RESERVED JUDGMENT OF RANDERSON J

Solicitors:
Y C Hong, P O Box 34845, Birkenhead, Auckland for Plaintiff
Loughlin McGuire, P O Box 312, Auckland for Defendants

Introduction

[1] The plaintiff Mr Kim is a businessman residing and carrying on business in Taegu City, South Korea. In 1996, his son Joon was being taught at secondary school by the first defendant, Mr Park. Mr Kim wished to have his son educated in New Zealand and arrangements were made for him to travel to this country in late 1996. According to Mr Park, Mr Kim asked him to go to New Zealand to look after Joon.

[2] Between February and November 1997, five payments were made by Mr Kim to Mr and/or Mrs Park (the second defendant). These payments were made in various currencies: Korean won, New Zealand dollars, and United States dollars. On the basis of conversion rates applicable at the time, they amounted in total to NZ$181,205.83. There is no dispute that the payments were made but the first issue is whether they were made as gifts or loans.

[3] Mr and Mrs Park emigrated to New Zealand in April 1997 and Joon began boarding with them soon afterwards. They provided him with food, lodgings, pocket money, and a motor vehicle while he attended university. In November 1997, using funds provided by Mr Kim, Mr Park bought a 50% share in a karaoke business in which Mr Park worked and derived income. That interest is held in the form of shares in a company named Black and Yellow Limited.

[4] In December 1997, Mr and Mrs Park purchased a property at 5A Redwood Drive, Royal Heights, with the assistance of a mortgage. Joon continued to live with them in that property on the same basis as before. However, difficulties later arose in the relationship between Joon and the Parks and he ceased to live with them in July 1999.

[5] In April 2000, Mr Kim came to Auckland. There were discussions with Mr and Mrs Park which resulted in a document dated 22 April 2000 being signed by Mr Park in the Korean language. The agreed translation in English is as follows:

Receipt

22 April 2000

Amount: W125,000,000

The above amount will be paid by transferring the ownership of the Karaoke and the house.

1. Address of Karaoke: Happy Karaoke Bar, Level 3 48 High St
2. Address of House: 5 Redwood Drive, Royal Heights (The house will be vacated within one month and Joon Yeob's father will sort out the documents.)

The person who promises: Park, Hee Su (Signed)

[6] Mr Kim agreed in evidence that he had accepted the terms set out in this document. Mr Park pleads that the agreement recorded in this document amounted to an accord and satisfaction in terms of which Mr Kim agreed to accept the transfer of the Royal Heights property and the half share in the karaoke bar in full satisfaction of the amount of 125,000,000 Korean won nominated in the agreement. I will call this agreement the Carlton agreement.

[7] After receiving legal advice, Mr Kim approached Mr Park again two days later and a further agreement was signed between the two of them in the Korean language. The agreed English translation is as follows:

AGREEMENT

KIM Jong Woo and PARK Hee Su agree as follows:

1. PARK Hee Su is to repay the 125,000,000 won that he borrowed from KIM Jong Woo as follows:

(a) The house (address: 5 Redwood Dr., Royal Heights) in the name of PARK Hee Su and AHN Hye Jun is to be transferred or mortgaged to KIM Jong Woo (by 10 May 2000).

(b) PARK Hee Su is to transfer his shares in "Happy Karaoke" (current market value agreed to be NZ$75,000) to KIM Jong Woo (by 10 May 2000).

(c) The outstanding partial repayments under (a) and (b) will be paid monthly on the 1st of each month, starting on 1 June 2000. Monthly repayments will be NZ$500, based on the foreign exchange rate of the total amount of 125,000,000 won on 24 May 2000. This will continue until the final repayment has been made. (If a monthly instalment is not repaid, an overdue interest rate of 12% per annum will apply).

22 April 2000

KIM Jong Woo [signed]

PARK Hee Su [signed]

[8] This agreement was signed at the Happy Karaoke bar and I will call it the Karaoke agreement. Although it is dated on the same day as the Carlton agreement, it is common ground that it was signed a day or two after the Carlton agreement. Mr Park alleges that he was forced to sign this agreement under duress.

