XCHRX CHAP MEI PLASTIC TOYS MANUFACTORY LTD. v. SHUN FAT TOYS CO. LTD.

HCA 846/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 846 OF 2000

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J U D G M E N T

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1. On 17 August of this year, I handed down judgment in favour of the Plaintiff. In respect of costs, I made an order nisi in favour of the Plaintiff. I did so on the basis that the Plaintiff had abandoned its claim for monetary relief and I took into account that such abandonment - at the eleventh hour - may well, to a material degree, have been one of the reasons why the Plaintiff's application for summary judgment was opposed.

2. The Defendant has now applied for a variation of that order nisi, seeking an order that the costs of the action, from about 27 January of this year, be in favour of the Defendant.

3. In January of this year, the Plaintiff issued process claiming injunctive relief and an accounting. The day after the writ had been served; that is, on 27 January 2000, the solicitors acting for Defendant wrote a letter to the Plaintiff's solicitors. The letter was headed 'without prejudice' and read:

"We act for Shun Fat Toys Co. Ltd in relation to your above claim and are instructed to propose the following terms of settlement in order to avoid further legal costs and expenses:-

(1) A permanent injunction to restrain the Defendant from infringing the Plaintiff's exclusive rights in Registered Design No.2057279.

(2) Usual discovery.

(3) No order as to costs and damages.

We are instructed by our client to inform you that our client is a small size agent company in the toy trade and has no idea concerning your client's copyright in its products and as such an early settlement is in the best interests of both parties. Kindly take your client's urgent instructions and revert to us as soon as possible."

4. There does not appear to have been a formal response to that letter. However, the Defendant in an affirmation has alleged that he also telephoned a representative of the Plaintiff to try and reach a settlement but was unsuccessful in this bid on the basis that the Plaintiff insisted:

"that the Defendant paid a sum of $48,000.00 as a pre-requisite to any settlement".

5. This demand was rejected by the Defendant. In his affirmation, the Defendant went on to say that, in his belief, there was an excessive amount of copying of documents by the Plaintiff for exhibiting to its process. The Defendant felt that this was exploitive.

6. It is apparent that the offer of settlement to which I have referred - both in writing and the one made orally by the Defendant - were rejected. The Defendant then entered an appearance to defend and Plaintiff sought summary judgment.

7. Up until the summary judgment hearing, a claim for an accounting and monetary damages was still being sought. However, at the hearing counsel for the Plaintiff abandoned the claim for monetary damages and said that his client would now proceed only to seek injunctive relief and the usual orders that flow from such relief. At that time, I asked counsel for the Defendant if the injunctive relief - which now stood on its own - was still being opposed. I was told that it was being opposed. The application for summary judgment therefore proceeded.

8. I do have sympathy for the Defendant who clearly wanted to reach a settlement. However, the law is clear. If an offer for settlement is made, before this Court can take it into account, it must be one that includes all that a Plaintiff is entitled to receive if he proceeds with his litigation. The letter of 27 January was, in the first instance, headed 'without prejudice' only and did not bear the normal endorsement which is anticipated by Order 22 r.14, namely 'without prejudice save as to costs'. The Plaintiff's solicitors were not, therefore, put on their guard that this was an offer which could well be made known to the Court to secure costs.

9. More fundamentally, however, the letter of 27 January did not offer the Plaintiff all that it was entitled to. There was no offer for delivery up. This may, of course, have been an oversight and could have been resolved by further correspondence. But the fact is the offer was not made. In addition - importantly in my view - no offer was made to pay the Plaintiff its costs incurred up to that time. Indeed, the letter of 27 January specifically states that there will be no order as to costs. It would appear that the oral negotiations also involved the question of costs. From what I have heard from Plaintiff's counsel, the sum of $48,000.00 mentioned in the Defendant's affirmation was clearly related to costs and expenses incurred by the Plaintiff up until that time as opposed to any 'round figure' settlement to cover compensation by way of damages. The Defendant took exception to that amount claimed and made no offer to pay Plaintiff's costs.

10. If I may jump forward now to the hearing. If, when the damages claim was abandoned, Defendant was maintaining a consistent attitude, one would expect a response to the effect that there was nothing any longer in contention and that the Plaintiff was therefore entitled to the orders being sought. But that in fact was not the case and the matter was contested.

11. I have been referred this morning to the authority of Oriental Press Group Ltd & Anor v. Apple Daily Ltd CA 104/1997. That case cites with approval the authority of EW Savory Ltd v. The World of Golf Ltd [1914] 2 Ch 566. There is no need for me to cite the authority again save to confirm that I have based my reasoning upon the authority of Oriental Press Group Ltd.

12. Having weighed all the matters, I am satisfied that the Plaintiff is entitled to all of its costs and there will be an order to that effect. First, the offer of settlement originally made was a without prejudice offer solely and not without prejudice save as to costs. Second, that letter did not offer the Plaintiff its costs. Third, delivery up of the infringing items was not offered. Fourth, when Plaintiff abandoned its claim for monetary relief, the Defendant persisted in opposing the claim for injunctive relief.

13. I said at the outset that I have some sympathy for the Defendant. No doubt under the new regime in England in Wales, the court has a very broad discretion to manage the manner in which litigation is conducted and to ensure that those representing litigants consider offers seriously and deal with them fully. That regime does not yet apply in Hong Kong. However, even though my powers are more restricted, I have considered an order in terms of which perhaps the Plaintiff is restricted to 75% of its costs. But looking at the law and considering all aspects of the matter, somewhat reluctantly I am obliged to order that the Plaintiff is entitled to all of its costs.

14. There has been a complaint that the Plaintiff has been exploitive in the manner in which it has copied materials. That, in my view, is a matter for the taxing master.

15. Accordingly, my order is that the order nisi be confirmed; namely that costs are awarded to the Plaintiff. As to the costs of the matter today, in my judgment, costs should follow the event. Costs of today are awarded to the Plaintiff.