CAI CHANGBIAN v. TEMMEX ENGINEERING LTD AND ANOTHER

DCEC 1270/2023

[2025] HKDC 1227

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 1270 OF 2023

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IN THE MATTER OF AN APPLICATION BETWEEN

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DECISION

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THE SUMMONS

1.  The Applicant (“A”) claims in this action against his employer as the 1^st Respondent and the principal contractor as the 2^nd Respondent (collectively “Rs”) for employees’ compensation under the Employees’ Compensation Ordinance (Cap 282) (“ECO”) in respect of an injury at work accident that he met on 21 April 2022 (“Accident”).

2.  A commenced this action on 6 June 2023. Rs made a sanctioned payment on 28 November 2023 in the sum of $655,000 (inclusive of interest but on top of advance payments totalling $574,651 already received by A) (“SP”) in accordance with O 22 r 3 of the Rules of the District Court (Cap 336H) (“RDC”). The payment was not accepted.

3.  By a summons filed on 5 September 2024 (“Summons”), A seeks:-

(i) Leave to A to accept the SP out of time; and

(ii) Costs of this action be paid by Rs to A, to be taxed if not agreed.

4.  Rs have no objection for A to accept the SP out of time, but oppose the proposed costs order. Whilst agreeing that Rs shall pay A’s costs of the action up to 27 December 2023, ie the deadline date of the 28-day prescribed period within which A could have accepted the SP without leave (“Expiry Date”), Rs argue that A should pay Rs’ costs, on an indemnity basis, incurred thereafter in this action.

5.  The only outstanding issue before this Court is thus costs liability after the Expiry Date of 27 December 2023.

6.  In support of the Summons, A filed an Affirmation of Yip Kam Shi on the date of the Summons. Rs filed an Affidavit of Lou Eileen in opposition on 28 October 2024 and A filed an Affirmation in reply on 4 November 2024.

7.  This Court has read the affirmations and affidavit filed by the parties and considered the written submissions of A’s counsel Mr Ronald Pang instructed by Messrs KCL & Partners, and those of Rs’ solicitors Messrs Deacons.

BACKGROUND/ PROCEDURAL HISTORY

8.  The relevant chronology of events is succinctly stated in Rs’ written submissions, as set out below:-

Date	Events
21 April 2022	Accident
6 June 2023	Application/ this action commenced
28 November 2023	SP effected
21 December 2023	Form 7 issued
27 December 2023	Expiry Date for accepting the SP
27 June 2024	Form 9 issued
19 August 2024	A’s written “sanctioned offer” proposing:- (i) acceptance of the SP out of time; (ii) costs to A up to 26 December 2023; and (iii) no order as to costs thereafter.

9.  There is no question that Rs should, and they have agreed to, pay A’s costs up to and including the Expiry Date, but parties cannot agree on costs of the action incurred thereafter.

10.  A commenced this action some 13 months after the Accident when he was still on sick leave. He first attended Medical Assessment Board (“MAB”) assessments during September to December 2023 for the purposes of the ECO. The Form 7 (Certificate of Assessment) was issued on 21 December 2023.

11.  As set out in the Form 7, A was certified to have suffered as a result of the Accident “head injury resulting in (i) loss of visual efficiency (5%) (ii) residual nausea and dizziness due to post-concussion syndrome (1.5%)”. Total permanent loss of earning capacity (“LEC”) was assessed at 6.5%.

12.  A objected to the Form 7. Upon review assessments conducted in May to June 2023, added impairment of “(iii) left ear hearing loss (0.5%)” was included, and total LEC was assessed at 7% as set out in the Form 9 (Certificate of Review of Assessment) issued on 27 June 2024. The continuous sick leave granted from the date of the Accident up to 3 May 2024 was endorsed.

13.  It became apparent at once that “left ear hearing loss (5%)” was not included in the Form 7, but featured in the Form 9. A argues that this had to some extent impacted on his decision not to accept the SP in December 2023.

A’S ARGUMENTS

14.  A’s arguments can be summarised as follows:-

(1) At the time when the SP was made, A was not in a proper position and unable to assess the claim as Form7/Form 9 had not been issued. A was forced to commence the action before expiry of his sick leaves and the MAB assessments due to Rs’ failure to pay him proper sick leave payments in accordance with section 10 of the ECO. Hence A had to commence this action to recover compensation/ enforce his entitlement to full sick leave payments; and

(2) Rs by making the SP prematurely shortly after commencement of this action and prior to the issue of the Form7/Form 9, also did not have sufficient information on A’s claim. The SP was never intended to be genuine, but a litigation manoeuvre to put undue pressure on A. This is unfair to A given the imbalance of power between the employer and the employer.

