Pitak v Sudtipatudom

These proceedings should have been a relatively straightforward matter concerning a dispute between two couples over the contract between them for the operation of a café in Loftus Lane near Circular Quay through the vehicle of the second defendant (now in liquidation). The references to two “couples” in these reasons is informal, because the first defendant’s wife, while involved in keeping the accounts for the café, was not a party to the contract.

Unfortunately, a series of procedural, factual and legal distractions meant that it was far from straightforward, including a three to four day hearing escalating to a six day hearing in two parts separated by several weeks with further written submissions. One, but only one, of the reasons for the extra time being required was the regrettable underestimation by the parties of the time that would be required to take the evidence of three of the four witnesses with the assistance of interpreters from the Thai language.

Once the legal and factual distractions were cleared away, the issues in dispute reduced to two, the most important being the existence of a particular term of the contract. It was common ground that each couple would contribute to 50% of the expenses of the café. The plaintiffs also contended for a term that “moneys and profits generated by the café would be divided between the two couples equally” (emphasis added). The first defendant admitted that the contract provided for profits to be divided equally. There was no dispute that the café never generated a profit. However, the plaintiffs pressed a claim for half of “moneys” (not profits) said to have been distributed to the first defendant or his wife on his behalf.

The second dispute was a factual one concerning the alleged payment of funds by the plaintiffs towards the operation of the café (the operating expenses claim).

For the reasons which follow, the Court accepts the first defendant’s submissions as to the relevant contractual term. The café never having generated any profits, the plaintiffs’ claim for damages fails. Similarly, the plaintiffs have failed to prove that they paid the funds which were the subject of the operating expenses claim.

With no disrespect intended, in these reasons the Court will refer to the parties by the anglicised names that they use in Australia. The first and second plaintiffs are Nat and her husband Sean respectively. The first defendant is Archie. Archie’s wife, who was not a party to the proceedings, is Mindy. The second defendant is Sai Lam Tan Pty Ltd (ACN 615 713 856) (in liq) (SLT).

Mr A Rogers of Counsel appeared for Nat and Sean. Mr J R Young of Counsel appeared for Archie. There was no appearance for SLT.

One of the large factual distractions in this case was the background to the incorporation of SLT and the motivation for Nat, Sean and Archie to enter into the contract. Much time was devoted to the proposition that Archie had agreed to sponsor Nat and Sean for visa purposes (Nat and Sean originally being in the country on student visas, but they are now permanent residents). All of this proved irrelevant.

There was no dispute that, in broad terms, Nat, Sean and Archie agreed that SLT would be incorporated with Archie as its sole shareholder and director, but with no active responsibilities, for the purpose of SLT being the legal owner of a café operated by Nat and Sean at Annandale (Annandale café).

Archie was not to have, and did not have, any involvement in the Annandale café. He received no payment or reward of any kind for his role in relation to SLT as the operator of the Annandale café. However, the fact that SLT was in law the owner and operator of the Annandale café later became part of the disagreement between Nat and Sean on the one hand, and Archie and Mindy on the other.

In 2018, the parties agreed they would undertake a new venture with SLT as the vehicle to run the café. In the events which happened, SLT took out a lease for the café, undertook the fit out and operated the café.

There is no dispute between Nat, Sean and Archie that they had agreed that Nat and Sean (of the one part) and Archie (of the other part) would each contribute to SLT 50% of the operating expenses for the café. Nor was there any dispute that any profits would be divided equally between those same parties. Mindy (a nurse by profession) undertook the role of bookkeeper for the café.

There was a subsidiary dispute between the parties as to whether Nat and Sean’s entitlement to receive 50% of the profits subsisted only so long as they were contributing 50% of the expenses. It was not necessary for me to decide this point. Were it necessary, I would have reached the conclusion that the agreement between the parties was to that effect.

The main issue was whether the terms of the contract included an entitlement in the plaintiffs to receive fifty percent of “moneys generated by the business operations of the” café (emphasis added).

In accordance with the contract, the parties did make contributions to the expenses of running the café. The café operated from 2019.

Unfortunately, relations between the parties deteriorated. At some time (about which there was a dispute that it is unnecessary to resolve), Nat and Sean ceased to make contributions to the running expenses of the café. They alleged that Archie had told them they were no longer to be part of the café and that he would not return the Annandale café to them, which was also under his legal control as the sole director and shareholder of SLT.

These proceedings were commenced in December 2021. At the time of the commencement of the proceedings, SLT remained in operation. However, in May 2023, the company was wound up.

On 11 August 2023, the Court made orders including:

At the final hearing, no relief was pressed against SLT and, as I have already recorded, no one appeared on its behalf.

