XCHRX SANRIO CO. LTD. AND ANOTHER v. TSUI WAI FOR AND OTHERS

HCA 20171/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 20171 OF 1998

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REASONS FOR DECISION

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The parties appeared before me on the Plaintiff's summons for continuation of an interlocutory injunction. During the hearing, I was given to understand that the Defendants would not oppose the continuation of the injunction. Indeed, my own perusal of the affidavit evidence before me revealed that it would be futile for the Defendants to oppose. Granted that there was no opposition, one would have thought that the hearing could have been dispensed with by consent. But there was the dispute over costs.

2. According to Mr. Pedruco, counsel for the Defendants, solicitors for the Defendants did suggest an arrangement whereby a court hearing can be obviated. The arguments between the parties and rehearsed before me are reflected in the correspondence between solicitors for the parties:-

(1) Letter dated 2nd February 1999 from solicitors for the Defendants to solicitors for the Plaintiffs

"Notwithstanding the aforesaid our client is willing to undertake to abide by the said prohibitions unnecessary, therefore and thereby obviating the need for the fixing of a date for the hearing nor obviously the hearing itself. Our client is prepared to issue a written undertaking that they shall be bound by the terms and conditions as set forth in paragraph 6(2) and (3) as well as 7(1) and (2) of the said Order.

In the circumstances therefore, we fail to see what shall be gained by the holding of such a hearing with the attendant costs and possible waste of the time of the Court.

Pursuant to the above, we have drafted a letter (see below) for your comments. This draft letter is without prejudice and should be treated as an invitation to treat. Our client's willingness to provide such a written undertaking should in no way shape or form be construed as any form of admission. It is done with the sole intent of saving time and costs. It is our client's position that since they never, as stated, or knowingly engaged in any of the said prohibited activities, it is absolutely no harshship to do, in essence, what they are already doing, that is, carrying on a legitimate business in accordance with the laws of the SAR.

Please treat this letter as a matter of urgency, and indicate by return or by telephone your client's position in respect to of the hearing, the application for same, and the said undertaking in writing of our client.

"Proposed Written undertaking by the Defendants

In consideration of your discharging the order issued on the 26th November 1998, we, the Defendants in the above-named action, that is to say, 1st Defendant, Tsui Wai For, 2nd Defendant Tsui Ling Ling, and 3rd Defendant Wong Chi Wai, on behalf of ourselves and our company Ngai Shak Imitation Jewellery Co. of No. 253 Ki Lung Street, Shamshuipo, Kowloon, Hong Kong and associated companies, or our or their employers, agents, servants or otherwise howsoever, hereby undertake follows:-

1. Forthwith to not make or authorise others to make, expose or offer for sale, sell, distribute, import or export, make delivery of or otherwise deal in, dispose or part with possession of merchandise bearing the likeness of any of the Plaintiff's cartoon characters named and identified in Schedule 2 of the said Order ("the Infringing Items"), or any imprints, graphic designs, plates, cutting patterns, embroidery patterns, silkscreens or artwork whether in electronic form or any other form, or any dies, casts, moulds, negatives, promotional matters including catalogues, leaflets, pamphlets, or any articles used or proposed to be used for the making or selling of the Infringing Items, or counsel or procure others to do any of the foregoing acts, or participate in any of the foregoing acts pursuant to a common design with any other.

2. Except for the purpose of obtaining legal advice, we will not directly or indirectly inform anyone of these proceedings or of the contents of the Order made on 26th November 1998, or warn anyone that proceedings have been or may be brought against him by the Plaintiff.

3. We shall not destroy, tamper with, cancel or part with possession, power, custody or control of the listed items otherwise than in accordance with the terms of the said Order.

4. We shall not collectively or individually do something which we have been ordered not to do ourselves nor in any other way, nor will we do it through other acting on our behalf or on our instructions or with our encouragement.

5. We will draw this Undertaking to the attention of and make it binding upon any proposed assignee or transferee of any business or relevant part of our business."

(2) Reply Letter dated 2nd February 1999 from solicitors for the Plaintiffs to solicitors for the Defendants

" We refer to your letter dated 2nd February 1999 which we received by fax at 18:37 p.m.

We wish to point out that given the very late hour of our receipt of your 4-paged letter when our letter inviting you to fix a date for the hearing of the Inter-Partes Summons dated 26th November 1998 was sent to you 5 days ago, it is unreasonable for you now to request for a cancellation of the appointment to fix date before the Clerk of Court tomorrow morning, or to expect us to consider you clients' proposed undertaking at such extreme short notice.

Further, your clients' Affirmations in reply in opposition to the Inter-Partes Summons were served upon us very recently on 25th January 1999, which but only demonstrate your clients' determination to contest the Summons, they being fully aware that costs are, and will inevitably be, escalating on both sides.

Our clients' position is that in order to dispense with the hearing of the Inter-Partes Summons, your clients shall either consent to the terms of the Inter-Partes Summons with costs to the Plaintiffs, or alternatively, give an undertaking to the Court in equivalent terms.

