Park v Koh & Anor [2007] NSWSC 222

New South Wales Supreme Court

CITATION : Park v Koh & Anor [2007] NSWSC 222

HEARING DATE(S) : 6 March 2007

JUDGMENT DATE : 16 March 2007

JUDGMENT OF : McDougall J at [1]

DECISION : See para [50] of judgment

CATCHWORDS : CONTRACT - franchise agreement - whether cross defendant's conduct misleading or deceptive - whether cross claimant relied on alleged misleading or deceptive conduct - representations by cross defendant as to future profitability and limitations of business - whether cross defendant had reasonable grounds to make representations - relief - deed of loan sought to be set aside - withdrawal of caveat sought - whether service of cross claim seeking removal of caveat may be effected at address for service of notices specified in caveat

LEGISLATION CITED : Fair Trading Act 1987 Trade Practices Act 1974

CASES CITED : Re H.M. Drinkwater (1929) 46 WN (NSW) 202 Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542

Mikaella Park (Plaintiff) PARTIES : Il Woong Koh (First Defendant) Myung Hee Koh (Second Defendant)

FILE NUMBER(S) : SC 50055/03

COUNSEL : E A White (Plaintiff) A P Spencer (Defendants/Cross-Claimants)

SOLICITORS : TurksLegal (Plaintiff) Strathfield Law (First and Second Defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

McDOUGALL J

16 March 2007

50055/03 MIKAELLA PARK v IL WOONG KOH & ANOR REASONS FOR JUDGMENT HIS HONOUR: Introduction 1 The plaintiff (Mrs Park) lent amounts totalling $370,000 to the defendants (Mr and Mrs Koh) to help them acquire equipment for and set up a mineral spring water extraction and bottling plant at Wentworth Falls in the Blue Mountains. The bulk of that money has not been repaid. Mrs Park has recovered judgment for the unpaid balance together with interest. The judgment debt has not been paid. 2 The cross-claimants (Mr Kang and his wife, Mrs Choi) bought from Mr and Mrs Koh the issued shares in the company that carried on the business to which I have referred, and the land on which it was carried on. They say that they were induced to do so by fraudulent, misleading and deceptive representations as to the renewability of the necessary development consent, and as to the likelihood of its being extended to permit extraction at rates greater than the then current limit of 2,000 litres per day. 3 Mr Kang and Mrs Choi paid some $1.7 million, partly from their own resources and partly from borrowings, and agreed to pay a further amount of $600,000. The amounts payable were apportioned as to $400,000 to acquire the land (15 McLaughlin Street, Wentworth Falls) and as to the balance for the shares. The amount of $600,000 was the subject of a deed of loan made on settlement of the purchase transactions, 14 November 2002. 4 Mrs Park learned of the existence of the loan, and caused a garnishment notice to be issued and served on Mr Kang and Mrs Choi requiring them to pay the amount of the debt to her. 5 The essential issue for my decision is whether there is any debt owed by Mr Kang and Mrs Choi to Mr and Mrs Koh. Resolution of that issue turns on whether Mr Koh was guilty of misleading or deceptive conduct, relating to the representations that I have briefly summarised. 6 The issues were agitated through the mechanism of Mr Kang's and Mrs Choi's cross-claim. Had it been necessary to do so, I would have directed that Mrs Park be joined as a cross-defendant. However, she has reached an accommodation with Mr Kang and Mrs Choi. On the second day of the hearing (6 March 2007) I made orders by consent as between those parties. 7 I also made orders as between Mr Kang and Mrs Choi as cross-claimants and Mr and Mrs Koh as cross-defendants. I said that I would give my reasons for making those further orders. These are my reasons. Background 8 In mid April 2001, Mr Kang read an advertisement in a Korean language newspaper circulating in Sydney. (Mrs Park, Mr and Mrs Koh and Mr Kang and Mrs Choi are all of Korean origin.) The advertisement referred to Mr Koh's mineral water business. For reasons that were not explained in the evidence, Mr Kang contacted Mr Koh. They met at the Wentworth Falls premises. 9 Mr Kang's evidence is that Mr Koh showed him the operation, and offered him a franchise for "the North Shore". A bargain was struck, whereby Mr Kang agreed to pay a "deposit" of $100,000 and to become a franchisee. That bargain was recorded in writing on 10 May 2001: some three weeks after the meeting. 10 Relevant terms of the "franchise agreement" that was signed include the following: " … · B and A have entered in to a contract that B must pay A franchise deposit fee of $100,000 · The distribution district is named above and through negotiations A and B will decide on other suburbs in Sydney … · B will charge for a 10L bottle of water for $8 per bottle · A will charge B 10L bottle of water for $5 per bottle and every 5 bottles one bottle will be given without charge · The duration of the franchise contract is for five years and all rules must be complied with and where there are no problems the contract will continue throughout … · After 2 years of B operating the business if B no longer want to continue the business A must repay the Franchise deposit fee to B … "