CHEN GUANGLAO v. DIXIE ENGINEERING COMPANY LTD AND ANOTHER

DCEC 365/2025

[2025] HKDC 2133

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 365 OF 2025

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IN THE MATTER OF AN APPLICATION BETWEEN

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DECISION ON COSTS

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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 (“R1” and “R2” respectively, and collectively “Rs”) for employees’ compensation (“EC”) under the Employees’ Compensation Ordinance (Cap 282) (“ECO”) in respect of an injury at work accident that he met on 11 June 2024 (“Accident”).

2.  Shortly after A commenced the action on 18 February 2025, Rs made a sanctioned payment on 25 March 2025 in the small sum of $1,600 (stated to be including of interest and on top of advance payments totalling $34,419.43 already received by A) (“SP”) in accordance with O22 r8(2) of the Rules of the District Court (Cap 336H) (“RDC”).

3.  A filed a Notice of Acceptance of the SP on 12 May 2025, ie about 3 weeks out of time beyond the 28-day prescribed time limit up to 22 April 2025 (“Expiry Date”) within which he could accept it without leave.

4.  Rs consent to A’s acceptance of the SP out of time, thereby concluding the action.

5.  The only outstanding issue before this Court is costs.

6.  A filed a Summons on 26 August 2025 (“Summons”) seeking costs of the whole action, including the Summons, against Rs.

7.  Rs on the other hand seek costs of the whole action against A on an indemnity basis and of the Summons. Their main arguments are that it was wholly unnecessary/inappropriate for A to have commenced these proceedings in the first place.

8.  In support of the Summons, A filed an Affirmation of Chan Kam Tak on the date of the Summons. Rs filed an Affidavit in opposition of Kwok Long Ning on 25 September 2025 and A filed an Affirmation in reply on 8 October 2025.

9.  This Court has read the affirmations and affidavit filed by the parties and considered the written submissions of A’s solicitors Messrs John W Wong & Co (“JWW”), and those of Rs’ solicitors Messrs Deacons (“Deacons”).

The Law/ Legal Principles

10.  O22 r20(1) of the RDC stipulates that where a defendant’s sanctioned payment to settle the whole claim is accepted without leave of the court, the plaintiff, as a prima facie or general rule of thumb, is entitled to his costs of the proceedings up to the date of serving the notice of acceptance, unless the court otherwise orders (“Otherwise Proviso”).

11.  The prima facie rule may be displaced when the court considers it necessary and orders otherwise (by applying the Otherwise Proviso). The court retains full discretion to do so, but the discretion should only be exercised in exceptional circumstances that clearly warrant a different costs order. The burden rests squarely on the party seeking to invoke the Otherwise Proviso to establish such circumstances. The court will not lightly displace the prima facie rule until and unless the applicant has discharged the burden to its satisfaction, per Jeremy Poon J (as the CJHC then was) in Etratech Asia-Pacific Ltd v Leader Printed Circuit Boards Ltd. [2013] 2 HKLRD 1184 at §§ 18-21.

12.  In Wong Ka Chi v Cheung Li Glass Engineering Company Limited and Kam Kee Steel's Works Limited (DCPI 2013 of 2014; 24 March 2015), HHJ Andrew Li in considering the application of the Otherwise Proviso under O22 r20(1) applied the principles set out in Etratech Asia-Pacific Ltd (supra) and the underlying objectives of O1A r1 of the RDC. He held that the plaintiff's failure to accept defendants’ two offers made at the pre-action stage with same settlement terms of the ultimate settlement/sanctioned payment accepted by the plaintiff despite being in an informed position to evaluate the reasonableness of the defendants’ offers constituted an exceptional circumstance, justifying operation of the Otherwise Proviso. Despite the plaintiff's acceptance of the defendants’ sanctioned payment, the court deviated from the general rule and ordered costs against the plaintiff.

13.  In the present case, Rs in their Notice of SP dated 25 March 2025 have stipulated clearly that the SP was made subject to the terms of Deacons’ offer letter of even date (“Offer Letter”) that they would invoke the Otherwise Proviso under O22 r 20(1) to seek costs of the proceedings against A on the basis that A had unreasonably refused Rs’ pre-action settlement offer and commenced these proceedings unjustifiably and unreasonably.

