Kim v Lee
[2025] VCC 615
•22 May 2025
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-23-03586
| JUNGHUN KIM | Plaintiff |
| V | |
| BYOUNGHWA LEE | Defendant |
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JUDGE: | HER HONOUR JUDGE A RYAN | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 4, 5, 6 and 13 February 2025; written submissions filed 12, 17 and 19 February 2025 | |
DATE OF JUDGMENT: | 22 May 2025 | |
CASE MAY BE CITED AS: | Kim v Lee | |
MEDIUM NEUTRAL CITATION: | [2025] VCC 615 | |
REASONS FOR JUDGMENT
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Subject:CONTRACT, TRUSTS
Catchwords: Joint venture relating to the establishment of a Korean restaurant – whether the defendant holds 50 per cent of the shares in the restaurant on trust for the plaintiff – plaintiff seeking reimbursement of costs incurred in setting up the restaurant – whether the defendant is indebted to the plaintiff under the terms of a written loan agreement.
Cases Cited:Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201; Beerens v BlueScope Distribution Pty Ltd [2012] VSCA 209; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) CLR 266; Crescendo Management Pty Ltd v Westpac Banking Corporation [1988] 19 NSWLR 40; Kim v Naum BBQ Pty Ltd [2024] FedCFamC 2G1418; Re St George Development Company: Re Elianna Construction and Developing Group [2022] VSC 296; Realestate.com.au Pty Ltd v Hardingham [2022] HCA 39; Wilson Pastoral International Pty Ltd (ACN 167 284 399) v George Street Steel Pty Ltd (ACN 008 179 708) [2020] SASCFC 54
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Noonan | Mann Lawyers |
| For the Defendant | Mr J Fetter | Murati Lawyers |
Table of Contents
(1) Overview and summary
(2) Background
(3) Pleadings
(4) The witnesses
(5) Key issues
Issue 1
Issue 2
Issue 3
Issue 4
Issue 5
Issue 6
Issue 7
Issue 8
Issue 9
Issue 10
Issue 11
Issue 12
(6) Disposition and orders
HER HONOUR:
(1) Overview and summary
1In May 2018, the plaintiff (‘Kim’) and the defendant (‘Lee’) agreed to set up and run a Korean restaurant. They subsequently established a restaurant in Point Cook known as Naum BBQ. Trading at the restaurant began in March 2019. Lee removed Kim from the restaurant business in November 2022, after the parties fell out in acrimonious circumstances.
2By this proceeding, Kim seeks reimbursement of various sums he invested in the restaurant business which he claims Lee owes him under the terms of their oral joint venture agreement. Kim also seeks an order that Lee transfer 50 per cent of the shares in Naum BBQ Pty Ltd (‘Naum’) (the corporate entity used to run the restaurant) to him.
3Depending upon how the Court construes the terms of a loan agreement entered into by the parties, Kim claims Lee is indebted to him in the sum of:
(a) $400,000, being an amount identified as a loan from Kim to Lee; or
(b) $247,241.36, representing the total amount of expenses which Kim says he contributed to the restaurant business.
4Lee denies he is indebted to Kim. He also denies that Kim is entitled to any shares in Naum.
5For the reasons that follow, I was not persuaded it was an agreed term of the parties’ oral joint venture agreement that Lee was obliged to pay all of the expenses in establishing the restaurant. Rather, both parties agreed to share the business expenses equally and contribute as and when they could, which is what happened. That being so, Lee is not under any contractual obligation to repay the costs incurred by Kim relating to the joint venture.
6There was no real dispute that the parties orally agreed to hold the business on a 50/50 basis once the restaurant was established. I find it was a term of the parties’ oral agreement that Lee held 50 per cent of the shares on behalf of Kim, pending the successful completion of the latter’s visa application, which was being sponsored by Naum. As that sponsorship came to an end following the termination of Kim’s employment, that condition no longer applies. In my view, Kim is entitled to the order sought that 50 per cent of the shares in Naum be transferred to him.
7The alleged loan agreement relied upon by Kim in the alternative, is unenforceable for the reasons set out below. Consequently, Lee is not obliged to repay any funds to Kim pursuant to the terms of the alleged loan agreement.
8I will order that Lee transfer 50 per cent of the shares in Naum to Kim to give effect to their agreement. The remaining claims by Kim will be dismissed.
(2) Background
9Kim is a South Korean national and a chef by trade. He has lived in Melbourne for many years working in restaurants around the city. Lee operates a meat supply business called “Seoul Meats” which supplies meat to restaurants in Melbourne. Kim and Lee first met in around early 2018, when Lee supplied meat to a restaurant where Kim was working as a chef.
10In about March-May 2018, Kim and Lee discussed establishing a Korean restaurant business together. Whilst the parties disagree about who made the first approach, there is no dispute they subsequently agreed to pursue this business proposal together.
11In around May 2018, the parties met in the Teak Room at the Crown Casino, where Lee was a member, to finalise details of their business arrangements.
