Kim v Oh
[2021] NZHC 751
•9 April 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-675
[2021] NZHC 751
BETWEEN CHONG CHU KIM and IN SUK KIM
Plaintiffs
AND
TAE LIM OH
First Defendant
YONG SOO CHOI
Second Defendant
Hearing: 22 March 2021 at 10:00am Appearances:
S Kang for the Plaintiffs
P C Murray for the Defendants
Judgment:
9 April 2021
JUDGMENT OF ASSOCIATE JUDGE R M BELL
This judgment was delivered by me on 9 April 2021 at 11:00am
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
Solicitors:
Fairbrother Family Law (Pamela A Fairbrother), for the Plaintiffs C L Law Limited (Sonee Chung), Auckland, for the Defendants
Copy for:
Seungmin Kang, Napier, for the Plaintiffs
Paul C Murray, Akarana Chambers, Auckland, for the Defendants
KIM v OH [2021] NZHC 751 [9 April 2021]
[1] In their first cause of action the plaintiffs sue the defendants for $571,428 as the amount repayable on 1 June 2019 under a written acknowledgement of debt of 2 June 2018. They have applied for summary judgment. The plaintiffs (Mr and Mrs Kim) are husband and wife, as are the defendants (Mr Oh and Mrs Choi). The couples were once friends, but this is yet another sad case where friends have fallen out because of business dealings. The plaintiffs live in New Zealand but have Korean citizenship. The defendants come from Korea but now have New Zealand citizenship and residence.
[2] The defendants admit signing the acknowledgement of debt, but they say that they did so because of misrepresentations by the first plaintiff. They also claim relief against oppression under the Credit Contracts and Consumer Finance Act 2003 and allege misleading conduct by the first plaintiff under s 9 of the Fair Trading Act 1986. In addition, the second defendant says that there was no consideration for her promise.
[3] The defendants have at least one arguable defence, contractual misrepresentation, and accordingly the summary judgment application fails.
Background
[4] The background is unsuccessful investment in gold mining in Mongolia. The mining was at Shariin gol about 200 kilometres north of Ulaan Bataar but off the beaten track. The case concerns two mines – called 14686A and 5582A - about four kilometres apart. Mongolian entities (Altan Khundii LLC and Orgil Ser LLC) had obtained mining rights and in turn licensed others to exploit the rights, receiving royalties in return. Dongwon Kweon is the Korean entrepreneur behind consortiums of Korean investors who put money into these mining projects. In November 2017 he entered into a joint venture agreement with Kwoonjae Lee and Tae Lim Oh, the first defendant, to exploit the mining rights through Wellich Mine LLC, a Mongolian entity. Mr Oh would be responsible for inviting investors and was in charge of financial affairs.
[5] In February 2018 Mr Oh told the plaintiffs, friends for some 15 years, about the opportunities for gold mining in Mongolia. He showed them a document “Summary of Alluvial Gold Mine Development”, which gave very optimistic projections of the returns that could be made from the gold mining. The summary proposed that mining would first take place in 14686A and later alluvial gold would be mined in 5582A. The document also refers to other mining rights. There is also a reference to 5582A having over 7.5 tonnes of “stone gold”. Counsel explained that “stone gold” was different from alluvial gold and meant underground gold.
[6] In 2018 Mr Kim entered into three “joint mine development investment contracts” with Wellich Mine LLC:
(a)The first, on 9 February 2018, was an investment of USD 100,000 to mine 14686A.
(b)Under the second, made on 20 February 2018, Mr Kim invested USD 350,000 also to mine 14686A.
(c)The third agreement of 23 March 2018 was for a further investment of USD 300,000. It also provided that Mr Kim’s investments over the three contracts would be changed so that he would be considered to have invested USD 400,000 to mine 5582A and USD 350,000 to mine 14686A.1
[7] At the time of these agreements, gold was not being mined. That could not start until winter had passed and snow had cleared.
