Lee v Kwak [2017] NSWDC 202 | Case summary

District Court of NSW|2017-03-21

Solicitors: H & H Lawyers (Plaintiff, Cross-Defendant on the Second Cross-Claim) Pelosi & Associates (Defendant and Cross-Claimant on the First Cross-Claim, Cross-Defendant on the First Cross-Claim, Cross-Claimant on the Second Cross-Claim) File Number(s): 2014/340072

Judgment

These proceedings relate to dealings between a number of members of the Australian-Korean community in the period 2010 to 2013. The plaintiff, Mr Bonney Lee, claims that the defendant, Mr Gregory Kwak, owes him $50,000 plus interest as a result of a loan between them. Mr Kwak denies that and says that any loan was between Mr Lee and a company of which Mr Kwak was a director and shareholder, Woorifarm Pty Ltd ("Woorifarm"), and that the loan was only in the sum of $35,000. Woorifarm sues Mr Lee in tort for alleged inducing breach of contract, interference with contractual relations and injurious falsehood. These torts are denied by Mr Lee.
In the event that one or more of these torts is established by Woorifarm against the plaintiff, a question arises as to the value, if any, of the loss of a chance of potential profit arising from an alleged agreement between Woorifarm and an entity representing the Democratic People's Republic of Korea ("North Korea") in November 2012.

Statement of Claim

A Statement of Claim was filed by the plaintiff in the Local Court on 18 November 2014. The proceedings have since been transferred to this court.
In the Statement of Claim the plaintiff, Mr Lee, pleads that on 8 January 2010 Mr Kwak executed a loan agreement of that date pursuant to which the defendant, Mr Kwak, agreed to borrow from Mr Lee the sum of $50,000 (paragraph 1). It is pleaded that Mr Kwak failed to repay the loan when it was due on 8 January 2011 and that the $50,000 remains outstanding under the loan agreement (paragraphs 2 to 3). It is asserted that it was a term and condition of the loan agreement that 10% annual interest would be paid on the amount borrowed and that Mr Kwak has failed to repay that sum. It is claimed that the capital sum of $50,000 with interest from 8 January 2010 is owing by Mr Kwak to Mr Lee. As at 17 November 2014, shortly before the Statement of Claim was filed, the amount sought was $74,301.37.
It is claimed that despite requests, the defendant, Mr Kwak, has not repaid the outstanding sum owed to the plaintiff.
In the alternative, a claim in restitution is made by the plaintiff against the defendant (paragraphs 8-12). This claim was not pursued in final submissions.

Amended Defence filed 21 July 2015

Mr Kwak filed an Amended Defence to the Statement of Claim on 21 July 2015.
The Defence responds to the Statement of Claim as follows: 1. Mr Kwak admits the loan including the execution by him of the loan agreement but says that he entered into the loan agreement not in his personal capacity but only as agent for and with the authority of Woorifarm (paragraph 1). It is not pleaded whether the alleged entry into the loan agreement was made as the disclosed or undisclosed agent for Woorifarm but it seems to be asserted that Mr Kwak was the disclosed agent; 2. It is said that the loan money was provided to Woorifarm (paragraph 2); 3. It is admitted by the defendant that he has not repaid the amount of the loan or interest but repeats that the loan agreement was with Woorifarm and not him in his personal capacity (paragraph 3); 4. It is also pleaded that in about 2011 the loan agreement was varied by the plaintiff, Mr Lee, and Mr Kwak as agent for Woorifarm, by which the loan amount was reduced from $50,000 to $35,000 and Mr Lee agreed to recover the difference of $15,000 from a Mr Kim who was allegedly assisting Woorifarm with a business venture in North Korea (paragraph 5); 5. In the alternative, it is pleaded that Mr Lee is estopped from denying that he would recover the $15,000 directly from Mr Kim and that Woorifarm would only be required to pay the balance of the loan moneys. Counsel for Mr Kwak said in opening that the detriment arises from the fact that Woorifarm has not sought the $15,000 from Mr Kim; 6. It is further asserted by Mr Kwak in response to the allegation that the $50,000 remains outstanding that: 1. In about March 2013, Mr Lee entered into an agreement with Mr Kim whereby Mr Lee would pay Mr Kim an amount of $70,000 to participate in a fraudulent scheme in North Korea; 2. Mr Lee and Mr Kim agreed to set off against the $70,000 the $15,000 which Mr Lee had agreed to recover from Mr Kim; 3. Mr Lee paid an amount of $20,000 to Mr Kim (paragraph 7); 4. As a result of the matters pleaded, Mr Kwak says that he is not liable to Mr Lee for the amount sought under the loan agreement.

Amended First Cross-Claim

An Amended First Cross-Claim was filed on 11 August 2015 in which Mr Kwak sought indemnity from Woorifarm. Leave was sought to discontinue this Cross-Claim on the first morning of the hearing on 21 March 2017. No objection was made by the plaintiff and leave was granted to discontinue the Cross-Claim.

Second Cross-Claim

A Second Cross-Claim was filed by Woorifarm against Mr Lee on 11 August 2015.
In the Second Cross-Claim, Woorifarm pleads the following matters: 1. At all material times the directors of Woorifarm were Mr Kwak and his wife (paragraph 2); 2. At all material times, Mr Lee ran an accountancy business in Campsie (paragraph 3); 3. In or about late 2009 Woorifarm authorised Mr Kwak to obtain a loan for the purposes of Woorifarm's business and as a result, Mr Kwak entered into a loan agreement with Mr Lee as agent for, and with the authority of, Woorifarm to borrow the amount of $50,000 from Mr Lee (paragraphs 4-5); 4. In about January 2010 Mr Kwak caused Woorifarm to lend an amount of $15,000 from the loan funds to Mr Kim who was assisting Woorifarm with the business venture in North Korea. It is alleged that in about late 2011 the terms of the original loan agreement were varied by Mr Lee and Mr Kwak as agent for Woorifarm such that the obligations for the repayment of the $15,000 rested with Mr Kim and not with Woorifarm. In the alternative, it is alleged that Mr Lee is estopped from denying that he would recover the $15,000 only from Mr Kim and not Woorifarm (paragraph 7-8); 5. On about 16 November 2012, Woorifarm entered into a written agreement with Chosun Kumsoo Company ("Kumsoo") ("the Kumsoo Agreement" or the "November 2012 Agreement"), said to be a State-owned entity located in North Korea, for the purpose of supplying seed, logistics and agricultural expertise to Kumsoo in consideration for which Woorifarm would receive profits from the sale of the produce. It is alleged that it was an express term of the Agreement that it would have a term of 30 years (paragraphs 9-10). It is asserted that in about December 2012 Woorifarm provided seed to Kumsoo in accordance with the Agreement (paragraph 11); 6. It is alleged that in about March 2013, Mr Lee, Mr Kim and another Mr Lee ("Mr David Lee") travelled to North Korea, and without the knowledge or authority of Woorifarm, fraudulently conspired to amend the November 2012 Agreement by entering into an Amended Agreement ("the March 2013 Agreement" or "the Amended Agreement"). It is claimed that pursuant to the amendments, the registered address of Woorifarm was changed to the address of Mr Lee's accountancy business, the company representative of Woorifarm was amended to Mr Kim as "President and Managing Director", the two Mr Lees were stated to be directors of Woorifarm, the investment amount under the joint venture was amended to €2,500,000, the Woorifarm investment amount was amended to €2 million and there were other relevant changes (paragraph 12); 7. It is alleged that on about 3 March 2013, Mr Lee, Mr Kim and Mr David Lee, without the knowledge or consent of Woorifarm, signed the Amended Agreement as purported directors of Woorifarm. It is asserted that at that time Mr Lee, Mr David Lee and Mr Kim knew they were not directors of Woorifarm and were not authorised to sign on its behalf (paragraphs 13-16). It is claimed that Mr Lee agreed to pay Mr Kim an amount of $70,000 to participate in the fraudulent Amended Agreement. It is claimed that he then paid Mr Kim an amount of $20,000 and set off the $15,000 which Mr Lee had allegedly agreed to recover from Mr Kim and not Woorifarm (paragraphs 17-18); 8. In about May 2013, the North Korean Government is alleged to have advised Mr Kwak that it had terminated the original Kumsoo November 2012 because of the asserted fraudulent conduct by Messrs Kim, Lee and David Lee. It is also pleaded that Woorifarm has not received any compensation from Kumsoo or any other party for the termination of the Kumsoo November 2012 Agreement nor any payments under the Agreement (paragraph 20); 9. Woorifarm seeks damages from Mr Lee. The basis of the claim for damages is not set out in the Second Cross-Claim. In submissions, counsel for Woorifarm and Mr Kwak indicated that the claims were for damages for the torts of inducing breach of contract, interference with contractual relations and injurious falsehood.

Defence to Second Cross-Claim

A Defence to the Second Cross-Claim was filed by Mr Lee on 23 November 2015.
In his Defence to the Second Cross-Claim, Mr Lee: 1. Denies the various allegations made against him in the Second Cross-Claim; 2. Denies that the original Kumsoo November 2012 Agreement was entered into on 16 November 2012 or that it was the final agreement (paragraph 9); 3. Denies that the original Kumsoo November 2012 Agreement existed at the time of the alleged Amending Agreement (paragraph 12(a)-(b)); 4. Says that the information provided for the purposes of the alleged fraudulent agreement was with the knowledge or authority of Woorifarm through its "agent, servant or officer" Mr Kim (paragraph 12(c)); 5. Admits that Mr Lee executed a document on 3 March 2013 in respect of a joint venture with Kumsoo, denies that it was an amendment to the original agreement and denies that he took any step without the knowledge and consent of Woorifarm (paragraph 13); 6. Admits that the North Korean Government terminated the joint venture (paragraph 19); 7. Says that if the alleged "fraudulent" agreement is found to be an amendment of the original Kumsoo November 2012 Agreement without the authority of Woorifarm, then Mr Lee acted at all times with the knowledge and authority, and at the express direction, of Mr Kim who held himself out to be the Managing Director with the full authority of Woorifarm. It is also asserted that Mr Kwak entered into further negotiations with the North Korean Government subsequent to the execution of the alleged fraudulent agreement and Mr Kwak held out the alleged fraudulent agreement as the full, final and authorised contract between the parties to the joint venture. It is also claimed that Woorifarm thereby ratified the alleged fraudulent Amended Agreement (paragraph 22).

Allegation of fraud by the defendant

As is clear from the summary of the pleadings set out above, the defendant, Mr Kwak, makes an allegation of fraud in the present case against Mr Lee.
Having regard to the seriousness of the allegation of fraud made by the defendant, the requirements in Section 140 of the Evidence Act 1995 (NSW) and the Briginshaw standard (Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362) apply in relation to the defendant's proof of the allegation which is contested.
In paragraph 45 of Varty v Director of Public Prosecutions (NSW) [2015] NSWSC 304, Adamson J stated as follows: "[45] Having read the Magistrate's reasons as a whole, I do not consider that her Honour's use of the words "benefit of the doubt" indicate that her Honour was applying the criminal standard of "beyond reasonable doubt". Although the civil standard applies (s 142) of the Evidence Act, so too does the doctrine of Briginshaw v Briginshaw [1938] HCA 34 ; 60 CLR 336 at 361-362, which is not excluded by the Evidence Act: Habib v Nationwide News Pty Ltd [2010] NSWCA 34 ; 76 NSWLR 299 at [338] per Hodgson, Tobias and McColl JJA (which dealt with s 140, which is, on this point, relevantly indistinguishable). The so-called Briginshaw doctrine has the effect that, although the standard of proof is not altered where the matter to be proved involves fraud, criminal conduct, or, as in the instant case, unlawful conduct, the strength of the evidence necessary to satisfy the tribunal of fact on the balance of probabilities may be greater because of the seriousness of the allegation."
However, the tort of deceit is not relied on by the defendant or Woorifarm. Accordingly, the Briginshaw standard may not apply to all aspects of the facts/torts relied on by them. Each will need to be considered.

Evidence in chief of Mr Kim

The plaintiff relied on and read an affidavit of Mr Un Kak Kim ("Mr Kim") sworn 2 December 2016. In his affidavit Mr Kim said he is originally from South Korea and that he migrated to Australia in the 1980s. He says he is 75 years of age.
Mr Kim gives evidence that in about January 2010 he borrowed $50,000 from Mr Lee and signed an IOU document as requested by Mr Lee. He also gives evidence that in about January 2010 he also borrowed $15,000 from Mr Kwak for business expenses. He says that in about January 2011 he paid the $50,000 he had borrowed back to Mr Lee.
Mr Kim states in his affidavit that he has worked as a farmer for more than 35 years in various countries including South Korea, the UAE, Australia and North Korea. He states that he has been "working with North Korea since 1997", initially through the charity World Vision and then through his own "capacity and network": affidavit paragraph 3. In relation to Woorifarm, Mr Kim states in his affidavit that he ran a farming business in Australia under the name Woorifarm from about 1985 to 2012 when he sold the farm. The farming business operated farms growing vegetables. Woorifarm had not been registered as a company but merely operated under that name. Mr Kim stated in his affidavit his belief that "as far as I knew and still know, I consider myself to be the owner and founder of Woorifarm" (paragraph 4).
Since 1997, Mr Kim states in his affidavit that he has had numerous dealings in North Korea, in particular through the provision of seeds and his skills in agriculture through the charity World Vision.
Mr Kim says that he first met Mr Kwak in about 2009 on a plane trip to North Korea where Mr Kwak indicated that he was interested in getting involved in Mr Kim's Woorifarm agricultural business in North Korea. Mr Kim says he agreed for Mr Kwak to become involved with the administrative side of the business. He gives evidence in his affidavit that thereafter Mr Kwak followed Mr Kim around in his business and visited his farm in Australia about two to three times per week. He also states that Mr Kwak paid for Mr Kim's expenses for travelling to North Korea.
Mr Kim gives evidence that he asked Mr Kwak to register Woorifarm in Mr Kwak's name "only for now" so Mr Kim could receive the retirement pension from the Australian Government. Mr Kim says that he made clear to Mr Kwak that he would remain "the owner and Chairman of Woorifarm". Mr Kwak was said apparently to have agreed to this. Mr Kim gave evidence that in Korea the word "Chairman" means the owner and "boss" of the company above all others including directors or managing directors and that is what Mr Kim believed to be the case when he said this to Mr Kwak, that is, that he Mr Kim would remain the owner and Chairman of Woorifarm.
Mr Kim gives evidence that Mr Kwak later told him that he had registered the company. Mr Kim says that he did not know Mr Kwak had registered himself as the holder of shares in Woorifarm (paragraph 4). Mr Kim gives evidence that it was always his understanding that he remained the owner of Woorifarm despite Mr Kwak being a director (paragraph 10). Mr Kim gave inconsistent evidence in relation to his knowledge that Mrs Kwak was a director of the company. In his affidavit (paragraph 10), he said that he only became aware of this when he was shown an ASIC search of the company in the proceedings (paragraph 10). In cross-examination he said he only heard it for the first time in being asked questions in the trial. He later clarified this and said he first found out about it when told by the solicitors for the plaintiff. Mr Kim asserted that despite Woorifarm being "registered in [Mr Kwak's] name" he Mr Kim remained in charge and made all decisions for Woorifarm since Mr Kwak had no background or experience in the agricultural business. Mr Kim asserted that he continued to operate the business and Mr Kwak was "merely assisting [him] in [an] administrative role" (paragraph 11).
Mr Kim gives evidence in his affidavit that in about 2012 Kumsoo, an investment company in North Korea, approached him for a business opportunity which he negotiated in a number of meetings. He gives evidence that he took Mr Kwak with him to the meetings where he was introduced as a director of Woorifarm. Mr Kim gives evidence that in about November 2012 Woorifarm signed a Joint Venture Agreement with Kumsoo for the purpose of agricultural development in North Korea through seed collecting and transferring technology "for the benefit of the North Korean people" (paragraph 19). Mr Kim said that he and Mr Kwak signed the Kumsoo Agreement on behalf of Woorifarm. He states that under the Agreement, Woorifarm had to come up with an investment of €2.5 million within a month after 16 November 2012 but, according to his belief, Woorifarm did not have the funds to meet those obligations under the Agreement.
Mr Kim gave evidence that on 27 November 2012 he personally delivered 14 different types of foundational seeds to Kumsoo as part of Woorifarm's investment under the November 2012 Agreement. He stated the belief in his affidavit that the foundational seeds were "very valuable" and it was his understanding that those seeds were to cover Woorifarm's investment of €2.5 million under the Agreement (paragraph 22). There is no clear evidence that Kumsoo had a similar view as to the value of the seeds supplied or that they were objectively worth that sum.
Mr Kim gave evidence that in the process of negotiating a further Joint Venture Agreement with Kumsoo in North Korea he met Mr Lee and Mr David Lee. He gives evidence that he asked them to join him in his meetings with Kumsoo "so that I could ask them to join Woorifarm as investors" (paragraph 25). Mr Kim gives evidence in his affidavit that he believed that Kumsoo would probably require some cash payments to pay for the office, cars and equipment which was needed in North Korea and he believed that Woorifarm did not have such funds: paragraph 25. In particular, Mr Kim gives evidence that at a meeting, Mr Seo from Kumsoo said to him that a further investment from Woorifarm was required in the sum of US$140,000 to meet "the operation costs" of the joint venture.
Mr Kim then states the following in paragraph 27 of his affidavit: 27. As such, I approached the plaintiff and David [Lee] asking for their investments in Woorifarm. We had a conversation in Korean to the following effect: I said: "They are asking for $140,000.00. What should I do?" Mr Lee said: "Why don't you talk to Mr Kwak?" I said: "No need. We have no funds." Mr Lee said: "How much did Mr Kwak invest in Woorifarm?" I said: "$35,000." Mr Lee said: "Hmm, what do you think about David and I investing the required amount of $140,000? $70,000 for 20% shares each in Woorifarm." I said: "Sure." Mr Lee said: "But you should also make us directors of Woorifarm. Is this ok even if you are not a director of Woorifarm?" I said: "Of course. You know I am the chairman of Woorifarm and I call the shots."
Mr Kim gives evidence in his affidavit that he believed that he was able to make this "executive decision" for Woorifarm since he had founded the company and was in charge of its day to day business as the Chairman (paragraph 28). This statement was admitted as evidence of his belief only.
The next day, Mr Lee, Mr David Lee and Mr Kim signed the Joint Venture Agreement on behalf of Woorifarm (this was the March 2013 Agreement) which is the Agreement which the defendant, Mr Kwak, calls 'the fraudulent agreement" in the Second Cross-Claim.
Mr Kim gives evidence that a few months later he visited North Korea where he met with Mr Seo and a Mr Kwon who was the President of Kumsoo. Mr Kim states in his affidavit that after that meeting he "came to a conclusion that [he] cannot trust them anymore as it transpired that the certificate issued to Woorifarm was not authentic" (paragraph 30). Mr Kim said that since then he has had no further dealings with Kumsoo.
It may be seen from his evidence in chief that Mr Kim: 1. Confirmed that he borrowed $50,000 from the plaintiff, signed an IOU document for this sum and then repaid it to the plaintiff; 2. Gave evidence that he was the founder of the Woorifarm business and believed that he remained the owner of Woorifarm and the Chairman of it; 3. Claims he negotiated the Kumsoo November 2012 Agreement with Kumsoo which was signed by Mr Kwak and himself. He later asserts that as a result of a request from Mr Seo of Kumsoo for an additional US$140,000, he sought an investment from the plaintiff and Mr David Lee in the sum of $70,000 for 20% of the shares each in Woorifarm and he agreed to make them directors as he believed he called "the shots" in relation to Woorifarm.

