Spacemtwo Design Limited v Park
[2025] NZHC 1926
•15 July 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-2254
[2025] NZHC 1926
BETWEEN SPACEMTWO DESIGN LIMITED
Plaintiff
AND
DONGWOO PARK
First Defendant
J ROAD DESIGN LIMITED
Second DefendantPLAN.T GROUP LIMITED
Third Defendant
Hearing: 2 July 2025 Appearances:
S Kang for Plaintiff
I M Hutcheson for Defendant
Judgment:
15 July 2025
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 15 July 2025 at 11.00 am pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date:
SPACEMTWO DESIGN LIMITED v PARK [2025] NZHC 1926 [15 July 2025]
[1] The plaintiff (Spacemtwo) sues its former director and first defendant in this proceeding, Dongwoo Park (Mr Park), alleging he breached duties owed to it under s 131 of the Companies Act 1993 by diverting business opportunities to the second and third defendants. Against the second and third defendants, Spacemtwo claims they are liable to it for knowing receipt of the proceeds of those business opportunities.
[2] The defendants have applied for summary judgment. Mr Park says all claims that Spacemtwo may have had against him were settled under a settlement agreement entered into at the time he resigned as a director of Spacemtwo. The second and third defendants say that as the claims against them are founded on an allegation of breach of fiduciary duty that Mr Park owed Spacemtwo, they too are precluded by the settlement agreement.
[3] In opposition to the summary judgment application, Spacemtwo says it was not a party to the settlement agreement, that the settlement agreement did not by its terms settle the claims it is making, that it has unpleaded claims against Mr Park in misrepresentation and under the Fair Trading Act 1986 making summary judgment inappropriate, and that it is neither fair nor reasonable for the settlement agreement to preclude its claims.1
[4] I do not need to address all the arguments advanced. Specifically, I do not need to consider the argument that Spacemtwo was not a party to the settlement agreement. For present purposes, I proceed on the basis that it was a party. This is because Mr Hutcheson accepts that the case is unsuitable for summary judgment if I was to find that:
(a)Spacemtwo has an arguable (albeit unpleaded) case that it entered into the settlement agreement in reliance upon a misrepresentation by Mr Park as to the extent that he had diverted projects away from Spacemtwo for the benefit of himself or corporate entities with which he was associated; and
1 Contract and Commercial Law Act 2017, s 50; Fair Trading Act 1986, ss 5 and 9.
(b)the settlement agreement does not preclude Spacemtwo from pursuing claims of knowing receipt against the second and third defendants.
Background
[5] Yohan Ko and Mr Park are architectural designers. From 2018 they were in business together, and at relevant times were the only shareholders and directors of Spacemtwo. From around September 2023, Mr Park expressed a desire for the parties to separate. A period of dispute and negotiation followed.
[6] Mr Park incorporated his own company, the second defendant, on 11 October 2023 but remained a director of Spacemtwo until 21 June 2024. The third defendant was incorporated in March 2024, and is a company associated with Mr Park’s wife.
[7] In June 2024, Mr Ko and Mr Park signed a settlement agreement. The parties to the settlement agreement are stated to be Spacemtwo, Mr Ko and Mr Park, but it was signed only by Mr Ko and Mr Park, and neither purported to sign on behalf of Spacemtwo.
[8] The settlement agreement contained obligations to be performed by Spacemtwo, Mr Ko and Mr Park, including the transfer of assets by Spacemtwo to Mr Park and that Mr Park would retire as a director and transfer his shares to the company.
[9]Recital E of the settlement agreement provides:
E.The Parties have agreed to fully and finally resolve the Dispute and all claims that may exist between [Spacemtwo] (on the one hand) and Mr Ko or Mr Park (on the other hand) on the terms set out in this Deed.
[10]Other relevant clauses are:
28.This Deed contains the entire agreement between the Parties about its subject matter. Any previous understanding, agreement, representation, or warranty relating to that subject matter is replaced by this Deed and has no further effect.
29.Each party represents and warrants that they have validly executed this Deed and that the obligations agreed to under this Deed are
binding and are enforceable against them in accordance with their terms.
30.Except as is provided for in this Deed, the Parties enter into this Deed entirely on their own [judgement] and not in reliance on any statement, representation or warranty made by any other party or any other person.
[11] The settlement agreement was originally drafted by Mr Ko’s lawyer but was subject to direct negotiation between Mr Ko and Mr Park, and at the time it was signed neither had a lawyer acting for them.