[9] The Redwood Drive home was sold in August 2000 and the net equity of $15,000 paid to Mr Kim. Mr Park's half share in the karaoke business has not been transferred to Mr Kim but Mr Park acknowledges he holds that interest in trust for Mr Kim and is prepared to transfer the shares to him, subject to the rights of pre-emption in the company's constitution. No payments have been made by Mr Park under clause 1(c) of the Karaoke agreement.

The plaintiff's claims

[10] Mr Kim's amended statement of claim filed on 15 February 2002 pleaded two causes of action:

[a] A claim that all of the payments made in 1997 by Mr Kim were advanced pursuant to an oral agreement that Mr Park would purchase a residential home and business in Mr Kim's name in Auckland. It was alleged that this agreement had not been carried out and that Mr and Mrs Park were liable to account to Mr Kim for the payments made, less the $15,000 recovered from the sale of Redwood Drive. It was alleged that the obligation arose by virtue of a constructive trust.

[b] A claim for $231,465.41 being the amount said to be due under the Karaoke agreement, including interest at 12% on the unpaid instalments of $500.

[11] During the course of the hearing, the constructive trust claim was abandoned because Mr Kim's evidence did not support it. I also granted leave to the plaintiff to amend the statement of claim to include two further causes of action:

[a] An alternative claim that all the payments made in 1997 were loans repayable on demand by Mr and/or Mrs Park.

[b] A claim based on the Carlton agreement that Mr Park owed the amount of 125,000,000 won less the $15,000 recovered from Redwood Drive. This alternative claim was based on an alleged implied term that Mr Park would transfer the shares in the business to Mr Kim within a reasonable time and/or repay the shortfall between the amount of the debt and the payments made under clauses (a) and (b) of that agreement.

The issues

[12] The issues for determination are:

[a] Were the payments made by Mr Kim to Mr and/or Mrs Park in 1997 loans or gifts?

[b] What is the true effect of the Carlton agreement?

[c] Was the Karaoke agreement obtained under duress and therefore invalid?

Were the payments made in 1997 loans or gifts?

[13] The five payments totalling NZ$181,205.83 made by Mr Kim in 1997 were:

[a] 26 February 1997 : 10,000,000 won (NZ$16,835.58 at the then exchange rate);

[b] 14 April 1997 : 30,000,000 won (NZ$48,357.45);

[c] 1 November 1997: 15,458,000 won (NZ$25,000) paid to Mrs Park;

[d] 10 November 1997 : NZ$75,000 paid directly by Mr Kim to the vendor of the half-interest in the karaoke business;

[e] 16 November 1997 : US$10,000 in traveller's cheques, made available to Mr Park (approximately NZ$16,012.80).

[14] Mr Kim maintained in evidence that all of the sums paid were loans, while Mr Park's evidence was that the payments were intended as gifts to assist Mr and Mrs Park in looking after Joon in New Zealand during the course of his education. In his evidence, Mr Kim accepted that Mr Park seemed to show an affection towards Joon during his schooling in Korea and, as a result, Mr Kim had developed a good relationship of trust and confidence with Mr Park.

[15] Curiously, he denied that he or his wife had requested Mr Park to look after Joon in New Zealand. Rather, his evidence was that Mr Park wished to emigrate to New Zealand and had approached him to borrow money for that purpose. He accepted, however, that Joon's school grades were too poor for him to obtain admission to university in Korea and that he believed there were suitable education opportunities for Joon in New Zealand. He also accepted that Mr and Mrs Park looked after Joon on a homestay basis while he was in New Zealand.

[16] Mr Park's account was very different. He said Joon went to New Zealand first in late 1996 and stayed initially in Rotorua. He said he was approached by Mrs Kim to go to New Zealand to check on Joon's welfare. He came to New Zealand briefly in late 1996 or early 1997 for that purpose, the costs of the trip being paid by Mrs Kim.

[17] Mr Park reported to Mrs Kim that Joon was not doing particularly well and shortly after Mr Park's return to Korea he says Mrs Kim asked him if he would be prepared to go to New Zealand to look after Joon. He says he met Mrs Kim in response to a telephone call from her and she said that they would pay for everything if he were willing to go to New Zealand. After consideration and discussion with his wife, he decided to resign from his position as a teacher and emigrate to New Zealand.

