ORIENTAL PRESS GROUP LTD v. APPLE DAILY LTD

IN THE COURT OF APPEAL

1997, No. 104
(Civil)

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J U D G M E N T

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Godfrey, J.A. :

Introduction

1. On 19 September 1997, this court gave judgment on an appeal from Rogers, J., who, in actions for breach of copyright, had awarded the plaintiffs, Oriental Press Group Limited and Oriental Sunday Publisher Limited, damages against the defendant, Apple Daily Limited. The damages fell far short of the amount to which the plaintiffs considered themselves entitled. The plaintiffs appealed, asking this court to substitute, for the order made by the judge, a much more substantial award in their favour.

2. This court dismissed the plaintiff's appeal on the point to which I have referred; but did not then resolve the plaintiffs' appeal against the judge's order as to the costs of the proceedings before him, which was an order that the plaintiffs should pay the defendant's costs of the action.

3. We now have to decide whether or not to interfere with the judge's order as to the costs below.

The background

4. For present purposes, the background may be very shortly stated. The defendant reproduced in a layout a photograph, or part of a photograph, copyright in which was claimed by the plaintiffs.

5. On 16 October 1996, before any proceedings had been instituted, the defendant's solicitors wrote to the plaintiffs' solicitors in the following term :

"On an entirely without prejudice basis, we are instructed to advise that our client wishes to resolve the matter with your client expeditiously and without recourse to legal proceedings. In this connection, our client is willing to offer the following terms in full and final settlement of all the claims of [the plaintiffs] in respect of the alleged infringement of the copyrights subsisting in the Photograph and the Layout.

1. our client agrees not to publish, print, sell or otherwise arrange for the publication and reproduction of the Photograph and the Layout.

2. our client agrees to pay your client a sum of HK$10,000.00 as an agreed compensation; and

3. our client agrees to pay your clients a sum of HK$10,000.00 as an agreed contribution to their legal costs incurred herein.

You are kindly requested to take instructions from your clients in respect of the above and revert to us as soon as practicable. It is hoped that an amicable settlement can be arrived at between our respective clients.

Meanwhile, we put it on record that we hereby reserve our right to produce this letter to the court when the costs of this matter shall fall to be decided."

6. That letter was written in response to a letter before action from the plaintiffs' solicitors, asking for an acknowledgement of the plaintiffs' copyright, damages and costs. As to costs, the plaintiffs demanded $100,000; on the face of it, an extravagant sum at so early a stage in the dispute. But, be that as it may, the plaintiffs rejected the defendant's offer; they instituted proceedings, on 23 October 1996, in order to establish their copyright, and to obtain damages for the defendant's infringement of that copyright.

7. On the day the writ was issued (but before it had been served) the defendant's solicitors wrote again to the plaintiffs' solicitors, repeating their offer, and asking for a breakdown of the sum of $100,000 demanded by the plaintiffs for their costs. The defendant's solicitors maintained that the compensation offered to the plaintiffs, in the sum of $10,000, was reasonable and adequate compensation to the plaintiffs for their loss and damage, if any, which was denied. But this offer, too, led to nothing. And so, when in due course the plaintiffs' actions came on for hearing before the judge, the state of play was that the defendant was not admitting any infringement of any copyright claimed by the plaintiffs, and it went into battle on that issue. But it lost. The plaintiffs succeeded on the question of liability.

8. So far as the question of damages is concerned, the matter is a little more complicated. Although the plaintiffs did recover damages from the judge in an award which this court has affirmed, it recovered only $8,001, less than the $10,000 which the defendant had offered in its letter of 10 October 1996 (an offer repeated in the letter of 23 October 1996).

The plaintiffs' case

9. The plaintiffs say that the judge, when he ordered that in these circumstances the plaintiffs should pay the defendant's costs, erred in principle. The plaintiffs say that a plaintiff who has succeeded in establishing the defendant's liability in an action for infringement of copyright and has recovered substantial (as distinct from nominal) damages, although damages falling far short of the amount to which he considered himself entitled, has succeeded in his action, and ought not to be made to pay his opponent's costs.

10. In Gupta v. Klito, only reported, so far as this court is aware, in "The Times" for 23 November 1989, and to which this court drew the attention of counsel, the Court of Appeal in England and Wales held that a successful plaintiff who recovers more than nominal damages against the defendant should in normal circumstances have an order for his costs against the defendant. The court said that it was an error of principle for a trial judge who wished to reflect his disapproval of the way in which such a plaintiff had conducted the litigation to do so by ordering him to pay the defendant's costs. Mustill, L.J. said that, although costs were in the discretion of the trial judge, it was very unusual for a plaintiff who had succeeded on the issue of liability and who had recovered more than nominal damages to be ordered to bear not only his own costs but also those of the unsuccessful defendant. So, the Court of Appeal reversed the judge. It concluded that justice could be done by making no order as to the costs of the action.

11. The plaintiffs cited in this court the decision of Neville, J. in E.W. Savory, Limited v. The World of Golf, Limited, [1914] 2 Ch 566, a case which was not drawn to the attention of Rogers, J. below.

