Kim v Oh
[2024] NZHC 1299
•23 May 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-675
[2024] NZHC 1299
UNDER
AND
the law of contract and tort IN THE MATTER
of breach of contract and tort of deceit or negligent misstatement
BETWEEN
CHONG CHU KIM and IN SUK KIM
Plaintiffs
AND
TAE LIM OH
First Defendant
YONG SU CHOI
Second Defendant
Hearing: 18–22 March 2024 Appearances:
S Kang for the Plaintiffs
P Murray for the Defendants
Judgment:
23 May 2024
JUDGMENT OF GORDON J
This judgment was delivered by me on 23 May 2024 at 3 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors/Counsel:
Fairbrother Family Law, Napier CL Law, Auckland
P Murray, Auckland
KIM v OH [2024] NZHC 1299 [23 May 2024]
[1] This is a case where friends have fallen out over business arrangements in relation to investments for the development of gold mining operations in Mongolia.
[2] The plaintiffs, Chong Chu Kim and In Suk Kim, are husband and wife. The first defendant, Tae Lim Oh, and the second defendant, Yong Su Choi, are also husband and wife. The two couples are of Korean ethnicity and now live in Auckland. They first met in Auckland in around 2006 and became friends.
[3]Mr and Mrs Kim make two claims in this proceeding:
(a)First, they claim against Mr Oh and Ms Su Choi for breach of contract. Mr Oh and Ms Su Choi make counterclaims against Mr and Mrs Kim by way of set off for misrepresentation under s 35 of the Contract and Commercial Law Act 2017 (CCLA) and under s 9 of the Fair Trading Act 1986 (FTA).
(b)Second, Mr and Mrs Kim claim against Mr Oh, in the tort of deceit, or alternatively the tort of negligent misstatement.
[4] The first language for all four is Korean. They each gave evidence at the hearing, Mr Oh in English and the other three in the Korean language using an interpreter. Some of the documents in the common bundle were in the Mongolian language and not all were translated. The documents in Korean were translated into English.
Background
[5] There are two key discussions between Mr Kim and Mr Oh that give rise to the claims and counterclaims. The first discussion occurred on 9 February 2018 (and again a day or so later) when Mr Oh spoke to Mr Kim about investing in gold mines in Mongolia. Mr Kim subsequently signed three investment contracts with another person (not Mr Oh) and invested a total of USD 750,000 in two gold mines.
[6] The second occasion was on 2 June 2018 when the two men spoke by phone and Mr Oh agreed to take an assignment of Mr Kim’s USD 400,000 interest in the
contract relating to one of those gold mines. Mr Oh made payment by way of a loan from Mr Kim for the full amount of the contract. The parties signed a debt acknowledgement for that amount.
[7] It is necessary to go back to late 2017 before returning to the discussions in February 2018.
[8] In October 2017 Mr Oh travelled to Mongolia through South Korea for unrelated business. In Mongolia Mr Oh met up with Woo Rae Cho, a friend from South Korea. The two men also met up with Dongwon Kweon who was living in Mongolia at the time. Mr Oh says he had known Mr Kweon since 2007. Mr Oh says Mr Keown initiated a conversation about the Mongolian gold mines which are at issue in this proceeding. Mr Oh said he visited the site of one of those gold mines with his friend Mr Cho while they were in Mongolia.
[9] There are emails from Mr Kweon to Mr Oh in October 2017.1 One of those emails is headed “Gold Mining Data” and another is headed “Overview of Sharin Gol Gold Mine”. It is not clear from the evidence if those emails were sent before, during or after Mr Oh’s visit to Mongolia.
[10] The Sharin Gol area referred to in one of the emails is around 210 kilometres north of Ulaanbaatar in Mongolia. The two gold mines in issue, 14686A and 5582A, are about four kilometres apart at Sharin Gol. Two Mongolian companies, Altan Khundii LLC and Orgil Ser LLC, had obtained mining rights for 14686A and 5582A respectively and, in turn, licenced others to take up those rights in return for royalties.
[11] It would appear that, through this arrangement, a Mongolian company Wellich Mine LLC,2 was licensed by Altan Khundii LLC to develop mine 14686A; and by Orgil Ser LLC to develop mine 5582A. Documents before the Court describe Mr Kweon as the CEO and a director of Wellich Mine LLC. It is not clear when Wellich Mine LLC obtained those rights (though it appears to have been some time after Mr Oh sourced an investment from Young Um, referred to below).
1 The evidence of the emails in the bundle is confined to subject matter headings only.
2 Wellich Mine LLC was previously called Wellich Construction LLC.
[12] After Mr Oh returned to New Zealand from his visit to Mongolia, Mr Kweon sent Mr Oh a draft contract for Mr Cho to sign to make an investment in mine 14686A. However, Mr Cho eventually decided not to invest. Mr Oh also spoke to another person, Young Um, a Korean woman living in New Zealand, about investing in one of the gold mines. It is not clear whether the discussions occurred before or after Mr Cho decided not to invest.
[13] Ms Um and her husband were part of a friendship group which included both Mr and Mrs Kim and Mr Oh and Ms Su Choi. Ms Um gave evidence under subpoena for Mr and Mrs Kim. However, she said that as a result of the events I have yet to describe, she was no longer friendly with either couple. Ms Um’s evidence was that the topic of investing in Mongolian gold mines was first raised with her by Ms Su Choi on an informal occasion when the two women met after Mr Oh had returned from Mongolia.
[14] I will refer to what Ms Um says she was told by Mr Oh and Ms Su Choi in the context of my discussion below as regards what Mr and Mrs Kim say they were told by Mr Oh. For present purposes I simply note that Mr Oh accepted he told Ms Um that swift action was required on her part if she was going to invest in order for mining rights to be secured.3
[15] On 25 October 2017 Ms Um signed a contract at Mr Oh and Ms Su Choi’s home which records an initial investment of USD 100,000 for the joint development of the 14686A mine owned by Altan Khundii LLC in Mongolia. One of the contracting parties is recorded as Ms Um and Ms Su Choi, together referred to as the “Investor”. The other contracting party was expressed to be Dongwon Kweon as CEO of Wellich Mine LLC. The arrangement was that Ms Um would provide the USD 100,000 up front and that Ms Su Choi would go “half and half” with her. In other words Ms Um loaned Ms Su Choi USD 50,000 for the combined investment.
[16] The term of the contract was expressed to be “until the completion and development of the mining rights 14686 [sic]”. As to the development of the mine,
3 Having regard to that evidence, it seems that Wellich Mine LLC had not in fact acquired the mining rights at this stage.
the contract recorded that Altan Khundii LLC owned a 30 per cent share while Ms Um, Ms Su Choi and Mr Kweon together held 70 per cent.
[17] Ms Um says she paid USD 100,000 into Mr Oh’s account at the time she signed the contract at Mr Oh and Ms Su Choi’s home. Her evidence is that she deposited the funds into Mr Oh’s account under his instruction, and that she knows he later transferred the funds to Wellich Mine LLC’s account.
[18] On 3 November 2017 Mr Oh entered into an “Agreement for Joint Mining Development” (JV agreement) with Mr Kweon and another Korean, Koonjae Lee. Mr Oh accepted he drafted the JV agreement. The first three articles are set out below:
Article 1 (Purpose)
The total of three people (Dongwon KWEON, Koonjae LEE, Tae Lim OH) (hereinafter referred to as “Party”) shall promise to run the project jointly by using investment, business management and technical ability for the development of the below Mongolia mining development. The purpose of this agreement is to decide the above.
1.Target of the project: Mongolia mining development project
2.Scope of the project: The first shall be the mining right number 14686A and 5582A located in Shariin gol, Mongolia. It may be added by agreement of the parties.
Article 2 (Joint development)
The title of the joint development body, and location and representative of the office shall be as follows.
1.Title: Wellich Mine Consulting
2.Location of the main office: Ulaanbaatar, Mongolia
3.Name of representative: Dongwon KWEON
Article 3 (Member of the joint development body)
The members and roles of the joint development body shall be as follows.
1.Dongwon KWEON, date of birth: 10 March 1963 (representative)
2.Koonjae LEE, date of birth: 01 December 1964 (site management and selection of development area)
3.Tae Lim OH, date of birth: 04 January 1968 (inviting investments and charge of financial affairs)
1The representative of the joint development body shall be Dongwon KWEON.
2The representative shall represent the joint development body to the investor and the third party, and have rights and obligations on property management and payment distribution of the joint development body. But in case of necessity, the rights and obligations might be divided by agreement of the contract parties of 3 peoples.
[19] Article 8, a provision for the distribution of profits, provided that each of the three members was to receive one third of the profits.
[20] I now turn to events leading up to Mr Kim’s first investment. On 8 February 2018 Mr Oh came to Mr Kim’s business unannounced and said that he had something to discuss with him. He did not say what it was at that time. Mr Kim met Mr Oh at Mr Oh’s house the following evening.
[21] Mr Kim says Mr Oh brought up the topic of investing in Mongolian gold mines. Mr Oh showed him various documents. Mr Kim went back to Mr Oh’s house with his wife a day or so later and further discussed the opportunity for investment.
[22] The parties give conflicting evidence about what was said by Mr Oh on 9 February 2018 when the two men met, and again when Mrs Kim was present a day or so later. It is these discussions and the alleged statements by Mr Oh that form the basis of the causes of action for deceit and negligent misstatement. I will return to this issue.
[23] Subsequently, on 12 February 2018 Mr Kim entered into a “Joint Mine Development Investment Contract” for investment of the sum of USD 100,000 in mine 14686A (first contract).