The first payment of 10 million won

[18] There was then a further discussion at the Kims' home in which Mr Kim said they wanted to help Mr and Mrs Park financially and that he should not have any concerns about money. They would do everything to help as long as Mr and Mrs Park were looking after their son. According to Mr Park, it was Mr Kim who offered him the initial sum of 10 million Korean won. He already had a bank cheque made out for that sum which he gave to Mr Park. Although Mr Kim did not ask for a receipt or any other documentation, Mr Park took a piece of paper from a notepad at the Kim home which, has been translated into English as follows:

Deed of Acknowledgement of Debt

Amount: Korean Won Ten Million Only (Won 10,000,000)

I have duly borrowed the above amount.

Dated this 26th of February 1997

(signed by)
Hee Su PARK
Resident ID number: 63 1230-1683617

[19] In cross-examination, Mr Park said he did not understand the first payment to have been made as a loan. Although those words were used, he understood he could have the use of the money with no obligation to pay the money back. However, the clear words of the document signed by Mr Park must tell against him on this issue. There is no dispute that the translation from the Korean language into English is correct and I am satisfied that the payment was intended to be a loan. But I note that no time was stipulated for repayment and there was no interest obligation noted or suggested. That suggests a reasonably informal and open-ended arrangement.

[20] The overwhelming inference to be drawn from the evidence is that the loan was made for the purpose of assisting Mr and Mrs Park to emigrate to New Zealand to look after Joon and to supervise his education. At that time, Joon was 18 years of age and had not previously travelled overseas. There was evidence from Mr Park that Joon had formed a relationship with a female in New Zealand and that this was a matter of concern to Mrs Kim. There was no evidence from Mrs Kim to contradict Mr Park's evidence on this subject and it makes no sense to suggest that Mr and Mrs Park would decide to leave Korea to live in New Zealand with large sums of cash provided by Mr and Mrs Kim unless the Kims were to receive some benefit for themselves. That benefit was the care of their son by the Parks.

The second payment of 30 million won

[21] There was a similar difference between Mr Kim and Mr Park about the second payment on 14 April 1997. Mr Kim said he was asked for more money by Mr Park and that he loaned 30 million Korean won to him. To the contrary, Mr Park said the payment was made a few days before he and his wife left Korea for New Zealand. He said Mr Kim had offered him the money. Mr Park advised him that he thought 30 million Korean won would be sufficient to enable him to settle down initially in New Zealand and look after Joon. He said Mr Kim produced another bank cheque saying he wanted to make sure Mr and Mrs Park had enough to look after Joon. According to Mr Park, Mr Kim did not ask for a receipt but Mr Park again wrote one out.

[22] The terms of the note have been translated into English. They are identical to those for the first payment except for the amount and the date. I reach the same conclusion that the second payment was intended as a loan and for the same reasons as the first payment.

[23] The Parks arrived in New Zealand on 17 April 1997 and Joon began living with them shortly afterwards. At first, Mr Park found it difficult to obtain employment but by August had commenced work at the Happy Karaoke bar. Joon was attending university in Auckland while staying with the Parks. He did not pay any board. The undisputed evidence of the Parks was that the going rate for a home stay was $350 per week. That would have amounted to $18,000 per annum over the two years Joon stayed with the Parks.

[24] In addition, in October 1997 the Parks bought a car for Joon for $24,500. Although the car was registered in Mr Park's name it was purchased with some of the funds made available by Mr Kim and was used by Joon. As well, over the two year period Joon stayed with them, the Parks gave him pocket money and paid expenses on his behalf amounting in all to $14,808.

The third payment of NZ$25,000 cash

[25] In November 1997, Mrs Park returned to Korea for a visit. Her evidence was that she contacted Mr Kim who thanked her for all the work they were doing and said he wished to give them some money. She and Mr Kim went to the bank where Mr Kim exchanged some currency and paid her New Zealand $25,000 in cash. Her evidence was that this sum was clearly intended as a gift and in recognition of the continuing care the Parks were providing to Joon. Mr Kim's evidence was that Mrs Park had asked to borrow the money.

[26] Unlike the two earlier payments, the only documentary evidence produced was a memorandum in Mr Kim's handwriting, the agreed English translation of which is as follows:

Borrowed Amount

The wife of Hee Su Park

01 November 1997

Korean Won of 15,458,000 has been borrowed from Foreign Exchange bank on the date of her second entrance into New Zealand.

