SKY KING MACHINERY ENGINEERING LTD v. CHINA HARBOUR ENGINEERING CO LTD

HCIP 45/2019

[2026] HKCFI 2965

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INTELLECTUAL PROPERTY PROCEEDINGS NO 45 OF 2019

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BETWEEN

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DECISION

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A. INTRODUCTION

1.  This is the adjourned hearing of the Summons of the Plaintiff (“P”) dated 4 March 2024 (“Summons”) for interim payment of costs, fixed for 30 minutes.

2.  The Summons first came before the Honourable Lok J on 4 July 2024. According to the transcript of that hearing:

(1) The learned Judge indicated that he was sympathetic to P’s application, but nonetheless decided to adjourn the application to be dealt with after the then pending appeal (“Appeal”) by the Defendant (“D”) to the Court of Appeal against the first instance judgment of Recorder Eva Sit SC dated 9 June 2023 (“CFI Judgment”), under which D was found liable for infringement of copyright. On 29 June 2023, D was also ordered to pay P’s costs of the action up to the date of the CFI Judgment (with certificate for two counsel for the trial on liability), to be taxed if not agreed.

(2) The learned Judge further indicated that if P succeeded in the Appeal, he would probably order interim payment, subject to arguments on quantum and costs of the application.

(3) Senior Counsel appearing for D at the hearing on 4 July 2024 agreed with the learned Judge’s observations.

3.  Judgment in the Appeal was handed down on 2 February 2026 by the Court of Appeal pursuant to which D’s appeal was dismissed in its entirety.

4.  Leave to appeal to the Court of Final Appeal (“CFA”) was granted by the Court of Appeal on 5 May 2026 on one out of four questions alleged to be of great general or public importance. The certified question for which leave was granted to appeal to the CFA involve one single point of law, namely, whether “a work of architecture” requires “artistic character” in order to qualify as an “artistic work” under the Copyright Ordinance (Cap 528).

5.  It is not in dispute that this single point of law only affects the question of whether copyright subsists in P’s Installation (as defined in the CFI Judgment) and does not affect the subsistence of copyright in the SF 2003 Plans (as defined in the CFI Judgment).

6.  In other words, this single point of law has limited impact on the ultimate findings against D on liability (as is apparent from §118 of the CFI Judgment[1]). It is not in dispute that even if D succeeds in the CFA on this single point of law, D would still remain liable for infringement of P’s SF 2003 Plans, and the vast majority of the acts of infringement found in the CFI Judgment will not be affected.

7.  Nonetheless, the Summons is opposed by D on the grounds that: (i) the Court should not exercise its inherent jurisdiction as there is no procedural lacuna and the circumstances do not merit the Court’s intervention; (ii) the Appeal has not been concluded as an appeal to the CFA is still pending; (iii) the Action has not been concluded and it is unfair for P to receive interim payment of costs at this stage; and (iv) the prejudice suffered by D if the Summons is granted outweighs the prejudice suffered by P if the Summons is refused.

B. APPLICABLE LEGAL PRINCIPLES

8.  The applicable principles in relation to interim payment of costs pending taxation have been set out by the Court of Appeal in Lau Yue Kui & Ors v Philip Chan & Co (unrep, CACV 75/2014, 29 December 2014) at §28(1)-(4), applying Mars UK Ltd v Teknowledge Ltd [2000] FSR 138:

“… 1) A party who has been awarded costs should receive those costs as soon as possible and pending detailed assessment, there should be an interim payment in general. Jacob J in Mars at page 153 explained:

‘ … Where a party has won and has got an order for costs the only reason that he does not get the money straightaway is because of the need for a detailed assessment. Nobody knows how much it should be. If the detailed assessment were carried out instantly he would get the order instantly. So the successful party is entitled to the money. In principle he ought to get it as soon as possible. It does not seem to me to be a good reason for keeping him out of some of his costs that you need time to work out the total amount. A payment of some lesser amount which he will almost certainly collect is a closer approximation to justice.

This is likely to have practical advantages in another way. The motive for trying to prolong a detailed assessment, namely putting off the evil day when payment has to be made, will be considerably reduced when he who has to pay can only put off the evil day in respect of a considerably reduced sum.’ (emphasis added)

2) The financial position of the parties is a relevant consideration. If there are disposable funds where trustees are concerned, the Court should be more inclined to grant interim payment, see Recorder Jat SC in Re Miller Peart, at paragraph 102.

