Lee v Klean King Pty Ltd

Case [2023] QDC 24

DISTRICT COURT OF QUEENSLAND

CITATION:

Lee v Klean King Pty Ltd [2023] QDC 24

PARTIES:

JONG KAP LEE

(plaintiff)

v

KLEAN KING PTY LTD

ACN 106 068 642

(defendant)
FILE NO:

1853/18

DIVISION:

Civil

PROCEEDING:

Trial

ORIGINATING COURT:

District Court, Brisbane

DELIVERED ON:

24 February 2023

DELIVERED AT:

Brisbane
HEARING DATE:

17, 18, 19, 21 October and 6 December 2022

Written submissions from the plaintiff 21 November 2022 and 30 November 2022 and from the defendant 23 November 2022 and 30 November 2022

JUDGE:

Muir DCJ

ORDER and DIRECTIONS:     

1. The defendant pay the plaintiff the sum of $127,020.15.

2. The parties bring in final orders reflecting this order together with any interest claimed (and calculations) and costs by 4.00pm Thursday 2 March 2023.

3. If these orders cannot be agreed by 4.00pm Thursday 2 March 2023, the parties are to email the Associate to Muir DCJ to request a date for a short hearing and determination of these issues at a time convenient to the court and the legal representatives.

CATCHWORDS:

CONTRACTS – CORPORATIONS – RUNNING LOAN ACCOUNT – DEBT– RESTITUTIONARY CLAIM  – where the plaintiff was a director of the defendant and entered into various agreement to borrow and lend money to the defendant – where running loan account kept – where the plaintiff alleges that the defendant failed to repay some or all of the money loaned – where questions arose as to whether the payments made by the defendant were loan payments or wages, bonus or other non-loan repayments – where balance of loan account to be determined – whether a further payment by the defendant to the plaintiff was made under a mistake of fact that he was an employee

LEGISLATION:

Evidence Act 1997 (Qld) s 92

CASES:

Anglo-Scottish Beet Sugar Corporation Limited v Spalding Urban District Council [1937] 2 KB 607
Beattie v Fine [1925] VLR 363
Caltabiano v Electrical Commission of Queensland (No. 1) [2010] 1 Qd R 100
Chaudhary v Chaudhary [2017] NSWCA 222
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353
Heydon v Perpetual Executors Trustees & Agency Co (WA) Ltd (1930) 45 CLR 111
McGowan v Klatt [2019] QSC 222
Oakwood Constructions Pty Ltd v Wyndon Properties Pty Ltd [2010] QCA 323
Onassis & Calogeropoulos v Vergottis (1968) 2 Lloyd’s Rep 403
Parker v Jervis [2013] QDC 271
Redland City Council v Kozik [2022] QCA 158
COUNSEL:

R.R. Ivessa for the plaintiff
M. Black for the defendant
SOLICITORS:

Brighthill Lawyers for the plaintiff

PM Lee & Co Pty Ltd for the defendant

Introduction

  1. This is a dispute (mainly) over the correct balance of a running loan account operated by the defendant Klean King Pty Ltd and one of its former directors and current shareholders, the plaintiff, Mr John Kap Lee.  The resolution appeared hindered by a number of factors including that many of the disputed payments occurred over 13 years ago; the books and records of Klean King – (to the limited extent they…

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AGLC
Lee v Klean King Pty Ltd [2023] QDC 24
Case
[2023] QDC 24
Decision Date

CaseChat Overview and Summary

In the case of Lee v Klean King Pty Ltd, the plaintiff, Mr Lee, sought to determine the balance of a loan account he maintained with the defendant, Klean King Pty Ltd, a company of which he was a former director. The dispute centred on the nature of the payments made by Klean King to Mr Lee between 2009 and 2013, which were variously described as wages, bonuses, or loan repayments. Mr Lee alleged that Klean King had failed to repay some or all of the money loaned, while Klean King contended that the payments were not loan repayments but were instead wages or bonuses. The legal issues for the court to decide included the characterisation of the payments, whether they were loan repayments or not, and the balance of the loan account if they were indeed loan repayments.