[8] In June 2018 Mr Kim transferred his 5582A rights to the defendants in return for their promising in the debt acknowledgement to pay the plaintiffs NZD 571,428.00 (the New Zealand currency equivalent of USD 400,000). The events leading up to
1 The Kims say that they have received nothing for their investment of USD 350,000 in 14686A. Their second and third causes of action are for deceit and negligent misrepresentation for having been induced to put that money in. They have not applied for summary judgment on those causes of action.
that transfer are in issue. The defendants say that Mr Kim misled Mr Oh in a telephone call on 28 May 2018.
[9] The three contracts each provided that neither party could transfer their rights or responsibilities to a third party without the written agreement of the other. With the consent of Wellich Mine LLC, Mr Kim transferred his rights in the third mining contract (the 5582A investment) to Mr Oh. The transfer document was signed on 20 June 2018 in Mongolia by Mr Kim, Mr Kweon and Mr Oh. The transfer has an “IOU” signed by Mr Oh for USD 400,000 at an annual interest rate of 5.8 per cent which says:
Regarding the gold mine development project of Mongolia Darkhan-Uul Khongoryn, Shariin gol, I have borrowed the money from the creditor Chong Chu KIM … 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.
[10] The debt acknowledgement, on which this claim is based, had however already been signed in New Zealand on 2 June 2018. Mr Kim was in Mongolia at the time but he authorised his wife to sign on his behalf. Under the acknowledgement, also called an IOU, the debtors are both defendants and the creditors are the plaintiffs. The document acknowledges a debt of NZD 571,428 (USD 400,000) to be repaid on 1 June 2019 with interest at 5.8 per cent per annum. Interest was payable monthly, on the 20th of each month. The debt was accelerated if a payment was missed. The document acknowledges that the loan was taken out for the transfer to Mr Oh of the rights to mine 5582A. The defendants paid the interest on the debt but they did not pay the principal when it was due on 1 June 2019.
[11] What I have set out so far is based on documents and is generally not in dispute. There are however differences on other matters. Mr Kim and Mr Oh give conflicting accounts how Mr Kim came to put money into the gold mining projects and how he came to assign his rights in the 5582A mine to Mr Oh. Mr Kim says that Mr Oh assured him on 9 February 2018 that there was no risk from investing in these gold mines, 100 per cent success was guaranteed, and a minimum 1,000 per cent profit was guaranteed. Mr Oh made investing in the 5582A mine attractive by assuring him that
the mine had confirmed deposits of about 1,100 kilograms of alluvial gold, apparently three times as much as in the 14686A mine. Mr Kim altered his total investments to put USD 400,000 into the 5582A mine agreement because that mine was confirmed as having more gold. In May 2018 the investors were meant to be receiving returns from the mine, but that did not happen. Mr Kim was under financial pressure after defaulting under the bank mortgage over his home in New Zealand. Mr and Mrs Kim raised this with Mr Oh, as did another investor, Young Um. In response, Mr Oh and his wife agreed to buy their rights in the 5582A mine. Dongwon Kweon had told Mr Kim that the 5582A mine had insufficient alluvial gold and decided not to develop that mine. Mr Kim’s responses to Mr Oh’s evidence are considered later.
[12] Mr Oh says that he was not involved in the incorporation of Wellich Mine LLC. In 2017, he invested USD 50,000 in his wife’s name. While he passed on documents and information to Mr Kim, he did not vouch for the accuracy of the information. He denies saying that 100 per cent success was guaranteed and that a minimum of 1,000 per cent profit was guaranteed.
[13] He and Mr Kim went to Mongolia in early March 2018. That led to Mr Kim deciding to invest more funds into mine 5582A. They incorporated Wellich Investment LLC (a different entity from Wellich Mine LLC).
