FEDERAL COURT OF AUSTRALIA Ku v Song [2007] FCA 1189 CORPORATIONS – requirements for a valid transfer of shares in an unlisted company CONTRACTS – intention to make a contract – when void for uncertainty – construction principles – implication of terms – collateral contracts TRUSTS – express trusts – implied resulting trusts GIFTS INTER VIVOS – incomplete gift Held: No shares had been validly transferred to entitle the third respondent, as a putative transferee of all the issued shares in a company, to remove the applicant as an officer. An intended gift inter vivos of shares had not been perfected. An agreement for the settlement of other proceedings had been repudiated and terminated. Corporations Act 2001 (Cth) ss 135(2), 176, 251A(2)-(4), 251A(6), 761A, 1041H, 1070A(1), 1071A, 1071B, 1071D(1), 1072F, 1072G, 1073A(1), 1073D, 1073F, 1274B(2) and 1404 Corporations Regulations 2001 (Cth) regulations 7.11.10, 7.11.11, 7.11.14, 7.11.15 and 7.11.22 Trade Practices Act 1974 (Cth) s 51AA and s 52 Fair Trading Act 1987 (NSW) s 42 Rose and Frank Company v J. R. Crompton and Brothers, Limited [1923] 2 KB 261 applied Eccles v Bryant (1947) 2 All ER 865 applied Sindel v Georgiou (1984) 154 CLR 661 referred to Australian (sic) and New Zealand Banking Group Ltd. v Frost Holdings Pty Ltd. (1989) VR 695 cited Powell and Berry v Jones and Jones (1968) SASR 394 cited Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 cited The Council of the Upper Hunter County District v Australian Chilling and Freezing Co. Limited (1968) 118 CLR 429 cited Whitlock v Brew (1968) 118 CLR 445 referred to Life Insurance Co of Australia Ltd. v. Phillips (1925) 36 CLR 60 referred to Bishop v. Taylor(1968) 118 CLR 518 referred to Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 referred to Equuscorp Pty Ltd v HGT Investments Pty Ltd (2005) 218 CLR 471 referred to Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99 applied Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 cited Whitworth Street Estates Limited v Miller (1970) AC 583 cited Port Sudan Cotton Co v Govinda Swami Chettiar & Sons (1977) 2 Lloyd's LR 5 referred to Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 referred to B.P. Refinery (Westernport) Pty. Limited v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266 cited Hoyt's Proprietary Limited v Spencer (1919) 27 CLR 133 referred to Chapman v Chapman [1983] 2 NSWLR 420 referred to Gates v The City Mutual Life Assurance Society Limited (1986) 160 CLR 1 referred to Russell v Scott (1936) 55 CLR 440 referred to Wirth v Wirth (1956) 98 CLR 228 referred to Hepworth v Hepworth (1963) 110 CLR 309 referred to Bloch v Bloch (1981) 180 CLR 390 referred to Muschinski v Dodds (1985) 160 CLR 583 cited Baumgartner v Baumgartner (1987) 164 CLR 137 referred to Barclays Bank Ltd. v Quistclose Investments Ltd. [1970] AC 567 explained Carreras Rothmans Ltd. v. Freeman Mathews Treasure Ltd. [1985] 1 Ch 207 cited Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491 cited Damberg v Damberg (2001) 52 NSWLR 492 referred to Milroy v Lord (1862) 4 DeGF & J 264 [45 ER 1185] referred to Cope v Keene (1968) 118 CLR 1 referred to Brunker v Perpetual Trustee Company (Limited) (1937) 57 CLR 555 referred to Anning v Anning (1907) 4 CLR 1049 referred to Henjo Investments Pty Limited v Collins Marrickville Pty Limited (1988) 79 ALR 83 referred to Jacobs' Law of Trusts in Australia, Seventh Edition 2006, J D Heydon and M J Leeming Underhill and Hayton, Law Relating to Trusts and Trustees, 16th Edition, 2003, D J Hayton JUN BOM KU v DONG SOON SONG, SUK JOON SONG, JI YOUNG SONG, KJUN INTERNATIONAL PTY LTD (ACN 092 708 999) AND SU-SHI WORLD AUSTRALIA PTY LTD (ACN 076 098 701) NSD 2502 OF 2006 GRAHAM J 8 AUGUST 2007 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 2502 OF 2006 BETWEEN: JUN BOM KU Applicant AND: DONG SOON SONG First Respondent SUK JOON SONG Second Respondent JI YOUNG SONG Third Respondent KJUN INTERNATIONAL PTY LTD (ACN 092 708 999) Fourth Respondent SU-SHI WORLD AUSTRALIA PTY LTD (ACN 076 098 701) Fifth Respondent JUDGE: GRAHAM J DATE OF ORDER: 8 AUGUST 2007 WHERE MADE: SYDNEY THE COURT DECLARES THAT: 1. The third respondent has no right, title or interest in any shares in the fourth respondent. 2. The purported removal of the applicant as a director, secretary and public officer of the fourth respondent and the purported replacement of the applicant as a director, secretary and public officer of the fourth respondent by the first respondent, by the third respondent's resolution signed and dated 15 December 2006, was of no force and effect. THE COURT DIRECTS THAT: 3. The parties file and serve any written submissions or supplementary written submissions on costs on or before 15 August 2007. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 2502 OF 2006 BETWEEN: JUN BOM KU Applicant AND: DONG SOON SONG First Respondent SUK JOON SONG Second Respondent JI YOUNG SONG Third Respondent KJUN INTERNATIONAL PTY LTD (ACN 092 708 999) Fourth Respondent SU-SHI WORLD AUSTRALIA PTY LTD (ACN 076 098 701) Fifth Respondent JUDGE: GRAHAM J DATE: 8 AUGUST 2007 PLACE: SYDNEY REASONS FOR JUDGMENT Index to Reasons Para Background...................................................................................................................... 