On Kim’s version of events, he and Lee agreed:
(a) they would open a restaurant in Point Cook of approximately 200 square metres, either by taking on a new restaurant or taking over an existing restaurant;
(b) Kim would travel to South Korea to source equipment;
(c) Kim was the expert who would contribute his skill in that capacity;
(d) Lee would pay; and
(e) once the restaurant was opened, it would be owned by them 50/50.
12By contrast, Lee’s version of their oral agreement was that he and Kim would share the costs of establishing the business which they would then own 50/50. Kim reassured Lee that they would not need “big money” to initially set up the restaurant. Kim estimated it could be done for less than $200,000 so that they would each contribute a sum in the order of $100,000. They did not discuss the specific amounts they would each contribute from time to time but agreed they would contribute 50/50. If one of them had less money at any time, they could contribute less and contribute more later on. They agreed they would share any profits made equally. Lee said he initially promised Kim 50 per cent of the shares provided the business ran well and on the condition Kim’s visa status got resolved. Lee denied he had agreed to repay Kim any expenses which Kim paid towards the business.
13Kim and his wife travelled to South Korea in July 2018 to source and purchase kitchen equipment and other necessary items for the restaurant. Kim spent $43,000 on equipment for the restaurant.[1] Lee paid $2,000 to Kim to cover the cost of Kim’s flights to Korea.
[1] Amended Statement of Claim, [4.3]
14On 8 August 2018, Lee caused Naum to be registered as the holding company for the business. Lee was the sole director. 100 per cent of the shares were registered in Lee’s name. The reason why Lee was named as the 100 per cent shareholder was due to Kim’s visa conditions which restricted him from being sponsored by a related party. Naum could not sponsor Kim if he were an owner of the relevant business. Lee accepted in cross-examination that the registration of the shares in his name was a formality only because of Kim’s visa status. It was submitted on Lee’s behalf that there was no firm agreement reached on the shares or if there was, it was subject to the condition of Kim obtaining a visa. As events turned out, the sponsorship of Kim by Naum came to a halt when Lee terminated his services (rightly or wrongly) on 22 November 2022.
15On 10 December 2010, a bank account in Naum’s name was opened with Westpac, which Kim controlled.
16On 23 December 2018, Lee signed the lease for the restaurant premises located at Point Cook in his capacity as director of Naum.
17Between December 2018 and March 2019, Kim organised the fit out for the restaurant. The quotes obtained for the fit out were in the order of $230,000.
18On 12 February 2019, Kim entered into an employment agreement with Naum as a cook on a salary of $55,000, plus superannuation.
19The business experienced some financial difficulty which led to it having to pay staff one to two weeks late and unable to pay Lee’s Seoul Meats business for meat supplies. Kim says Lee told him in January 2019 that he was experiencing financial difficulties and was unable to contribute capital to finish the fit out works. He says Lee asked Kim to supply the necessary capital to finish the fit-out works, which Kim agreed to do.
20The restaurant opened for business on 28 March 2019. Thereafter, Kim said they discussed the financial position of the company on many occasions leading up to August 2019. Kim says he discussed Lee’s failure to make contributions with Lee and told him that the business was being financially supported by Kim and his wife. He claimed that Lee said he would repay him and his wife. For his part, Lee accepts they had discussions about finances. He told Kim that he was unable to pay any further substantial sums at that time as he was financially unable to do so. Lee denied telling Kim he would repay Kim for the amounts he was putting into the business.
21The restaurant did not turn a profit until about August or September 2019.
The Loan Agreement
22On 19 August 2019, Lee and Kim signed a document headed “Unsecured Loan Agreement Individual to Individual” (‘loan agreement’). Kim drafted this document which he copied from a loan agreement given to him by someone else. He made minimal changes to the document.
23The circumstances in which this loan agreement came to be signed are in dispute. Lee claims he signed the document because Kim threatened to resign as a chef if he did not do so. Lee said that Kim told him the document was “a kind of insurance” in case Lee changed his mind and kicked him out of the restaurant.
24Kim is named as the lender and Lee as the borrower in the loan agreement. Recital A records that the borrower (Lee) is indebted to the lender (Kim) for the amount of the loan set out in Clause 1. The relevant clauses of the loan agreement are as follows:
1.1. The borrower acknowledges that the Lender has lent to the Borrower the sum of AUD $400,000 (THE “LOAN”) The LOAN was made to the borrower on 1 October 2018. THE LOAN is unsecured.
1.3. The borrower acknowledges that the Lander (sic) may at any time hereafter lend further moneys to the borrower. These further advances form part of the Loan and the terms of this Loan Agreement apply.
2.1. All moneys lent to the borrower by the Lender including the Loan must be repaid by the borrower to the lender as follows:
2.1.1. On before the 2/11/2021 (one month);
2.2. The borrower agrees and acknowledge to pay interest in advance month and will be calculated as follows
2.2.1. $3.3333 interest for the amount borrowed. The percentage in which the loan will be calculated upon will be set as 10% annually.