[14] In March 2018, when Mr Kim invested a further USD 300,000 in mine 5582A, Mr Kim had USD 204,000 from his initial investment in his personal Mongolian bank account, undisbursed. He had the choice of remitting those funds back to New Zealand but entered into the third contract instead. By the time Mr Kim signed the third contract, he had already visited the two mines in Mongolia and had met other investors and related persons. Mr Kim requested the change to his investments.
[15] They returned to Korea and met with other investors in the mining projects. They made enquiries about obtaining screening machines for the mines.
[16] Mr Oh says that Mr Kim travelled back to Mongolia in April 2018 and while there actively managed operations at both mines between April 2018 and June 2018, including paying mining expenses and recording production. Mr Kim was more than
an investor and acted as a form of “auditor” of mining operations. Mr Oh has included as evidence handwritten notes of Mr Kim, recording the sale of gold on 11 May 2018 to 19 June 2018 (from the date of the first production until Mr Kim’s departure from Mongolia). He also says that Mr Kim personally managed all expenses relating to the mines through his personal Mongolian bank account and also through the bank account of Wellich Investment LLC. Mr Kim signed a contract to provide machinery, as an executive of Wellich Mine LLC. Mr Kim dealt with employment agreements for the Mongolian staff, as director of Wellich Investments LLC.
[17] While Mr Kim was managing the mine, he asked Mr Oh to invest further funds. Mr Oh put in a further KRW 34,000,000 (NZD 43,000). Gold production was not going smoothly, and urgent funds were needed to pay the costs of labour, machinery rental and other costs.
[18] Mr Oh was in New Zealand in May 2018. On 28 May Mr Kim called him from Mongolia. According to Mr Oh, Mr Kim was in financial difficulty and demanded that Mr Oh take over his share of mine 5582A. Mr Kim proposed that the development rights for the mine be transferred in exchange for a loan. Mr Kim said that Mr Oh could repay him from his profits from the gold produced from 5582A.
[19] Mr Oh thought the mining rights had significant value and that is why he agreed to pay USD 400,000. He did not know that there had been testing and that Mr Kweon had decided not to develop mine 5582A. Mr Oh says that by the end of May 2018, Mr Kim was aware that mine 5582A had been tested and there was not enough gold to make it worth mining.
[20] Mr Kim distinguishes between alluvial gold, which is what the third contract is about, and underground gold, and suggests that Mr Oh was willing to buy the rights in 5582A because it held underground gold. Mr Oh denies this and says he was unaware of the difference between alluvial gold mining and underground mining.
[21] Mr Oh returned to Mongolia on 15 June 2018 where he and Mr Kim signed the agreement transferring Mr Kim’s interest in the third contract. Once Mr Oh had signed the transfer, Mr Kim left promptly for New Zealand saying that his wife had fallen ill.
After Mr Kim left, Mr Oh found out “all the issues at the site and all the costs that had been incurred”. According to Mr Oh, he identified and resolved a number of issues at mine 14686A and gold production increased. Mining operations stopped after 9 July 2018 because of the Naadam Festival in Mongolia and they had run low on funds. Production was not resumed after the Naadam Festival. Mr Oh acknowledges that he invested in another mining operation at Hore (also spelt as Huree).
[22] In early 2019, Mr Kim was in contact with Mr Oh about re-starting the mining operation at the two mines. New investors were found by April 2019 but there was a delay and mining stopped. There was no return to investors. All the funds that had gone into mining were used up in costs.
[23] In reply, Mr Kim plays down his role in running the mines although he acknowledges signing a contract for a forklift. He says that Mr Oh was in Mongolia in late April 2018, supervising the mining with Dongwon Kweon. He also says that Mr Oh knew, even before him, that Dongwon Kweon had tested part of the 5582A mine, and raised concerns about insufficient alluvial gold with the mine owners. He had instead obtained rights to develop three other mines in the Huree region. He rejects Mr Oh’s denial that he knew the difference between alluvial gold and underground mining and says that the contracts contemplated mining for both alluvial gold and underground gold. Much of his reply affidavit is argumentative.