Cross-examination of Mr Kim

Mr Kim gave oral evidence through a Korean interpreter. Mr Kim agreed that he was a good friend of the plaintiff, Mr Lee, and had known him for more than 20 years. He indicated that he got to know Mr Lee's name as an accountant and became friendly with him since he started travelling to Pyongyang, the capital of North Korea, in about August 1998. Mr Kim said that he did not join the business association "Business Link to DPRK" as a member.
Mr Kim said that Mr Lee was not his accountant and he did not ask for his advice in relation to his business activities.
Mr Kim gave evidence that he ran a farming business through the name Woorifarm. He confirmed that it had been eventually incorporated but he did not own the business now as it had been passed on to Mr Kwak. This was done to assist him (Mr Kim) to obtain retirement benefits in Australia. Mr Kim said he passed it on to Mr Kwak by ceasing work as a farmer and Mr Kwak taking on the business activities. Mr Kim confirmed that he had previously used the name for his business of Woorifarm. The business was to distribute groceries under that name and he employed workers in the business. Mr Kim confirmed that he did not have any documents to show that he had used the business name Woorifarm.
Mr Kim confirmed that he did not initially want to be involved in the company called Woorifarm Pty Ltd which Mr Kwak had established, as he wanted to obtain a pension from the Government. He also confirmed that he was content for Mr Kwak to use the name Woorifarm if he Mr Kim had some involvement in the company. He stated that he had never been registered as a director of Woorifarm but said that he acted as the President of the company in Australia, in North Korea and in South Korea. He confirmed that he had never been registered as the Chairman of the company with ASIC as far as he was aware. He also agreed that he did not have any documents to establish that he had invested money in Mr Kwak's Woorifarm company.
In answer to the question whether Mr Kim was happy to assist Mr Kwak with his agricultural experience, Mr Kim said that he gave him his experience not just to please Mr Kwak but also to assist North Korea and Mongolia. He agreed that Mr Kwak had paid for his travel expenses on occasions to go to North Korea.
In response to the suggestion that Mr Kwak had introduced Mr Kim to people for business purposes as a "consultant" to Woorifarm, Mr Kim denied this and said that he had been introduced as the "President" of Woorifarm. Mr Kim said he was the owner of the Woorifarm business when he was operating the farm.
In response to the suggestion that he was not the owner of the Woorifarm company or business at any time in the period 2009 to now, Mr Kim said he did own the Woorifarm business. He said all products of the Woorifarm business were sold under that name.
Mr Kim confirmed that he had borrowed $15,000 from Mr Kwak in 2010. He said he had not paid this sum back. He said this was because Mr Kwak had received money in North Korea and had kept it whereas Mr Kim had delivered seeds to the North Korean authorities on behalf of Woorifarm. He confirmed he had not sued Mr Kwak for that money spent on the seeds. This suggests that Mr Kim had paid for the seeds supplied to Kumsoo which evidence shows was in November 2012.
Mr Kim gave some confusing evidence in relation to borrowing money from Mr Lee. He said he had given an IOU to Mr Lee for the $15,000 and Mr Lee had not asked for the $15,000 back. It was unclear from this evidence whether Mr Kim was confused in relation to the IOU given in 2010 to Mr Lee for the $50,000. To the extent his evidence suggests that he had given an IOU for $15,000 to Mr Lee, it is inconsistent with Mr Lee's affidavit. This evidence was later relied on by Mr Kwak to suggest that there was a variation to the initial loan agreement made by Mr Lee in 2010.
Mr Kim confirmed that he had introduced Mr Kwak and Woorifarm to the North Korean authorities in relation to agricultural matters. He also confirmed that Mr Kwak was in charge of all matters other than agricultural business ventures. He agreed that he understood Mr Kwak could engage in agricultural business ventures as he was the legal director of the Woorifarm company.
In relation to the first contract signed in November 2012, Mr Kim said that he was happy when it was signed, he regarded it as a good business deal and he believed that Woorifarm would make a lot of money out of the deal. In answer to the suggestion that he was concerned he was not a director or shareholder of the Woorifarm company, Mr Kim said he was not concerned as he aimed to assist North Korea with the provision of seeds. He said he had previously been involved with NGO work in North Korea for World Vision. Mr Kim said he did not complain to the plaintiff Mr Lee that he had not been made a director of the Woorifarm company by Mr Kwak.
Mr Kim gave evidence that he believed that Woorifarm belonged to him and he never believed that it was owned by anyone else. Mr Kim agreed that he wanted to be a director and did ask Mr Kwak to be made a director in about 2010. He said Mr Kwak did not refuse his request but did not respond to it.
As stated above, Mr Kim initially said that the first time he heard that Mr Kwak's wife was a director and shareholder of Woorifarm Pty Ltd was when it was suggested to him in cross-examination. When he was shown paragraphs 8-11 of his affidavit, he amended his evidence and said that he became aware that Mrs Kwak was a director and shareholder of Woorifarm Pty Ltd when he went to the solicitor's office to prepare his affidavit.
Prior to the continuation of his cross-examination on the second day of the trial, Mr Kim stated that he had a bad memory and had been hospitalised on two occasions as a result of a stroke: T69.3.
Mr Kim was asked questions in relation to the use of honorific titles as a sign of respect in the Korean community. He agreed that this was his experience. Mr Kim agreed that he had been called "Chairman" as a matter of respect in conversation but not in written documents. He agreed that the use of the word "Chairman" had been used as a mark of respect to him on occasions.
Mr Kim was asked questions in relation to travelling to North Korea in 2012 with the defendant Mr Kwak to negotiate with Kumsoo. He agreed that he had gone in 2012 to North Korea for this purpose and that Mr Kwak had travelled with him. He said that Mr Kwak had organised for some of his expenses to be paid for the trip, although he also took money for himself which he used for hotels, taxis and personal expenses. He agreed that a joint venture between Woorifarm and Kumsoo had been signed in November 2012 and that he was very happy that the document had been signed. He confirmed that when he returned that he told some people who were interested in projects in North Korea of the contract and some people had congratulated him. He could not recall whether Mr Lee, the plaintiff, had congratulated him. He did not give evidence that he told Mr Lee of the November 2012 Agreement.
Mr Kim was asked further questions in relation to a desire on his behalf to be a director of Woorifarm. He denied that he complained to Mr Lee in relation to not being made a director of the company. Mr Kim gave evidence that he ordered Mr Kwak to register him as a director of Woorifarm and that he assumed he did. He could not recall exactly when he did this but he believed it was in about 2009. After being taken to paragraph 8 of his affidavit, he agreed that he did not want to be a director of Woorifarm in 2009 as he wanted to obtain the Australian Government pension. When it was put to him that he wanted to be a director after 2009, he responded that he "broke the relationship" with the North Korean entities as the relationship was not good between them and "us". By "relationship" he confirmed he meant all the Agreements: T73.30-.47.
Mr Kim was then asked questions about travelling to North Korea in March 2013. He agreed that he had travelled there in March 2013. He denied that Mr Kwak had organised the visas for the trip and instead gave evidence that they were organised by the North Korean entities. He denied that Mr Lee paid for his trip and said that he had paid for it. In relation to the suggestion that the March 2013 Agreement had changed the November 2012 Agreement, he agreed with that. However, he denied that the March 2013 Agreement had replaced the November 2013 Agreement.
Initially Mr Kim vaguely described the March 2013 Agreement as being "related to an operation manual": T74.33. He clarified this by stating that in March 2013 the North Korean authorities had asked for more money for the operation of the joint venture. Mr Kim then said that he asked Mr Lee and Mr David Lee for $70,000 each to pay for the operation costs as funds were short: T74.45. He denied the suggestion that Mr Seo from Kumsoo would only change the signatories on the November 2012 Agreement in exchange for money.
Mr Kim agreed that he did not tell Mr Kwak of the changes to the contract in March 2013 either before he went to North Korea or whilst he was in North Korea. He said he told Mr Kwak of the changes after he returned from North Korea. He denied that he did not tell Mr Kwak of the changes whilst he was in North Korea because he wanted to "take over" the contract and exclude Mr Kwak from it: T75.6. He also denied that his intention was to set up a different company with Mr Lee and Mr David Lee and replace Woorifarm. Mr Lee, in later submissions, relied on the fact Mr Kim had told Mr Kwak of the March 2013 Agreement on his return from North Korea as negating any conspiracy on the part of Mr Kim and Mr Lee to take over the benefit of the November 2012 Agreement from Woorifarm.
Mr Kim was taken to the documents at pages 493 to 494 of Exhibit A. Mr Kim was asked whether he suggested to Kumsoo that a solution to the "conflict issue" in relation to Mr Kwak was to set up another company. Mr Kim said he asked Mr Lee to register his name to Woorifarm. Mr Kim was then asked questions about the company One Korea Trading Pty Ltd. Mr Kim said he did not recognise the name and said that he did not recall setting up a new company with himself, Mr Lee and Mr David Lee as directors.
Exhibit 1 which is a current and historical company extract for One Korea Trading Pty Ltd, establishes that the company was registered in New South Wales on 8 July 2013. The directors of the company are Mr Kim, Mr Lee and Mr David Lee. Originally Mr Lee and Mr David Lee held 30 shares each and Mr Kim held 40 shares. The current shareholding of the company was 30 shares to Mr Lee and 70 shares to Mr Kim. It seemed from his evidence that Mr Kim knew little about this company. Mr Kim gave evidence that he did recall requesting help from Mr Lee and Mr David Lee in the form of the payment of US$140,000 towards operation costs under the joint venture in North Korea with Kumsoo.
Although initially Mr Kim gave evidence that he travelled to North Korea in March 2013 with Mr Lee and Mr David Lee for discussions in relation to a new agreement, he then clarified his evidence by saying that he asked them for help and met them on the plane. The discussion in relation to the US$140,000 occurred in Pyongyang. He said he did not have discussions with them prior to the meeting with Mr Seo.
Mr Kim then gave some evidence that at the meeting with Mr Seo in March 2013 he knew that the North Korean representatives from Kumsoo were lying. He said he knew the acceptance letter from Kumsoo "was a fake" one: T78.44. This was not further clarified.
Mr Kim denied that he asked Mr Lee and Mr David Lee to come to North Korea to help him. He said that they had their other business to attend to in North Korea and he met them there. Mr Kim confirmed that he saw Mr David Lee give Mr Seo US$5,000 in cash. However, he said that the payment was to set up the company including for buying office equipment. Mr Kim stated again that he knew the representatives from Kumsoo were lying as they asked for cars and computers whereas they did not do any work: T79.34; T79.49; T81.12; T81.37-82.3.
Mr Kim expressly denied that he wanted to set up another company to take the Kumsoo Agreement from Woorifarm: T82.13.
Mr Kim said that there was no intention to set up a new company. There was a shortage of operation costs and he asked Mr Lee and Mr David Lee for money towards the joint venture project in exchange for a director position in Woorifarm.
In re-examination Mr Kim said that Mr Kwak had prepared business cards for him for the purposes of completing business in North Korea: T56.11; T82.39. A business card became Exhibit C in the proceedings. Mr Kim was described on the business card as "Chairman". The words "Woorifarm Pty Ltd" are at the top of the business card.
Mr Kim stated in his evidence that due to ill health he had memory problems. On occasions he seemed to give answers which were not connected to the questions asked. However, I did not form the view that he was being deliberately evasive or was deliberately intending to give false evidence.
Mr Kim's evidence was that he believed he was the Chairman and owner of Woorifarm, although he was not a director or shareholder of the company. His evidence was to the effect that when he was in North Korea at a meeting in Pyongyang with the representatives of Kumsoo in March 2013 he was asked for US$140,000 towards operation costs and due to the fact that there was a shortage of funds in Woorifarm he asked Mr Lee and Mr David Lee to contribute the money and they would be awarded directorships and a shareholding. This seems to be generally consistent with Mr Kim's evidence in paragraphs 26 to 28 of his affidavit.
Overall, I formed the opinion that Mr Kim was attempting to answer the questions put to him truthfully. However, his lack of recollection on some issues and his evidence that he had a poor memory means that some caution should be exercised in accepting his evidence unless it is consistent with other evidence.
Exhibit C appears to establish that in business cards organised for Mr Kim by Mr Kwak, Mr Kwak described Mr Kim as the Chairman of Woorifarm.

Evidence of Mr Bonney Hoi Jung Lee

Mr Bonney Hoi Jung Lee ("Mr Lee") is the plaintiff in the proceedings. He swore two affidavits for the purposes of the proceedings, dated 29 January 2016 and 27 June 2016.
In relation to the loan issue, Mr Lee's evidence is that he lent $100,000 to Mr Kim and Mr Kwak in the form of two bank cheques for $50,000 made out to each of them. In exchange for a signed IOU Mr Lee gave the two bank cheques to Mr Kwak and Mr Kim on or about 8 January 2010. Mr Lee's evidence is that he was repaid the $50,000 from Mr Kim on or about 10 January 2011 (which is supported by a receipt of that sum in Mr Lee's bank statement) but he has never been repaid the $50,000 which he lent to Mr Kwak.
Mr Lee denies that he agreed to vary the Agreement to seek $15,000 of that amount from Mr Kim. He also denies that the loan was to Woorifarm Pty Ltd as opposed to Mr Kwak. He annexes to his affidavit the IOU which is signed by Mr Kim and Mr Kwak without any reference to Woorifarm (see pages 38-39 of Exhibit A). He also annexes a copy of the bank cheque for $50,000 dated 8 January 2010 which is made out to Gregory Kwak and not Woorifarm (Exhibit A, page 40). Mr Lee also relies on an email he received from Mr Kwak dated 18 December 2011 which includes the following in the English translation: "I am well aware that you took much trouble in paying the interests by yourself. Today, I met Mr KIM and deaconess, we felt sorry among ourselves that we haven't been able to pay your favors back to you despite of your great trouble in arranging it. I felt my heart heavy as I have never indebted to anyone in my life. Sooner or later, I will pay back the money, With interests as well." [sic] (Exhibit A, page 43).
Mr Lee also relies on an email demand for the $50,000 and interest sent by him to Mr Kwak on 15 October 2013 (Exhibit A, page 44).
In relation to the position of Mr Kim, in his second affidavit Mr Lee gives evidence that he was aware at all times that it was Mr Kim who had the expertise in the agricultural business (paragraph 10). Mr Lee states in paragraph 9 of his second affidavit that he "was always under the impression that Mr Kim was the president or chairman with the full authority of Woorifarm".
Mr Lee says that neither Mr Kim nor Mr Kwak ever mentioned to him about the November 2012 Agreement at the time and he was not aware of its existence until much later.
In relation to what occurred in the relevant conferences in March 2013 in North Korea, Mr Lee gives the following evidence in paragraph 13 of his affidavit: "13. In relation to the signing of the March 2013 Agreement, I say that: (a) In March 2013, I happened to visit North Korea with Mr Kim to check the changes on the new leadership, and to meet with staffs from the Department of Sports with whom I have contacted several times. (b) Mr Kim and l went to Pyongyang together on the same flight. (c) Mr Kim and I met with Mr David Lee ("Mr Lee") from Philippines in Pyongyang … (d) Mr Lee and I did not join Mr Kim's meeting with the North Korean partners. On the second day however, Mr Kim asked and begged us in Korean to the following effect: Mr Kim said: "Gentlemen, would you please be kind enough to join my meeting? I beg you please." Mr Lee and I reluctantly agreed and accompanied Mr Kim to his meeting. (e) During the meeting, Mr Sung II Seo ("Mr Seo"), the representative of the North Korean authorities, requested Mr Kim for a number of amendments to be made to the March 2013 Agreement and a further investment in the sum of US$140,000.00 being US$40,000.00 for the operating costs and US$100,000.00 for the original seeds in Korean to the following effect: Mr Seo said: "Mr Kim, estimated scale of production needs to be increased and investment and capital amounts for our joint venture will need to be reduced. Otherwise, it will be difficult to obtain the necessary approval for the certificate of incorporation." Mr Kim said: "Ok." Mr Seo said: "We will also need a further investment for US$140,000.00. $100,000.00 for the seeds and $40,000.00 for operation costs." Mr Kim said: "Right." (f) Mr Kim seemed very concerned and distressed about Mr Seo's requests. (g) After the meeting with Mr Seo, Mr Kim turned to Mr Lee and I, and we had a conversation in Korean to the following effect: Mr Kim said: "Oh no, what can I do now?" I said: "You should sort this out with Mr Kwak." Mr Kim said: "Mr Kwak and I don't have the funds." (h) I then had a second thought about this business opportunity and we had a further conversation in Korean to the following effect: I said: "How much did Mr Kwak invest in Woorifarm?" Mr Kim said: "$35,000.00." I said: "Right. How about Mr Lee and I invest $70,000.00 each for 20% of the company shareholdings each. Mr Kwak must of course keep his shares in the company." Mr Lee said: "I'm happy to invest on that basis." Mr Kim said: "Sounds good to me. Thank you." I said: "Mr Lee and I will also need to become directors of the company." Mr Kim said: "Yes." I said: "Can you agree to our proposal even though you are not recorded as a director of Woorifarm?" Mr Kim said: "No problems at all. I am the president of Woorifarm as you know." (i) At the time I understood that Mr Kim was authorised to agree to this as he was the president or chairman with the full authority of Woorifarm. (j) On the next day, Mr Kim, Mr Lee and I signed the March 2013 Agreement (which Mr Kwak claims to be the Fraudulent Agreement) incorporating the changes requested by Mr Seo. Mr Lee and I signed as directors and Mr Kim as chairman of Woorifarm."
Overall, this evidence in relation to the March 2013 meeting appears in substance to be similar to the evidence of Mr Kim in his affidavit. Although there are some differences in their accounts there are not differences in relation to the fact that money or benefits were requested by Mr Seo of Kumsoo in the sum of US$140,000, Mr Kim said that he and Mr Kwak did not have the funds to pay this and that Mr Lee and Mr David Lee offered to invest the US$140,000 (US$70,000 each) for 20% of the shares in Woorifarm each and to be made a director of the company. These main items are confirmed in Mr Kim's evidence: see paragraph 27 of his affidavit. Mr Lee's alleged belief that Mr Kim had the full authority of Woorifarm as he was the President or Chairman of the company (paragraph 13(i) of Mr Lee's second affidavit) is supported by Mr Kim's evidence in paragraph 28 of his affidavit that he believed he was able to make the decision to grant the interest in Woorifarm and the directorships to Mr Lee and Mr David Lee as he was of the belief that he "found the company and was in charge of its day to day business as the chairman".
Although the evidence is clear that Mr Kwak and his wife were the directors and shareholders of Woorifarm at all relevant times, Mr Kim attended meetings in relation to the negotiations of the November 2012 Agreement, signed the November 2012 Agreement as Chairman (Exhibit A, page 134), and had business cards arranged for him by Mr Kwak indicating that he was the Chairman of Woorifarm: Exhibit C. In addition, the negotiations related to an agricultural joint venture business and the evidence was that Mr Kim had extensive business experience in agriculture including in North Korea for World Vision whereas Mr Kwak was a painter by occupation, although he had pursued other business interests in North Korea. Mr Kim also gave evidence that he had run an agricultural farming business near Sydney under the business name Woorifarm for many years. Although Mr Kim was not able to produce documents establishing this, his evidence was that the business ceased in 2012 when he sold his farm.