[24] The two contracting parties were Mr Kim and Mr Kweon, “CEO of Wellich Mine LLC”. The introduction provides that the two contracting parties “make the following contract in order to jointly develop the 14686A mine … for which Altan Khundii LLC company of Mongolia holds mining permission”.
[25] The duration of the contract was expressed as “until the development of mining right 14686A is finished”. The contract conditions included the following:
2.Development of the target object shall be 30% for Altan Khundii LLC company, and 70% for [Mr Kim and Mr Kweon]. May be changed by agreement upon contract.
3.Upon contract, [Mr Kim] shall electronically transfer investment payment 1 as given in the annex, being one hundred thousand US dollars (100,000 USD), into the account appointed by [Mr Kweon].
[26] Further terms provided a right of priority regarding investment in 5582A to Mr Kim, and a prohibition on either party transferring the rights and responsibilities in the contract without written agreement.
[27] At the end of the contract the company name is expressed to be “Wellich Group/Wellich Mine LLC”. The seal affixed was that for Wellich Group LLC. The contract nominated an account purporting to be the account of Wellich Group LLC for the transfer of Mr Kim’s funds.
[28] Mr Kim says he signed the contract in his name alone for convenience, although it was intended to be a joint investment with his wife. He says that on 12 February 2018 when he signed the first contract, he asked Mr Oh for the documents Mr Oh had shown him on 9 February 2018. A few days later Mr Oh provided Mr Kim with a USB: Mr Kim says one of the documents on the USB was the JV agreement. Mr Oh impliedly disagrees with that when he says he does not understand how Mr Kim has a copy of the JV agreement.
[29] On 20 February 2018 Mr Kim entered into another “Joint Mine Development Investment Contract” for investment of the sum of USD 350,000 in mine 14686A (second contract). There is disagreement between Mr Kim and Mr Oh as to the events that led to Mr Kim entering into the second contract. Mr Oh says the day after Mr Kim signed the first contract, Mr and Mrs Kim visited his home and said that they wanted to invest a further USD 350,000. In contrast, Mr Kim says that following the first contract, Mr Oh continued to communicate with him and that Mr Kim casually told Mr Oh as a friend that he and his wife had taken out a loan of NZD 500,000 from the bank to subdivide the land they owned and to construct an additional house. Mr Oh
says he did not know that the money was from bank borrowings. He appeared to accept he knew that Mr Kim had borrowed money from someone.
[30] The contracting parties and terms are substantially similar to the terms in the first contract, with one difference being that the duration of the contract includes a reference to the second mine 5582A, stating: “the basic length of the contract shall be until the development of mining rights 14686A and 5582A is finished”.
[31] Around 24 February 2018 Mr and Mrs Kim attended what was described as the first investor meeting at Mr Oh’s house. Mr Oh and Ms Su Choi were both present. Ms Um was also in attendance. As recorded in the minutes of that meeting, Mr Oh said he planned to start his trip to Korea then Mongolia on 27 February 2018 and that the 14686A mine would begin production in mid-April 2018. Mr Kim’s evidence is that on Mr Oh’s advice he appointed himself as an auditor (which the contract permitted investors to do). Mr Oh also suggested he join him on the trip. Mr Kim agreed to do so.
[32] The minutes further record that a new company Wellich Investment LLC would be established. Mr Kim says Mr Oh told him that was for the purposes of distributing the return on the investment and for applying for a Mongolian investment visa. He says Mr Oh asked him to put his name as the company representative of the investors. Mr Kim says he agreed because he did not think he could ask his wife or Ms Um to do it.
[33] The two men left New Zealand around 27 February 2018, first going to Korea. Mr Kim’s evidence is that in Korea, Mr Oh bought a gold sorter to be shipped to Mongolia. He and Mr Oh then flew to Mongolia, where Mr Kweon met them at the airport. A few days later Mr Kweon and Mr Oh gave him a document in Mongolian for him to sign for the establishment of Wellich Investment LLC. Mr Kim says he did not understand any Mongolian but signed it only because he trusted Mr Oh. It is agreed that Mr Kim was the sole director of Wellich Investment LCC, and Mr Oh was a shareholder.
[34] A bank account was opened for Wellich Investment LLC. Mr Oh’s position is that account was for the purpose of managing mining operations and funds at mines 14686A and 5582A. Both Mr Kim and Mr Oh obtained residence visas in Mongolia to enable them to travel there.
[35] Mr Kim says Mr Kweon and Mr Oh told him that there would be a large amount of tax to pay if they had too much money in the Wellich Group LLC account. Accordingly, they told him to open a Mongolian bank account under his personal name to reduce tax liability, which Mr Kim did with their help. Mr Kweon and Mr Oh told him they would deposit USD 240,000 in that account from Wellich Group LLC but that Mr Kim should not make any withdrawals without their permission.
[36] They visited the site of the gold mine but it was still covered in snow. Mr Kim says he was worried but Mr Kweon assured him there would be no problem with starting the development mid-April because Mr Lee was an experienced site manager and the weather was expected to become warmer.
[37] Around 11 March 2018 Mr Oh and Mr Kim went back to Korea. Mr Kim says around 14 March 2018 Mr Oh informed him that the gold mine investment had fallen through and that would cause issues with the mine development and more money was required. Mr Kim says he feared that without the complete investment in a proper mine operation, he and his wife would struggle to get back the existing USD 450,000 which they could not afford to lose. After discussing the situation with his wife Mr Kim decided to borrow some money from his younger sister and the bank to invest a further sum.
[38] Mr Oh’s position is that any decision by Mr Kim to enter into a contract for development of mine 5582A was in consequence of what Mr Lee had said to Mr Kim and not any representations made by him (that is, by Mr Oh). In the end it will not be necessary to resolve this issue as the alleged representations which give rise to the tortious claims relate only to the investments in mine 14686A pursuant to the first contract and second contract.
[39] On 23 March 2018 Mr Kim entered into the third “Joint Mine Investment Contract” for the investment of USD 300,000 in mine 5582A (third contract). Mr Kim says the third contract was drafted at Mr Oh’s office. The contract was again between Mr Kim and Mr Kweon, who is described as a representative director of Wellich Mine LLC. The purpose of the contract was expressed to be to develop mine 5582A, the mining rights of which were held by Orgil Ser LLC. Distribution of profits was to be 20 per cent to Orgil Ser, 10 per cent to Mr Kim and 70 per cent to Mr Kweon.
[40] The third contract provided that Mr Kim’s investment across the three contracts would be changed so that he would be considered to have invested USD 400,000 in mine 5582A and USD 350,000 in mine 14686A. Mr Kim says that this division was decided after a discussion with Mr Oh, who made the amendments accordingly on his computer. As was the case with the first and second contracts, the third contract also provided that neither Mr Kim nor Mr Kweon was able to transfer the rights or responsibilities of the contract to a third party without written agreement.
[41] The contract provided that Mr Kim was to pay the investment amount of USD 300,000 to an account nominated by Mr Kweon who was then to pay it to Orgil Ser LLC. Mr Kim paid the USD 300,000 in two instalments. Around 21 March 2018, he transferred USD 100,000 to Wellich Group LLC’s Mongolian bank account. Around 29 March 2018 Mr Kim deposited the final USD 200,000 into Wellich Investment LLC’s Mongolian bank account. Mr Kim says that was in accordance with Mr Oh’s instructions.
[42] Around 6 April 2018 Mr Kim returned to Mongolia. He says he was acting in his role of “auditor” to which he had agreed to be appointed. That role included inspecting the production site and signing the daily production record. He says this role did not include any active management of the two mines.
[43] In contrast, Mr Oh says Mr Kim had taken on an active management role including the sale of gold, managing mine expenses, and processing employment agreements. Mr Kim was surprised to find that Mr Lee, whom he understood would be in charge of managing the mines, was not there. After inquiring with Mr Kweon, Mr Kim says he was finally told that Mr Lee could not be there as he had been arrested
by the police in December 2017 and deported to South Korea for illegally staying in Mongolia for six years. Mr Oh says he knew nothing about any immigration matters preventing Mr Lee from being present in Mongolia.
[44] By May 2018 the projected returns had not occurred. Mr Kim and his wife were in difficult financial circumstances because of the money they had borrowed and invested in the mines.
[45] A key event is the phone call between Mr Kim and Mr Oh on 2 June 2018, when Mr Kim was still in Mongolia and Mr Oh was in New Zealand. Mr Kim and Mr Oh dispute what was allegedly said by Mr Kim in that phone call.
[46] Following the phone call, and with the consent of Mr Kweon on behalf of Wellich Mine LLC, Mr Kim transferred his rights in the third contract (the USD 400,000 investment in mine 5582A) to Mr Oh. Two documents were entered into to facilitate this transfer.
[47] First, on 2 June 2018, a “Debt Acknowledgement Form (IOU)” (debt acknowledgement) was signed in New Zealand by Mr Oh and Mrs Kim. As Mr Kim was in Mongolia at that time he authorised Mrs Kim to sign on his behalf. It is this document which forms the basis of the cause of action for breach of contract.
[48] Second, a transfer document was signed in Mongolia on 17 June 2018 by Mr Kweon, Mr Kim and Mr Oh (who by then had arrived in Mongolia) (transfer agreement). The transfer agreement contains an “IOU” signed by Mr Oh for USD 400,000 at an annual interest rate of 5.8 per cent. The IOU states as follows:
Regarding the gold mine development project of Mongolia Darkhan-Uul Khongoryn, Shariin gol, I borrow the amount money from the creditor Chong Chu KIM (a resident of [address], Auckland, New Zealand). I promise to pay back the principal and interest by 01 June 2019.
