Kang v Yoo

The Evidence in the Local Court

1. The Magistrate heard the matter over four days; on 2 September 2013, 9 September 2013, 11 November 2013 and 6 February 2014. Both Mr. Kang and Mr. Yoo gave evidence, together with others who had some involvement with either contractual negotiations, or with the operation of the business.
2. Before his Honour in translation was a "Sale Agreement", an unsigned and undated document which purports to record the details of the proposed sale by Mr. Kang to Mr. Yoo. By its terms, Mr. Yoo was to take over operation of the restaurant from 3 October 2006 and, on the basis of the conditions precedent being met, he would thereafter pay the balance of the purchase monies to Mr. Kang.
3. A further document, also in translation, was before the Local Court, that being a document signed and dated by the parties on 28 September 2006, which recorded the payment of the disputed sum, with a condition that, if a proper sale was not concluded, the money was to be refunded ("the September agreement").
4. There were a number of meetings between the parties when the proposed sale and its conditions were discussed. Mr. Kang was eager to complete the sale due to his family circumstances; Mr. Yoo did not wish to take the sale further unless a lease was obtained for him with favourable terms, and other matters were attended to by Mr. Kang, principally the change of the business from a take-away operation to a restaurant, and the provision of outdoor seating approved by council. Although each party had engaged a lawyer, many of the critical terms of the agreement were evidenced by nothing more than contrasting assertions by the parties in evidence.
5. Even where there was some evidence of actions taken by the respective legal representatives to further the sale, its meaning was disputed by the parties. An example is a letter from Mr. Kang's lawyers to Mr. Yoo's lawyers of 23 August 2006 in which a Contract for Sale was provided to Mr. Yoo for execution, with the following expressly noted: "Please note that there will be no legally binding relationship between our respective clients until formal exchange of the contracts takes place."
6. Although this correspondence was sent by Mr. Kang's lawyers, he repudiates what appears to be the plain meaning of the sentence.
7. Further legal correspondence was in evidence as to the requirements for the sale, including the negotiation by Mr. Kang of a lease for Mr. Yoo seeking conditions acceptable to Mr. Yoo.
8. On 28 September 2006 Mr. Yoo paid Mr. Kang the disputed sum. His evidence and that of his brother, who was present at the time, was that the sum was a holding deposit only. Mr. Kang's evidence was that it was an "instalment" on the purchase. The Agreement reflects the payment.
9. On 1 October 2006 Mr. Yoo took over management of Redpepper, either to help Mr. Kang (as Mr. Yoo asserted in evidence) or as a further step towards completion of the purchase of the business (as Mr. Kang asserted in his evidence). A friend or relation of Mr. Yoo began working at the premises on that date, learning the cooking techniques used.
10. On 11 October 2006 Mr. Yoo ceased managing (or occupying) the premises, as a suitable lease in his favour had not been secured. On 20 October 2006 the parties met, with Mr. Yoo's brother again present, and Mr. Yoo told Mr. Kang he could not proceed with the purchase in the absence of a suitable lease.
11. There was evidence of a letter from Mr. Yoo's lawyers confirmatory of Mr. Yoo's position, and of a further letter of 17 November 2006 which formally advised Mr. Kang's lawyers of his decision not to proceed with the purchase. Mr. Yoo gave evidence before his Honour, confirmed by evidence from his brother, that the sticking point was the proposed terms of the lease which involved a 23% increase to the rent, and required a substantial sum as a rental bond; and the failure to obtain necessary consents for the business to operate as a restaurant.
12. Contradictory evidence was led in Mr. Kang's case, to the effect that Mr. Yoo had said that he wanted to "hand the business back" because it was not going well, and expressly said that he "didn't mind" losing his "deposit".

