R.A. STEGEMANN v. WISE POWER FAR EAST LTD AND OTHERS

HCA 282/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 282 OF 2005

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HCA 283/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 283 OF 2005

____________________

____________________

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J U D G M E N T

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1. Before me there are 3 applications in the above two actions.  They are related to the same set of facts and the claims are closely related.  The parties had no objection that I heard the 3 applications one after another at the same hearing.

2. In HCA 282/2005, the defendants have taken out 2 applications:

                   (a)     Application to strike out the claims of the Plaintiff i.e. Mr. Stegemann under Order 18 rule 19 of the Rules of High Court;

       and      (b)     Application for security of  costs in respect of the action up to the stage of exchange of witness statement under Order 23 rule 1(1)(a).

3.  In HCA 283/2005 where Mr. Stegemann is the defendant, he seeks to strike out the claim of the plaintiffs therein i.e. Wise Power East Limited, the 1^st Plaintiff (“Wise Power”) and Mr. Ho Chun Hung Lawrence trading as Time Enterprises Company (“Mr. Ho”), the 2^nd Plaintiff.  Incidentally, Wise Power is the 1^st Defendant in HCA 282/2005 and Mr. Ho, the 2^nd Defendant therein.

4. These two cases have been with the Labour Tribunal for several months; after some hearings and decisions they are transferred to High Court.  The decisions are more on procedural matters rather than making any finding of facts or ruling on any substantive issues.  The evidence before the Tribunal has not been fully examined and tested.  I take the transcripts nothing more than statements made by the parties.

Background

5. On 14 April 2004 Mr. Stegemann applied to Mr. Ho for a part time post of English Teacher.  According to the application Mr. Stegemann was a highly qualified person: he obtained BA degree in University of Michigan and two MA degrees in University of Oklahoma and University of Washington respectively.  He has taught in Saitama Daigaku University in Tokyo and also in the Chinese University of Hong Kong for some time.  His native language is English and could manage to write some Chinese.

6. On 16 April 2004, Mr. Stegemann, the Plaintiff and Wise Power, the 1^st Defendant in HCA 282/2005 entered into an agreement that Mr. Stegemann would carry out teaching duties as English Course Instructor at such time and place as designated by Wise Power with tuition fee at the rate of HK$200 per hour.  Mr. Stegemann was required to follow the rules and regulations of the designated school and he also had to comply with certain conditions as set out in the Requirement for English Course Instructor for Teaching Project agreed by Mr. Stegemann.

7. Pursuant to such agreement, four teaching project assignments were completed:

	Name of Schools	Periods
(i)	Weaving Mills Association Primary School	24 April – 10 July 2004
(ii)	Yuen Long Merchant Secondary School	27 May – 31 May 2004
(iii)	Lei Muk Shue Catholic Primary School	5 June – 19 June 2004
(iv)	Belilios Public School (“Belilios”)	21 July – 13 August 2004

Because they were part time works the periods in the first three projects overlapped with each other.

8. On 8 June 2004 together with the last project relating to Belilios, Mr. Stegemann had also separately accepted an offer made by Wise Power to take up a teaching post at Chinese Women’s Club College for 8 days commencing on 16 August 2004 (“the 1^st Contract”).

9. According to the Requirement agreed by Mr. Stegemann he had to attend the office of Wise Power or that of Mr. Ho, which had the same address, “for drilling the course materials”.  For some reason which I shall elaborate later, the project was taken away from Mr. Stegemann.

10. Mr. Stegemann’s relationship with Wise Power or Mr. Ho did not end there.  There was another project committed earlier on 28 July 2004 when Mr. Ho and Mr. Stegemann entered into an agreement for teaching at Buddhist Lim Bing Yim Memorial School (“the Buddhist Memorial School”) for a period of 10 months from 1 September 2004 to 30 June 2005.  He would be paid on monthly basis of $12,000 per month instead of hourly basis as in the previous projects (“the 2^nd Contract”).

11. The agreement was terminated on 22 September 2004 because the Buddhist Memorial School did not allow Mr. Stegemann to teach at its school.  It was alleged that Mr. Stegemann was found touching “the bottoms of several female students repeatedly”.  The principal considered that this amounted to sexual harassment.  Accordingly, Mr. Ho, the 2^nd Defendant, terminated the 2^nd contract with Mr. Stegemann.