If I do not pay back all principal by 01 June 2019, I confirm that I have no objection in civil or criminal cases regarding the claim of all principal which is equivalent to borrowed amount.
[49] Mr Kim left Mongolia shortly after signing the transfer agreement. Mr Oh remained in Mongolia.
[50] The debt acknowledgement records the debtors as Mr Oh and Ms Su Choi and the creditors as Mr and Mrs Kim. The acknowledgement is for a debt of NZD 571,428 (the equivalent of USD 400,000) which was to be repaid by 1 June 2019 with interest at 5.8 per cent per annum. Interest of NZD 2,761.90 was payable monthly on the twentieth day of each month starting from 20 June 2018. The debt was to be accelerated if a payment was missed. The document records that the loan was taken out for the transfer by Mr Kim to Mr Oh of the rights in mine 5582A.
[51] Mr Oh and Ms Su Choi paid interest in accordance with the debt acknowledgement from 20 June 2018 until 20 May 2019. They did not repay the principal on its due date of 1 June 2019 and did not make any more interest payments after the 20 May 2019 payment.
The claims
[52] First, Mr and Mrs Kim bring a claim for breach of the debt acknowledgement contract. Mr and Mrs Kim seek damages against Mr Oh and Ms Su Choi jointly and severally for NZD 571,428 and interest at 5.8 per cent per annum from 1 June 2019.
[53] Mr Oh and Ms Su Choi accept that they entered into the debt acknowledgement but say in defence and in a counterclaim that Mr Kim made a number of misrepresentations. Mr Oh and Ms Su Choi rely on s 35 of the CCLA. It is alleged that, as a result of verbal representations made by Mr Kim to Mr Oh on 2 June 2018, Mr Oh entered into the transfer agreement and the debt acknowledgement. Mr Oh and Ms Choi say that this gives rise to a set off against the amount claimed by Mr and Mrs Kim in the cause of action for breach of contract.
[54] Mr Oh and Ms Su Choi make a second, alternative counterclaim under s 9 of the FTA. They say that the transfer agreement and the debt acknowledgement was undertaken by Mr and Mrs Kim in trade. They say that by making the alleged misrepresentations Mr Kim engaged in conduct that was misleading or deceptive or was likely to mislead or deceive. As a consequence they have suffered loss.4
4 An affirmative defence by Ms Su Choi that she did not receive consideration for the transfer agreement and the loan under the debt acknowledgement; and a counterclaim under the Credit Contracts and Consumer Finance Act 2003, were not pursued.
[55] Second, Mr and Mrs Kim bring a claim against Mr Oh based on the tort of deceit. Mr and Mrs Kim say that even after Mr Oh and Ms Su Choi agreed to purchase their investment in mine 5582A for the sum equivalent to USD 400,000 they were left with the remaining loss of USD 350,000 in relation to mine 14686A. They say this is because the mines have been neither developed nor operated from May 2018 onwards. For this claim, Mr and Mrs Kim rely on one particular representation that Mr Oh allegedly made to Mr Kim in February 2018, before Mr Kim signed the first contract. They seek compensatory damages in the sum of USD 350,000. They also seek “exemplary damages in the sum the Court thinks fit”.
[56] In the alternative, Mr and Mrs Kim bring a claim against Mr Oh based on the tort of negligent misstatement. Mr and Mrs Kim rely on a number of representations, including the representation in the above claim, that Mr and Mrs Kim say were made by Mr Oh in February 2018 before Mr Kim signed the first and second contracts. They seek compensatory damages in the sum of USD 350,000. They also seek “exemplary damages in the sum the Court thinks fit”.
Preliminary issues
[57] In his written opening submissions Mr Kang, counsel for Mr and Mrs Kim, raised two preliminary issues. The first was that he said terminology issues had arisen as a result of the parties having used three different translators, including Jennifer Shin, who was the interpreter at the trial. He suggested that if any translations became contentious or needed clarification, Ms Shin might assist. In fact that was not required.
[58] As a second issue, Mr Kang noted that both Mr Oh and Ms Su Choi had served briefs of evidence only in English and not in Korean as well. He queried whether their briefs were in their own words.5 That issue also fell away and their briefs of evidence were taken as read.
[59] Mr Kang raised a third issue orally during his opening submissions. He objected to the inclusion of a seven page document in the common bundle. The document is headed “Case Progress Details”. There is an English version translated
5 High Court Rules 2016, r 9.7(4)(b).
from the Korean version. It is in the nature of a chronology but contains a more detailed recitation of events that might commonly be included in a chronology filed by the parties. The author of the document is not identified. I did not determine admissibility at the time. My decision is that to the extent any entries are not proved by the evidence of the witnesses or by documents produced, it is inadmissible. Further, it is not a document which in itself is supportive of the version of events given by any witness.
Disputed factual issues
[60] Mr Kang and Mr Murray, counsel for Mr Oh and Ms Su Choi, agree on the legal principles that apply to the legal bases for the claims. The issues in this case turn on disputed facts.
[61]There are two main disputed factual issues which need to be resolved:6
(a)What representations did Mr Oh make to Mr Kim before Mr Kim entered into the first two contracts to invest a total of USD 450,000 in the mining operations? In particular, what was said by Mr Oh to Mr Kim on 9 February 2018 before Mr Kim entered into the first contract?
(b)What was said by Mr Kim to Mr Oh in the phone call on 2 June 2018 that lead to Mr Oh taking a loan from Mr Kim for the purpose of funding the transfer of Mr Kim’s rights under the third contract? It is the breach of the obligations in the debt acknowledgement that is the foundation of the breach of contract claim and counterclaims.
[62] The alleged misrepresentations by Mr Oh to Mr Kim in February 2018 are the foundation for the causes of action in deceit and negligent misstatement (which follow the cause of action for breach of contract in the statement of claim). It will be convenient to start with those two causes of action in turn as they relate to the events that occurred first in time.
6 I refer to the factual issues in chronological order as opposed to the order in which the causes of action are set out in the statement of claim.
Tort of deceit
[63] The claim based on the tort of deceit relies on one of the statements Mr Kim says Mr Oh made to him on 9 February 2018. The alleged statement is that Mr Oh claimed he was a gold mining expert. This is part of the first factual issue referred above.
Legal principles
[64]The tort of deceit has been summarised as follows:7
[46] The tort of deceit is summarised in Clerk & Lindsell on Torts (18th ed, 2000) para [15–01] in these terms: “The tort involves a false representation made by the defendant, who knows it to be untrue, or who has no belief in its truth, or who is reckless as to its truth. If the defendant intended that the claimant should act in reliance on such a representation and the claimant in fact does so, the defendant will be liable in deceit for the damage caused.”
…
[50] The critical features of the tort are therefore that the representor must have lacked an honest belief in the truth of his statement; “carelessness” is not to be equated with “dishonesty”; and even recklessness in the sense of gross negligence will not suffice, unless there is a conscious indifference to the truth.
[65]The tort involves the following elements:8
(a)the defendant must make a representation of fact;
(b)the representation must be made in the knowledge that it is false or where the defendant is reckless as to its truth (if there is a conscious indifference to the truth);
(c)the representation must be made with the intention that it be relied upon by the plaintiff;
(d)the plaintiff must in fact rely upon the representation; and
(e)the plaintiff must suffer damage as a result of relying on the representation.
[66] As with a claim in misrepresentation under s 35 of the CCLA, misrepresentation must be a representation as to a past or existing fact. A statement
7 Amaltal Corp Ltd v Maruha Corp [2007] 1 NZLR 608 (CA) at [46].
8 Mount v C & F Legal Ltd [2023] NZHC 653 at [62].
of opinion or belief is not actionable as a statement of fact. A representation as to the future will not found liability in deceit.9
Representation
[67] In the amended statement of defence and counterclaim dated 29 January 2021 Mr Oh and Ms Su Choi plead as follows:
3bThey admit the first defendant has experience and knowledge of gold mining.
[68] That was in response to the pleading in the statement of claim that one of the statements made by Mr Oh to Mr Kim on 9 February 2018 was that:
3a.He has expertise in gold mining as he has visited many gold mines in many places including Africa, China, Cambodia and Mongolia.
[69] In the amended statement of defence and counterclaim dated 29 January 2021 Mr Oh and Ms Su Choi also plead as follows:
7cThe first defendant and the other investors did possess expertise in operating a gold mine business.
[70]That was in response to the following pleading in the statement of claim:
7b.That the First Defendant and his other business partner in fact did not have expertise in operating [a] gold mining business…
[71] Despite the admission recorded above that Mr Oh possessed expertise in operating a gold mine business, Mr Oh’s evidence under cross-examination was that he did not claim to Mr Kim that he was an expert in gold mining. Rather, his evidence was that he said to Mr Kim that he was familiar with gold mining. He said that he told Mr Kim that Mr Kweon and Mr Lee were gold mine experts.
[72]In his brief of evidence Mr Kim said:
Mr Oh brought up the topic of investing in Mongolian gold mines and said to me that he was a gold mine expert who had visited gold mines in Africa, China, Cambodia, and Mongolia.
9 Peck v Grasshopper Lawnmowing Services Ltd [2018] NZHC 2615 at [48]–[49].
[73] In the course of Mr Kim’s cross-examination, when Mr Kim was asked about documents Mr Oh showed him on 9 February 2018, he said that there were:
Various photos that intended to prove that Mr Oh was an expert travelling around various countries regarded to gold mines.
[74] Mr Oh did not address this issue in his brief of evidence. Under cross-examination he said he had previously travelled to Africa because his business partner also had a small gold mine in Africa. Mr Oh said he invested around USD 30,000 in that gold mine and did not get his money back. He said he had also travelled to Cambodia with a Korean geologist in relation to:10
…pure sand for glass making, sand, and iron for [inaudible] and silver, silver mine and for the China, I visit another, I don’t know the English name but I visit several sites for – yeah.