[12] An issue of concern to Mr Ko was the extent to which Mr Park had diverted business away from Spacemtwo during the period they had been in dispute. In an email of 3 November 2023, Mr Ko’s lawyer had sought an assurance that Mr Park was not diverting opportunities belonging to Spacemtwo or misappropriating its confidential information.
[13] In an email of 8 November 2023, Mr Park’s lawyer advised that he had responded to those concerns in a letter of 1 November 2023 (which is not before me) and that Mr Park was very clear as to his duties as a director of Spacemtwo.
[14] Relevant to Mr Ko’s concerns, prior to the signing of the settlement agreement he proposed a new cl 7 be added as follows:
7.Mr Park agrees and acknowledges that:
(a)he has neither sought nor undertaken any work, nor has redirected any of [Spacemtwo’s] confidential information, resources and prospects to [Spacemtwo’s] competitor (including any entities newly incorporated by Mr Park, being [the second defendant] and [the third defendant]) to the date of this Deed;
(b)any release of claims or liabilities under this Deed is expressly conditional upon the accuracy of the above acknowledgement in clause 7(b);
(c)if it is subsequently discovered after the date this Deed is executed that Mr Park has breached this acknowledgement under clause 7 by engaging in such prohibited activities, the release of claims or liabilities granted to Mr Park under this Deed shall be rendered null and void; and
(d)Mr Ko fully reserves his rights in respect of any issues that may arise with Mr Park’s new companies competing with [Spacemtwo].
[15] Mr Ko says cl 7 was removed from the settlement agreement because there was a separate agreement (the side agreement) between him and Mr Park that Mr Park would make full and frank disclosure of all projects undertaken by any of the defendants for clients of Spacemtwo, and that if the disclosure was found to be false the agreement would be to no effect and there would be compensation paid. Whether the parties made a side agreement is one of the factual disputes that exist. In any event, Mr Park did not agree to the proposed cl 7, which was deleted from the settlement agreement as signed.
[16] The settlement agreement was first signed by Mr Ko, who forwarded it by email on 19 June 2024 to Mr Park. Mr Ko clearly remained concerned as to the extent to which Mr Park had diverted projects from Spacemtwo to the second and third defendants. His email contained the following:
I have signed and am sending [the settlement agreement] on the condition that Mr Park discloses all projects about two companies established.
[17] Mr Park signed the settlement a few days later without responding to the “condition” in Mr Ko’s email.
[18] Mr Ko says after the settlement agreement was signed and Mr Park had provided him with the means to access emails and other company records, he learned that Mr Park had undertaken work himself or through the second and third defendants on 31 projects, and that the work appeared to have been performed during the period of the dispute between them.
[19] Mr Ko emailed Mr Park on 20 July 2024 and raised his concern that Mr Park had misled him. Mr Ko asked Mr Park whether he wished to renegotiate, pay compensation or accept legal proceedings. The email was sent in Korean, but a translation has been provided which reads:
Through the arbitrator that each other knows, Item 7 of the agreement requested by the Dongwoo PARK was deleted as a condition to share all project names and customer names performed by J Road Design and Plan.t
Group. And if the contents of this agreement fail or it is confirmed that the contents of the agreement are not based on facts, you will know that the agreement will no longer be effective.
When I shared the project names and customer names that Mr. PARK shared, I believed in his minimum conscience and agreed to the agreement, and deleted Item 7 under the arbitrator’s arbitration. But it turns to that this was also falsely consistent until the end, and that was also false to the end. As of May 16, 2025, 31 projects were in progress, many of which were existing SPACEMTWO projects and were connected to SPACEMTWO customers. I have already been disappointed enough as a human being, so I will not mention any more situations that would hit rock bottom.
As a condition of the agreement, it was disclosed that the 6 projects were all projects that J road design and Plan T group had carried out during the dispute period. And you deceived the other party and signed the agreement as if it were the truth.
Please reply within 24 hours whether to proceed with a renegotiation by
considering compensation again or to accept legal procedures.
....
[20] While the translation is not easy to understand, it is sufficiently clear that it refers to an agreement between Mr Ko and Mr Park concerning disclosure of the work Mr Park had the second and third defendants perform, that Mr Park had disclosed six projects, and Mr Ko considered he had been misled as he had discovered 31 such projects.
[21] Mr Ko says Mr Park did not immediately respond to his email, or to other emails he sent demanding that Mr Park comply with the settlement agreement in other respects. Mr Park did respond on 5 August 2024 and stated (as translated):
From the beginning, when I was required to disclose the project names, I believed that this was my personal information and that information about clients and projects should be protected. Therefore, I only disclosed the projects that were not problematic at the time and those for which I obtained client consent. I also did not want to create an inconvenient situation where I had to contact clients, explain the situation, and obtain their consent within a short period. Additionally, since many of the projects came through someone I started working with newly, I could not disclose that part either.
