Yi v Park

1. [1]

   BELL CJ: Although many issues were litigated between the parties in the proceedings at first instance, this appeal raises a single issue, namely whether the primary judge erred in finding that an agreement entered into between the Respondent, Ms Eun Ju Park, and her late mother, Ms Young Ja Yi (the deceased), on 13 July 2017 (the Loan Agreement) was supported by valuable consideration: Park v Yi [2024] NSWSC 294 (the primary judgment or PJ) at [83].

2. [2]

   The recitals to the Loan Agreement stated that the deceased borrowed $300,000 from the Respondent in 2012 and used this sum to renovate a property at Concord West (the Property) which, at the time of the Loan Agreement, was jointly owned by the deceased and her husband from whom she separated in 2015 (they were to divorce in 2018). The $300,000 referred to in the recitals was defined as “the Loan”.

3. [3]

   The operative terms of the Loan Agreement were simply that “Party A [the deceased] agrees to pay Party B [the Respondent] the Loan with a fixed interest of AUD $200,000.00 if the [Property] is sold or Party A is deceased.”

4. [4]

   The Respondent, as plaintiff in the proceedings below, positively pleaded that the Loan Agreement was supported by valuable consideration, particularising this plea as follows:

5. [5]

   This was denied by the Appellant, Mr Chong Eun Yi, who is the Respondent’s brother and the deceased’s son. He was sued in his capacity as executor of the deceased’s estate.

6. [6]

   The primary judge characterised the particularised agreement that “any moneys due to the plaintiff would not be payable by the deceased until [the Property] was sold” or the deceased died as an act of forbearance on the part of the Respondent. The reference to “any moneys due to the plaintiff” was not a reference to any moneys advanced under the Loan Agreement but a reference to any moneys due to the plaintiff [Respondent] as a result of an earlier commercial arrangement between the Respondent and her mother, as referred to, in short form, in the recitals to the Loan Agreement.

7. [7]

   In this context, the primary judge found (at PJ [20]), and it is not contested, that around 2011 or 2012, the Respondent and the deceased reached an agreement, which it is convenient to refer to as the First Agreement, which had the following “ingredients”:

8. [8]

   If the Loan Agreement was supported by valuable consideration, $500,000 together with interest will be required to be paid by the Appellant from the estate before any distribution of the residue under the deceased’s will. (An initial distribution has been made but $2 million remains to be distributed subject to the outcome of this appeal.)

9. [9]

   At first instance, the Appellant was unsuccessful in his argument that the Loan Agreement was not supported by any valuable consideration. He had disputed that there had been any forbearance on the part of the Respondent in relation to an accrued liability or debt as between the Respondent and the deceased which supplied good consideration for the Loan Agreement. On appeal, he challenged the primary judge’s conclusion that there was valuable consideration, essentially on the basis that there was no finding that any moneys were due to the Respondent from the deceased at the time of her entry into the Loan Agreement. He also said that there were in fact no moneys due to her from the deceased.

10. [10]

    The terms of the Notice of Appeal are as follows:

11. [11]

    The Respondent submitted that the primary judge made an implicit finding that “the Deceased was indebted to the [Respondent] in respect of funds advanced between 2010 and 2012, and the amount was immediately repayable” and that this was a finding open to the primary judge on the basis that the evidence supported the existence of a binding agreement between the deceased and the Respondent formed in mid-2017 as to the repayment of the funds.

12. [12]

    In order to consider the merits of the appeal, it is first necessary to set out some further background to the matter as emerges from the primary judgment as well as some affidavit evidence not referred to by the primary judge but sought to be relied upon by the Respondent on appeal.

Factual background

1. [13]

   The deceased, together with her then husband, purchased the Property in 1990. They separated in 2015 and were divorced in 2018. In 2018, the deceased’s ex-husband also executed an agreement pursuant to s 90C of the Family Law Act 1975 (Cth) by which he transferred his interest in the Property to the deceased who thereafter became its sole owner.

2. [14]

   Prior to 2010, the Respondent, together with her ex-husband, Young Seek Park (Dominic), owned two properties subject to one mortgage. It was the equity from the sale of these two properties which was provided to the deceased and which permitted the construction of a second storey on the Property and also, separately, a “granny flat”. The Respondent’s evidence was that this amounted to $370,000 which was paid to the deceased in cash: PJ [21].

3. [15]

   The construction of the second storey extension was completed in August 2012. Consistent with the agreement found by the primary judge as summarised at [7] above, the Respondent and her family moved into the extension to the Property and the granny flat was let. Whilst the Respondent and her family resided at the Property, they did not pay rent but occasionally provided the deceased with funds for her living expenses. The primary judge found that the Respondent did receive rent from the granny flat ($450 per week) “although this was not every week as the deceased sometimes kept money for herself”: PJ [22].