LBTC 6462/2004

12. Mr. Stegemann lodged a claim with the Labour Tribunal under LBTC 6462/2004 with the following claims:

(A) a sum of $9,142.85 being his wages for teaching at the Buddhist Memorial School for the period from 1 September 2004 to 22 September 2004 under the 2^nd Contract;

(B) another sum of $110,857.14 being the “unearned expected wages” for the period from 23 September 2004 to 30 June 2005 under the 2^nd Contract;

(C) a further sum of $6,000 being damages for breach of the 1^st Contract;

(D) “Collateral Damages” in a sum of $37,105.00; and

(E) “Additional Collateral Damages after 28 December 2004” to be assessed.

13. As stated above, the case was transferred to High Court as High Court Action No. 282 of 2005.  On 23 March 2005 I ordered that the Statement of Claim be filed and served.  Instead of filing and serving any formal pleading, Mr. Stegemann filed and served a bundle of documents of 45 pages consisting of a background paper and several appendixes.  He expressly stated in the Reply to Defence filed herein on 30 May 2005 that the background paper was not meant to be the Statement of Claim.  He adopted the claim lodged with the Labour Tribunal as the Statement of Claim.

14. In April 2005 he applied to join Time Enterprises Publications Ltd as the 3^rd Defendant in the action.  I granted leave on the ground of expedience as I understood from the solicitor for the defendants at that time that Wise Power and Mr. Ho were contemplating to strike out Mr. Stegemann’s claims in any event.  The matter could be dealt with at the time of striking out.

The 1^st Ground

15. As anticipated, on 14 July 2005 the 3 defendants in High Court Action No. 282 of 2005 applied to strike out Mr. Stegemann’s claim.  The 1^st ground is that no real statement of claim has been filed.  I consider that the purpose of pleading is to identify the facts and issues in dispute and for the parties to state their cases.  I accept that the papers filed by Mr. Stegemann are many and very confusing as well.  To say the least, it is not easy to understand.  Their contents give detail accounts of Mr. Stegemann’s squabbling arguments rather than pleading the material facts.

16. Notwithstanding the above shortcomings, I cannot say that the defendants are unable to identify the issues or to understand the plaintiff’s case.  I accept that they have some difficulties in pleading.  However, as the record shows, the 3 defendants on 18 May 2005 filed 3 separate defences setting out the areas of dispute and clearly pleaded their own cases in answer to the plaintiff’s claims.

17. Having read Mr. Stegemann’s papers and heard his submission, no one will dispute it, if I describe him as quarrelsome as he tends to argue every minute point raised.  Even though it is so, I must allow a litigant acting in person some latitude.  As he has adopted the claims set out in Form 2 filed with the Labour Tribunal under LBTC 6462/2004 as his Statement of Claim and I have summarized them in paragraph 12 above, I find no difficulty in pursuing or defending the action.  I refuse to strike out his claim on the ground that no real statement has been filed.

Claim against the 3^rd Defendant

18. The main argument to bring the 3^rd Defendant into this action, if I understand Mr. Stegemann correctly, is that the various papers and correspondences showed different legal entities including the 3^rd Defendant having transactions with him.  He considered that the 3^rd Defendant was also involved in the arrangement of the different projects.  He showed me the logo, the web-page, the documents with the Inland Revenue Department, the internet domain, the facsimile messages, the defendant’s business card and the contractual documents, etc.

19. I have examined those documents: they are nothing but peripheral evidence in bits and pieces without any direct bearing on the issues.  The evidence does not implicate the 3^rd Defendant at all; I find nothing, upon which I can conclude that a contractual relationship had been established between Mr. Stegemann and the 3^rd Defendant.  Had I had the chance of studying the documents in detail, I would have not allowed Time Enterprises Publications Ltd to be joined as a party.

20. I share the view of Ms. Tsang, counsel originally acting for the Defendants, that there is no privy of contract between Mr. Stegemann and the 3^rd Defendant.  There is no cause of action against the 3^rd Defendant.  Mr. Stegemann never denied that he was contracting with either Wise Power or Mr. Ho in the subject transactions.  I accept that the 3^rd Defendant was brought for the sake of harassment.  It is an abuse of the court procedure.  I dismiss all his claims against the 3^rd Defendant in HCA No. 282 of 2005.