The Conclusions of the Magistrate

1. Magistrate Favretto made orders and published his reasons on 30 April 2014.
2. In his reasons, the learned magistrate prefaced his conclusions by noting that there were subjective features of the evidence which had borne upon his determination of the issues, including 'evasive' witnesses who had to be prompted at times to answer questions in evidence.
3. It is apparent that his Honour was not impressed by any of the material witnesses, and had reservations about the veracity of aspects of the evidence of each. For that reason, the Local Court gave greater weight to objective [independent] evidence, and to what was objectively plausible in the context of contractual negotiations for the purchase of a business.
4. His Honour held that the undated and unsigned Sale Agreement, together with the September agreement, formed a concluded agreement for the sale of Redpepper, albeit subject to the fulfilment of conditions precedent by Mr. Kang.
5. He found further that two of the conditions precedent had not been met by Mr. Kang, and thus that Mr. Yoo was entitled to withdraw from the sale, with the disputed sum returned to him.
6. In reaching those conclusions the learned magistrate analysed the terms and apparent meanings of the documents, in the context of commercial negotiations. He also gave particular weight to the legal correspondence, as objective evidence of the things referred to therein, which was not subject to the sort of retrospective reinterpretation that could apply to the terms and purport of oral discussions.
7. Having concluded that, contrary to Mr. Yoo's evidence, the documents did evidence a concluded commercial contract, his Honour accepted Mr. Yoo's evidence, supported as it was by contemporaneous correspondence from his lawyer, that he withdrew from the sale agreement because Mr. Kang had failed both to negotiate a lease in terms acceptable to Mr. Yoo, and to secure necessary council consent to the operation of the business as a restaurant.
8. The corollary of that finding was that Mr. Yoo was entitled to the return of the disputed sum, because of Mr. Kang's breach of the conditions of sale. His Honour found that, "Kang's evidence that Yoo said he could keep the fifty thousand is so highly improbable as to be objectively incredulous […] (at J18)."
9. As to Mr. Kang's cross-claim, his Honour found that this claim must fail, having regard to his determination that Mr. Yoo was entitled to terminate the Sale Agreement, and in fact did so both in writing and in person, by 4 December 2006.

The Appeal

1. In an amended summons filed on 21 August 2014 Mr. Kang seeks to initiate an appeal against the whole of the decision of the learned magistrate, on the following grounds: "The Judgment of Favretto LCM 30 April 2014 be set aside; On the basis that the learned magistrate erred at law in deciding the matter The learned magistrate decided the matter against the evidence The learned magistrate made a finding without evidence with which to make such a finding The learned magistrate failed to give adequate reasons The learned magistrate failed to address the defence in his reasons in respect to the Judgment. Paragraphs 37 to 39 the learned magistrate fails to identify the correct vendor of the business which is contrary to the evidence and as such falls into error Paragraphs 46 and 47 the learned magistrate determined correctly and according to law that the sale agreement was a concluded contract in or about August but found against the evidence that the entry of a new lease was a term of the agreement and as such falls into error. And specifically that Kang was to obtain a new lease on the terms alleged by Yoo and as such falls into error Further the judgment failed to make a finding in respect to the alleged repudiation of the contract identified at paragraph 2 of the judgment and as such falls into error At paragraphs 52 and 54 the learned Magistrate makes a finding which is inconsistent with the evidence referred to at paragraphs 13, 14, 15, 16 & 17 of the judgment and as such falls into error The learned magistrate erred in dismissing the Cross Claim as this finding is clearly against the evidence and the finding of the learned magistrate at paragraphs 46 & 47 of the judgment and as such falls into error."
2. The grounds as pleaded involve considerable overlap, and are expressed in a confused and confounding form. Although the distinction is not always easy to draw, even those grounds which purport to assert error of law seem in fact, to depend upon a contention that the conclusions of fact drawn by the learned magistrate are erroneous. All but grounds 1a and 1d are reliant on their face upon asserted error in the finding of facts by the Local Court.
3. Whilst 1a is pleaded as an error of law, the nature of the error is nowhere identified, and it can only be something of a "catch-all" ground which must, having regard to the balance of the grounds and the submissions in support, rely principally upon purported error of fact.
4. Ground 1d complains that the reasons given by the learned magistrate for his orders were inadequate. This appears to be the only ground which raises a question of law.
5. What Mr. Kang evidently seeks to do is to attempt to revisit findings of fact unfavourable to him that were made by his Honour, and have this Court reach a different conclusion.
6. The jurisdiction of this court to determine an appeal from a decision of the Local Court is grounded in ss39 and 40 of the Local Court Act 2007. An appeal may be brought as of right regarding questions of law, but the leave of the Court is required to determine questions of mixed law and fact.
7. The question of leave to appeal was explored by Gleeson CJ in Swain v Waverley Municipal Council [2004] HCA 4; (2004) 220 CLR 517 at [2]: "In the common law system of civil justice, the issues between the parties are determined by the trial process. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal. Most decisions of trial courts are never the subject of appeal. When there is an appeal, the appellate court does not simply re-try the case. Depending on the nature of the appeal provided by statute, Courts of Appeal act according to established principles by which their functions are constrained. Those principles reflect the primacy of the trial process and the practical limitations upon the capacity of a court which does not itself hear the evidence justly to disturb an outcome at first instance."
8. This Court does not sit to re-determine questions of fact, or to re-hear factual disputes at large. That is particularly so where issues of credit are critical to the determination of fact, as in this matter.
9. His Honour had the considerable advantage, not enjoyed by this Court, of seeing the parties and their witnesses give evidence. It is clear from his Honour's reasons that his conclusions were significantly informed by the demeanour of the critical witnesses, together with the content of the evidence.
10. Having been in a position to make that assessment of credit, his Honour placed greater weight upon the documentary evidence and, in particular, what the letters sent by the respective legal representatives acting on the proposed sale established.
11. This Court should only disturb his Honour's conclusions of fact where there is some identifiable error: where the judge acted on a wrong principle, allowed extraneous or irrelevant matters to guide or affect him, mistook the facts, or did not take into account some material consideration.
12. Although Mr. Kang submitted to the Court that the appeal as a whole is one which raises a question of law, I cannot accept that submission. With the exception of ground 1d, there appears to be no question of law alone to be determined.
13. Ground 1d may be regarded as an appeal brought pursuant to s.39 (1) of the Local Court Act 2007. The balance of the grounds of appeal relies on asserted factual error and, on the interpretation most favourable to Mr. Kang, raises mixed questions of fact and law. Those grounds may only be advanced by leave.