4. [16]

   The Appellant moved into the granny flat with his wife and children in about 2016 or early 2017 and from that time the Respondent ceased to receive any rent from the granny flat.

5. [17]

   In an affidavit dated 14 July 2023, the Respondent gave the following evidence as to the existence of any agreement for the repayment of the funds she had provided to the deceased in around 2012:

6. [18]

   On 2 June 2017, the deceased executed a will which left the whole of her estate to her husband or, if he did not survive the deceased, 60% to the Appellant and 40% to the Respondent. This was obviously contrary to the fifth of the “ingredients” of the agreement which the primary judge held had been reached between the deceased and the Respondent in 2011 or 2012: see [7] above.

7. [19]

   By affidavit of 7 December 2022, the Respondent deposed to the fact that in “probably around June 2017” she had the following conversation with the deceased as to the repayment of the “money and time … put into” the Property:

8. [20]

   On 4 July 2017, the Respondent contacted Mr Song to seek advice in relation to the funds. Mr Song sent text messages to the Respondent, which were translated from Korean, advising her that there were “3 steps available”. The Respondent and the deceased agreed to proceed with the first step proposed by Mr Song, being to “make an IOU for a loan for $300,000 …” and “$200,000 as fixed interest on which you and your mother have agreed” which would allow for the funds to be deducted “without difficulty, when the property is sold or when you succeed to the property as inheritance”.

9. [21]

   The Respondent also deposed to a conversation at the solicitor’s office on about 6 July 2017 which included the following:

10. [22]

    The primary judge also did not refer to this evidence.

11. [23]

    A file note made by Mr Song on 11 July 2017 recorded the following conversation:

12. [24]

    Mr Song’s file note also recorded that he provided the Respondent and the deceased with an English version of the Loan Agreement and asked them to return on 13 July 2017 to obtain a Korean version.

13. [25]

    In that portion of his reasons dealing with the Contracts Review Act 1980 (NSW) (Contracts Review Act) (a matter of no continuing relevance in this appeal), the primary judge referred (at PJ [93]) to what was Exhibit C at first instance, namely a letter from Cambridge Lawyers, who prepared the Loan Agreement, to Uther Webster & Evans, the Appellant’s solicitors, dated 25 January 2021. The letter noted that Cambridge Lawyers were the deceased’s “instructing solicitors back on 13 July 2017 when she entered her loan agreement with her daughter”. The primary judge indicated that he took this “as a statement that Cambridge Lawyers regarded the deceased as their client and owed their primary duties as solicitors, to the deceased.”

14. [26]

    The letter, which was admitted for all purposes, bears some light on the background to the entry into the Loan Agreement and is confirmatory of the Respondent’s account. It included the following:

15. [27]

    On 13 July 2017, the Loan Agreement was executed. It should be noted that it was styled as a Deed of Loan Agreement but it did not take effect as a Deed as it was not witnessed. Had it been executed as a Deed (as Cambridge Lawyers had advised), no question of want of valuable consideration would have arisen.

16. [28]

    The deceased executed a further will on 2 June 2020, two days prior to her death. That will provided that, after payment of the estate’s liabilities, there be left:

17. [29]

    The Property was sold in December 2022 for $2.68 million. Following the sale, the mortgage over the Property was discharged and the distributions provided for by cl 2.1 of the will ($300,000 to the Respondent and $200,000 to the Appellant) were made. At the time of the trial, approximately $2 million remained in a solicitor’s trust account awaiting distribution.

The manner in which the matter was argued at first instance

1. [30]

   Reference has already been made to the way in which the valuable consideration was particularised in the pleading: see [4] above.

2. [31]

   In his opening written submissions filed on 5 March 2024, more than a week before the hearing, Mr Ellison SC wrote:

3. [32]

   In her opening written submissions, Ms Bailey, who appeared for the Appellant at first instance, contended that:

4. [33]

   There were no final written submissions but simply brief oral addresses. Relevantly, the following exchange occurred between the primary judge and Ms Bailey:

Primary judgment

1. [34]

   In finding that the Loan Agreement was supported by valuable consideration and that the Respondent was accordingly entitled to judgment in the sum of $500,000 plus interest, the primary judge (at PJ [78]-[86]) held the following:

2. [35]

   Three comments may be made about these reasons.

3. [36]

   First, they represent the entirety of his Honour’s reasoning in relation to the issue of consideration.