The leave application
[24] The plaintiffs have applied for leave under r 12.4(2) of the High Court Rules 2016 to apply for summary judgment, as well as applying for summary judgment. While they began this proceeding on 15 May 2020, they did not apply for summary judgment until 9 July 2020, after the defendants filed their statement of defence. They therefore need leave. The parties agreed that the leave application and the application for summary judgment should be heard together. Both sides prepared fully for the summary judgment application on the basis that leave might be granted.
[25]In Stephens v Barron, the Court of Appeal said:2
2 Stephens v Barron [2014] NZCA 82, (2014) 21 PRNZ 734 at [13].
We add that it is important that leave be dealt with as a prior step to the merits of an application for which leave is required. The criteria for granting leave need to be addressed, even if the merits of the substantive application are, themselves, an important aspect of the leave decision.
The Court did not, however, say that separate hearings are required for the leave application and the summary judgment application.
[26]As to how the leave application should be decided, McGechan says:3
HR12.4.01A Applications with leave
No guidelines are laid down for the granting of leave. The question is clearly a discretionary one, and it will be up to the party applying for leave to show why it should be granted. If the absence of a defence has only become apparent after discovery or the exchange of briefs, this may well be an adequate reason for granting leave. In many cases, as with appeals, the leave question will be bound up with the merits, and it may be difficult to determine the leave question without some consideration of the merits.
[27] It can be helpful to decide the leave application at an early stage, before the parties devote considerable time and effort to a fully-opposed summary judgment application. Accordingly, when a summary judgment application is called before me, I often ask counsel to submit on the leave application and give a ruling on the spot. That, however, was not done here.
[28] The rules require summary judgment applications to be brought early in the proceeding, whereas most interlocutory applications tend to be heard later, usually after discovery. It is often efficient to decide summary judgment applications early before the parties spend time and resources on discovery and interlocutory matters. In this case the plaintiffs applied reasonably soon after the defendants filed their statement of defence. The parties had not spent time and effort on interlocutory matters at that stage. Time since then has been taken up with the defendants’ unsuccessful protest to jurisdiction,4 but that had to be cleared away before the court could deal with the summary judgment application.5
3 AC Beck and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR12.4.01A].
4 Kim v Oh [2020] NZHC 2985.
5 Advanced Cardiovascular Systems Inc v Universal Specialties Ltd [1997] 1 NZLR 186 (CA).
[29] The plaintiffs seek summary judgment on only their first cause of action for breach of contract. That does not count against the leave application. In many cases, plaintiffs who succeed in a summary judgment application on only one cause of action or obtain only partial relief move to enforcement without pursuing the other cases of action.6 There is no reason for denying them that option.
[30] In this case, as both sides prepared fully for the opposed summary judgment application, the leave question is almost academic. Accordingly, I grant leave under r 12.4(2) while leaving the merits to be considered under the summary judgment application.
[31] There was no dispute as to the principles on plaintiffs’ applications for summary judgment. They are well settled and do not need to be repeated.7
No foreign law questions
[32] There are no questions of foreign law. Mr Oh was unsuccessful in contesting this court’s jurisdiction, but he did not suggest that the case should be decided according to Korean or Mongolian law. The debt acknowledgement agreement was made in New Zealand and is governed by New Zealand law, even though it is written in Korean. It was not suggested that any relevant extra-territorial elements affect the application of the Credit Contracts and Consumer Finance Act.
[33] There is a question whether the Fair Trading Act 1986 applies to Mr Kim’s statements in his phone call on 28 May 2018 from Mongolia to Mr Oh in New Zealand. Section 3(1) of the Fair Trading Act says:
3 Application of Act to conduct outside New Zealand
(1)This Act extends to the engaging in conduct outside New Zealand by any person resident or carrying on business in New Zealand to the extent that such conduct relates to the supply of goods or services, or the granting of interests in land, within New Zealand.
6 For example, Sharma v Mundath [2019] NZHC 24.
7 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162 at [26].