12. In that case, as in this, offers of settlement had been made by a defendant who had infringed the plaintiffs' copyright. The judge said (at p.571) :

"..... When a complaint was made by the plaintiffs' solicitors to the defendants' solicitors, a suggestion was made that out of Court satisfactory terms could be made, and an offer was suggested on the part of the solicitors for the defendants, which, it is argued, would have given, had it been accepted, the plaintiffs all that they were entitled to, and that, if that were so, then the writ was improperly issued and the action improperly brought and ought to be dismissed with costs. The writ was issued and the action proceeded to trial. The defendants in their defence denied the rights of the plaintiffs, but also set up this offer before action and suggested that on that ground the action should be dismissed. There were certain other offers made during pendency of the action, which in my opinion were not all that the plaintiffs were entitled to demand, and therefore cannot come into consideration in the determination of the case at the present time. Nor do I think that the offer made before action can come into consideration either under the circumstances. In my view, where a right of this kind has been infringed by a defendant, the plaintiff is entitled to an order and is not debarred from exercising his right to sue by a suggestion on the other side that they will promise not to do it again and will pay such damages as may be agreed between them. I am not going to consider it, and it is not necessary from the point of view I take, but supposing that the plaintiffs had been offered all that they were entitled to except an order, and that then the writ was issued and the defendants had repeated the offer that they made before action, enlarging their offer by including the costs of the action up to date, and then the plaintiffs had persisted with the action, I think the whole of the subsequent costs, from the time of their offer to submit to an order, would be cast upon the plaintiffs, but that in my opinion is the only way in which, where a wrong has been done, the defendant can escape from the liability of having the rights which have been infringed asserted in a Court of law and a proper order obtained. ....."

13. Founding themselves on this, the plaintiffs say that, as a matter of principle, a plaintiff whose copyright is infringed has a right to an order of the court restraining the infringement, and is not prevented from the exercise of this right by an offer by the infringer before action brought not to do it again.

14. So the plaintiffs say, the judge here erred in principle. This court should reverse his decision as to costs of these proceedings below and should exercise its own discretion as to how those costs ought to be dealt with.

The defendant's case

15. The defendant supports the judge's order as to the costs below. The defendant says that the offer made in the letter of 16 October 1996 should be construed as having a continuing effect, despite its rejection and the subsequent issue of proceedings. It was not expressed to be limited as to time, and the plaintiffs, and the judge, ought to have proceeded on the footing that it was open for acceptance at all times. Since the offer was one with continuing effect, and since the sum awarded fell short of $10,000, the judge was right, says the defendant, to make an order for the plaintiffs to pay the defendant's costs, and to equate (as he did) the offer made in the letter of 16 October 1996 with a payment into court. He might (though he did not) also have equated it to an offer of a formal character such as is contemplated by O. 22 r.14 of the Rules of the High Court, which enables the judge to give effect to a written offer on any question of costs similar to that of a payment into court. The defendant accepted that the judge was not bound to consider the letter of 16 October 1996 as an offer made under O.22 r.14 (which is concerned with offers made after the commencement of the action) but argued that that did not disentitle him from doing so. The judge had a discretion as to the order to costs which he should make, and he was entitled to take this letter into account in exercising that discretion. The defendant suggested the case before Neville, J., having been decided before the more recent developments as to costs such as the introduction of O.22 r.14, had had its authority weakened by those developments. I note, however, that the editors of the Supreme Court Practice 1997 do not, in citing the case at 62/9/5, suggest that its authority is in any way lessened because of such recent developments. Indeed, it is cited for the propositions on which the plaintiffs rely, that is to say, that the owner of a copyright is entitled to an order; an infringer to escape trial at his cost must wait till a writ is issued and then submit to a proper order with costs.

Conclusion

16. For my part, I find it impossible to construe the letter of 16 October 1996 as having the continuing effect after action brought which the defendant suggests. I think that its effect was spent when the plaintiffs rejected it and issued proceedings. In order to protect itself, the defendant ought to have admitted liability and renewed its offer of $10,000 compensation.

17. The defendant says the plaintiffs' case was in disorder; it had never really sorted out precisely what its case was in relation to this photograph. But there is nothing relevant in this point, which the plaintiffs anyway do not accept. Nor do I.

18. So I conclude that the plaintiffs are right. The judge here did err in principle. As I have already indicated, an order that a plaintiff who succeeds on liability and succeeds in obtaining substantial, that is to say, more than nominal damages, should be made to pay the defendant's costs, is a most unusual order to make. I appreciate that the offer made in the letter of 16 October 1996 was something which the judge was entitled to take into account in the exercise of his discretion as to costs. But, in my judgment, to use this limited offer to support an order that the plaintiffs bear the defendant's costs of the action is to put much too much weight on it. That result may sometimes achieved by a payment into court, or by an offer made after action brought under O.22 r.14 of the Rules of the High Court. Perhaps, in very rare circumstances, it might be achieved in other ways; but I do not think it has been achieved here. The plaintiffs succeeded in establishing liability, which the defendant had always denied, and the plaintiffs recovered damages, although not as much as they had hoped (indeed, the plaintiffs' claim for damages was even more extravagant than their claim for costs). But the fact is that the judge made an order as to liability, and for damages, in favour of the plaintiffs; and this court has sustained that order.

Result

19. So now it falls to this court to exercise its own discretion in the matter. Taking into account all the circumstances to which I have referred, I would, for my part, substitute, for the judge's order, no order as to costs. I propose that the judge's order for costs be set aside, and that this court in substitution therefor should make no order as to the costs of the proceedings below.

Wong, J. :

20. I agree.

Pang, J. :

21. I also agree.