Determination

1. Mr. Kang contends by his written submissions that his Honour's findings were not open to him, or are unsupported, on the evidence, and that the reasons given for the conclusions reached are inadequate.
2. It is not enough in an appeal of this nature to complain that the trial judge was in error because he or she did not accept, or did not accept in its entirety, the appellant's case at first instance. Mr. Kang does not appear to come to terms with the fact that his Honour made findings in some respects that were contrary to Mr. Kang's evidence, because Mr. Kang was not accepted by him as a wholly reliable witness. That does not of itself bespeak error.
3. A litigant may not like the decision a court makes, but that is to be distinguished from error of the sort this Court would move to correct.
4. The written submissions for Mr. Kang do not greatly assist the Court in identifying with precision where and how purported errors have arisen; they do not address the grounds specifically as pleaded, and they raise other complaints of error not encompassed by the grounds.
5. In his written submissions the first issue dealt with in any substantial way is that relating to the correct identification of the parties to the contract for sale (ground 2, although it is not referred to as such in the submissions, being set out in a list of "errors" which do not correspond to the grounds).
6. Whilst given prominence in submissions before this Court, this issue does not seem to have had the same emphasis at first instance. All of the documents filed in the lower court by Mr. Kang were filed in his name, and no material distinction seems to have been drawn by him in the Local Court proceedings between him and his company. There was some evidence concerning the involvement of Mr. Kang's company, and some brief reference to the company in written submissions filed in the Local Court for Mr. Kang, but the question of the contracting parties was not central to his Honour's determination.
7. His Honour approached the matter - consistent with all of the evidence and the approach of the parties - on the basis that the real issue to be determined related not to the identity of the contracting parties, but to the existence and terms of any contract.
8. The Civil Procedure Act 2005 requires the Court and the parties in any litigation to identify and address the real issues between the parties; it is unnecessary and unhelpful in this Court to focus on what was a collateral issue in the Local Court and attempt to give it significance that it does not have. Drawing a distinction between Mr. Kang and his company was not relevant to the determination of the real issue in the Local Court and it was not necessary for his Honour to devote inordinate attention to this issue. The magistrate approached the matter on the basis that the parties to the contract, if it existed, were Mr. Kang and Mr. Yoo. That approach was entirely open to him.
9. Mr. Kang next deals in his written submissions with "the lease controversy" and asserts error in his Honour's conclusions of fact about this issue. Again, there is no attempt by the plaintiff to identify the relevant grounds, or relate the submissions to the grounds (which appear to be grounds 3 and 4).
10. The argument is addressed in four short paragraphs which do not attempt to consider the evidence before the Court, address the substance of his Honour's conclusions, or to relate that material to the grounds as pleaded. The submissions unhelpfully assert that the magistrate went "off on a frolic of his own", without providing any analysis of the evidence or reasons in support of that claim.
11. Contrary to the bare assertion that the conclusions drawn by his Honour were contrary to all evidence, there is a degree of evidence independent of the two protagonists that the Local Court plainly relied upon in this regard. Whilst Mr. Kang contends that it was no part of an agreement with Mr. Yoo that he was obliged to obtain lease terms for the premises that were acceptable to Mr. Yoo, there was evidence before the Court to demonstrate that Mr. Kang attempted to do precisely that. Mr. Kang had taken steps from about July 2006 to negotiate lease terms that would be favourable to Mr. Yoo. Correspondence before the Court confirmed the steps he had taken in this regard.
12. Despite Mr. Kang's denial in oral evidence of any term of the sale agreement that required him to secure an acceptable lease for Mr. Yoo, it was open to his Honour to infer the existence of a term of this breadth by reference to evidence of Mr. Kang's conduct. It was equally open to his Honour to reject Mr. Kang's oral evidence in that respect.
13. Whilst it not clear to me what "frolic" his Honour is said to have embarked upon, I see nothing in the evidence or reasons to conclude that he did other than draw a conclusion that was available on the evidence. That Mr. Kang does not like or agree with that conclusion is not to the point.