01 November 1997

[27] Mr and Mrs Park denied any prior knowledge of this document saying they saw it for the first time after these proceedings were commenced. Mr Kim acknowledged in cross-examination that Mrs Kim had told him on the occasion of her visit to Korea that Joon was "getting on fine" in New Zealand and he accepted he was pleased about that.

[28] In the absence of any documentation acknowledged by Mr or Mrs Park in relation to this payment, I am not satisfied that the plaintiff has proved that it was a loan. I regard it as more likely to have been a gift or payment in recognition of the care given by Mr and Mrs Park to Joon. It needs to be borne in mind, that by this time, Mr and Mrs Park were living in Auckland and Joon had been staying with them for at least six months without paying board. The Parks had the expense of travelling to New Zealand as well as establishing and supporting themselves in a new country. It is reasonable to infer that the Parks had exhausted all or most of the funds provided by Mr Kim from the first two payments in February and April and that the Kims wished to assist them in the continued care of their son.

The fourth payment of NZ$75,000

[29] It is apparent that the relationship between the Kims and the Parks remained on a sound footing at this stage. Mr Kim had asked Mr Park to identify any suitable business opportunities for him in New Zealand and was informed by Mr Park of the karaoke business. Mr Kim agreed to pay NZ$75,000 directly to a Mr Seo, the owner of 50 percent of the shares in Black and Yellow Ltd. That payment was made on or about 10 November 1997. Mr Park's evidence was Mr Kim offered to help him buy the shares in the business and said he could use the profits earned from it to help with living expenses. Whatever the precise arrangement was, it is not now in dispute that Mr Park holds the shares in trust for Mr Kim. The other half owner of the company is a Mr Yang who has rights of pre-emption under the company's constitution should Mr Park wish to transfer the shares.

The fifth payment of US10,000 in travellers cheques

[30] The final payment also occurred in November 1997. Mr Kim stated that Mr Park asked to borrow further money. He therefore arranged to send US$10,000 in traveller's cheques through a third party who was to visit New Zealand. Mr Park's version was that he was contacted by Mr Kim to find out how Joon was progressing. He said Mr Kim wanted to send further money in traveller's cheques and he did so. There is no documentation for this transaction and I am not satisfied that it was a loan. Mr Kim's evidence under cross examination on this payment was vague. Like the earlier payment of $25,000 in cash, the traveller's cheques were more likely intended as a gift to assist the Parks in looking after Joon.

Purchase of Redwood Drive

[31] Mr Park accepts that some of the money used to purchase the property at Redwood Drive came from the traveller's cheques. That property was bought in December 1997 in the name of Mr and Mrs Park for $221,000. A mortgage was obtained for $165,000. The balance of the funds required came from the sale of some assets held by the Parks in Korea and a further $15,000 from the earlier sums provided by Mr Kim.

[32] Mr Kim gave what can only be described as a bizarre account of a conversation he had with Mr Park about the purchase of a house. He claimed that in November 1997, Mr Park had telephoned him to advise he was having a problem with his permanent residence application in New Zealand. That was because he had agreed with a Korean immigration broker to forge his English test result and the broker had been arrested. He said he would need to buy real estate in New Zealand to solve the problem and that he would buy a home under the joint names of Mr Kim and himself with the money Mr Kim had advanced to him. For that purpose, he said Mr Park asked him to fax his signature to him in New Zealand so that he (Mr Park) could imitate Mr Kim's signature for the purpose of buying the house. Mr Kim said that he faxed his signature to Mr Park as requested. Joon also gave evidence to similar effect and claimed he saw Mr Park receiving a fax and then practising the imitation of Mr Kim's signature.

[33] Mr Park denied these allegations outright and there is no evidence to support them. Nor is there any evidence that Mr Kim made any enquiries about the title to the house until much later, or that he inquired in any way about the details of the purchase at the time it was made. I also note, that by letter dated 3 July 2000, Mr Kim's New Zealand solicitor wrote to the solicitors by then acting for Mr Park advising that they would be reporting to the New Zealand Immigration Service and to the Police allegations that Mr Park had forged his English test for immigration purposes. Those allegations were "unreservedly and unconditionally" withdrawn by letter of 7 August 2000 from Mr Kim's solicitors. Notwithstanding that, the allegations were repeated in evidence before me. It is also significant that Mr Kim's evidence did not support the claim initially made in the pleadings that all the payments were made pursuant to an oral agreement that Mr Park would purchase a home and a business in Mr Kim's name in New Zealand. Given Mr Park's denial and the lack of any supporting evidence, I cannot give any weight to these allegations.

