EST-OUEST AUCTIONS CO LTD AND ANOTHER v. NEW ART EST-OUEST AUCTIONS COMPANY LTD formerly known as NEW ART EST-OUEST AUCTIONS COMPANY LTD

HCIP 45/2023

[2025] HKCFI 782

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INTELLECTUAL PROPERTY PROCEEDINGS NO. 45 OF 2023

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DECISION ON COSTS

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1.  There are 2 summonses to vary the costs order nisi I made following the trial of this action.

2.  The background of this case and my reasons for deciding the case in favour of the Defendant have been fully set out in my judgment handed down on 30 September 2024 (“the Judgment”).

3.  In the Judgment, I made a cost order nisi that the Plaintiffs do pay to the Defendant 80% of its costs of the action (“the Nisi Order”). By the summons dated 10 October 2024 (“the Defendant’s Summons”), the Defendant sought to vary the Nisi Order to the effect that the Plaintiffs do pay to the Defendant all of its costs, including the costs of the Plaintiffs’ summons dated 11 July 2023 whereby the Plaintiffs applied for interlocutory injunction (“the Injunction Summons”), on an indemnity basis. On the other hand, the Plaintiffs, by their summons dated 14 October 2024 (“the Plaintiffs’ Summons”), sought to vary the Nisi Order to the effect that the Plaintiffs do pay to the Defendant only two-thirds of its costs of the action.

4.  In this Decision on Costs, I will adopt the same abbreviations that I have used in the Judgment.

5.  In the Judgment, I have set out the 3 core issues in this case. Though the Defendant has succeeded in its defence and counterclaim, the court did spend time to deal with the 3^rd Core Issue the finding of which is unfavourable to the Defendant. Hence I made the Nisi Order that the Plaintiffs do pay to the Defendant 80% of its costs of the action.

6.  In support of the Defendant’s Summons, the Defendant has advanced the following arguments:

(i)  Since the court found in favour of the Defendant on the 1^st and 2^nd Core Issues, the finding of the court on the 3^rd Core Issue does not affect the overall result of the case. Hence, there is no reason to deny the Defendant to recover all of its costs in this action.

(ii)  Seki was in breach of the Non-Competition Clause in the SPA in applying for the registration of the Marks. Clause 14.1 of the SPA provides that Seki and Florial would indemnify New Art Holdings for any damages, loss or expenses arising out of and in connection with any breach of their obligations under the Share Transfer Agreement including legal costs and compensation, and so the Defendant’s costs should be assessed on such indemnity basis.

(iii)  In the course of the trial, the Defendant made a without prejudice offer to the Plaintiffs to settle the case by having judgment be entered in favour of the Defendant and the Plaintiffs paying 75% of the costs of the Defendant (“the WP Offer”). The Plaintiffs refused to accept the WP Offer. Though the Defendant was not able to make a sanctioned offer by that time, the court should take this into account in exercising the discretion in deciding the issue of costs.

7.  On the other hand, the Plaintiffs have put forward the following arguments in support of the Plaintiffs’ Summons:

(i)  The finding of the court on the 3^rd Core Issue is material to the determination of the claim of the New Art Camp in the HC Action, and the Defendant lost on such issue in the trial.

(ii)  The time spent and the evidence heard on the 3^rd Core Issue were no less than those related to the 1^st and 2^nd Core Issues.

(iii)  The Defendant had acted oppressively in the litigation, including making unilateral communications to the court-appointed interpreter, delaying the provision of the documents in the supplemental list of documents, making unnecessary objections and obstruction when the Plaintiffs sought to file additional expert report, and making unsuccessful application to consolidate the present case with the HC Action.

8.  Having carefully considered these arguments, I refuse to disturb the Nisi Order.

9.  First, I agree that the finding of the court on the 3^rd Core Issue is material to the claim of the New Art Camp in the HC Action. Though it was apparent in the early stage of the trial that the Defendant had a strong case on the 1^st and 2^nd Core Issues, the Defendant was still pushing the court to make a finding in the Defendant’s favour on the 3^rd Core Issue, which may have substantial implications in determining the merits of the claim in the HC Action. Time and costs had indeed been spent on the arguments of the 3^rd Core Issue in this trial, and so there is no reason why the Defendant’s entitlement to costs should not be discounted to give effect to such unsuccessful challenge on the part of the Defendant.

10.  Second, as the court did not find it necessary to determine the questions in Issues 6 to 8, the court had not found that Seki was in breach of his obligations under the SPA. Even if Seki were in breach of the Non-Competition Clause, the indemnity provision in Clause 14.1 of the SPA is only applicable as between Seki, Florial and New Art Holdings. As the Defendant in the present case is HK New Art Est-Ouest, the indemnity provision is not applicable. This is the case even if HK New Art Est-Ouest is a wholly-owned subsidiary of HK New Art, which in turn is a wholly-owned subsidiary of New Art Holdings.

11.  Third, I do not find that the refusal to accept the WP Offer in the course of the trial warrants the award of costs on a higher basis. Apart from the fact that the WP Offer came very late after the Plaintiffs’ main witness, i.e. Seki, was already in the witness box, the Plaintiffs did in fact succeed in the 3^rd Core Issue which may have important implication in the determination of the claim in the HC Action. As the Plaintiffs have achieved something at the trial, one cannot criticize the Plaintiffs’ refusal in accepting the WP Offer as oppressive.

12.  Fourth, I do not find that the Plaintiffs had conducted the case in an oppressive manner by reason of the matters mentioned in §7(iii) above. The Plaintiffs just took a different stance on those matters, and there is no basis for the court to make a finding of oppressiveness based on such matters.

13.  Fifth, though I had reserved the costs of the Injunction Summons, such costs should be costs in the cause of the proceedings. I do not find that the costs of the Injunction Summons warrant separate consideration, and so the Defendant’s 80% entitlement to costs should include the costs of the Injunction Summons.

14.  Finally, I take the view that 20% is an appropriate discount in respect of the Defendant’s costs in the present case. Whilst there was time spent at the trial to deal with the 3^rd Core Issue, the main focus at the trial was still the 1^st and 2^nd Core Issues. Furthermore, the costs of the trial, though substantial, only account for a portion of the Defendant’s costs. The additional pre-trial costs caused by the inclusion of the 3^rd Core Issue should not be substantial. In assessing the discount, the court should not carry out an elaborated inquiry to ascertain the additional costs caused by the inclusion of the 3^rd Core Issue. Adopting a broad-brush approach, I am of the view that 20% should be an appropriate discount.

15.  For the above reasons, I refuse to disturb the Nisi Order save as to make it clear that the Defendant’s 80% entitlement to costs shall include the costs of the Injunction Summons. As both summonses are dismissed, I make no order as to costs in respect of the Plaintiffs’ and the Defendant’s Summonses.