1 - 28 The 25 October 2006 forms of agreement....................................................................... 29 - 36 Surrounding circumstances...................................................................................................... 37 The making of contracts................................................................................................... 38 - 43 When are contracts void for uncertainty?.......................................................................... 44 - 48 Construction of contracts................................................................................................. 49 - 55 Implication of terms......................................................................................................... 56 - 57 Collateral contracts................................................................................................................. 58 Trust principles................................................................................................................. 59 -72 Summary................................................................................................................................ 73 The witnesses.................................................................................................................. 74 - 75 17 October – 9 November 2006..................................................................................... 76 - 77 First meeting.................................................................................................................... 78 - 80 Second meeting............................................................................................................... 81 - 84 Third meeting................................................................................................................ 85 - 109 Fourth meeting and intervening steps............................................................................ 110 - 174 Legislative provisions concerning the transfer of shares................................................. 175 - 199 Post settlement conduct............................................................................................... 200 - 201 Conclusions................................................................................................................. 202 - 204 Background 1 These proceedings concern a transfer by the applicant of 1,000 shares, said to have been the whole of the issued capital in the fourth respondent, Kjun International Pty Ltd ACN 092 708 999, ('the shares') to the third respondent, Ji Young Song ('Ji Song'), which was said to have been made on 9 November 2006. 2 Further evidence tendered by the respondents on 6 August 2007, following the re-opening of the respective cases of the applicant and the respondents, after the hearing had concluded on 19 June 2007, revealed that there is a material inconsistency between what the public record shows the issued capital of Kjun International Pty Limited to be and what Kjun International Pty Limited's own Register of Members reveals. 3 It may be that share transfers have been made but not registered and that further shares have been allotted, without the relevant allotments being recorded, but there is no evidence to allow any conclusions to be drawn in this regard. 4 The minute book recording minutes of meetings of directors of Kjun International Pty Limited (Exhibit 5 as tendered on 6 August 2007) only records resolutions passed at meetings which took place on 5 May 2000. The unsigned minutes of one such meeting recorded the deemed allotment to the applicant of one share on 5 May 2000 and the deemed allotment to Seon Ho Jang of one share on the same date. The same minutes recorded the appointment of the applicant and Seon Ho Jang as directors of Kjun International Pty Limited. 5 There are no minutes recording the registration of any transfer, by Seon Ho Jang, of his share in Kjun International Pty Limited to the applicant and no minutes recording the allotment of a further 998 shares in Kjun International Pty Limited to the applicant. 6 Kjun International Pty Limited's register of members (Exhibit 6 as tendered on 6 August 2007) shows that only two shares have been allotted by it, one held by the applicant and the other held by Seon Ho Jang. 7 A register of directors (Exhibit 9 as tendered on 6 August 2007) showed that the directors of Kjun International Pty Limited were the applicant and Seon Ho Jang. The minutes of meetings of members of Kjun International Pty Limited record no changes in this regard. 8 Section 176 of the Corporations Act 2001 (Cth)('the Corporations Act') dealt with the evidentiary value of a company's register of members as follows: '176 In the absence of evidence to the contrary, a register kept under this Chapter is proof of the matters shown in the register under this Chapter.' There was no like provision which gave evidentiary value to a register of directors. 