Summary on the first issue

[34] To summarise, I am satisfied that the payments of 10 million and 30 million Korean won in February and April 1997 were loans. No evidence was submitted as to Korean law, but for the purposes of this judgment I am prepared to assume that, in the absence of any stipulated time for repayment, the loans would be repayable on demand.

[35] In contrast to the first two payments, I find that the payments of NZ$25,000 in cash on 1 November 1997 and US$10,000 in traveller's cheques on 16 November 1997 were both intended as gifts or in payment for services rendered by Mr and Mrs Park in looking after Joon. The payment of NZ$75,000 on 10 November 1997 for the half share in the karaoke bar is accepted by Mr Park as having been paid for Mr Kim's benefit and, in consequence, the shares in Black and Yellow Ltd by Mr Park are held in trust for Mr Kim.

The Carlton agreement

[36] During 1998, Joon advised Mrs Park his girlfriend was pregnant by him. The baby was born in September that year. Mr Park's evidence was that he was not told about the child until April 1999. He said this came as a severe shock to him and he had to be hospitalised for a short period. Joon ceased to live with Mr and Mrs Park in July 1999.

[37] Mr Kim deposed that he was attempting to telephone Mr Park from time to time in 1999 but claimed he was being fobbed off. However, he learned some time during 1999 that the Redwood Drive property had been bought in the name of Mr and Mrs Park. He decided to go to New Zealand but because he was so busy he did not come to New Zealand until April 2000. A meeting took place at the Canton Hotel. Those present were Mr and Mrs Kim, their friend (a Mr Kang), Mr and Mrs Park and Mrs Park's younger brother.

[38] Mr Park's evidence was that he was somewhat nervous about this meeting because he expected Mr Kim to be concerned and possibly upset about Joon. I infer Mr Park felt responsible for Joon, having agreed to look after his welfare while he was in New Zealand.

[39] At the meeting which took place on 22 April 2000, Mr Kim agreed it was he who raised the question of repayment of money advanced. He also accepted it was he who mentioned a total of 125 million Korean won and acknowledged that this figure was queried by Mrs Park. He also accepted that Mr Park told him that their only assets were the Redwood Drive house and the half-share in the karaoke bar.

[40] Mr Park said he was prepared to transfer ownership of the half-share in the karaoke business and the Redwood Drive property to Mr Kim on the basis that the amount demanded by Mr Kim would be regarded as being repaid by the transfer of those assets. Mr Kim accepted that he agreed to Mr Park's proposal and asked him to write it down. That resulted in the document I have referred to as the Canton agreement signed by Mr Park.

[41] The evidence does not disclose any discussion of the values of the karaoke business and the house. Mr Kim stated in his evidence that he believed the house would be worth at least 100 million Korean won. In his evidence in chief, he denied any knowledge of a mortgage over the property although, in cross-examination, he admitted there was discussion at the meeting about a mortgage. Despite that knowledge, he made no inquiry about the amount outstanding. Mr Park said although the figure of 125 million Korean won mentioned in the Carlton agreement was substantially in excess of any amount he considered to be due, it was of little concern to him because Mr Kim had agreed to accept the transfer of the only assets he had in satisfaction of the amount Mr Kim claimed.

[42] I am satisfied there was a clear agreement at the meeting at the Carlton Hotel on 22 April 2000 that the amount of 125 million Korean won would be paid by transferring to Mr Kim the half-share in the karaoke business and the Redwood Drive property and that the transfer of those assets would be received in satisfaction of the amount claimed. There is no room in those circumstances for an implied term that the Parks would pay any balance if those assets proved to be insufficient to meet the sum of 125 million won.