Cross-examination of Mr Lee

Mr Lee gave evidence that he was practicing as a Certified Practicing Accountant and a Registered Tax Agent. He said he was the principal of his firm. He gave evidence that taxation work took up most of his time. He conceded that in the last 15 years or so he had created documents changing directors for corporate clients on about four or five occasions. He was asked whether he had ever offered to change directors for a company for Mr Kim. Mr Lee gave evidence that Mr Kim had initially said to a Mr Park and him that he did not want to be a director of Woorifarm because he wished to obtain a Government pension benefit. Mr Kim said that about one year after this Mr Kim told Mr Park and him that he now wanted to be a director of Woorifarm.
Mr Lee was then cross-examined in relation to companies of which he was or had been a director. Initially he denied having been a director of a company but after further reflection indicated that he had been a director and shareholder of a company named Auslife Enterprise Pty Ltd. Mr Lee was shown company summaries for a number of other companies and agreed that he had been a director of Dialpad.com Australia Pty Ltd and Ausuwon Co Pty Ltd (see Exhibits 2-4).
Mr Lee agreed that he was a director of One Korea Trading Pty Ltd. He also agreed that he had created this company at the request of Mr Kim. Mr Lee agreed that the company was created by him with three directors, Mr Kim, Mr David Lee and himself.
Mr Lee agreed that he was a member of the organisation "Business Link DPRK". He said he was the Chairman of that organisation and it had six other members. He agreed that it was a private organisation which had as a purpose the organisation of business ventures in North Korea. It also had as a purpose the discussion of business opportunities in North Korea. Mr Lee said he had travelled to North Korea to negotiate business opportunities on four or five occasions as start-up business ventures.
Mr Lee was taken to paragraph 8 of his affidavit sworn 29 January 2016 and agreed that in or about December 2009 Mr Kwak told him that he and Mr Kim were interested in starting an agricultural business in North Korea under the name of Woorifarm Pty Ltd. Mr Lee said that he did not get involved in this matter but knew that Mr Kwak wanted to pursue the opportunity with Mr Kim. Mr Lee said he thought it was a good idea and that it would be profitable as Mr Kim was involved in it: T91.37.
Mr Lee was then asked some questions in relation to the use of honorific titles in the Korean community. He agreed that he was the President of the Business Link DPRK organisation. He denied that it was his idea to set it up and gave evidence that Mr Park asked him to organise it. The Association had a business name and an ABN with the standard constitution provided for by the Department of Fair Trading. He said the organisation had a president, treasurer and secretary and he had been selected by the other members as the President. Mr Lee agreed that people called him by the title "Chairman" in the community but did not agree this was as a mark of respect. Mr Lee was taken to emails from Mr Kwak at pages 477 and 479 of Exhibit A where Mr Kwak had addressed the email as "Dear Mr Chairperson". Mr Lee said he did not believe that this was as a mark of respect by Mr Kwak but because he was the President of the Business Link DPRK Association. Mr Lee agreed that the words "President" and "Chairman or chairperson" were sometimes used as equivalents but not always.
Mr Lee gave evidence that he normally spoke 60% of the time in English and 40% of the time in Korean in his work. He agreed that with older Korean clients he sometimes used titles in Korean such as Senior or Teacher as a mark of respect.
Mr Lee was then taken to page 489 of Exhibit A and agreed that it was an email to him from Mr David Lee where he was addressed as "Mr Chairperson". Mr Lee said that Mr David Lee was a member of the Business Link organisation and he called him by the title of "Chairperson". Mr Lee agreed that if a person had owned a business then he was commonly called "Chairman" whereas if he did not have a business he was not called "Chairman".
Mr Lee denied knowing Mr Kim for more than 20 years. He said he had known him since about 2005. This was contrary to Mr Kim's evidence.
Mr Lee was then asked questions about his belief as to whether Mr Kim was a director of Woorifarm in March 2013. Mr Lee gave evidence that he believed Mr Kim was a director of Woorifarm as at that time. It was put to Mr Lee that he was aware that Mr Kim was not registered as a director of Woorifarm at any time. Mr Lee denied this and said he believed Mr Kim was a director of Woorifarm from about 2011. He agreed that he had never been told by anyone that Mr Kim had been registered as a director of Woorifarm. He also agreed that he did not conduct any search of ASIC's records to confirm that Mr Kim was a director of Woorifarm. He said it was not his job to undertake such a search. Mr Lee confirmed that in order to become a director you needed a consent from the director, the completion of the appropriate form and to file it with ASIC. Mr Lee said he did not know as at 2013 that no-one had taken the steps to register Mr Kim as a director of Woorifarm.
Mr Kim was then taken to paragraph 13(h) of his affidavit sworn 27 June 2016 (Exhibit A, page 50) where he records a conversation with Mr Kim in North Korea in March 2013 in which he said to Mr Kim words to the following effect: "Can you agree to our proposal even though you are not recorded as a director of Woorifarm?".
Mr Lee gave evidence that he said this "just in case Mr Kim was not a director": T105.1. He denied that he knew Mr Kim was not a director of Woorifarm at that time in March 2013 and believed he had been a director since 2010. He conceded that he did not take steps to check that Mr Kim was a registered director of Woorifarm. Mr Lee said that he understood that Mr Kim was called the "Chairman" of Woorifarm, that he was a representative of Woorifarm and when he saw the November 2012 Kumsoo Agreement he noted that Mr Kim had signed it as Chairman: T105.24-.33.
This evidence of Mr Lee was not persuasive and I reject it. The clear inference to be drawn from paragraph 13(h) of his 27 June 2016 affidavit was that he was aware that Mr Kim was not recorded as a director of Woorifarm as at March 2013.
Mr Lee was then taken to the email which he forwarded to Mr Kwak on 24 January 2014 which is at pages 224-230 of Exhibit A. Although Mr Lee stated in his evidence that he believed the translation in English of the Korean email was wrong he does not dispute the translation in his affidavit. In the email (Exhibit A, page 225) Mr Lee stated as follows: "We said that we would agree to invest on the condition that Mr Kwak's equity is maintained. Chairman Kim surely agreed to that. I in fact raised a concern with Chairman Kim that he was not registered as the Managing Director of Woori Nongjang so it would be a flaw in the contract. However Chairman Kim insisted that it should not be a problem at all."
It was put to Mr Lee by counsel for the defendant that the email dated 24 January 2014 at page 225 of Exhibit A was to this extent consistent with paragraph 13(h) of his second affidavit. Accordingly, in 2013 Mr Lee knew that Mr Kim was not registered as a director of Woorifarm. Mr Lee maintained that as at March 2013 he believed Mr Kim was a director of Woorifarm. Mr Lee referred to the business card which Mr Kwak prepared for Mr Kim and which Mr Kim showed to Mr Lee which recorded Mr Kim's position as "Chairman" of Woorifarm. Mr Lee said that he believed this showed that Mr Kim was a director of Woorifarm. He denied that he had only been told that Mr Kim was a consultant to Woorifarm. There was no evidence Mr Lee had seen this business card in or before March 2013.
Mr Lee agreed that he was aware of Mr Kim's experience and background with World Vision and his agricultural expertise. He did not agree that he was a friend of Mr Kim in 2012 but described him as a business associate. He agreed that he had lent Mr Kim $50,000 in 2010 but that it had been paid back. Mr Lee said that Mr Kim had not paid him interest on the $50,000 loan and Mr Lee had not sought this interest as Mr Kim was a farmer and then a pensioner and he did not think he could afford the interest.
Mr Lee denied that he was aware that Mr Kwak had given Mr Kim $15,000 from the $50,000 which Mr Kwak had borrowed. He also denied that Mr Kim had provided him with an IOU for $15,000 or that he had required Mr Kim to sign an IOU for $15,000. He said that if Mr Kim had given this evidence he was wrong. Mr Lee said he was aware that Mr Kim had borrowed $15,000 from Mr Kwak in about March 2011. He said he was told this by Mr Kim later. When cross-examined about his instructions to lawyers in 2012 and 2013 only to ask for $35,000 from Mr Kim plus interest, Mr Lee said that at least $35,000 and interest would be acceptable to him but this was never repaid.
Mr Lee agreed that he had received the email from Mr Kwak on 9 November 2013 (Exhibit A, pages 100-102) in which Mr Kwak had referred to "the debt of $35,000". He was also taken to a letter from his previous lawyers to Mr Kwak (Exhibit A, page 114) which provided: "We are instructed that you have failed to repay the balance of the advance in the sum of $35,000.00 with interest at the rate of 10%." Mr Lee said that in his view the best way to get the money from Mr Kwak was to only seek $35,000 plus interest. He confirmed that he believed he was owed $50,000 plus interest and had emailed Mr Kwak twice seeking this money. He denied that the arrangement was for him to seek $15,000 from Mr Kim.
Mr Lee was taken to a letter he wrote to Mr Kwak's previous lawyers where he said: "…I borrowed $100,000 from my friend, Mr Thomas Kang and I loaned it to them ($50,000 for each) (see attached) in January 2010. Mr Kwak later transferred $15,000 out of his $50,000 to Mr Kim". Mr Lee was then taken to the next sentence in the letter to the following effect: "They did neither repay it at all until now, nor the interest on it at all". Mr Lee said this was a mistake and that he expected Mr Kwak to repay the $50,000 plus interest not merely $35,000 plus interest. He said that the $15,000 loan was between Mr Kim and Mr Kwak. He said they did not let him know of the transaction at the time and told him about one year later.
When it was suggested to Mr Lee that he knew the loan was for Woorifarm he denied this and said that he gave the money to Mr Kwak: T117.29. He agreed that he understood in 2010 that Mr Kwak handled all the administrative side of Woorifarm. However, Mr Lee denied that when he gave the cheque to Mr Kwak he intended that it be provided to Woorifarm for its business in North Korea. He said it was simply provided to Mr Kwak. He said it was Mr Kwak's decision if the money borrowed was used for Woorifarm or him personally. He denied that anything was said to him as to the purpose of the loan at the time.
Mr Lee was then taken to his contrary evidence in paragraph 8 of his 29 January 2016 affidavit where he states Mr Kwak had sought money by way of a loan for investing in the agricultural business in North Korea under the name of Woorifarm. Mr Lee eventually accepted that he was aware that the money borrowed was to be used for the purpose of the agricultural business of Woorifarm in North Korea: T118.31.
Mr Lee was then cross-examined in relation to his March 2013 trip to North Korea. He agreed that he went to North Korea with Mr Kim in March 2013. Mr Lee denied that he bought the plane tickets in March 2013 but said that he had paid for the tickets for the previous visit to North Korea which did not involve meeting representatives from Kumsoo. Mr Lee said that he and Mr Kim travelled together whereas Mr David Lee travelled from the Philippines. He agreed that the three of them normally stayed together in the same hotel and shared meals together.
Mr Lee denied that prior to the March 2013 trip to North Korea that he was aware of the November 2012 Kumsoo Agreement. He said he heard no discussion of it in the Korean community at the time and Mr Kim and Mr Kwak had not told him about it.
Whilst they were in North Korea Mr Lee denied that Mr Kim had talked to him prior to his meeting with Kumsoo about the purpose of the meeting. Mr Lee said he was asked on the second day in North Korea by Mr Kim to attend the meeting with Kumsoo with Mr David Lee. He denied that he was told the purpose of the meeting was to change or amend the November 2012 Kumsoo Agreement. Mr Lee was taken by counsel for the defendant to his 24 January 2014 email (Exhibit A, page 225) where he said words to the effect: "Chairman Kim insisted that Mr Myung Ja Lee and I should come to a meeting where a contract would be amended and signed so I agreed to go as an observer. In the discussion between Chairman Kim and Seong Il Seo, it became clear that US$40,000 for operations costs and US$100,000 for importing the seeds must be invested in addition for the contract to be signed."
Despite this email, Mr Lee said that he did not know the contract was to be amended. He thought it was only to be discussed. He denied that Mr Kim had shown him the November 2012 Agreement prior to the meeting. Mr Lee said he noted as an observer at the meeting that there was discussion about a draft agreement between Mr Kim and Mr Seo.
It was put to Mr Lee that when the March 2013 Agreement was signed there was no intention to provide further seeds to Kumsoo. Mr Lee said there was discussion about a new draft of the Agreement and a request for operating costs in the sum of US$140,000. Mr Lee denied that Mr Seo asked for an extra $140,000 but merely said that US$140,000 should be invested by Woorifarm. Mr Lee agreed that the Agreement was not signed at that meeting but was signed the next day. He denied that the Agreement was discussed between Mr Kim, Mr David Lee and himself that night. He also denied that in the evening before the Agreement was signed that Mr Kim talked about the November 2012 Agreement.
When it was suggested to Mr Lee that he was concerned that Mr Kwak had not registered Mr Kim as a director of Woorifarm, Mr Lee said that Mr Kwak was not present and that Mr Kim therefore had to sign for Woorifarm. He agreed that he knew Mr Kwak was a director of Woorifarm and that he did not call or email him to ask him if Mr Kim had authority to sign the Agreement.
It was put to Mr Lee that when he signed the March 2013 Agreement he knew that he was not a registered director of Woorifarm. He said he signed as he believed Mr Kim had authority to appoint him a director and to sign the Agreement and he trusted Mr Kim. He said that he regarded the registration of himself and Mr David Lee as directors of Woorifarm to be Mr Kim's job. He said he regarded Mr Kim and Mr Kwak as business partners and he trusted Mr Kim.
When it was suggested to Mr Lee that Mr Kwak alone could make him a director of Woorifarm Mr Lee denied this. He said he believed that Mr Kim and Mr Kwak could make him a director of Woorifarm.
It was put to Mr Lee that he realised it was a problem that he and Mr David Lee had signed the Agreement when they were not directors of Woorifarm. He said that he became aware that there was a problem after he had come back to Sydney after a number of days and he realised that there was a dispute between Mr Kim and Mr Kwak as to the signing of the Agreement. He said he called Mr Kwak and Mr Kim into his office to attempt to mediate the matter. He said he told both of them exactly what he believed happened in North Korea.
In relation to the March 2013 meeting with Mr Seo, Mr Lee agreed that Mr Kim appeared to be very distressed and nervous and was chain smoking. It was put to him that Mr Kim was nervous as he was trying to change the November 2012 Agreement. Mr Lee denied this and said he believed Mr Kim was nervous because he had to find the extra amount required by Kumsoo of US$140,000.
Mr Lee was taken to his email at Exhibit A, page 225 where he stated the following: "However Chairman Kim insisted that it should not be a problem at all. Although I could not fully understand, I did not have any choice but to follow Chairman Kim's decision as a solution. When I think about it now, it was a very big mistake."
It was put to Mr Lee that he did have a choice and that he was not obliged to follow Mr Kim's decision. He denied this and said that to get the business going the money had to be provided to Kumsoo. It was put to Mr Lee that he had a choice and he could have called Mr Kwak. Mr Lee said that that was Mr Kim's job and he regarded Mr Kwak as being under Mr Kim. It is clear in my view that Mr Lee did have a choice at the time as to whether he agreed to provide Mr Kim and Woorifarm the US$70,000 which he agreed to.
It was put to Mr Lee that although he did not want to invest in Woorifarm's proposed agricultural activities in North Korea in 2009 he had changed his mind by 2013 and did want to invest. Mr Lee said that the situation had changed and Mr Kim had asked him for money in exchange for being a shareholder and director of Woorifarm. He decided to invest US$70,000 in exchange for a 20% interest as he did not understand that Mr Kim could afford the US$140,000 sought by Kumsoo. It was put to Mr Lee that his reference at Exhibit A, page 225 to "a very big mistake" was a reference to signing the March 2013 Agreement when he was not a director and attempting to exclude Mr Kwak. It was also suggested that it was a reference to the fact that Mr Kim had signed even though he was not registered as the Managing Director of Woorifarm and that would be a "flaw in the contract". Mr Lee did not agree with this. He said there was a dispute later between Mr Kwak and Mr Kim. However, he regarded Mr Kim as having solved the problem in North Korea in March 2013 in his capacity as Chairman of Woorifarm. Mr Kwak had recognised Mr Kim as Chairman and Mr Kim had signed both the November 2012 Agreement and the March 2013 Agreement in that capacity. Mr Lee said he regarded Mr Kim as signing as a representative of Woorifarm and that Mr Kwak was only assisting him in the proposed agricultural joint venture. Mr Lee said that without Mr Kim no Agreement could have been achieved with Kumsoo. There appears to be some force in that opinion as only Mr Kim and not Mr Kwak had any relevant expertise in agriculture as was apparently known to Kumsoo: see Exhibit A page 93.
It was put to Mr Lee that he, Mr David Lee and Mr Kim set up One Korea Trading Pty Ltd as a new company to take the place of Woorifarm with the North Korean entity. Mr Lee denied this and said that Mr Kim had asked him to set it up.
Mr Lee was then taken to an email sent to him on 28 June 2013 from the Investment Committee of the Equity Joint Venture in North Korea (Exhibit A, page 494). In particular his attention was drawn to the following extract from the email: "With reference to drawing a new conclusion for company contract The Equity Joint Venture for Seed gathering, it would be much appreciated if you could register the incorporation anew, with Mr Un Kak Kim as representative director at the relevant body in Australia within a few days. Please kindly send me the company registration documents and certifying documents showing the name of the company and the name of representative director by email" [sic].
Mr Lee said that Mr Kim had requested him to register a new company but he did not understand that the registration of the new company was to replace Woorifarm as the joint venture partner. He also did not understand that its purpose was to exclude Mr Kwak from the deal.
Mr Lee was taken to his email dated 24 January 2014 (Exhibit A, page 226) where he stated: "I believe that the following reasons are the reasons why the contract failed: … 3. Chairman Kim's lack of understanding and experience of the business operation, suggesting something like setting up a new company if he is not listed as a director, etc. Also because he failed to meet the demand from Hae Dong so Hae Dong obstructed it."
Mr Lee agreed that the new company did not have Mr Kwak as a director. However, Mr Lee denied that Mr Kwak was excluded as he had refused to make Mr Kim a director of Woorifarm. He said that was a dispute between Mr Kwak and Mr Lee. Mr Lee said that he denied he was aware that Mr Kim was angry as he was not a director as he thought Mr Kim was a director at the time.
Mr Lee denied that One Korea Trading Pty Ltd was registered by him for the purpose of concluding a new agreement. His attention was directed to the fact that One Korea Trading was registered on 28 June 2013. Mr Lee repeated that this was Mr Kim's direction and he had no idea that its purpose was to replace Woorifarm.
Mr Lee agreed that at the March 2013 meeting he saw Mr David Lee pay US$5,000 in cash to Mr Seo at the signing of the Agreement. He said that he understood that this was part of the US$140,000 that needed to be advanced. He also agreed that he had advanced US$20,000 to Mr Kim as part of the amount required from him. He said it has never been paid back by Mr Kim to him. He said that he understood that Mr Kim had used this money to buy seeds from South Korea in order for them to be provided to the North Korean joint venture party.
In answer to the suggestion that he knew that the signing of the March 2013 Agreement was a mistake, Mr Lee said that Mr Kim did not handle the matter properly and it gave rise to a big dispute. This was the "big mistake" that he was referring to in his email.
Mr Lee confirmed that he did not expect Mr Kim to complete the registration requirements for him to become a director of Woorifarm in the period before requesting it in exchange for his investment in North Korea in March 2013 and the date of the signing. Mr Lee said that he expected that after they came back to Australia that Mr Kim as Chairman of Woorifarm would handle the registration as a director with Mr Kwak. Mr Lee agreed that when he signed the March 2013 Agreement he knew he had not been registered as a director of Woorifarm.
Mr Lee was taken to his 24 January 2014 email (Exhibit A, page 226) where he gave as one of the reasons why the contract failed as being "2. Mr Soong II Seo's greed and lack of experience".
It was put to Mr Lee that what he was referring to was Mr Seo's demand for $5,000 in cash to change the November 2012 Agreement and Mr Lee denied this.
Mr Lee agreed that one reason he was prepared to invest money in the Agreement in March 2013 was to assist him in getting money back from Mr Kwak that he was owed. He agreed that he believed that he and Mr David Lee were entitled to double the share of Mr Kwak as they were to invest US$70,000 each whereas Mr Kwak had only invested $35,000. Mr Lee denied that he thought it was a good idea to take over the Woorifarm Agreement by One Korea Trading as Mr Kwak still owed him $35,000.
I viewed Mr Lee carefully whilst he was giving his evidence. Overall, I am of the view that some real caution should be exercised in considering the evidence of Mr Lee. I was not impressed with some aspects of Mr Lee's oral evidence including: 1. His failure to concede he was of the belief that Mr Kim was not a director of Woorifarm in March 2013. That he had this belief is clear from paragraph 13(h) of his second affidavit; 2. His explanation for his willingness to accept a repayment of $35,000 of the $50,000 loan to Mr Kwak, being that it was an attempt to resolve the matter; 3. His initial assertion that he did not understand the $50,000 loaned to Mr Kwak was to be provided to Woorifarm for its business in North Korea whereas this is clear from his first affidavit; and 4. His explanation for the registration of One Korea Trading Pty Ltd.
I consider Mr Lee was attempting in his evidence to place a good light on his actions in North Korea in March 2013. However, I did not form a view that Mr Lee was lying about what occurred at the March 2013 meeting with Kumsoo. It seems from the evidence that the Kumsoo representatives were trying to alter the deal to obtain further benefits for Kumsoo. In forming this view I took into account the defendant's allegations that Mr Lee was fraudulently attempting to take the benefit of the November 2012 Agreement for himself, Mr David Lee and Mr Kim. I accept that Mr Lee believed Mr Kim was very important in relation to any agreement between Woorifarm and Kumsoo because of his extensive agricultural experience. I also accept Mr Lee's evidence that without Mr Kim there would likely have been no Agreement reached with Kumsoo. This was due to Mr Kim's known expertise in agriculture.

Expert report of Mr Domenic Quartullo

The defendant and cross-claimant to the Second Cross-Claim rely on an expert accountant's report of Mr Domenic Quartullo dated 21 July 2016.
In his report, Mr Quartullo states that his instructions from the solicitors for the defendant were to prepare a report addressing and valuing the loss of a chance suffered by Woorifarm as a consequence of the "fraudulent actions to which Bonney Lee was a party": paragraph 3.02. Mr Quartullo gives as part of the background to his report that as a consequence of the conduct of Mr Lee, Mr Kim and Mr David Lee, the November 2012 "Kumsoo Agreement was terminated thus depriving Woorifarm of a chance to participate in the joint venture under the Kumsoo Agreement" (paragraph 2.09). Mr Quartullo assumed a valuation date of at or about November 2012 (paragraph 3.03).
The methodology adopted by Mr Quartullo in his report is to ascertain the expected future cashflows to Woorifarm based on the financial details of the expected investment of the parties in the joint venture and the expected financial performance of the joint venture (paragraph 7.01). Mr Quartullo adopted a discount rate to take into account risks which varied between 45% and 50% in determining his valuation (paragraph 7.12).
Mr Quartullo assessed the valuation in two different scenarios. Scenario 1 was that €15,387 of seeds still had to be delivered by Woorifarm to Kumsoo and Scenario 2 was that €76,934 of seeds still had to be delivered by Woorifarm. Mr Quartullo expresses his opinion that the valuation range of Woorifarm's expected cashflows from its investment in the Kumsoo joint venture "lies in the range of $3.29 million (Low Value Scenario 2) to $3.84 million (High Value Scenario 1), with mid-point values of $3.595 million (Scenario 1) and $3.535 million (Scenario 2)" (paragraph 7.13).
In relation to the discount rates of 45-50% Mr Quartullo states the following: "Whilst these rates are "high" by normal standards I consider them to be appropriate given my professional assessment of the risks associated [with] the investment by Woorifarm, including the risk associated with the investment being in the DPRK." (paragraph 7.08).
At paragraph 7.08.4 in his report Mr Quartullo refers to the following risk: "The specific business risks associated with Woorifarm's investment in the Kumsoo JV including the risk that the returns expected to be received by Woorifarm from the Kumsoo JV may not eventuate."
No further detail is provided by Mr Quartullo in relation to the risks arising from the proposed joint venture.
I will consider the report in some detail further below in relation to Mr Quartullo's cross-examination and the loss of a chance issue.

Affidavit Evidence of Mr Kwak

Mr Kwak, the defendant, swore three affidavits for the purposes of the proceedings.
He gave evidence in his first affidavit sworn 13 April 2016 that he and his wife were the two directors of Woorifarm and that they have always been the only directors of Woorifarm (paragraph 1). Mr Kwak gave evidence that he incorporated Woorifarm in September 2009 for the purposes of exploring agricultural and other business opportunities in North Korea (paragraph 5). He said he was a member of the business association Business Link to DPRK. He said that he met Mr Kim in North Korea in about October 2009.
Mr Kwak gave evidence in his first affidavit about meeting Mr Kim and discussing with him a number of potential agricultural opportunities using Mr Kim's agricultural expertise (paragraphs 9 to 10). Mr Kwak also sets out in his affidavit his versions of the conversations with Mr Kim and Mr Lee relating to discussions concerning the borrowing of $50,000 for the agricultural business of Woorifarm. Mr Kwak said he did not think it was necessary to include a reference to Woorifarm in the IOU Agreement as he understood that Mr Lee was aware that he was borrowing the money for Woorifarm (paragraphs 14-17). Mr Kwak also gives evidence that it was agreed between him and Mr Lee that $15,000 of the $35,000 would be repayable by Mr Kim to Mr Lee leaving only $35,000 outstanding to be paid by Woorifarm (paragraph 20).
In the rest of his first affidavit, Mr Kwak sets out in detail his pursuit on behalf of Woorifarm of business opportunities in North Korea including potential agricultural businesses (see paragraph 21 and following). In particular, Mr Kwak gives the detail of his negotiations throughout 2012 with Kumsoo. He says he travelled to North Korea about three times for this purpose and on each visit Mr Kim accompanied him and Woorifarm paid for his trip. Mr Kwak gives evidence that he referred in his conversation with Mr Seo to Mr Kim being Woorifarm's "consultant" as he had the agricultural expertise (paragraph 22). Mr Kwak gives evidence that Mr Seo asked for something to be drafted in writing in relation to Woorifarm. Mr Kwak prepared a draft letter which is annexed to his affidavit describing Mr Kim on the letterhead of Woorifarm Pty Ltd as the "President" of Woorifarm. Mr Kwak in his oral evidence said that the letter was never finalised and that the English translation is incorrect because the original Korean version refers to Mr Kim as the "Chairman". In his oral evidence Mr Kwak said that he described Mr Kim as the Chairman as a matter of respect and to make him "feel better" because of poor business outcomes Mr Kim had experienced in North Korea.
Mr Kwak gives evidence of the execution of the November 2012 Kumsoo agreement. He annexes a copy of the Korean version to his affidavit with an English translation. Mr Kwak gives evidence that prior to the signing of the November 2012 Agreement the parties had developed a projected profit and loss statement which he annexes to his affidavit. Mr Kwak said in his oral evidence that this was a draft profit and loss statement depending on the final total investment of the parties under the Agreement.
Mr Kwak gives evidence of conversations he had with Mr Kim and then with Mr Seo in relation to Mr Kim signing the November 2012 Agreement. He said that Mr Kim indicated to him that he should also sign the contract and that Mr Seo agreed to this even though Mr Kwak told him that Mr Kim was not a director of Woorifarm. The contract which was ultimately signed describes Mr Kim as the Chairman of Woorifarm (Exhibit A, page 134).
Mr Kwak then gives evidence about Mr Kim requesting in early 2013 to be made a director and shareholder of Woorifarm. Mr Kwak said that he would think about it and he would work out something with Mr Kim which is fair for him to be paid as a consultant (paragraph 30). Mr Kwak said that Mr Kim repeated his request to become a director and shareholder of Woorifarm in late February 2013 whilst he was with the company of Mr Lee (paragraphs 35-36). Mr Kwak said that he again said that he would work out a "fair arrangement" with Mr Kim when he returned from North Korea to ensure that he was "properly rewarded for his efforts". Whilst this payment was uncertain and may have impacted on any profits Woorifarm may have made from the Agreement, both parties submitted in their final submissions that any such amount did not need to be taken into account.
Mr Kwak gives evidence that in about mid-March 2013 Mr Kim informed him that he changed the November 2012 Agreement while he was in Korea and that Mr Kwak told him that he could not do that. He asserted that Mr Kim claimed that it was fairer and that he gave 20% of the company to Mr Bonney Lee and to Mr David Lee for US$70,000 each. Mr Kwak said that Mr Kim gave him a copy of what he describes in his affidavit as "the fraudulent agreement". Mr Kwak claims that he remonstrated with Mr Lee in relation to this (paragraph 39) and then pursued discussions with the North Korean authorities to try and remedy the situation (paragraphs 41-43). The North Korean authorities requested a formal written complaint and in due course told him that because a fraud had been committed, Mr Seo had been dismissed and that it was too difficult to continue with the Joint Venture without him (paragraph 47). Mr Kwak claims that a Mr Shin from the North Korean Government told him that Mr Seo would provide a written explanation as to what had occurred and that a document was provided to him by a person in November 2015 providing that explanation.
In his second affidavit sworn 21 July 2016 Mr Kwak gives evidence responding to paragraphs of Mr Lee's affidavits. Mr Kwak provides evidence to the following effect: 1. He denied that the balance of the seeds to be delivered by Woorifarm by May 2013 would have cost US$100,000 and says that the balance of the seeds would have cost about US$20,000; 2. He had numerous discussions with Mr Seo in November 2012 about the payment by Woorifarm of an amount for operating costs and Mr Seo informed him that the amount needed was estimated at about US$40,000; 3. Mr Seo claimed that as a director of the Foreign Investment Committee he could authorise and arrange for registration of the Joint Venture company; 4. In relation to the document at pages 62-67 of Exhibit A, Mr Kwak denied that he prepared it and said it had been prepared by Mr Seo. Mr Kwak claimed that he informed Mr Seo that Mr Lee and Mr David Lee had never been directors of Woorifarm and that those two men and Mr Kim were not authorised to enter into the March 2013 Agreement.
In relation to his third affidavit sworn 8 February 2017, Mr Kwak gives evidence: 1. That he was not aware that Mr Kim had any business called Woorifarm (paragraph 3); 2. He used the title "Chairman" as a mark of respect to people and not simply in relation to Mr Kim. Mr Kwak said he also used it in relation to Mr Lee; 3. That he operated a painting business which is his fulltime occupation; 4. That Mr Kim was only a consultant to Woorifarm and made no decisions in relation to the management or operation of the company; 5. That he did not pay for any expenses for Mr Kim to travel to North Korea in March 2013.
In oral evidence in chief Mr Kwak asserted that he introduced himself as the President of Woorifarm and introduced Mr Kim as "a helper": T146.35. This seems to be somewhat different to Mr Kwak's affidavit evidence where he describes introducing Mr Kim in North Korea as a "consultant".

