Fang Gu & Anor v An Jong Hong & Anor

By Statement of Claim filed 13 September 2017 Mr Fang Gu (First Plaintiff) and Ms Xuxing Huang (Second Plaintiff) sought an order that Mr An Jong Hong (First Defendant) and Ms Bokhee Byun (Second Defendant) specifically perform the terms of an agreement dated 12 August 2017 (the Agreement) upon receipt of a bank cheque in the sum of $450,000.

On 11 October 2017 the Defendants filed a Defence and on 31 October 2017 the Defendants filed a Statement of Cross-Claim seeking an account of profits for the profits acquired from the company Sushiya Miranda Pty Ltd (Sushiya Miranda) as well as an injunction against the Plaintiffs preventing them from hindering the Defendants performing their duties as directors and shareholders of Sushiya Miranda.

On 13 November 2017 the Plaintiffs filed a Defence to the Cross-Claim. The Defendants filed two Amended Defences on 15 November 2017. The Plaintiffs filed an Amended Statement of Claim on 11 May 2018.

On 20 August 2018 the Defendants indicated they no longer pressed the Statement of Cross-Claim and I formally dismissed it. (T40/17-20).

The Plaintiffs are a married couple, and the Defendants are a married couple (CB 58).

In approximately April 2014, the First Plaintiff met the First Defendant. The First Plaintiff was working for a supplier of food to Japanese restaurants, and the First Defendant was one of the customers of that supplier. At this time the Defendants were operating a sushi restaurant known as “Sushiya” in Castle Tower shopping centre (CB 58).

In approximately October 2014 the First Plaintiff was interested in purchasing a sushi restaurant in a Westfield shopping centre in Miranda known as “Lucky Sushi”. He did not have any experience in operating a restaurant, and he approached the First Defendant to invest jointly with him and the First Defendant agreed (CB 58-59).

On 4 January 2015 Sushiya Miranda Pty Ltd (the Company) was registered and around that date the Company purchased the Lucky Sushi restaurant (CB 70).

In April 2015 the Company commenced operating the Lucky Sushi business pursuant to an agreement for early possession (CB 59).

In July 2015 the Company settled the purchase of the Lucky Sushi business and changed its name to “Sushiya”. The First Plaintiff and First Defendant contributed $100,000 each towards the purchase price. The Plaintiffs assert that initially the First Defendant attended the business to work with the Plaintiffs for the first month however he gradually ceased to do so thereafter leaving the Plaintiffs with the day-to-day responsibility for the operations of the Company (CB 59, T48/45-T49/20).

In the period after the business commenced trading the Company was not making a profit, which caused the First Defendant to suggest to the First Plaintiff that they forfeit their deposits and mutually abandon the agreement to purchase. The First Plaintiff refused this request and gradually the business became profitable (CB 59-60).

In May 2016 the Company acquired another food business in the same Westfield Miranda named “Maru1” wherein the First Plaintiff and First Defendant again contributed $100,000 each to the purchase price (CB 60). At the same time, the Plaintiffs assert they became aware that the Defendants had purchased another business named “Waba Waba” in North Sydney and as a result the First Defendant informed the First Plaintiff he would be unable to attend the training for the Maru1 business (CB 60-61).

In June 2017 the Plaintiffs assert they discovered that the Defendants had opened another business name without their knowledge although trading the similarly named “Sushiya Liverpool Pty Ltd” (CB 79-83).

On 15 July 2017 the First Plaintiff and First Defendant exchanged a number of text messages in relation to the wages of the Company (CB 167-172):

On 22 July 2017 the First Plaintiff and First Defendant met at Westfield Miranda to discuss ending the business relationship (T53/11-28).

On 23 July 2017 the First Defendant sent the First Plaintiff a text message (CB 153):

On 29 July 2017 the Plaintiffs assert the First Plaintiff and First Defendant had a conversation where they agreed to attempt to terminate the business relationship between the parties and discussed the price of the shares in the Company (T56/16-20).

On 8 August 2017 the First Plaintiff received a text message from the First Defendant (CB 85):

On 8 August 2017 First Plaintiff replied (CB 85):

On 11 August 2017 the First Plaintiff sent a text message to the First Defendant (CB 85):

On 12 August 2017 the First Plaintiff and First Defendant had a meeting in Westfield Miranda food court. Shortly prior to this meeting the First Plaintiff prepared a short written agreement document leaving a blank space for the insertion of the purchase price of the Defendants’ shareholding in the Company. Although what happened in this meeting is contested by the parties it is the Plaintiffs’ case that the First Defendant inserted “$450,000” in handwriting into the blank space. The final sentence in the written agreement was crossed out by the First Defendant, with the First Defendant’s initials written over the crossed words “agreement” and “immediately”. The words “bank guarantees” and “one month” were underlined. The following text attempts to recreate with spelling inaccuracies and interlineations that document (CB 87):

The First Plaintiff and First Defendant only signed the written document.