[75]He also said in relation to China:
A.… but maybe China I visit some gold mine yeah, but not long time just look around.
Q. Just visiting?
A. Yeah, yeah, visiting many sites.
…
Q. So there was no intention of investing in any gold mine in China?
A. Just watching how it works.
[76] He said he visited the Chinese gold mine before investing in the African gold mine.
[77] In relation to his efforts to persuade Mr Cho to invest (which occurred prior to speaking to Mr Kim) Mr Oh said that Mr Cho was very interested in investing in mining, “but I had experience procuring or visit [sic] the mining site …”.
10 The substance for which Mr Oh did not know the English name was unable to be translated.
[78] Further cross-examination in relation to Mr Oh’s discussions with Mr Kim on 9 February 2018 proceeded as follows:
Q. And you brought up about investing in Mongolian gold mines, didn’t you?
A. Yes.
Q. Did you talk about how you had visited gold mines in Africa, China, Cambodia and Mongolia?
A. Yes. Not gold mine but also – not only the gold mine but also all the mining site.
Q.Did you make it clear like you did to me yesterday that you only visited gold mines in Africa, China and Mongolia and in the case of Cambodia it wasn’t a gold mine, do you remember making it very clear?
A. Right.
Q. You did?
THE COURT:
Q. So was that a yes or a no?
A. Yes.
CROSS-EXAMINATION CONTINUES: MR KANG
Q. So you did explain to him that you didn’t visit any gold mine in Cambodia?
A. Cambodia silver mine.
Q. Did you claim that you’re a gold mine expert?
A. No.
Q. Did you claim anything similar to that you knew about gold mining?
A. I just showed Africa photos?
Q. What is that?
A. The photos that made in Africa, Guinea. I have a small mine.
THE COURT:
Q. Did you say photos in Africa?
A. Yeah photos, photos.
Q. Photos from Africa?
A. Mmm.
CROSS-EXAMINATION CONTINUES: MR KANG
…
Q.Did you explain to Mr Kim that you invested in African gold mine, you had?
A. I can’t remember but I, maybe I said I just working.
Q.And did you explain to Mr Kim, like you did to me yesterday, that your investment, you had experienced of failing in investing in Africa?
A. I didn’t said about fail or success because that was very small, just two months and then I finished, stop it.
Q.But you did talk about, you did show him African gold mining photos and you didn’t talk about how you invested in it and failed, do you accept that by doing it, you only gave him part of the truth and in a way you deceived your friend?
A. No, I just show him because including the gold mine and the touring Cambodia with geologist and everything I show him.
Q. What I’m suggesting is that when you are showing African gold mine photos, you should have told him the full picture that you had invested in gold mining then and you failed it, you should have, do you not agree?
A.No at the time I just simply think about that. Before introducing to him I want to make, I think I want to show him I’m familiar the mining, that’s all.
Q. But you say you told him that you were familiar with mining?
A. Yeah, mining yeah, because I visit several days.
THE COURT:
Q.Mr Oh, you say you told Mr Kim you were familiar with mining, did you say you were a gold mine expert?
A.No expert, familiar with. Expert means geological or chemical, very, very long experience need.
[79] Despite Mr Oh’s answer immediately above, I have no doubt that he claimed he had gained expertise, that is, that he was an expert in gold mining because of his experience. His showing of photographs to Mr Kim was to demonstrate expertise that he gained through experience. He represented he was an expert in gold mining. That was a representation of fact.
[80] Mr Oh knew that he was not an expert in gold mining. He simply had a failed investment in an African gold mine (and he did not tell Mr Kim it had failed) and he knew that, in relation to the proposal he was putting to Mr Kim, he did not have relevant expertise.
[81] Mr Oh intended Mr Kim to rely on his representation that he was an expert. Mr Oh accepted under cross-examination that the purpose of the 9 February meeting was for him to convince Mr Kim to invest USD 100,000. Mr Oh made this representation intending that Mr Kim rely on it (and other representations I have yet to refer to) and thus make an investment.
Reliance and loss
[82] Mr Kim did rely on this statement and other representations to make his USD 100,000 investment. It is not necessary for the representation in issue to be the only reason for a plaintiff acting as they did but it must have been a reason.11 That was the case here.
[83] Mr Oh suffered loss as a result. The investment failed. The representation was made prior to Mr Kim entering the first contract which was for an investment in the sum of USD 100,000.
[84] After entering the first contract, Mr Kim continued to communicate with Mr Oh. Mr Kim says he told Mr Oh in passing that he had taken out a loan of NZD 500,000 from the bank to subdivide land they owned and for an additional house construction. Mr Oh says he did not know of a bank loan. It is not necessary for me to make a finding on that issue.
[85] What I do accept is that the statement Mr Oh made to Mr Kim on 9 February 2018, was still operative when the second contract was entered into. In other words, although the representation was not repeated before the second contract for a further USD 350,000 investment was entered into I accept that representation was still operative at the time Mr Kim invested a further USD 350,000. Mr Oh did not
11 Coleman v Myers [1977] 2 NZLR 225 (CA) at 322; Zurich Investment Co Plc v Hayward [2016] UKSC 48, [2017] AC 142 at [33].
withdraw or disclaim the representation before the second contract was entered into. Mr Oh was asked under cross-examination whether at any stage between Mr Kim’s first and second contract he had disclaimed what he had told or shown Mr Kim on 9 February 2018. Mr Oh said he had not. There was no other supervening event breaking the chain of causation.
[86] The total loss would be USD 450,000 but as a result of the third contract, USD 100,000 of the funds already invested was apportioned to mine 5582A. The total loss suffered by Mr and Mrs Kim on this cause of action is accordingly USD 350,000 with the reapportioned USD 100,000 being claimed in the action for breach of contract. It is accordingly not necessary to consider the effect of Mr Oh’s representation or any further alleged representations on the making of the third contract (or for that matter what may have been said by Mr Lee before Mr Kim entered into the third contract).
[87]Mr and Mrs Kim succeed on the cause of action based on the tort of deceit.
[88] As part of their relief they seek exemplary damages. Unlike compensatory damages, the purpose of which is to compensate a plaintiff, the purpose of exemplary damages is to punish a defendant.12 Accordingly, the Court will only exercise its discretion to award exemplary damages when the defendant’s conduct was exceptionally outrageous, flagrant, or high-handed.13
[89] The high threshold required to award exemplary damages was made clear by the Supreme Court in Couch v Attorney-General:14
[178] Exemplary damages are anomalous. Civil remedies are not generally designed to punish. The reach of exemplary damages should therefore be confined rather than expanded. Outrageousness is not a satisfactory sole criterion. The concept lacks objective content and does not contain sufficient certainty or predictability. Exemplary damages should be confined to torts which are committed intentionally or with subjective recklessness, which is the close moral equivalent of intention.
12 A v B [1974] 1 NZLR 673 (SC) at 679.
13 Ellison v L [1998] 1 NZLR 416 (CA) at 418–419.
14 Couch v Attorney-General [2010] NZSC 27, [2010] 3 NZLR 149 at [178] (per Tipping J).
[90] In this case, an award of exemplary damages is not justified. Although I have found Mr Oh liable under the tort of deceit, his conduct is not the kind that merits an award of exemplary damages. Accordingly, the claim for exemplary damages is refused.
Tort of negligent misstatement
[91] Mr and Mrs Kim bring the cause of action in negligent misstatement as an alternative to the cause of action in deceit. It is strictly unnecessary to consider the alternative cause of action as the plaintiffs have succeeded on their cause of action in deceit, but I do so for completeness.
Legal principles
[92]The elements of negligent misstatement are:15
(a)a false or misleading statement;
(b)made in circumstances where a duty of care is owed to the plaintiff;
(c)reasonable reliance on the statement by the plaintiff; and
(d)resulting in loss to the plaintiff.
[93] In relation to a duty of care, the Court must be satisfied of the existence of a “special relationship” between the parties from which it can be said that one party has assumed a responsibility as a matter of law to the other party.16
[94] In Attorney-General v Carter Tipping J stated that while in most cases there would be no voluntary assumption of responsibility, the law would deem the defendant to have assumed responsibility if the defendant foresaw or ought to have foreseen that the plaintiff would place reasonable reliance on what was said:17
15 Carter Holt Harvey Ltd v Minister of Education [2015] NZCA 321 at [112], accepted by the Supreme Court in Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78. The SC discusses negligent misstatement at [78]–[85] and implicitly accepts the CA’s formulation of the elements, however, ultimately overturned the CA’s decision to strike out this ground because it was not clearly inarguable.
16 North Shore City Council v Attorney-General [2012] NZSC 49, [2012] 3 NZLR 341 [The Grange] at [188]–[189].
17 Attorney-General v Carter [2003] 2 NZLR 160.
[26] Whether it is reasonable for the plaintiff to place reliance on what the defendant says depend on the purpose for which this statement is made and the purpose for which the plaintiff relies on it. If a statement is made for a particular purpose, it will not usually be reasonable for the plaintiff to rely on it for another purpose.
Summary of alleged representations
[95] Mr and Mrs Kim’s claim in this cause of action relies on statements allegedly made by Mr Oh on 9 February 2018 when he met with Mr Kim.
[96] The alleged misrepresentations made by Mr Oh on 9 February 2018 fall into two categories. First, there were verbal representations and guarantees about investing in the gold mines including that:
(a)by implication, Mr Lee as site manager would be present at the sites during the development;
(b)that Mr Oh had expertise in gold mining;
(c)that there was no risk to the investment;
(d)that 100 per cent success was guaranteed;
(e)that Mr Oh would take responsibility if the investment failed; and
(f)that at least 1 kg of gold be extracted per day from each gold mine.