...
Over the weekend, I read the emails you sent multiple times and deeply reflected on my mistake of not being completely honest regarding the disclosure of the project list. Once again, I sincerely apologize for this.
...
You mentioned renegotiation or legal proceedings—please specify the terms of the settlement you seek. If there was financial damage due to the undisclosed project list after the Deed, please explain what kind of damage was incurred.
Summary judgment principles
[22] Although the defendants’ application seeks summary judgment and strike out, Mr Hutcheson submitted it was appropriately dealt with as a summary judgment application. The defendants do not advance an argument that Spacemtwo’s statement of claim does not on its face disclose arguable causes of action.
[23]Rule 12.2(2) of the High Court Rules 2016 reads as follows:
12.2 Judgment when there is no defence or when no cause of action can succeed
…
(2) The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[24] The principles that apply to a defendant’s application for summary judgment were set out in Stephens v Barron as follows:2
(a)The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed. Usually this will arise where the defendant can offer evidence which is a complete defence to the plaintiff’s claim.
(b)An application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment able to be properly arrived at only after a full hearing of the evidence.
(c)The Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment is not to be arrived at on a fine balance of the available evidence as would be appropriate at a trial.
(d)The residual discretion of the Court to refuse summary judgment would be properly invoked to avoid the oppression which would otherwise result if an application by a defendant for summary
2 Stephens v Barron [2014] NZCA 82, (2014) 21 PRNZ 734 at [9], citing Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA) (footnotes omitted).
judgment would pre-empt a plaintiff exercising the right to amend the pleadings.
(e)Summary judgment should not be applied for unless the substantive merits of the case are clear and capable of summary disposal.
[25] It is important to identify that Spacemtwo had pleaded its case against Mr Park solely in reliance upon s 131 of the Companies Act. However, before me much of the argument concerned the possibility of as yet unpleaded claims for breach of the side agreement, misrepresentation and breach of the Fair Trading Act.
Issue 1 — Misrepresentation
[26] In the notice of opposition, the complaint that Mr Park misrepresented the number of diverted projects is presented as:
(a)a breach of the side agreement;
(b)a misrepresentation that induced Mr Ko (and for present purpose Spacemtwo also) to enter into the settlement agreement; and
(c)misleading and deceptive conduct under s 9 of the Fair Trading Act.
[27] Mr Hutcheson’s submissions focused on the way that Mr Ko had expressed the nature of the side agreement in the notice of opposition. The matter was put this way:
i.[Mr Park] was to make full and frank disclosure regarding all projects undertaken by any of the [defendants] for the clients who used to be [Spacemtwo’s]; and
ii.If the disclosure is found to be false or misleading, then the Settlement Agreement may become of no effect (*cancellation), and/or there may be a legal proceeding for compensation (*damages).
[28] Mr Hutcheson argued that taken at its highest the alleged side agreement required or intended “future performance” insofar as it used the words “was to make”,3 “is found to be” and “the settlement agreement may become of no effect”. By future performance I understood him to mean that disclosure of the diverted projects was to
3 Mr Hutcheson incorrectly referred to “would make” in his submissions but I appreciate that was unintended and does not materially affect the matter.
be made after the parties had entered into the settlement agreement. Mr Hutcheson’s contention is that a failure to make such disclosure cannot have induced Spacemtwo’s entry into the settlement agreement and could not give rise to a claim for misrepresentation. He also submitted it is impossible to perceive how it could give rise to any other claim, such as for misleading and/or deceptive conduct within the meaning of the Fair Trading Act, because there were no consequences flowing from the fact full disclosure was not made.
[29] I am unable to accept Mr Hutcheson’s argument. While the notice of opposition could be read as referring to future disclosure, that is not how I understood Mr Ko’s evidence. His evidence is, to my mind, consistent with there having been misleading disclosure by Mr Park of the diverted projects which induced Mr Ko and/or Spacemtwo to enter into the settlement agreement.
[30] For instance, at paragraph 21 of his affidavit Mr Ko referred to cl 7 being removed on the basis that Mr Park “makes full and frank disclosure regarding all projects undertaken by any of the defendants”. In paragraph 15 he refers to the terms of the email that accompanied the settlement agreement and identifies the reason cl 7 was deleted as being “on the condition that Mr Park discloses all projects about two companies established”. Those words are, to my mind, consistent with the view that Mr Park had made disclosure to Mr Ko about the diverted projects prior to the signing of the settlement agreement.
