shall pay Madam Fok’s costs incurred on or before 26 July 2024.

Facts in DCEC 171/2025

18.  The applicant Mr Fong was employed by Serco Group (HK) Limited (“Serco”) as a traffic officer at the Cross Harbour Tunnel. On 16 July 2023, when he was instructed to lift an electric bike from the ground onto the trunk of a recovery vehicle, he missed his step and fell. He sustained a fracture at his left little toe.

19.  On 11 March 2024, JWW&C sent a letter before action to Serco and its insurer, Falcon.

20.  On 13 March 2024, Falcon sent a letter in response to the letter before action. It admitted liability to pay employees’ compensation on Serco’s behalf. It further accused Mr Fong of escalating the legal costs, contrary to the spirit of the Civil Justice Reform and PD 18.2, by engaging JWW&C at that stage.

21.  Meanwhile on 25 January 2024, Mr Fong was arranged to be examined by Dr Chun Siu Yeung. Dr Chun prepared a medical report on 30 January 2024; Mr Fong and JWW&C were not given a copy of Dr Chun’s report.

22.  On 22 March 2024, Falcon put forward an offer to settle Mr Fong’s employees’ compensation claim at $300,000.00 (inclusive of the payment already made by the respondent), plus costs to be taxed. This offer was open for acceptance for 14 days; but Mr Fong did not accept it within the 14-day period.

23.  On 24 April 2024, the Medical Assessment Board issued a Form 7. Mr Fong was assessed to have suffered 2% in loss of earning capacity. Absence from duty from 16 July 2023 to 10 April 2024 was assessed as necessary. Mr Fong lodged an objection to the Form 7.

24.  On 7 May 2024, JWW&C sent an offer to Falcon, indicating Mr Fong’s willingness to settle his claim at $190,000.00 on top of $215,154.40 already received, plus costs. Despite Falcon’s requests, JWW&C did not reply to explain the bases of (i) adopting 5% as the loss of earning capacity; (ii) adopting 12 months as a reasonable sick leave; and (iii) claiming $10,000.00 as the medical expenses. Falcon stated that it would not be in a position to consider Mr Fong’s quantification unless its queries were answered.

25.  On 24 July 2024, the Medical Assessment Board issued a Form 9 after reviewing Mr Fong’s injuries. He was assessed to have suffered from 1.5% loss of earning capacity; absence from duty was certified necessary for around 10 months from 16 July 2023 to 26 April 2024, and from 3 to 30 May 2024.

26.  On 7 and 17 January 2025, JWW&C wrote to Falcon to ask for a draft discharge. Falcon replied on 22 January 2025, stating that it was willing to settle Mr Fong’s claim at $300,000.00 it offered in March 2024, if Mr Fong agreed to bear the costs it incurred since the 14-day period to accept its offer lapsed by 5 April 2024.

27.  On 21 January 2025, Mr Fong commenced DCEC 171/2025 against Serco to claim employees’ compensation arising out of the work accident he met on 16 July 2023.

28.  On 14 February 2025, Serco put forward a sanctioned payment of $300,000.00, comprising $10,305.46 it paid into court that day, and $289,694.54 it already paid to Mr Fong. The Notice of Sanctioned Payment was accompanied by A&A’s letter of the same date notifying Mr Fong that, if he accepted the sanctioned payment, Serco would apply to the court, invoking the “otherwise” proviso under Order 22 rule 20(1) of the Rules of the District Court, for a costs order that it shall pay his costs at the District Court scale up to 5 April 2024, but he shall pay its costs thereafter.

29.  Mr Fong filed a Notice of Acceptance of Sanctioned Payment on 13 March 2025. In its letter dated 27 March 2025, JWW&C stated that Mr Fong should not be liable for costs incurred after 5 April 2024, as Falcon refused the re-open its pre-action offer when invited to do so on 7 and 17 January 2025.

30.  Serco issued a summons on 16 April 2025 to seek an order that Mr Fong shall pay its costs, except that it shall pay Mr Fong’s costs incurred on or before 5 April 2024.