Cross-examination of Mr Kwak

Mr Kwak was subject to detailed cross-examination.
Mr Kwak gave evidence in cross-examination that he introduced himself by using the word "President" in negotiations in North Korea and that in Korea the term President meant that the person must be a member of the Board of Directors of the relevant company.
Mr Kwak gave evidence that in 2009 Mr Kim suggested to him that he use the name Woorifarm for a proposed agricultural joint venture in North Korea. Mr Kwak said that he knew as at this time that Mr Kim had land and was growing vegetables. He also conceded that he was aware that Mr Kim had employees at the time and had a business. It was put to Mr Kwak that at the end of 2009 he knew the name of Mr Kim's agricultural business was Woorifarm. Mr Kwak agreed to this and stated that at the end of 2009 he had heard about Woorifarm which involved Mr Kim delivering vegetables to small grocery businesses: T150.27-.33; T150.46. Mr Kwak later added that he assumed that it was not an officially registered business: T151.12.
This evidence is contrary to paragraph 3 of Mr Kwak's 8 February 2017 affidavit (Exhibit A, page 468) where Mr Kwak claimed that he was not aware that Mr Kim had any business called Woorifarm. After further cross-examination Mr Kwak conceded again that he knew Mr Kim was using the name Woorifarm for his agricultural business growing vegetables: T151.25; T151.49.
Mr Kwak was then taken to the draft letter relating to Woorifarm Pty Ltd that he had prepared for Mr Seo which indicated that Woorifarm had introduced hydroponics to a group of delegates from North Korea who were visiting Australia in 1996. This document was on Woorifarm letterhead and was prepared in 2012. Mr Kwak conceded that the purpose of the letter was to show Woorifarm's agricultural expertise which was based on Mr Kim's knowledge: T153.34.
In my view the contents of the draft letter at page 93 of Exhibit A which was prepared by Mr Kwak is also inconsistent with paragraph 3 of his third affidavit.
It was then put to Mr Kwak that Mr Kim was the President of Woorifarm which he denied. Mr Kwak was then taken to the fact that the draft letter at Exhibit A, page 93 described Mr Kim as the President.
Mr Kwak said that this was a draft designed to show to Mr Seo and was not a final official document. He said a final version was not requested. In answer to a question from the court as to why he described Mr Kim as the "President" in the draft letter, Mr Kwak said that he thought it was a "nice idea" to put Mr Kim's name as President in order to encourage and please him. Mr Kwak said that he described Mr Kim as the "President" in order to make Mr Kim "feel better": T155.6; T155.37.
I reject this explanation put forward by Mr Kwak. In my view it is clear that Mr Kwak described Mr Kim as the President or Chairman of Woorifarm Pty Ltd in order to seek to capitalise on Mr Kim's expertise in relation to agricultural matters which was, as Mr Kwak understood it, well known in North Korea. It seems clear that Mr Kwak did this in order to attempt to advance Woorifarm's potential for agricultural opportunities with Mr Seo and Kumsoo in North Korea.
Mr Kwak conceded in cross-examination that he intended to convey that Mr Kim was the expert in 2012 in relation to agricultural matters: T159.3. Mr Kwak then claimed that the Korean version of Exhibit A, page 93 which is at Exhibit A, 92 did not describe Mr Kim as the President but rather as the Chairman and it had been wrongly translated. He said that in parts of Korea every elderly person is called "Chairman". Whether this is correct or not I find that Mr Kwak intended to describe Mr Kim as either President or Chairman to rely on his reputation for agricultural expertise in dealings with Mr Seo. Mr Kwak confirmed that he had no agricultural expertise as at 2012: T159.31.
Later, Mr Kwak gave inconsistent evidence suggesting that he had entered into a number of agreements prior to November 2012 providing seeds for agricultural production in North Korea and that these were not successful. It may be that Mr Kwak was making a distinction between agricultural expertise and the mere provision of seeds as at 2012.
Mr Kwak was then cross-examined in relation to Exhibit C, Mr Kim's business card. The business card had on it a description of Mr Kim as the Chairman of Woorifarm Pty Ltd. Mr Kwak conceded that he had the business cards prepared. However, Mr Kwak denied that the purpose of having the business cards prepared was for Mr Kim to give them to other people as a representative of Woorifarm. Mr Kwak accepted that the business cards were prepared so Mr Kim could hand them out but claimed they were made so that Mr Kim could "feel better" by being described as Chairman.
Again, I reject this evidence. In my view Mr Kwak clearly had the business cards prepared with a description of Mr Kim as Chairman in order to associate Woorifarm with Mr Kim's undoubted agricultural expertise. I reject Mr Kwak's evidence that he did not regard Mr Kim at the time as being integral to the success of Woorifarm in North Korea in agricultural ventures: T162.23. This is supported by Mr Kwak's evidence that in the period 2010-2013 he paid for 10 trips for Mr Kim to accompany him to North Korea. It is unlikely that this would have been done unless Mr Kim was seen by Mr Kwak as being very important.
As stated above, Mr Kwak gave inconsistent evidence in relation to his agricultural experience as at 2012. He referred to two or three other agricultural ventures in North Korea in which he was involved between 2010 and 2012 where he had provided seeds to people in North Korea for their use. He said that he had acquired the seeds either from the Catholic Church or from seed companies and provided them to three North Korean entities. The first of the ventures had a crop failure. The second venture had no sales recorded but the costs of the seeds were reimbursed by the North Korean entities. Mr Kwak described these ventures as a failure: T165.3; 166.29.
Mr Kwak was taken in cross-examination to the profit and loss document, the English version of which is at page 155 of Exhibit A. In paragraph 25 of his 13 April 2016 affidavit Mr Kwak states inter alia: "Prior to signing the Kumsoo Agreement the parties had, in the process of negotiations developed a projected profit and loss statement. The document was the culmination of negotiations between the parties." Somewhat inconsistently with this evidence, Mr Kwak gave evidence in cross-examination that Kumsoo prepared this document and provided it to him. He said he looked at the document and had no objection to it. He said he did not verify the material in it. When asked how he found out about the current seed prices for seeds referred to in the document he said that he asked a scholar himself and made his own investigations: T171.41. Mr Kwak said that in North Korea the government provides seeds for growing vegetables and if they could not provide them they would buy them in China at the market price: T172.1. When asked whether he verified the market price for seeds in China, Mr Kwak stated that he did not verify it but that is what he had heard was the price and he was satisfied with the document: T172.6.
Mr Kwak was then taken to the fact that the total investment amount referred to in the November 2012 Agreement was €5 million with €4 million to be provided by Woorifarm whereas in the profit and loss statement at page 155 of Exhibit A the total investment amount was €2.5 million with €2 million to be provided by Woorifarm.
Mr Kwak said that at the time, there needed to be a revision of the November 2012 Agreement (despite his evidence that the November 2012 Agreement was a final agreement - T173.8). Although Mr Kwak's evidence was somewhat confusing on this point it seemed to be that the profit and loss statement needed to be revised if the total investment was €5 million but it did not need to be revised if the November 2012 Agreement was amended so that the total investment was €2.5 million. Mr Kwak conceded that after November 2012 the total investment amount was revised downwards to €2.5 million, with Woorifarm's investment being revised downwards to €2 million. Mr Kwak agreed that the revision occurred after the November 2012 Agreement was entered into: T174.38. Mr Kwak said somewhat ambiguously that the parties had agreed to finalise the agreement "when the seed is delivered" (T175.22) which was to take place after November 2012: T175.30. Mr Kwak confirmed in answer to a question from the court that the Korean version of Exhibit A 155 was the final version and it was delivered after the signing of the November 2012 Agreement: T176.41; T177.25.
Mr Kwak was then taken to the reference in the November 2012 Agreement Korean version at Clause 4.4.16 at page 139 of Exhibit A (see also page 120 for the English version) to the estimated scale of production being decided by the Economics Technology Estimation Document. Mr Kwak said this was a document he was supposed to receive and was not the document at Exhibit A, page 155. He stated that he never received it: T178.32. Accordingly, it appears that the estimated scale of production under the November 2012 Agreement was never decided by the North Korean authorities in accordance with Clause 4.4.16 of the November 2012 Agreement or, if it was, it was never communicated to Mr Kwak. This is highly relevant to the assumptions adopted by Mr Quartullo for the purposes of the preparation of his valuation. There is no evidence before the court that the estimated scale of production under the November 2012 Agreement was ever decided by the North Korean authorities in accordance with Clause 4.4.16 of the November 2012 Agreement.
Mr Kwak confirmed that he was always prepared to re-mortgage or sell his house in order to obtain the necessary funding for Woorifarm for the November 2012 Agreement venture: T181.44; T182.3. Exhibit E showed Mr and Mrs Kwak to have $906,000 as at 3 September 2015 which apparently was the money received by them for the equity in their Lidcombe house after its sale. It is unclear whether Mrs Kwak was also willing to mortgage the house as Mr Kwak was. She did not give evidence in the proceedings. Mr Kwak conceded that Woorifarm as at 2012/2013 had no income in Australia and he did not dispute that the bank accounts of his painting business, his personal cheque account and of Woorifarm had modest balances.
It was put to Mr Kwak that he attempted to keep the March 2013 Agreement as an enforceable agreement to obtain the benefit for Woorifarm under that Agreement as it involved contributing half the investment for the same profits. Mr Kwak said that he could not do this as there was no proper explanation as to why the three persons (Mr Kim, Mr Lee and Mr David Lee) had signed the March 2013 Agreement: T184.28-185.29 cf T184.49.
Mr Kwak was then taken to the document at Exhibit A, page 62, the English translation of which is at Exhibit A, page 65. He gave evidence that Mr Seo gave the draft document to him but he said he could not accept it because it listed as directors of Woorifarm Mr David Lee and Mr Lee and had Mr Kim as the President. He said he thought the document was prepared by Mr Seo to get him (Mr Seo) out of trouble. He said he looked at it and handed it back to Mr Seo without signing it.
Mr Kwak was then asked questions about the description of Mr Kim as the Chairman of Woorifarm in the November 2012 Agreement. He was taken to paragraph 27 of his 13 April 2016 affidavit (Exhibit A, page 85) where he sets out a conversation with Mr Seo. It was put to him that in that conversation he did not request Mr Seo to describe Mr Kim as the Chairman of Woorifarm in the November 2012 Agreement. Initially Mr Kwak said that he described Mr Kim as the Chairman (T188.42; T189.32) but later claimed that Mr Kim had requested it: T189.40. This is not mentioned in paragraph 27 of Mr Kwak's affidavit and it would be expected that he would have referred to it as it was such a significant matter in relation to the status of Mr Kim. I reject Mr Kwak's evidence that he did not think it was necessary to add the full conversation in paragraph 27 of his affidavit which he had with Mr Seo: T190.4; T190.15.
In my view there are real concerns in relation to aspects of Mr Kwak's evidence. He attempted at all times to downplay the role of Mr Kim in the negotiations on behalf of Woorifarm Pty Ltd which led to the November 2012 Agreement. However, it is quite clear from his evidence, in my opinion, that Mr Kwak sought to capitalize on the reputation and experience of Mr Kim in North Korea to advance the interests of Woorifarm to obtain an Agreement. He was content to describe Mr Kim as the Chairman or President of the company as it suited him and to prepare business cards (Exhibit C) for that purpose. Mr Kwak accepted that Mr Kim had the agricultural expertise as at 2012 and he did not. The reference to Mr Kim as the Chairman in the November 2012 Agreement reinforced his status in the negotiations. In my view the presence of Mr Kim as the so-called Chairman of Woorifarm, although not as a director of the company, was crucial in Woorifarm obtaining the execution of the November 2012 Agreement by Kumsoo. Similarly, his continued involvement in the company, as Mr Kwak had no agricultural expertise, was also important.
Mr Kim had previously run a vegetable growing business called Woorifarm. This was conceded by Mr Kwak in his cross-examination although effectively denied in paragraph 3 of his 8 February 2017 affidavit.
The difference between the November 2012 investment amount and the profit and loss statement was significant. The former had a reference to the total investment being €5 million whereas the latter had a reference to the total investment being €2.5 million. This indicated that the November 2012 Agreement may not have been in final form and was open to alteration where required.
Mr Kwak's evidence that he never received the Economics Technology Estimation Document referred to in paragraph 4.4.16 of the November 2012 Agreement (Exhibit A page 120) is also significant to Mr Quartullo's valuation. In Woorifarm's submissions dated 2 June 2017 paragraphs 5, it is submitted that Mr Kwak's "subjective understanding after formation of the legal construction of the document is irrelevant." However, there is no evidence before the court that the Economics Technology Estimation Document referred to in paragraph 4.4.16 of the November 2012 Agreement was ever received by the parties. It is submitted in paragraph 6 of Woorifarm's submissions that the profit and loss document can be seen as the "non-contested objective joint approach by the parties" or "an agreed variation." Both parties agreed that Kumsoo was a North Korean Government owned entity and it is not established that it was able to vary the Agreement in a binding way as submitted. Counsel for Woorifarm accepted in oral submissions that the Haedong department was able to terminate both the November 2012 Agreement and the March 2013 unilaterally. The November 2012 Agreement also suggests strong government control and oversight: see clauses 1.1.9, 5.2.7, 6.1, 9.2.2 and 21.4. Accordingly, in the context of the November 2012 Agreement which was substantially to be performed in North Korea, it is not established that the profit and loss document referred to by Mr Kwak in his affidavit would ultimately be approved.
In my view some real caution needs to be exercised in accepting Mr Kwak's evidence on any central point except where there was other evidence to support it including documentary evidence.

The issues according to the parties

At the commencement of the hearing each party handed up a schedule of issues. The plaintiff accepted the issues proposed by the defendant and added some additional issues. As indicated, leave was granted to discontinue the First Cross-Claim and accordingly, at least one of the issues on the schedule is no longer relevant.
I set out the relevant issues according to the plaintiff below. The issues underlined are those raised by the plaintiff in addition to the other issues which are raised by both parties: "Statement of Claim and first cross-claim 1. Whether the First defendant (Kwak) entered into the loan agreement with the Plaintiff (Lee) as an agent for the Second Cross Claimant (Woorifarm) or in his personal capacity. 2. If it is found that Kwak entered into the loan agreement in his personal capacity whether: (a) The loan agreement was varied such that Lee agreed to recover part of the loan ($15,000) directly from Un Kak Kim. (b) In the alternative to (a), Lee is estopped from denying that he agreed to recover part of the loan ($15,000) directly from Un Kak Kim. 3. ... Second Cross-claim - Woorifarm v Lee 4. What is the place of the alleged tort and does it matter. 5. Whether the March 2013 Agreement was authorized or ratified by Woorifarm. 6. Whether Un Kak Kim was authorized to represent Woorifarm in negotiating and executing the March 2013 Agreement. 7. Whether Lee knew or ought to have known that Woorifarm had not authorized any of Lee, Un Kak Kim and/or David Lee to enter into the March 2013 Agreement. 8. Whether on the balance of probabilities the conduct of any of Lee, Un Kak Kim and David Lee caused termination of the November 2012 Agreement and the subsequent loss to Woorifarm. 9. Whether Mr Lee intended to cause the termination of the November 2012 Agreement. 10. Whether Mr Kwak ratified the March 2013 Agreement. 11. What is the quantum of the lost opportunity suffered by Woorifarm."
In relation to Issue 4 concerning the place of the alleged tort, the parties agree that that is no longer an issue to be determined.
I will first make my relevant findings as to the facts and then proceed to consider the above issues.