15.  A’s counsel Mr Pang further relies on an alleged “sanctioned offer” dated 19 August 2024 made by A to Rs for A to accept the SP out of time (with no order as to costs after the Expiry Date). Should this Court be minded to accede to the Summons and grant costs of the action against Rs, he asks the court to give effect to the “sanctioned offer” and order costs against Rs on an indemnity basis from 17 September 2024 (28 days after A’s “sanctioned offer”) onwards.

LEGAL PRINCIPLES

16.  The legal principles and costs considerations following acceptance of sanctioned payments out of time are clear, and have been summarised in the recent decision of this Court (involving the same counsel and legal representatives as in the present case) in To Shing Chau v Hung Wai Building Construction and Engineering Ltd & Anor (DCEC 491/2023) handed down on 24 March 2025 (“Decision”).

17.  The same issue of costs liability arising out of similar facts and circumstances and the arguments were canvassed in the Decision in To Shing Chau (supra): The parties agreed for the applicant to accept the sanctioned payment paid into court by the respondents almost a year ago out of time, leaving the only outstanding issue on liability on costs of the post-sanctioned payment period up to acceptance. The slight complication in that case was that acceptance of the sanctioned payment resulted in a global settlement of both the parallel employees’ compensation and personal injuries claims.

18.  Same arguments were raised in To Shing Chau (supra): The respondents argued that the applicant should pay their costs on an indemnity basis after the expiry of the sanctioned payment. The applicant argued that he should be granted leave to accept the sanctioned payment with costs of the action. It was held by this Court that the applicant has not demonstrated any special circumstances which would render it unjust for a usual costs order to be made. The applicant was ordered to pay the respondents’ costs incurred after the expiry of the sanctioned payment.

19.  As set out in §32 of the Decision, and I quote again the judgments both of HHJ Marlene Ng (as she then was) in Wong Ching Wan v A S Watson & Co Ltd [2007] 4 HKLRD 362 at §§33-37 and Miah Mohammed Tara v Hyundai-CCECC Joint Venture (DCEC 1068/2005, 22 May 2006), followed in Lau Po Ling v Josef Gartner & Co. (HK) Ltd & Anor (DCEC 976/2014, HHJ Levy, 17 March 2015), as follows:-

“(1) The starting point is that a party who fails to accept a sanctioned payment until after expiry of time limit for accepting such a payment without leave is deemed to be the unsuccessful party. Subject to section 53 of the DCO and O 62 rr 2(4) and 3(2) of the RDC, costs should usually follow the “event”, ie the usual costs order is for the claimant to pay the paid-in party’s costs after expiration of the prescribed period unless there are special circumstances that render it unjust to make the usual order;

(2) The burden of demonstrating “special circumstances” justifying departure from the usual costs order lies on the unsuccessful party, ie the claimant who accepts the sanctioned payment out of time;

(3) Where no “special circumstances” are demonstrated, to grant costs in favour of the claimant would cause grave hardship and would blunt the overriding objective of the payment-in scheme under O 22 of the RDC to prevent further costs and to dispose of legal proceedings;

(4) The court’s discretion should be exercised in furtherance of the overriding objective of justice and fairness as provided under O 62 r 2(4) of the RDC;

(5) A crucial test would be whether the claimant was justified in not accepting the sanctioned payment within the prescribed time and whether his belief, if any, of entitlement to compensation higher than that paid in was reasonable; and

(6) The waiting by the claimant for further or hopefully more favourable evidence to put him in a better position to consider acceptability of the sanctioned payment does not constitute a special circumstance.”

[emphasis added]

DISCUSSION

20.  It is clear, and I accept Rs’ submission, that A’s main argument of the alleged inability to properly assess his claim in the absence of Form 7 or Form 9 does not constitute a “special circumstance”. On the authorities cited above, the argument simply does not get off the ground. It is also abundantly clear that the waiting for medical assessment does not constitute a “special circumstance” for a departure from the normal rule on costs.

21.  A’s argument that he was forced to commence this action before MAB assessments because R had failed to properly discharge their statutory duty to pay A the full extent of his periodical payments (under section 10 of the ECO) is unreasonable. Section 10 entitlement based on factors of sick leaves granted and monthly earnings of A at the time of the Accident would be a live issue in this action.

22.  I do not accept that A was forced by Rs to commence the action bearing in mind that Rs had all alog been paying periodical payments, albeit not the full amount based on A’s calculations. It is noteworthy that Rs had already paid A advance payments totalling $574,651 by the time when Rs made the SP as at 28 November 2023.