[97] Second, there were representations contained in documents provided to Mr Kim at the meeting including that:
(a)from late April or early May 2018 the principal investment would be paid back within two to three months;
(b)investors would receive 1,000 per cent to 1,200 per cent profit within three years; and
(c)mine 14868A had confirmed deposits of at least 400 kg gold and mine 5582A had around 1,100kg of confirmed deposits.
[98] Mr Oh denies making the alleged representations. In particular, he denies making the first category of verbal representations. As to the representations in the documents, his position is that while he passed on information in documents to Mr Kim, he did not vouch for the accuracy of the information contained in the documents. He says the production, repayment and profit forecasts were not representations made by him. He was a mere “conduit” of the information.
Verbal representations
[99] I start with what was allegedly said or implied in relation to Mr Lee. Mr Kim says that on 9 February 2018 Mr Oh introduced the topic of investing in Mongolian gold mines. Mr Oh said he was doing a gold mine business with two people, Dongwon Kweon and Koonjae Lee, and that they were also gold mine experts and trustworthy people whom Mr Oh had known for over ten years. Mr Oh allegedly explained that: Mr Kweon was the CEO, Mr Lee was the director in charge of the mine site work and Mr Oh was responsible for the mine investment.
[100] Mr Oh did not address in his brief of evidence what, if any, statements he made about Mr Lee. Under cross-examination, Mr Oh says he did not know Mr Lee personally and only knew of Mr Lee from his previous successes in gold mining. He did not meet Mr Lee until 2017.
[101] Mr Oh’s evidence under cross-examination was contradictory in a number of respects. He was asked whether he talked to Mr Kim about Mr Kweon and Mr Lee on 9 February 2018. Mr Oh’s answer was: “Maybe. I’m not sure”. It was then put to him that Mr Kim said that he did talk about it and also that Mr Oh had said they were “a gold mine expert”. Mr Oh then acknowledged that he had “told Mr Kim they are the gold mine expert”. He acknowledged that he told Mr Kim about Mr Lee’s previous success in a gold mine in Jaamar. However, later in cross-examination when he was asked whether he talked to Mr Kim about the roles of Mr Kweon as the representative and CEO and Mr Lee as the site manager on 9 February 2018, Mr Oh answered in the negative. When asked again whether he talked about Mr Kweon and Mr Lee on
9 February 2018, Mr Oh said “just simply there are two, maybe Mr Kweon there, something like that, I’m not sure”.
[102] Further evidence by Mr Oh under cross-examination as to what, if anything, he said about Mr Lee’s proposed involvement continued to be contradictory and, I consider, evasive. An extract is as follows:
Q. You said you didn’t talk about Mr Kweon at all that day. Did you talk about Mr Lee or his Jaamar region success in the past?
A. Yeah.
Q. So you talked about Mr Lee that day on 9th of February?
A. Maybe I talking about the story, not person.
Q. How did you talk about the story without talking about the person?
A.Because that Jaamar has many peoples working, not only one people, you know, Mongolian managers, maybe two or three, and 70 workers and Korean investors, and how can I mention only one people? I don't understand.
Q. But how is that relevant to Mr Kim’s investment without you talking about Mr Lee having been involved in that one and would have been involved in this one as well?
A. I just explained that Jaamar.
Q.And are you sure that you didn’t talk about Mr Lee’s name that day on 9th February?
A. Mr Lee’s name? Maybe I mentioned one of the manager in Jaamar.
Q. Is that Mr Lee, was he the manager in Jaamar?
A. Jaamar, yeah.
Q. So maybe, your evidence is that maybe you mentioned Mr Lee’s name on 9th of February to Mr Kim?
A. Yeah, maybe, because Mr Kim doesn’t know about the name, so I just interested, some – someone who invest, the working, something like that.
Q.Then did you maybe talk to Mr Kim about Mr Lee that, how he’s going to be the site manager for these mines?
A. Yeah.
[103]However, as questioning went on, Mr Oh appeared to change his evidence:
Q. Yes you did mention that?
A. How to be the site, site manager?
Q. No, that Mr Lee will be the site manager for these mines.
A. This 55-something?
Q. Yes, and of 14.
A. No.
[104] I turn to the JV agreement between Mr Kweon, Mr Lee and Mr Oh (which is set out above at [18]) which records Mr Lee’s role as “site management and selection of development area”.
[105]As regards this agreement, Mr Oh says in his brief of evidence that:
This agreement was written with the purpose of incorporating the company after the development of mines 14686A and 5582A was successful. Mr Kim has said that I showed him this agreement. This is incorrect. I do not understand how he has a copy of the agreement.
[106] Mr Kim agreed that Mr Oh did not show him the JV agreement on 9 February 2018 but he said Mr Oh later provided it to him on a USB, a few days after he made the first investment of USD 100,000. However, Mr Kim said that although he did not see the JV agreement on 9 February 2018 he said Mr Oh explained to him that he was one of the three Wellich Mine “executors”.
[107] I consider Mr Oh did convey to Mr Kim that he was working with two others (Mr Kweon and Mr Lee) and in particular that Mr Lee had experience at a previous gold mine site and that he would be site manager for the two mines.
[108] I do not accept Mr Oh’s evidence that the JV agreement was written with the purpose of incorporating a company after the development of the two mines was successful. That is not what the contract in its plain words says. The scope of the project is said to be first, the mining rights number 14686A and 5582A located in Sharin Gol, Mongolia. The title of the joint development was “Wellich Mine Consulting”.
[109] I accept that Mr Oh conveyed to Mr Kim that Mr Lee was to be the site manager and by implication, Mr Lee would be present at the sites during the development. That did not occur. Mr Lee was not present at all material times.
[110] Although statements about the future are generally not actionable under the tort of negligent misstatement, I consider this statement is actionable to the extent that it pertains to a false or misleading representation of present fact. As has been held in the Court of Appeal:18
A statement of intention will be a misrepresentation if the intention did not in fact exist when the statement was made. But what appears to be a statement concerning the future may in reality be, or it may imply, a representation as to a present fact. The distinction can be a fine one.
[111] Such statements are actionable even if they depend on the conduct of a third party. In Narayan v Arranmore Developments Ltd, the Court of Appeal considered a statement made by a property development company that “seven new schools would be completed by 2009” and, by implication, the Ministry of Education would complete the construction of those schools by 2009.19 Although there was no evidence of the company’s belief of the statement at the time it was made, the Court nevertheless considered that:20
… the publicly available material indicates that the school building programme was intended to extend significantly beyond 2009, so that the representation was not an accurate statement of the Ministry’s intentions at the time it was made. To that extent at least it was a misrepresentation of fact.
[112] In the present case, Mr Oh said under cross-examination that he only found out Mr Lee was unable to be on-site after his trip to Mongolia, around June 2018. Applying the reasoning in Narayan v Arranmore Developments Ltd, Mr Oh’s statement and its implication is not an accurate representation as to Mr Lee's intentions at the time the statements were made. To that extent it was an actionable false or misleading statement.
18 Buxton v The Birches Time Share Resort Ltd [1991] 2 NZLR 641 (CA) at 646.
19 Narayan v Arranmore Developments Ltd [2011] NZCA 681, (2011) 13 NZCPR 123 at [28(b)]. Although the claims were brought by way of claims under the Contractual Remedies Act 1979 and Fair Trading Act 1986, I consider the Court’s reasoning is relevant to determining whether a statement is false and misleading in the context of the tort of negligent misstatement.
20 At [38].
[113] To the extent that it is necessary, my findings are supported by the representations Mr Oh accepts he made to Ms Um (although similarly with some contradictions) before she invested. He said he told her about Mr Kweon and Mr Lee. He said he may have told her they were going to work together after it was successful (as I have found above, that is not what the JV agreement said). He then said he did not tell Ms Um about the roles held by Mr Kweon and Mr Lee under the JV agreement but then said: “and Mr Lee, maybe I – Mr Lee’s story before, working for Jaamar, and he has good knowledge about the mining”.
[114] As far as the next representation is concerned, namely that Mr Oh had expertise in gold mining, I have already found that Mr Oh did say that and this was false.
[115] Next, I address the allegations that Mr Oh said that: there was no risk to the investment; 100 per cent success was guaranteed; and he would take responsibility if the investment failed. I consider all three together.
[116]In his brief of evidence Mr Oh says:
I never said that there was no risk in investing in the gold mines. I also never said that 100% success was guaranteed or that a minimum 1,000% profit was guaranteed. It is simply not possible to describe any investment in this way, in particular in gold mines. I would never have said anything like this when it comes to investing in gold mines. I did not say that I would take responsibility if the investment failed.
[117] Under cross-examination Mr Oh suggested that Mr Kim (and Ms Um as well) may have misunderstood him when he was recounting the successes of Mr Kweon and Mr Lee in the past and they mistakenly drew the inference that success was 100 per cent guaranteed.
[118] As to the conversation on 9 February 2018, Mr Kim says he said to Mr Oh that investing a lot of money was challenging. Mr Oh claimed that it was a guaranteed success with 100 per cent certainty and he promised that he would take responsibility if the investment happened to fail. Mr Kim says Mr Oh said their mutual friend, Ms Um, had invested USD 100,000 and Mr Oh urged Mr Kim to lend her the same amount if Mr and Mrs Kim did not want to invest themselves, so that Ms Um could increase her investment. Finally, Mr Kim says Mr Oh told him to go to Mongolia and see the gold mine to check the progress of the business himself if Mr and Mrs Kim
decided to invest. Mr Oh also provided Mr Kim with some documents with alleged representations, which I will discuss after a consideration of the verbal representations.