The Plaintiffs engaged solicitors to prepare a written agreement and on 18 August 2017 Sun Lawyers provided a draft formal agreement to the First Plaintiff who sent it by email to the First Defendant. The recitals and some of the terms of the agreement are set out (CB 89-101):

On 19 August 2017 the First Plaintiff and First Defendant exchanged several text messages (CB 103-104):

On 21 August 2017 the First Plaintiff sent a text to the First Defendant stating “Morning mate. Let’s meet Tuesday 7pm same place” (CB 104).

On 22 August 2017 at approximately 7:00pm at a plaza in Strathfield the First Plaintiff and First Defendant met. The Plaintiffs assert at this meeting the First Defendant informed the First Plaintiff he had received accounting advice to the effect that he would pay capital gains tax in relation to the purchase price of $450,000 and requested the First Plaintiff make an entry in the Company’s accounting statement to incorrectly state the Company owed the First Defendant $350,000.

After conferring with his wife and the Plaintiffs’ accountant, on or about 23 August 2017 the First Plaintiff sent a text message to the First Defendant (CB 106):

The First Defendant replied (CB 107):

The Plaintiffs state that on 24 August 2017 at approximately 11:00am the First Defendant attended the Company’s business premises and threw food onto the ground in the kitchen, causing them to report him to the police (CB 65).

On 25 August 2017 Sun Lawyers sent a letter to the Defendants insisting upon performance of the Agreement (CB 65).

The Plaintiffs commenced these proceedings.

In Masters v Cameron (1954) 91 CLR 353 at 360-1; [1954] HCA 72, Dixon CJ, McTiernan and Kitto JJ said (citations omitted):

The Courts have subsequently recognised a fourth category of agreements to contract, where the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms: Sir Kim Lewison and David Hughes (eds), The Interpretation of Contracts in Australia (Thomson Reuters, 1st ed, 2012) [8.16.1].

In relation to the fourth category see Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628 per McLelland J:

Whether or not the parties here intended the agreement to be immediately binding is to be determined objectively having regard to the language contained in the relevant document. The High Court has repeatedly affirmed this proposition: Taylor v Johnson (1983) 151 CLR 422; [1983] HCA 5; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52; Byrnes v Kendle (2011) 243 CLR 253; [2011] HCA 26.

More recently see Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]-[52] (“Mount Bruce Mining”), Hancock Prospecting Pty Ltd v Rinehart [2017] FCAFC 170 at [163] and Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]. Mount Bruce Mining was cited by the High Court in Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 91 ALJR 486 at [73].

The High Court in Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ said (at [22]) (citations omitted):

In International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151; [2008] HCA 3 Gleeson CJ remarked (at [8]) (citations omitted):

Sir Kim Lewison and David Hughes (eds), The Interpretation of Contracts in Australia (Thomson Reuters, 1st ed, 2012) [3.14.5] provides:

If the terms of such a document indicate that the parties intended to be bound immediately, effect must be given to it. Construction of a document may make it sufficiently clear that the parties were content to be bound immediately by the terms to which they had agreed, notwithstanding they contemplated further documentation: Masters v Cameron (1954) 91 CLR 353 at 360 (Dixon CJ, McTiernan and Kitto JJ); [1954] HCA 72; Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 at 110 (Ipp J); [2000] WASCA 27.

As McHugh JA (as his Honour then was) said in GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 634:

McHugh JA also said at 635-6:

There are broadly three circumstances in which extrinsic materials can be taken into account in assessing objectively contractual intentions.

The first is that extrinsic materials can aid in construction of a contract in the event of an ambiguity. In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352-3; [1982] HCA 24 (“Codelfa”) Mason J (with Stephen and Wilson JJ agreeing) said:

There is some authority that ambiguity is not a necessary prerequisite to reference to extrinsic materials: Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407, but see Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1. The better view of the law is that expressed by Mason J in Codelfa.

Secondly pre and post-contractual conduct is admissible to determine the existence of a contract. In Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 McHugh JA observed (at 336-7):

In this case McHugh JA further said (at 338):

Thirdly extrinsic materials are admissible as evidence of mutually known facts or descriptive terms. As McHugh JA (as his Honour then was) said in GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 636-7:

There is further a question of whether the First Defendant had the authority or agency to contract on behalf of his wife the Second Defendant. In Press v Mathers [1927] VLR 326 at 332-3 Dixon AJ observed:

In general a principal is responsible for all acts of his or her agent within the scope of that authority (actual or apparent) of the agent: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 at [79]-[82] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ.