14.  The court has full discretion as to costs pursuant to section 53(1) of the District Court Ordinance (Cap 336) (“DCO”).

15.  Also as provided under O62 r5 of the RDC, the court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account, inter alia, the underlying objectives set out in O1A r1 and the conduct of all the parties, and be guided by O62 r2.

16.  As to the costs incurred upon A’s late acceptance of the SP, 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 O62 rr2(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. See the judgment of HHJ Marlene Ng (as she then was) in Miah Mohammed Tara v Hyundai-CCECC Joint Venture (DCEC 1068/2005, 22 May 2006) at §22 and the legal principles cited in this Court’s decision on costs in To Shing Chau v Hung Wai Building Construction and Engineering Limited & Anor [2025] HKDC 480 at §§32-34.

17.  In considering costs, it would be necessary to look into the pre-action background and the (short) procedural history of this case.

Background/ Procedural History

18.  A was a construction site labourer. His pleaded case on the circumstances of the Accident suggests an extremely mild injury: When removing/ retrieving a key in the course of work, he stabbed himself and suffered a left upper lip injury, resulting in incapacity for work/a sick leave of 20 days being granted up to 30 June 2024. [Application/§§3(3)-(5)]

19.  A special feature in this case is that the employer R1 and the Insurer had all along, and soon after occurrence of the Accident, taken full responsibility of the matter and made prompt payment, clearly indicating their intention to settle the modest EC claim of A without litigation. Such conduct should be commended.

20.  R2 submitted a Form 2 Notice dated 24 June 2024 of the Accident to the Labour Department, and had apparently reported the same to its EC insurer Chevalier Insurance Co Ltd (“Insurer”).

21.  On 6 July 2024 R1 paid A $12,995.60 being full sick leave payment in accordance with section 10 of the ECO plus medical expenses reimbursement of $300, calculated as follows:

$23,804.25 x 20 days x 4/5 + $300 = $12,995.60

22.  There is no dispute on A’s monthly earnings of $23,804.25 (adopted and pleaded in the Application) for the month preceding the Accident being the more favourable figure compared to his monthly average.

23.  Upon receipt of JWW’s pre-action letters dated 30 July 2024 issued 1 odd months after the Accident, the Insurer had taken prompt steps to deal with A’s claim. By its letter dated 23 August 2024 to JWW, the Insurer confirmed that R1 had paid and A had received full sick leave pay, and that Rs/the Insurer would settle the balance of A’s claim for EC once Form 7 (Certificate of Assessment) and Form 5 (Certificate of Compensation Assessment) have been issued by the Labour Department. It specifically requested A not to commence EC action to save unnecessary costs.

24.  Medical Board Assessment for the purposes of the ECO took place on 12 September 2024. Form 7 issued on 26 September 2024 certifies permanent loss of earning capacity (LEC) at 1% in respect of “left upper lip injury, resulting in pain and scarring” and the 20-day sick leave.

25.  Upon A’s objection and review on 28 November 2024, the LEC assessment was revised to 1.25% as stated in the Form 9 (Certificate of Review of Assessment) issued on 12 December 2024.

26.  Form 6 (Certificate of Review of Compensation Assessment) was issued on 19 December 2024 certifying total EC at $34,119.43 based on the Form 9 assessment of 1.25% LEC.

27.  On 6 January 2025, R1 notified and tried to pay A the balance of EC calculated at $21,423.83 ($34,119.43 ­– $12,995.60 + $300) in accordance with Form 6, and requested A to sign a Discharge Receipt upon acceptance. A refused to accept R1’s cheque dated 2 January 2025 (drawn payable to him for the sum of $21,423.83) nor sign the Discharge Receipt.

28.  On 18 February 2025, A commenced these proceedings by issuing the Application.

29.  On 13 March 2025, without notifying A, Rs deposited R1’s cheque dated 2 January 2025 for the sum of $21,423.83 into A’s bank account.