The Karaoke agreement

[43] After the meeting at the Carlton Hotel, Mr Kim obtained legal advice that he should obtain an agreement from Mr Park that he would meet the shortfall should the value of the property to be transferred be less than the amount claimed of 125 million won. A revised agreement in the Korean language was prepared in handwriting and taken by Mr Kim to a further meeting with Mr Park at the karaoke bar one or two days after the meeting at the Carlton Hotel. Mr Kim was accompanied by his wife and his friend, Mr Kang. The other partner in the business, Mr Yang, was present for a short time but later left. Mr Kim's evidence was that he told Mr Park he needed to sign another document drafted by his (Mr Kim's) lawyer. He showed him the draft prepared by the lawyer and told him to read it and then write it out in his own handwriting and sign it.

[44] Mr Kim denied using any pressure and denied shouting at Mr Park. He agreed however that Mr Park had initially refused to sign the agreement and had told him he had no ability to repay a figure of $1,000 per month which was specified in the draft prepared by the lawyer. Mr Kim also accepted that Mr Park was in an emotional state. He was kneeling down and bowing to Mr Kim. He accepted that Mr Park begged him to reduce the monthly payment, crying and clinging to his leg. He did that, he said, for some 20 minutes.

[45] Initially, Mr Kim said that he and Mr Kang were in the room together with Mr Park but then Mr Kang left. At that point, said Mr Kim, Mr Park "begged me to reduce it and he asked me to save his life". He said he felt sorry for Mr Park so he allowed him to amend the agreement to repay any shortfall to a figure of $500 per month. He agreed there was a period when Mr Kang and Mr Park were together alone in the room. Mr Kim accepted that he had left the room because Mr Kang had asked him to do so.

[46] Mr Park's account of the meeting was that Mr Kim began to threaten him immediately. He claimed to have been pushed by Mr Yang and stated that they were all shouting and yelling at him. After his initial refusal to sign the documents, he was left alone with Mr Kang who spoke quietly to him and endeavoured to persuade him to copy the document. Mr Park said he was told that all they wanted to know was what Mr Park's real intentions were towards Mr Kim. If he signed the document then everything would be fine. Mr Kim really wanted him to sign the document as a matter of honour but once it was signed he would not have to repay.

[47] Mr Park went on to say that Mr Kang then threatened him by saying that Mr Kim had many friends in New Zealand and if he wanted to live in New Zealand, then he must copy out the paper. Mr Park said he was very frightened by this threat and he was worried for his family both in New Zealand and in Korea. At that stage he did not have any work and he knew he could not pay the money. He decided in the end to accept what Mr Kang had said to him about the agreement not being enforced and "he took the risk" of signing the document after changing the figure of $1,000 per month to $100 per month. He said he changed the figure back to $500 per month after Mr Kim and his wife began shouting at him again.

[48] Immediately after the document was signed, he said Mr Kim told him in a threatening manner that he was never to approach his son again and was never to be involved in the karaoke business again. Mr Park's evidence was that Mr Kim then said to him, "My word is law. If you don't obey me, your family in New Zealand will not be safe and your family in Korea will not be safe either."

[49] To the extent that Mr Kim and Mr Park differ in their accounts of what happened at the meeting at the karaoke bar, I prefer the evidence of Mr Park. The assessment of credibility was made more difficult by the need for an interpreter and I accept that shades of meaning may have been lost in the translation. However, my clear impression, having seen and heard the witnesses, is that Mr Kim was quite capable of behaving in the manner described. There may have been some exaggeration in Mr Park's evidence but I accept the general tenor of it. There can be no doubt that he was extremely frightened and in a highly emotional state. That was confirmed by the evidence of Mr Kim himself. I accept that the threats made to him and his family were real and that Mr Park genuinely felt that Mr Kim was capable of carrying them out. Mr Kim corroborated that himself by instructing his solicitors not long afterwards to write to the New Zealand Immigration Service and the police, making serious allegations against Mr Park.

[50] I also take into account that Mr Kim's friend Mr Kang was not called to give evidence although he was present. Nor was Mrs Kim even though she was said by Mr Kim to be present looking through the window into the room where the men were talking.

[51] I am satisfied that Mr Park believed he had no practical choice other than to sign the document. The threats made to him and to his family were serious and he had no resources. In contrast, he believed (with some justification) that Mr Kim as a businessman was well resourced and capable of carrying out the threats made. In cross-examination Mr Park accepted he could have left the room but said he was persuaded to sign by the threats made and by Mr Kang's statement that it was really a matter of honour and that he would not have to pay any shortfall. I have some reservations about this last aspect of Mr Park's evidence but I am satisfied that, in all the circumstances, he had no effective choice available to him other than to sign the document.