Actual authority is the authority which the principal has given the agent wholly or in part by means of words or writing (sometimes called express authority) or is regarded by the law as having given to him or her because of the interpretation put by the law on the relationship and dealings of the two parties. So in the first instance it will always be a question of fact what the words or conduct might be that are relied upon as the source of actual authority. Second in any event actual authority can of course be terminated either by agreement by principal and agent or if for example the agency is only for a limited period of time or for a particular transaction: Peter Watts and F M B Reynolds (eds), Bowstead & Reynolds on Agency (Sweet & Maxwell, 19th ed, 2010) at 3-003.

In Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 502 Diplock LJ described “actual authority” as “a legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any proper implications from the express words used, the usages of the trade, or the course of business between the parties”.

The doctrine of non est factum may be invoked by a limited class of person who, through no carelessness on their part, are unable to have any understanding of the meaning of a particular document and sign the document in the belief that it was radically different from what was in fact signed. Given its limited application, the party who seeks to rely on the defence bears the “heavy onus” of doing so: Petelin v Cullen (1975) 132 CLR 355 at 359-60; [1975] HCA 24.

The necessary difference between what the document was and what the person believed the document to be has also been described as "fundamental" or "serious" or "very substantial": see Ford v Perpetual Trustees Victoria Ltd (2009) 75 NSWLR 42; [2009] NSWCA 186 at [42].

The Plaintiffs submit they seek relief in the form of specific performance in respect of a partly written and partly oral agreement contracted into on 12 August 2017 (the Agreement) (submissions [1]-[9], closing submissions [1]-[4]). The Plaintiffs note it is common ground that the First Plaintiff and First Defendant signed a written document dated 12 August 2017 (submissions [5]) however submit there are four issues that require determination (closing submissions [5]):

After outlining the factual background of the dispute (submissions [10]-[34], closing submissions [14]-[57]) and legal principles (submissions [35]-[40], closing submissions [58]-[63]) the Plaintiffs submit there are five reasons why they should be granted specific performance of the Agreement:

The Plaintiffs note that there is no cross-claim filed by the Defendants that the Agreement is liable to be set aside on the basis of misleading and deceptive conduct (submissions [47]). The Plaintiffs reject the contention of the Defendants that the First Defendant does not have a competent grasp of English, as he did not require an interpreter to affirm his affidavit and his written communications demonstrate competency in English (submissions [47], closing submissions [76]-[78]).

The Plaintiffs submit that the terms of the Agreement reached between the parties was that the Defendants would retain their voting rights until payment for their shares had been received, but that on 12 August 2017 an agreement was reached which was intended to be final and binding. They assert this is corroborated by the text messages exchanged between the First Plaintiff and First Defendant prior to 12 August 2017, and their post-contractual conduct including the First Defendant’s text message of 23 August 2017 that refers to his desire not to “keep the contract” going anymore (closing submissions [64]-[70]).

After providing submissions on the Defendants’ now dismissed cross-claim (submissions [48]-[52]) the Plaintiffs submit they should be granted the relief in the Amended Statement of Claim and be given an opportunity to formulate orders to this effect following delivery of this judgment (submissions [54], closing submissions [79]-[81]).

The Plaintiffs further submit that the Defendants’ evidence should be rejected. The Plaintiffs specifically assert the First Defendant’s evidence should be rejected because he gave dishonest evidence and during cross-examination invented evidence which he thought would assist his case (closing submissions [11]-[13]).

The Defendants did not provide a written outline of submissions or outline of closing submissions and I indicated during the hearing my dissatisfaction with this state of affairs. Such a position in the absence of an appropriate explanation is entirely unacceptable whether the usual order for hearing is made.

However during argument the Defendants indicated that their case would be advanced first on the basis that there was no intention to enter into legally binding relations as at 12 August 2017 (or a “Masters v Cameron” issue), secondly on the basis that the First Defendant did not have authority to enter into binding relations on behalf of the Second Defendant, and thirdly a non est factum issue derived from the First Defendant’s poor English (T8/16-24) (see also T91/36-T96/43).

The First Plaintiff swore two affidavits on 11 December 2017 and 15 February 2018.

In his first affidavit (11 December 2017) the First Plaintiff outlined his position as presently a 25% shareholder of the Company. He was born in China and currently holds an Australian permanent resident visa and is married to the Second Plaintiff.

He is a native speaker in Chinese Mandarin. He is able to read and speak English however he said he would not describe himself as proficient in English.

The First Plaintiff got to know the First Defendant in or around April 2014, whilst he was working for a supplier of Japanese food restaurants and the Defendants were running a “Sushiya” restaurant at Castle Tower. In or around October 2014 he was interested in purchasing a “Lucky Sushi” restaurant at Miranda Westfield. He had no experience and he invited the First Defendant to invest jointly in the restaurant.

The First Plaintiff said the First Defendant said to him “[t]hat sounds like a good idea. I’m interest [sic] in opening another restaurant. If the business grows well, we can also make it a franchise business”.

On 4 January 2015 the Plaintiffs and the Defendants established the Company with each of the four holding 25% shares. The First Plaintiff and First Defendant contributed $100,000 each towards the purchase price of the “Lucky Sushi” restaurant and for one month the First Defendant and Plaintiffs attended the daily operation of the business.