4. [37]

   Second, the primary judge did not address an important and indeed central part of the argument that had been expressed both in writing and orally by the Appellant at first instance, as reproduced at [32] and [33] above. This was regrettable, and the failure to address that argument is an aspect of the appeal.

5. [38]

   Third, at PJ [83], the primary judge mistakenly inverted the parties in the sense that Party A, who was the deceased, did not advance or indeed lend any moneys to Party B, the Respondent. Moneys were advanced to Party A by Party B and her husband Dominic. It was common ground that [83] contained a misdescription but nothing ultimately turns on that.

Consideration

1. [39]

   The Appellant contended that the central error in the reasoning of the primary judge was that his Honour did not make any finding that any money was presently repayable by the deceased to the Respondent at the time the Loan Agreement was made. Further, it was contended that his Honour’s primary findings of fact, and the evidence, were contrary to any such finding with the consequence that the conclusion of forbearance lacked a factual basis. The Appellant also submitted that the primary judge did not find, nor did the Respondent allege, that it was a term of the First Agreement, that the deceased would “repay” the Respondent the equity provided to her. The Appellant then submitted that “[r]egrettably, and in error”, the primary judge did not engage with the submissions that had been put both in writing and orally, and that his Honour “made no finding as to whether there was any presently owing debt of the Deceased to Ms Park as at 13 July 2017.”

2. [40]

   As has already been observed, the primary judge did not engage with the central submissions made by the Appellant on the question of forbearance, and made no finding as to whether there was any presently owing debt to the Respondent as at the date the Loan Agreement was entered into. The primary judge’s reasoning also did not engage in any real detail with the circumstances as at 13 July 2017, the date of execution of the Loan Agreement, and, in particular, the question of what the legal position was as between the Respondent and the deceased at that time for the purposes of assessing the question of forbearance. In this context, his Honour did not refer to any of the evidence identified at [19]-[21] above, nor make findings of fact in respect of that evidence.

3. [41]

   Rather, the primary judge appears to have proceeded on the twin assumptions, no doubt influenced by the language of the recitals to the Loan Agreement and the way in which the case was put, that the moneys advanced in 2012 were in fact in the form of a loan and were repayable on demand. Neither assumption was, however, correct and both assumptions flew in the face of the primary judge’s unchallenged finding as to the “ingredients” of the First Agreement: see [7] above.

4. [42]

   That agreement was not a loan which contemplated repayment at all let alone on demand. Nor, contrary to Mr Ellison’s opening written submission, did it entail a “borrowing” of moneys. It was a “loan” only in the most colloquial sense of an advance of moneys for which there was no expectation of repayment. In point of fact and critically, the essence of the First Agreement was that the moneys advanced to the deceased would be utilised to fund an extension to the Property in return for which the Respondent would receive a number of benefits, namely permission to construct a second storey on the Property and also, separately, a granny flat; the right to move into the second storey and reside there rent free; the right to rent from the granny flat and the expectation/promise that the deceased would leave the entire house to the Respondent in her will.

5. [43]

   There being no loan in or around 2012 in relation to the First Agreement, there was therefore no loan which was repayable on demand as at 13 July 2017 when the Loan Agreement was entered into, and thus no act of forbearance which was capable of supplying the consideration for the Loan Agreement. It is hornbook law that past consideration is not good consideration: Eastwood v Kenyon (1840) 11 Ad & E 438; SAS Realty Developments Pty Ltd v Kerr [2013] NSWCA 56 at [69].

6. [44]

   As noted at [11] above, the Respondent submitted that the primary judge made an implicit finding that “the Deceased was indebted to the [Respondent] in respect of funds advanced between 2010 and 2012, and the amount was immediately repayable”, and that this was a finding open to the primary judge on the basis that the evidence supported the existence of a binding agreement between the deceased and the Respondent formed in mid-2017 as to the repayment of the funds. On appeal, Mr Ellison (who appeared on appeal with Mr Byrne) referred in his written submissions in this Court to the primary judge’s reference to the loan at PJ [83] in inverted commas, namely “loan”, presumably in recognition of the reality that the First Agreement did not entail a loan at all.

7. [45]

   The Respondent’s reference to an “implicit finding by the primary judge, by reference to the ‘loan’” entailed acceptance of two of the Appellant’s criticisms of the primary judgment, namely that there was no express finding on a critical issue, and that the First Agreement was not in fact a loan in any recognised sense of the word. For there to have been forbearance, there would have had to be an indebtedness in respect of the funds advanced in 2012, but the pleading was silent as to how any such indebtedness was said to have arisen. Mr Ellison’s opening written submissions at first instance purported to fill this gap by seeking to characterise the First Agreement as amounting to a loan “repayable on demand”: see [31] above. For the reasons already given, that conclusion was not sustainable.