[119] When he got home Mr Kim showed his wife the documents and explained to her what Mr Oh had told him. A day or so later Mr and Mrs Kim went to Mr Oh’s home office and heard more details about the investment. Mr Kim says Ms Su Choi was also present at his office.
[120] Mrs Kim’s evidence is that she asked Mr Oh about the risks. She says Mr Oh assured her that it was a guaranteed success with 100 per cent certainty and that he would take responsibility if it failed, just as he had told Mr Kim. Mr Kim says he and his wife decided to invest USD 100,000 since this was a project that Mr Oh, whom they had known for a long time, had personally recommended. Mr Kim says they believed Mr Oh when he mentioned the confirmed gold reserves and his guarantee of
100 per cent success. There was also Mr Oh’s statement that he would take responsibility in case the venture failed.
[121] I address the last of these three alleged representations first. Although in their briefs of evidence both Mr and Mrs Kim said that Mr Oh said he would take responsibility if the investment failed, under cross-examination Mr Kim said that Mr Oh made that statement at the time of the events which underpin the cause of action for breach of contract, in other words on 2 June 2018. The Court sought clarification from Mr Kim as to whether he was saying Mr Oh also said that in February and Mr Kim said Mr Oh did not. I therefore find Mr Oh did not make this representation in February 2018.
[122] As to the representations that there was no risk to the investment and success was 100 per cent guaranteed, not only did Mr Kim say that Mr Oh made the representations, there is also the evidence of Mrs Kim. In particular, Mrs Kim says she asked Mr Oh about the risks. She wanted to be sure. She says he assured her that it was a guaranteed success with 100 per cent certainty. While a sceptic might say that, of course, Mrs Kim is going to support the evidence of her husband, there is also the evidence of Ms Um, who is no longer a friend of either party. Her evidence was
that Mr Oh said: “there is nothing to be scared of, 100% sure no risk”. She did not waiver from that position under cross-examination.
[123] I find support in that evidence from Ms Um and make the finding that Mr Oh did represent to Mr Kim that there was no risk in the investment and that 100 per cent success was guaranteed. Neither representation was true.
[124] Finally, there is the statement that Mr Oh allegedly made to Mr Kim that at least 1 kg of gold would be extracted per day from each gold mine. This statement was not in issue. Mr Oh accepted under cross-examination that he said this to Mr Kim. The statement was clearly false. The 14686A mine development stopped after the extraction of about 10.8 kg over 50 operating days.
Written representations
[125] As far as the representations contained in documents, Mr Kim’s evidence was that Mr Oh showed him various documents containing mine-related information, including geological maps of the Mongolian Sharin Gol region on his computer.
[126] He said Mr Oh also showed him a document entitled “Gold Mine Development Overview” and a map on his computer. Mr Oh said that the two mines, 14686A and 5582A, had confirmed reserves of 400 kg and 1,100 kg of gold respectively. Mr Oh also showed Mr Kim another document titled “Investment Repayment Income Statement” and claimed (as noted above) that 1 kg of gold would be produced per day starting from late April or early May. According to Mr Oh (as demonstrated in the Investment Repayment Income Statement), this would allow Mr Kim’s principal to be repaid in two to three months and a profit of 1,000 per cent to 1,200 per cent would be earned in three years.
[127] Mr Oh accepted he showed Mr Kim a number of documents. However, his position is that apart from the document titled “Investment Repayment Income Statement” (which I will come to below), the other documents were provided to him by Mr Kweon or Mr Lee. He says he was merely passing on information or statements made by someone else without endorsing it. He argues that he was not “making” the
statement because he was a “mere conduit” for the information. He relies on Red Eagle Corporation Ltd v Ellis where the Supreme Court said:21
... In order to be seen to be a mere conduit, the conveyor of misleading or deceptive information must have made it plain to the recipient that he or she is merely passing on information received from another, without giving it his or her own imprimatur – that is, making it appear to be information of which the conveyer has firsthand knowledge. Unless it must be obvious to the recipient that information is second-hand only (hearsay), the conveyor who does not make that clear must accept the risk that he or she will reasonably be taken by the recipient to have spoken from personal knowledge. ...
[128] I note that the tort of negligent misstatement was not raised in Red Eagle. Accordingly, the Supreme Court only considered the “mere conduit” defence in the statutory context of a misleading and deceptive statement under s 9 of the FTA. My own research has not located any authority where this argument of “mere conduit” has been applied to the tort of negligent misstatement, and there were no submissions from counsel as to the expansion of this defence to the tortious context.
[129] But regardless, Mr Oh did not make it clear to Mr Kim that he was simply passing on information from others as to the amount of reserves and how much gold would be extracted per day from each gold mine. In fact he went further, and acknowledged under cross-examination, that he created the “Investment Repayment Income Statement” which represented that from late April or early May 2018 the principal investment would be paid back within two to three months and that investors would receive 1,000 per cent to 1,200 per cent profit within three years. He did not explain that the figures in his schedule of returns were estimates only or that Mr Kim could not rely on the accuracy of those figures.
[130] The statements regarding production were false. As noted above, the 14686A mine development was shut down after extracting about 10.8 kg of gold over 50 operating days: about 200 g per day. As well, no profit was ever distributed (other than living expenses/an allowance paid by Mr Kweon upon demand by Mrs Kim) let alone the principal not being repaid in two to three months and 1,000 per cent to 1,200 per cent profit not being earned in three years.
21 Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] NZLR 492 at [38].
[131] I accept that Mr Oh’s statements about production and future earnings were statements of fact. The courts have accepted that representations as to future earnings may be representations of fact by reason of the implication that there must be a reasonable basis for the forecast.22
[132] This principle is exemplified in the similar case of Esso Petroleum Co Ltd v Mardon.23 In that case the appellant company, Esso, was looking to lease out a petrol station. A representative of the company with expertise in petrol trade estimated, erroneously, that the petrol station would sell 200,000 gallons per year. The respondent relied on this forecast when entering the tenancy agreement and consequently suffered loss. Lord Denning held that the forecast was a misrepresentation, stating:24
… it is plain that Esso professed to have—and did in fact have—special knowledge or skill in estimating the throughput of a filling station. They made the representation—they forecast a throughput of 200,000 gallons—intending to induce Mr Mardon to enter into a tenancy on the faith of it. They made it negligently. It was a 'fatal error'. And thereby induced Mr Mardon to enter into a contract of tenancy that was disastrous to him. For this misrepresentation they are liable in damages.
Duty of care
[133] It is well settled that a duty of care in the context of negligent misstatement is generally found in circumstances where a special relationship exists between the parties such that one party has assumed a responsibility as a matter of law to use reasonable skill and care to the other party.25
[134] The Supreme Court has summarised the circumstances as to when a special relationship may arise:26
[80] The necessary relationship between the maker of the statement and the recipient will typically arise where:
22 New Zealand Motor Bodies Ltd v Emslie [1985] 2 NZLR 569 (HC) at 593.
23 Esso Petroleum Co Ltd v Mardon [1976] 2 All ER 5.
24 At 16.
25 The Grange, above n 16, at [188].26 Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78 at [80], citing Caparo Industries plc v Dickman [1990] 2 AC (HL) 605 at 638 and The Grange, above n 16, at [189].
(a)the advice is required for a purpose that is made known (at least inferentially) to the adviser;
(b)the adviser knows (at least inferentially) that the advice will be communicated to the advisee specifically or as a member of an ascertainable class;
(c)the adviser knows (at least inferentially) the advice is likely to be acted on without independent inquiry; and
(d)the advisee does act on the advice to its detriment.
[135] I consider that Mr Oh did assume responsibility for the statements he made to Mr Kim such that it was reasonable for Mr Kim to rely on them. In my assessment Mr Oh falls within the third circumstance as described by the House of Lords in Hedley Byrne v Heller:27
A reasonable man, knowing that he was being trusted or that his skills and judgment were being relied upon, would, I think, have three courses open to him. He could keep silent or decline to give the information or advice sought: or he could give an answer with a clear qualification that he accepted no responsibility for it or that it was given without that reflection or inquiry which a careful answer would require: or he could simply answer without any such qualification. If he chooses to adopt the last course he must, I think, be held to have accepted some responsibility for his answer being given carefully, or to have accepted a relationship with the inquirer which requires him to exercise such care as the circumstances require.
[136] When making the statements, Mr Oh held himself out as a gold mining expert and that the other two he was involved with had relevant expertise, while knowing that Mr Kim had no knowledge of gold mining. Even if Mr Oh told Mr Kim that the documents are “documents from Mongolia” (as is his evidence), I do not consider this to be a sufficiently clear qualification that absolves him of assuming responsibility for the statements.
[137] Mr Murray submits that a duty of care was not established because it was open to Mr Kim to contact Mr Kweon or Mr Lee directly to verify the accuracy of the information provided by Mr Oh. I disagree. The evidence does not show that Mr Oh provided Mr Kim with clear ways of contacting them. Even if it was open to Mr Kim to independently verify the information, I still consider it reasonable for Mr Kim to
27 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 at 486.
have relied on Mr Oh’s statements in the circumstances. As Richardson J held in Phil Clark Contractors Ltd v Drewet:28
It is clear, too, that it is not fatal to a plaintiff's claim that he could have obtained the information for himself by making his own independent investigation: Capital Motors Ltd v Beecham [1975] 1 NZLR 576, 580. But it is essential for the plaintiff to satisfy the court from the whole of the evidence that the defendant accepted or assumed responsibility for giving accurate and full information and that the plaintiff to the knowledge of the defendant relied upon the defendant to supply such information.
