THOMAS VINCENT v. HONG KONG AUTOMOBILE ASSOCIATION

DCCJ3133/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3133 OF 2014

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JUDGMENT
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1. The plaintiff, Mr Vincent, was at the material time an English freelance editor. The defendant, Hong Kong Automobile Association, was at the material time a company carrying on the business of members’ services in relation to cars and driving, which also published a quarterly magazine called “Driven” (“Magazine”).

2. This is the defendant’s application to strike out the plaintiff’s claim under O.18 r.19 of the Rules of the District Court (“RDC”), relying on the grounds that the claim has disclosed no reasonable cause of action, is frivolous and vexatious, and is otherwise an abuse of the process of the court.

3. The plaintiff was acting in person, and the defendant was represented by a solicitor, Mr Cheung. The further written submissions that I had directed the parties to lodge at the end of the hearing have been so lodged.

4. I had also heard the plaintiff’s oral application made in the course of the hearing to adjourn the hearing and refused his application. The reasons for the refusal were reserved which reasons will also be given in this judgment.

BACKGROUND AND THE CLAIM

5. Most of the background facts are not in dispute.

6. The plaintiff’s claim, according to the plaintiff’s brief home-made statement of claim (“SOC”), is based on a verbal agreement (“Verbal Agreement”) made in or around July or August 2013, by which the plaintiff agreed to provide editorial services for the publication of the Magazine in return for retaining any revenues that were to be generated from advertisements placed in the Magazine, which advertisements the plaintiff solicited at his own cost and expense.

7. The plaintiff only provided editorial services to the publication of three issues – October 2013, February 2014 and June 2014 (which are respectively described as “First Issue”, “Second Issue” and “Third Issue”) as, will be discussed in §9 below, the defendant terminated the Verbal Agreement on 3 July 2014.

8. Although the plaintiff had, in or around October 2013, sent a draft proposed written agreement (“Draft Agreement”) to the defendant, the Draft Agreement was not signed. 

9. Admittedly, the plaintiff received no income for the publication of the First Issue and the Second Issue as he was not able to successfully solicit any advertisements for these issues.  As for the Third Issue, the parties initially had a dispute as to whether an amount of $8,000 generated from a Volkswagen advertisement had indeed been solicited by the plaintiff. The dispute was later resolved by the defendant’s paying the plaintiff the disputed $8,000 on 3 July 2014, on a without prejudice basis. The defendant also terminated the Verbal Agreement by a written notice on the same date on 3 July 2014.

10. Based on the above-mentioned undisputed facts, the plaintiff in his SOC claims a sum of $300,000 for services /compensation in respect of the editorial work he allegedly provided for the Magazine between September 2013 and June 2014 (“Claimed Period”). It is further averred in the SOC that the said amount is based on an alleged benchmark contractual fee of $100,000 for the production of the past issues of the Magazine.

LEGAL PRINCIPLES

11. According to the settled legal principals governing a striking out application, it is only in obvious cases that the court should exercise its summary power to strike out a claim. Any disputed facts are to be taken in favour of the party making the claim.  The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court would strike it out.  If any defects in a pleading can be cured by an amendment, the pleadings should also not be struck out.

12. For striking out based on a claim being frivolous and vexatious, a proceeding is frivolous when it is not capable of reasoned argument, without foundation or where it cannot possibly succeed.  Also, the process of the court must be used bona fide and properly and must not be abused:  Leung Chung Lan Lorraine v Merrill Lynch (Asia Pacific) Ltd [2015] HKCU 352 at § 21.

13. I will apply these principles to the consideration of this application.

THE ARGUMENTS

The defendant’s submissions

14. It is submitted that the plaintiff’s claim of $300,000 for the payment of services is totally devoid of merit and unsustainable as it has neither any contractual basis nor is it supported by any particulars in the SOC.

15. Noticing however that the plaintiff in his affidavit in opposition to the striking out application has asserted that his claim was “within the labour laws of Hong Kong”, and further averred  in §8 of the Reply to “a ‘Master and Slave’ arrangement”, Mr Cheung therefore further argued that even if the plaintiff’s claim were indeed an  employment claim (which Mr Cheung denied that it was), such claim would also be plainly unsustainable because jurisdictionally an employment claim could only be instituted in the exclusive jurisdiction of the Labour Tribunal.