[31] That view is reinforced by the correspondence between the parties’ lawyers to which I earlier referred, where Mr Park’s lawyer said he had addressed Mr Ko’s concerns about diverted business.
[32] Also relevant is Mr Park’s revealing email of 5 August 2024, in which it appears he recognises there had been early disclosure of diverted projects and acknowledges that he deliberately withheld full disclosure. For instance, Mr Park refers to “[f]rom the beginning, when I was required to disclose the project names”.
[33] In Mr Ko’s response, he refers to the fact that “[t]he precondition was that if all projects conducted under the [second and third defendants] were disclosed, clause 7
of the agreement would be removed” and that there had been disclosure of only six projects. He appears to be referring to disclosure before the signing of the settlement agreement.
[34] On what is before me I consider that Spacemtwo does have an arguable case that Mr Park misrepresented the number of diverted projects giving rise to claims for misrepresentation and breach of the Fair Trading Act, and potentially on other bases also.
[35] To the extent that the defendants say the settlement agreement precludes Spacemtwo from advancing such claims, or of the Court inquiring into them, Spacemtwo relies upon s 50 of the Contract and Commercial Law Act 2017 and s 5D of the Fair Trading Act which relevantly provide:
Statement, promise, or undertaking during negotiations
(1)This section applies if a contract, or any other document, contains a provision purporting to prevent a court from inquiring into or determining the question of—
(a)whether a statement, promise, or undertaking was made or given, either in words or by conduct, in connection with or in the course of negotiations leading to the making of the contract; or
(b)whether, if it was so made or given, it constituted a representation or a term of the contract; or
(c)whether, if it was a representation, it was relied on.
(2)The court is not, in any proceeding in relation to the contract, prevented by the provision from inquiring into and determining any question referred to in subsection (1) unless the court considers that it is fair and reasonable that the provision should be conclusive between the parties, having regard to the matters specified in subsection (3).
The matters are all the circumstances of the case, including—
(a)the subject matter and value of the transaction; and
(b)the respective bargaining strengths of the parties; and
(c)whether any party was represented or advised by a lawyer at the time of the negotiations or at any other relevant time.
5D No contracting out: exception for parties in trade
(1)Despite section 5C(1) and (2), if the requirements of subsection (3) are satisfied, parties to an agreement may include a provision in their agreement that will, or may (whether directly or indirectly), allow those parties to engage in conduct, or to make representations, that would otherwise contravene section 9, 12A, 13, or 14(1); and in that case,—
(a)the provision is enforceable; and
(b)no proceedings may be brought by any party to the agreement for an order under section 43 in relation to such a contravention of section 9, 12A, 13, or 14(1).
(2)A provision of the kind referred to in subsection (1) includes, for example,—
(a)a clause commonly known as an entire agreement clause:
(b)a clause that acknowledges that a party to the agreement does not rely on the representations or other conduct of another party to the agreement, whether during negotiations prior to the agreement being entered into, or at any subsequent time.
(3)The requirements referred to in subsection (1) are that—
(a)the agreement is in writing; and
(b)the goods, services, or interest in land are both supplied and acquired in trade; and
(c)all parties to the agreement—
(i)are in trade; and
(ii)agree to contract out of section 9, 12A, 13, or 14(1); and
(d)it is fair and reasonable that the parties are bound by the provision in the agreement.
(4)If, in any case, a court is required to decide what is fair and reasonable for the purposes of subsection (3)(d), the court must take account of all the circumstances of the agreement, including—
(a)the subject matter of the agreement; and
(b)the value of the goods, services, or interest in land; and
(c)the respective bargaining power of the parties, including—
(i)the extent to which a party was able to negotiate the terms of the agreement; and
(ii)whether a party was required to either accept or reject the agreement on the terms and conditions presented by the other party; and
(d)whether the party seeking to rely on the effectiveness of a provision of the kind referred to in subsection (1) knew that a representation made in connection with the agreement would, but for that provision, have breached section 12A, 13, or 14(1); and
(e)whether all or any of the parties received advice from, or were represented by, a lawyer, either at the time of the negotiations leading to the agreement or at any other relevant time.
(5)To avoid doubt, nothing in this section—
….
(b)limits the application of subpart 3 of Part 2 of the Contract and Commercial Law Act 2017.
[36] It is arguable, in my view, that the settlement agreement does not preclude claims by Spacemtwo for misrepresentation or under s 9 of the Fair Trading Act because it is not fair and reasonable that its terms bind Spacemtwo.