Factual Findings

The parties provided detailed written submissions and addressed the court also in oral submissions.
I will set out my factual findings in relation to the claim concerning the $50,000 loan from Mr Lee to Mr Kwak further below.
However, it is necessary to consider the evidence concerning the claim of Woorifarm in the Second Cross-Claim. I make the following factual findings having regard to all of the evidence and the submissions of the parties: 1. Mr Kim had a lengthy history of farming. He was originally from South Korea and migrated to Australia in the 1980s. He had worked as a farmer for more than 35 years in various countries including South Korea, the UAE, Australia and North Korea. Mr Kim commenced running a farming business in 1985 in Australia and continued in that business until 2012 when he sold his farm. The business involved the growing of vegetables for sale. I accept Mr Kim's evidence that the business was run by him under the name Woorifarm but it does not seem to have been registered as a corporate entity. I accept this evidence even though Mr Kim currently has no documents relating to the farm. Mr Kwak conceded in cross-examination that he knew Mr Kim had run a vegetable growing business under the name Woorifarm; 2. Since 1997 Mr Kim was involved in providing agricultural assistance and expertise through the charity World Vision in North Korea, particularly in providing seeds and growing vegetables; 3. Mr Lee is an accountant by profession and had no relevant background in agriculture. He also originated from South Korea; 4. Mr Kwak describes himself in his affidavit as a businessman. He also operates a business as a contract painter. There is no suggestion, until the events giving rise to these proceedings, that Mr Kwak had any relevant experience in agriculture, including the growing of vegetables, although he did give evidence that he provided seeds for two or three ventures in North Korea in 2010-12 although no profit was made and in one venture, the crop failed. Mr David Lee, a Mr Park, Mr Kwak, Mr Lee (the plaintiff) and other persons were members of an association called Business Link to DPRK. The purpose of the association was to explore business potential and business opportunities in North Korea. Although Mr Kim was not a member of Business Link to DPRK he was known to Messrs Park and Lee. Mr Kwak first met Mr Kim in 2009; 1. On 1 September 2009 Cornerstone Management Pty Ltd was registered. Its directors and shareholders at all relevant times have been Mr Kwak and his wife; 2. In late 2009 Mr Kim and Mr Kwak spoke about potential agricultural business opportunities in North Korea. Mr Kim was known to both Mr Lee and Mr Kwak as an expert in agriculture with a reputation in agriculture in North Korea. Mr Kwak was interested in advancing these agriculture opportunities. This may have been a reason behind the registration of Cornerstone Management Pty Ltd, although that is not clear. It is, however, quite clear that Mr Kim was the one with the agricultural expertise and agricultural contacts in North Korea; 3. There is a dispute between Mr Kwak and Mr Kim in relation to the role which Mr Kim was to play from the end of 2009 in the potential agricultural business opportunities in North Korea. Mr Kwak claims that Mr Kim was only to be retained by his company Woorifarm as a consultant or "helper". Mr Kim claims that Mr Kwak was merely to assist him in commencing the Woorifarm agricultural business in North Korea relying on Mr Kim's expertise and contacts. Mr Kim says that Mr Kwak was merely to assist with the administrative side of the business. Mr Kim says that Mr Kwak followed him around in his business and visited his farm about two to three times per week. I find that there was no clear and agreed delineation between the two men in the roles to be taken by Mr Kim and Mr Kwak in Woorifarm. It is more likely, and I find, that due to Mr Kim's extensive agricultural expertise and contacts, he was the main reputational source in establishing any Woorifarm agricultural business in North Korea. This is despite the fact that the evidence makes clear that Mr Kim at no time was a director or shareholder of Cornerstone Management Pty Ltd. That company, on 2 December 2009, changed its name to Woorifarm Pty Ltd, no doubt to reflect the involvement of Mr Kim in its affairs and to reflect Mr Kim's prior agricultural business experience under that name: Exhibit A, page 475; 1. I accept Mr Kim's evidence that he initially sought no shareholding in Woorifarm to ensure there was no issue with him eventually being entitled to claim a government pension. I also find that despite Mr Kim not having a directorship or shareholding in Woorifarm Pty Ltd at any time, he believed he had an interest in that company due to his agricultural expertise and contacts in North Korea and the fact that the company had changed its name to Woorifarm (the name of his business) and was intended to be the vehicle to pursue those agricultural opportunities. Mr Kim did not appear to me to be a sophisticated man at all in relation to legal and company matters. I think it likely, and I find, that he did not give any real detailed consideration to these matters at the time. However, Mr Kwak clearly in my opinion saw there to be real opportunities in using Mr Kim's expertise and agricultural contacts in North Korea in pursuing commercial arrangements in agriculture while at the same time using Woorifarm Pty Ltd as a corporate vehicle to pursue other potential investment opportunities in North Korea. I also find that Mr Kwak used Woorifarm as the investment vehicle to try and maintain any profits within the company, the shares of which were owned by Mr Kwak and his wife; 2. Mr Kim and Mr Kwak were both short of investment capital. In January 2010 there was a loan by Mr Lee to Mr Kwak and Mr Kim of $100,000. It is clear that $50,000 of that amount was paid to Mr Kim and ultimately the $50,000 was repaid by Mr Kim to Mr Lee. An issue is whether the other $50,000 was lent to Mr Kwak or to Woorifarm through Mr Kwak as its disclosed agent. This issue will be considered further below together with the issue of whether the loan agreement was varied so that the amount which remained to be repaid by Mr Kwak and/or Woorifarm was reduced to $35,000 as Mr Kwak claims; 3. The moneys lent by Mr Lee were at least partly used to pursue agricultural opportunities in North Korea including for payment of airfares and other expenses. 4. There were apparently a number of meetings in 2012 between Mr Kim and Mr Kwak and North Korean government officials in relation to the potential for an agricultural business to be established through a joint venture. I think it likely, and I find, that having regard to the evidence about the respect given in the Korean community to older persons, that Mr Kim would have been regarded by the North Korean officials as the main representative in those discussions. This is consistent with his background with the North Korean officials, his agricultural expertise and his title of Chairman. 5. Mr Kim asserts that Mr Kwak arranged business cards for him for the purposes of negotiations with North Korean officials. A business card became Exhibit C in the proceedings. On that business card which is headed "Woorifarm Pty Ltd" Mr Kim is described as the "Chairman". On the other side of the card are Korean characters. There is no evidence that anything different to what was on the English side of the card was on the Korean side of the card. I find that the purpose of arranging the business cards as held by Mr Kwak was to give Mr Kim, as the senior person with expertise in agriculture, a title and standing for the purposes of the negotiations with North Korean representatives on behalf of Woorifarm and for Mr Kwak to take advantage of Mr Kim's reputation. I find that Mr Kim's involvement was crucial to the success of any venture. I reject Mr Kwak's denial of this and his claim that he arranged the business cards to make Mr Kim "feel better". 6. Mr Kwak claims that it was another contact in North Korea with whom he dealt in relation to a metal magnesium venture who introduced him to Kumsoo: Exhibit A, page 469, paragraphs [10]-[11]. However, Mr Kwak concedes that he relied on Mr Kim's assistance in relation to technical agricultural matters: Kwak affidavit, Exhibit A, page 470, paragraph [12]. Mr Kim claims that he was approached by Kumsoo for a business opportunity in North Korea: Kim affidavit, Exhibit A, page 76, paragraph [17]. In my view it is unnecessary to make a finding in relation to how Mr Kim and Mr Kwak and Woorifarm were introduced to Kumsoo. What is clear is that negotiations started with representatives of Kumsoo in relation to an agricultural joint venture. What is also clear is that Mr Kim and Mr Kwak attended those negotiations primarily with Kumsoo's representative Mr Seo, a government official overseeing foreign investment: Kwak affidavit, Exhibit A, page 74, paragraph [22]. As stated above, I reject Mr Kwak's evidence that Mr Kim was always introduced to Kumsoo representatives as a "consultant" or "helper". The business card, Mr Kim's agricultural expertise and his experience in North Korea with World Vision make it highly likely that he was introduced to Kumsoo as the Chairman of the company. 7. Mr Kim claims that Mr Kwak told him that he had registered Woorifarm as a company. He also asserts that it was always his understanding that he (Mr Kim) remained the owner of Woorifarm despite Mr Kwak being a director "on paper". Mr Kim claims that he did not know Mr Kwak's wife was also listed as a director: Kim affidavit, Exhibit A, page 76, paragraph [10]. Mr Kwak denies this. Again, I find that Mr Kim was unsophisticated at all relevant times in relation to legal and company matters. I think it likely, and I find, that at all relevant times during the negotiations in 2012-13, Mr Kim believed that he had some right of ownership in Woorifarm Pty Ltd due to the fact of his involvement in its affairs, his expertise in agricultural matters and his contacts, Mr Kwak's lack of agricultural expertise and the use of the Woorifarm name which had been the name of his (Mr Kim's) business. I think it likely that initially Mr Kim did not turn his mind at all to the strict legal control and ownership within the company. 8. On 16 November 2012 an agreement was signed in Pyongyang in North Korea between Woorifarm and Kumsoo to create a joint venture vehicle known as the Hanmaeum Equity Joint Venture vehicle. Both Mr Kim and Mr Kwak seek to downplay in their affidavits the role of the other in the negotiations. I think it likely that both were involved in the negotiations and that the North Koreans regarded Mr Kim as significant to the joint venture because of his agricultural expertise and background. I reject Mr Kim's assertion that he was the primary negotiator in the contractual negotiations to the exclusion of Mr Kwak. I also reject Mr Kwak's assertions that he was the primary negotiator and Mr Kim was only there for his technical expertise as a consultant. It is important at this stage to consider aspects of the November 2012 Agreement which was in evidence. First, Mr Kim signed the Agreement as did Mr Kwak. Mr Kim was described in the Agreement as "Chairman" and Mr Kwak was described in the Agreement as "Representative Director": Exhibit A, page 134. The fact that Mr Kim's signature is above that of Mr Kwak, suggests to me that he was regarded as the more senior representative of Woorifarm in accordance with the title "Chairman". It is noted that in relation to the North Korean representatives, the General President Mr Kwon has signed before Mr Seo as Director, Investment Committee of the Equity Joint Venture. Paragraph 1 of the recitals describes the Equity Joint Venture as being "to jointly operate seed-gathering, production and sales of horticultural crops of pure breeds": Exhibit A, page 116. Paragraph 2 of the recitals states that the parties agreed to follow a North Korean Act and Regulations: Exhibit A, page 116. It is noted that Clause 1.1.9 indicates that the day of establishing the Equity Joint Venture is the day when the Equity Joint Venture "receives approval for the establishment and registration of the venture from the Central Investment Managing Agency" of North Korea. There was no evidence before me of that approval. Paragraph 2.3 of the Agreement provided that a party to the Agreement shall have the right to amend their corporation representative, company name, legal address and communication details. In paragraph 2.2 of the Agreement Mr Kwak is described as the "CEO" of Woorifarm. However, for the emails, both the formal email addresses of Mr Kim and Mr Kwak are included. Clause 4.1 of the Agreement says the purpose of the joint venture was to aim at "improving people's life by revival of our people and agricultural development through seed collecting and production for horticultural crops of pure breed and introduction of advanced technology for production" [sic]. Sales of the produce including for export were contemplated: Clause 4.3.1. An estimated scale of production of vegetables was provided in Clause 4.4 of the Agreement. However, it is noted in Clause 4.4.16 that the estimated scale of production "shall be decided by Economics Technology Estimation Document" and that all figures "are not more than estimation". Mr Kwak gave evidence that this document was never received by him. There is no evidence that it was ever created or received by anyone. The total investment amount of the Equity Joint Venture was said in Clause 5.1.1 to be €5 million. Woorifarm was to provide 80% of the capital being €4 million. €2.5 million were to be provided by Woorifarm within a month after the establishment date of the Equity Joint Venture, and the remaining 25% being €1.5 million was to be provided within 10 months after the establishment date of the Equity Joint Venture: Clause 5.2.4. See also Clause 5.2.2 as to the €4 million funding to be provided by Woorifarm. Woorifarm relies on this Clause as to the intended nature of the €4 million funding to be provided by it. It is noted that the evaluation of any asset values which both parties invested was to be confirmed based "on the verification of the Joseon Pyongyang Accounting Accreditation Office": Clause 5.2.7. This seems to place practical control about the value of the investment of the parties, in the North Korean authorities. This may well have been relevant to the valuation of the seeds provided by Mr Kim to Kumsoo in November 2012. This is considered further below. Clause 6.1 contemplates the equity joint venture receiving the approval document of the venture from the "Central Investment Managing Agency of DPRK". Kumsoo had the responsibility under the Agreement for tasks related to the establishment of the equity joint venture such as obtaining the permission, approval and ratification from "the review and ratification organisation" contemplated under the Agreement: Clause 9.1.2. This is a somewhat vague clause. The rights and obligations of Woorifarm under the November 2012 Agreement included to complete the funding and to acquire necessary documents of approval such as an external investment approval letter from the "relevant review and ratification organisation of DPRK with regard to investment prescribed in the Agreement": Clause 9.2.2. It is unclear as to the likelihood of any such approval. No relevant evidence was given as to this issue. It is noted in Clause 9.2.9 that Woorifarm "shall co-operate for purchasing and supplying seeds of various high quality horticultural crops such as beans, vegetables and grass seeds for livestock". Clause 12 deals with the settlement and distribution of profits. Clause 12.1.2 requires the joint venture to pay corporate income tax from "the settled profits" according to the laws of North Korea. There is no clear evidence before me about what the rates of tax were in North Korea which were applicable. The fact that corporate income tax had to be deducted was emphasised in Clause 12.2.1 of the Agreement. See also Clause 14.2. The term of the Agreement was 30 years: Clause 15.1. However, the Agreement was to terminate in the case of a substantial breach of the Agreement which was not rectified: Clause 16.1.1. The Agreement was also to be terminated where continuous losses occurred or the joint venture could not "reach the expected production goals": Clause 16.1.5; 1. The applicable law of the Agreement was the law of North Korea. There is no evidence as to what this law was including in relation to North Korean income tax rates or charges. 2. Under Clause 21.4, "in principle" the Agreement was to be legally effective from the date when both parties signed the Agreement and received "the establishment approval of the corporation from the Central Investment Agency of DPRK" and the Agreement was registered nationally. However, the Agreement also stated as follows: "However, if Party B [Woorifarm] completes the first funding before the approval [of] the establishing of the corporation [€2.5m, see Clause 5.2.4], the Agreement shall be effective from that day, and the Agreement shall be legally binding to both parties": Clause 21.4. There is no evidence of the required approval and registration. 3. In his submissions, Mr Lee says that there is no evidence Woorifarm completed the "first funding" other than providing some seeds through Mr Kim of which there is no evidence that they were worth €2.5m. Accordingly, it is submitted that Clause 21.4 has not been complied with and thus the required approval was not obtained. It is also submitted that the November 2012 Agreement therefore never became effective. This shall be considered further below. 4. Mr Kim states that under the November 2012 Agreement, Woorifarm did not have the funds to meet its obligations in relation to the investment of €2.5 million "within a month after the establishment date of the joint venture": see Clause 5.2.4. There is no evidence before me that these moneys were held by Woorifarm or reasonably available to Woorifarm or could be readily borrowed by Woorifarm (or Mr Kwak) within the time stated. Mr Kim says that on 27 November 2012 he personally provided and delivered 14 different types of foundational seeds to Kumsoo as part of the investment for the purposes of growing plants to produce further seeds: Kim affidavit paragraph 22. It is not clear who funded the purchase of these seeds but it appears to have been Mr Kim as he used the words "personally provided." Mr Kim asserts in his affidavit evidence that foundational seeds are "very valuable" and that it was his understanding that these seeds were to cover Woorifarm's investment of €2.5 million under the Agreement: Exhibit A, page 77, paragraphs 21-22. There is no satisfactory evidence before me that Kumsoo took the same view in relation to the seeds being worth €2.5 million or their delivery satisfying Woorifarm's initial funding obligation under the Agreement. There is also no evidence that the seeds had a market value of €2.5 million. Mr Kwak also says that the seeds were partly delivered in late November 2012 although he does not indicate who delivered them or discuss their value: Exhibit A, page 86, paragraph 29. 1. Mr Kwak asserts that in late February 2013 he received a telephone call from Mr Kim who said he wanted to be made a director and shareholder of Woorifarm. Mr Kwak gives evidence that Mr Lee was in the presence of Mr Kim at the time and that he Mr Kwak informed Mr Lee that Mr Kim did not want to be a director or a shareholder until all the risk was gone in the negotiations and that his wife and he were the only directors and shareholders of Woorifarm. Mr Kwak says he indicated to Mr Lee that he would work out a "fair arrangement" with Mr Kim when he returned from North Korea to ensure he was "properly rewarded for his efforts": Exhibit A, pages 86 to 87, paragraphs 30 and 35-36. Mr Lee disputes this conversation in his second affidavit: Exhibit A, page 51, paragraph 16. What was involved in the alleged "fair arrangement" is unclear. On balance, I find that a conversation to the effect stated by Mr Kwak in his affidavit did occur as he asserts with one exception. I do not believe there was any reference to Mr Kim being "happy to be paid as a consultant" as this is inconsistent with the role which he appeared to play in securing the November 2012 Agreement which was significant. It is also inconsistent with his belief he still had an ownership interest in Woorifarm at the time; 2. Mr Kwak submits that it is clear from Mr Lee's second affidavit that he knew that Mr Kim was not a director of Woorifarm at this time: Exhibit A, page 50, paragraph 13(h). Despite Mr Lee asserting that he did not know this, in my view paragraph 13(h) of his second affidavit makes that clear. However, that is not the same as knowing that Mr Kim was not a shareholder in Woorifarm or that he had no authority in his status as Chairman (or representative) of Woorifarm to act on its behalf; 3. In early March 2013 Mr Kim and Mr Lee travelled to North Korea and met Mr David Lee there who travelled from the Philippines. Mr Kwak asserts that I should find they travelled together for the purposes of deliberately undermining the November 2012 Agreement. However, I do not believe that is established to the necessary standard by the evidence. It is inconsistent with the evidence of both Mr Kim and Mr Lee and in my view cannot properly be inferred; 4. Whilst the parties were in North Korea there was a meeting between Mr David Lee, Mr Bonney Lee, Mr Kim and Mr Seo of Kumsoo. Mr Kwak was not in North Korea with them. Mr Kim says that he asked Mr Lee and Mr David Lee to join his meeting with Kumsoo so that he could ask them to join Woorifarm "as investors". Mr Kim says that he knew that Kumsoo would probably require some cash payments "to pay for the office, cars and equipment in North Korea, and Woorifarm did not have such funds": Exhibit A, page 77, paragraph [25]. Similar evidence is given by Mr Lee: Exhibit A, page 49, paragraph 13(d). I think it likely in all the circumstances that this evidence is correct. I find Mr Kim probably thought that the meetings that were proposed with the representatives of Kumsoo would involve matters where he would feel out of his depth without Mr Kwak. I consider that Mr Kim thought he should take a greater role in finalizing the joint venture having regard to his agricultural expertise and Mr Kwak's lack of expertise. I think it likely and I find that Mr Lee and Mr David Lee attended the meeting at the request of Mr Kim although they may have thought there was some commercial opportunity which could arise for them to take an interest in or become involved in the venture with the North Korean entity; 5. Why these meetings occurred at this time is unclear. Who arranged them is also unclear. In paragraph 24 of his affidavit Mr Kim says he was in North Korea "for finalizing" the joint venture. He says this was a further joint venture agreement with Kumsoo and became the March 2013 Agreement. It seems that either Mr Kim arranged the meetings or Kumsoo arranged the meetings. Both Mr Kim's affidavit (paragraph 26) and Mr Lee's affidavit (paragraph 13(e)) have Mr Seo from Kumsoo making demands at the meeting so it seems likely that Mr Seo from Kumsoo requested the meetings of Mr Kim. Whether that request was made before or after Mr Kim arrived in North Korea is unclear; 6. The accounts of what occurred in the crucial meeting in March 2013 in Pyongyang are set out in paragraph 13 of Mr Lee's second affidavit and paragraphs 26-27 of Mr Kim's affidavit. I consider it likely and I find that the additional amounts were sought by Mr Seo from Woorifarm, that Mr Kim knew that he did not have the funds for these amounts, that he also believed Mr Kwak and Woorifarm did not have these amounts and that the presence of Mr Lee and Mr David Lee in North Korea provided an opportunity for their moneys to be used. Mr Kim had already borrowed from Mr Lee and apparently considered him to be a person of means. I think it also likely that Mr Kim wrongly believed that he had the power as "Chairman" to offer shares in Woorifarm in exchange for the investment as he sets out in paragraph 27 of his affidavit: Exhibit A, page 78. There is no evidence that Mr Kim actually had this power or that he had been formally appointed as the Chairman of the company or had any delegated authority from Woorifarm which had been passed by a meeting of directors. Mr Kim was facing a demand from Kumsoo for more money and he felt he had to resolve the issue. I find that Mr Kim was not trying to seize Woorifarm from Mr Kwak at this point but was merely dealing with the difficult problem of Woorifarm meeting its funding needs as then demanded by Kumsoo through Mr Seo; 7. I also find that Mr Lee believed at the time that Mr Kim did have that power practically to offer shares and a directorship in Woorifarm as he asserts. The following matters support, in my view, that conclusion: 1. Mr Kim was to Mr Lee's knowledge an expert in agricultural matters; 2. He had no doubt been told by Mr Kim that the venture involved an investment in agriculture; 3. The discussion with Mr Seo would have also likely informed him that the joint venture related to agricultural matters: see paragraph 13 (e) of Mr Lee's second affidavit; 4. There is no evidence that he understood that Mr Kwak had any experience with, or knowledge of, agricultural matters; 5. Mr Kim would appear to Mr Lee to be familiar with Mr Seo from Kumsoo as indeed he was; 6. Mr Lee, I infer, would have assumed that without Mr Kim's involvement, the deal would never have advanced because he was the one with agricultural expertise in North Korea. This is consistent with paragraphs 9-10 of Mr Lee's second affidavit and his oral evidence; 1. Taking all of these matters into account, I find on all the evidence that Mr Lee honestly but mistakenly believed that Mr Kim had authority to deal with negotiations with Kumsoo even though he was not formally a director of the company. In paragraph 13(h) of Mr Lee's second affidavit, Mr Lee has Mr Kim offering him and Mr David Lee each a 20% interest in the company for $70,000. Mr Lee asserts that Mr Kim said that he could agree to the proposal as he was "the president of Woorifarm as you know". This is very similar to what appears in paragraph 27 of Mr Kim's affidavit. It seems to be inconceivable that Mr Kim would do this unless he honestly thought that he had authority to do it and/or could bring this change in shareholding into effect following discussions with Mr Kwak; 2. On 3 March 2013 the second agreement was signed. It was signed on behalf of Woorifarm by Mr Kim as Chairman and by Mr David Lee and Mr Lee as directors. It was not disputed by Mr Lee that he was not a director of Woorifarm by this date. He gave evidence that Mr Kim, he believed, would take care of the necessary requirements to make him a director. I find that Mr Lee at no time believed himself to be a director of Woorifarm. I also reject Mr Lee's evidence that he believed Mr Kim would take care of his appointment as a director of Woorifarm. Mr Kim obviously knew little about such matters. It is likely, and I find, that Mr Lee believed that Mr Kwak, when faced with the Kumsoo funding demands, would attend to his registration as a director of Woorifarm on the basis of the funding which he would provide. I find that it is also likely that Mr Lee believed that Mr Kim as Chairman and as the person with agricultural expertise was in a position to discuss the matter with Mr Kwak and persuade him to give them the interest in the company as Mr Kim's involvement was crucial to the success of the joint venture; 3. At some time towards the end of March 2013 Mr Kim informed Mr Kwak that he had changed the November 2012 Agreement: see paragraphs 37-38 at Exhibit A, pages 87 and 88. It is unlikely, as submitted by Mr Lee's counsel, that Mr Kim would do this on his return to Australia if there was indeed a conspiracy to attempt to take over the benefit (if any) of the November 2012 Agreement. Mr Kwak was angered by Mr Kim's information and then travelled to North Korea to complain in relation to the change made in March 2013 to the Agreement. Whilst Mr Kwak was in North Korea he was given a receipt for the seeds provided by Mr Kim in November 2012: Exhibit A, page 94. This was signed by Mr Seo; 4. The complaints made by Mr Kwak obviously caused some concern with the North Korean authorities. See the letter to Mr Lee from the Investment Committee of Equity Joint Venture dated 28 June 2013: Exhibit A, page 494 and 471, paragraph 20(b). At about this time Mr Kwak said that he was told in North Korea that the Joint Venture Agreement could not continue because a "fraud has occurred". He claims this was the phrase used by a Mr Shin, a senior government official from a North Korean government department, Haedong: Exhibit A, page 88 [43] and page 89 [47] 5. Mr Kim expressed the view in cross-examination that the representatives from Kumsoo (presumably Mr Seo and perhaps Mr Kwon) had been "lying" and therefore the Agreement with Kumsoo could not continue: T81.34-.42. He did not elaborate on that. Crucially, however, this seems to have led Mr Kim to decide to have no further involvement in the proposed venture. I find that his continued involvement was in practical terms crucial to the future of the relationship between Woorifarm and Kumsoo. Mr Kwak submitted that other expertise could have been obtained in place of Mr Kim, such as the scholar who advised Mr Kwak on the value of the seeds, however there was no satisfactory evidence as to other experts who would be available and who would be trusted by Mr Kwak and importantly Kumsoo; 6. On the evidence before me I am unable to determine that Kumsoo through Mr Seo had fraudulently attempted to demand money from Mr Kim for the Agreement to continue. Certainly I find that there are serious doubts about the prospects of Kumsoo continuing its obligations under either the November 2012 or the March 2013 Agreements without the payments demanded by Mr Seo and contemplated under the Agreements; 7. Soon after this time Mr Lee arranged the incorporation of One Korea Trading Pty Ltd who had as the directors Messrs Kim, David Lee and Bonney Lee. The cross-claimant/defendant claims this was incorporated to take advantage of the opportunity in North Korea and to take it away from Woorifarm. Mr Lee says he incorporated it at the request of Mr Kim only. I think it likely that there were discussions between Mr Lee and Mr Kim as to the incorporation of the company and it was probably incorporated to take advantage of any opportunities which arose in relation to agricultural investment. Mr Kim denied that the company was set up to attempt to divert the opportunity from Woorifarm to One Korea Trading as he believed the Kumsoo representatives were lying and he had no intention to "set up a new business" with them: T79.25; T81.1; T81.12. I observed him carefully when he gave this evidence and I accept it. It also appears logical to me; 8. There was extensive email correspondence between the plaintiff and the defendant in relation to what had occurred with the November 2012 Agreement. In this Mr Lee asserts that he raised a concern with Mr Kim that he was not registered as the managing director of Woorifarm so it would be "a flaw in the contract". He asserts that Mr Kim insisted that it should not be a problem at all. Mr Lee stated in the email that the decision to follow Mr Kim "was a very big mistake". I infer this was because he realised that Mr Kim had no authority to deal with the North Korean authorities on behalf of Woorifarm: Exhibit A, page 225. In the same email Mr Lee asserted that one of the reasons why the contract failed was because Mr Kim had a "lack of understanding and experience of the business operation, suggesting something like setting up a new company if he is not listed as a director" [sic]. In my view there is some force in that claim. Mr Kim, I find, believed he had authority as the Chairman of the company to negotiate with the North Korean authorities whereas in fact he did not; 9. I find on all the evidence that Mr Kim believed, wrongly, that the use of the word Woorifarm by the company which had previously been the name of his agricultural business, gave him some right of ownership over the company. I accept his evidence in this regard. However, he was wrong and the only legal authority in relation to Woorifarm Pty Ltd lay with Mr Kwak and his wife. I find that the request for extra money was made by Mr Seo of Kumsoo in the March 2013 meeting and that Mr Kim believed he had the authority, wrongly, to deal with the situation on the spot in the absence of Mr Kwak by offering shares in the company and directorships to Mr David Lee and Mr Lee in exchange for needed financial assistance from them. No doubt Mr Lee opportunistically took advantage of the situation to seek an interest in a project which he thought may well be established successfully in North Korea. However, I am unable to find on all the evidence that he did so fraudulently or with the intention of breaching the November 2012 Agreement which had already been reached between the parties. Mr Lee asserts, and I accept, that he had never seen a copy of the November 2012 Agreement. Mr Kim should not have entered into any further negotiations with Kumsoo without the express permission (and probably presence of) Mr Kwak; 10. Mr Lee I find was quite happy to take advantage of the opportunity presented to him and probably thought that Mr Kim should have been a director of Woorifarm due to his expertise but believed that the matter would be regularised upon their return to Australia as Mr Kwak would have needed their investment and Mr Kim's involvement to deal with the demands of the North Korean authorities. I find that there is no satisfactory evidence that the November 2012 Agreement or the March 2013 Agreement could have continued in a practical way successfully without the assistance and involvement of Mr Kim due to his agricultural expertise and standing with the North Korean authorities and the lack of that experience in Mr Kwak; 11. I now turn to consider the issues in the case.

Issue 1: Was the loan for $50,000 with Mr Lee entered into by Mr Kwak or Woorifarm Pty Ltd?

The plaintiff, Mr Lee, seeks to recover $50,000 plus interest pursuant to the Statement of Claim. He asserts that the contract of loan for $50,000 was entered into with Mr Kwak pursuant to a written loan agreement on 8 January 2010: Statement of Claim paragraph 1. Mr Kwak asserts that the contract of loan was entered into by him as agent for and with the authority of Woorifarm and he has no liability for the loan to Mr Lee: Amended Defence paragraphs 1 and 2.
Mr Lee submits that even if Mr Kwak entered into the loan contract as agent for Woorifarm that both he (Mr Kwak) and Woorifarm would be liable under the contract of loan pursuant to the doctrine of the undisclosed principal as it was not stated to Mr Lee that he was acting as agent for Woorifarm.
Where an agent enters into a contract on behalf of an undisclosed principal, either the principal or the agent may be sued in the alternative: Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 at 149-150; Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199 at 207; Integrated Asset Management Pty Ltd v Trans Communications Pty Ltd [2015] NSWSC 984 at [122]. The issue therefore is whether Mr Kwak entered into the loan contract with Mr Lee as a disclosed agent for Woorifarm, as undisclosed agent for Woorifarm or on his own account.
The written contract, being the IOU, is between Mr Lee, Mr Kwak and Mr Kim and makes no mention of Woorifarm. It appears to be clear on its face and negates the argument of Mr Kwak. There is no suggestion on the face of the contract to indicate that Mr Kwak signed it in any other capacity than his personal capacity: See Exhibit A page 39. Extrinsic evidence is not admissible to rebut the clear terms of a written agreement to suggest alternative contracting parties: Campbell J in White v Baycorp Advantage [2006] NSWSC 441 at [80]; Integrated Asset Management Pty Ltd v Trans Communications Pty Ltd [2015] NSWSC 989 at [132]. Mr Kwak relied on the decision of Giliberto v Kenny (1983) 48 ALR 620 where Gibbs CJ held at 623 that in construing a contract general surrounding circumstances is admissible to identify the person or persons referred to in a contract. Mr Lee submitted that that case was unusual and the identity of the contracting party was unclear. This should be contrasted with the present case where the IOU was clear as to parties on its face. I agree with the submissions of Mr Lee on this point.
Mr Kwak submits that the contract was formed through an oral discussion not the written agreement. However, it seems clear that the IOU was intended to replace any oral contract on the issue. In any case, as discussed below, the evidence of the oral discussion does not assist Mr Kwak.
Paragraph 1 of Mr Kwak's Amended Defence asserts that he entered the contract "as agent for and with the authority of Woorifarm". Mr Lee submits there is no evidence that Mr Kwak had the authority of Woorifarm to enter into the contract with Mr Lee and Mr Kim. The evidence shows that at all relevant times, Mr Kwak and his wife were the two directors of Woorifarm. In the absence of evidence showing authority in Mr Kwak, it is argued that he would have no actual or ostensible authority as a single director to bind the company: Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at 205. There is also no evidence that the requirements of Section 248A(1) of the Corporations Act were complied with.
Mr Kwak responds that this issue was not pleaded and takes Mr Kwak by surprise and should not be allowed to be raised. Mr Lee submits that authority was a live issue as he is regarded as joining issue with paragraph 1 of the Amended Defence. I agree with Mr Lee's submission.
In my view, the authority argument should be rejected. The evidence shows that Mr Kwak proceeded with the approval of his wife who was the only other shareholder apart from him. With small family companies a certain degree of informality is expected. In any case, I accept the submission of counsel for Mr Kwak that Woorifarm could have readily ratified the decision.
If there is any doubt, the other evidence in the proceedings also supports the conclusion that the loan contract was with Mr Kwak as the borrowing party.
In paragraph 14 of his affidavit sworn 13 April 2016, Mr Kwak refers to a conversation with Mr Lee to the following effect: "[Mr Kwak]: Could you also lend me $50,000 for Woorifarm, for the agricultural business. Bonney Lee: Sure. We will need a document drafted."
Mr Lee's affidavit sworn 29 January 2016 in paragraph 8 refers to a conversation between Mr Lee and Mr Kwak where Mr Lee said words to the effect: "Having said that, I will find out [if I] can lend you some money to you if you would like".
In my view the affidavit evidence relied upon even by Mr Kwak does not establish that the money was being borrowed by Mr Kwak as disclosed agent for Woorifarm. The conversation does not involve Mr Kwak asking for money as a loan to Woorifarm but has a request involving lending him money for Woorifarm. This establishes a loan between Mr Lee and Mr Kwak.
This conclusion is, in my view, strongly confirmed by the contemporaneous documents: 1. The IOU (irrespective of who it was prepared by) is signed by Mr Lee, Mr Kim and Mr Kwak. There is no reference to Woorifarm on the document (Exhibit A, page 39); 2. The cheque dated 8 January 2010 was made out to Mr Kwak not to Woorifarm (Exhibit A, page 40); 3. The email dated 18 December 2011 from Mr Kwak to Mr Lee includes the following: "I felt my heart heavy as I have never indebted to anyone in my life. Sooner or later, I will pay back the money, With interests as well." There is no mention of Woorifarm in this email (Exhibit A, page 43). The email as a post-contractual document may be considered in relation to determining the identity of the contracting party: Tomko v Palasty [2007] NSWCA 258 at [63]-[68].
I do not accept the assertion by Mr Kwak that the money was borrowed by him on behalf of Woorifarm as a disclosed agent. The overwhelming evidence, in my view, establishes that the money was borrowed by him in his personal capacity albeit that some of the proceeds may well have been intended to be used by him for the proposed agricultural business in North Korea under the name of Woorifarm.
The agreement is silent as to the rate of interest to be paid in the event that the principal money was not repaid on the due date of 8 January 2011. It is clear from the terms of the IOU that it was agreed that 10% interest would be charged on the amount borrowed until 8 January 2011, that is, $5,000. In my view, it cannot be inferred from the IOU document that 10% interest was to be paid after 8 January 2011 in the event that the money was not repaid by Mr Kwak by that date.
Accordingly, in my view any interest on the money outstanding after 8 January 2011 should be paid at court rates. The interest will need to be calculated by the parties.