16. Mr Cheung further suggested that the plaintiff’s averring of an employer and employee relationship was not only inconsistent with the evidence – especially the admitted remuneration terms of  the Verbal Agreement – showing overwhelmingly that the plaintiff had only been engaged as an independent contractor , it was also procedurally wrong for the plaintiff to  raise this new plea in the Reply in accordance with RDC O.18 r.10, which prohibits a plaintiff from setting up in his reply a new pleading which is inconsistent with the cause of action alleged in a statement of claim: : Hong Kong Civil Procedure 2015, Vo1.1 at §18/10/1.

The plaintiff’s contentions

17. Some of the plaintiff’s contentions are not easy to understand as he seemed to have been constantly adding new arguments and shifting ground.  I summarize the plaintiff’s contentions below.

18. First, the Verbal Agreement allegedly contained an agreement that the parties, after the publication of the First Issue, would be contractually bound to make a contract. The defendant had therefore breached the alleged agreement to make a contract in having failed to sign the Draft Agreement. It was contended that he had suffered the loss of a chance as a result of the defendant’s refusal to enter into a contract. (This contention will be referred to as the “Further Contract Argument”).

19. Second, the plaintiff became the defendant’s employee upon the defendant’s alleged breach of the agreement to make a contract, and also upon his having been required “to undertake various tasks set out by the defendant”, relying on Leung Kam Wah v Fung Yuk Ching Yvonne trading as Hong Kong Transportation Co., HCLA43/2006, (unreported), 23 April 2008, an appeal from the Labour Tribunal. (This contention will be referred to as the “Employee Argument”).

20. Third, there were documents that could support (i) the Further Contract Argument; (ii) the reason why “no references to remuneration or payment of services were made in the [Draft Agreement] … due to the [Draft Agreement] being incomplete and eventually abandoned” by the defendant, and (iii) the basis of his claim for payment of services.

21. Since all of the above contentions were matters that have not been pleaded, and in view of the fact that the plaintiff was not legally represented, I decided to briefly stand over the hearing of the application so as to allow the plaintiff sufficient time to reduce into writing all the proposed amendments to his claim.

22. Consequently, the plaintiff prepared a note entitled “Amendments to Plaintiff’s Skeleton Submission” (“Amendment Note”).  In spite of my specific direction directing the plaintiff to set out his proposed amendments to the SOC in the Amendment Note, he had however described the document as amendments to his written skeleton.  Be that as it may, I believe that the plaintiff must also have regarded it, albeit not so entitled, as a note containing his proposed amendments to his claim, and it will be treated as such.

23. Similar to the plaintiff’s contentions, the averments in the Amendment Note, which seem to be a duplication of the plaintiff’s contentions, are equally confusing and sometimes difficult to understand. Notwithstanding, the Amendment Note  at least has the function of allowing the court an opportunity to consider whether an amendment to his pleading should be granted were defects be found in his pleading, and further enables the plaintiff to focus on the causes of action he wished to rely upon. In addition to the averments in the SOC, the plaintiff seems to be additionally averring that :

(1) First, the parties had agreed (in the Verbal Agreement) that a contract was to be entered into after the “success” of the first issue of the Magazine (§3) (“Further Contract Plea”).

(2) Second, the defendant had broken the Verbal Agreement by encroaching on his editorial freedom in requiring him to write certain articles that were allegedly outside the scope of the Verbal Agreement (§4).

(3) Third, there were a number of email exchanges between the parties that could explain why the defendant had allegedly broken the Verbal Agreement by refusing to enter into a written contract (§5 and the Addendum).

24. In the light of the plaintiff’s reference to the email exchanges as set out in §23(3) in the above, the plaintiff made an oral application at the hearing for an adjournment for the filing of evidence to include two types of documents: (i) email exchanges between himself and Mr Tai of the defendant (who had made two affirmations on behalf of the defendant in this application) that would allegedly throw light on the defendant’s breaches of the Verbal Agreement, and (ii) extracts of the three issues of the Magazine that would allegedly show how the defendant breached the Verbal Agreement, and the defendant’s termination of the Verbal Agreement, which documents he submitted would be relevant to this application.

DISCUSSION

25. Since, as already stated above, the Amendment Note is to be treated as containing the plaintiff’s proposed amendments to the SOC, I will when considering the merits of the plaintiff’s claim, treat any disputed assertions the plaintiff made in both the SOC and the Amendment Note in his favour.