The legal principles

31.  There is no dispute that the respondents can ask for a costs order departing from the one stipulated in Order 22 rule 20(1) of the Rules of the District Court, upon the respective acceptance by Madam Fok and Mr Fong of the respective sanctioned payments, by way of the 2 summonses issued in the present cases. This is because the respondents gave the requisite warning for their respective intention to do so as per Etratech Asia-Pacific Ltd v Leader Printed Circuit Boards Ltd [2013] 2 HKLRD 1184.

32.  Mr Ho invites me to exercise discretion in a way similar to Wong Ka Chi v Cheung Li Glass Engineering Company Ltd & Anor DCPI 2013/2014 (HH Judge Andrew Li; 24 March 2015); Ku Suet Yu Amy v J V Fitness Limited trading as California Fitness HCPI 266/2015 (Master Roy Yu; 5 February 2016); and Chan Fung Yu Anji v Hong Kong Sheng Kung Hui Welfare Council Ltd [2023] 4 HKLRD 223.

33.  In each of these cases, the plaintiff failed to accept the pre-writ settlement offer made by the defendant (or its insurer). After the plaintiff commenced proceedings, the defendant made a sanctioned payment which was identical to the pre-writ offer. The plaintiff then accepted the sanctioned payment. On the defendant’s application under the “otherwise” proviso of Order 22 rule 20(1), the court held that the plaintiff should only be entitled to costs up to the last date on which the pre-writ offer was open for acceptance, and the plaintiff should pay the defendant’s costs thereafter.

34.  In Wong Ka Chi, HH Judge Andrew Li referred to Etratech, and considered whether the defendant in that case discharged the burden of showing exceptional circumstances that justified a departure of the usual costs order under Order 22 rule 20(1). He held that the plaintiff should be deprived of his costs because (see §39 of the decision):-

34.1.  The defendant made 2 pre-writ offers to the plaintiffs; those offers were no worse than the sanctioned payment subsequently accepted by the plaintiff;

34.2.  The plaintiff and his legal advisors were in a fully informed position to evaluate the reasonableness of the defendant’s offer, because they were given the report prepared by the single joint expert orthopaedic specialist before the pre-writ offer was put forward. Since then, there was no change in the plaintiff’s circumstances resulting from the accident; and

34.3.  The plaintiff did not mention any special circumstances prior to rejecting the pre-writ offer for the insurer’s consideration. The defendant and its insurer did all they could to achieve an amicable settlement prior to the commencement of action by the plaintiff.

35.  The learned Judge also held that the underlying objectives of Order 1A rule 1 of the Rules of the District Court calls to deprive the plaintiff his costs, as he unreasonably refused to accept the pre-writ offer but subsequently chose to accept a sanctioned payment in the exact amount without good reason.

36.  Similar reasoning was put forward by the court in Ku Suet Yu Amy and Chan Fung Yu Anji.

37.  On the other hand, Ms Yue refers to the Court of Appeal’s decision in Or Siu Lung v Fu Hong Home for the Elderly Co Ltd [2018] 1 HKLRD 872, and submits that it would be unjust to deprive Madam Fok and Mr Fong of their costs.

38.  Or Siu Lung dealt with a situation where a plaintiff applied for leave to accept a sanctioned payment out of time. The Court of Appeal held that, when the court was asked to make an order for costs upon granting leave to accept a sanctioned payment out of time under Order 22 rule 15(3), it should adopt the same approach as laid down under rule 23. In other words, the court should consider whether it would be unjust to penalize the plaintiff on costs.

39.  I note that Poon J (as the Chief Judge then was) in Etratech referred to “exceptional circumstances” instead of whether it would be unjust to depart from the usual costs order under Order 22 rule 20(1). Whilst Etratech is binding on me, it is my judgment that the phrase “exceptional circumstances” should receive a similar meaning as the consideration of justice (or injustice) in a particular case, which was the test adopted by the Court of Appeal in Or Siu Lung in relation to rule 15(3):-

39.1.  Although the proviso under rule 20(1) does not expressly refer to injustice as the benchmark, I find the reasoning of Black LJ in SG v Hewitt [2013] 1 All ER 1118 (quoted with approval in Or Siu Lung at §17), viz the reference to “exceptional circumstances” would have a tendency to give rise to the idea that circumstances must be at the end of the spectrum before they would count, highly persuasive.