8. [46]

   To overcome this point, the Respondent sought to advance on appeal a very different and far more nuanced argument but, most unfortunately for the Respondent, one that was neither pleaded nor advanced at first instance. That argument was summarised in the Respondent’s written submissions in this Court as follows:

9. [47]

   There was evidence to this effect before the Court but, contrary to this submission, it was not fully reflected in any findings by the primary judge. As already noted, for example, his Honour made no reference to the material that has been reproduced at [19] and [21] above, and his Honour’s only reference to the letter from Cambridge Lawyers, parts of which have been reproduced at [26] above, was in the context of considering an argument under the Contracts Review Act.

10. [48]

    The Respondent submitted on appeal that the evidence summarised in [46] above was unchallenged. That submission was correct but, as pointed out firmly by Mr Hochroth, who appeared with Ms Lambourne for the Appellant in this Court, that lack of challenge had to be considered in light of the very and unambiguously narrow way in which the Respondent had put her case at first instance. He submitted that counsel for the Appellant at first instance was forensically entitled not to challenge this evidence, given the way the case was formulated, and it was not open to rely on this evidence to advance a different argument for the first time on appeal, given the forensic course that had been taken on the basis of the pleading and how the case had been run at first instance. As pointed out by Ms Bailey to the primary judge in the extract of the transcript set out at [33] above, “[t]his case is not a case about a breach of that first agreement”.

11. [49]

    It is not difficult to conceive how a different case could have been advanced on behalf of the Respondent to the effect that, as at July 2017, the Respondent had a contractual claim against her mother who, by making her will in June 2017 leaving the Property to her husband, had manifested a clear intention no longer to be bound by the First Agreement, giving rise to a claim in damages that may have been compromised by the Respondent’s entry into the Loan Agreement.

12. [50]

    It is similarly not difficult to conceive how an alternative claim for money had and received or restitution on the basis of a partial failure of consideration (to the extent that the First Agreement was not contractually enforceable) may also have been formulated as giving rise to a claim, forbearance in respect of which could also have been contended to have supplied consideration for the Loan Agreement.

13. [51]

    But neither of these potential alternative arguments, and different acts of forbearance, were either pleaded or put and I accept Mr Hochroth’s argument that it was not open to the Respondent to advance them in this Court for the first time on appeal.

14. [52]

    Mr Ellison also acknowledged that he did not rely on any argument that valuable consideration for the Loan Agreement was supplied by some compromise of the amount (and value of services) that may have been advanced by the Respondent and Dominic to the deceased under the First Agreement for the purposes of undertaking the additions to the Property. Various paragraphs towards the end of the letter extracted at [26] may have supplied the basis for such an argument but, again, it was neither formulated nor put this way at first instance.

15. [53]

    It is an important principle, underscored by considerations of practical fairness and the importance of finality in litigation, that fresh arguments are generally not permitted to be advanced on appeal. Thus, in Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598 at [51], Gleeson CJ, McHugh and Gummow JJ said, referring to University of Wollongong v Metwally (No 2) [1985] HCA 28; (1985) 59 ALJR 481 at 483; Coulton v Holcombe (1986) 162 CLR 1 at 8-9; [1986] HCA 33; Liftronic Pty Ltd v Unver [2001] HCA 24; (2001) 75 ALJR 867 at [44]; and Water Board v Moustakas (1988) 180 CLR 491 at 496-497; [1988] HCA 12, that it:

16. [54]

    In the context of that particular case, their Honours said at [53] that “it is a virtual certainty that, if such a case had been run at the trial, Whisprun would have wished to cross-examine the doctors.” In the present case, it is also “a virtual certainty” that, had any of the possible alternative cases posited above been pleaded, not only would the Respondent have been cross-examined on portions of her affidavits upon which she was not tested but she may well have been tested more thoroughly or with a different forensic purpose or intent which was not necessitated by the clear and narrow way in which the case had been formulated at trial.

Orders

1. [55]

   For the above reasons, I propose the following orders:

   1. (1)

      Allow the appeal.

   2. (2)

      Set aside order 1 of the Court below made on 22 March 2024 and orders 2 and 3 made on 11 April 2024 and in lieu thereof, order that the plaintiff’s claim is dismissed with costs.

   3. (3)

      Order the Respondent to pay the Appellant’s costs of the appeal.

2. [56]

   MITCHELMORE JA: I agree with Bell CJ.

3. [57]

   ADAMSON JA: I agree with the Chief Justice.