26. The plaintiff’s claim, according to the SOC and the Amendment Note, is based on a number of alleged breaches of the Verbal Agreement. The allegations seem however to be circuitous and bare. The causes of action the plaintiff relies on are un-particularized at best and fundamentally muddled at worst.

27. First, despite having averred in the SOC to the defendant’s refusal to sign the Draft Agreement, the cause of action the plaintiff relies on is unclear. The plaintiff however is able to purportedly cure this failure by the adding in the Amendment Note a cause of action based on the Further Contract Plea. It should be noted however,  in law, that a contract to make a contract  is not enforceable : Von Hatzfeldt-Wildenburg v Alexander [1912] 284, adopted by the Court of Appeal in Hyundai Engineering & Construction Co Ltd v Vigour Ltd [2005] 1HKC 579. Thus,

“ … if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognise a contract to enter into a contract… ” (Per Lord Parker J in Von Hatzfeldt-Wildenburg at pp288-9).

28. Applying the above established principle to the Further Contract Plea, such plea, in order to be sustainable, requires the plaintiff to show that, prior to the alleged oral agreement for the making of a contract, the parties had already agreed to the engagement of the plaintiff in providing services to the defendant, and that the oral agreement was only an expression of the manner as to how it should be carried out. On the other hand, if the alleged oral agreement for the execution of the further contract was only a term or condition, it would be unenforceable at law.  According to the plaintiff’s averments, the alleged oral agreement for the execution of a further contract seems to be of the latter type.

29. In §3 of the Reply, for example, the Further Contract Plea is so averred: “It was agreed that the first issue would be a trial, after which if both parties were satisfied, a contract would be drafted and signed”.

30. Also, in  the Amendment Note, the plaintiff further avers  that:

“ The verbal agreement was originally set out to be a vehicle for a one month or one issue trial period whereby both parties would assess their suitability and compatibility to continue the relationship of producing ‘Driven’ magazine. A contract was to be signed after the “success” of the First Issue. ”

31. These averments, even if they were taken to be true, show that at the time of the alleged oral agreement for the further execution of a contract, the parties had not agreed to the engagement of the plaintiff’s services, but rather were only contemplating for the execution of a further contract in the event that the First Issue was a “success” , and  after the First Issue, the parties would “assess their suitability and compatibility to continue the relationship” and consider whether they were satisfied before “a contract would be drafted and signed”.  Such averments, in my view, have clearly undermined the plaintiff’s assertion that the defendant was contractually bound to execute the Draft Agreement after the First Issue, and further show that the alleged oral agreement to make a contract is only a condition or a term that has not been fulfilled. Such agreement is uncertain and non-binding.

32. It is noted that the plaintiff has also alluded in the Amendment Note to the existence of various email exchanges that he averred were for the fine tuning of the Draft Agreement. In the absence of any plea or averment that the parties had in fact already agreed that the transaction would in fact go through, and especially as the plaintiff himself seems to have averred to a term or a condition of the alleged oral agreement ( of the parties being satisfied and of the “success” of the First Issue) in both the Reply and the Amendment Note as discussed in §§29 and 30 above, the fine tuning of the Draft Agreement without more,  would be no more than amounting to, in my judgment,  the parties’ negotiations for the execution of a contract.  A contract to negotiate is too uncertain to have any binding force: Courtney and Fairbairn Ltd v Tolaini Brothers (Hotels) Ltd and another [1975] 1 All ER 716 at 720d).

33. In the circumstances, the plaintiff’s Further Contract Argument and the assertion that he had suffered the loss of a chance as a result of the defendant’s refusal to execute the Draft Agreement must be rejected. The Further Contract Plea is plainly and obviously unsustainable. Any amendment, as evidenced by the proposed amendments contained in the Amendment Note, will not cure the inherent defect of such a plea.

34. Second, the plaintiff’s next allegation in the SOC concerning the non-payment of the advertising fees of $8,000 for the Third Issue is irrelevant as the dispute for this payment, according to the undisputed facts outlined above, has been admittedly resolved before the commencement of this action. 

35. Third, the “dispensing with my services” averment in the SOC is also meaningless since the plaintiff does not seem to be alleging that the defendant wrongfully terminated the Verbal Agreement.  Nor is it the plaintiff’s pleaded case that the defendant was not entitled to terminate the Verbal Agreement.