30.  On 25 March 2025, Deacons filed in this action a Notice to Act for Rs who also made the SP on the same day. Deacons sent the Offer Letter together with the Notice of SP to JWW (i) stating that A had already received advance payments totalling $34,419.43 hence his claim herein had already been subsumed; and (ii) urging A to accept the SP but Rs would invoke the Otherwise Proviso under O22 r20(1) to seek against A costs of the whole action in favour of Rs.

31.  Parties exchanged further correspondences on clarification of the alleged payment of $21,423.83 received by A, extension of deadline for acceptance of the SP (rejected by Rs) and costs arguments.

32.  A filed a Notice of Acceptance of the SP on 12 May 2025, almost 3 weeks past the Expiry Date.

33.  Parties could not agree nor resolve the costs issue. Hence the Summons.

34.  A brief summary of the relevant events, incorporating the parties’ elaboration and explanations as stated in their respective Affirmations/Affidavit, is set out below for ease of reference:

11.6.2024	Accident
11-30.6.2024	20 days’ sick leave
2.7.2024	A resumed working for R1
6.7.2024	A received $12,995.60 in respect of the 20 days sick leave and medical expenses reimbursement
30.7.2024	JWW issued pre-action letters to Rs and the Insurer
23.8.2024	Insurer advised that A had received $12,995.60 from his employer R1 who would pay the balance of EC once Form 7 and Form 5 had been issued. It was thus not necessary for A to commence court action to claim EC [45-46]
26.9.2024	Form 7 issued – 1% LEC; sick leave of 20 days [51]
3.10.2024	JWW made a “without prejudice” offer to the Insurer to settle the EC claim at $72,000 based on 3% LEC and 1 month sick leave [48]
7.10.2024	Insurer rejected the offer, stating that it would advise R1 to pay EC in accordance with Form 5 (based on Form 7 assessment) once issued [49-50]
12.12.2024	Form 9 issued – 1.25% LEC; sick leave of 20 days [52]
19.12.2024	Form 6 issued for $34,419.43 (based on Form 9) [53]
6.1.2025	A refused to accept R1’s proposed settlement based on Form 6 nor the cheque for $21,423.83 (making a total of $34,419.43 including advance payments already received by A). NB: The Discharge Receipt purports to be “in full and final settlement of all claims” in respect of the Accident （“全部及最終解決有關就此次意外之損失賠償”）[89-90]
18.2.2025	EC Application filed
13.3.2025	Without notifying A nor his solicitors JWW, Rs deposited $21,423.83 into A’s bank account, as revealed later in A’s bank statement [72]
25.3.2025	Rs made the SP in the sum of $1,600 accompanied by Deacons’ Offer Letter [58-60 & 82-83]
17.4.2025	JWW’s letter stating that A had only received $12,995.60, seeking clarification from Rs and requesting for extension of time for A to accept the SP [62]
22.4.2025	Expiry Date for acceptance of the SP without leave. Deacons disclosed the deposit slip for $21,423.83 and urged A to accept the SP by close of business [65-69]
24.4.2025	A verified and confirmed with JWW receipt of $21,423.83 in his bank account on 13 March 2025 [7-8]
25.4.2025	JWW proposed acceptance of SP conditioned on Rs paying A costs of the whole action [75]
8.5.2025	Deacons rejected, insisting no order as to costs of the action [76-77]
12.5.2025	A filed a Notice of Acceptance (which was served on Deacons much later on 28 July 2025 allegedly due to administrative delay)
13.5.2025	JWW proposed costs to A up to 25 April 2025, and no order as to costs thereafter [78]
21.5.2025	Deacons rejected, insisting no order as to costs of the action [79-80]

Discussion

35.  The Accident was most likely a minor one as borne out by the circumstances in which it had occurred and the mild injury. The upper lip laceration was sutured and had apparently healed and recovered without complication. A resumed working for R1 immediately after the sick leave, and had continued working thereafter.