2.2.2 This agreement will be agreed ONLY for one month.
2.2.3 Interest will be paid by cash only.
25After the loan agreement was signed, the restaurant changed its mode of operations to a buffet style in about August or September 2019. This proved to be popular and the restaurant began to make a profit. Trading conditions were adversely affected by the COVID-19 pandemic in the years ending 30 June 2020 to 30 June 2022. However, in the financial year ending 30 June 2023 and continuing through to 2024, the restaurant was turning over $1 million a year.[2] When the business was making a profit, the parties renegotiated a division of the profits on the sales with 8 per cent being paid to Lee. There is no dispute that each of the parties received some payments of profits once the restaurant was trading successfully.
[2]Exhibit ‘P5’, Draft 2024 Financial Statements
26Lee recorded approximately $344,000 in establishment costs of the business as a liability that Naum owed to Lee personally. Kim argued this was incorrect because Lee knew this amount included some contributions made to the business by Kim rather than Lee. In the defendant’s closing outline, Lee conceded that he was bound to admit that both parties’ financial contributions were loans to Naum, in light of the 2020 financial statements.[3] The sum of $333,000 was recorded in the accounts as “Owner A funds” but Lee submitted it was abundantly clear that this was the total sum of the parties’ contributions. Kim had contact with the accountants whom the parties saw when they went to set up the company and this is the structure they adopted. These sums were treated as loans to Naum and not to Lee. In response, Kim argued there was no evidence of any loan to Kim and what the accounts show is only a loan to Lee. Lee reiterated in closing that Exhibit ‘P4’ clearly showed that the sums advanced were treated as a loan in the accounts to Naum and not to Lee.
[3] Exhibit ‘P6’, Draft 2023 Financial Statements
27Although Kim made contributions to the business directly by paying sums into Naum’s bank account, he did not bring any claim against the company for recovery of those funds. Naum was not a party to the proceeding. Kim’s claim was premised on the basis that Lee had a personal obligation to repay Kim the amounts which Kim had contributed to the business. Lee denies that this was the case as the notion that he should be personally liable to repay Kim’s loans is fanciful and it would have been uncommercial and unaffordable for Lee. Lee contends the 2020 Naum financial report is powerful contemporaneous evidence against such a proposition. Lee’s evidence was that he contributed approximately $200,000 to the business whereas Kim had paid in the order of $100,000.
28By 30 June 2024, the financial statements revealed that Naum’s liability to Lee had been substantially repaid. Lee has not in turn repaid Kim’s contributions, according to Kim. It was apparent from the evidence led at trial that the parties’ funds were intermingled with various cash payments being made to and from each other. The lack of a proper documentary trail has led to difficulties in determining precisely who paid what and when.
29Lee terminated Kim’s services on 6 November 2022 for what he alleges was serious misconduct. This turn of events led to Kim and his wife[4] commencing a proceeding against Naum in the Federal Circuit Court on 23 February 2023 claiming various employment entitlements. The respondents in turn bring a counterclaim alleging, amongst other things, that Kim and his wife caused Naum to make improper payments to themselves which they were not entitled to receive.[5] This litigation is ongoing. An application to cross-vest this proceeding to the Federal Circuit Court was unsuccessful.[6]
[4] Kim’s wife, Jihyun Kye, was also employed by Naum as an operations manager from 28 March 2019
[5] Exhibits ‘D1’ and ‘D2’, pleadings filed in the Federal Circuit and Family Court of Australia
[6] Kim v Naum BBQ Pty Ltd [2024] FedCFamC 2G1418
30This proceeding was commenced by writ on 7 July 2023.
31The parties accepted that Kim, either directly or via his wife’s bank account, paid the following sums totalling $116,495.18 towards the restaurant business:
(a) $41,565.69 as particularised in paragraph 4.2 of the amended statement of claim (net of the $2,000 repaid by Lee for Kim’s airfare);
(b) $16,199.87 as particularised in paragraph 13 of the amended statement of claim;
(c) $33,729.62 being the sum of the first seven items particularised in paragraph 14 of the amended statement of claim; and
(d) $25,000 on 28 December 2018.
32A further sum of $90,900 claimed by Kim was in dispute. This formed part of the cash contributions particularised in paragraph 14 of the amended statement of claim. If this sum is included, then the amount claimed by Kim is $212,395.18.
33Kim also sought the sums of $10,000 and $19,170 as set out in paragraph 15 of the plaintiff’s closing submissions. If these amounts are accepted, then according to Kim, he had contributed at least $241,565.18 towards the business.
34Counsel for Lee produced at the start of the trial an aide memoire listing various payments made by the parties to assist the Court. In closing, counsel for Lee pointed out that the figures in the document were no longer correct because of the evidence given at trial.
35Kim conceded at trial that amounts he had initially claimed, such as direct payment of staff wages and other costs had not been proved on the evidence. Further, the evidence of a loan from an entity called ‘Finstro’ was, according to the plaintiff, “ultimately opaque”. Accordingly, those amounts in his claim were not pressed.[7]
[7] Plaintiff’s Closing Submissions dated 12 February 2025, [16]
36In addition, Kim claimed $5,676.44 representing migration agent fees. These were fees he paid YK Migration Services Melbourne on 9 October 2020 for the purpose of obtaining an employer sponsored visa. Kim argued this was a cost properly borne by his employer, being Naum. Lee’s evidence was that he did not have any discussion with Kim about payment of the latter’s costs of using a migration agent. When the visa costs are added, the total amount sought by Kim is $247,241.56.