Claims D and E

21. According to the Labour Tribunal record, Claims D and E were withdrawn pursuant to an order made on 24 January 2005 at the request of Mr. Stegemann.  He said that he wanted to settle the case with Mr. Ho as soon as possible and withdrew them to facilitate the settlement.

22. It is quite clear that the order was made without hearing the merits of these two claims.  I find that it is legitimate for Mr. Stegemann to restore the two claims in High Court.  So, I refuse to strike out claims D and E on the ground that they have been withdrawn.

23. The particulars of Claim D are set out in detail in Appendix E filed with the background paper amounting to $37,105.  I have examined them.  Appendix E sets out the costs of the time Mr. Stegemann had spent in various activities like contacting with the Buddhist Memorial School after 22 September 2004, trying to seek for legal advice, pursuing claims in the Labour Tribunal, resisting claims in Small Claims Tribunal, making searches in the Companies Registry and the Inland Revenue Department, moving home, losing friendship and family relationship and preparing the case for court etc.

24. These are the consequences one has to accept in instituting legal proceedings.  Some of the items can be included in the claim for costs of the action, which is a matter for taxation.  They cannot be treated as damages, collateral or otherwise; I see no merits in this claim.  Accordingly, I dismiss Claim D.

Claim E

25. As to Claim E, Mr. Stegemann described it as “Additional Collateral Damages after 28/12/2004”.  Appendix E referred to in paragraph 23 above covered a period up to 27 December 2004.  It was his intention to continue with the claim from 28 December 2004 onward.  As I have disallowed such claim of the same nature in Claim D, for the same reason stated above I dismiss Claim E.

Claim C

26. Mr. Stegemann claimed damages for breach of the 1^st Contract by Wise Power and/or Mr. Ho.  It is not clearly pleaded whether he is claiming against Wise Power or Mr. Ho in the name of Time Enterprises Company.  It is not denied that the 1^st Defendant entered into agreement with Mr. Stegemann on 16 April 2004 i.e. the general agreement.  Wise Power also made an offer, which was accepted by Mr. Stegemann, to teach at the Chinese Women Club College.  I have no doubt in my mind that the right party, against which Mr. Stegemann should claim, is Wise Power and not Mr. Ho or Time Enterprises Company.

27. The basis of the claim, as I understand, is that an agreement had been reached between Mr. Stegemann and Wise Power on 8 June 2004 at the time when the offer was accepted by him.  For no reason at all, Wise Power should take the job away from him and assigned it to another person.  Wise Power is in breach of the contract, so Mr. Stegemann alleges.

28. Wise Power or Mr. Ho tried to justify not giving the work to Mr. Stegemann for various reasons, among which are the following:

(a) The general agreement dated 16 April 2004 (described in paragraph 6 above) as well as all other agreements should be construed as contract for service, not contract of service.  Wise Power has the discretion to assign or remove him from the job at any time.

(b) The general agreement still subsisted after removing Mr. Stegemann from the work: there was no breach of contract.

(c) Wise Power or Mr. Ho was justified in not giving the work to Mr. Stegemann and in assigning it to another person because he had failed to go to the defendants’ office to collect the teaching materials and to attend the drilling session as stipulated in the Requirement for English Course Instructor as agreed by Mr. Stegemann as a condition of the contract; and

(d) Mr. Stegemann had not done anything for that school and he is not entitled to payment.

29. Mr. Stegemann considered that the other side was in breach of the agreement (the 1^st Contract) reached on 8 June 2004 and he lost the opportunity to earn the sum of $6,000, the amount he would have earned under the 1^st Contract.

30. The main issues are whether the practice of collecting materials at the defendant’s office had been changed by past conduct, whether any drilling session had ever been attended by Mr. Stegemann, and whether the condition as set out in the Requirement which formed part of the 1^st Contract had been waived or the breach of which had been acquiesced etc.  These are the issues that cannot be resolved without hearing evidence.

31. I find the parties have different arguments and have raised different issues on facts.  It is not possible to resolve them without trial.  For this reason, I refuse to strike out Claim C.

Claim A

32. Claim A is a straightforward one.  Mr. Stegemann claimed for the remuneration in respect of the work he had done at the Buddhist Memorial School during the period from 1 September 2004 to 22 September 2004 under the 2^nd Contract.