The court examined the evidence presented by both parties, including the contemporaneous documentary evidence and the objective facts of the case. The court concluded that the periodic payments made by Klean King to Mr Lee were indeed loan repayments, not wages or bonuses, based on the objective evidence provided by the company records, such as the bank statements and the company's cash flow management system. The court found that these records were objective evidence of the communicated intention of Klean King, despite the lack of formal documentation or employment agreements.

As a result, the court dismissed Klean King's restitutionary claim and ordered the defendant to pay the plaintiff the balance of the loan account, which was determined to be $127,020.15. The court directed the parties to finalise the orders, including any interest claimed and costs, by a specified date, with a further hearing to be scheduled if the parties were unable to agree on the final orders.

Orders

Orders of the court

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Background

Background to the litigation

Ultimately, I have assessed the evidence of each of the witnesses having regard to the objective facts with particular regard to contemporaneous documentary evidence and upon a consideration of where the onus of proof lies and upon my satisfaction to the requisite standard - on the balance of probabilities.Relevant facts For some time prior to 2007 Mr Lee ran a cleaning supply wholesaling company called “Shin Sung Total Company” in South Korea. In 2007 he sold that company to his nephew, Young-Wan Jang. Klean King was incorporated on 27 August 2003 but did not adopt the name Klean King Pty Ltd until August 2007. The directors and shareholders of Klean King are as follows:[8](a)Ben Hur from 27 August 2003 to date (and as company secretary for this period);(b)Jin-Tae Kim from 27 August 2003 to date;(c)Huyn Soo (Paul) Shim from 14 November 2008 to date; and(d)Mr Lee from 23 November 2007 to 17 May 2013.[9][8]All four men still hold a 25 per cent shareholding in the company. [9]During this time he resided in Australia. There was a dearth of evidence about the nature of Klean King’s business but underneath the Klean King letterhead appears the words “cleaning products/ food packaging/ homeware” so it is reasonable to assume as I do that the company was involved in the wholesale supply of such items. It was not clear what role each of the directors actually played in the day to day operations of the company. Although there was some evidence that at some point Mr Lee provided management and warehousing services to the company. Prior to 2009, the directors did not receive any regular payments from Klean King but in January 2011 they all resolved (although there is no record of this resolution or any evidence about the terms of these payments) that they should each receive income of $30,000 per annum. These monthly payments were recorded in payslips. Relevantly, and in addition, between January 2009 and March 2013, Klean King made periodic payments to Mr Lee. The uncontested evidence about the amounts and method of payments of these periodic payments over the years is as follows: (a)in the 2009 financial year, the periodic payments amounted to a total of $15,000 paid by bank deposit and $2,500 paid in cash;(b)in the 2010 financial year, the periodic payments amounted to a total of $36,000 paid by bank deposit and $500 paid in cash;(c)in the 2011 financial year, the periodic payments amounted to a total of $21,000 paid by bank deposit and $9,599 paid in cash;(d)in the 2012 financial year the periodic payments amounted to a total of $28,481 paid in cash; and (e)in the 2013 financial year the periodic payments amounted to a total of $32,500 paid in cash. The characterisation of these periodic payments is dealt with under the heading “Issue Two” below. But relevantly there are no payslips relating to these payments. Nor was there any evidence that Mr Lee declared the payments as income for tax or any other purpose. The evidence (or lack of it) is consistent with how Klean King conducted its affairs – that is with lack of formality and process. For example:(a)There is no evidence of an employment agreement or other contractual agreement by which Mr Lee or the other directors were entitled to payment of wages or any specific amounts in respect of work performed by Klean King;(b)There is no evidence of formal declarations of dividends; and(c)There is no record of any formal minutes of meetings.