In any event, our clients will in no circumstances consent to a discharge of the Order to Allow Entry and Search of Premises of 26th November 1998.

In the circumstances, we must remind you that our clerk will attend the office of the Clerk of Court tomorrow, 3rd February 1999 at 10:30 a.m. to fix a date for the hearing of the Inter-Partes Summons as scheduled. A date will be fixed in you absence if your firm's representative fail to attend the said appointment."

(3) Further Letter dated 24th February 1999 from solicitors for the Plaintiffs to solicitors for the Defendants

" We refer to your letter of 2nd February 1999 and our letter in reply of the same date.

We are utterly perplexed by the contents of your said letter. With due respect, the writer of that letter seemed to have a complete misconception of the state of the proceedings. We must, therefore, endeavour to put certain matters straight, as follows:-

1. The Plaintiff's Inter Partes Summons of 26th November 1998 was adjourned to a date to be fixed for substantive hearing as a result of the Defendants' indication of their intention to contest it, hence the setting of a time-table for the filing of evidence for the purpose of the contested hearing. It is absurd to suggest that the Plaintiffs "insist upon" a lengthy hearing.

2. Under the terms of the ex parte Order, the injunctions in paragraphs 6(1), (2) and (3) expired on 4th December 1998, the return day of the Inter Partes Summons. In particular, paragraph 6(1) has no continuous effect beyond the return day.

3. The purpose of the Inter Partes Summons was precisely to enable an interlocutory injunction to the same effect as paragraphs 6(2) and (3) of the ex parte Order to be put in place to protect the interest of the parties until judgment. Due to the fact that the Inter Partes Summons was contested by the Defendants, a temporary injunction had to be put in place since 4th December 1998 continuing the effect of paragraphs 6(2) and (3) until the determination of the Inter Partes Summons. For the same reasons, the Inter Partes Summons will have to be disposed of one way or the other, either by consent or at a contested hearing.

4. If the Defendants had never intended to resist a temporary injunction, they ought to have consented to the terms of the Inter Partes Summons on the return day (which was the first hearing of the Summons) on 4th December 1998 instead of indicating their intention to contest it. As matters now stand, costs have been wasted as a result of the Defendants filing evidence in answer to the Summons and our considering them and filing the Plaintiffs' evidence in reply on the basis that the Summons is contested. Such costs thrown away should be to the Plaintiffs in any event.

5. If the Defendants are now genuinely willing to continue to abide with the temporary injunction which was put in place to continue the effect of paragraphs 6(2) and (3) on the return day, and if they genuinely wish to save time and costs as indicated in your letter, they ought to consent to the terms of the Inter Partes Summons forthwith. This is the only way to stop further wastage of costs.

6. A mere contractual private undertaking (as per the draft set forth in your said letter of 2nd February 1999) does not measure up to an interlocutory injunction granted by the Court and is therefore unacceptable. Without having the Summons disposed of by consent, the Plaintiffs are not acting unreasonable in fixing a date for the contested hearing and proceeding with the hearing. It is ridiculous to suggest that such course of action is a waste of the Court's time and costs attributable to the Plaintiffs' failure to accept the proposed contractual undertaking and their "insistence" on a hearing. Further, your suggestion that the ex parte Order is to be discharged by consent in return for the Defendants' contractual undertaking is preposterous. The Defendants have made no application to discharge it, and if they have, it will be strenuously contested.

We reiterate that the only way to dispose of a contested hearing and to avoid further wastage of time and costs is for the Defendants to consent to the terms of the Inter Partes Summons. We enclose herewith a Consent Summons and draft Order for your signing and return without further delay.

We reserve the right to show this letter to the Court if the Defendants do not agree to consenting to the terms of the Summons now but only choose to do so near or at the hearing. Further, reply evidence has been prepared and filed in accordance with the Court's direction and time table and we shall of course ask for the costs thrown away to be paid by the Defendants in any event." (Emphasis added)

3. As can be seen, the offer from the Defendants was a private contractual undertaking in place of a court order or an undertaking to the court. I accepted the arguments advanced on behalf of the Plaintiffs that the offer was unsatisfactory. The last letter was sent by solicitors for the Plaintiffs to solicitors for the Defendants after the hearing date before me had been fixed. So there was further effort on the part of the Plaintiffs to avoid an unnecessary hearing. Apparently, the Defendants did not reply.

4. The parties did have other arguments over the precise terms of the injunction order continued. But they were technicalities which should not prevent the parties from reaching a consensus as to the extent the Defendants should be bound by injunction. Those arguments did not need a hearing to resolve.

5. Costs is a matter for the discretion of the court. In this case, the parties had no real dispute over the substance of what the Defendants should undertake. The Defendants did not even attempt to justify why they would offer an extraordinary private contractual undertaking only. It was this unreasonable stand or stand without reason that necessitated a hearing. In the exercise of my discretion, I ordered the Defendants to bear the Plaintiffs' costs of and thrown away by the hearing in any event to be taxed if not agreed. All other costs and costs reserved were ordered to be costs in the cause.