14. In sections headed "The Parole Evidence Rule" and "Repudiation and the Cross Claim" Mr. Kang appears to address ground 5 - 7. The complaint as argued is that his Honour failed to distinguish between termination of the contract by Mr. Yoo or his repudiation of it. Since his Honour dealt with the factual circumstances surrounding Mr. Yoo's withdrawal from the sale process at some length, and set out the evidence he accepted in that regard, Mr. Kang's complaint appears to be one of semantics rather than substance.
15. It is not necessary for a trial judge to use any particular form of words in a judgment. What is necessary is that the issues between the parties are identified and decided, with an adequate account of the reasons for the conclusions of the court given.
16. Here, his Honour concluded that the sale agreement and the September agreement were contractual agreements, but that Mr. Yoo was entitled to withdraw from the contract because Mr. Kang had failed to fulfil all of the conditions precedent for the sale to take place. His Honour set out the evidence accepted by him in that regard.
17. Nothing further was required.
18. Neither was anything further needed as reasons for the conclusions made by the court (ground 1d).
19. The dictates of justice require that an adequate statement of reasons is provided to the parties. The relevant principles are summarised in Wiki v Atlantis Relocations (NSW) Pty Ltd [2004] NSWCA 174; (2004) 60 NSWLR 127 at [56] - [59]: "A miscarriage of justice can arise where what is and is not disclosed in a judge's reasons is a breach of the principle that justice must not only be done but must be seen to be done: Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430 at 431, per Mason P. As McHugh JA explained in Soulemezis v Dudley (Holdings) Pty Ltd (1987)10 NSWLR 247 at 279, one of the purposes served by a judicial decision is that: "... [I]t enables the parties to see the extent to which their arguments have been understood and accepted as well as the basis of the judge's decision". Accordingly, as McHugh JA said (at 278-279): "... [A] judicial decision must be a reasoned decision arrived at by finding the relevant facts and then applying the relevant rules or principles. A decision which is made arbitrarily cannot be a judicial decision; for the hallmark of a judicial decision is the quality of rationality ..." In Flannery v Halifax Estate Agencies Ltd [2000] 1 WLR 377; [2000] 1 All ER 373, which was followed in Moylan v NutraSweet Co [2000] NSWCA 337, Henry LJ said (at 381-382; 377-378) in regard to the general duty of a judge to give reasons for his or her decision (particularly in relation to expert evidence): "(1) the duty is a function of due process, and therefore of justice. Its rationale has two principal aspects. The first is that fairness surely requires that the parties especially the losing party should be left in no doubt why they have won or lost. This is especially so since without reasons the losing party will not know ... whether the court has misdirected itself, and thus whether he may have an available appeal on the substance of the case. The second is that a requirement to give reasons concentrates the mind; if it is fulfilled, the resulting decision is much more likely to be soundly based on the evidence than if it is not." It is, of course, well settled that a judge does not need to refer to all the evidence in the proceedings or to indicate which of the evidence is accepted or rejected. The extent of the duty to give reasons depends upon the circumstances of the individual case: Mifsud v Campbell (1991) 21 NSWLR 725 at 728 (per Samuels JA, with whom Clarke JA and Hope A-JA agreed). But it is not for nothing that in some bilingual countries the judgment of the court is given in the language of the unsuccessful party. The proper administration of justice requires reasons to be given in a form, firstly, that will enable the losing party to understand properly the grounds upon which the case was lost, and, secondly, that will not, effectively, frustrate the losing party's right of appeal: Public Service Board of NSW v Osmond (1986) 159 CLR 656 at 666-667."
20. In Beale, Meagher JA considered at p 443, that there are three fundamental elements of a statement of reasons. His Honour opined that a judge should; "1. refer to relevant evidence, but there is no need to refer to it in detail; 2. set out any material findings of fact and any conclusions or ultimate findings of fact reached; and 3. provide reasons for making the relevant findings of fact (and conclusions) and reasons in applying the law to the facts found."
21. In a twenty page judgment, his Honour identified the issues, referred to relevant parts of the evidence and the conclusions he had drawn from it, and set out his findings and the basis of them.
22. His Honour's judgment could not reasonably be regarded as inadequate.
23. I am satisfied that his Honour considered the facts carefully, reached his determination fairly and appropriately, and set out his reasons for the orders made in a manner which should have been readily comprehensible to the parties.