3) The consideration of hardship is not relevant in the exercise of discretion but whether the grant of interim payment would stifle the paying party’s ability to appeal may be a factor in assessing quantum and the method and time of payment.

4) The approach to assessing the quantum of the interim payment is to use the ‘rough and ready’ approach to ensure a ‘close approximation of justice’ as set out by Jacob J in Mars. This approach is analogous to the one Kwan JA adopted in Re Hawkins, where Kwan JA held that the Court should consider what amount could be reasonably taxed off as the basis for interim payment.”

9.  Although Lau Yue Kui (supra) concerned the Court’s power to order interim payment of costs under section 67 of the Legal Practitioners Ordinance (Cap 159), there is no reason why the same approach should not be adopted in relation to an application under the Court’s inherent jurisdiction.

C. ANALYSIS

10.  Applying the aforesaid applicable principles, and having considered the relevant circumstances of this case, I consider it appropriate to exercise my discretion to order the interim payment sought by P for the following reasons.

11.  First, P was the successful party under the CFI Judgment and has been awarded its costs by an Order made on 29 June 2023, almost 3 years ago. D’s appeal against the CFI Judgment was wholly dismissed. P should be entitled to receive his costs as soon as possible pending detailed assessment (see Lau Yue Kui (supra) at §28(1)). There is no reason to keep P out of pocket for its costs as the successful party.

12.  The fact that there is a pending appeal to the CFA (“CFA Appeal”) on the single certified question of law should not be an impediment to the Court ordering interim payment, as such question of law, even if ultimately decided in D’s favour, would have limited impact on the ultimate findings against D on liability (see §§5-6 above).

13.  Mr Wong (Counsel for D) stated in his skeleton submissions that D is still considering whether to make an application to the Appeal Committee for leave to appeal to the CFA against the other 3 proposed questions (for which the Court of Appeal declined to grant leave), and the deadline for such application will not expire until 26 May 2026.

14.  But as matters currently stand, there is no such application. More importantly, as pointed out by Mr Chain SC (Counsel for P)[2], it is trite that a pending appeal does not operate as a stay of any Court order, including orders as to costs. There is simply no legal basis for D to suggest that the Court should not order interim payment just because the CFA Appeal is pending, or to contend that it is premature for P to restore the Summons before conclusion of the CFA Appeal, particularly given its limited scope.

15.  Second, the financial position of the parties is a relevant consideration (see Lau Yue Kui (supra) at §28(2)). In this case, it is not in dispute that D is a large institution with substantial capital backed by a listed company, whereas P is a local boutique engineering and design company who has already had to spend substantial costs in prosecuting this action (including the 10-day liability trial) and also in defending the Appeal. The inequality of resources of the parties is a factor in favour of granting interim payment, so that P is not left out of pocket in respect of costs it is entitled to, particularly when the trial on quantum is still pending for which further additional costs will have to be incurred going forward.

16.  Third, Mr Wong submits that the Court should only exercise its inherent jurisdiction to order interim payment where there is a “procedural lacuna”, and if circumstances were such that would merit the Court’s intervention to do justice between the parties or prevent abuse (referring to the case of Re Hawkins Development Ltd [2010] 1 HKLRD 535). Mr Wong submits that there is no procedural lacuna in this case so as to justify any interim costs order, as P could have, but did not apply for immediate taxation of its costs. I cannot agree with Mr Wong’s submission.

(1) Similar to the facts in Re Hawkins, there is here a procedural lacuna in that the power to make provisional summary assessments under Order 62 r.9A the Rules of the High Court (“RHC”) only applies to interlocutory applications and there is no power under Order 62 rr.21-21C RHC to make any interim payment of costs. As stated by the Court in Re Hawkins (at §24 per Kwan JA (as she then was)), this is where the inherent jurisdiction may be exercised to fill the lacuna.

(2) There is also no strict rule that an applicant must have commenced taxation proceedings before interim payment can be granted. The absence of any formal Bill of Costs or Lists of Objections in ongoing taxation proceedings does not mean that the Court cannot assess quantum of any interim payment using the “rough and ready” approach to ensure a “close approximation of justice” (see Lau Yue Kui (supra) at §28(4)).

(3) In this case, P in fact did commence taxation proceedings on 18 September 2023 and filed a Bill of Costs, but D applied to stay such proceedings under Order 62 r.9D RHC on the basis that P was not entitled to commence taxation as it did not seek an immediate taxation order before the learned Recorder. That application was adjourned for argument but no hearing has been fixed and P has not pressed on with the taxation proceedings.