[138] Accordingly, I consider that there was a special relationship between Mr Kim and Mr Oh such that Mr Oh owed a duty of care to Mr Kim in making the statements. In all the circumstances it was reasonable for Mr Kim to rely on what Mr Oh said to him verbally and what he showed him in the documents.
Reliance and loss
[139] Finally, I turn to the resulting loss suffered by Mr and Mrs Kim. Mr Kim says in reliance on Mr Oh’s false or misleading statements, he contacted Mr Oh and agreed to invest.
[140] My findings and analysis in [82]–[86] above regarding the claim in deceit apply here as well. I do not repeat them.
[141] For completeness I mention a conversation which Mr and Mrs Kim had with Mr Oh and Ms Su Choi around 1 December 2018. Mr Kim recorded the conversation but Mr Oh and Ms Su Choi were not aware that it was being recorded. At the end of the conversation Mrs Kim said to Mr Oh:
We are having a hard time. I think you should do something for us as much as you can. When you explained investment, I clearly asked whether there was any risk in the mine. Then you said, “None, 100% success.” And I asked if the mine failed…. You answered that you would take responsibility… I want you to take responsibility.
[142] The transcript of the recording stops at that point. Both Mr and Mrs Kim say that there was no denial by Mr Oh when those allegations were put to him on that date.
28 Phil Clark Contractors Ltd v Drewet [1977] 2 NZLR 556 (SC) at 562.
Under cross-examination, Mr Oh said he was just listening to Mrs Kim’s complaint and that if he had known it was recorded, perhaps he would have responded.
[143] I consider it is reasonable to have expected that Mr Oh would have responded by denying what Mrs Kim was saying if that was untrue and if he had not made those representations. However, in the end I do not need to rely on that evidence as I have made my findings without needing to take it into account.
[144] Mr and Mrs Kim succeed on the alternative cause of action for negligent misstatement.
[145] I will not make an order for exemplary damages, for the same reasons as set out in [88] to [90] above.
Breach of contract
[146] I now summarise the events in April and May leading up to the phone conversation between Mr Oh and Mr Kim on 2 June 2018 (when Mr Kim was in Mongolia and Mr Oh was in New Zealand), which led to Mr Kim entering into the transfer agreement and signing the debt acknowledgement. This is the second factual issue referred to in [61(b)] above. It is the alleged breach of the debt acknowledgement which gives rise to the cause of action for breach of contract.
[147] Mr Kim went back to Mongolia on 6 April 2018. Mr Oh arrived in Mongolia around 23 April 2018. Mr Kim says that in April, there was no progress in the mine development except for the transfer of various mine-related costs from the money in Mr Kim’s Mongolian account.
[148] Production at the 14686A mine started around 7 May 2018. From that day until around 22 May 2018 Mr Kim recorded the mine’s daily production in his role as an auditor. He says the production was much lower than the 1 kg that Mr Oh had claimed. By this time Mr Kim says he was in financial trouble in New Zealand because of the mortgage taken out for their New Zealand house and he risked losing it to foreclosure. He asked Mr Kweon to pay him some of the return and Mr Kweon transferred around NZD 14,033.76 to Mrs Kim’s joint bank account on 14 May 2018.
[149] Mr Kim says that on 17 May 2018, while he was in Mongolia, he phoned Mr Oh (who had by then returned to New Zealand) and told him that the 14686A mine had extremely low gold production and numerous problems and more money was needed. There was a temporary halt in production at the 14686A mine with production resuming around 26 May 2018 but Mr Kim says production was still low.
[150] I interpose in this chronology a reference to the discussions in New Zealand during this period between Mrs Kim, Ms Su Choi and Ms Um as they relate to the transfer of the rights in mine 5582A. There is a dispute between Mrs Kim and Ms Su Choi as to who initiated the idea of the transfer of rights in mine 5582A in the third contract: each claim the other proposed the idea. In the end it is not necessary to decide who proposed the transfer but it is likely the sequence of events was as follows:
(a)During April and May 2018 Mrs Kim spoke to Ms Su Choi about the extreme financial pressure she and Mr Kim were under.
(b)Mr Kim raised with Mr Kweon those financial pressures and as a consequence, on or about 20 May 2018 Mr Kweon made a payment of USD 10,000 (received as NZD 14,033.76) to Mrs Kim’s New Zealand bank account.
(c)Mrs Kim told Ms Um she had received that payment.
(d)Having heard this from Mrs Kim, Ms Um became upset that she had not received any payment of profit from her investment. Ms Um called Ms Su Choi to complain.
(e)An agreement was reached for Ms Um to transfer her mining rights to Ms Choi.
(f)Around 30 or 31 May 2018 Ms Um told Mrs Kim about the agreement she had reached with Ms Su Choi.
(g)On 2 June 2018 Mrs Kim phoned Ms Su Choi and asked why she had only transferred Ms Um’s rights and not Mrs Kim’s rights. It was
agreed that Mr Oh and Ms Su Choi would take over Mr and Mrs Kim’s interest in mine 5582A. Mrs Kim phoned Mr Kim and told him of her discussion with Ms Su Choi.
(h)Mr Kim then phoned Mr Oh.
[151] Prior to those phone calls, around 28 May 2018 Mr Kim had been told by Mr Kweon that the gold in 5582A mine had been tested and there seemed to be no economic benefit in starting mining operations. Mr Kim says he had no way of verifying whether that was true or not but he was upset to be told that what he had been told about the confirmed reserves was not true. He says that Mr Kweon said that he had told Mr Lee and Mr Oh about this and, in fact, Mr Kim was the last one to know. Mr Kim says, however, that Mr Kweon told him that instead of 5582A mine he was going to develop three other mines in the Hore29 area. He says that Mr Kweon also referred to production of some other form of gold at the 5582A mine.
[152] Mr Kim says he made a phone call to Mr Oh and explained what Mr Kweon had said regarding mine 5582A, and urged him to take over his rights in mine 5582A. He says Mr Oh acknowledged he already knew of the issue with the 5582A mine.
[153] Mr Oh disagrees with Mr Kim’s evidence. He says Mr Kim called him on 2 June 2018 and proposed to transfer the development rights for mine 5582A to him in exchange for a loan. In addition, Mr Kim told him he could repay the loan with profits from the gold produced from mine 5582A. Mr Oh says the request was founded on Mr Kim’s claim of financial difficulty as well as their friendship.
[154] Mr Oh says Mr Kim lead him to believe that there was gold in mine 5582A and that the mine would be developed. He said before he agreed to purchase the mining rights for mine 5582A and signed the debt acknowledgement, he was not told by either Mr Kim or Mr Kweon that there was insufficient gold (of any type) in mine 5582A. He says he agreed to Mr Kim’s demands believing that the mine’s production would stabilise and improve. Mr Oh said that if he had known about the testing that had been done and the decision made by Mr Kweon not to develop mine 5582A, he would not
29 Also referred to as ‘Huree’ and ‘Khore’ due to differences in romanization.
have agreed to take over the rights in the third contract or sign the debt acknowledgement. He said he would have never have agreed to pay USD 400,000 for a mining right when testing showed insufficient gold and a decision had been made not to develop the mine.
[155] Under cross-examination Mr Kim denied telling Mr Oh that he could repay the loan with profits from the gold produced from mine 5582A. He also denied telling Mr Oh that because gold production was expected from 5582A Mr Oh would be able to repay him within a year.
[156] Mr Kim explained that in the 2 June 2018 phone call it was understood that although mine 5582A had no economic benefit, it would be developed later through the production of stone gold (as opposed to alluvial gold). He said Mr Oh acknowledged he had a moral responsibility toward the investors, including Mr Kim.
[157] Mr Kim said the important thing was that because 5582A would be developed to produce stone gold the following year, he thought there would be a lot of money made from that. Mr Kim also said that as part of the arrangement, three other mines in the Hore region would be developed.
[158] Mr Kim said Mr Oh told him he could not repay the USD 400,000 immediately. So he offered to pay monthly interest at 5.8 per cent for a year and then pay back the principal the following year. Mr Kim said he asked Mr Oh what he would do if he could not pay back the principal by the following June and Mr Oh promised that he would even sell his mother’s house in Seoul if required to make repayment. Mr Kim says it was agreed that his wife would sign the contract on his behalf at Mr Oh’s house.
[159] Mr Oh says that after the phone call from Mr Kim, he made a phone call to Mr Kweon for two reasons: first, to ask whether it was possible to transfer the mining rights to him; and second, to ask whether there were any special issues in regard to developing mine 5582A. He said Mr Kweon agreed it was possible for the mining rights to be transferred from him. As regards mine 5582A Mr Oh says Mr Kweon told him that mining could go ahead but Mr Kweon was looking for some more investors
to make that happen. In other words, if more investors had been found, mining at 5582A could have gone ahead.
[160] Back in New Zealand, on 2 June 2018 Mrs Kim went to Mr Oh’s house, taking with her a copy of the debt acknowledgement that Mr Kim had sent her. When she arrived Ms Um was already signing a document there. Mrs Kim signed the debt acknowledgement on behalf of her husband, and Mr Oh and Ms Su Choi also signed it.
[161] Around 15 June 2018 Mr Oh went back to Mongolia. Around 17 June 2018 Mr Kweon, Mr Oh and Mr Kim signed the transfer agreement.