Evidence

Evidence Before The Court

Mr Lee relies on the records in the CFM as supporting his case. Klean King submits that there is no evidence that Mr Lee actually knew about or relied upon those notations at the relevant time.[19] But this submission is a distraction and overlooks that the crucial issue is what was objectively communicated to Mr Lee by Klean King’s words, actions and the surrounding circumstances. In this sense, reliance is irrelevant. Regardless and as my findings at paragraph 19 above reveal, I am satisfied that Mr Lee knew of and was shown the CFM from time to time. [19]Para 52 of Defendant’s Closing Submissions.Objective evidence of the intention of Klean King The parties differ as to the objective evidence of Klean King’s intention. Mr Lee submitted that the company records are objective evidence of Klean King’s intention but Klean King submitted that the various descriptions of the periodic payments as wage, salary, share or bonus were merely a statement of uncommunicated subjective intention. I am satisfied that there is an underlying inconsistency in Klean King’s argument. On the one hand it asks the Court to treat the company records (that is the bank statements and the CFM) as evidence as to the timing and amount of the payments but not as to what the nature of the payments were. But in the case of the periodic payments, these documents are the only records that those payments actually occurred. Overall, I prefer Mr Lee’s submissions on this point. I am therefore satisfied that these records are objective evidence of the communicated intention of not only the timing and amounts of the payments but as to the nature of the payments. These records were official company documents. At the time Mr Lee was a director of the payer (Klean King) and so it follows that Klean King’s internal records are not an uncommunicated record private to the payer. I am also satisfied that far from being evidence of uncommunicated subjective intention, the CFM is objective evidence of communicated intention for the reasons set out in the following three paragraphs. First, the periodic payments which Klean King made to Mr Lee by way of bank deposits in 2009 to 2011 usually described the payments as “wages” through notations that appeared on Mr Lee’s bank statements. It is true that Mr Lee did not speak English but his evidence which I accept as entirely plausible is that his children assisted him with his banking. But even if these descriptions were not translated to Mr Lee – the point only goes to reliance (which is irrelevant) and does not deprive the bank statements of their character as objective evidence of the communicated will of the payer.[20] [20]Para 67 of Outline of Submissions of Plaintiff in Reply. Secondly, Mr Lee’s evidence (which I accept as corroborated by Mr Shim as discussed below) was that in 2010 he was told by the internal Klean King accountant that regular payments that he had been receiving from Klean King (which he understood to be wage payments) were to be treated as loan payments. His evidence was that he confronted the other directors about what was going on and was told that there was a mistake which would be corrected. Mr Kim denied that Mr Lee was told that the recording of the regular payments as loan repayments was a mistake, and that the accountant would be instructed to correct it. But I reject his evidence on this issue as it is inconsistent with the evidence of Mr Shim who was the person entrusted by the other directors with the task of maintaining the CFM. Mr Shim’s evidence (which I accept) was that Mr Lee came to the other directors in 2010 as he had been told that regular payments he was receiving from Klean King were being recorded not as wages but as loan repayments. Mr Shim did not recall Mr Lee being upset but he agreed that he or one of the other directors told Mr Lee that this was “just a mistake” that would be fixed. I am therefore satisfied that as at the end of 2010 the discussion between the directors was that the periodic payments Mr Lee was receiving from Klean King were not to be treated as loan repayments but rather as wage payments.

Decision

Reasons for decision

It follows that I am not satisfied that Klean King’s resitutionary claim has been made out and I therefore dismiss that claim. Conclusion and orders It follows from the above analysis that the balance of the loan account is $127,020.15. I therefore order that the defendant pay the plaintiff the sum of $127,020.15. I direct that the parties bring in final orders reflecting this order together with any interest claimed (and calculations) and costs by 4.00pm Thursday 2 March 2023. If these orders cannot be agreed, the parties are to email my associate (by 4.00pm Thursday 2 March 2023) to request a date for a short hearing and determination of these issues at a time convenient to the court and the legal representatives.

Ratio Decidendi

Legal Principle Established

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