37On 17 October 2022, Lee paid $15,431 to Kim. This payment was made to Kim for the purchase of new equipment in the restaurant. Kim accepted in closing that this was a correct characterisation of this payment and accordingly, he would not deduct this amount from his claims.[8]
[8] Ibid [20]
(3) Pleadings
38On 13 February 2025, and after the conclusion of evidence, I granted leave to the plaintiff to file an amended statement of claim in the form produced to the Court on that day. An amended statement of claim was subsequently filed on 17 February 2025.
39The first cause of action relied upon by Kim is based on an oral agreement entered into between the parties in about May 2018 to run the restaurant business. It is alleged that the express terms of the agreement in paragraph 3 that Kim would:
(a) invest his time and expertise in the establishment of the proposed business;
(b) travel to South Korea to source and purchase kitchen equipment and other necessary items for the proposed business;
(c) use his expertise to identify an appropriate site for the proposed business and design a Korean barbecue restaurant, kitchen, menu and other necessary things required to open and operate it;
(d) invest his expertise to operate and manage the proposed business;
(e) be employed by the proposed business; and
(f) receive half the shares in the holding company when it commences trading.
40As for Lee’s contractual obligations, the express terms alleged are that the defendant would:
(a) incorporate a company (holding company) through which to operate the proposed business;
(b) provide capital and meet expenses for the proposed business as required;
(c) be responsible for all costs and expenses for the establishment of the proposed business;
(d) establish, at his expense, a holding company for the proposed business;
(e) hold the shares in a holding company on trust for himself and the plaintiff in equal shares;
(f) reimburse the plaintiff for all costs and expenses associated with the travel and purchase of the equipment referred to in paragraph 3.1(b);
(g) transfer half the shares in the holding company to the plaintiff when the proposed business commences trading, alternatively, when the plaintiff’s visa application no longer prevented the plaintiff from holding shares in a holding company; and
(h) procure that the holding company sponsor the plaintiff’s permanent visa application (sponsorship) until granted.
41Lee also breached the agreement because he failed or refused to continue to provide capital and meet expenses from about 12 April 2019 onwards and did not reimburse Kim for costs and expenses associated with setting up the business and obtaining equipment.
42It is also alleged that Lee breached the agreement by failing to transfer half the shares in Naum on 28 March 2019. In the alternative, it is alleged that Lee holds the shares in Naum on either an express or a constructive trust on behalf of Kim.
43As a separate cause of action, Kim relies upon the loan agreement. This loan agreement was said to be partly oral, partly to be implied and partly in writing.
44In paragraph 12A, Kim claims there were terms of the loan agreement that:
(a)the plaintiff’s contributions (personal, financial or otherwise) to establishing the Naum BBQ business would be treated as a loan to the defendant, in the sum of $400,000;
(b)the defendant would repay that loan the to the plaintiff in accordance with the terms of the written Loan Agreement.
45In paragraphs 12-13, Kim provides details of funds he expended in connection with the business totalling $219,630.52. A number of other expenses were claimed in paragraph 16, including migration agent fees to YK Migration Services Melbourne in the amount of $5,676.44.
46As a result of the breach of the loan agreement, Kim claims Lee is indebted to him in the amount of $400,000, alternatively, the sum of $279,396.08 together with interest.
47In terms of relief, Kim seeks a declaration that Lee holds 50 per cent of the shares of Naum on trust for him, and an order that Lee transfer 50 per cent of the shares in Naum to Kim. The amount of damages sought is $400,000, alternatively $279,396.08.
48By his further amended defence dated 21 January 2025, Lee admitted that the holding company would sponsor Kim’s permanent visa application. As for the express oral terms, save for him agreeing to reimburse Kim’s airfare to travel to South Korea in sourcing and purchasing kitchen equipment and other necessary items for the proposed business, it was agreed that Kim and Lee would make equal capital contributions and share in the profits and losses equally of the proposed business.
49Lee pleads the sponsorship of Kim was terminated by Naum due to Kim’s misappropriation of monies from Naum’s bank account.
50Lee admits signing the loan agreement but says that the loan of $400,000 referred to in clause 1.1 was not advanced to Lee by Kim on 1 October 2018 or at all. Further, none of the matters referred to in paragraphs 12.1 to 12.6 of the amended statement of claim are terms of the loan agreement. Lee pleads there was no consideration for the loan agreement or, alternatively, the consideration given was past consideration. Kim had told Lee the document was just “insurance” and did not need to be honoured.
51As a separate defence, Lee contends he signed the agreement under duress upon a threat by Kim that Kim would leave the restaurant unless Lee signed the document. As a result of the matters referred to in paragraph 13 of the further amended defence, Lee alleges the loan agreement is void and/or unenforceable.