9 Clauses 73 – 78 inclusive of Kjun International Pty Limited's constitution made provision in respect of the appointment, removal and remuneration of directors of Kjun International Pty Limited. In relation to a director's continuation in office, clauses 76 and 78 relevantly provided: '76. … a director appointed under any of Clauses 73, 74 or 75 shall hold office until he dies, or until his office becomes vacant by virtue of the Law [a reference to the Corporations Law], the SIS Act [a reference to the Superannuation Industry (Supervision) Act 1993 (Cth)] or this Constitution. … 78 In addition to the circumstances in which the office of a director becomes vacant by virtue of the Law and the SIS Act, the office of a Director becomes vacant if the Director: (1) becomes of unsound mind or a person whose person or estate is liable to be dealt with in any way under the law relating to mental health; (2) resigns office by notice in writing to the Company; or (3) is absent without the consent of the Directors from meetings of the Directors held during a period of six months.' 10 In relation to persons who stop being directors, s 205B(5) of the Corporations Act provided: '205B(5) If a person stops being a director … of the company, the company must lodge with ASIC notice of the fact within 28 days. The notice must be in the prescribed form.' 11 Section 251A(2)-(4) of the Corporations Act made provision for the signing of minutes of resolutions. The evidentiary significance of minutes duly recorded and signed is covered by s 251A(6) of the Corporations Act, which provided as follows: '251A(6) A minute that is so recorded and signed is evidence of the proceeding, resolution or declaration to which it relates, unless the contrary is proved.' There was no provision in the Corporations Act giving evidentiary significance to the lack of a duly recorded and signed minute. 12 Notwithstanding what is revealed in Kjun International Pty Limited's register of members, information obtained by the Australian Securities and Investments Commission ('ASIC') from the national database suggests that the issued capital of Kjun International Pty Limited consisted of 1,000 shares. A 'Historical Extract' of 27 October 2006 (part of Exhibit A) indicated that the applicant was the holder of 1,000 shares and that Seon Ho Jang was a former member of Kjun International Pty Limited as at that date. 13 Section 1274B(2) of the Corporations Act provided: '1274B(2) In a proceeding in a court, a writing that purports to have been prepared by ASIC is admissible as prima facie evidence of the matters stated in so much of the writing as sets out what purports to be information obtained by ASIC, by using a data processor, from the national database. In other words, the writing is proof of such a matter in the absence of evidence to the contrary.' 14 Whatever the state of Kjun International Pty Limited's issued capital may have been immediately prior to 9 November 2006 and whoever may have been the owners of the issued shares, it seems to me that I should proceed to address the issues in this case on the common assumption of the parties, at least until very recently, that 1,000 shares had been allotted, all of which were held by the applicant, prior to 9 November 2006. I will later return to address the relevance of a finding that, on the basis of the register of members, only two shares in Kjun International Pty Limited had ever been allotted, one of which was held by the applicant, and the other by Seon Ho Jang. 15 In relation to the status of Seon Ho Jang as a director of Kjun International Pty Limited, the 'Historical Extract' of 27 October 2006 suggests that he ceased to be a director on 5 May 2001. Having regard to s 1274B(2) of the Corporations Act, it is clear, on the evidence, that the applicant became the sole director of Kjun International Pty Limited from that date. 16 The applicant contends that the shares are held by Ji Song in trust for the applicant. 17 Alternatively, the applicant contends that the fifth respondent engaged in unconscionable conduct within the meaning of s 51AA of the Trade Practices Act 1974 (Cth) ('the Trade Practices Act') and also that the first, second, third and fifth respondents engaged in misleading or deceptive conduct within the meaning of s 52 of the Trade Practices Act and/or s 42 of the Fair Trading Act 1987 (NSW) ('the Fair Trading Act') and/or s 1041H of the Corporations Act which resulted in the transfer of the shares by the applicant to the third respondent. In the circumstances the applicant seeks orders restoring to him ownership of the shares. 18 Lying at the heart of the proceedings is the trade mark 'Su-shi World' said to have been registered as No. 785516 on and from 12 February 1999. That trade mark was apparently registered by the fifth respondent, Su-shi World Australia Pty Ltd ACN 076 098 701, a Song family company, of which the first respondent was a director between 23 October 1996 and 29 May 2006 and of which the second respondent has been the sole director since 29 May 2006. 19 The applicant contends that by a deed made 1 May 2002 Su-shi World Australia Pty Limited assigned certain intellectual property including the trade mark 'Su-shi World' to Kjun International Pty Limited. The consideration for the assignment was said to be $50,000 which was allegedly paid to Su-shi World Australia Pty Limited by a bank cheque on 25 October 2002. The first, second, third and fifth respondents (collectively referred to as 'the respondents') do not accept the validity of the alleged assignment of the trade mark. 20 As it transpires Su-shi World Australia Pty Limited allegedly transferred the registered trade mark to LSU Pty Limited ACN 119 854 152 as trustee of the Nirvana Investment Trust by a Deed of Assignment dated 24 May 2006. LSU Pty Limited was a Song family company of which the first and second respondents have been directors since 24 May 2006. The applicant does not accept the validity of that assignment. 