However the First Plaintiff said that after one month the First Defendant ceased to participate in the daily operation of the business and only attended on average once per week, leaving the Plaintiffs to assume full responsibility of the business.

The First Plaintiff said during this time the “Lucky Sushi” restaurant was not making a profit, and the Defendants had a discussion with him to the effect that they wanted to forfeit the deposit and withdraw from the purchase of the sushi business at Miranda. He said he refused and with his and his wife’s effort they gradually improved the business whilst working approximately from 7am to 7pm daily with no weekend or holiday breaks.

In or around May 2016, the First Plaintiff described how he and the First Defendant became aware of the opportunity of buying another Japanese restaurant in Miranda called “Maru1”. He recalled that a discussion took place between himself, the First Defendant and Second Defendant wherein they agreed to purchase the “Maru1” restaurant.

In or around November 2016 the Company’s purchase of the “Maru1” restaurant completed and the First Plaintiff and First Defendant again contributed $100,000 to the Company. The First Plaintiff said it was around this time he became aware that the Defendants had bought another Japanese restaurant called “Waba Waba” in North Sydney. He said the First Defendant said to him “I just bought a restaurant at North Sydney. I will be busy with my business so I can’t attend the training” of the new “Maru1” restaurant.

In or around July 2017 the First Plaintiff asserted he and his wife decided that they would buy out the Defendants’ shares in the Company.

From July to August 2017 the First Plaintiff and First Defendant negotiated a price for the shares, agreeing via text messages including on 8 August 2017 and 11 August 2017 on $450,000.

The First Plaintiff then set out his account of the critical meeting on 12 August 2017:

After his meeting with the First Defendant, the First Plaintiff described how he instructed his lawyers to prepare a formal contract of sale based on the terms of the written document of 12 August 2017, and on 18 August 2017 he sent this formal contract to the First Defendant.

However, the First Plaintiff’s account is that following this agreement, the First Defendant via text message said that there was a “big issue” he needed to discuss with him, and on 22 August 2017 the two met at around 7:00pm at a shopping plaza in Strathfield.

The First Plaintiff stated at this second meeting, the First Defendant said he had spoken to his accountant who had said he would be liable for capital gains tax on the $450,000 sale. The First Defendant suggested: “that we record in the company’s book as the company owes me $450,000. So when you pay the $450,000 to me, $350,000 will be the company repaying the debt to me … In this case, the $450,000 is not paying for the purchase of shares, and I will not be liable for capital gain tax”.

On 23 August 2017 the First Defendant sent him a text message saying “[t]his is last warning. I don’t want keep going this contract any more [sic]” and on 24 August 2017 at 11:00am the First Defendant is alleged to have attended the Company’s sushi business and throwing food on the floor.

As at 12 September 2017 the First Plaintiff said he and his wife were ready willing and able to complete the Agreement and had cash resources of approximately $460,000.

In his second affidavit (15 February 2018) the First Plaintiff largely responded to the evidence of the Defendants. He denied the Defendants ever told him prior to starting the Company that the Defendants were to be overall directors of the business whilst the Plaintiffs would be the on-site managers. He denied he gave the Defendants on average $3,000 per week or $2,500 per week.

He also described a meeting he had with the First Defendant on 29 July 2017 and on 7 August 2017 where they discussed and bargained over the price for the shares of the Company.

In cross-examination the First Plaintiff said he came to Australia in 2013 and described his English as equivalent to IELTS 6-7 (T14/46-T15/2).

He denied that when the parties met to set up the Company and purchase the first sushi business that the First Defendant said to him that the Defendants would help set-up the business and get it running, and denied there was any discussion between the parties concerning who would take on the various tasks in running the business (T16/35-T17/48). The First Plaintiff denied the First Defendant ever told him that the Defendants would not be onsite all the time in the running of the business (T18/15-33).

The First Plaintiff further denied that the First Defendant ever said to him that he would be in charge of training the staff, developing the menu and purchasing the food ingredients for the sushi restaurant (T20/11-24). The First Plaintiff rejected that from November 2015 to November 2016 he paid the First Defendant $3,000 per week (T21/30-41). He agreed that during this period he paid himself a wage of $1,000 per week however his wife received no wage during this year (T23/4-22). He said he was not sure whether in November 2015 the Company started making a profit (T23/24-32).

The First Plaintiff denied that he ever disagreed with the Defendants about how much the Company was making or how much the employees were making (T24/23-31; T26/17-24). He denied when the Company purchased the “Maru1” restaurant the First Defendant’s salary was reduced to $2,500 per week (T23/4-9). He accepted some money was paid to the First Defendant but denied payments were made weekly and denied it was $3,000 (T25/24/46).