In the events which happened, a company related to Mindy purchased the café’s assets from the liquidator of SLT. Accordingly, the café continues to trade under the ownership of Mindy’s company.

Subject to some refinements and concessions at the hearing, the plaintiffs’ case proceeded by reference to an amended statement of claim filed on 13 September 2024 (ASOC). Given the winding up of SLT, a substantial and obvious purpose of the amendments was an attempt to fix Archie with personal liability in lieu of SLT.

The ASOC sought relief including (underlining in original to show amendments):

By the conclusion of the hearing, Archie did not resist an order that he transfer his share in SLT to the plaintiffs. However, I do not regard that as a substantial concession, given that relief was not the focus of attention during the hearing and relates to a company in liquidation.

The terms of the contract pleaded by the plaintiffs in the ASOC were:

There were no particulars appended to paragraph 6 of the ASOC and no other terms of any agreement between the parties were pleaded.

Paragraph 6 of the ASOC was responded to in Archie’s defence (numbering as in original, emphasis added):

In their reply to the defence, the plaintiffs pleaded to this paragraph of the defence by repeating paragraph 6 of the ASOC and saying “that there was no contractual term that [Nat] would work in the café”.

As I have already recorded, notwithstanding its absence from the ASOC, the parties conducted the case on the basis that there was a term to the effect of that I have emphasised in Archie’s defence in [26] above.

However, the plaintiffs sued for half of what were described as “moneys” (not profits) that had been “distributed” to Archie (or to Mindy on behalf of Archie) from the “business operations of the café”. To succeed in that claim, the plaintiffs had to establish that the contract included the term alleged in paragraph 6(iii) of the ASOC (see [24] above).

When I asked Mr Rogers what the alleged term that, in addition to profits, the plaintiffs would receive 50% of “moneys generated by the business operations of the” café (emphasis added) actually meant, he explained that it referred to “Moneys which are available in the accounts, whether bank accounts or otherwise, of the business, available to be distributed to, as it turns out, Archie in the circumstances, as we say they are, quite independently of profits” (Tcpt, 27 August 2024, p 356(43) – (46)). He later submitted “The fact that the moneys were distributed, we say, means that by definition they were available, and the allocation ought to have been fifty-fifty, not 100% to Archie and nil to Nat and Sean” (Tcpt, 27 August 2024, p 357(12) – (14)).

I gave Mr Rogers an opportunity to formulate the term, which was to be implied, that he submitted would entitle his clients to half of the amounts paid out of the café business to Archie. In a further written submission this implied term was formulated as:

The submission continued “It can be conceded that there was also an implied term that the parties would share the costs of outgoings equally”. As I have already noted, whether express or implied, a term to this effect was common ground.

Mr Young did not require the formality of an amendment in response to Mr Rogers’ submission, on the basis the Court gave Mr Young an opportunity to make further written submissions. He did so, to which there was also a short final reply from Mr Rogers.

The primary evidence on both sides in relation to the contract was, to say the least, thin.

Nat’s affidavit evidence was:

Mindy replied to Nat’s evidence:

Sean’s affidavit evidence was:

Archie’s affidavit evidence was:

Sean’s affidavit in reply denied Archie’s version reproduced in the preceding paragraph.

The cross-examination of the witnesses did not take matters any further in assisting the Court to determine what was said that would evidence the terms of the contract.

In approaching the parties’ evidence about the contract, I have taken the following into account:

Having seen the parties and Mindy give their evidence and taking into account their various affidavit evidence, the Court finds that the contract between Nat, Sean, Archie and SLT was to the effect that while operated by SLT, the café would be run on the basis that Nat and Sean, of the one part, and Archie, of the other part, would each be liable for 50% of the expenses required by SLT to set up and run the café in return for 50% of the net profits generated by the café. The simplicity and obvious logic of this arrangement as to expense and profit sharing makes it, in my opinion, the most plausible between parties who, with no disrespect intended, were not commercially sophisticated people but (then) friends going into business with each other.

The term proposed in paragraph 6(iii) of the ASOC insofar as it refers to “moneys” is vague and impractical. Turning to Mr Rogers’ explanation (see [30] above), the question becomes what is the difference between profits and moneys available for distribution? The term is not reflected in the primary evidence. The Court rejects the suggestion that something different from and in addition to net profits was agreed between the parties to be distributed between them.

Similarly, I accept Mr Young’s submission that the implied term is “a quite convoluted way to reformulate [6(iii)]” of the ASOC and that it does not satisfy the test for implication of a term set out in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; [1982] HCA 24. In particular, the contract is effective without it; it is not so obvious that it goes without saying; and, with no disrespect to Mr Rogers, it is not capable of clear expression. There is much rhetorical force in Mr Young’s submission that “it cannot seriously be suggested that persons such as Sean, Nat and Archie would have dreamed of such a term”. Despite that force, insofar as the submission departs from the objective theory of contract, it plays no part in the Court’s conclusion.