21 In the foregoing circumstances, Kjun International Pty Limited, then said to be wholly owned by the applicant, and an associated company, Sushi Nara Australia Pty Ltd ACN 099 988 333, instituted proceedings NSD 1661 of 2006 against LSU Pty Limited as trustee of the Nirvana Investment Trust, Su-shi World Australia Pty Limited, Dong Soon Song ('Sue Song') and Suk Joon Song ('Luke Song') ('the trade mark proceedings') on 30 August 2006. By an Amended Application filed 1 September 2006 SNK Trading Pty Limited ACN 105 594 296, a Ku company, was recorded as being a third applicant and JHJ Brothers Holdings Pty Limited ACN 119 204 125, another Song family company of which Luke Song and Sue Song have been directors, was recorded as being a fifth respondent. Neither of these companies would appear to have become parties to the trade mark proceedings by an order of the Court under Order 6 rule 8 of the Federal Court Rules, nor would they appear to have become parties in accordance with Order 13 rule 2(4) or 2(5). 22 Sushi Nara Australia Pty Limited claims to be a franchisor of 'Su-shi World' deriving rights to franchise others to use that name from Kjun International Pty Limited as the equitable owner of the registered trade mark 'Su-shi World'. Sushi Nara Australia Pty Limited was a party to an undated Deed apparently executed in 2002 whereby Kjun International Pty Limited purported to grant to Sushi Nara Australia Pty Limited as and from 1 May 2002: '… a licence to conduct business in the Area as "SUSHI WORLD" using the System and the Image AND to itself grant to Franchisees, by way of Franchise, the rights to operate and conduct business as separate "Sushi World" retail businesses.' (see clause 3.1) Clause 1 of the Deed contained, amongst other things, definitions of 'The System' and of 'The Image'. 'The Image' was defined to mean: '… the distinctive image, visual appearance, reputation and presentation of the Licensor [Kjun International Pty Limited] in the market. The name "SUSHI WORLD", the Marks, and the brand names, logos and slogans associated with the Licensor's goods or services and the System are part of and features of the Image'. Clause 1 of the Deed also included a definition of 'The Marks' as: '… the trade or service marks and names listed in Annexure "A" whether or not registered and includes any application for registration of the same and includes but is not limited to the Licensor's e-mail address and the Licensor's homepage/website.' The term of the Licence Agreement was expressed to be 5 years from 1 May 2002. Clause 8.1 of the Deed provided: '8.1 This Agreement shall continue in full force and effect until the expiration of the Term, provided that the parties may by agreement terminate or extend this Agreement upon such terms and conditions as the parties may agree.' The copy of the undated Deed, which forms part of Exhibit A, does not include an 'Annexure "A"'. 23 In the trade mark proceedings the applicants therein seek relief in respect of the trade mark 'Su-shi World' and certain consequential relief. The orders sought in the Amended Application in those proceedings include: '1. An order that the Register of Trade Marks be amended by recording the first applicant [Kjun International Pty Limited] as registered owner of Trade Mark No. 785516. 2. Alternatively, an order that the first respondent [LSU Pty Limited as trustee of the Nirvana Investment Trust], by its directors, the third and fourth respondents [Sue Song and Luke Song], sign an application and all other documents prescribed pursuant to s.107(2) of the Trade Marks Act 1995 for an assignment of Trade Mark No. 785516 from the first respondent to the first applicant within 7 days of the date of this order. … 4. Alternatively, an order that the Register of Trade Marks be rectified by cancelling the registration of Trade Mark No. 785516 on the grounds set out in ss.88(2)(c) and (e) of the Trade Marks Act 1995. 5. Declaration that the first respondent had and has no grounds for making the threats of legal proceedings for infringement of registered Trade Mark No. 785516 in: (a) the letter from its solicitors, Edwin Davey, dated 16 August 2006 to MNA Lawyers, a copy of which is annexed to this application marked "A"; (b) the letter from its solicitors, Edwin Davey, dated 18 August 2006 to Sushi World, Hurstville, a copy of which is annexure "B" to this application; (c) the letters from its solicitors, Edwin Davey, to other persons and entities carrying on the business of retail sale of sushi and related food products under and by reference to the name "Sushi World" as franchisees of the second applicant. …' 24 In paragraph 22 of the Statement of Claim in the trade mark proceedings it was alleged that by a letter dated 16 August 2006 addressed to Kjun International Pty Limited, LSU Pty Limited as trustee of the Nirvana Investment Trust had: '(a) asserted that it was the owner of trade mark No. 785516; (b) asserted that it had a substantial reputation in the name Sushi World, including the Sushi World logo; (c) asserted that it had a substantial reputation in the new Japanese girl logo; (d) threatened to commence proceedings against the first applicant [Kjun International Pty Limited] for infringement of mark No. 785516.' 