33. The only reason that the defendants have advanced is that Mr. Stegemann had committed certain misconduct i.e. touching the buttocks of the students.  So, he had committed certain wrong and the defendants had suffered damage in reputation and loss of profits because of his mistake.

34. Mr. Stegemann did not deny he patted the students but argued that he had no intention of committing any act of indecency.  It was a way to help to “overcome important psychological and physical linguistic barriers developed over the years …”.  It was a sign of encouragement.

35. Whether it was right for Mr. Stegemann to perform such act, whether it amounted to an act of indecency, whether the Buddhist Memorial School was entitled to remove Mr. Stegemann from the teaching post and whether the defendants were entitled to terminate their 2^nd Contract, these are questions of facts that ought to be decided at trial.

36. I do not find the two defendants can strike out Claim A for the unpaid remuneration.  I ask a simple question: why has Mr. Stegemann not been paid as he has performed his duties as an English instructor during the period of the said 22 days?  From the documents produced, the defendants were paid by the Buddhist Memorial School.

Claim B

37. Mr. Stegemann claims for unearned expected wages in the sum of $110,857.14.  In effect, he is claiming for damages in breach of contract.  The main argument as advanced by the two defendants, apart from the argument that had been given in respect of Claim A, is that Mr. Stegemann has not earned the money.  Ms. Tsang, counsel for the defendants, in her written submission states: “There is no forced labour or forced acceptance of personal service by recipient”.  I take it to mean that Mr. Stegemann cannot force the defendants or the Buddhist Memorial School to continue to retain him.  This must be right.  The main issue is whether there has been any wrongful repudiation of the contract.  This cannot be resolved without hearing evidence.

38. If the defendants are found to have wrongfully repudiated the 2^nd Contract, the way to assess damages is by considering the amount Mr. Stegemann would have earned under the contract for the period until it expired i.e. 30 June 2005 (i.e. $110,857.14), less the amount he could reasonably be expected to earn by taking up other work during the period.

39. For this reason, I could not find that Claim B is lack of merit.  I refuse to dismiss Claim B.

HCA No. 283 of 2005

40. This is an action commenced by Wise Power and Mr. Ho against Mr. Stegemann.  They clearly pleaded their case in the Amended Statement of Claim.  In essence, it is a claim for loss of income because of “the indecent misbehaviour” committed by Mr. Stegemann.  Mr. Stegemann sought to strike out the claim.

41. I see no merit in the application as the whole case depends upon the answers to the questions I have raised in paragraph 35.  They cannot be decided without trial.  I refuse to strike out the claim by the 2^nd Plaintiff.

42. I have carefully considered the Amended Statement of Claim filed herein on 30 June 2005.  I try to find out the involvement of the 1^st Plaintiff as pleaded but I can hardly find any.  As there is no claim by the 1^st Plaintiff, Wise Power Far East Limited, there is nothing for me to strike out.  I am tempted to strike out the action taken by the 1^st Plaintiff but as I have not raised this point before and the parties have not addressed me thereon, I take no action in that regard.

Application for security for costs

43. The 3 defendants in HCA No. 282 of 2005 applied for an order that the Plaintiff, Mr. Stegemann, be required to give security for the defendants’ costs of the action pursuant to Order 23 rule 1.

44. The defendants raised two grounds:

(a) That the plaintiff is ordinarily resident out of jurisdiction; and

(b) That the plaintiff does not have any means to satisfy any award if granted in the defendants’ favour.

45. From the papers before me I understand that Mr. Stegemann is a foreigner: he requires a sponsor and a visa to stay and work in Hong Kong.  For the time being he works in Hong Kong and stays here.  But, if job opportunity opens to him elsewhere, I am sure he will leave.  I cannot regard him as an ordinary resident in Hong Kong.

46. It is not an inflexible rule that a plaintiff resident abroad will be ordered to give security for costs.  We have to consider all circumstances of the case.  As rightly pointed out by the learned editor of Hong Kong Civil Procedure 2006 in paragraph 1 of Section 23/3/3 making reference to the case of Dragages et Travaux Public v Hong Kong Chinese Insurance Co. Ltd & Another, he comments:

“The Court has to strike the balance between what would be oppressive to the plaintiff and what would give the defendant a measure of security, and will take into account the bona fide nature of the claim and any element of overlap between the claim and the counterclaim.”