(4) The witnesses
52Kim and Lee gave evidence and no other witnesses were called. There were some differences in the parties’ accounts as to the basis upon which they went into the business. Their negotiations were conducted orally with the critical conversations taking place in 2018. Nothing was put into writing. The Court was not asked to making any adverse findings relating to credit. When assessing the parties’ evidence, it can be readily accepted there is a natural tendency to remember matters which favour a party’s own case, rather than the reverse, and that recollections fade over time.
53The parties’ subsequent conduct sheds some light as to the basis upon which they conducted their affairs. Such conduct is admissible when considering the formation of the parties’ oral agreement to set up the restaurant as well as its terms. The Court can take into account what was done later as a basis for inferring what was agreed when the contract was made.[9]
[9] Heydon on Contract, Lawbook Co. 2019 [9.1560] and the cases referred to therein
(5) Key issues
54The parties submitted a list of key issues for determination which are set out below.
Issue 1
55In about May 2018 did the parties agree that Kim would receive 50 per cent of the shares in the holding company of the restaurant business when it commenced trading, namely, Naum. Alternatively, when Kim’s visa application no longer prevented him from holding Naum’s shares.
56The discussions relating the ownership of shares were oral and nothing was reduced to writing. The parties’ evidence on this issue largely coincided. Both Kim and Lee gave evidence they agreed in 2018 they would own the business 50/50, and that the registration of the shares in Lee’s name was a formality only due to Kim’s visa status.
57Lee confirmed that “Yeah, he has a right for the 50% share”.[10] The question then arises as to when the transfer of the shares ought to have taken place. Lee’s evidence was that the retention of Kim’s shares by him was for the purpose of preventing the shares from interfering with Kim’s visa application. Therefore, the plaintiff argued that the purpose of him retaining the shares was only insofar as Kim holding the shares would interfere with his application for a visa. Consequently, the shares should be transferred to their rightful owner, Kim, as soon as that transfer was no longer prevented by his visa application. Upon Lee terminating Kim’s involvement in the business and consequently, Naum’s sponsorship of Kim’s visa, there is no such impediment.
[10]Transcript (‘T’) 205:[13]-[14] and T206:[2]-[15]
58In closing, Lee submitted the position was he was to be the sole shareholder and director with the expectation that there would be further discussions if and when Kim became a permanent resident. According to Lee, there was no firm agreement reached about the shares on the evidence and there was only an expectation about what would happen in the future.
59Having regard to the evidence led, it is clear the arrangement made and agreed upon was that the two men would own the business 50/50. The only reason that Kim was not given shares at the time was because that could have adversely affected the outcome of his visa application.
60Lee accepted that he held the shares on behalf of Kim. Now that Kim is no longer being sponsored by Naum following his departure in late 2022, there is seemingly no impediment to prevent the transfer of shares in accordance with their original agreement. Lee gave evidence at trial that the shares were still held in his name. The Court asked the parties to consider whether there was any present impediment which would prevent an order for specific performance being made relating to the shares. None was identified. In closing, the defendant submitted that if the Court were against him on this issue, then an order could be made transferring the shares forthwith.[11]
[11] Defendant’s closing submissions dated 12 February 2025, [11]
61Accordingly, I find that Kim is entitled to an order for specific performance. I will order that Lee transfer 50 per cent of the shares he holds in Naum to Kim forthwith.
Issue 2
62If there was such an agreement and it was breached, what remedy should Kim be given?
63As I have already found there is an agreement and that the shares have not been transferred, Kim is entitled to relief in the form claimed in the amended statement of claim.
Issue 3
64Does Lee hold 50 per cent of the shares in Naum on an express, alternatively, constructive trust for Kim?
65It is strictly unnecessary to determine the issue of a constructive trust being formed as I have already found it was an express oral term of the parties’ contractual arrangements that Lee held his shareholding for the benefit of Kim as to 50 per cent.
Issue 4
66Should the Court order that Lee transfer 50 per cent of the shares in Naum to Kim?
67For the reasons already identified, the answer to this issue is yes.
Issue 5
68Did the parties enter into the loan agreement alleged in paragraph 11 of the statement of claim?
69A loan is a simple contract, the essence of which is an obligation to make repayment in which the lender advances the money in consideration of the borrower’s promise to repay. The burden of proving that an advance of money made by one party to another is by way of loan is not discharged by mere proof of the payment itself.[12]
[12] Re St George Development Company: Re Elianna Construction and Developing Group [2022] VSC
296, [23]
70The loan agreement referred to in paragraph 11 of the amended statement of claim is alleged to be partly oral, partly implied and partly in writing. As for the latter, there is no dispute the parties signed the written loan agreement drafted by Kim on 19 August 2019.
71Prior to amendment of the statement of claim, the original oral particulars alleged were that the defendant said between April and August 2019 that he would repay Kim any funds contributed by Kim or his wife and the defendant had the ability to repay the funds because he owned ‘Seoul Meats’.
72The additional particulars provided in paragraph 11 of the amended statement of claim plead further oral particulars in the alternative. The effect of these particulars is that Lee agreed to sign the written loan agreement so as to give Kim some protection and Kim would only enforce it if Lee betrayed him and kicked Kim out of the business. Lee did say he would not betray Kim and was willing to sign the document proffered by Kim but in a context where Kim was threatening to walk out of the business. But as noted below, the subjective intentions of the parties are not admissible as a matter of construction of a contract.