36.  In considering the Summons and upon this Court’s specific request for A to produce all medical records, reports and certificates in support of his injury and treatment, A has produced the following two medical certificates only:

(i) One dated 11 June 2024 issued by the Accident & Emergency Department of Pamela Youde Nethersole Eastern Hospital certifying a sick leave of 7 days covering 11–17 June 2024 in respect of “laceration”; and

(ii) Sick leave certificate with receipt dated 17 June 2024 issued by a private medical practitioner certifying “off suture” and “upper lip injury” and a further sick leave covering 17–30 June 2024.

37.  Rs and the Insurer had all along upon receipt of the pre-action demand letters from JWW made it clear that they would pay EC in accordance with the assessments of Form 7/Form 9 and upon issue of Form 5/Form 6 without litigation nor incurring unnecessary costs.

38.  Indeed on 6 January 2025, R1 had attempted to pay to A balance of EC in accordance with Form 6.

39.  Under those circumstances, I accept Rs’ submissions that it was wholly unnecessary and unjustifiable for A to issue these proceedings, especially when the medical evidence would most unlikely support an EC claim higher than that assessed in Form 6.

40.  I am of the view that A’s “without prejudice” settlement offer of $72,000 based on 3% LEC and 1 month’s sick leave, substantially higher than the Form 9 assessment and more than double the Form 6 compensation assessment and without evidential basis, was wholly unreasonable and unsustainable. It was justifiably rejected by Rs.

41.  The submission of A’s solicitors in court that A had appealed against Form 9 and was hopeful of achieving an EC award higher than Form 6, without any medical evidence in support, lacks conviction. It is also contradicted by A’s ultimate acceptance of the SP in the nominal sum of $1,600 made shortly after commencement of these proceedings.

42.  Also as a matter of common sense, it is doubtful how a long recovered lip laceration injury would cause any permanent LEC to A or impact on his work as a construction labourer. In any event, A himself should know too well that he had resumed working continuously immediately after the sick leave since 2 July 2024.

43.  A’s appeal against Form 9 as pleaded in the Application [§2(a)] is unmeritorious.

44.  A’s issue of these proceedings did not serve any useful purpose; it was wholly unnecessary and a costs wasting exercise. Such litigation conduct in blatant disregard of the underlying objectives of O1A r1 and the CJR and against the spirits of the no-fault scheme under the ECO aiming to resolving EC claims in a cost effective manner must be discouraged and sanctioned.

45.  I accept Rs’ submissions that exceptional circumstances justifying application of the Otherwise Proviso under O22 r20(1) are established as follows: (i) The genuine intention and attempt of the employer R1/the Insurer to settle pre-action A’s claim pursuant to Form 5/Form 6 when issued; (ii) A’s minor injury which renders any alleged claim higher than the Form 6 compensation assessment unrealistic in light of the medical evidence; and (iii) A’s unreasonable refusal of the settlement offer based on Form 6 and issue of these proceedings, as demonstrated by his acceptance of the SP in the nominal sum of $1,600 ultimately. A should not have costs of the action, not even if he had accepted the SP before the Expiry Date.

46.  Also, upon (i) full sick leave payments made by R1 under section 10 of the ECO and (ii) the minor/long recovered injury not warranting a claim beyond the Form 9 review assessment, A’s nominal EC claim, left with reimbursement of a few hundred dollars of medical expenses (and interest) only, is not one entitled to be commenced in the District Court but may only be recovered as a civil debt in the Small Claims Tribunal as stipulated under section 10(7) of the ECO. Even if A had won costs of these proceedings, such should be Small Claims costs only.

47.  I was tempted to consider making costs sanctions against A in respect of the issue of these proceedings. However, R1’s conduct in attempting settlement, more specifically in offering to pay A the balance of EC in accordance with Form 6, made to A personally on 6 January 2025 without informing his solicitors, was not without problem.

48.  Rs and the Insurer well knew since July 2024 that A had legal representation, yet they chose to liaise settlement and make payment to A without informing the solicitors. Worse still, A was required to sign a Discharge Receipt, stating the payment to be in full settlement of all of A’s claims in respect of the Accident. It is apparently prejudicial to A’s interests in regard to future possible personal injuries common law action. I do not accept Rs’ submissions that the Discharge Receipt, in its present wordings, would have the effect of settlement of the EC claim only.