Issue 2: Was the loan agreement between Mr Kwak and Mr Lee varied so that only $35,000 is owing?

It is asserted by Mr Kwak that if he fails in establishing that the $50,000 was borrowed in his capacity as a disclosed agent for Woorifarm, the loan agreement was varied such that Mr Lee agreed to recover $15,000 of the loan directly from Mr Kim or that Mr Lee is estopped from denying his agreement to this.
Mr Kwak asserts that there was an agreement between himself and Mr Lee to vary the loan agreement so that the capital amount owing by him was only $35,000: see paragraphs 18-20 of Mr Kwak's affidavit sworn 13 April 2016. This is denied by Mr Lee in paragraph 8 of his affidavit sworn 27 June 2016. Mr Kwak says the arrangement agreed was that Mr Lee was to recover $15,000 from Mr Kim. Mr Kim gave evidence that he borrowed $15,000 from Mr Kwak but later gave an IOU for $15,000 to Mr Lee: T58. This supports Mr Kwak's submission.
The contract on its face appears to be a tripartite contract between Mr Lee, Mr Kwak and Mr Kim. The contract includes the words: "Eul shall pay A$100,000 of the principal money and its corresponding interest of A$10,000 totalling A$110,000 to Gap by the 8th of January, 2011". "Eul" is defined in the contract as both Mr Kim and Mr Kwak. "Gap" is defined as Mr Lee.
As it is a tripartite contract between the three parties it seems difficult to accept that Mr Lee and Mr Kwak could vary it without the approval of Mr Kim, whether expressly or by conduct. The contract seems to indicate that Mr Lee could choose to recover the money owing from either party. The issue is whether there is satisfactory evidence that Mr Kim agreed to the variation: see Kim affidavit paragraphs 13-15; T57.28-T58.34.
Mr Kwak submits that the contract was varied by conduct. See New South Wales Housing Authority v Diab [2015] NSWCA 133 at [33]-[36]. In my view there is force in that argument. The conduct of the parties was consistent with a variation by conduct of the terms of the loan as set out in the written contract so that Mr Kwak only owed Mr Lee $35,000.
The following matters support this conclusion: 1. The IOU for $15,000 given by Mr Kim to Mr Lee. Mr Kim was clear in his evidence on this issue and I accept it; 2. The email from Mr Kwak to Mr Lee dated 9 November 2013 (Exhibit A, page 101) refers to a debt of $35,000 not a debt of $50,000. At this stage no litigation for this amount was likely; 3. The letter from Mr Lee's former solicitors, Rose Kanaan, dated 3 December 2013 (Exhibit A, page 114) provides as follows: "We are instructed that you have failed to repay the balance of the advance in the sum of $35,000 with interest at the rate of 10%". This is consistent with the balance owing being only $35,000 plus interest and not $50,000. In my view I am able to infer that this letter would have been based on instructions from Mr Lee; 4. I was not impressed with Mr Lee's explanation for the lesser amount being sought being that although he was still asserting $50,000 was owed the lesser amount of $35,000 was acceptable to resolve the matter: T113.36; T113.50. However, it should be noted that Mr Lee sought to recover the full $50,000 in his email dated 15 October 2013: Exhibit A page 44.
The balance of the evidence establishes a variation by conduct as asserted by Mr Kwak. I agree with the submission made on behalf of Mr Kwak that the consideration was the conferral of a practical benefit on Mr Lee as having Mr Kim as a borrower as to $15,000 was seen as a preferable commercial arrangement for Mr Lee. Mr Kim, it will be recalled, had already repaid $50,000 of the debt: see Tinyow v Lee [2006] NSWCA 80 at [61]. Accordingly, I find that the contract was varied as alleged.
I also need to consider the estoppel argument raised by Mr Kwak. In argument, counsel for Mr Kwak submitted that Mr Lee is estopped because Mr Kwak has suffered a detriment through not pursuing his $15,000 loan against Mr Kim. The loan appears to have been made in January 2010 (Kwak affidavit paragraph 18).
Detrimental reliance is needed to establish estoppel. The onus rests on the plaintiff to establish detrimental reliance: Sidhu v Van Dyke (2014) 251 CLR 505 at [50]-[61]. When the Statement of Claim was filed on 18 November 2014 seeking $50,000, Mr Kwak could have sued Mr Kim to recover the $15,000 in question. This pleading should have informed Mr Kwak of Mr Lee's position as to the loan. Any cause of action would not have been statute barred at this time: Section 14 of the Limitation Act 1969 (NSW). It was also not statute barred when the Amended Defence was filed pleading the estoppel. Accordingly, estoppel is not established by Mr Kwak.
The contract was varied as alleged by Mr Kwak so that only $35,000 was owed to Mr Lee by Mr Kwak.
The date of the varied loan is not clear. Mr Kwak's 13 April 2016 affidavit refers to "in about late 2011". Nothing is said in relation to who owed interest on the $15,000 to Mr Lee for the period from the date of the loan until late 2011. In my view the discussion in paragraph 20 in Mr Kwak's affidavit only related to the sum of $15,000. Accordingly, Mr Kwak remains liable to Mr Lee for interest on $50,000 for the period from the date of the loan until (say) 1 October 2011. This should be added to the interest on the $35,000 which has been unpaid by Mr Kwak for the period from 1 October 2011 to date.

Issue 5: Whether the March 2013 Agreement was authorised or ratified by Woorifarm

In my view, on all the evidence Woorifarm did not authorize the March 2013 Agreement. There is no evidence that Mr Kim had authority from the board of Woorifarm to enter into the Agreement on its behalf. Messrs Kim, Lee and David Lee were not directors of Woorifarm. I discuss this in more detail in Issue 6 below.
Was the March 2013 Agreement ratified by Woorifarm? There are several requirements for ratification: the agent showed the intention to contract on behalf of the principal at the time of contract; the principal was in existence at the time of contract; the principal possessed contractual capacity at the time of contract and ratification; the principal ratified the whole contract and the principal had full knowledge of what had been done or had made an unqualified adoption of whatever may have been done: Gooley and Others, Corporations and Associations Law: Principles and Issues, 6th Edition, LexisNexis 2015 at [9.17]. See also Bennett v Strauss [2016] NSWCA 324 at [1]-[2] and [46]-[51] and Williams Group Australia Pty Ltd v Crocker [2016] NSWCA 265 at [119]-[127], [152] and [153]. The last two requirements would appear to be in issue in the present case. In Leybourne v Permanent Custodians Ltd [2010] NSWCA 78 at [132] it was held that clear adoptive acts are required from the principal.
In my view there was no ratification in the present case as there were no clear adoptive acts or ratifying acts with full knowledge: 1. Despite paragraph 17 of Mr Lee's second affidavit (Exhibit A page 51), Mr Lee appears to have become aware that Mr Kwak was annoyed with Mr Kim in signing the March 2013 Agreement: T124.22; 2. Paragraphs 39-46 of Mr Kwak's first affidavit are inconsistent with a ratification; 3. Mr Lee's 14 January 2014 email is inconsistent with a ratification where he describes signing the March 2013 agreement as "a very big mistake" (Exhibit A page 225). Mr Kwak had earlier described the March 2013 Agreement as "a fraudulent and false contract": Exhibit A page 106. This is not consistent with ratification; 4. The documents at Exhibit A pages 62-67 were not identified by Mr Kim despite paragraph 19 of Mr Lee's second affidavit; 5. Mr Kwak said that the documents at Exhibit A pages 62-67 were prepared by Mr Seo not him and he (Mr Kwak) refused to sign them; 6. The transcript at T184.28-T185.42 when read as a whole is not consistent with Mr Kwak and Woorifarm adopting the March 2013 Agreement in an unqualified fashion; 7. I can find no evidence that Woorifarm ratified the conduct of Messrs Kim, Lee and David Lee in signing the March 2013 Agreement with full knowledge of what had been done or had made an unqualified adoption of whatever may have been done by them in signing the Agreement on behalf of Woorifarm. In the end Mr Kwak as the directing mind and will of Woorifarm did not have "full knowledge of all the material circumstances", particularly why Kumsoo had signed the March 2013 Agreement with the variations.

Issue 6: Whether Mr Kim was authorised to represent Woorifarm in negotiating and executing the March 2013 Agreement

The issue to be determined is whether Mr Kim was authorised to represent Woorifarm in negotiating and executing the March 2013 Agreement.
There is no evidence that the Board of Woorifarm which consisted of Mr Kwak and his wife provided any delegated authority to Mr Kim to negotiate and execute the March 2013 Agreement. Mr Kim was not a director or shareholder of Woorifarm at the relevant time and could have no apparent, usual or express authority arising from his position.
Mr Kim, however, was represented by Mr Kwak to be the Chairman of Woorifarm both in the business card which was Exhibit C and in letting Mr Kim sign under that title in the November 2012 Agreement. It is likely the business card was provided to the representatives of Kumsoo.
The evidence shows that Mr Kwak did prepare a draft letter for Mr Seo of Kumsoo, a copy of which was provided to both Mr Seo and Mr Kim in North Korea. See Annexure B of Mr Kwak's affidavit at Exhibit A, page 93. Mr Kwak says that the draft letter was never finalised: Kwak first affidavit, Exhibit A, page 84, paragraph [23]. The letter is relevant as being signed by Mr Kim with the title "President" (or perhaps "Chairman"). It is also relevant as it asserts that Woorifarm introduced hydroponics to representatives from North Korea in 1996 which was before Mr Kwak and his wife registered Cornerstone Management Pty Ltd which later became Woorifarm. This supports the proposition that Mr Kim had been using the name Woorifarm much earlier than the registration of the company.
However, in my opinion, these matters do not establish that Mr Kim was authorised to represent Woorifarm in negotiating and executing the March 2013 Agreement.
The issue arises whether the representation by Mr Kwak (presumably on behalf of Woorifarm) to the effect that Mr Kim was the "Chairman" amounted to a representation of apparent authority to Mr Kim or Kumsoo to undertake the negotiations.
In my view it did not. First, the fact that someone is described as the chairman of a company or even signs an agreement on the company's behalf does not mean, or infer, that the person has authority to enter into a new and different agreement or an amending agreement on behalf of the company.
Further, in order for Mr Kim to have had apparent or ostensible authority, there must have been a representation from Woorifarm (through Mr Kwak) that Mr Kim had that authority. In addition, there is no evidence to suggest that Mr Kwak himself had actual as opposed to ostensible authority to enter into such an agreement. In Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising and Addressing Co Pty Ltd (1975) 133 CLR 72 the High Court stated as follows at page 80: "… a person with no actual, but only ostensible, authority to do an act or to make a representation cannot make a representation which may be relied on as giving a further agent an ostensible authority. Hence the stress by Diplock L.J. [in Freeman & Lockyer] on the need that the person or persons making the representation must have actual authority to make the representation."
Even if the reference to Mr Kim as Chairman of Woorifarm could amount to a representation, there is no evidence that Mr Kwak himself had actual authority to represent that Mr Kim had actual authority to negotiate and execute the March 2013 Agreement for Woorifarm. Mr Kwak was only one director and shareholder in Woorifarm and could only have had ostensible not actual authority. There was no evidence that Mr Kwak had been given a general delegated authority to act on behalf of Woorifarm. In any case calling someone Chairman is in my view not a representation of apparent authority to sign an Agreement on behalf of a company, particularly when Mr Kwak as "representative Director) (Exhibit A page 134) was not involved.
Accordingly, I find that Mr Kim was not authorised to represent Woorifarm in negotiating and executing the March 2013 Agreement.

Issue 7: Whether Mr Lee knew or ought to have known that Woorifarm had not authorised any of Mr Lee, Mr Kim and/or Mr David Lee to enter into the March 2013 Agreement

There is no evidence that Woorifarm had expressly authorised Mr Lee or Mr David Lee to execute the March 2013 Agreement on behalf of Woorifarm. I find that Mr Lee knew at all relevant times that neither he nor Mr David Lee were directors of Woorifarm.
However, there is no satisfactory evidence to suggest to me that Mr Lee knew that Mr Kim did not have authority to enter into the March 2013 Agreement on behalf of Woorifarm. Mr Lee knew that Mr Kim was not a director of Woorifarm at the relevant time. See the discussion on this issue above. However, that does not mean that he knew or ought to have known that Mr Kim did not have authority to negotiate and execute the March 2013 Agreement.
I find that there is no evidence that Mr Lee knew this.
In relation to the issue of whether he ought to have known it, in my view there is no reason to conclude that he should have.
In my view, Mr Lee believed at the time that Mr Kim was intimately involved in the negotiations in North Korea because of his expertise and prior experience in agriculture in that country and that the proposed agreement with Kumsoo related to agriculture. I think Mr Lee must have believed that a crucial component of the agreement was Mr Kim because of that expertise and experience. Mr Kim was also much more senior to Mr Kwak in years and this was significant in the North Korean community. I therefore conclude that Mr Lee reasonably was of the view that Mr Kim was there with authority from Woorifarm to continue any contractual negotiations or arrangements required in relation to the joint venture between Woorifarm and Kumsoo, even though he was not a director and had sought to become a director of Woorifarm.

Issue 8: Whether on the balance of probabilities the conduct of any of Mr Lee, Mr Kim and Mr David Lee caused termination of the November 2012 Agreement and the subsequent loss to Woorifarm

The conduct of Mr Lee appears to be the only conduct which is relevant in these proceedings.
The evidence suggests that the North Korean authorities chose to have no further involvement with the November 2012 Agreement because an alleged fraud had occurred involving Messrs Lee, David Lee and Mr Kim on the one hand and Mr Seo on behalf of Kumsoo on the other hand: Kwak first affidavit paragraph 47 (Exhibit A page 89). Initially Mr Kwak only complained in relation to the alleged fraud of Messrs Kim, Lee and David Lee: first affidavit paragraphs 42 and 43. Then he alleged that these men conspired with Mr Seo to change the November 2012 Agreement: 24 May 2013 email at Exhibit A page 211.
The evidence seems to suggest that Mr Seo was regarded as being implicated in the matter as Mr Shin from North Korea said he had been fired from Kumsoo and was a party to the alleged fraudulent arrangement. It was said by Mr Shin that the Agreement could not go ahead as Mr Seo had intimate knowledge of "the business deal": first affidavit paragraph 47.
Mr Kim gives evidence that Mr Seo requested the additional money: Kim affidavit paragraph 26. This is confirmed in Mr Lee's second affidavit: paragraph 13 (e) Exhibit A page 50.
Accordingly, Mr Kim reacted to a request by Mr Seo and then sought the assistance of Mr Lee. As stated above, I find that Mr Lee honestly believed Mr Kim had authority to negotiate with Kumsoo even though Mr Kim was not a director of Woorifarm. However, it is clear that Mr Lee signed the March 2013 Agreement.
Taking all the evidence into account, it appears that the North Korean authorities decided not to proceed with the November 2012 and the March 2013 Agreements because of the conduct of Mr Seo not the conduct of Mr Lee. Mr Shin told Mr Kwak that Mr Seo "was also party to the fraudulent arrangement" and he was the person with "intimate knowledge of the business deal" and the matter cannot go ahead as Mr Seo "cannot be a part of the deal."

Issue 9: Whether Mr Lee intended to cause the termination of the November 2012 Agreement

Mr Lee raises as a main initial point, the assertion that the November 2012 Agreement was not legally binding at the time the March 2013 Agreement was purportedly entered into: 16 June 2017 submissions paragraphs 6(b) and 19-26. It is submitted, in summary as follows: 1. Clause 21.4 of the November 2012 Agreement was not complied with - there was no evidence of approval from the Central Investment Agency of the DPRK or that the Agreement was registered nationally; 2. No certificate of funding was issued under Clause 5.3 of the November 2012 Agreement; 3. 75% of Woorifarm's funding being €2.5m was not funded by it within a month after the establishment date of the joint venture within Clause 5.2.4 of the November 2012 Agreement; 4. If the establishment date is the date of the Agreement being 16 November 2012 Woorifarm did not pay €2.5m by 16 December 2012. If the establishment date is the date of approval and registration under Clause 21.4, there is no evidence this happened; 5. Woorifarm's submissions in paragraph 7 of its 2 June 2017 submissions, that it did not have to pay €2.5m in cash but rather its initial contribution was foundational seeds or agricultural expertise, was not available on the proper construction of Clauses 5.2.4 and 21.4 of the November 2012 Agreement; 6. Accordingly, the November 2012 Agreement was never legally effective. The tort of inducting breach of contract cannot be established.
Woorifarm in response submits in summary, as follows: 1. Clause 21.4 has to be read with the text appearing on the top of page 134 of Exhibit A; 2. The evidence of Mr Kwak and Mr Kim was that the first funding was completed by Woorifarm. This is supported by the profit and loss statement and the Investment Statement; 3. The parties had mutually agreed the evaluation of the asset values under Clause 5.2.7 of the November 2012 Agreement; 4. Clause 5.2.2 contemplates a fund of €4m "for horticultural crops of pure breed" and the funding was to be represented by the seeds provided; 5. Mr Lee agreed that all that was still to be provided by Woorifarm was US$130-140,000: T121; 6. Other clauses of the November 2012 Agreement and the profit and loss statement and the Investment Statement confirm that the investment was to be in the form of seeds; 7. As a fallback submission that the parties varied the Agreement to accept that the provision of the seeds satisfied Woorifarm's first funding.
In my view, Mr Lee's submissions are to be preferred on this issue. In my view the November 2012 Agreement was legally not binding and not in operation as at March 2013. This is for the following reasons: 1. Clause 21.4 of the November 2012 Agreement makes clear that the Agreement was to be legally effective from the date when both parties sign the Agreement and receive the establishment approval of the corporation from the Central Investment Agency of the DPRK and have the Agreement registered nationally. There is no evidence this had occurred. Clause 21.4 continues that if Party B (Woorifarm) completes "the first funding" before the approval of the establishing of the corporation, the Agreement shall be effective from that day and the Agreement shall then be legally binding to both parties; 2. The total funding by Woorifarm was €4m (clause 5.2.2) and the first funding appears to have been €2.5m which is 75% of its allocation of funding towards its total investment amount within a month after the establishment date of the joint venture: Clause 5.2.4; 3. Clause 5.2.2 says "[Woorifarm] shall make fund of [€4m] for horticultural crops of pure breeds, technology etc, as its funding toward the total investment." The reference to "technology, etc" negates that seeds necessarily have to be the funding of €4m contemplated; 4. What was the establishment date of the "equity joint venture"? The November 2012 Agreement is dated 16 November 2012. Clause 1.1.9 states that the "day of establishing the equity joint venture: It refers to the day when the equity joint venture receives approval for the establishment and registration of the venture from the Central Investment Managing Agency of DPRK." There is no evidence that this approval was obtained; 5. Was €2.5m in funding provided by Woorifarm within one month of 16 November 2016 or at any time? Mr Kim delivered foundational seeds on behalf of Woorifarm on 27 November 2012: Exhibit A page 94. The receipt received does not state that this was accepted as the €2.5m of first funding. Mr Kim says in his affidavit that these seeds were very valuable "and it was [his] understanding that the seeds were to cover Woorifarm's investment of €2.5m under the agreement." Mr Kim's subjective understanding is not relevant to the proper interpretation of the November 2012 Agreement. The same applies to Mr Kwak's understanding; 6. Clause 5.2.7 allows the parties to decide on the asset values contributed by mutual agreement but only according to "the international market prices." Further the Board was to confirm it based on the "verification of the Josean Pyeongyang Accounting Accreditation Office"; 7. In my view, there is no satisfactory evidence that the asset value of €2.5m for the seeds supplied was mutually agreed. The receipt (Exhibit A page 94) does not suggest that. There is no evidence the market value of the seeds supplied was €2.5m. The seed cost in the profit and loss statement (even if applicable) was €1.453m not €2.5m: Exhibit A page 155. The total investment Statement was only €1.62m including €1.453m for seeds: Exhibit A page 168. Whilst there is evidence the seeds were used (Exhibit A page 96) and the parties were performing aspects of the Agreement there is no evidence that all parties agreed that funding to the value of €2.5m was supplied by Woorifarm either within one month of 16 November 2012 or by March 2013; 8. The other clauses relied on by Woorifarm do not lead to a different result; 9. Mr Lee's understanding that only US$140,000 remained outstanding is irrelevant to the issue of the value of what was supplied: T121.42; 10. Mr Kwak gave very confusing evidence in relation to whether the November 2012 Agreement was the final agreement. His subjective intentions are of course of limited value. See Mr Lee's submissions dated 16 June 2017 paragraph 20 and T176.4-.17; 11. Even if there was some form of agreement on foot which was not the November 2012 Agreement, what is alleged is conduct relating to the November 2012 Agreement.
For all these reasons the November 2012 Agreement was not legally effective or in force as March 2013. I accept Mr Lee's submissions on this issue. It is clear from the terms of the November 2012 Agreement that the central government agencies of the North Korean Government were intended by the parties to have a pivotal role in the approval and authorization of the proposed agreement. As to the allegation that some other contract was in existence, having regard to the terms of the November 2012 Agreement it is difficult to determine that there was an intention to create binding legal relations until the approvals in the November 2012 Agreement were obtained. Issues of consideration also arise.
The cross-claimant, Woorifarm, relies on three torts against the plaintiff, Mr Lee: 1. Injurious falsehood; 2. Intentional interference with contractual relations; 3. Inducing breach of contract. See cross-claimant's submissions paragraph 11. Each of these will be considered.

(1) Injurious falsehood

In Born Brands Pty Ltd v Nine Network Australia Pty Ltd [2014] NSWCA 369 Basten JA (with whom Meagher JA and Tobias AJA agreed) stated as follows at paragraphs [90]-[91]: "[90] The applicants pleaded an alternative case claiming damages for the tort of injurious falsehood. It was necessary for them to establish that the respondents had maliciously published a false statement about them, their property or business and that actual damage resulted from such publication: Palmer Bruyn & Parker Pty Ltd v Parsons [2001] HCA 69; 208 CLR 388 at [1] (Gleeson CJ). The critical element in the present case was to establish malice. The English Court of Appeal has held that the same principles apply with respect to malice in defamation and in injurious falsehood: Spring v Guardian Assurance Plc [1993] 2 All ER 273 at 288. The concept of malice in relation to defamation has been explained by the High Court in Roberts v Bass [2002] HCA 57; 212 CLR 1, where the concept was discussed in reference to a defence of qualified privilege, which is destroyed by malice. In that context, the question is whether the publisher's state of mind was actuated by an improper purpose or motive: at [76] (Gaudron, McHugh and Gummow JJ). [91] In the present case, the applicants did not rely upon actual knowledge of the falsity of any statement made about the applicants' product, but rather relied upon a failure to make proper inquiries and reckless indifference as to the truth or falsity of the allegations, amounting to wilful blindness. The trial judge dealt with the question of malice in relation to injurious falsehood in the following passage: [189] … I am not satisfied that the defendants were careless in failing to contact the plaintiffs before televising the Broadcast since I consider that the terms of the FDA warning were sufficient to apply [to] the Babywedge and the potentially fatal consequences of using such a product warranted the urgency with which the Broadcast followed the issue of the FDA warning. However, even had I considered the defendants' omission to contact the plaintiffs to request comment on the FDA warning before the Broadcast went to air to be careless, this would not have amounted to malice …."
There is no evidence in the present case that Mr Lee maliciously published a false statement about Woorifarm, their property, or business, and that actual damage resulted from such publication. Even if the first two elements of the tort are established (a defendant (Mr Lee) publishing to a third party (Kumsoo) words which are false (that he is a director of Woorifarm) which refer to a plaintiff's property or business (the business of Woorifarm)), I specifically find that Mr Lee did not act with malice in the present case in relation to Woorifarm by making a false statement in relation to it. See also Palmer Bruyn & Parker Pty Ltd v Parsons (2001) 208 CLR 388. I find that Mr Lee was not actuated by an improper motive or purpose in signing the March 2013 Agreement as he believed Mr Lee had authority to negotiate on behalf of Woorifarm in March 2013 due to his agricultural expertise and Mr Lee's knowledge that the two were involved in the pursuit of agricultural activities in North Korea. Mr Lee also had no shareholding in the company at that stage.
As to the element of actual damage, this shall be considered further below.

