When a business partnership goes sour

Running a business can be both rewarding and risky - especially if its a cafe operated not by a single owner, but by business partners — often friends or family — who decide to “go in together.” But when agreements are made informally, without clear written contracts, disputes can quickly arise.

The recent Supreme Court of New South Wales case of Pitak v Sudtipatudom [2025] NSWSC 1088 highlights exactly how badly things can unravel. The dispute involved two couples who went into business together to run a café in Loftus Lane, near Circular Quay in Sydney. What began as a promising partnership turned into years of litigation, with allegations of broken promises, unpaid expenses, and unshared profits.

This blog unpacks the case: the background, the issues before the Court, the final decision, and most importantly — the lessons café owners can take away to avoid similar pitfalls.

The Background: Two Couples, One Café

The dispute was between:

• Nat and Sean (the plaintiffs), a couple who had already operated a successful café in Annandale.

• Archie (the first defendant) and his wife Mindy (not a party to the proceedings but involved in the bookkeeping).

The business was structured through a company called Sai Lam Taan Pty Ltd (SLT). Although Archie was the sole shareholder and director, the café venture at Loftus Lane was intended to be a joint operation between the couples.

The arrangement was largely informal:

• Nat and Sean, on one side, and Archie, on the other, would each contribute 50% of the expenses for the café.

• Any profits from the café would be split equally.

• Mindy assisted with bookkeeping but was not formally part of the agreement.

The café opened in 2019. But tensions quickly grew. At some stage, Nat and Sean stopped contributing to the running costs. They claimed Archie had told them they were no longer part of the café and refused to return control of the Annandale café, which was also legally tied to SLT.

The relationship broke down. The café eventually went into liquidation in 2023, and its assets were bought by a company associated with Mindy.

The Plaintiffs’ Claims

Nat and Sean launched court proceedings in December 2021, later amending their claim in 2024. Their key allegations included:

1. Ownership of SLT – They argued Archie held his shares in SLT on trust for them and should transfer those shares.

2. Profits and “Moneys” – They claimed the agreement entitled them to 50% not just of profits, but also of all “moneys generated by the café.” In other words, they wanted a share of every dollar that came in, regardless of whether the café made a profit.

3. Operating Expenses – They alleged they had personally contributed over $77,000 in cash towards operating expenses, which Archie (or Mindy on his behalf) had received but not properly accounted for.

4. Damages – They sought hundreds of thousands of dollars in damages and other equitable relief.

By the time of the final hearing in 2025, they were effectively pressing two main issues:

• Whether the contract included a right to share in all “moneys” (not just profits).

• Whether they had actually paid the claimed operating expenses.

The Court Proceedings

The case took far longer than expected. Hearings stretched over six days, partly because interpreters were needed for Thai-language witnesses.  Justice Kunc noted that what should have been a “straightforward matter” became bogged down in distractions, including arguments about visas, sponsorships, and irrelevant background details.

Once the distractions were stripped away, the Court was left to resolve two core issues:

1. What were the actual terms of the agreement?

2. Did the plaintiffs really pay the cash expenses they claimed?

Issue 1: Profits vs “Moneys”

The plaintiffs argued that the agreement entitled them to 50% of all “moneys generated by the café.” They said this meant any money available in the café accounts, regardless of whether the café was profitable.  Archie’s position was simpler: the parties had agreed to share profits, not all money flowing through the business.

The Court agreed with Archie.

• There was no written record of the arrangement, only conflicting memories of informal conversations in 2018–2019.

• The plaintiffs’ proposed term was vague and impractical. What exactly counts as “moneys generated”? How is it different from profits?

• The Court emphasised the objective theory of contracts: agreements must be clear enough to be enforceable. Here, there was no evidence anyone had agreed to such a broad entitlement.

Since the café never actually made a profit, Nat and Sean’s claim failed.

Issue 2: The Operating Expenses Claim

The plaintiffs also claimed they had paid $77,745.32 in cash to Mindy for café expenses. They alleged she had requested the payments (often via text messages) and they had handed her envelopes of cash.

But the Court found serious problems with this claim:

• There was no corroborating evidence such as receipts, bank records, or text messages specifically about those payments.

• Some alleged payments included odd amounts like “$20.46” — impossible in cash, since 1c and 2c coins were abolished in 1992.

• Both Archie and Mindy denied receiving the cash. Mindy, who was considered meticulous with accounts, was found credible in her denial.

Without documentary evidence, the Court was not persuaded the payments were made. The operating expenses claim also failed.

The Outcome

In the end:

• The Court dismissed the plaintiffs’ contractual and damages claims.

• Archie did not oppose transferring his share in SLT to Nat and Sean — but since SLT was already in liquidation, this was of little practical benefit.

• The Court indicated that costs would likely follow the event, meaning Nat and Sean may have to pay Archie’s legal costs.

Key Lessons for Café Owners

The case is a cautionary tale for anyone thinking of opening a café — especially with friends or family. Here are the takeaways:

1. Always Put Agreements in Writing

The couples here relied on informal conversations. Years later, each gave conflicting accounts of what was said. Without a written contract, the Court was left to guess.

Lesson: Before you open your café, document the key terms:

• Who owns what percentage.

• Who contributes to costs.

• How profits (and losses) are shared.

• What happens if someone wants to leave.

A written shareholders’ agreement or partnership agreement avoids costly disputes.

2. Be Clear About Profits vs Revenue

The plaintiffs tried to argue for a share of “moneys” — essentially, all cash coming in. The Court rejected this.

Lesson: Understand the difference between:

• Revenue (takings) – all money coming in.

• Expenses – rent, wages, supplies, etc.

• Profit – what’s left after expenses.

Only profits can realistically be distributed to owners. Café owners should clarify in advance whether they are sharing revenue (rare and risky) or profits (standard).

3. Keep Proper Records

The plaintiffs’ claim about paying $77,000 in cash failed because they had no proof.

Lesson: Never rely on cash handovers without receipts. Café owners should:

• Use bank transfers, not cash, for contributions.

• Keep receipts and invoices for all expenses.

• Maintain accurate accounts — ideally with professional bookkeeping software.

Good records are essential both for tax compliance and for protecting your rights in disputes.

4. Structure Your Business Carefully

Here, the café was operated through a company, but ownership of the shares was disputed. Archie was the sole legal shareholder, leaving Nat and Sean exposed.

Lesson: If you’re going into business together:

• Ensure shareholdings reflect the agreed ownership.

• Register directorships appropriately.

• Consider shareholder agreements to protect minority interests.

Never rely on trust that “we’ll sort it out later.”

5. Choose Partners Wisely

Perhaps the hardest lesson: business partnerships can strain personal relationships. Friends can become adversaries when money is at stake.

Lesson: Think carefully before going into business with friends or family. If you do, protect the relationship with a clear, professional legal framework.

Final Thoughts

The Pitak v Sudtipatudom case is a sobering reminder of how informal café partnerships can unravel. Despite years of hard work and investment, the plaintiffs walked away with little more than legal bills.

For café owners, the message is clear:

• Document agreements.

• Define profit-sharing clearly.

• Keep proper records.

• Structure ownership correctly.