39.2.  Rule 15(3), on its face, is also silent as to the test to be applied when the court considers the appropriate costs order. But this does not prevent the court adopting injustice as the benchmark. I cannot see why the court should refrain from exercising its discretion to depart from the usual costs order under rule 20(1) simply because the facts presented to it are not rarely seen in litigation.

39.3.  I suggest that, when one reads the cases involving the exercise of discretion under the proviso of rule 20(1) in close detail, they in effect adopted a benchmark akin to injustice as well.

40.  Of course, I remind myself that a decision on costs is highly fact-sensitive. It is not helpful to compare one case with another. The court should guard against citation of authorities for the purpose of persuading it to follow decisions on the facts as if they are precedents: see Or Siu Lung at §17(e).

Analysis for the present cases

41.  Armed with the above legal principles, I accept that the respondents have demonstrated the requisite exceptional circumstances justifying a departure from the usual costs order under rule 20(1); in other words, I accept it would be unjust not to deprive the applicants of their costs since the lapse of the pre-action offers.

42.  I agree with Mr Ho that it was unreasonable for the applicants to accept the sanctioned payments, which left them in no better position than accepting the respective pre-action offers they had initially refused. There is no evidence put before me to explain or justify why the applicants had a change of heart and decided to accept the sanctioned payments.

43.  Ms Yue retorts by submitting that, particularly for Mr Fong, the applicants were not in a position to accurately assess the pre-action offers within the 14-day period given to them. She points to the fact that, by the time Falcon put forward the pre-action offer, Mr Fong was still on sick leave.

44.  I cannot accept Ms Yue’s submissions:-

44.1.  For Mr Fong’s case, as pointed out by Mr Ho, when Mr Fong was followed up by Dr Andrew Chan on 16 November 2023, Mr Fong was noted to have reached maximal medical improvement, and would be discharged at the next follow-up. Further, the Form 7 was issued upon an assessment by the Medical Assessment Board on 25 March 2024. As is common knowledge, a referral to the Medical Assessment Board indicates that the injuries suffered by a worker have become stable. Thus, when Mr Fong received the pre-action offer, his injuries should have reached a stage by which a realistic assessment of the employees’ compensation he could have received was permissible.

44.2.  For Madam Fok, by the time Falcon put forward the revised pre-action offer of $300,000.00, the Form 9 was already available. She must have been in a position to assess the extent of her injuries and disabilities. Indeed, she obtained a medical report from her treating doctor, Dr Shirley Ip, as early as 18 April 2024.

44.3.  The injuries suffered by the applicants were neither substantial nor rare. In my decision, there was nothing to prevent them to obtain the relevant medical records from their treating doctors, and estimate the reasonable amount of employees’ compensation with the help of their legal representatives. The present cases are vastly different from the facts in SG v Hewitt, in which the infant plaintiff suffered from a head injury, which might have variable prognosis as time went on. I disagree with the suggestion that as long as one is still on sick leave, it must follow that he cannot have a realistic assessment of the value of his potential employees’ compensation claim. This remains fact-sensitive in each case.

45.  I also agree with Mr Ho that the stance taken by the applicants during the pre-action negotiation does not invite sympathy from the court. The applicants never sought to justify the calculations they adopted in their respective offers; and those offers were plainly excessive when compared to the Form 7 and/or Form 9 in each case. I also accept Mr Ho’s submissions that, even on the applicants’ own calculations as set out in their affirmation evidence, Falcon’s pre-action offers were not outright unreasonable, as they were more generous than what the applicants could obtain as employees’ compensation by adopting the assessment in the Form 7 and/or Form 9. In my decision, it was not obviously reasonable to reject the pre-action offers outright.

46.  There is no evidence suggesting any drastic change in the applicants’ condition between the respective pre-action offers and their acceptance of the sanctioned payments. As stated in Or Siu Lung at §24, a change of mind simpliciter cannot normally be a ground to justify the late acceptance of a reasonable settlement offer.

47.  One may rhetorically ask: what can an applicant do in such a situation, when he/she missed the opportunity to amicably dispose of his/her potential claim by accepting the insurer’s pre-action offer?