[37] Counsel did not address submissions to this point, but factors that might be relevant to that enquiry include that Mr Ko had made it clear that Spacemtwo did not intend to be bound in the absence of complete disclosure, that Mr Park deliberately withheld full disclosure, that the parties were in an existing relationship requiring them both to act in the best interest of Spacemtwo, that Mr Ko did not have access to information about the diverted projects because of Mr Park’s control of the company records, and the fact that the parties were not legally represented at the time the settlement agreement was entered into.
[38] Ultimately, whether the settlement agreement does bind Spacemtwo notwithstanding s 50 of the Contract and Commercial Law Act and s 5D of the Fair Trading Act (and the factors I have mentioned) is not an issue that is appropriate for summary judgment.
Issue 2 — Knowing receipt
[39]The elements of a claim in knowing receipt are:4
(a)the transfer of property in breach of fiduciary duty;
(b)that the defendant beneficially received that property; and
(c)the defendant has knowledge that the transfer was in breach of fiduciary duty such as to make it unconscionable for it to retain the benefit of the receipts.
[40] The defendants say the settlement agreement is also a complete answer to the claim against the second and third defendants because there can be nothing unconscionable in them retaining income from diverted projects in circumstances where there is no substantive claim against Mr Park for breach of fiduciary duty. Mr Hutcheson put the matter this way:
Because the claim against the first defendant is doomed to fail … so too must the consequential claims against the second and third defendants.
[41] I asked Mr Hutcheson if he had any authority that supported his submission that the settlement of claims against Mr Park would preclude a claim for knowing receipt against the second and third defendants. He was not able to refer me to any authority but to be fair to him the issue, as I put it to him, had not been directly raised by Spacemtwo.
[42] The defendants’ submission appears to me to be unsound in principle. In my view, the fact that a claimant cannot bring a claim against an errant fiduciary should not necessarily mean that it is also precluded from making a claim against a third party who has knowingly received the fruits of the fiduciary’s breach of duty.
4 Khan v New Zealand Muslim Association [2025] NZCA 109 at [33], citing Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437 (CA) at 455.
[43] I find support for my view in Khan v New Zealand Muslim Association.5 There, the appellants were trustees of a trust which operated a mosque. There was a dispute between nine trustees and five were removed. Those five challenged their removal in High Court proceedings and also in proceedings between the nine trustees. While those proceedings were on foot, the remaining trustees resolved to transfer all the assets of the trust, including the mosque, to the New Zealand Muslim Association. The New Zealand Muslim Association was then joined as a party to the proceedings and the appellants sued it for knowing receipt. The appellants and the remaining trustees then entered into a settlement agreement which provided that all claims against the remaining trustees would be withdrawn and that they would have no liability to the appellants arising from the facts of the litigation.
[44] In the High Court, Jagose J held the settlement agreement prevented the appellants from pursuing their claim against the New Zealand Muslim Association for knowing receipt.6 Jagose J said the pleadings, taken in conjunction with the settlement agreement, meant there was no breach of trust which could be alleged against the first respondents in making the transfer of property to the New Zealand Muslim Association and without any foundation breach of trust, the claim could not succeed.7
[45] The Court of Appeal held that Jagose J was wrong to dismiss the claims.8 The Court of Appeal’s analysis focused on the settlement agreement, finding that it specifically contemplated proceedings against the New Zealand Muslim Association continuing.9 However, the decision is relevant insofar as the Court appeared to be of the view that the claim in knowing receipt could continue, notwithstanding that the claim against the original wrongdoer was precluded by the settlement agreement.
[46] I am satisfied it is arguable the settlement agreement does not preclude Spacemtwo from pursuing the second and third defendants for knowing receipt.
5 Khan v New Zealand Muslim Association, above n 4.
6 Khan v Hussain [2023] NZHC 802.
7 At [15]–[18].
8 Khan v New Zealand Muslim Association, above n 4, at [16].
9 At [17].
Result
[47]The defendants’ application for summary judgment is dismissed.
[48] The case is to be allocated a case management conference before an Associate Judge on the first available date. Counsel should file memoranda at least three working days prior to the case management conference with proposed timetabling orders to advance the case towards hearing. Those proposed directions should include provisions for the filing of amended pleadings.
[49] In respect of costs, my present view is that costs should be reserved. If, despite that indication, either party seeks costs, they may file a memorandum within 10 working days, with five working days for any replies. Memoranda shall be no more than five pages. I will then determine costs on the papers.
O G Paulsen Associate Judge
Solicitors:
Fairbrother Family Law, Napier Bae Legal Ltd, Auckland
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