25 The trade mark proceedings, which are presently listed before another Judge of the Court, have been adjourned pending the outcome of the current proceedings NSD 2502 of 2006. These proceedings were instituted on 21 December 2006 after what was, arguably, a settlement of the trade mark proceedings on or about 25 October 2006, at least as between the parties named in the original Application in those proceedings. It was agreed between the applicant and the first, second, third and fifth respondents in the current proceedings that the fourth respondent should be taken to have submitted to such orders as the Court may seem fit and that position has been maintained, notwithstanding the respondents' submission of 6 August 2007 that: '14. The only conclusion that the Court can reach is that, despite the inappropriate registration by the Applicant, Ji Song is not the owner of any shares in Kjun International Pty Limited. … … 30. The Applicant has, since the outset, conducted this proceeding on the basis that an effective transfer of shares had occurred in circumstances where a cursory glance at the constitution would have disclosed that this was not the case. …' 26 Following the 'settlement' of the trade mark proceedings it had been said that the applicant proceeded to transfer the shares to Ji Song, a son of Luke Song and Sue Song, on 9 November 2006. However, as will be apparent later, Mr Ku's evidence, which I accept, is that he didn't ever execute a traditional form of transfer of the shares to Ji Song. This is now common ground. 27 It so happens that on 9 November 2006 a Cross-claim was filed in the trade mark proceedings notwithstanding the alleged 'settlement' of those proceedings that occurred on or about 25 October 2006. The cross-claimants were each of the five parties named in the Amended Application in the trade mark proceedings as being respondents, including JHJ Brothers Holdings Pty Limited. The cross-respondents were each of the three parties named in the Amended Application as being applicants (Kjun International Pty Limited being wrongly described as ACN 105 593 879), including SNK Trading Pty Limited, together with Kjun Australia Pty Limited ACN 092 708 999 (sic), Theme Land Group Pty Limited ACN 118 575 992, Jun Bom Ku, the applicant in the current proceedings, Keith Kang Ho Rhee, Young Ha Kim, Young Kim Legal Pty Limited ACN 101 573 460, ENC International Pty Limited ACN 105 593 824, SSW Management Pty Limited ACN 115 922 864 and Sushi World Pty Limited ACN 100 334 058. 28 For present purposes it is unnecessary to determine the strengths and weaknesses of the cases of the respective parties in the trade mark proceedings in relation to the Amended Application and the Cross-claim. However, it is important to note that the Cross-claim, which bears a certificate of the cross-claimants' solicitor dated 20 October 2006, was not served until 13 November 2006, i.e. after the transfer of the shares from the applicant in the current proceeding to Ji Song was said to have been made on 9 November 2006. Having said that, it may be noted that paragraph 5 of the Defence filed 19 October 2006 in the trade mark proceedings did refer to 'the reasons pleaded in the cross-claim'. The 25 October 2006 forms of agreement 29 It is common ground that on 25 October 2006 two forms of 'Agreement' between Su-shi World Australia Pty Limited, Luke Song or (sic) Sue Song and Kjun International Pty Limited and the applicant were executed, purportedly on behalf of the named parties, by Luke Song and Jun Bom Ku respectively, at a meeting between those gentlemen. The substantive parts of the two forms of agreement were expressed in the Korean language. It is common ground that the translations proffered by the applicant may be relied upon, although there is an apparent error in the alphabetical identification of the paragraphs in the translation of the longer form of agreement. The longer form of agreement contained seven clauses and the shorter form contained five clauses. They were as follows: Longer form of agreement ' AGREEMENT 'A': SUSHI WORLD AUSTRALIA PTY LTD, SUK JOON SONG or DONG SOON SONG of 22 Wybalena Road Hunters Hill in the State of New South Sydney (sic) Australia 'B': KJUN INTERNATIONAL PTY LTD, JUN BOM KU of 2603/1 Sergeants Lane, St Leonards in the State of New South Wales Sydney Australia The upper mentioned 'A' and 'B' agreed as follows on the 24th of October, 2006. Both parties are to accept it as a legally binding agreement and execute it. ['A' and 'B' agree the following.] A) 'A' and 'B' agree that they will not disclose what was agreed by both parties in this agreement to anyone including solicitors. Both agree to keep the content of the agreement confidential not disclosing it to any third party apart from 'A' and 'B'. B) 'A' and 'B' accept what was ordered by the Federal Court of Australia New South Wales District Registry that was mutually agreed, and agree that it holds good permanently. C) 'A' admits that it ['A'] transferred IP to 'B' in May 2002, and that 'B' has managed and developed the franchise system until as of October 2006 with it, and that 'B' has the right for it. 