CATHAY PLASTIC FACTORY LTD v. GOLDEN RICH INDUSTRIAL LTD

HCA 756/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 756 OF 2005

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D E C I S I O N

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The Dispute

1. On 28 April 2005, the Plaintiff commenced the present proceedings against the Defendant for copyright infringement of a card shuffle product.  The parties settled the action by the Consent Order dated 23 June 2005 with costs for the Plaintiff.  Unfortunately, the scale of costs was not dealt with.  When the parties had failed in negotiating the quantum, they sought to resolve the question of scale, i.e. High Court or District Court, before the substantive taxation.

The Law

2. Both parties, Mr. Derek Wong of Messrs. Benny Kong & Peter Tang representing the Plaintiff and Mr. Tony Ng of Counsel for the Defendant, did not dispute that the crux lied on “reasonableness”, i.e. whether it was reasonable for the Plaintiff to commence the action in the High Court (Lai Ki v B+B Construction Co. Ltd. & Others [2003] 3 HKLRD 192 and Eastward Enterprises Ltd. v. A.S. Watson Group (HK) Ltd. HCA 331 of 2003, 25 May 2004, Hon. Sakhrani J. (unreported)).

The Application

3. I agree with the following submissions made by Mr. Wong.

(a)    The fact that it was a copyright infringement action did bear some significance.  As commented by Hon. Sakhrani J. in the Eastward Enterprises case,

“10.  ……At the outset of the proceedings the plaintiff does not know the extent of the infringing activities of the defendant.  The plaintiff can either claim damages or an account of profit.  Until it has the information as to the extent of the infringing activities it would not be right to say that it was unreasonable for the plaintiff to have commenced the action in the High Court.”

(b)    As a matter of evidence, on balance, I agree to accept that, upon investigation, the Defendant was found having dealt with the infringing product for about one year before the commencement of the proceedings.  However, at that time, the Plaintiff did not know and was not in a position to know exactly the extent of the Defendant’s infringing activities.

(c)    The proceedings were shortly settled within 2 months since the same was instituted.  The Defendant only formally confirmed by way of affirmation on 29 June 2005 its extent of infringing activities.  By then, it would be too late for a transfer of the action to the District Court.  After all, the Defendant did not raise the question of transfer at the material time.

(d)    Not until the Defendant has filed his list of objection for the Plaintiff’s bill of costs dated 20 July 2006, the Defendant raises no question on the scale of costs.

4. On the other hand, with respect, I disagree with Mr. Ng in the followings:

(a)    Mr. Ng relied on OWT Asia Ltd v CPCNet Hong Kong Ltd, HCA 6436 of 2000, 13 February 2007, Hon. Barma J. in Court, (unreported) to argue that District Court scale should apply herein. Scale was not mentioned or discussed in the Consent Order or the parties’ correspondence. When the damages recovered fell within the jurisdiction of the District Court, it should be understood that costs would be taxed at such scale accordingly.  I decline to accept such proposition being applicable to our case herein.  The OWT Asia Ltd case is clearly distinguishable from the present one because the damages thereof, US$40,400 and HK$436,692, were awarded by the learned Judge after trial.  Clearly, the trial Judge must be the best person to decide the scale of costs, he having considered all the evidence adduced by the parties.

(b)    Mr. Ng further referred me to the correspondence between the parties, including 2 “without prejudice” letters, of which I hereby formally allow the reliance of them by the Defendant.  It was said that:

“ 6.    In fact, from the correspondence between the parties, it should be clear that P was all along aware of the cost issue.

  7.    With the experience of the P’s solicitor, and the well-known authority and reasoning in the B + B Construction case, P would have insisted and/or indicated to D that the costs of the case should be taxed in High Court scale, if it were really the intent of P.

  8.    It is obvious that the parties settled the case under the understanding that the costs of the case should be taxed in the District Court scale.”

(skeleton of Mr. Ng)

(c)       However, in my view, these submissions do not assist the Defendant’s case.  On balance, I am not satisfied that the Plaintiff settled the case with an “understanding” of District Court scale and now, tries to argue otherwise.  Probably, the parties are facing a common problem whereby they forgot to discuss the question of scale of costs at the time of settlement, leaving it to be argued and then decided by the Court according to all the circumstances of the case.

The Decision

5. In the circumstances, I order that the Plaintiff’s bill of costs dated 20 July 2006 is to be taxed at High Court scale and there be an order nisi that the Defendant shall further bear costs of the dispute heard by me on 7 March 2007, to be dealt with at the end of said Plaintiff’s bill.