73The implied terms alleged are that if Lee refused or failed to transfer 50 per cent of the shares, Kim’s contribution would be treated as a loan. The figure of $400,000 represented the parties’ reasonable estimate of the value of the Kim’s contribution (personal, financial or otherwise) to the business.
74The tests for finding an implied term are well known.[13] As the High Court of Australia stated recently, the implied term must be reasonable and equitable, capable of clear expression and non-contradictory of the express terms of the contract. To be implied, a term must be necessary to give business efficacy to the contract (which will not be satisfied if the contract is effective without it) and must be so obvious that it goes without saying.[14]
[13] BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) CLR 266, 282-283
[14] Realestate.com.au Pty Ltd v Hardingham [2022] HCA 39, [18]
75Having regard to those principles, in my view, the implied terms relied upon by Kim are not so obvious it goes without saying. Nor are they necessary to give business efficacy to the written loan agreement. Further, the first implied term is contradictory to the terms of the written agreement. The loan agreement refers to a loan having being made and repayable by Lee by a particular date. The implied term is that the loan was only repayable if the shares were not transferred to Kim. Such a term is inconsistent with the express terms of the written loan agreement.
76The cause of action relied upon pursuant to the loan agreement is fundamentally flawed in my view. Apart from the document being poorly drafted, there was simply no evidence before the Court which proved Kim had advanced the sum of $400,000 to Lee on 19 August 2019, being the figure stated in the written loan agreement. Lee gave evidence that he did not borrow $400,000 from Kim. Kim did not give any evidence that he lent $400,000 to Lee. As Lee did not borrow any moneys from Kim, Lee has no obligation to repay Kim anything under the terms of the loan agreement. For that reason alone, the loan agreement is unenforceable and a sham.
77The moneys Kim paid for expenses were paid to by him into Naum’s bank account – not to Lee. Whilst it is understandable that Kim was trying to secure his position and obtain some protection given the amounts he had paid into the business, the written loan agreement which he prepared was wholly ineffective for that purpose.
78Kim argued in the alternative, that the expenses he paid were captured under the terms of the loan agreement and therefore, repayable by Lee – in essence, that they were advanced as part of a loan facility up to $400,000. The first difficulty is that I could not find on the basis of the oral evidence led that this was discussed between the parties, let alone agreed upon. The second difficulty is that this alleged arrangement is not actually stated in the loan agreement, the terms of which must be construed objectively and not according to the parties’ subjective intentions.[15]
[15] Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201, [70]
Issue 6
79Did the loan agreement include the terms alleged in paragraphs 12.1 to 12.6 of the statement of claim, alternatively, paragraph 12A of the amended statement of claim?
80For the reasons already identified above, I consider the loan agreement is unenforceable and a sham given Lee did not borrow any moneys from Kim. As a matter of construction, I would not have been persuaded that the loan agreement contained the express terms alleged in paragraph 12.1 to 12.6 and 12A of the amended statement of claim. It is self-evident that the express terms alleged do not appear in the written loan agreement
Issue 7
81Was the loan agreement supported by consideration?
82Kim argues that if the Court accepted Lee’s evidence to the effect that Kim, as party to the agreement, agreed not to exercise his right to resign as a chef of Naum, this promise alone would constitute good consideration. However, the plaintiff says that it is open on the evidence that the loan agreement entailed consideration, as it amounted a rearrangement of the parties’ rights and compromise of a dispute. That compromise in itself constituted consideration (regardless of the ultimate merit of the parties’ position).[16]
[16]See the authorities usefully summarised in Wilson Pastoral International Pty Ltd (ACN 167 284 399) v George Street Steel Pty Ltd (ACN 008 179 708) [2020] SASCFC 54
83The plaintiff submitted that Kim sought greater financial contribution from Lee and that Lee did not provide it. On Kim’s understanding of the original agreement, Lee was obliged to contribute the entire cost of establishing the restaurant but had failed to do so. On Lee’s evidence, the obligation to contribute was not so clearcut, but he certainly conceded that Kim had wanted and asked Lee to contribute more money, that Lee had not provided that money, and that Kim was upset. Kim had said he would resign as chef.
84Kim argues, on either case, the loan agreement constituted a compromise of a dispute. The necessary consideration is the settlement of that dispute and the forbearance from exercising any rights the parties may have had such as immediately terminating the agreement.
85The position put forward by Lee as to consideration was that there was no evidence that Lee and Kim were in any dispute back in 2019, or that the loan agreement was intended to settle that dispute. All that happened was that Kim had asked to be paid back his money and he had asked Lee to put in more capital. The first request was a matter between Kim and Naum, and Naum was not a party to the loan agreement. The second request did not give rise to a legal dispute because Lee had no obligation to contribute more capital. Lee argues that neither request gave rise to any dispute of a kind which the loan agreement was intended to settle.