The First Plaintiff rejected the proposition that he was lying by saying he never cared about the profits of the Company (T27/10-28). He rejected that on 22 July the First Defendant asked him to provide payroll details of the company and offered to buy the Plaintiffs’ shares in the Company (T30/20-45).

The First Plaintiff denied that on 12 August 2017 when he met with the First Defendant, he arrived with a document which had a blank purchase price because he intended to discuss or at least negotiate the price (T31/42-T32/12). He rejected the First Defendant’s account of the 12 August 2017 meeting and affirmed his account (T32/10-T34/14). The First Plaintiff denied the First Defendant said to him “I need the wage records before we can go into the contract” (T34/10-14) and denied there was ever a dispute prior to 12 August 2017 about the profit the Company was making (T34/27-33). However he agreed he was upset at the Defendants for not spending enough time at the restaurants (T34/35-41).

The First Plaintiff denied the Defendants were unhappy with the Plaintiffs because they had not provided the wage records of the Company to them (T35/16-21). He rejected that he had written the handwritten document (marked MFI 1 and returned to the Defendants) (T35/28-50).

The Second Plaintiff swore two affidavits on 29 November 2017 and 11 December 2017.

In her first affidavit (29 November 2017) the Second Plaintiff described how she is married to the First Plaintiff and a 25% shareholder in the Company. In general terms she corroborated the Plaintiffs’ case that the parties entered into an agreement on 12 August 2017.

The Second Plaintiff further provided grounds for expedition of the case including problems in lodging the Company’s Business Activity Statements and providing bank guarantees.

In her second affidavit (11 December 2017) the Second Plaintiff described how she was born in China and currently holds an Australian permanent resident visa. She is a native speaker of Chinese Mandarin. She is able to read and speak English however said “I would not describe myself as proficient in English”.

The Second Plaintiff described how between January 2015 and April 2015 she worked for the Defendants in their restaurant at Castle Tower and did not get paid for this work.

She asserted during the training of two weeks for the Company’s “Maru1” restaurant she observed the First Defendant only attended for one half day. She affirmed that since opening the “Sushiya” business she has worked on average from 7am to 7pm seven days a week and has not been paid until November 2016.

The Second Plaintiff said on or around 11 August 2017 she had a conversation with her husband in Mandarin to the effect that she said “Sure. When you sign the agreement with him [the First Defendant] tomorrow, you can just sign for me. I don’t want to deal with him directly”.

The Second Plaintiff affirmed that her mother Ms Ping Xu had told her in Mandarin words to the effect that she would support the Plaintiffs by providing them money to pay the $450,000 for the Defendants’ shares in the Company.

The Second Plaintiff was not required for cross-examination.

Mr Xu swore one affidavit on 11 December 2017.

In her affidavit Ms Xu said she is the mother of the Second Plaintiff and does not speak English. She affirmed the affidavit as translated to her from English by her Mandarin speaking solicitor.

She said on or about 15 August 2017 she had a conversation with her daughter to the effect that she would lend monies to the Plaintiffs to complete their purchase of the Defendants’ shares in the Company for $450,000.

Ms Xu was not required for cross-examination.

The First Defendant swore one affidavit on 30 January 2018.

In this affidavit he described how he was born in South Korea in 1965. He moved to Australia in 2008 when he was 42 years old and he could not read, write nor speak English prior to coming to Australia.

The First Defendant outlined how he and the First Plaintiff agreed to buy the “Lucky Sushi” business in Miranda. He said some time in December 2014 the Plaintiffs and Defendants met at a food court at Castle Tower Shopping Centre. The First Defendant’s evidence is that he told the Plaintiffs that he and his wife were to be the overall directors of the Company, in that they would set up the business and get the business running: “My wife and I be [sic] the overall directors of the business. As you do not have the proper experience to run a sushi business we will train you so you can be the on-site managers of the business. We will not be onsite all the time as we also run another business”.

The First Defendant said at this meeting he made it clear that he and his wife would purchase and supply food, deal with the accountant, develop the menu, maintain the equipment and train staff, whereas the Plaintiffs were to be the on-site managers.

The First Defendant then described how he pitched a business plan to Westfield Miranda to obtain approval of the transfer of the lease over the “Lucky Sushi” business to the Company, and that the Plaintiffs were not present at any of the negotiations with the lease manager. He said from January 2015 to March 2015 he trained both the Plaintiffs on how to run a sushi business day-to-day at the Defendants’ shop at Castle Hill every day. After opening the Company’s first sushi business in Miranda, the First Defendant said he attended the day-to-day business of the Company, and in May 2015 decided the Plaintiffs were ready to take over the day-to-day running of the shop.

The First Defendant said that the business “appeared to run smoothly to about November 2016”. From November 2015 to November 2016, once a week he would attend the Company’s business and the First Plaintiff would hand him an envelope which would contain cash on average of $3,000 per week.