'A' admits and agrees that 'B' continues the franchise system. D) 'B' agrees to withdraw the lawsuit against 'A' that was brought in the Federal Court of Australia New South Wales District Registry without reservation as soon as 'A' admits the above (C). And 'B' agrees that there will be no more lawsuits against 'A' regarding this matter. D) (sic) If 'B' withdraws the lawsuit against 'A' brought in the Federal Court of Australia New South Wales District Registry, 'A' accepts it without reservation and agrees that there will not be any legal proceedings against 'B' from 'A'. F) 'A' and 'B' agree that each party is responsible for its own court costs which have been paid until as of October 24. G) On the basis of the basic agreement that 'A' and 'B' will not continue to proceed the lawsuits that have been brought in, both parties agree that they accept mutual authority and right that have been developed for the last 5 years by each party, and solve all problems harmoniously through a mutual talk and agreement, and help and cooperate with each other for mutual development without slandering each other. EXECUTED as a agreement between the parties who have hereunto set their hands and seals on the day and year first hereinbefore mentioned: EXECUTED by ) KJUN INTERNATIONAL PTY LTD, ) [Signed] JUN BOM KU of 2603, 1 Sergeants Lane ) St Leonards NSW 2065 ) EXECUTED by ) SUSHI WORLD AUSTRALIA PTY LTD, ) SUK JOON SONG or DONG SOON SONG ) [Signed] of 22 Wybalena Road Hunters Hill NSW 2110 )' Shorter form of agreement ' AGREEMENT 'A': SUSHI WORLD AUSTRALIA PTY LTD, SUK JOON SONG or DONG SOON SONG of 22 Wybalena Road Hunters Hill in the State of New South Sydney (sic) Australia 'B': KJUN INTERNATIONAL PTY LTD, JUN BOM KU of 2603/1 Sergeants Lane St Leonards, in the State of New South Wales Sydney Australia The upper mentioned 'A' and 'B' agreed as follows on the 24th of October, 2006. Both parties are to accept it as a legally binding agreement and execute it. [Both 'A' and 'B' agree the following:] A) 'A' and 'B' agree that they will not disclose what was agreed by both parties in this agreement to anyone including solicitors. Both agree to keep the content of the agreement confidential not disclosing it to any third party apart from 'A' and 'B'. B) 'B' agrees to withdraw the lawsuit against 'A' that was brought in the Federal Court of Australia New South Wales District Registry without any condition without further proceedings and process the withdrawal through a solicitor(s). And 'B' agrees that there will be no more lawsuits against 'A' regarding this matter. D) 'A' agrees that if 'B' withdraws the lawsuit against 'A' brought in the Federal Court of Australia New South Wales District Registry, 'A' accepts it without reservation and agrees that there will not be any more legal proceedings against 'B' from 'A'. F) 'A' and 'B' agree that each party is responsible for its own court costs which have been paid until as of October 24. G) On the basis of the basic agreement that 'A' and 'B' will not continue to proceed the lawsuits that have been brought in, both parties agree that they accept mutual authority and right that have been developed for the last 5 years by each party, and solve all problems harmoniously through a mutual talk and agreement, and help and cooperate with each other for mutual development without ever slandering each other. EXECUTED as a agreement between the parties who have hereunto set their hands and seals on the day and year first hereinbefore mentioned: EXECUTED by ) KJUN INTERNATIONAL PTY LTD, ) [Signed] JUN BOM KU of 2603, 1 Sergeants Lane ) St Leonards NSW 2065 ) EXECUTED by SUSHI WORLD AUSTRALIA PTY LTD, ) SUK JOON SONG or DONG SOON SONG ) [Signed] of 22 Wybalena Road Hunters Hill NSW 2110 )' Each form of agreement was translated into the English language by Jin Ki Min. The longer form of agreement was translated on 18 December 2006 and the shorter form on 1 May 2007. 30 Both forms of agreement had been prepared by Mr Ku on 24 October 2006. They were presented by him to Luke Song at the meeting on 25 October whereupon, following discussion, both forms of agreement were executed in duplicate by each of Mr Ku and Luke Song. The circumstances pertaining to the execution of the seemingly inconsistent documents will be addressed hereafter. 