But for that section, the Act would apply only to conduct in New Zealand. In this case however it is arguable for the defendants that the relevant conduct was in New Zealand. In Wing Hung Printing Co Ltd v Saito Off-Shore Pty Ltd8 the Court of Appeal followed Australian authority, Bray v F Hoffman-La Roche Ltd,9 in holding that communications from outside New Zealand to someone in New Zealand could be regarded as conduct within New Zealand under the Act.
The misrepresentation defence
[34] The defendants say that they took the transfer of the 5582A investment and agreed to pay the USD400,000 under the debt acknowledgement because Mr Kim misrepresented that:
(a)Mine 5582A contained gold.
(b)Mine 5582A was going to be developed.
(c)Mr Oh and his wife could repay the loan for the purchase of mining rights from profits from the gold produced from mine 5582A.
They say that Mr Kim made these representations in the phone call of 28 May 2018. They were false because mine 5582A did not have enough gold to make mining worthwhile. Because 5582A would not be mined, there would be no profits from gold production to fund loan repayments.
[35] The misrepresentation claim is for damages under s 35 of the Contract and Commercial Law Act 2017.10 The defendants do not say that they have cancelled the debt acknowledgement because of Mr Kim’s misrepresentations and there is no evidence that they have. Cancellation would be pointless because the obligation to pay the principal amount has already accrued and is enforceable.11 Instead, the defendants counterclaim for the losses they have suffered from taking the transfer and
8 Wing Hung Printing Co Ltd v Saito Offshore Pty Ltd [2010] NZCA 502, [2011] 1 NZLR 754.
9 Bray v F Hoffman-La Roche Ltd [2002] FCA 243, (2002) 118 FCR 1.
10 Formerly s 6 of the Contractual Remedies Act 1979.
11 See s 42 of the Contract and Commercial Law Act 2017, formerly s 8(3)(a) of the Contractual Remedies Act 1979 and Garratt v Ikeda [2002] 1 NZLR 577 (CA).
agreeing to pay the USD 400,000. A counterclaim cannot be run as a defence to a summary judgment application, but equitable set-off can. In Grant v NZMC Ltd, the Court of Appeal said that a defendant may set-off a cross-claim which so affects the plaintiff’s claim that it would be unjust to allow the plaintiff to have judgment without bringing the cross-claim to account. The link must be such that the two are in fact inter-dependent: judgment on one cannot fairly be given without regard to the other; the defendant’s claim calls into question or impeaches the plaintiff’s demand.12 That applies here. The plaintiffs can hardly claim payment under the debt acknowledgement without at the same time addressing the defendants’ claim that the plaintiffs induced them to incur the liability by misrepresentations. The plaintiffs did not suggest that the damages claim for misrepresentation could not be an equitable set- off.
The plaintiffs’ responses to the misrepresentation defence
[36]The plaintiffs’ responses are:
(a)The second and third representations are about what might happen in the future rather than statements of past or present facts.
(b)Mr Kim did not make the representations.
(c)There is no evidence that the representations were false or misleading.
(d)The defendants’ reason for buying the 5582A mining rights was that they acknowledged their responsibility to the plaintiffs for having induced them to invest in the mine after assuring them of 100 per cent success.
(e)It was not reasonable for the defendants to rely on the representations.
(f)There is no evidence that the defendants suffered any loss.
12 Grant v NZMC Ltd [1989] 1 NZLR 8 (CA) at 12–13.
[37] For their first response the plaintiffs rely on the familiar principle that a misrepresentation can only be about past or present facts. Statements of intention or opinion and statements as to the future are not representations about present or past facts. They accept that the first representation, that mine 5582A contained gold, is about an existing fact, but they say that the representations that mine 5582A was going to be developed and that the defendants could repay the loan from profits are about the future and therefore are not about present facts.