The First Defendant described how the parties purchased on behalf of the Company a second sushi business called “Maru1”, with the Plaintiffs contributing $100,000 and Defendants $100,000 to the price. He said he and his wife worked every day at the Maru1 restaurant for the first week. He expected this would increase the amount of cash he would be paid by the Plaintiffs, however the First Plaintiff began to pay him only $2,500 per week on average in cash.

The First Defendant described how in June 2017 he decided to confront the First Plaintiff regarding this, where he asked him “where is the money going … why is it disappearing” wherein the First Plaintiff replied “labour cost has increased”. There were further text message exchanges on 15 July 2017.

The First Defendant stated on 23 July 2017 he visited the premises of both the Sushiya and Maru1 restaurants of the Company to check the situation in relation to labour. He said he did not notice more staff at the restaurant, and had a conversation with the First Plaintiff where he said “I am prepared to sell my share of the business to you for $500,000 … but first I would like to see all the books to make sure that you have been providing me with the right amount of money”. The First Plaintiff and First Defendant exchanged texts on 8 August 2017.

The First Defendant then set out his account of the critical meeting on 12 August 2017:

The First Defendant said he continued to request the records of wage costs of the Company. He accepted that he did have a discussion with the First Plaintiff about the tax implications of the sale price of $450,000 for the Company, but said that during this conversation he had asked the First Plaintiff “I need the wage records before we can go into the contract” and the First Plaintiff replied “okay”.

In cross-examination the First Defendant asserted he had told the Plaintiffs that he and his wife were to be the overall directors of the Company, as the Plaintiffs did not themselves have the proper experience to run a sushi business (T43/1-22). However he agreed this conversation would have occurred in English (T43/24-30).

He did not agree the First Plaintiff negotiated the purchase price of the “Lucky Sushi” restaurant (T44/4-7), and said he negotiated the purchase price in English (T44/42-43). He agreed he discussed with the leasing manager of Westfield the core business strategies of the Company in English in order to obtain the lease for the Company’s first sushi restaurant (T46/4-19).

The First Defendant asserted he had told the Plaintiffs about the Defendants’ restaurant called “Waba Waba” but could not remember deposing to this in any of his affidavits (T46/21-43). He admitted he did not inform the Plaintiffs of his intention to purchase a new sushi restaurant in Liverpool prior to doing so in June 2017 (T48/33-39). He admitted he would only attend the Company’s sushi restaurant from May 2015 to August 2017 only once a week on average (T48/41-43).

He continued to assert that he was concerned with the Plaintiffs’ wage records and labour costs (T51/38-T53/5). He said prior to meeting the First Plaintiff on 22 July 2017 he “continuously” requested documents from the Plaintiffs (T53/20-23). He rejected the Plaintiffs wanted to end the business relationship because they had worked continuously for two and a half years and the Defendants had opened a business elsewhere (T53/37-T54/10).

The First Defendant admitted he could not refer to any document indicating the Company had engaged in “illegal employment” (T55/47-50). He however largely rejected the Plaintiffs’ account of the negotiations over the purchase price of the shares of the Company (T56/32-T57/20).

The First Defendant denied he and his wife had agreed to make an offer to the Plaintiffs to sell their shares in the Company for $450,000 (T57/47-50). He admitted however that on 12 August 2017 when he wrote $450,000 onto the document provided by the First Plaintiff, that was the price he and his wife “were willing to offer to sell” their shares (T59/14-17).

The First Defendant said when he crossed out the last line of the 12 August 2017 document, he “tried to cross out some more, but I was stopped by Mr Gu”. He admitted he did not refer to this event in his affidavit evidence (T59/31-37).

He denied the First Plaintiff’s version of events regarding the reason why he crossed out the last sentence of the document was true and denied that he was ever told at that meeting “everything else we have finally agreed” (T60/1-11). He accepted his handwriting was on the 12 August 2017 document and that he wrote his initials over the crossed out words “agreement” and “immediately” on this document (T60/15-25).

The First Defendant accepted he signed his name both next to his name and his wife’s name on this document (T60/40-45). He however later denied when he signed the 12 August 2017 document that he ever had authority to sign on his wife’s behalf (T61/26-33) and asserted he did not read the document “in detail” (T63/16-17). He said he signed the document with no prior consultation with his wife, as all he had discussed with his wife was the acceptable price for their shares in the Company (T61/37-50). He asserted he informed the First Plaintiff he did not have authority to sign on behalf of his wife at this meeting (T62/18-20).

The First Defendant asserted that whilst he did not keep the 12 August 2017 meeting a secret from his wife, he did not tell her about the document until after the court proceedings had commenced and in fact had forgotten he had signed the document (T63/28-36).

He denied he ever asked the First Plaintiff to record in the Company’s accounts that it owed him $350,000 (T65/28-T67/42). He however admitted that between 23 July 2017 and 23 August 2017 there is no written communication that demonstrates the parties discussed the Company’s wage records (T68/34-36).