31 Without embarking upon a detailed consideration of the wording of the two forms of agreement it is appropriate to note in the case of the longer form of agreement that: (a) the reference in paragraph B to 'what was ordered by the Federal Court of Australia New South Wales District Registry that was mutually agreed' appears to be a reference to an undated interlocutory agreement that was reached between the parties in the trade mark proceedings on or about 1 September 2006. That agreement includes in its heading, in manuscript form, a reference to SNK Trading Pty Limited as a third applicant in those proceedings and also a reference to JHJ Brothers Holdings Pty Limited as a fifth respondent. The agreement in its amended form provided as follows: 'IN THE FEDERAL COURT OF AUSTRALIA ) No. NSD 1661/2006 NEW SOUTH WALES DISTRICT REGISTRY ) KJUN INTERNATIONAL PTY LIMITED Fist (sic) Applicant SUSHI NARA AUSTRALIA PTY LTD Second Applicant SNK Trading Pty Limited (Third Applicant) AND LSU PTY LIMITED AS TRUSTEE OF THE NIRVANA INVESTMENT TRUST First Respondent SU-SHI WORLD AUSTRALIA PTY LIMITED Second Respondent DONG SOON SONG Third Respondent SUK JOON SONG Fourth Respondent JHJ Brothers Holdings Pty Limited (Fifth respondent) AGREEMENT BETWEEN PARTIES Without prejudice to their respective claims in this proceeding, the parties agree that until the final determination of this proceeding by the Court: 1. Each party will be entitled to continue to operate the Sushi World shops currently managed by them or by companies associated with them without interference from any other party in the proceeding. The Sushi World shops currently managed by the respondents or by companies associated with them are set out at paragraph 62 of the affidavit of Dong Soon Song sworn 1 September 2006, namely: Shop Address 1. Bay Village Shop 22 Stockland Bay Village 2. Broadway Shop G06, 1-21 Bay Street, Broadway 3. Camperdown 15-17 Larkin Street CAMPERDOWN NSW 2050 4. Canberra Centre Shop A07 Canberra Centre CANBERRA 5. Canberra Food Shop CL 30 Ainslie Ave Civic Centre CANBERRA 6. Canberra Belconnen Kiosk FFK1 Westfield Shoppingtown Belconnen 8. Canberra Foodcourt BBQ Kiosk CL 28B Canberra Centre CANBERRA 9. Canberra Queanbeyan Kiosk K1 Riverside Plaza QUEANBEYAN 10. Double Bay Shop 8, 20-26 Cross Street, DOUBLE BAY NSW 2028 11. Erina Fair Sop T011 Erina Fair Shopping Centre ERINA 12. Erina Fair Restaurant Shop R9 Erina Fair Shopping Centre ERINA 13. Fox Studio No 215 – G07 Fox Studios RANDWICK 14. Hornsby Kiosk K102, Westfield Shoppingtown HORNSBY 15. Liverpool Shop 1-114 Westfield Shoppingtown LIVERPOOL 16. Macquarie Shopping Centre Kiosk K91B Macquarie Shopping Centre MACQUARIE 17. Marrickville Metro Centre Kiosk K25 Marrickville Metro Shopping Centre MARRICKVILLE 18. Miranda Westfield Kiosk 221 Westfield Miranda 19. Miranda (2) Shop 2078 Westfield MIRANDA 20. Miranda Food Shop 2006 Westfield Second Food Court MIRANDA 21. Mona Vale Shop 5, Pittwater Place MONA VALE 22. Pagewood Kiosk 115, Bunnerong Road, WESTFIELD PAGEWOOD 23. Pagewood (2)/East Gardens Kiosk K 302, Bunnerong Road WESTFIELD PAGEWOOD 24. Parramatta (2) Kiosk 504A, 159 Church Street St PARRAMATTA 25. Parramatta Food Kiosk 510C Westfield Shoppingtown PARRAMATTA 26. Penrith Plaza Kiosk K19 Penrith Plaza Shopping Centre PENRITH 27. Penrith Plaza Restaurant Shop R1 Penrith Plaza Shopping Centre PENRITH 28. Rhodes Homebush Shop 28 Rhodes Shopping Centre HOMEBUSH 29 Tuggerah Westfield Kiosk K201 Cnr Cobbs & Gavenlock Roads TUGGERAH 2. Each party without any interference from any other party will be entitled to open new Sushi World shops and to enter into leases in respect of those new shops provided that in so doing there is no assignment of the goodwill and intellectual property the subject of this proceeding. 3. In relation to shops currently intended to be opened by a party in respect of which another party has informed the landlord or intending landlord that there is a dispute as to the ownership of the goodwill and intellectual property the subject of this proceeding, that other party will on the request of the firstmentioned party inform the landlord or intending landlord in writing that, whilst the parties remain in dispute, the landlord or intending landlord is free to enter into leasing arrangements with the firstmentioned party if the landlord or intending landlord so chooses. In the case of the applicants, the respondents will so inform QIC (if requested) in respect of the shop to be opened at Centre Tower and at Canberra City. In the case of the respondents, the applicants will so inform (if requested) QIC in respect of the shop and kiosks to be opened in the Canberra Centre.' (manuscript additions to the typed document appear in normal type; manuscript deletions of typed script are as noted) (b) the reference to 'IP' in paragraph C is plainly a reference to intellectual property; (c) the reference to the transfer of intellectual property in May 2002 in paragraph C was plainly intended as a reference to the deed made 1 May 2002 referred to above; (d) the references to 'the lawsuit' in the first paragraph D and the second paragraph D were references to the trade mark proceedings; (e) the reference to 'court costs' in paragraph F was a reference to costs in the trade mark proceedings; and (f) a footnote to the document recorded it as 'Agreement Version 2'. 32 In relation to the shorter form of agreement it may be observed that: (a) it contained no paragraphs equivalent to B and/or C in the longer form of agreement; (b) paragraph B in it was expressed in marginally different terms from the first paragraph D in the longer form of agreement. However, it was essentially directed at achieving the same outcome as the first paragraph D; (c) paragraph D in it was essentially the same as the second paragraph D in the longer form of agreement; (d) paragraph F was expressed in the same terms in both forms of agreement; (e) paragraph G was expressed in substantially the same terms in both forms of the agreement, but the longer form of agreement contained 4 additional Korean characters; (f) a footnote to the document recorded it as 'Agreement Version 1'. 