86Lee also notes the recitals to the document did not record that the agreement was made to settle a pre-existing dispute over the character of their initial agreement. Lee says it was clear Kim’s purpose in seeking the loan agreement was to get Kim to guarantee Naum’s debt to him. However, the guarantee was not under seal and not supported by any consideration and as such is unenforceable.
87I accept and prefer the defendant’s submissions on this issue. There is insufficient evidence to find that the parties signed the loan agreement in order to compromise a dispute between the parties. The reality is that Kim produced the document as a means of trying to get some formal acknowledgment as ‘insurance’ to protect his investment in the joint venture. As already discussed, the loan agreement was wholly inapt for that purpose. Additionally, the written terms of the loan agreement make no reference to the document being prepared in order to resolve a dispute. Lee accepted that Kim had asked for more money and he told Kim he could not provide additional funds when asked. He also accepted that Kim asked to be repaid for sums he had put in but that does not amount to a dispute of the kind needed to effect a compromise of existing legal rights. If necessary, I would have found that the required element of consideration was not made out on the evidence.
Issue 8
88Did the parties intend to be bound?
89Under this issue, the plaintiff needs to show that objectively the parties intended to enter into legal relations and create enforceable obligations.
90Kim told Lee that he would “never use” the document.[17] Both parties knew that Kim had not advanced the sum of $400,000 to Lee or to Naum. Kim had described the document as providing him with insurance. Lee said he was willing to sign in order to give Kim some protection if he ever betrayed Kim. Whilst it may be accepted that the parties subjectively believed that they were entering into some kind of binding agreement, the issue goes nowhere as I have already found that the document they signed was a sham and unenforceable.
[17] T189:12
Issue 9
91Was the loan agreement vitiated by duress such that it is void and unenforceable?
92Lee submitted that the imposition of illegitimate or unconscionable pressure will amount to economic duress sufficient to vitiate a contract.[18] In this case, Kim had threatened to leave the business immediately. Making that threat was illegitimate and unconscionable because it dashed the mutual expectations of the parties that he would stay for at least 4 years.[19]
[18]Beerens v BlueScope Distribution Pty Ltd [2012] VSCA 209, [145]
[19]Court book (‘CB’) 76, see employment contract/employment period
93Kim’s conduct was inconsistent with his obligation to give one month’s notice of departure.[20] He threatened to destroy Lee’s investment in the business given Kim had all the knowhow as to how the business operated. Therefore, it was submitted that as Lee was not a rich man and had borrowed money to fund Naum, the threat of losing his investment was obviously significant.
[20]CB 73
94For his part, Kim noted that for an agreement to be vitiated by duress the conduct must be unlawful or unconscionable conduct.[21] Commercial pressure alone is not duress. Kim noted that Lee had not pleaded that Kim had engaged in unlawful or unconscionable conduct. The position was that Lee was fearful that Kim would resign as a chef but there was no suggestion that this would be unlawful or unconscionable and, accordingly, the issue of duress did not arise.
[21]Crescendo Management Pty Ltd v Westpac Banking Corporation [1988] 19 NSWLR 40
95Had it been necessary to do so, I would have found against Lee on the duress defence as I was not satisfied Kim’s statement he would leave the business amounted to illegitimate or unconscionable conduct on his part. Although his employment contract provided it was for a term of four years, it was always the case that Kim could give one month’s notice under his employment contract.[22] Whilst his immediate departure may have caused temporary difficulties in the running of the business, I do not consider Kim saying he would quit the restaurant was sufficient in the circumstances to support a finding of economic duress on his part.
[22]CB 69-77, Kim’s contract of employment with Naum dated 12 February 2019
Issue 10
96Did the plaintiff incur the expenses alleged in paragraphs 4.2, 13, 14 and 16 of the statement of claim?
97Given I have found that Lee has no personal obligation to repay Kim, then the resolution of the quantum of the expenses paid by Kim is now otiose.
98But had it been necessary to do so, I would have been satisfied that Kim paid $116,495.18 to Naum, which included direct purchases and $25,000 as a cash deposit on 28 December 2018. So much was conceded by counsel for the defendant.[23]
[23]T56; Defendant’s closing submissions, [9]
99The further sum of $90,900 claimed was disputed by Lee. This sum comprised deposits made by Kim into the bank account of Naum at Point Cook. A breakup of these sums was set out in an aide memoire provided by Lee’s counsel at the start of the trial. However, in closing, counsel for Lee said that these figures were no longer correct because of the evidence given at trial. Lee argued the bulk of these deposits were made after the restaurant was up and running. Kim made the deposits because he was the one in control of the banking. However, it was not proved on Lee’s case that the deposits paid were actually Kim’s money as opposed to takings of the business. The natural inference is that it was customers’ money from sales at the restaurant being deposited. Lee contended that Kim had failed to prove the sums he deposited was in fact Kim’s money and in the absence of such evidence, he was not entitled to the sum of $90,900.
100Kim provided a supplementary submission dated 17 February 2025 dealing with this topic after closing submissions were made with leave of the Court. This submission addressed the deposits made by Kim into the Naum bank account at Point Cook and with three exceptions, listed a corresponding withdrawal by Kim or his wife taken from bank statements in evidence. Therefore, Kim argued that these entries showed that the deposits paid into Naum’s bank account came from Kim’s own resources.
