Goo v Sim  NSWSC 420
The plaintiffs claimed they paid $160K cash to defendant in connection with an online payment business.
The defendant said the $110K was appropriately spent on business expenses and defendant’s salary, and the $50K was for some units in a unit trust.
The parties’ dealings were informal: a lack of documents, cash only payments, few bank records etc.
One of the plaintiffs facilitated currency exchanges and money transfers between Australia and Korea.
A plan was hatched to expand that business to include online payments, with that work to be done by the defendant.
There was heavily contested evidence about the dealings before the venture kicked off.
The defendant gave the plaintiffs advice on the Korean requirements for the venture, advising around 100 million Korean Won (~AUD$100K) would be needed.
The defendant was given $109K in cash from one of the plaintiffs.
On collection of the funds the defendant signed a “loan agreement” which they understood would later be destroyed.
The funds were transferred to the Korean entity under the defendant’s control, which was created to operate the venture.
One of the plaintiffs said they paid a further $50K from their safe to the defendant to, the relevant plaintiff said, finish the venture.
The defendant denied receiving the $50K payment on that basis.
The venture never traded.
The plaintiffs said the defendant had breached various duties and sought the return of the $160K.
The Court found purpose of the payment of the $110K from the plaintiffs to the defendant was for the venture, and that the defendant accepted the funds on behalf of the venture.
The Court found some, but not all, of the funds were used by the defendant for the venture. Other funds were used for their own benefit e.g. to pay off personal credit cards.
No fiduciary obligations arose between the parties. The plaintiffs had no special vulnerability giving rise to any.
The Court considered a no purposive Quistclose trust arose because the evidence showed the parties intended for the $110K to become part of the working capital of the Korean venture.
Crucially, the plaintiffs did not allege that the recipient of the $110K, the Korean entity, owed any obligations to repay any money.
The evidence did not suggest the defendant had stolen the money, meaning a Black v Freedman trust (where a third party who takes the benefit of stolen money must repay it) does not arise.
Further, the defendant was not obliged to repay the $50K sum. This payment was found to be consideration for the defendant transferring their units in a unit trust (which was done), not a payment made for the venture.
The plaintiff’s claim was dismissed.
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