Counterclaim – s 35 CCLA
[162] Mr Oh and Ms Su Choi accept they breached the debt acknowledgement. However, they advance a counterclaim alleging that Mr Kim induced them to enter into the debt acknowledgement by making misrepresentations during the 2 June 2018 phone call. Mr Oh and Ms Su Choi say that as a result of the misrepresentations by Mr Kim their loss is the USD 400,000 that they agreed to pay Mr and Mrs Kim for the transfer of the rights in mine 5582A and for the interest they paid for around a year on the loan. They say their loss must be set off against the amount claimed by Mr and Mrs Kim under the debt acknowledgement.
[163] The misrepresentation claim is for damages under s 35 of the CCLA. That section relevantly provides:
35 Damages for misrepresentation
(1)If a party to a contract (A) has been induced to enter into the contract by a misrepresentation, whether innocent or fraudulent, made to A by or on behalf of another party to that contract (B),—
(a)A is entitled to damages from B in the same manner and to the same extent as if the representation were a term of the contract that has been breached; and
…
[164] The legal principles that apply for misrepresentation pursuant to s 35 are well settled.30 Mr Oh and Ms Su Choi must demonstrate:
(a)representations as to a past or present fact that is false or misleading;
(b)that Mr Kim intended that Mr Oh would be induced to enter the contract (the debt acknowledgement);
(c)that Mr Oh relied on the representations when entering the contract, such reliance was reasonable;
(d)that Mr Oh and Ms Su Choi have suffered loss as a result, recoverable on the basis that the representation is a term of the contract.
[165] There is a general requirement that reliance on a misrepresentation must be reasonable.31 There must be actual reliance on the representation.32 A representation will not be actionable if it was of such a kind that no reasonable person in the position of the representee would have relied on it.33
[166] When determining whether a misrepresentation is actionable the court must consider the nature and subject-matter of the transaction, the respective knowledge of the parties, their relative positions and the words used.34
[167] Mr Oh and Ms Su Choi allege that Mr Kim made the following misrepresentations during the 2 June 2018 phone call:
(a)mine 5582A contained gold;
(b)mine 5582A was going to be developed; and
30 Magee v Mason [2017] NZCA 502 at [42], [51].
31 Vining Realty Group Ltd v Moorhouse [2010] NZCA 104 at [46]; Stephen Todd and Matthew Barber, Burrows Finn and Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington, 2022) at [11.2.4].
32 Vining Realty Group Ltd v Moorhouse, above n 31, at [46]; Savill v NZI Finance Ltd [1993] NZLR 135 (CA) at [145].
33 Western Park Ridge Ltd v Baho [2014] NZHC 198, (2014) 15 NZCPR 180 at [67] (this decision was overturned by the Court of Appeal but not on the issue of misrepresentation).
34 Ridgway Empire Ltd v Grant [2019] NZCA 134, (2019) 20 NZCPR 236 at [11].
(c)Mr Oh and Ms Su Choi could repay the loan they took from Mr Kim for taking over the mining rights in the third contract, from the profits of the gold produced from mine 5582A.
[168] I prefer Mr Kim’s evidence over Mr Oh’s evidence. Generally, I found Mr Oh to be an unreliable witness. As already mentioned he contradicted himself on a number of issues. I make some allowance for the fact that he gave his evidence in English (which he wished to do) but there were, nevertheless, contradictions that cannot be explained solely for that reason.
[169] There are other reasons as well. First, as between the two men, Mr Oh was the one who had some (limited) familiarity with mining. He had been in partnership with Mr Kweon since November 2017 and had been in constant contact with Mr Kweon during May 2018 as evidenced by the schedule of dates of KakaoTalk messages between the two men. I consider he would have known the state of production at mine 5582A as at the date of the phone call on 2 June 2018. I do not consider that Mr Kim had an active role in managing the mines as asserted by Mr Oh. Mr Kim’s role was simply as an auditor, as described by him in his evidence and referred to above.
[170] Second, even assuming Mr Kim said that mine 5582A contained gold in the phone call, that statement was not false. In June 2018, after his return to Mongolia, Mr Oh took over development of the mines and a work report from 2019 records the presence of gold in mine 5582A. Mr Oh confirmed that he arranged for drilling of both 5582A and 14686A. As regards 5582A the work report states:
In area 5582A, among four drillings in total, slow drilling due to strong geological conditions
*Discovered at 7–10m layer, six drillings completed
*Presence of gold bearing layer below 40m (2018 drilling results)
[171] Further, even if Mr Kim did say that mine 5582A was going to be developed that is not actionable under s 35 of the CCLA because it would have been a statement of Mr Kim’s opinion. It does not imply a representation as to a past or existing fact.
This is because Mr Oh ought to have known that Mr Kim could not be certain of the truth of the statement.35
[172] Leading up to the 2 June 2018 phone call (as summarised above), I consider it likely that Mr Kim was the last to find out about any issues with mine 5582A, and he relied on what Mr Kweon and Mr Oh told him regarding developments. Mr Oh’s conduct immediately after the phone call with Mr Kim by phoning Mr Kweon suggests that he understood that Mr Kim was not in a position to actually know the truth of any of his statements. Further, Mr Kweon told Mr Oh that mine 5582A was going to be developed if more investors were found. Accordingly, even if Mr Kim did say mine 5582A was going to be developed, Mr Oh knew, after talking to Mr Kweon, that came with a caveat that to do so, more investors would be needed.
[173] I also do not consider Mr Kim said that Mr Oh and Ms Su Choi could repay the loan they took from Mr Kim within one year from the profits of the gold produced from mine 5582A. Both he and Mr Oh knew that mining at 5582A was delayed because of the lack of investor funds.
[174] Even if Mr Kim made any of the three statements on which Mr Oh and Ms Su Choi base their counterclaim, I do not consider Mr Oh relied on the representations. As already discussed, Mr Oh made a phone call to Mr Kweon after speaking to Mr Kim on 2 June 2018. He made that phone call to specifically seek reassurance from Mr Kweon that there was no issue with transferring mining rights or issues with developing mine 5582A. It was what Mr Kweon had to say that Mr Oh relied on. Further, any reliance on what Mr Kim might have said in the conversation before Mr Oh spoke to Mr Kweon would not have been reasonable. It was Mr Kweon who had the apparent expertise and who was in a position to explain the state of affairs to Mr Oh whereas Mr Kim did not have the expertise and was not in a position to explain the state of affairs.
[175] Finally, any loss suffered was not as a result of what Mr Kim said to Mr Oh. It was as a result of Mr Oh’s failure to find further investors in the project. Indeed, that was Mr Oh’s role under the JV agreement: “inviting investments”.
35 Burrows, Finn and Todd on the Law of Contract in New Zealand, above n 31, at [11.2.1(c)].
[176] Mr and Mrs Kim did not receive the repayment of the principal on 1 June 2019. However, Mr Kim says he did not take any immediate action because he had been receiving the interest payments almost every month for a year and Mr Oh had also asked him to wait until the mine development was fully operational so he could repay the loan. On 7 July 2019 Mr Kim emailed Mr Oh and Ms Su Choi demanding payment of the principal and the overdue interest. The principal and monthly interest since 20 May 2019 remains outstanding.
Alternative counterclaim – s 9 FTA
[177] The defendants advance an alternative counterclaim to the breach of contract claim under s 9 of the FTA. That section provides:
9 Misleading and deceptive conduct generally
No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
[178] Mr Murray acknowledges that the question of whether there was a breach of s 9 of the FTA is likely academic. He submits that if the Court were to find that there was no representation by Mr Kim, unless the Court were to consider that the conduct fell under the wider scope of s 9 FTA (which he acknowledges appeared unlikely) there would be no need to consider this alternative counterclaim.
[179] I agree that having found there were no misrepresentations, I do not need to consider the alternative counterclaim under the FTA. But for completeness, I refuse this counterclaim because I consider that the parties were not “in trade”.
[180]The FTA at s 2 defines the term trade in the following way:
trade means any trade, business, industry, profession, occupation, activity of commerce, or undertaking relating to the supply or acquisition of goods or services or to the disposition or acquisition of any interest in land.
[181] There is nothing in the evidence to suggest that the parties were engaging in an activity of commerce or any of the other meanings of trade given by the FTA. The debt acknowledgement simply formalises a one-off “IOU” from Mr Oh to Mr Kim, in
their personal capacities. This situation can be distinguished from cases where a party was held to be “in trade”.36
Result and orders
[182] The plaintiffs succeed on the cause of action for breach of contract. The defendants fail on their two counterclaims on this cause of action.
[183] I enter judgment on the cause of action for breach of contract in favour of the plaintiffs against both defendants jointly and severally in the sum of NZD 571,428.00 and interest at 5.8 per cent from 1 June 2019. I refuse the plaintiffs’ claim for exemplary damages.
[184] The plaintiffs succeed on the cause of action in the tort of deceit. In the alternative, I also find that the plaintiffs succeed on the alternative cause of action on the basis of the tort of negligent misstatement.
[185] I award compensatory damages in favour of the plaintiffs against the first defendant in the sum of USD 350,000.00. I refuse the plaintiffs’ claim for exemplary damages.
Costs
[186] I did not hear submissions on costs. Accordingly, I reserve costs. If the parties are able to agree costs then a joint memorandum is to be filed and served within 20 working days of the date of this judgment. If costs cannot be agreed the plaintiffs may file a memorandum within five working days of the date for the joint memorandum. The defendants are to reply within five working days of the date of service of the plaintiffs’ memorandum on them.
36 For example, see Gilmour v Decisionmakers (Waikato) Ltd [2012] NZHC 298 (financial adviser); MacFarlane v Informed House Inspections Ltd [2023] NZHC 934, (2023) 16 TCLR 586 (director of house inspection company).
[187] Costs memoranda are to be no more than five pages. I will determine costs on the papers.
Gordon J
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