There are two further matters to be noted.

First, in reaching the conclusion in [42] above, I have not overlooked the reference in Archie’s evidence (see [38] above) to “cash”. However, that account is denied by Sean. In any event, I accept Mr Young’s submission that even if the parties shared the cash in the café’s till at the end of a day’s trading (and there is evidence they did), no complaint is made in the proceedings by the plaintiffs about that cash. There is no evidence about how that cash was treated in the accounts of the café, so no more can be said about it.

Second, in his final submissions in reply, while accepting there was sharing of cash, Mr Rogers sought to overcome the difficulties in his case by eliding “moneys” with “profits”:

The Court rejects that submission. The Court’s task is to determine the terms of the contract, and for the reasons already given, the relevant term was for a sharing of net profits and nothing more. Archie tendered an expert accounting report which was the basis for the common position that the café did not make a profit at any relevant time. Nat and Sean’s claim for half of the other “moneys” fails. Whatever those “moneys” were, they have not demonstrated a contractual or other right to half of them, or at all.

Nat and Sean’s other claim that was pressed was for operating expenses of $77,745.32 in cash described in the ASOC as “operating expenses – cash payments to [Mindy]”. This was part of a larger claim for $392,073.19. However, in closing submissions, Mr Rogers quite fairly and properly conceded that $314,327.87 of the claim could not be maintained against Archie for reasons it is unnecessary to record.

The balance of the claim was pressed under the allegation in [8] of the ASOC that “In pursuance of the agreement referred to in [6] hereof [set out in [24] above] the Plaintiffs in and/or after 2018 made payments totalling [$77,745.32] at the direction of the First Defendant for and on behalf of the First Defendant and the Second Defendant…”. Insofar as the operating expenses had been paid to Mindy, Mr Rogers also accepted (correctly in my respectful opinion) that in circumstances where Mindy was not a defendant, Nat and Sean could only succeed against Archie if she received the funds as agent for Archie in his personal capacity.

As Mr Rogers himself acknowledged, this claim was “counterintuitive”. The operating expenses were said to have been paid by Nat and Sean to Mindy in accordance with their obligation to pay half the expenses of the café. Therefore, it was acknowledged that there would be no claim if Archie admitted that the money had been received. However, Archie (and Mindy) denied the operating expenses had been received. Mr Rogers submitted that this meant that if the Court found the operating expenses had been paid, it followed that the operating expenses had not been applied to the café but for other purposes and was repayable to Nat and Sean accordingly.

Mr Young’s primary attack on this claim, and which the Court accepts, is that the plaintiffs fail at the outset because they have not proved that the operating expenses were paid.

There were two pieces of evidence in support of the claim.

The first was this bare statement in [63] of Nat’s affidavit of 1 June 2022, “I made the following cash payments to [Mindy] on the dates set out below” followed by a list of precise dates and payments between 4 July 2019 and 9 March 2021 totalling $77,745.32.

The second was this evidence from Nat in her supplementary affidavit of 1 July 2025:

Archie’s defence denied the allegation of these payments, and in his affidavit evidence he said he was not aware of any such payments being made to Mindy. In her affidavit of 2 July 2025, Mindy denied ever receiving the operating expenses.

Three criticisms of Nat’s evidence were made by Mr Young (and which the Court accepts):

While Mr Rogers contended that the evidence was not strong, he submitted that it was enough to move the evidentiary onus onto Archie. I disagree. The onus was on the plaintiffs to satisfy the Court on the balance of probabilities that the operating expenses had been paid to Mindy in cash and on the dates alleged. That requires the Court to reach a state of actual persuasion of the existence of the fact alleged. The concept of actual persuasion was elucidated by Emmett J (as his Honour then was) in Warner v Hung, in the matter of Bellpac Pty Ltd (Receivers and Managers appointed) (in liq) (No 2) [2011] FCA 1123; (2011) 297 ALR 56:

Without more, a bare assertion by a plaintiff of a cash payment to a defendant who denies receipt will generally be insufficient to satisfy the Court such a payment was made. Taking into account the criticisms advanced by Mr Young, in particular the plaintiffs’ inability to provide any independent documentary or other corroboration for any of the 56 payments said to comprise the operating expenses (and ranging from $20.45 to $5,000), I am unable to reach the requisite state of actual persuasion on the evidence such as it is that the operating expenses were ever paid. The claim for operating expenses therefore also fails.

For completeness, there were at least four other reasons why this claim would not have succeeded.

First, my overall impression of Mindy was that she was meticulous in her account keeping. This adds weight to her denial that the operating expenses were ever received and it was not put to her that they had been received and applied to something other than the café.