[52] In reaching that conclusion, I am influenced by the terms of the agreement which, I am satisfied, were seriously unfair to Mr Park. I find that he would not have signed such an unfair agreement unless he were effectively forced to do so. The agreement was unfair for a number of reasons. First, the amount of 125 million Korean won converted to New Zealand currency at the exchange rate applying at 24 May 2000 amounted to $226,334.47. This sum was well in excess of the total amount paid to Mr and Mrs Park which Mr Swan accepted was $181,205.83. Secondly, I have found that the payments on I and 16 November 1997 of $25,000 and $16,012.80 were gifts rather than loans. As well, Mr Swan accepted that Mr and Mrs Park had provided to Joon the car valued at $24,500 and pocket money of $14,800.

[53] It follows that the maximum sum which could have been due to Mr Kim at April 2000 was:

[54] It follows that, on this analysis, the amount Mr Park was being asked to pay under the Karaoke agreement was more than $125,000 in excess of any sum which could properly be regarded as due to him. The amount specified in the Karaoke agreement was more than double any fair assessment of the amount due to Mr Kim. As well, it provided for interest to be paid at 12% per annum on unpaid instalments, a rate well in excess of bank rates current at the time.

[55] In considering these figures I have taken no account of the fact that board and lodgings worth in the vicinity of $18,000 per annum had been provided by Mr and Mrs Park to Joon over a two-year period. I have put this to one side because there was evidence of certain other payments which may have had some off-setting effect. Mr Kim claimed that his wife had paid certain amounts to Mr and Mrs Park in addition to the payments claimed in the proceedings. However, there was no detail given by Mr Kim of any additional amounts that may have been paid to the Parks by Mrs Kim. Had they been significant, I would have expected evidence of them to have been forthcoming. There was also evidence from Mrs Park that she had, from time to time, drawn funds from an account in New Zealand in Joon's name. Given the lack of detail in this evidence, it is impossible to draw any conclusions from it.

Conclusions

[56] In the light of my factual findings, my conclusions can be shortly stated. First, of the total payments made, only the first two amounted to loans repayable on demand. Those sums amounted to NZ$16,835.58 and NZ$48,357.45. In addition, Mr Park acknowledges that he holds the shares in Black and Yellow Ltd in trust for Mr Kim. The other payments were gifts in recognition of services provided by Mr and Mrs Park.

[57] I am also satisfied, that, by the Carlton agreement, Mr Kim accepted that the transfer of the house at Redwood Drive and the half-share in the karaoke business would extinguish the amount he claimed from Mr Park. In that respect, it amounted to an accord and satisfaction which is the purchase of a release from an obligation, whether arising in contract or tort, by means of any valuable consideration, not being the performance of the obligation itself: Halsbury's Laws of England, 4th ed. Vol 9(1) 782.

[58] The agreement or accord was satisfied in part by the payment to Mr Kim of the net equity in the Redwood Drive property after its sale in August 2000. Although the shares in Black and Yellow Ltd have not been transferred to Mr Kim, Mr Park acknowledges that he holds them in trust for him. Subject to the rights of pre-emption in the constitution, Mr Park is willing to transfer those shares to Mr Kim.

[59] It remains to consider the validity of the Karaoke agreement. The parties are agreed, that if the Karaoke agreement is valid, then it supersedes the Carlton agreement.

[60] The issue of duress has recently been considered by the Court of Appeal in Attorney-General for England and Wales v R [2002] 2 NZLR 91, 111-112. Tipping J delivered the leading judgment. After reference to the two major English cases on duress (Universe Tank Ships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366, and Dimskal Shipping Co SA v International Transport Workers Federation [1992] 2 AC 152 (HL)), Tipping J observed at paragraph 60:

The approach taken prior to these cases, whereby duress was seen as vitiating consent, is no longer the essential focus. The law recognises that in all but the most extreme cases of duress there has been consent. The focus is now on the quality of that consent. If it has been given in circumstances which the law regards as justifying relief, the party who acted under duress may avoid the contract, unless it has been affirmed once the circumstances amounting to duress have ceased to operate. It is, however, necessary for the consistent application of the law that there be recognised criteria to determine what circumstances justify' relief.