(4) I do not consider that the absence of any application by P for an order for immediate taxation should, in and of itself, deprive it of the interim costs order sought.

(i) Even if P had applied for such order for immediate taxation, there is no suggestion by D that it would have consented to such order or that the Court would have granted it as a matter of procedural case management, bearing in mind the general rule that costs of any proceedings shall not be taxed until conclusion of the action. In fact, Mr Wong accepted that D would have opposed such an order.

(ii) Also, pursuing separate taxation proceedings at this juncture without waiting for the completion of the quantum stage of the action would potentially involve expending substantial additional costs and resources.

17.  Fourth, I also do not agree with Mr Wong’s submission that the Court should not order interim payment of costs because the trial on quantum of damages is yet to take place. Regardless of the outcome of the quantum trial or any costs order that may be made in respect of such trial, P’s entitlement to its costs up to the date of the CFI Judgment is not affected. There is simply no basis or justification for D to ask the Court to speculate that the amount of costs D will be liable to pay for this Action could be “considerably less than what now P claims, or the costs liability may even balance out” (as suggested by Mr Wong in his skeleton submissions) consequent upon the result of the quantum trial.

18.  Fifth, as to D’s contention that it will suffer significant prejudice if interim payment is granted as P is a company with paid up capital of HK$10 and there is no evidence that it has any operation or on-going business, such that P may not be in a position to repay to D any excess sums:

(1) Although P has not adduced evidence of its financial resources or its sources of funds to support this Action, I am of the view that this is not a sufficiently cogent reason to refuse an order for interim payment, particularly given the high likelihood that regardless of the outcome of the CFA Appeal (being of limited scope), D would be liable for at least a significant part of P’s costs up to the CFI Judgment in any event.

(2) I also take into account prejudice to P in having been kept out of pocket in respect of costs it is entitled for almost 3 years, whilst having to incur additional costs going forward including for the purpose of prosecuting the quantum trial.

19.  Lastly, as to quantum of the interim payment:

(1) According to P’s Bill of Costs filed on 18 September 2023, the total legal costs incurred by P up to that date was over HK$5.9 million. The amount of interim payment now claimed in the sum of HK$2.5 million is just over 40% of such total costs.

(2) I also take into account the scale and complexity of the evidence and issues in this Action, which necessitated a trial lasting 10 days (originally fixed for 16 days), with 23 trial bundles, and both sides represented by senior counsel and assisted by junior counsel, and ultimately resulting in a lengthy CFI Judgment of 84 pages.

(3) As Mr Chain SC submits, the interim payment claimed in the sum of HK$2.5 million would approximately cover the HK$2.6 million for briefs to trial counsel for the liability trial as shown in P’s Bill of Costs, and it would be unrealistic to suggest that the remaining solicitors’ profit costs and counsel fees would ultimately be taxed down to nil. D has not put forward any cogent reasons to suggest that briefs of P’s counsel are disproportionate in light of the scale and complexity of this case and the length of the liability trial, nor has D disclosed its own expenditure on counsel’s trial briefs as a comparison.

(4) Bearing in mind that the Court should adopt a “rough and ready” approach to ensure a “close approximation of justice”, and taking into account all the circumstances, I consider the sum of HK$2.5 million claimed by P to be a fair and appropriate sum as interim payment.

D. DISPOSITION AND COSTS

20.  In the premises I make the following Orders:

(1) D shall, within 14 days from the date hereof, make interim payment to P in the sum of HK$2,500,000 on account of P’s legal costs and disbursements incurred up to and including the trial on liability herein; and

(2) Costs of and occasioned by the Summons (including the hearings on 4 July 2024 and 20 May 2026) shall be payable by D to P forthwith, to be summarily assessed.

21.  Given that the Summons is not a complicated application, I will not order certificate for two counsel.

22.  For the purpose of summary assessment of costs, I make the following directions:

(1) P shall file and serve its Statement of Costs within 7 days from the date hereof;

(2) D shall file and serve its Statement of Objections within 7 days thereafter;

(3) For the purpose of apportioning costs of (i) the affirmations filed in relation to the Summons (which also deal with P’s Summons filed on 16 January 2024 seeking consequential directions on the CFI Judgment and directions for the trial on quantum (“P’s Directions Summons”)), and (ii) the hearing on 4 July 2024 (at which the Court dealt with both the Summons as well as P’s Directions Summons), such costs shall be apportioned on a 50:50 basis as between the two summonses.