48.  I suggest there are multiple avenues open to such an applicant: (i) he/she can commence an action, if he/she concludes that the risk of rejecting the pre-action offer is worth taking; (ii) he/she can put forward a further offer which may be more attractive to the insurer; or (iii) he/she can agree with the insurer to bring proceedings to ask the court to rule on the incidence of costs only[1], instead of commencing a full-blown action. Even if there is a change of heart after a full-blown action has been commenced, the applicant may well consider worthwhile to put forward a sanctioned offer to induce settlement from the insurer on more favourable terms: cf Or Siu Lung at §36.

49.  Ms Yue next complains that the parties could not reach settlement prior to the commencement of the present cases, because the applicants met a stonewall when they invited Falcon to re-open the respective pre-action offers.

50.  When invited to re-open its pre-action offer, Falcon insisted that the applicants should pay the costs incurred since the lapse of the respective pre-action offer, which was something that the applicants did not accept. Falcon was at a liberty to take such stance, and I cannot accept that it acted unreasonably in choosing to so in the present cases, as it was not given any information to justify the re-opening of the pre-action offers.

51.  I do not share Ms Yue’s worry that this court will encourage aggressive stance to be taken by insurers in the future, if Falcon’s action is condoned in the present cases. As I have repeatedly emphasized above, the assessment by the court to consider the incidence of costs is highly fact-sensitive. This court cannot be taken to have accepted that insurers have the blessing to take an aggressive approach in settlement negotiations. It must be a matter for the court to examine on a case-by-case basis if costs are disputed.

52.  Having considered all the evidence before me, I think the following words by HH Judge Andrew Li in Chan Fung Yu Anji at §26 aptly describe the applicants, with modifications by myself:-

“Based on the above, with respect to the plaintiff’s legal representatives, it appears to me that this is a classic case of a non-legally aided plaintiff who wishes to “fly a kite” and to test the waters of whether the defendant (or its insurer) would be prepared to pay her more than what she” [was already offered by the insurer during the pre-action negotiation].

53.  I agree with Mr Ho that all the costs since the lapse of the respective pre-action offers have been unnecessarily incurred because the applicants acted unreasonably. They should pay for such costs.

54.  As a matter of completeness, I would like to briefly deal with 2 points arising in the evidence:-

54.1.  It is alleged in the affirmations filed by the applicants’ solicitor[2] that it was “procedurally irregular” for Falcon to have engaged counsel to give advice prior to the commencement of the present cases. It was alleged that no solicitor was appointed by then. This allegation must be rejected, not only because there was no evidential basis justifying the allegation, but Falcon must plainly be entitled to do so, provided counsel was properly instructed. The insinuation that there was a breach of §5.16(a) of the Bar Code is plainly inappropriate.

54.2.  I also reject Falcon’s allegation in the pre-action correspondence that it was inappropriate for the applicants to engage lawyers by the time the respective letters before action were sent. Again, the applicants were plainly entitled to do so. It also appears to me to be contradictory for Falcon to so allege, when it appeared keen to engage pre-action negotiation with the applicants and seek a settlement of their claims as quickly as possible. The engagement of legal representatives by the applicants would certainty facilitate such negotiation. To this extent, I agree with Ms Yue that Falcon’s tone in their pre-action correspondence was not conducive to settlement.

Conclusion

55.  I find in favour of the respondents. I make the following orders:-

55.1.  In DCEC 48/2025, the applicant shall be entitled to costs of and occasioned by the work accident she met on 31 July 2023 up to and including 26 July 2024; the applicant shall pay the respondent’s costs thereafter, including the costs in DCEC 48/2025. Costs shall be taxed if not agreed; and

55.2.  In DCEC 171/2025, the applicant shall be entitled to costs of and occasioned by the work accident he met on 16 July 2023 up to and including 5 April 2024; the applicant shall pay the respondent’s costs thereafter, including the costs in DCEC 171/2025. Costs shall be taxed if not agreed.

56.  For the present applications, I order (on a nisi basis) that the applicants to pay the respondents’ costs, to be taxed if not agreed, with a certificate for counsel. In the absence of any application for variation, this order shall be made absolute after 14 days. I apportion 50% of the time before me to each case in order to facilitate taxation. It is a matter for the taxing master to consider the amount of costs to be allowed in each case, taking into account the fact that the affirmation evidence and the counsel’s submissions are identical except the fact-sensitive information.

57.  I thank counsel for their assistance.