36. Fourth, no particulars have been provided to support the plaintiff’s claim for the payment of the amount of $300,000 for the Claimed Period in the SOC. Since the Claimed Period appears to be the period during which the plaintiff had been engaged to provide services for the publication of the First, Second and the Third Issue, the plaintiff, according to the undisputed remuneration term (on a successful solicitation of advertisement basis) would not be entitled to any fees or remuneration for the provision of editorial services for the publication of the Magazine.

37. Thus, the plaintiff’s adding in the Amendment Note of a new allegation alleging that the defendant acted outside the terms of the engagement in the Verbal Agreement by allegedly encroaching on the plaintiff’s editorial freedom by requiring him to write certain articles is therefore equally unsustainable.  The remuneration term, as discussed in the preceding paragraph, will not entitle the plaintiff to be remunerated, other than for a successful solicitation of advertisement, for the services he provided for the production of the Magazine. Thus, the said new allegation is wholly irrelevant, and without any merits.

38. It follows therefore, the plaintiff’s claim for payment of services, albeit his further elaboration in the Reply at §14 that the “previous incumbent”, “Graficia Production Limited” would supposedly provide evidence for the calculation of the amount of his claim, has, for the reasons discussed above, no contractual basis.  Any evidence that would allegedly provide support for the calculation of the amount claimed is irrelevant to the plaintiff’s claim.

39. Lastly, the plaintiff’s new averment in the Amendment Note  in §4 of the Amendment Note that he was engaged to work “independently”, and later became an employee of the defendant as a result of the defendant’s alleged breach of the Verbal Agreement is frivolous.  Not only has the plaintiff completely failed to identify what breach had allegedly made him become an employee of the defendant, all the breaches that he has alleged, as discussed above, are without merits. The alleged breach of the agreement to enter a contract, for example has been held to be bad, the defendant’s alleged encroachment on the plaintiff’s editorial freedom and the termination of the Verbal Agreement have both been found to be irrelevant.   Since it is also not supported by any particulars, it is, in my judgment, frivolous.  Thus, the plaintiff’s Employee Argument is baseless, and must also be rejected.

40. In any event, should his claim indeed be a claim based on the employer and employee relationship as the plaintiff seems to be also asserting, he shall be precluded from instituting this action in the District Court, and the claim is liable to be struck out for that reason alone.

41. In conclusion, therefore, I am in respectful agreement with Mr Cheung that the plaintiff’s claim, whether it is a claim for payment of services, or a claim for alleged employee’s entitlements, or the newly added Further Contract Plea is lacking in particulars, and also bad in law.  Any amendments, as evidenced by the proposed amendments set out in the Amendment Note, will not be able to, in my judgment, cure the defects of the plaintiff’s claim.

REASONS FOR THE REFUSAL OF ADJOURNMENT

42. According to of the plaintiff’s contentions in §20, and the reasons that he gave when applying for the adjournment, as outlined in §24 above, the two types of documents the plaintiff sought to adduce would allegedly support his allegations concerning (i) the new Further Contract Plea; (ii) the basis of his claim for payment of services; (iii) the defendant’s breach of the Verbal Agreement, and (iv) the defendant’s termination of the Verbal Agreement.

43. The reasons given in support of the plaintiff’s application for an adjournment, as already analyzed above, will not help advance the plaintiff’s arguments. Reason (i) concerning the Further Contract Plea has been ruled as an unsustainable plea. Reason (ii), likewise is found to be without any foundation. As for reason (iii), the plaintiff has failed to identify the breach having being allegedly committed by the defendant. As for the last reason, reason (iv), the termination of the Verbal Agreement, it has also been found in the above discussion that the allegation is irrelevant.  Thus, I find the documents the plaintiff proposed to file are wholly irrelevant to this application.

CONCLUSION

44. For the reasons above, I am satisfied that the plaintiff’s claim discloses no reasonable cause of action, and is frivolous. To allow the claim to proceed will be an abuse of the process of the court.  In the circumstances, I accede to the defendant’s summons and strike out the plaintiff’s claim.

45. I further make a nisi costs order that the defendant’s costs, including previous reserved costs, are to be paid by the plaintiff, to be taxed if not agreed. Unless an application is made to vary the said nisi order within 14 days of the handing down of this judgment, it will become an absolute order.