[38] The statement that the mine was going to be developed is a statement about an intention — admittedly not Mr Kim’s intention because he was going to quit his investment. A statement about someone else’s intention, such as Wellich Mine LLC, may be a representation of present fact.13 It is a question of fact whether, on 28 May 2018, Wellich Mine LLC intended to mine 5582A. On the evidence given so far it is arguable that there was a misrepresentation (that the mine was going to be developed), as the plan to mine 5582A had been abandoned.
[39] Similarly, the statement that the defendants could repay the loan from profit shows that there was an expectation that profits could be earned from the mine. If Mr Kim knew that profits could not be earned because there would be no mining, that was a misrepresentation.
[40] For the second response, the plaintiffs say that the misrepresentation allegations are not credible but are improbable. This is based on Mr Oh allegedly having expertise in mine development, his role in the joint venture with Dongwon Kweon and his telling the plaintiffs about the opportunities for investing in the mines. The plaintiffs say that Mr Oh already knew about the test results and he chose instead to mine elsewhere, at Huree, knowing that 5582A mine could not be developed.
[41] Mr Oh has contested the allegations that he was an expert in gold mining and that he knew that the 5582A mine would not profitably produce gold. Disclaiming any gold mining expertise, he says that he simply passed on information provided by Mr Keown. The matter is not clear-cut in favour of the plaintiffs. I cannot say who is to be preferred, Mr Kim or Mr Oh. That can only be resolved at trial.
13 Edgington v Fitzmaurice (1885) 29 Ch D 459 (CA) at 483.
[42] The suggestion that Mr Oh already knew the test results is really a claim that Mr Oh was not misled because he knew the facts already. While that is a sound defence to a misrepresentation claim, the plaintiffs’ evidence is not strong enough to say on a summary judgment application that the alleged misrepresentations did not induce the defendants to take the transfer and to enter into the debt acknowledgement.
[43] The third response is that even if Mr Kim made the representations, there is no evidence that those representations were false or misleading. For this, it was submitted that there is no credible evidence that the 5582A mine does not actually have any gold. Dongwon Kweon is reported as saying that the mine was tested and that there was insufficient alluvial gold, but that is inadmissible hearsay.
[44] At this stage, even without that hearsay evidence, it is arguable for the defendants that the mine was not exploited and a reasonable explanation for not mining is that the miners did not expect to find enough gold to turn a profit. The objection does not succeed.
[45] The plaintiffs’ fourth response is that the defendants’ reason for buying the mining right was Mr Oh’s acceptance of responsibility for inducing the plaintiffs to invest in the gold mines in the first place. This is more a matter of assertion and submission than evidence. There is no direct evidence that Mr Oh agreed to take the transfer because he considered that he had let his friends down. He denies the suggestion.
[46] The Kims say that the defendants purchased the rights of Un Young in the 14686A mine for the same reason, borrowing USD 50,000. That agreement was also signed on 2 June 2018 at the same time as the debt acknowledgement. According to the Kims, the defendants bought her out because they had also let her down.
[47] There is no evidence from Un Young. Mr Oh says that he and his wife made an initial investment of USD 50,000 and they later put in a further NZ 43,000. He denies that he bore any responsibility for making any alleged misrepresentations for the initial investments. Again, this matter is contested and I cannot resolve it on the
evidence. The defendants’ position is arguable, and the plaintiffs have not shown that it is not.
[48] The fifth response is that it was not reasonable for the defendants to rely on the alleged representations. This is not an objection that the defendants actually knew the truth. Rather, it is a claim that they ought to have found out the correct position. That is not a proper response to a claim of misrepresentation.14
[49] The final response is that the defendants have not shown that they suffered loss as a result of the misrepresentations. The plaintiffs put the defendants’ alleged losses as the interest they paid under the acknowledgement of debt, their initial investment of USD 50,000 and a further investment of NZD 43,000 and any costs incurred in Korea. However, the defendants can also point to their loan of USD 400,000 as a further liability they have incurred. It is arguable on the evidence so far that mine 5582A was not productive and accordingly the defendants have not received any benefits from having bought the mining rights, allegedly because of the misrepresentations.