He denied he threw food on the ground on 24 August 2017 at the Company’s restaurant (T68/43-48). He denied he specifically provided information to a Ms Li accountant in relation to two Business Activity Statements (T73/1-3) and denied he had dealings with Mr Seogh in 2017 (T73/43-44).

The Second Defendant swore one affidavit on 30 January 2018.

In this affidavit she described how she was born in South Korea in 1969. She moved to Australia in 2008 when she was 39 years old, and could neither read, write nor speak English prior to coming to Australia.

She and her husband have been operating a sushi restaurant in Castle Tower Shopping Centre since 2012, and described how the parties came to set up the Company with each being 25% shareholders. The Second Defendant described how she generally disagreed with the affidavit evidence of the Plaintiffs.

The Second Defendant stated the operation of the Company “went well until November 2016”. She said shortly after the purchase of the Maru1 restaurant she “became aware of the problems we were having” with the Plaintiffs.

In cross-examination the Second Defendant denied she discussed with her husband selling shares in the Company (T75/24-27). However she did later state that whilst she did not discuss with her husband selling shares, she did discuss with him that based on the dividends received from the Company she considered that $450,000 to $550,000 would be the price for their share in the Company (T75/40-50). She said they wanted to verify the financial costs and labour costs of the Company and “if those details can be given to us and I can [make sure] that these figures are reliable and true, then I can consider maybe selling the shares, but it was just a thought” (T76/18-26).

The Second Defendant denied on 7 or 8 August 2017 she and her husband agreed to make an offer of $450,000 to the Plaintiffs or that it was her idea for this amount (T77/34-41). She denied she knew her husband was going to meet the First Plaintiff on 12 August 2017 and said she was not aware an offer was made (T78/12-41). She did not accept that if the figures for the Company were correct she was prepared to consider $450,000 as the sale price, because she needed to know whether the figures were correct before confirming the amount (T79/5-11).

Two preliminary points arose in this case: the question of authority and the question of non est factum.

On the question of authority both parties worked as business partners together and worked alongside each other. This is true for the Defendants and the Plaintiffs. The Second Plaintiff expressly said her husband had authority to enter into an agreement on her behalf (CB 119).

The Second Defendant’s occupation identifies herself as ‘business owner’ and said in cross-examination that she was analysing the Company’s figures and financial data herself to determine the true value of the Company (T75/40-T76/26).

It is clear from the evidence that the Defendants wanted to expand their sushi restaurant businesses and did so jointly by investing in at least two new restaurants in Liverpool and North Sydney.

Furthermore it is clear that at 8:59pm on 8 August 2017 the First Defendant sent a text message to the First Plaintiff stating “I have made decision for $450k with Sharon. Thanks mate”.

There was no reason for him to be untruthful in sending this text message and I do not believe this text message was dishonest. However I do think that the evidence given at the hearing by the Defendants that they never discussed the 12 August 2017 meeting and that the Second Defendant never authorised her husband to enter into contractual relations in relation to the Company was untruthful. This is at odds with the contemporaneous documents and especially the above text message. In my view the Defendants gave evidence at the hearing that in their view portrayed their case in the most favourable light.

The Second Defendant was obviously numerate and financially astute. She had analysed the figures supplied and by whatever methodology came up with a range of purchase price (T79/5-11).

In my view the First Defendant did have authority from the Second Defendant and their evidence on this point should be rejected as contrary to the contemporaneous documents and their prior business activity.

I am not satisfied that the First Defendant has established any defence or case of non est factum. In my assessment he clearly understood English and understood the document provided to him on 12 August 2017. This much is clear at the very least on the text messages exchanged between the parties which are in English and displayed a good understanding of English. Moreover I am satisfied the First Defendant understood precisely the content and import of the document of 12 August 2017. This is why he crossed out the last sentence and initialled over the two words most indicative of a binding agreement.

The Defendants have not satisfied the heavy onus of the doctrine of non est factum and I reject the First Defendant’s account on this point.

In my view each of the witnesses who were cross-examined gave evidence that is open to criticism and is in some respects problematical. There is I am inclined to think an element of truth on both sides but I am also satisfied a healthy amount of historical revision and exaggeration.

It is clear that the Plaintiffs and Defendants have had a falling out and it is no longer possible that they are able to continue working together. I am satisfied that this falling out occurred due to some level of distrust between the Plaintiffs and the Defendants, and reached a point where the First Plaintiff and First Defendant began to have discussions about severing ties and buying out the others’ shares in the Company. This occurred clearly before 8 August 2017 and by that date it is clear the parties were not going to stay business partners.

Although at some point before August 2017 the Defendants were seeking further financial information regarding the Company including labour costs and wage records, I am satisfied that they had ceased these inquiries some time prior to 12 August 2017 when the First Plaintiff and First Defendant met and signed the written document of that date. This is because as evident from the text messages between the First Plaintiff and First Defendant they had discussed and agreed upon a price of $450,000.