23.  It was entirely A’s decision when he would choose to commence the action, whether or not he could realistically assess quantum of his claim. I do not think Rs were complaining that the commencement of this action by A was premature. By submitting that A could have waited longer in commencing the action or that there was no question of time-bar yet, Rs were simply making a reply to A’s complaint that he was unable to properly assess his claim as the MAB assessments had not yet taken place when the SP was made.

24.  Reference is made to this Court’s observations as stated in §§73-75 of the Decision:-

“73. I agree with Rs that such complaints should more properly be made by Rs but not A. The ball is in A’s court who chose to commence the EC Action within a short time after the Accident and before expiry of the sick leaves or MAB assessment. Rs were put in a difficult position and could not properly assess the claim should they wish to settle the action early by making a sanctioned payment to protect their position on costs.

74. The costs consequence on A’s predicament in having to investigate the merits of his own case cannot be laid at the door of Rs who have made promptly the EC Sanctioned Payment with a view to protecting their costs position. Such clearly cannot constitute “special circumstances” justifying departure from the usual costs order against A in light of the principles stated in Or Siu Lung (supra) and Miah Mohammed Tara (supra) cited above.

75. It was up to A to commence the EC Action before he could realistically assess quantum of the claim. On the other hand Rs would be entitled to make a sanctioned payment to protect their costs position anytime after proceedings have commenced in accordance with O 22 r 23(3).”

[emphasis added]

25.  A argues that Rs had taken a wrong approach in making the SP without having sufficient information, and were themselves gambling by taking a calculated risk, hence the SP was never intended to be genuine, but a litigation manoeuvre intended to put A in an undesirable position and leverage the benefits under O22, and to put undue pressure on A. Rs have not even provided any analysis as to how the SP was calculated. A argues that Rs’ conduct was unfair to A given the imbalance of power between the employer and the employee.

26.  With respect to A’s counsel, these convoluted arguments lack logic or legal basis.

27.  It is further noted, with regret, that despite this Court’s direction to the parties to submit supplemental written submissions “with specific reference to the Decision” of this Court on To Shing Chau (supra) “…if appropriate, applying or distinguishing the principles distilled therefrom in the present case”, A’s counsel in his supplemental written submissions, without addressing the court’s question, simply refers to irrelevant matters, in further attack of Rs’ litigation conduct, of (i) Rs’ attempt to reduce the SP at some stage; and (ii) A acceding to Rs’ request to transfer the related common law personal injuries action from the High Court to the District Court. The transfer should in A’s view imply Rs’ agreement for A to accept the SP out of time without costs sanctions, but Rs are now “reneging from this implied position”.

28.  A asks this Court to give effect to A’s “sanctioned offer” made on 19 August 2024 and grant indemnity costs against R should this Court accede to the Summons on costs.

29.  The alleged A’s “sanctioned offer” was in fact a proposal for A to accept the SP out of time (with no order as to costs after the Expiry Date), which was rejected by R.

30.  A’s proposal for indemnity costs against R on the basis of this alleged “sanctioned offer” is also wholly unreasonable and wrong in principle.

31.  Rs were acting in accordance with the rules provided under O 22 r 23 in making the SP. It was a substantial payment into court offering gross settlement at $1,229,651 (taking into account the advance payments totalling $574,651 already received by A). Rs have in this Court’s view demonstrated a genuine attempt to settle the action early and acted in furtherance of the underlying objects of the CJR.

32.  There is no substance in A’s complaint that Rs had not even provided any analysis as to how the SP was calculated or that Rs had focused singularly on A’s visual impairment without reference to other multiple injuries in Rs’ “without prejudice” sanctioned offer letter encompassing the SP of the same date. Rs are not under a duty nor required by any rules to do so. It would be up to A to consider whether the SP was reasonable or he should accept it or not.

Whether A had a good claim beyond the SP

33.  As stated in §§56-58 of the Decision, an important consideration would be merits of A’s claim as to whether he had a good claim beyond the SP, following the approach of and exercise conducted by the court in Or Siu Lung v Fu Hong Home for the Elderly Co Ltd [2018] 1 HKLRD 872 and Miah Mohammed Tara (supra).

34.  A crucial test for this Court to consider would thus be whether A was justified in not accepting the SP within the prescribed time and whether his belief, if any, of entitlement to compensation higher than the SP was reasonable.

35.  I should assess A’s claim herein on a broad-brush basis to see whether it was reasonable for A not to accept the SP.

36.  There should be no dispute that A was aged 56 at the time of the Accident. A multiplier of 48 would be appropriate for assessing section 9 compensation.

37.  His pleaded case is that his average monthly earnings during the 12 months prior to the Accident were $33,416.42, and much higher at $40,600 for the month immediately before the Accident.