(2) Inducing Breach of Contract

Woorifarm relies on the tort of inducing breach of contract.
At common law an action lies against a person who induces another to break a contract with the claimant: Williams v Hursey (1959) 103 CLR 30. The tort of inducing breach of contract is clearly part of Australian law: Short v Citibank of Sydney (1912) 15 CLR 148; Raj Law NSW Pty Ltd v Raj Law Pty Ltd [2013] NSWSC 1621 at [11].
In Sharjade Pty Ltd v Commonwealth of Australia [2009] NSWCA 373 Hodgson JA stated at [130] that it was an element of the tort of inducing breach of contract that the defendant have sufficient knowledge of the terms of the contract to appreciate that what it is inducing will breach the contract.
In Daebo Shipping Co Ltd v The Ship Go Star [2012] FCAFC 156 the Full Federal Court stated the following at [88]-[89]: "[88] The tort of inducing a breach of contract consists of the following elements: (1) there must be a contract between the plaintiff (or applicant) and a third party; (2) the defendant (or respondent) must know that such a contract exists; (3) the defendant must know that if the third party does, or fails to do, a particular act, that conduct of the third party would be a breach of the contract; (4) the defendant must intend to induce or procure the third party to breach the contract by doing or failing to do that particular act; (5) the breach must cause loss or damage to the plaintiff. [89] The gravamen of the tort is the defendant's intention to induce or procure the breach in the knowledge that such a breach will interfere with the plaintiff's contractual rights: Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (1995) 58 FCR 26 at 43A-C per Lindgren J with whom Lockhart and Tamberlin JJ agreed; Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 at 509-512 [159]-[171] per Sheller, Stein and Giles JJA; LED Technologies Pty Ltd v Roadvision Pty Ltd (2012) 199 FCR 204 at 212-216 [40]-[54] per Besanko J with whom Mansfield and Flick JJ agreed. As Lindgren J explained, the defendant must have "a fairly good idea" that the contract benefits another person in the relevant respect. He said that knowledge of the contract may be sufficient for the purpose of grounding the necessary intention to interfere with contractual rights, even though the defendant does not know the precise term that will be breached. Reckless indifference or wilful blindness can amount to knowledge for this purpose: Allstate 58 FCR at 43C-44F; Fightvision 47 NSWLR at 512 [171]; LED 199 FCR at 216 [54]."
Both parties accepted that Daebo sets out the applicable principles.
In the present case: 1. There must be a contract between the applicant and a third party - here the November 2012 Agreement in question between Kumsoo and Woorifarm was not legally binding as at March 2013. See my analysis above. The tort is thus not established; 2. The respondent must know that such a contract exists - here the November 2012 Agreement was not legally binding. Mr Lee said he did not know the November 2012 Agreement existed. In addition, Mr Seo in the March 2013 meeting referred to the need to obtain approval: Lee second affidavit 13 (e) and 14. However, Mr Lee's 24 January 2014 email refers to Mr Lee attending a meeting "where a contract would be amended and signed": Exhibit A page 225. It is unclear whether this indicates Mr Lee knew the contract was in final as opposed to draft form. The evidence is unclear on this point. I find that Mr Lee knew that an agreement document existed when he attended the meeting. However, there is no satisfactory evidence he knew it was final and believed it was binding and operative; 3. The respondent must know that if the third party does, or fails to do, a particular act, that conduct of the third party would be a breach of the contract - this element is established in the present case if the first two elements had been satisfied. The March 2013 Agreement was also between Woorifarm and Kumsoo. The evidence of Mr Kim and Mr Lee, which I accept, is that the contract was varied at the request of Mr Seo on behalf of Kumsoo. While there is no suggestion that Mr Lee knew that any conduct would amount to a breach of the contract in the sense that the benefits to Woorifarm would be reduced he must have known that the amendments would affect Woorifarm's existing contractual rights; 4. The respondent must intend to induce or procure the third party to breach the contract by doing or failing to do that particular act - this element is also not established in the present case. There was no intention on the part of Mr Lee in my view to cause a breach of the contract. Rather, the amendments were to fit in with the requests of Mr Seo on behalf of Kumsoo; 5. The breach must cause loss or damage to the applicant - this will be considered further below.
There is also no evidence in the present case that Mr Lee intended by the 2013 Agreement to lessen the benefits to Woorifarm under the November 2012 Agreement: All State Life Insurance Co v ANZ Banking Group Ltd (1995) 58 FCR 26 at 43. If anything, as it was proposed by Mr Kim that Mr Lee take an interest in Woorifarm, his only objective must have been to protect Woorifarm's position and its benefits: see Mr Lee's submissions dated 16 June 2017 at paragraphs 15-16.
Accordingly, I find that the tort of inducing breach of contract is not established in the present case. Daebo was followed by Slattery J in Ryan and Briggs (as Executrices of Estate of late Donoghue) v Wikramanayake [2013] NSW 1150 at [106]-[107].

(3) Interference with contractual relations

There is a dispute between the parties as to whether the tort of interfering with contractual relations is part of Australian law.
Mr Lee submits that it is not: Mr Lee's submissions dated 16 June 2017 paragraphs 47-50. However, Mr Lee's submissions seem to refer mainly to the consideration by various judges of the tort of interference with trade or business by unlawful means not the alleged tort of interference with contractual relations. See the analysis of the authorities by Moore J in Qantas Airways v TWU of Australia [2011] FCA 470 at [422]-[430], by McMurdo P in Deepcliffe Pty Ltd v Council of the City of the Gold Coast [2011] QCA 342 at [18]-[28] and by McDougall J in Ballard v Multiplex [2012] NSWSC 426 at [77]-[85].
Mr Kwak submits that the tort of interference with contractual relations is part of the law of Australia: Mr Kwak's reply submissions paragraphs 49-53.
In Donaldson v Natural Springs Australia Ltd [2015] FCA 498 at [209]-[223] Beach J held there was such a tort. In Network Ten Pty Ltd v Seven Network (Operations) Ltd [2014] NSWSC 692 at [110]-[114] Stephenson J held there was no such tort and a breach of a contract was required.
Is there a tort of inducing breach of contractual relations by direct or indirect means which is accepted and which should be followed by me, contrary to the decision of Stephenson J in the Network Ten case?
Mr Kwak says there is and in his submissions relies on the decision of the High Court in Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530 at [40]-[42] and [123] and following where it is submitted the High Court accepted in that case the tort of interference with contractual relations. It is submitted that the way Zhu should be understood is that the High Court accepted direct or indirect interference with contractual relations as a separate tort. Zhu was not referred to by Stephenson J in the Network Ten case.
It seems to me that on a proper analysis the High Court in Zhu did recognize the tort of unlawful interference in contractual relations.
In Donaldson v Natural Springs Australia Ltd [2015] FCA 498 at [209]-[223] Beach J held that interference with contractual relations is the preventing or hindering of one party's contractual performance even though this may not amount to procuring or inducing a breach of contract. If it is aimed at a contractual party, as is alleged here, it is interference with contractual relations by direct means.
Mr Kwak submits, based on Donaldson that the elements of the tort of direct interference are: 1. The defendant must have an intention to interfere with a contractual relationship; and 2. The interference must be with contractual relations.
It is submitted that as the interference is direct, there is no need to find any "unlawful means", which is only necessary for indirect interference. It is also submitted that a breach of contract need not be caused.
In the present case: 1. A legally binding contract was not on foot between Woorifarm and Kumsoo. See my analysis above; 2. Accordingly, Mr Lee did not induce a breach of the contract. None of the parties signing the March 2013 Agreement on behalf of Woorifarm had authority to enter it and therefore it was a nullity. The changes to the November 2012 Agreement were requested by Mr Seo on behalf of Kumsoo; 3. There was no intention by Mr Lee to harm or hinder Woorifarm's position. His actions are consistent with wanting to advance Woorifarm's interests whilst obtaining a shareholding in Woorifarm in due course in exchange for an investment; 4. Mr Lee did not have a detailed knowledge of the November 2012 Agreement and he honestly but wrongly believed that Mr Kim had authority to negotiate on behalf of Woorifarm; 5. As stated above, in Donaldson v Natural Springs Australia Ltd [2015] FCA 498 at [209]-[223] Beach J held that interference with contractual relations is the preventing or hindering of one party's contractual performance even though this may not amount to procuring or inducing a breach of contract. There was no preventing or hindering Woorifarm's contractual performance here by Mr Lee. First, there was no binding contract in the November 2012 Agreement as I have found above. Secondly, Mr Lee was not intending to prevent or hinder Woorifarm's contractual performance but to advance it by offering to provide part of the additional money sought by Kumsoo. Thirdly, it was Mr Seo on behalf of Kumsoo who apparently sought the changes to the November 2012 Agreement not Mr Kim (or Mr Lee): see Lee second affidavit paragraph 13(e) (Exhibit A page 49); Kim affidavit paragraph 26 (Exhibit A page 77). I have no reason to disbelieve this evidence and I accept it. However, Mr Lee seemed to know that some amendments were likely. I consider this issue in greater detail below. Fourthly, Mr Seo was likely, it appears, to have sought the same changes to the November 2012 Agreement if Mr Kwak had been present as well as Mr Kim. I note that the profit and loss statement on which Mr Kwak places great weight (Exhibit A page 155), incorporates the reduced investment amounts reflected in the March 2013 Agreement. In addition, Woorifarm had the capacity to restore the company representatives and their details set out in the November 2012 Agreement: clause 2.3 (Exhibit A page 118); 6. The present case is very different to Zhu. That case involved an indirect interference with an existing contractual relationship to harm the plaintiff there. Here, there was no apparent intention to harm Woorifarm but to advance its interests; 7. In relation to the issue of damage, this will be considered further below.
Further consideration needs to be given to Mr Lee's knowledge in March 2013.
Mr Lee gave evidence that as at March 2013 he was not aware that an agreement had been entered into between Kumsoo and Woorifarm in November 2012 and that he had never seen a copy of it: Lee second affidavit paragraph 14.
Mr Kim said that he did not recall whether one of the people who congratulated him in relation to the November 2012 Agreement was Mr Lee: T72.12.
There is no independent evidence that Mr Lee saw the November 2012 Agreement prior to these proceedings. Mr Kim did give evidence that when he was travelling to North Korea in March 2013 with Mr Lee they discussed the 2012 Agreement: T78.31. Mr Kim later clarified that the discussion he referred to was in Pyongyang in North Korea: T78.38; T79.4.
No evidence was given by David Lee in these proceedings.
The defendant places significant reliance on Mr Lee's 24 January 2014 email at Exhibit A, page 225 where he states: "Chairman Kim insisted that Mr Myeong Jae Lee and I should come to a meeting where a contract would be amended and signed so I agreed to go as an observer". This, it was submitted, shows that Mr Lee was aware that the contract would at least be amended. However, in my view, that is inconsistent with the contract being terminated or knowledge that it was binding at that stage.
The affidavit evidence of Mr Kim (affidavit paragraphs 26-27) and Mr Lee (second affidavit paragraph 13(e) to (i)) is also inconsistent with Mr Lee intending the termination of the November 2012 Agreement.
Taking into account all the evidence, I am not satisfied to the requisite standard that Mr Lee was either aware of the detail of the November 2012 Agreement or intended to cause the termination of the existing November 2012 Agreement in March 2013.
Accordingly, in the light of the above analysis I find that the tort of interference with contractual relations is not established.
This finding leads to the conclusion that the three torts alleged against Mr Lee by Woorifarm have not been established.

Issue 10: Whether Mr Kwak ratified the March 2013 Agreement

An issue is raised by the parties as to whether Mr Kwak ratified the March 2013 Agreement. In my view this is a false issue. The Agreement was between Kumsoo and Woorifarm. The question is not whether Mr Kwak ratified the March 2013 Agreement but whether it was ratified by Woorifarm itself which was the proper party to the November 2012 Agreement (Exhibit A, pages 118 and 134) and the March 2013 Agreement (Exhibit A, pages 171 and 189).
I have considered whether Woorifarm ratified the March 2013 Agreement above. I have found that it did not.

Issue 11: What is the quantum of the lost opportunity suffered by Woorifarm?

The three torts alleged by Woorifarm each requires damage to be established. A loss of commercial opportunity under the November 2012 Agreement is relied upon: paragraph 32 of Mr Kwak's reply submissions.
The issue to be considered therefore is the amount, if any, which should be assessed as the value of the lost commercial opportunity suffered by Woorifarm if a breach had been established.
Some initial factual observations can be made in relation to the commercial opportunity provided to Woorifarm in the November 2012 Agreement: 1. An Agreement had been executed between Woorifarm and Kumsoo in November 2012; 2. The Agreement was between an Australian company and a North Korean government controlled entity. Enforcement of a contract against a foreign government entity always involves additional complexities; 3. The arrangement related to the objective of achieving profits from a commercial venture in North Korea in circumstances where North Korea does not have a modern western market economy. In my view judicial notice can be taken of this fact as it is notorious. Both parties agreed with this in oral submissions. See also Mr Quartullo's report at paragraphs 14.10-14.13 (Exhibit A page 447); 4. The November 2012 Agreement had not yet been put into full operation and no profits had emerged from it by March 2013. There is evidence from Mr Kim, who had extensive dealings with North Korean representatives, that he believed the North Korean representatives were lying and wanted to obtain further money without carrying through their part of the Agreement; 5. A significant matter in the context of the November 2012 Agreement was the contribution of expertise by Woorifarm through Mr Kim. Mr Kim had the expertise in growing vegetables including in North Korea not Mr Kwak. Mr Kim had no shareholding in Woorifarm or agreed remuneration. He thought the Kumsoo representatives were lying. He has had no further dealings with Kumsoo since about May 2013: Exhibit A page 78 paragraphs 30-31. Counsel for Mr Kwak submitted that if Mr Kim did not want to co-operate other expertise would be obtained by Woorifarm. There was no evidence as to other expertise or that any other person other than Mr Kim would have been acceptable to Kumsoo; 6. I have found that the November 2012 Agreement was not legally binding.
These facts raise for consideration the approach which the court must adopt in circumstances where the success of the commercial agreement may on a proper assessment be less than 50%.
In Malec v J C Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20, the High Court drew a distinction between proof of historical facts and proof of future possibilities and past hypothetical situations. The civil standard of proof on the balance of probabilities applies to the former but not the latter.
In Malec, which was a personal injuries case, the majority stated as follows at 642-643: "When liability has been established and a common law court has to assess damages, its approach to events that allegedly would have occurred, but cannot now occur, or that allegedly might occur, is different from its approach to events which allegedly have occurred. A common law court determines on the balance of probabilities whether an event has occurred. If the probability of the event having occurred is greater than it not having occurred, the occurrence of the event is treated as certain; if the probability of it having occurred is less than it not having occurred, it is treated as not having occurred. Hence, in respect of events which have or have not occurred, damages are assessed on an all or nothing approach. But in the case of an event which it is alleged would or would not have occurred, or might or might not yet occur, the approach of the court is different. The future may be predicted and the hypothetical may be conjectured. But questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration or proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high - 99.9 per cent - or very low - 0.1 per cent. But unless the chance is so low as to be regarded as speculative - say less than 1 per cent - or so high as to be practically certain - say over 99 per cent - the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability. The adjustment may increase or decrease the amount of damages otherwise to be awarded. See Mallett v McMonagle [1970] AC 166, at 174; Davies v Taylor [1974] AC 207, at 212, 219; McIntosh v Williams [1979] 2 NSWLR 543, at pp.550-551. The approach is the same whether it is alleged that the event would have occurred before or might occur after the assessment of damages takes place." (emphasis added)
Therefore, according to the High Court in Malec, unless the chance in the assessment of damages is so low as to be regarded as speculative, being less than 1%, the court will take that chance into account in assessing the damages.
In Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4, the High Court considered whether a similar approach should be adopted in assessing damages for the deprivation of a commercial opportunity because of misleading or deceptive conduct under Section 52 of the Trade Practices Act 1974 (Cth). After a detailed consideration of the authorities, the majority held that it should.
Further, the High Court appeared to state that a similar approach should be adopted for the assessment of damages in contract, tort and for misleading or deceptive conduct for the loss of a chance: see at [20]-[22].
The High Court followed its reasoning in the prior decision of Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1992] HCA 54 which was a contract case. The majority stated as follows: "Notwithstanding the observations of this Court in Norwest, we consider that acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s52(1), should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued. The principle recognised in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind. On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable." (emphasis added)
Therefore, according to the High Court in Sellars, the question is the proper assessment of the loss of a commercial opportunity which had some value not being a negligible value with the value being ascertained by reference to the degree of probabilities or possibilities of the opportunity.
Sellars has been followed in numerous later appellate authorities: see for example Hart Security Australia Pty Ltd v Boucousis [2016] NSWCA 307; OXS Pty Ltd v Sydney Harbour Foreshore Authority [2016] NSWCA 120 at [252]-[259].
In Hart Security Meagher JA (with whom Bathurst CJ and Beazley P agreed) stated as follows at [131]-[136]: "[131] Where a claim is made for damages for loss of a valuable opportunity the initial question is whether the breach of contract, negligence or breach of statutory duty caused the loss of an opportunity answering that description. That question is decided on the balance of probabilities. [132] In Sellars the position in relation to such cases was stated by the plurality (Mason CJ, Dawson, Toohey and Gaudron JJ) at 355: … the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value) … [133] Where the issue of causation of loss or damage turns on what the plaintiff would have done had the conduct complained of not occurred, the plurality also observed (at 353) that "there is no particular reason for departing from proof on the balance of probabilities notwithstanding that the question is hypothetical". [134] However, once it is established on the balance of probabilities that such a valuable opportunity has been lost, its value is to be ascertained by reference to the "degree of probabilities or possibilities" and "it is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable" (at 355). [135] In Sellars the company, Adelaide Petroleum, claimed that by reason of the misleading or deceptive conduct of its director Mr Sellars and Petroleum Poseidon it lost a valuable commercial opportunity. That opportunity was described by the plurality as being "the loss of the opportunity or chance of securing commercial benefits which entry into the Pagini agreement and completion of it would have brought" (at 348); and by Brennan J as the opportunity "to enter into a contract with Pagini and to obtain the financial benefits which completion of the contract would have produced" (at 357). The trial judge (French J as his Honour then was) had held (as summarised at 346-347) that on the balance of probabilities the Pagini agreement would have been entered into. His Honour also held that there was "more than a speculative possibility" that agreement would have been completed, thereby yielding benefits to Adelaide Petroleum. [136] The plurality concluded (355-356) that Adelaide Petroleum had established on the balance of probabilities that the contravening conduct caused the "loss of a commercial opportunity which had some value". It did so by proving that but for that conduct it would have entered into the Pagini contract in circumstances where there was a significant chance that it would be completed (at 356). The value of that lost opportunity then depended on an assessment of the prospects of that agreement being completed, and of the value of the benefits that would have been enjoyed in that event."
In Origin Energy LPG Ltd v Bestcare Foods Ltd [2013] NSWCA 90 Ward JA (with whom Macfarlan and Hoeben JJA agreed) stated as follows at paragraphs [85]-[86]: "[85] The majority in Sellars said (at 355) that "acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s 52(1), should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued". At 358, Brennan J, as his Honour then was, said: Where a loss is alleged to be a lost opportunity to acquire a benefit, a plaintiff who bears the onus of proving that a loss was caused by the conduct of the defendant discharges that onus by establishing a chain of causation that continues up to the point when there is a substantial prospect of acquiring the benefit sought by the plaintiff. Up to that point, the plaintiff must establish both the historical facts and any necessary hypothesis on the balance of probabilities. A constant standard of proof applies to the finding that a loss has been suffered and to the finding that that loss was caused by the defendant's conduct, whether those findings depend on evidence of historical facts or on evidence giving rise to competing hypotheses. In any event, the standard is proof on the balance of probabilities. [86] While it is accepted that, as Toohey J in Amann noted (at 138) the assessment of damages does sometimes, of necessity, involve what is "guess work rather than estimation" (his Honour there quoting Menzies J in Jones v Schiffmann (1971) 124 CLR 303 at 308), the onus remains on the plaintiff to prove its loss. In a loss of opportunity case that requires evidence from which the value of that lost opportunity can be assessed. In Sellars, Brennan J (at 365) noted that "in order for a plaintiff to establish that a negligent defendant's conduct has caused a valuable loss of opportunity, he or she must establish by evidence that, but for the contravening conduct of the defendant, he or she could have and would have taken the opportunity and the benefit that it would have yielded" (my emphasis)."
Accordingly, in the present case the value of the lost opportunity of the November 2012 Agreement depends on an assessment of the prospects of Woorifarm taking up the opportunity under the November 2012 Agreement, that Agreement being completed (in whole or in part), and the value of the benefits that would have been enjoyed by Woorifarm in that event.
In support of its claim for damages, Woorifarm relies on the expert accountant's report of Mr Quartullo dated 21 July 2016 which has already been referred to. The evidence relating to this report needs to be considered in greater detail.