All cases of duress involve the existence of pressure causing the party under that pressure to enter into a contract which, but for the existence of the pressure, would not have been entered into. The pressure can be to the person or to economic interests and can also involve social, professional or moral elements. The pressure may be direct or indirect, and its impact requires an examination of the circumstances in which the party under pressure is situated as a result of the pressure.

Whether the pressure amounts to such compulsion of the will as to constitute duress in law, depends essentially on an assessment of two often-linked matters. The first is whether the pressure is regarded in law as illegitimate, and the second is whether the pressure brought about an absence of practical choice. Illegitimate pressure may amount to duress even if there is a practical choice, but the absence of practical choice may suggest the pressure is illegitimate. Illegitimacy of pressure can sometimes arise from conduct which is lawful in itself, albeit it will of course be easier to demonstrate illegitimacy of pressure if it derives from conduct which is unlawful in itself. The starting point must be that the law recognises people generally act under some degree of pressure in making decisions affecting their commercial and other interests. In all duress cases the Court must consider whether the pressure under which the plaintiff was acting should be regarded as legitimate or illegitimate and, in that respect, the nature of any alternatives reasonably open to the plaintiff will be of major importance.

[61] I accept that duress is not something which should be found lightly. I also accept as Young J observed in delivering the judgment of the Court of Appeal in Haines v Carter (CA.286/99, 19 December 2000) paragraph [112] that:

The fact that threats capable of amounting to duress have been made in the course of the negotiating process does not, without more, mean that the bargain reached as a result of that process can be avoided for duress.

[62] But where there has been the illegitimate application of pressure by threats to such an extent as to leave the opposite party in the position of having no practical option other than to sign the agreement, duress may be established. As Lord Scarman put it in the Universe Tank Ships case at 400:

Compulsion is variously described in the authorities as coercion or the vitiation of consent. The classic case of duress is, however, not the lack of will to submit but the victim's intentional submission arising from the realisation that there is no other practical choice open to him.

[63] In the present case, I am satisfied that the threats described by Mr Park were made to him by Mr Kim and Mr Yang at the meeting at the karaoke bar. Those threats, implying injury or damage to Mr Park or members of his family were plainly illegitimate. Moreover, I am satisfied that Mr Park was, at the time, in a vulnerable and highly emotional state. There was a significant imbalance in power between Mr Kim and Mr Park. That was emphasised by their respective financial positions as well as by the presence of Mr Kim's friend, Mr Kang. Although Mr Kim had been in receipt of legal advice, no such advice was received by Mr Park.

[64] I find that he would not have entered into an agreement which was so seriously unfair to him if he had any other choice available to him. I find accordingly that this is one of those rare cases where it is established that the agreement was procured by duress and Mr Park is entitled to avoid it.

[65] It was not suggested that he has affirmed the agreement at any stage. When documentation was sent by Mr Kim's solicitors on 22 May 2000 there was an assertion in response by solicitors for Mr and Mrs Park dated 13 June to the effect that the transfer of the Redwood Drive property and the half-share in the karaoke business were to be accepted in full and final settlement of any amounts due. By letter of 16 June 2000 the Parks' solicitors asserted that considerable duress had been placed on their client and asserted that the demands made were unfair and inequitable.

Result

[66] Mr Swan, on Mr Kim's behalf, accepted that there was no basis for any claim against Mrs Park except in relation to the payments of NZ$25,000 and the US$10,000 in traveller's cheques. In view of my finding that those payments were gifts, Mrs Park can have no liability. Accordingly there will be judgment in favour of the second defendant against the plaintiff.

[67] The only remaining obligation of Mr Park as first defendant is in relation to the half-share in the karaoke business. In that respect:

[a] I declare that the first defendant holds his 50% of the shares in Black and Yellow Ltd in trust for the plaintiff; and

[b] I order that within three months of the date of this judgment, the first defendant shall procure the transfer of those shares to the plaintiff at no cost and, in default, the plaintiff will be entitled to judgment against the first defendant for the sum of $75,000 being the agreed value of the shares.

[68] The question of costs is reserved. If counsel are unable to agree, a memorandum shall be filed no later than 3 February 2003.