[50] In summary, the plaintiffs have not persuaded me that the misrepresentation defence is bound to fail. That finding is enough for the summary judgment application to fail. While it is not essential, I consider the other defences.
Defence under the Credit Contracts and Consumer Finance Act 2003
[51] The defendants seek a re-opening of the debt acknowledgement contract under Part 5 of the Creditor Contracts and Consumer Finance Act 2003. They say that Mr Kim induced them to enter into the agreement by oppressive means.15 Under s 118 of the Act, the definition of “oppressive” includes “unconscionable” and “in breach of reasonable standards of commercial practice”.
[52] The plaintiffs object that the defendants are out of time to seek a re-opening under Part 5. Under s 125(1)(c) the defendants had only one year after the date of
14 Redgrave v Hurd (1881) 20 Ch D 1; Nocton v Lord Ashburton [1914] AC 932 (HL) at 962.
15 Credit Contracts and Consumer Finance Act 2003, s 120(c).
performance required to be performed under the contract in which to seek relief. As the loan was repayable on 1 June 2019, the defendants had until 31 May 2020 in which to seek a re-opening. They did not raise the matter until their amended statement of defence of 29 January 2021.
[53] However, in Watherston v PGW Rural Capital Ltd,16 the Court of Appeal accepted that the time bar under s 125 does not apply when the borrower raises an oppressiveness defence in response to a proceeding by the lender. In this case, the oppressiveness has been pleaded as a counterclaim, but it is being run as a defence. The time bar does not apply.
[54] The oppressiveness the defendants rely on is Mr Kim’s alleged misrepresentations. I understand that they argue that but for the misrepresentations, they would never have agreed to take the transfer of mining right 5582A and would therefore never have given the debt acknowledgement. Nevertheless, the merits of their oppressiveness claim seem doubtful. The purpose of Part 5 of the Credit Contracts and Consumer Finance Act 2003 is to give relief for the credit aspects of a transaction. It seems odd to use those provisions for relief against other aspects of the transactions. The defendants do not complain that the 5.8 per cent per annum interest rate was onerous or that there was anything wrong with the one-year term. Instead, their complaint is with the value of the asset they took on the transfer of the mining rights. While this is an issue for trial, the defendants may have difficulty with this aspect of the case.
Defence under the Fair Trading Act 1985
[55] The defendants say that Mr Kim’s misleading and deceptive conduct in the phone call of 28 May 2018 induced them to take the transfer of the mining right 5582A. Just as it is arguable that what Mr Kim said was a contractual misrepresentation under s 35 of the Contract and Commercial Law Act 2017, it is also arguable that it was misleading or deceptive conduct under s 9 of the Fair Trading Act 1985.
16 Watherston v PGW Rural Capital Ltd [2020] NZCA 329 at [64].
[56] There is, however, a question whether Mr Kim’s statements in the telephone call of 28 May 2018 were “in trade”. Under s 2(1) of the Fair Trading Act 1986:
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.
The transaction in this case was for the disposition of an interest in land, the 5582A mining rights. It does not matter that the interest in land was overseas.17 The question is whether this was a private transaction and not “in trade”. There is guidance from Australia. There, the relevant term is “in trade or commerce”. Australian courts have held that it is a contextual test where a number of relevant considerations are taken into account, including the character of the parties involved, whether the vendors have engaged or are about to engage in commercial activities, and whether the transactions were motivated by business as distinct from personal reasons.18 In Cashmore v Sands, Clifford J said:19
These Australian cases demonstrate that the commercial nature of a one-off transaction is an important, possibly decisive, factor in determining whether a sale of land is an activity done “in trade or commerce”. Where in all of the circumstances the sale appears to be a springboard for the vendor to remain active in his field of commerce (i.e. to buy another farm or business), the authorities suggest that it will meet the “in trade or commerce” requirement.