101Lee provided a reply submission dated 19 February 2025 pointing out some discrepancies with the amounts in Kim’s submissions. For two of the items listed, the payments were made into a different bank account at Hoppers Crossing and not Point Cook. Additionally, it was said that Kim had not disclosed that Lee had paid sums into Kim’s bank account totalling $38,000 during the relevant period. It is not stated what these sums represented. In any event, no set off was claimed by Lee for these sums.
102The task for the Court was to determine the amount of business expenses that had been paid by Kim towards the joint venture. On balance, having regard to the submissions put, I am satisfied that Kim paid a further sum of $73,950 into Naum’s bank account. I deducted the amounts paid into the Hoopers Crossing bank account of $6,950 and $10,000 to arrive at this figure. When added to the acknowledged sum of $116,495.18, the total paid by Kim for expenses is $190,445.18.
103I was not ultimately persuaded on the evidence led that the further sums of $10,000 and $19,170 as set out in paragraph 15 of the plaintiff’s closing submissions were proved as being payments made by Kim and that they represented business expenses of Naum’s.
104I would not have ordered Lee to personally pay the migration agency costs in the sum of $5,876.44. I accept his evidence that this topic was not discussed with him. There was no evidence led to prove that Lee agreed to bear these costs personally. Further, Lee argued that the Kim did not give any evidence that this was a business expense of Naum’s – the effect being that the Court could not find that it was a business contribution. In my view, Kim failed to prove that this was an expense for which Lee was liable to repay.
Issue 11
105If so, did the payment of those expenses constitute a loan pursuant to the loan agreement?
106For the reasons already given, the expenses paid by Kim were not the subject of a loan from him to Lee under the loan agreement.
Issue 12
107Having regard to the answers to the preceding issues, is Lee indebted to Kim pursuant to the loan agreement and, if so, in what amount?
108The result of my earlier findings is that the loan agreement is unenforceable in which case Lee is not indebted to Kim under its terms.
109The list of issues formulated by the parties did not expressly address the first cause of action pleaded, namely, that Lee was in breach of an oral contractual term to pay all of the business expenses and had failed to reimburse Kim for the expenses he had paid. The focus at trial was on Kim’s right to claim reimbursement of expenses from Lee under the terms of the loan agreement. For the sake of completion, I would not have found that Lee was in breach of their oral joint venture agreement regarding the payment of expenses.
110In an oral contract such as this, the Court has to determine as a matter of fact what was agreed having regard to the words used by the parties. The rights and liabilities of the parties under a contract, including an oral contract, are determined objectively and not subjectively. If the contract is commercial, it is necessary to ask what a reasonable person engaged in the respective businesses of the parties would have understood the words and conduct to mean.[24]
[24] Realestate.com.au Pty Ltd v Hardingham [2022] HCA 39, [43]
111I am not satisfied on the state of the evidence led that Lee agreed with Kim that he (Lee) would pay all the expenses, being the allegation pleaded. I accept and prefer Lee’s evidence on this point ahead of Kim’s and find Lee did not agree to bear all of the business expenses personally. I do so because I found Lee to be the more credible witness of the two given their respective demeanour at trial. Moreover, it is inherently unlikely that Lee would agree to bear all the expenses in circumstances where he was unable to meet this cost financially and was not a wealthy man.
112I consider a reasonable businessperson would have formed the view, having regard to the words used by the parties and their conduct, that the parties agreed to share in the costs of setting up the joint venture equally, consistent with their agreement that once the business was up and running, they would share the profits and own it 50/50. Additionally, when considering the parties’ subsequent conduct in determining whether an oral contract was formed and its terms, it is significant that Kim paid $25,000 towards expenses into Naum’s bank account on 28 December 2018, when on his version of events he had no obligation to do so. By the time Kim paid this sum, Lee had already contributed $64,000 towards the joint venture. The fact that Kim did contribute the sum of $25,000 towards the expenses at this time is more consistent with the parties agreeing to share these costs.
113Given all these matters, the first cause of action pleaded relating to breach of the oral joint venture contract was not proved and will be dismissed.
(6) Disposition and orders
114I will make a declaration that the defendant holds 50 per cent of the shares in Naum Pty Ltd on trust for the plaintiff. I will order that the defendant transfer 50 per cent of the shares in Naum Pty Ltd to the plaintiff forthwith. The plaintiff’s remaining claims will be dismissed.
115Kim succeeded on his claim relating to the transfer of shares but failed on his claim for reimbursement of expenses paid under the terms of the parties’ oral joint venture contract and under the loan agreement. Consequently, my preliminary view is that there should be an apportionment on costs to reflect this outcome. Subject to hearing from the parties, I propose ordering the defendant pay 50 per cent of the plaintiff’s costs of and incidental to the proceeding on the standard basis, to be taxed in default of agreement.
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Certificate
I certify that these 26 pages are a true copy of the Reasons for Judgment of Her Honour Judge A Ryan delivered on 22 May 2025.
Dated: 22 May 2025
Associate to Her Honour Judge A Ryan
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