The cross-appeal

1. Mr. Yoo (the plaintiff in the lower court) filed a cross summons in this Court on 21 July 2014. The grounds of appeal are based in his Honour's finding that the Sale Agreement was a binding contract between the plaintiff and the defendant. His appeal grounds are: "The learned trial Magistrate's ("Magistrate") finding that the Sale Agreement (defined in paragraph 2 of the reasons for decision in the lower court ("Reasons")) was a concluded contract was in error and attenuated by the following related errors: The Magistrate (at [45] of his reasons), assumed that the self-reference in an unsigned document to its being a contract provides evidence for that document's being a contract; yet acceptance is an anterior question needing to be established by evidence. The Magistrate (at [45] of his reasons), assumed that the defendant's failure (the plaintiff in the lower court) to refer to the Sale Agreement in his evidence-in-chief constituted by the defendant that the Sale Agreement was a concluded contract; yet this did not account for the facts that at the time of the service of that evidence: the defendant (then plaintiff) did not count on the document known as the Sale Agreement to establish any part of his own case and, as such, should not be expected to refer to that document; and ii) the cross claim by the plaintiff (then defendant) had not yet been filed The Magistrate failed to provide reasons as to why his Honour considered the Sale Agreement to be a contract rather than the parties' settling on the basis as to what the terms of a contract should be if made and failed to differentiate between these concepts; The Magistrate assumes in paragraph 48 of the Reasons that the plaintiff's (then defendant's) desire to have a sale of the relevant business by 30 September 2006 evidences the Sale Agreement being a contract; yet the desire of one party for there being a contract is an insufficient condition of a contract existing at law; In paragraph 48 of the Reasons the Magistrate, without giving reasons, assumes that [sic] a reference in a document to a future contract possibly coming into existence counts as a qualification of an earlier contract; In paragraph 48 of the Reasons the Magistrate assumes that the payment by the defendant (then plaintiff) of $50,000.00 to the plaintiff (then defendant) implicates the Sale Agreement as being a contract when the Sale Agreement (considered as a contract or otherwise) does not refer to such a payment. The Magistrate, in evaluating whether the Sale Agreement constituted a contract, failed to account for the plaintiff's (then defendant's) own solicitors saying to the defendant's (then plaintiff's) solicitors on 23 August 2006 that "there will be no legally binding relationship between our respective clients until formal exchange of contracts takes place." In paragraph 50 of the Reasons, the Magistrate assumes that: Parties would only retain solicitors and incur expenses associated with solicitor representation if an earlier contract had come into existence; and In aid of the assumption immediately above, refers to the parties' having engaged solicitors in July 2006 when on no parties' evidence was the Sale Agreement in existence at that time."
2. The cross-summons not only opposes the appeal and seeks costs but also seeks to appeal findings of fact made by His Honour. It appears to suffer from the same unwillingness to accept conclusions of fact reached by his Honour, the Local Court having found that Mr. Yoo was not a wholly credible witness.
3. When questioned about the basis of the cross-summons, counsel for Mr. Yoo conceded before this Court that Mr. Yoo had been "forced" to file process to protect his position in light of Mr. Kang's proposed appeal. It was made clear that Mr. Yoo only sought to proceed with his cross-appeal if the Court upheld Mr. Kang's complaints.

Conclusion

1. Having considered the evidence before the Local Court, and his Honour's reasons for the orders he made, I am unable to identify error such that this Court should intervene.
2. Excluding ground 1d, I would refuse leave to bring the appeal. Had leave been granted I note here that I would have dismissed it for want of merit.
3. In relation to ground 1d, the complaint has not been made good by the plaintiff, and the appeal should be dismissed.
4. In that event, it is not necessary to consider the cross-appeal, having regard to the concession made by counsel for Mr. Yoo.
5. Accordingly, the orders of the Court are as follows: 1. Ground 1d is dismissed. 2. Leave to appeal on the remaining grounds is refused. 3. Costs of the plaintiff's appeal on an ordinary basis as agreed or assessed are to be paid by the plaintiff (Kang) to the defendant (Yoo). 4. Yoo bears his own costs with respect to the cross-appeal in this Court.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 June 2015