47. In case of impecunious plaintiff, one has to consider whether the plaintiff’s claim is a genuine one.  It is not the intention of the law to stifle any genuine claim.  In this case I have struck out those parts that are not sustainable leaving behind those that are at least arguable.  Claim A for unpaid remuneration is particularly a strong one.

48. There are two defendants left to defend after I have struck out the action against the 3^rd Defendant.  The two defendants as plaintiffs have instituted the other action No. 283 of 2005 relating to the 2^nd Contract arising out of the same facts.  It can be treated as a counterclaim in HCA 282 of 2005.

49. I accept the general proposition that a counterclaim should not be regarded as an impediment to ordering security for costs.  However, in this case, in view of the special circumstances I do not follow that proposition.  I have expressed my reservation about the lack of involvement by the 1^st Plaintiff in HCA 283 of 2005.  I have expressed my view in respect of Claim A.

50. I have to balance between the claims of both sides and also to consider the interests of the parties I need to protect.  I decline to make any order for security for the defendants’ costs.

51. If I were wrong, the amount of security will not be as substantial as claimed by the defendants as set out in exhibit “H-7” referred to in the 3^rd affirmation of Ho Chun Hung Lawrence affirmed on 19 July 2005.  Since the affirmation, circumstances have changed.  The defendants have been acting in person.  I will not allow that part of costs projected to be charged by their legal advisers.  Neither will I grant any costs order to the remaining two defendants for their partial success in their application to strike out.  Having taken into consideration the above factors, I would have allowed a sum of $30,000 to be paid in court if an order were to be made.

The Orders

52. In conclusion, I make the following orders in High Court Action No. 282 of 2005:

(a)       All claims against the 3^rd Defendant, Time Enterprises Publications Limited, are dismissed;

(b)       Claims D and E against the 1^st Defendant, Wise Power Far East Limited, and Ho Chun Hung Lawrence trading as Time Enterprises Company are dismissed; and

(c)       The application for security for defendants’ costs is dismissed.

53. I dismiss the application by the Defendant, Mr. Stegemann, to strike out the Plaintiffs’ claim in HCA No. 283 of 2005.

54. I make the following order nisi in respect of costs pursuant to Order 42 rule 5B(6) of the Rules of High Court:

(A) In HCA No. 282 of 2005

(1) The Plaintiff pays the costs of the 3^rd Defendant for the whole action including the costs of the application to strike out and all costs reserved, if not agreed, to be assessed by me;

(2) The directions I give for the assessment mentioned in subparagraph (1) above are:

(a)  A date for hearing be fixed for assessment with 1 hour reserved;

(b)  The 3^rd Defendant shall at least 21 days before hearing file and serve a Statement of Costs in the form annexed; and

(c)  The Plaintiff shall within 14 days thereafter file and serve a list of objections to the Statement.

(3)  As between the Plaintiff and the other two defendants, each party pays its own costs in respect of the applications to strike out and for security for costs respectively.

(B) In HCA No. 283 of 2005 I make no order as to costs for the application to strike out.

(C) This order nisi will become absolute 14 days after the date of this judgment unless an application in writing to vary the order nisi is filed and served within the said 14 days.

Observation

55. I note the claims remaining in the two actions do not exceed a sum of $1 million in each case.  Parties should seriously consider to transfer the two cases to the District Court for further proceeding.

Statement of Costs for Gross Sum Assessment
under Order 62 rule 9(4)(b)

Case No.: _______________

A.	General Information
	A1	Order dated the       day of             200
	A2	Type of Proceedings:
	A3	Fee Earners’ Rates of Charges per hour:
		Solicitor:	Year of admission:
		Trainee Solicitor:	1st / 2nd Year
		Litigant acting in person:	$200
B.	Communication including conferences, telephone calls and letters with client, the other side, counsel, court witnesses and others
	No. of hours:		Sub-total:	$
C.	Work done
	C1	Preparation of Documents:	hours	$
	C2	Perusal of Documents:	hours	$
	C3	Preparation for hearing:	hours	$
	C4	Hearing including call-over:	hours	$
			Sub-total:	$
D.	Counsel Fee, if any			$
E.	Other disbursements
	Photocopying charges			$
	Total			$

Dated the      day of             200

 

	Signed by
	Applicant/Solicitors for Applicant