Cross-examination of Mr Quartullo

Mr Quartullo was cross-examined in relation to paragraphs 4.07-4.08 of his report (Exhibit A, page 418). Mr Quartullo gave evidence that he assumed that the investment amount in the joint venture was the €5 million referred to in Clause 5.1 of the November 2012 Agreement (Exhibit A, page 120). He said he assumed that this represented what the parties considered was being invested in the joint venture and consisted of cash and expertise.
However, Mr Quartullo was then taken to Table 6 of his report at page 426 of Exhibit A where he assumed Woorifarm's gross investment amount was €2 million as opposed to the €4 million under the November 2012 Agreement. Mr Quartullo said that he had used these figures as they were in the profit and loss statement which was at Exhibit A, page 155. €2 million represented Woorifarm's gross investment in the profit and loss statement not the November 2012 Agreement. Mr Quartullo said that he understood the €2 million in the profit and loss statement was the correct figure as it constituted the figure in the Economic Technology Estimate Document referred to in the November 2012 Agreement (see Clauses 4.02.5, 4.04, 4.06 and 4.07 of Mr Quartullo's report). See also Clause 4.4.16 of the November 2012 Agreement.
After cross-examination, Mr Quartullo confirmed that if the figure of a €2.5 million investment in the profit and loss document at Exhibit A, page 155 was not used and the €5 million figure was instead used that this would change the figures in a number of his tables including the table number 6 at Exhibit A, page 426.
Mr Quartullo was then taken to Clause 7.11 of his report at Exhibit A, page 432. He confirmed that his valuation had been prepared on the present value of net cash flows assumed to the joint venture under the November 2012 Agreement on the basis that the assumed cash and services were provided by the parties set out in Table 6 on page 426 of his report. Mr Quartullo confirmed again that the numbers referred to in his report were based on the profit and loss statement at Exhibit A, page 155. That included the prices for the seeds and vegetables set out at pages 156-157 of Exhibit A. Mr Quartullo said that he had not verified the prices set out in the profit and loss statement and assumed that the per kilogram prices were correct. In answer to the question whether he had assumed the seed and vegetable prices were the same throughout the whole of his future projections, Mr Quartullo said that he had escalated the real amount over time to allow for projected increases. See paragraph 5.18 of his report. However he conceded that he used the figures in the profit and loss statement as his starting point for the escalation.
Mr Quartullo said that he had undertaken the calculation of the figures for the annual gross income amount of €6,290,400 referred to at page 156 of Exhibit A of the profit and loss statement and had arrived at a different figure to €6,290,400. His figure is in Table 3 at Exhibit A, page 421 of €6,540,400. See paragraph 5.08 of Mr Quartullo's report. Mr Quartullo said that he had used the different number he had arrived at in making his calculations in his report.
Mr Quartullo confirmed that he had assumed the profit and loss statement at page 155 of Exhibit A to be the Economics Technology Estimation Document referred to in Clause 4.4.16 of the November 2012 Agreement. Mr Kwak confirmed in his evidence that when he signed his first affidavit he understood the English translation at page 155 of Exhibit A to be the translation of the Korean version at page 161 of Exhibit A: T177.25. Mr Kwak had confirmed that the document at page 155 was not a draft but was the final version of the profit and loss statement: T177.29-.36. Further, and importantly, Mr Kwak gave evidence that the Economics Technology Estimation Document referred to in Clause 4.4.16 of the November 2012 Agreement was not delivered to him: T178.32.
Mr Quartullo conceded that the November 2012 Agreement did not include prices for the seeds and vegetables. He also conceded that his report was based on the figures in the profit and loss statement and he assumed it to be the Economics Technology Estimation Document referred to in the November 2012 Agreement. He said that he would need further information to fill the void created by the absence of the relevant document and that if the profit and loss document at page 155 of Exhibit A was not the correct document he would practically not be able to perform his valuation.
Mr Quartullo confirmed that he had not valued a loss of a chance in relation to a contract requiring performance in North Korea before. Mr Quartullo said that he had dealt with this issue by referring to the country risk premium research for North Korea assessed by Professor Damodaran, a Professor of Finance at New York University: see paragraphs 14.10-14.13 of his report. Mr Quartullo said he had not been able to find other evidence of rates of returns on agreements with parties in North Korea. He said that the market risk premium was relevant to the total discount rate which he assessed for the purposes of his report.
Mr Quartullo was asked whether Professor Damodaran's research took into account the particular industry involved in North Korea. He said that he understood that it did not and that the country risk premium used by Professor Damodaran of 17.2% assumed a balanced portfolio across an entire investment spectrum. That, of course, is not the case here where the investment was focused in the agricultural sector and more specifically in the growing of vegetables and vegetable seeds.
For the purposes of calculating risk factors and the discount rate for his report, Mr Quartullo confirmed that he had used comparable Australian companies: paragraph 14.17 of his report (Exhibit A, page 448). Mr Quartullo said that he could not find similar companies in North Korea and he needed to draw on the closest comparable companies. He denied that the use of the Australian companies effectively amounted to a guess.
Mr Quartullo was asked to assume that Woorifarm or its directors had been previously involved in two agricultural projects providing seeds to North Korean entities with the expectation of profit in the two years prior to 2012 and that in relation to the two schemes they did not return a profit and one of the schemes had experienced a crop failure. Mr Quartullo said that assumption would not affect his calculations "at the micro level" but would be relevant to the discount rate which he had used of 45%-50%. He regarded this as an appropriate discount rate for an early stage venture.
When asked what factors he took into account in assessing the discount rate of 45%-50%, Mr Quartullo referred to paragraph 6.05.2 on page 429 of his report. He said these were the factors which he took into account. He said he was of the view that the risks of a contract where performance was to occur in North Korea were captured partly by the equity market premium. He said that there was no accurate way to assess the risk of such a venture: T214.4
Mr Quartullo was asked about whether he made any assumptions for the purposes of preparing his report about the enforceability of the November 2012 Agreement in North Korea. His evidence on this point was as follows: "Q. Did you make any assumption about the enforceability of that agreement in North Korea? A. Look, my genuine assumption would have been that the contractual arrangements could have been carried out. If it had been brought to my attention that there was a risk that the contractual arrangements could not be carried out, it would be a significant factor. Q. When you say not carried out, you mean enforceable? A. From a valuation perspective it's more about the commercial practicalities rather than the enforceability. Many things may not be enforceable, but from a commercial perspective they carry commercial ‑ and ultimately, yes, I think you need to be able to rely on being able to carry it out. That would be a factor."
North Korea is not a country referred to in the Foreign Judgments Regulations 1992 (Cth).
There was no evidence before the court as to whether North Korea would recognise any judgment obtained in Australia against Kumsoo.
Mr Quartullo was taken to Recital 2 on page 116 of Exhibit A of the November 2012 Agreement. He confirmed that he had not reviewed the Equity Joint Venture Act and the Enforcement Regulations of that Act of North Korea. Mr Quartullo confirmed that for the purposes of his evaluation he had assumed that all approvals required in North Korea would be granted. There was no evidence that such approvals had been granted, would be granted or were likely to be granted before the court.
A review of Mr Quartullo's report and his cross-examination referred to above shows that the report was based on a number of assumptions: 1. That all North Korean government approvals would be obtained as required under the November 2012 Agreement: T216.9. There was no evidence of the likelihood of the approvals being obtained referred to in clauses 1.1.9, 5.2.7, 6.1, 9.2.2, 21.4 of the November 2012 Agreement. As to the first sentence on page 134 of Exhibit A, there is, as found above, no satisfactory evidence Woorifarm had advanced its first funding of €2.5m. There was no evidence Mr Kim's assertion in paragraph 22 of his affidavit as to the value of the seeds provided by him (Exhibit A page 77) was accepted or would be accepted under clause 5.2.7 of the November 2012 Agreement; 2. That the profit and loss statement at Exhibit A page 155 was the Economics Technology Estimation Document referred to in clause 4.4.16 of the November 2012 Agreement. The evidence shows that the Economics Technology Estimation Document was, as Mr Kwak understands it, never received by him and is not the document at Exhibit A page 55: T178.16-.35. There is no objective evidence to the contrary of Mr Kwak's evidence even though it is only his understanding. Mr Quartullo based his valuation report on the basis that the profit and loss statement at Exhibit A page 55 was the Economics Technology Estimation Document referred to in clause 4.4.16 of the November 2012 Agreement: T210.20; report paragraph 5.04 and following. Accordingly, this assumption is not established on the evidence. I do not accept the cross-claimant's submissions in paragraphs 5-6 to the extent they constitute a challenge to this assumption of Mr Quartullo not being established; 3. That the November 2012 Agreement would be carried out commercially: T214.23. There was no evidence that the November 2012 Agreement could be enforced by Woorifarm in North Korea. When Mr Shin said the Agreements could not be continued with, Mr Kwak did not practically have a means to challenge this. In the end, Mr Kwak accepted this pronouncement: see paragraph 48 of Mr Kwak's affidavit sworn 13 April 2016 where he says "From my experience in North Korea…there is no possibility of challenging that decision". Further, both Mr Lee and Mr Kim in their affidavits state that Kumsoo through Mr Seo sought amendments to the November 2012 Agreement and the payment of additional money by Woorifarm; 4. That Woorifarm's contribution under the November 2012 Agreement was €2m not the €4m referred to in clause 5 of the November 2012 Agreement. See the report Tables 2 and 6 cf paragraph 5.04 of the report; 5. That Woorifarm would contribute €300,000 worth of expertise: Profit and Loss Statement Exhibit A page 155; report paragraph 5.02 Exhibit A page 419. The only real expertise in vegetable growing was provided by Mr Kim who had no shareholding in Woorifarm. See the Kwak 13 April 2016 affidavit paragraph 22 and Exhibit A page 93. As stated above, by about May 2013 Mr Kim believed the Kumsoo representatives were lying. His continued involvement in the venture was speculative prior to the signing of the March 2013 Agreement: Kwak 13 April 2016 affidavit paragraph 30.
These assumptions by Mr Quartullo are, in my view, not established on the evidence. The matter in sub-paragraph (b) in the previous paragraph seems to be particularly important.
In Kyluk Pty Ltd v Chief Executive, Office of Environment and Heritage [2013] NSWCCA 114 the Court of Criminal Appeal, after reviewing the authorities, considered the approach which should be taken to an expert report if factual assumptions made by an expert are not established.
In Kyluk Schmidt J stated in [177] as follows: "[177] An expert opinion which meets those requirements need not be excluded if all of the factual bases upon which the opinion is proffered are not established by the expert's own evidence. Even if facts which the expert "assumes" or "accepts" in reaching the opinion expressed are not proved in some other way, then the opinion may still be admissible. That will depend on the nature of those facts and what bearing they have on the opinion. If they provide but a small part of the basis upon which the opinion rests, then the failure to prove those facts may have but little impact, and not render the opinion inadmissible. The failure to prove facts which provide a significant basis for the opinion might, by way of contrast, be such as to render the opinion no longer relevant to a fact in issue, no foundation for the opinion having been established. Such an opinion, even if it were admitted, would be of no value. Where an opinion is admitted, the failure to establish a fact which is not of such significance, may nevertheless have an impact on the weight given to the opinion."
McCallum J was of the same view as Schmidt J: see at [138]. At [61] Price J stated that even if an opinion based on an assumed but unproven fact is admissible, the opinion may be given little or no weight if the assumption is made good by the evidence.
The important assumptions which were made by Mr Quartullo which I have referred to above were not established. In my view they were significant to the report and therefore the report should be given little or no weight.

Further Analysis of Mr Quartullo's report

The following further observations are made in relation to this expert report in the event that my conclusion as to the report in the previous paragraph is held to be wrong: 1. Mr Quartullo indicates in paragraph 1.05 of his report that he has prepared his report on the basis of the information provided to him. He states that he has not undertaken an audit or other independent examination of the documentation provided. He lists the documentation provided in Appendix A to his report. Mr Quartullo emphasises again in paragraph 1.16 of his report that he has prepared his report on the basis of information provided to him. The documents provided to him are the basis for his understanding of the background to the matter: paragraph 2.01 to his report; 2. In paragraph 2.05 of his report, Mr Quartullo states that in or about November/December 2012, Woorifarm provided seed to Kumsoo in accordance with the November 2012 Agreement. It seems from the evidence that the seeds were provided not by Mr Kwak but by Mr Kim: Kim affidavit, Exhibit A, page 77, paragraph 22. In paragraph 44 of his first affidavit, Mr Kwak annexes a receipt for the seed which was provided: Exhibit A, page 88, paragraph 44. Mr Kwak does not say who provided this seed and seemingly does not dispute that it was provided by Mr Kim. There is no clear evidence about who funded the purchase of this seed. Mr Kim asserts in this paragraph that the foundational seeds were "very valuable" and it was his understanding that the seeds were to cover Woorifarm's investment of €2.5 million under the November 2012 Agreement but the actual cost of the seeds is not stated. As stated above, there is no evidence that the North Korean authorities or Kumsoo agreed with Mr Kim's valuation of the seeds provided; 3. Mr Quartullo for the purposes of his report, assumed that Mr Lee, Mr Kim and Mr David Lee, without the knowledge or authority of Woorifarm, fraudulently conspired to amend the November 2012 Agreement and thus deprived Woorifarm of a chance to participate in the joint venture under the November 2012 Agreement: Report paragraphs 2.06-.07 and 2.09. I have found that there was no fraud on the part of Mr Lee; 4. It is clear from paragraphs 3.02-3.03 of his report that Mr Quartullo assesses the value of the lost chance as being the chance of making profits under the November 2012 Agreement; 5. In paragraph 4.02 of his report Mr Quartullo notes certain matters set out in the November 2012 Agreement including that it was for 30 years and included in Clause 4.4 an estimated scale of production per year of vegetables. While setting out the estimated scale of production, Clause 4.4.16 of the November 2012 Agreement states that the estimated scale of production shall be decided by "Economics Technology Estimation Document" ("ETED") and the figures in that document are "not more than estimation". Mr Quartullo assumes for the purposes of his report that the estimated scale of production as decided in the ETED referred to in Clause 4.4.16 of the November 2012 document is the profit and loss statement which is Exhibit GK-2 to Mr Kwak's first affidavit which is at Exhibit A, page 155 and following: Quartullo report paragraph 4.02.5. Mr Quartullo notes that the production estimates in Clause 4.4 of the November 2012 Agreement differ from those in the ETED. Mr Quartullo indicates that he has assumed that the estimation set out in the ETED represent the expected annual trading results of the joint venture arising from the November 2012 Agreement in each year of the term of the Agreement, expressed in 2012 euros. Why Mr Quartullo has made that assumption is unclear. There is no reference or assumption in the report of Mr Quartullo as to the experience or trading history of Kumsoo including in agricultural products. There is no evidence about whether it has made profits in the past in agricultural enterprises or whether it breached joint venture agreements with other foreign entities or any other commercial background as to Kumsoo. Mr Quartullo also does not appear to have taken into account the history as at 8 April 2013 of the cultivation of vegetables from the seeds provided by Mr Kim which shows on balance a poor production: see Exhibit A, page 88, paragraph 44; Annexure D to Mr Kwak's affidavit at Exhibit A, page 96. 1. Clause 5.2.7 of the November 2012 Agreement provides that the evaluation of asset values for which parties invested shall be decided by both parties upon mutual agreement according to the international market prices and the board of directors will confirm such evaluation based on the "verification of the Joseon Pyongyang Accounting Accreditation Office". There is no evidence of this confirmation of valuation. Mr Quartullo notes that the ETED contains details of the value of the assets that each of the parties will invest in the Kumsoo Joint Venture totalling €2.5 million rather than the €5 million set out in Clause 5 of the November 2012 Agreement. Mr Quartullo has been asked to assume that the investment amount details set out in Clause 5 of the November 2012 Agreement apply rather than the details in the ETED: paragraphs 4.07-4.08. Why that assumption was asked to be made is unclear; 2. In doing this, Mr Quartullo is asked to assume to place an extremely heavy value on expertise in Woorifarm: see Exhibit A page 155. This is despite the fact that the evidence shows that the only person with expertise in relation to agricultural matters is Mr Kim as opposed to Mr Kwak. Mr Kim's future involvement in Woorifarm was highly doubtful as he thought the representatives of Kumsoo were lying to him: Kim affidavit paragraph 30 and paragraph 56 above. It is unclear in relation to paragraph 5.02 of Mr Quartullo's report how he assumed that Woorifarm would pay for its share of the funding under the November 2012 Agreement; 1. Mr Quartullo makes assumptions about the value of seeds yet to be delivered under the November 2012 Agreement. He does not determine how these seeds were to be obtained or provided nor does he take into account that it appears that Mr Kim provided the earlier seeds: Quartullo report paragraphs 5.05-5.06. In particular, he does not determine how the costs would be borne by Woorifarm if they were to be incurred in or around May 2013 as he assumes in paragraph 5.06 in his report; 2. In relation to the expected annual gross income referred to in the ETED that Mr Quartullo includes in paragraph 5.07 of his report, there is no evidence that Mr Quartullo has compared the unit prices indicated with market value. The unit prices have a uniformity which is surprising. An independent assessment of the annual production costs which he sets out in paragraph 5.09 of his report does also not appear to have been undertaken. The assumption seems to be made that these estimates are accurate and can be relied upon; 3. In paragraph 5.11 Mr Quartullo sets out a summary of the estimated annual profit amount for the Kumsoo Joint Venture. However, this assumes the accuracy of the income which he sets out in Table 3 in paragraph 5.07 and the production costs in Table 4 in paragraph 5.09. He assumes a corporate tax rate of 25%. It is unclear where he obtained this percentage from. All these matters appear to affect the calculation in paragraph 5.11; 4. In paragraph 5.17 of his report Mr Quartullo assumes that the expected annual profit amounts set out in the ETED would be the annual profit expected each year over the term of the Kumsoo Joint Venture with no real growth. However, Mr Quartullo then increases cashflows in each year subsequent to Year 1 by 3% to reflect nominal, rather than real, results. In doing so, it does not appear that Mr Quartullo has taken into account the actual evidence of the crop performance history in Annexure D to Mr Kwak's first affidavit (Exhibit A, page 96) which shows that the results were less than impressive or matters such as crop failures through disease or adverse weather events. It seems that Mr Quartullo may not have taken all adverse matters into account in determining an appropriate discount rate; 5. Mr Quartullo adopts a discounted cashflow methodology to determine the valuation of Woorifarm's alleged loss of a chance in relation to the November 2012 Agreement: paragraph 6.03. In paragraph 6.04 Mr Quartullo states as follows: "The DSF methodology is based on the premise that the value of an asset is the present value of future cashflows expected to be derived from that asset. It requires an analysis of risks, revenue, expenses, investment and cost of capital and (if applicable) the residual remaining at the end of the projected period". In paragraph 6.05.2 Mr Quartullo refers to the application of an appropriate discount rate which he says must be "adjusted for the differences in country risk rates and a subjective estimate of the specific risks associated with the investment in the Kumsoo JV". In the end Mr Quartullo adopts a 45-50% discount rate: paragraph 7.08. The matters Mr Quartullo takes into account are set out in paragraph 7.08 of his report and include "an appropriate risk premium that would apply to an investment in the DPRK" and "the risk that the returns expected to be received by Woorifarm from the Kumsoo JV may not eventuate". Mr Quartullo notes that it is a subjective estimate in paragraph 6.05.2. The precise matters he takes into account in assessing the appropriate risk premium to an investment in North Korea and the risk that returns may not eventuate are not stated in greater detail. However, see T213.43. There is no analysis from any objective materials about profits made by other private companies from western countries in relation to investments in North Korea or, in particular, actual returns compared to estimated returns for agricultural investments in North Korea. Mr Quartullo also says that he had regard to the amounts purportedly paid by parties for minority interests in Woorifarm as at the date of the March 2013 Agreement: paragraph 6.06. However, Mr Kwak's whole case is that these amounts were part of a fraudulent conspiracy. Further, there is no apparent detailed analysis leading to the amounts offered by Mr Kim and Mr David Lee. Mr Quartullo in paragraph 7.6 of his report refers to the very substantial balance which Woorifarm had to pay for its share of the investment amount in paragraph 5.2.1 which exceeds over €500,000 (on the assumption that Woorifarm's investment amount was €2m rather than €4m) and in paragraph 7.06 says that he has assumed that Woorifarm would not have been able to borrow moneys for its investment and "would have financed its investments solely from equity". There is no evidence of any available equity investors in Woorifarm other than Mr Kwak and his wife.
My overall impression of the Quartullo report is, with respect, that it is essentially largely a theoretical exercise which has been conducted on the basis of certain assumptions without appropriate consideration of: 1. The fact that Mr Kim had the agricultural expertise and experience at the time and not Mr Kwak. As I have found above, Mr Kim's future involvement was crucial to the venture. If there was a disagreement as occurred between these two persons then Mr Kim would likely no longer have been involved in the joint venture for Woorifarm; 2. A subjective discount rate of between 45% and 50% has been undertaken without any empirical evidence of success by foreign western owned companies in agricultural investments in North Korea and in particular whether North Korean government controlled entities have complied with their contractual obligations; 3. There is no reference to disease and climate risks for agricultural enterprises taking into account evidence of such risks in North Korea. Exhibit D to Mr Kwak's first affidavit has not, it seems, been taken into account; 4. There is no evidence as to whether Mr Quartullo has taken into account North Korean income tax rates and charges that would be applied. There is some suggestion he has taken into account a rate of 25% but it is not clear where he got this from; 5. Mr Quartullo takes into account in the calculation of an appropriate discount rate in Appendix F to his report the activities of Australian vegetable growing companies which in my view are not relevant to an assessment of possible performance by a joint venture entity in North Korea; 6. In paragraph 14.7 of Appendix F, Mr Quartullo notes that as the investment in the Kumsoo Joint Venture is situated in North Korea, the most appropriate rate would be one relating to North Korea. He then notes that such a rate "is not readily published" and he bases his estimate of the risk free rate on that for Australia with an added premium to represent the added risk associated with the investment being in North Korea. Whilst that may theoretically be an appropriate approach, some proper basis needs to be identified for the rate ultimately adopted for the joint venture in North Korea.
I also note: 1. If Exhibit A page 155 is not the ETED what rates should be adopted for vegetable and seed prices for any valuation; 2. What further discount, if any, should be allowed for the risk of not getting the relevant North Korean government approvals; 3. What further discount, if any, should be allowed for the risk the estimated scale of production set out in clause 4.4 of the November 2012 Agreement is not achieved; 4. What further discount, if any, should be allowed for a risk Mr Kim's assessment of the value of the seeds provided in November 2012 would not be adopted under clause 5.2.7.
In the light of all of these matters the question arises whether within Malec and Sellars the valuation conclusion in paragraph 7.13 of Mr Quartullo's report should be rejected on the basis that the assumptions in the report have not been established and the chance of profits out of the joint venture is truly "speculative" or "negligible" being less than 1%.
In my view, many factors need to be taken into account including: 1. The assumption that Exhibit A page 155 is the ETED not being established; 2. The fact that Mr Kwak had no expertise in agricultural matters and that the expertise was held by Mr Kim; 3. The possibility of Mr Kwak obtaining alternative expertise satisfactory to Kumsoo; 4. The fact Mr Kim thought the representatives of Kumsoo were lying and he believed he could not trust them any more; 5. The fact Mr Seo asked for changes to the November 2012 Agreement and more money to be contributed by Woorifarm; 6. The fact that the joint venture arrangement was in North Korea which does not have a modern western market economy; 7. The need for Woorifarm to make substantial additional investments as part of the joint venture with real uncertainty as to where the money was to come from, particularly in the short term in 2013; 8. The difficulty with placing much weight on the estimates of future production in Clause 5 of the November 2012 Agreement; 9. The need to take into account the possibility of poor production or disease or other extreme weather events; 10. The need to consider whether the joint venture would be approved by North Korean authorities; 11. The need to take into account the consequences of a dispute arising and whether Woorifarm would have any prospects of enforcing its rights. It is noted that the courts of North Korea are not referred to in the Foreign Judgments Regulations 1992 (Cth) made under the Foreign Judgments Act 1991 (Cth).
Taking all of these matters into account, in my view there were very serious risks that the joint venture by Woorifarm would lead to heavy losses as opposed to profits. Doing the best I can in the light of the matters set out above, in my view the prospect of Woorifarm making profits under the November 2012 Agreement was entirely speculative and no amount should be allowed for a loss of a chance. The various factors which I have listed strongly indicate to me that this was a highly speculative joint venture which could have resulted in considerable time, expenditure and effort for a negative return.
If I am wrong in this approach, and some weight should be given to Mr Quartullo's valuation, I would only allow for a 1% loss of a chance being $79,888 (mid-point value of $3.595m divided by 45 - paragraph 7.13 of Mr Quartullo's report) plus interest.

Disposition

Accordingly, I would make the following orders: 1. Judgment for the plaintiff on the Statement of Claim; 2. The parties are to bring in short minutes of order within 7 days reflecting these reasons in relation to the amount of the claim of the plaintiff and interest; 3. The defendant is to pay the plaintiff's costs of the Statement of Claim as agreed or assessed; 4. The Second Cross-Claim is dismissed. Judgment for the cross-defendant on the Second Cross-Claim; 5. The cross-claimant is to pay the costs of Mr Lee of the second cross-claim as agreed or assessed; 6. Liberty to the parties to apply on two business days' notice for different orders to those in (3) and (5) above; 7. Exhibits to be returned after 28 days.

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: 08 August 2017

Trade Practices Act 1974(Cth)

Lee v Kwak

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Judgment (34 paragraphs)

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Cases Cited (47)