49.  It was in my view reasonable for A, who without knowing the legal implications of the Discharge Receipt nor the benefit of legal advice from his solicitors, to refuse settlement at that juncture.

50.  What Rs should have done then was to continue to liaise settlement through A’s solicitors on the basis of Form 6. Had that been done and A had still refused settlement and issued these proceedings, it would have been appropriate for the court to consider costs sanctions against A in issuing these proceedings; A should then be made to bear the costs of the unnecessary proceedings commenced.

51.  Unfortunately, Rs did not do so, and A’s claim was left in limbo, until A commenced these proceedings on 18 February 2025.

52.  After commencement of action, R1 deposited the cheque for the sum of $21,423.83 in A’s account on 13 March 2025 without notifying A. Deacons filed a Notice to Act on 25 March 2025 to act for Rs who made the SP on the same day.

53.  It is stated in the Notice that the SP of $1,600 was made on top of advancement payments totalling $34,419.43 already paid by Rs. The Expiry Date/28-day deadline within which A could accept the SP without leave fell on 22 April 2025.

54.  A, allegedly had not received any payment beyond the initial sick leave payments of $12,995.60, did not seek clarification within 7 days from Deacons on the SP/alleged total payments of $34,419.43 as prescribed under O22 r14(1), in which event the deemed date of SP may by a later court order be extended. Rs waited until 17 April 2025 to seek clarification on the advance payments of $34,419.43 from Deacons. Upon the latter’s clarification on 22 April 2025, JWW finally confirmed with A on 24 April 2025 that A’s bank account was credited with a cheque deposit of $21,423.83 back on 13 March 2025. A subsequently filed the Notice of Acceptance on 12 May 2025.

55.  A’s dilatory manner in clarifying receipt of payments and dealing with the SP is unreasonable, and cannot be accepted to be a justifiable reason for the late acceptance.

56.  Considering all matters, I am inclined that Deacons’ offer made upon A’s acceptance of the SP that there be no order as to costs of the proceedings would be reasonable. A had commenced these proceedings unnecessarily, yet that development was partly resulted from Rs’ failure to liaise and settle A’s EC claim properly through his legal representatives in January 2025.

57.  I therefore make no order as to costs of the action up to the Expiry Date of 22 April 2025.

58.  As to the post-acceptance SP costs after 22 April 2025, I have no doubt coming to the conclusion that on the available evidence, the SP of $1,600 made was a reasonable offer based on Form 6 (with interest) and should be accepted. On the scanty medical evidence, there was no reasonable prospect for A to have a claim beyond the SP.

59.  Following the legal principles cited in this Court’s decision on costs in To Shing Chau (supra) at §§32-34. I consider it appropriate to order costs of the action incurred after 22 April 2025 against A and in favour of Rs.

60.  Costs should follow the event. Rs should also have costs of the Summons against A.

61.  On those costs ordered against A in respect of the late acceptance and of this Summons, I do not consider it justified and decline Rs’ request for indemnity costs.

Order

62.  I therefore make the following order:

(1) Leave be granted to A to accept the SP in the sum of $1,600 made by Rs on 25 March 2025 out of time;

(2) The SP be paid out forthwith to A through his solicitors;

(3) All interest, if any, accrued on the SP be paid out forthwith to Rs through their solicitors;

(4) There be no order as to costs of these proceedings up to and including 22 April 2025; and

(5) A do pay Rs’ costs of these proceedings after 22 April 2025.

63.  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 (including costs of the written submissions).

64.  In the absence of application from the parties to vary this costs order within 14 days by written submissions, the costs order nisi will become absolute.

65.  I consider it appropriate to deal with all costs above by way of summary assessment in accordance with O62 r9A(1)(a) of the RDC.

66.  For those purposes, I direct that:

(1) Rs do submit a Statement of Costs of (i) the action covering the period after 22 April 2025 up to the date of the Summons; and (ii) the Summons (including the written submissions) within 21 days from the date hereof; and

(2) A do submit a List of Objections to Rs’ Statement of Costs within 14 days thereafter.

67.  Summary assessment will be conducted by this Court on paper.