The Defendants I am satisfied discussed the price they should value their 50% shareholding in the Company, and had felt comfortable on the information they had been provided to agree to an amount of $450,000. I do not accept the Defendants’ accounts that they did not together discuss the price of the Company, did not discuss whether or not to sell the Company, and did not inform each other about the 12 August 2017 meeting.

Furthermore, as is apparent from the text messages between the First Plaintiff and First Defendant, the parties clearly wanted to come to some final agreement at some point and part ways. However, the crucial question is whether they intended to reach a final and legally binding agreement on 12 August 2017. This requires a consideration of the opposing parties’ different versions of events.

The First Plaintiff says that the parties’ agreed to be finally and immediately bound on 12 August 2017 when he and the First Defendant signed on the document of that date and also signed next to their wives’ names. His version of events was that the First Defendant crossed out the last sentence of the document because he did not want to forfeit his rights to vote or participate in the Company until the Defendants received the purchase price.

On the other hand the First Defendant says that he struggled fully to understand the written document of 12 August 2017, and crossed out the last sentence because he still wanted information on the Company’s labour costs to be provided to him by the Plaintiffs. He says he demanded the labour costs and did not want a final agreement until he was provided with the Company’s information on labour costs. Further he did not regard the document as binding as there was no provision for a deposit.

There is no dispute however that on 12 August 2017 the First Defendant wrote $450,000 in the blank space provided as the purchase price of the Defendants’ shares in the Company.

I am of the view that both versions of events have some elements of truth about them.

The document was drafted by the First Plaintiff and it is uncontroversial that it was not given to the First Defendant in advance of the 12 August 2017 meeting.

It is obvious from the document and the First Plaintiff’s texts to the First Defendant prior to the meeting that he wanted a final agreement between the parties on that day.

It is also clear that both parties were capable of reading and understanding the document. Whilst English was each of the parties’ second language, each felt entirely comfortable not only dealing with each other but negotiating with each other.

On one view it is unclear why the amount on the 12 August 2017 document was left blank, as is clear from the text messages between the two businessmen that the agreed price was $450,000 prior to the meeting. It is possible the First Plaintiff had in mind negotiating a different and more favourable amount at the meeting. However, nothing turns on this possibility as $450,000 was indeed written by hand on the document and obviously had been the subject of consideration and agreement by both sides.

Importantly however the last sentence of the document was crossed out by the First Defendant and his initials were written over the words “agreement” and “immediately”. The First Plaintiff suggests this deletion was related to the First Defendant’s concern about relinquishing management control over the Company prior to receiving the $450,000. This is in my view implausible and I do not accept this account. This is because the prior two sentences of the 12 August 2017 document were not deleted, and they had precisely that effect of relinquishing the Defendants’ control over the Company.

The deletion of the last sentence of the document is more consistent with the Defendants’ account as he did not want a final agreement, or “contract”, however I do not accept his account that he wanted further information on labour costs. I do accept his account that he did not want the document to be immediately binding or an agreement between the parties as at 12 August 2017 because he wanted provision for payment of a deposit. This is corroborated by the later contract that was drafted by the Plaintiffs’ lawyers and provided to the Defendants on 18 August 2017.

The 12 August 2017 document further only addressed in a very cryptic way the issue of bank guarantees.

In my view at the 12 August 2017 meeting the First Plaintiff and First Defendant did not enter into legally binding arrangements, and clearly intended a more formal contract to be prepared between the parties. This is corroborated by the text message of 19 August 2017 in which the First Plaintiff referred to “the contract” he had provided to the Defendants.

This more formal contract provided on 18 August 2017 provided for a number of important elements of the deal between the parties. It provided for a 10% deposit (reflecting the First Defendant’s version of the 12 August 2017 meeting), it provided for the Company to accept settlement, it provided for the issue of bank guarantees, it provided for independent legal advice and it provided that that contract be the entire agreement between the parties. These were all important provisions that had not been addressed at a sufficient level of detail in the cryptic document of 12 August 2017. Importantly this formal contract did not mention the 12 August 2017 meeting in the recitals or anywhere.

None of this is necessarily inconsistent with there being a final agreement between the parties as at 12 August 2017. However the formal contract provided that there would only be a binding agreement between the parties upon execution of that document (not the 12 August 2017 document) by each of them (CB 90-96 and clauses 4 to 6 inclusively of the formal contract).

In my opinion objectively viewed the parties did not intend to enter into a legally binding agreement on 12 August 2017.

I am satisfied however the First Defendant did have authority from the Second Defendant to enter a contract. I reject the defence of non est factum.

In light of my findings I would invite the parties to provide short minutes and I will hear the parties on the issue of costs if they cannot be agreed.