Second, and related to the preceding point, the allegation (see [49] above) was that the operating expenses were paid to Mindy at Archie’s direction. Archie worked in the café as a barista. I accept he worked diligently in that role. However, having seen Archie give his evidence, it became clear beyond serious dispute that Archie had no real idea about, or responsibility for, the finances of the café. He left that to Mindy and I accept his repeated evidence that Mindy, rather than him, was the repository of all knowledge about financial matters. In those circumstances, I do not accept the suggestion, to the extent it was advanced by the plaintiffs, that Archie would have been the one directing Mindy to ask for the operating expenses to be paid to her. Were it necessary to make a finding, it would be that Mindy was, in effect, the financial controller of the venture operated by SLT.

Third, and again following from the preceding point, if a finding of agency was required, it would be that Mindy was acting on behalf of SLT in obtaining funds for the café, given that SLT was the vehicle for the operation of the café. In the unlikely event that Archie may have given Mindy any direction about the finances of the café, I would (if necessary) have found he did so in his capacity as the director of SLT.

Fourth, the further case advanced by Mr Rogers (that the operating expenses, if received, had not been applied for the café and should be repaid accordingly) was not pleaded.

Finally, it is necessary to record two other matters in relation to the operating expenses claim.

First, Nat gave inconsistent evidence in her 1 July 2025 affidavit about how the operating expenses were alleged to have been paid. I have set out her first explanation in [55] above. Later in her affidavit, referring to many of the same payments, she contended that, owing to a Thai cultural custom, she gave the money to Sean to pay to Mindy. I do not accept that evidence because it is inconsistent with her first evidence on the topic and there is no admissible evidence of the existence of such a custom.

Second, Mindy suggested in cross-examination that the plaintiffs had reconstructed the operating expenses claim by claiming to have contributed half of certain payments evidenced in SLT’s bank records. It is not necessary to decide whether it is a reconstruction. It is enough to conclude, as I do, that it is insufficient proof to point to what were said to be expense payments made from SLT’s account and assert, without more, “we provided half of that in cash”.

There will be an order, not ultimately opposed by Archie, for the transfer by Archie of his share in SLT to the plaintiffs. The proceedings will otherwise be dismissed. The parties will be given an opportunity to address as to costs. My preliminary view is that costs should follow the event so that the plaintiffs should pay Archie’s costs of the proceedings.

As finally calculated, the plaintiffs’ claim was for just over $800,000 in damages, of which some $300,000 was abandoned in closing submissions. As a contract claim in that amount, it was well within the jurisdiction of the District Court. However, as the Court has found to be increasingly common, the matter was commenced in this Court because a declaration and consequential relief was sought in relation to the share Archie held in SLT. It must be observed, with no disrespect intended, that the equitable claim was not complex.

The jurisdictional limit of the District Court in common law actions such as an action for contract damages is currently $1,250,000 (District Court Act 1973 NSW, s 4(1)). In relation to equity proceedings, the District Court’s jurisdiction is set out in s 134 of the Act:

In the present case, in my respectful opinion, it is likely that the District Court would have had jurisdiction to make the declaration sought by the plaintiffs under s 134(1)(e) of the Act. Nevertheless, it is well understood that many in the profession are of the view that the equitable jurisdiction of the District Court is not always clear in a given case, such that prudence dictates proceedings should be commenced in this Court. Alternatively, there are also many cases where what would otherwise be an unremarkable money claim within the jurisdictional limit of the District Court has added to it a superfluous, if not spurious, equitable claim to justify commencement of proceedings in this Court.

Section 149 of the Civil Procedure Act 2005 (CPA) specifies the jurisdiction of a lower court in relation to a matter which has been transferred from a higher court:

There are many cases in this Court which, but for doubt about the District Court’s equitable jurisdiction, could and should be commenced in the District Court. However, a frequently encountered problem is the terms of s 146 of the CPA:

The problem is the requirement for the Supreme Court to be satisfied that the proceedings “could properly have been commenced in the District Court”. This often invites an excessively technical enquiry where equitable relief is claimed that ends in uncertainty as to whether the proceedings “could properly have been commenced in the District Court”.

In my respectful opinion, the Court should have a broader power to transfer proceedings to the District Court to overcome the oft-expressed doubts about the scope of the District Court’s equitable jurisdiction. To that end, I suggest consideration be given to introducing an additional ground for transfer as an alternative to the “could properly have been commenced” test. That alternative ground would be that the Court was otherwise satisfied that the transfer of the proceedings would advance the overriding purpose set out in s 56 of the CPA. Had such a power existed, this case would have been an appropriate one to be transferred to the District Court.