[57] As Mr Kim was getting out of Mongolian gold mining, it may be arguable for him that this was a one-off transaction and not “in trade”. That however is a trial issue. More evidence is required.
The “no consideration” defence
[58] Mrs Choi raises a separate defence, that there was no consideration for her promise to pay under the debt acknowledgement. She says that the mining rights were transferred to her husband, Mr Oh, but not to herself. As she received nothing, there was no consideration for her promise.
17 Fair Trading Act 1986, s 3(1).
18 O’Brien v Smolonogov (1983) 53 ALR 107 at 112–113; and Bevanere Pty Ltd v Lubidineuse (1985) 59 ALR 334 at 339 and 341. See also Cashmore v Sands [2007] BCL 267 (HC) at [211]– [220].
19 Cashmore v Sands, above n 17, at [217].
[59]In Attorney-General v R, the Court of Appeal said:20
[38] The classic theory of consideration rests on a mutual exchange of benefits. A provides a benefit to B in return for the benefit which B provides to A. If B incurs a detriment it may qualify as consideration provided it is incurred at A’s request and is otherwise of benefit to A. Detriment to B is often the logical corollary of the fact that B has conferred a benefit on A. By doing so, B suffers the detriment of providing the benefit but receives in return the benefit of what A is providing under the contract.
…
[40] Benefits may be conferred or, as I would prefer to put it, the necessary price can be paid, either by a promise to do something or by actually doing it. Hence consideration may be provided either by a promise or by an act. A promise confers a benefit in law and an act provides a benefit in fact or a practical benefit, as it is sometimes called. An exchange of promises may provide consideration and so may be the exchange of an act for a promise…
[60] In this case, Mr Oh and Mrs Choi agreed together to pay Mr and Mrs Kim for Mr Kim’s transfer of the mining rights to Mr Oh. The transfer of the mining rights to Mr Kim was a benefit to him. While Mrs Choi did not take a transfer of the mining right, Mr Kim’s transfer to her husband was a detriment by him, which counts as consideration for Mrs Choi’s promise. Accordingly, I do not consider that absence of consideration is a defence available to Yong Soo Choi.
Other matters
[61] While the summary judgment application fails mainly because of the misrepresentation defence, there are other aspects that make me cautious. To give summary judgment the judge must be confident that if the case did go to trial, the result would be no different. These matters reduce my confidence:
(a)Mongolian aspects. I am not familiar with gold mining in Mongolia. There is little contextual evidence. Some documents were in Mongolian, but not all of them were translated into English.21 The Mongolian business entities are LLCs. I suppose that they are something like American limited liability companies (LLCs), but there
20 Attorney-General v R [2002] 2 NZLR 91 (CA) at [38] and [40].
21 Others (bank forms) had accompanying translations into English.
was nothing to say so. It may not be safe to apply New Zealand company law concepts.
(b)Some of the evidence was hearsay.
(c)Many agreements and communications were originally in Korean. Some were put in evidence with accompanying translations, but not all. In some cases only English versions were provided. There was no way of checking the accuracy of the translations.
(d)The plaintiffs used a professional translation service. In some places the interpreter declared that the translation is true and accurate but an affidavit or affirmation made before someone authorised to take oaths would have been better.
While these were not critical, I could not be sure that matters would not come out differently at a defended hearing.
Outcome
[62] The plaintiffs’ summary judgment application fails primarily because the defendants have an arguable defence by way of equitable set-off based on contractual misrepresentation. The case will go to trial in the normal way.
[63]I make these orders:
(a)Leave is granted to apply for summary judgment.
(b)The application for summary judgment is dismissed.
(c)Costs on the summary judgment application are reserved.22
22 NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA).
[64] The Registrar is to arrange a first case management conference for further directions. Ahead of the conference, the parties should confer as to discovery and how language issues are to be handled.
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Associate Judge R M Bell
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