38.  Of note is that upon issue of the Form 7 on 21 December 2023 which certifies LEC at 6.5% and sick leaves granted from 21 April 2022 to 6 October 2023 (a total of about 534 days), A was still within time to accept without leave the SP. Should A require more time to consider the SP, he could have sought time extension from Rs. He did not.

39.  It is not difficult to assess at that time that A’s claim herein would likely fall far below the SP as shown below:-

Section 9 $35,600 x 48 x 6.5% [*$35,600 being the cap under the Sixth Schedule as at the time of the Accident]		$111,072
Section 10 $40,600 x 534/30 x 4/5		$578,144
Section 10A Medical expenses		[no evidence]
Total EC		$689,216
(Less) Advance payments		($574,651)
Nett		$114,565
Interest: Nett EC at say 4.2%pa from date of Accident for 20.2 months (up to Expiry Date on 27 November 2023)		$8,100
Nett EC plus interest		$122,665 (plus s10A medical expenses)

40.  A broad-brush quantification demonstrates that the nett employees’ compensation claim plus interest would highly likely fall far below Rs’ SP paid in at $655,000, even also taking into account section 10A medical expenses (capped under the Third Schedule of the ECO).

41.  I have no doubt coming to the conclusion that it was unreasonable for A not to accept the SP within time, and that he did not have a good claim beyond the amount paid in.

42.  I do not accept that A should be entitled to wait and see pending the additional LEC assessment in respect of his left ear hearing loss not included in the Form 7, subsequently assessed at LEC 0.5% upon review per the Form 9 issued on 27 June 2024. A himself should best know the gravity of his hearing loss and its impact, if any, on his loss of earning capacity.

43.  On the other hand, Rs in my view have not been at fault nor unreasonable in their conduct of these proceedings. They should not be deprived of the costs protection which they have secured by making an early SP evincing a genuine intention to kill the litigation.

44.  No “special circumstances” having been demonstrated by A, I conclude that the normal costs rule should take effect: A should bear Rs’ costs of the action after the Expiry Date of 27 December 2023 when he has not achieved an outcome more favourable than that paid in.

Indemnity Costs?

45.  Rs seek costs of the action after the Expiry Date against A on an indemnity basis.

46.  I have considered the proposition, stated in Or Siu Lung (supra) at §17, that the approach on costs consequences of O 22 r 23 should apply to an acceptance of sanctioned payment out of time.

47.  O 22 r 23(4) provides part of the costs sanctions under the O 22 regime that the party who accepts a sanctioned payment out of time may have to bear costs on an indemnity basis after the expiry of the sanctioned payment.

48.  O 22 r 23(5) provides that:-

“Where this rule applies, the Court shall make the orders referred to in paragraphs (2), (3) and (4) unless it considers it unjust to do so”.

[emphasis added]

49.  The costs sanctions should not automatically apply. Consideration of costs is fact-sensitive, of which the court retains full discretion pursuant to section 53(l) of the District Court Ordinance (Cap 336).

50.  I have considered Rs’ submissions and accept that they have all along evinced a genuine intention to settle the action promptly by making an early SP. I have in particular borne in mind that the SP is exceptionally generous and highly favourable to A in light of the assessments in the Form 7 which was issued before the Expiry Date. The acceptance of the SP within time, had A taken a reasonable stance, would have saved substantial time and costs of litigation.

51.  Considering all matters in the round, I do not consider it unjust to award costs to Rs and against A on an indemnity basis in respect of costs of the action incurred after the Expiry Date. I so exercise my discretion.

ORDER

52.  I therefore make the following order:-

(1) Leave be granted to A to accept the SP out of time;

(2) Rs do pay A’s costs of this action (including all costs reserved, if any) up to and including 27 December 2023, to be taxed if not agreed; and

(3) A do pay Rs’ costs of this action (including all costs reserved, if any) after 27 December 2023, on the indemnity basis, to be taxed if not agreed.

53.  There is no reason why costs should not follow the event in respect of the Summons. I further grant a costs order nisi that A do pay Rs’ costs of the Summons, to be taxed if not agreed. In the absence of application from the parties to vary this costs order within 14 days, the costs order nisi will become absolute.

54.  Parties have submitted, and I agree, that it is appropriate to deal with the costs of the Summons by summary assessment in accordance with O 62 r 9A(1)(a) of the RDC. For those purposes, both parties have lodged their respective Statements of Costs and Lists of Objections.

55.  I further order that, in the event that this costs order nisi becomes absolute on 1 August 2025, A do submit, if so advised, on or before 15 August 2025 his Further List of Objections to Rs’ Revised Statement of Costs lodged on 27 June 2025. Summary assessment will be dealt with on paper thereafter whether or not a Further List of Objections is lodged.