33 The evidence of Mr Ku was that the shorter form of agreement was recorded in a computer file entitled 'AGREEMENT for Legal Case' and that the longer form of agreement was recorded in a computer file entitled 'AGREEMENT for Legal Case–V2'. His computer files also suggest that the longer form of agreement was the subject of amendment later in point of time than the last amendment of the shorter form of agreement. Having noted that, I must say that I find it curious that the shorter form of agreement contains paragraphs identified as A, B, D, F and G. One might have thought that those paragraphs would have been simply A, B, C, D and E if the shorter form of agreement came first. However, it is possible that in its original form the shorter form of agreement contained paragraphs A, B, C, D, E, F and G, and that it was later amended to excise paragraphs C and E without there being any re-identification in alphabetical order of the remaining paragraphs, followed by the creation of a second version founded upon the shorter form of agreement but with new paragraphs B and C inserted into it and the old B reidentified as D. This may explain how it came about that there were two paragraphs D in the longer form of agreement. 34 Mr Ku's evidence is that on 24 October 2006 he prepared not only the shorter form of agreement and the longer form of agreement but also a form of transfer whereby Ji Song could transfer back to him shares in Kjun International Pty Limited, be they all of the shares or some of them. The 'Transfer of Shares' form did not provide a space for the insertion of a number to indicate how many shares were being transferred back to Mr Ku. Furthermore, it did contemplate the payment by Mr Ku of a monetary consideration for any transfer back that may have been in contemplation. 35 Mr Ku says that when he had finalised the preparation of the longer form of agreement on the evening of 24 October 2006, he printed off two copies of each document, inadvertently including the shorter form of agreement, which he did not then intend to utilise. 36 As it transpires Mr Ku attended his meeting with Luke Song on 25 October 2006 armed with two copies of the longer form of agreement, two copies of the shorter form of agreement and two copies of the form of share transfer which he had prepared to allow Ji Song to retransfer shares in Kjun International Pty Limited to him, all within a single plastic sleeve. Surrounding circumstances 37 Whilst, for present purposes, the focus of attention needs to be on the period 17 October to 9 November 2006, it is appropriate to refer to some of the surrounding circumstances: (a) Su-shi World Australia Pty Limited was incorporated in about 1996; (b) The driving force behind the establishment and early development of the Sushi World business was Sue Song; (c) For an extended period of time Luke Song and Sue Song lived separately and apart with Sue Song residing at the family home in Hunters Hill and Luke Song residing at the family farm at Colo Vale; (d) Luke Song did not have any involvement in the Sushi World business for an extended period of time; (e) In about 2003 – 2004 Sue Song was overworked and became very tired and ill; (f) Mr Ku had experience in working with computers. In about 1999 he was assisting a supplier to the Songs. Following his initial contact with the Songs through that supplier, he spent some time teaching them how to use a computer. At the time he was a director of a Korean e-commerce business; (g) In about mid-2001 Mr Ku had a meeting with Mr and Mrs Song at the hotel in Sydney then known as the 'ANA Hotel'; (h) Following that meeting Mr Ku says that he developed a proposal for the establishment of a franchise business exploiting the name 'Sushi World'; (i) After a couple of months Mr Ku started to work in the Su-shi World business. He was issued with a business card describing him as 'Trading Director' of Su-shi World Australia Pty Limited of 15-17 Larkin Street, Camperdown; (j) In about 2004 Mr Ku was given the use of a BMW 530i motor vehicle registered in the name of Su-shi World Australia Pty Limited; (k) The Sushi World factory was located at the Camperdown premises. Those premises included a small office area, the use of which was shared at various times by Mr and Mrs Song, Mr Ku and an accountant, Richard Jang of Baretan Consulting Pty Limited; (l) A structure was put in place whereby each Sushi World outlet was to be operated under a separately registered company. This may not have been implemented in respect of each and every outlet; (m) Sushi Nara Australia Pty Limited was incorporated by Mr Ku on or about 21 March 2002; (n) Prior to the end of 2002 about 15 Sushi World outlets had been established by Su-shi World Australia Pty Limited. These outlets enjoyed a total turnover of approximately $4,000,000 per annum; (o) Sushi Nara Australia Pty Limited began securing franchisees for further Sushi World outlets in about early to mid-2003. Between about mid-2003 and mid-2005 Sushi Nara Australia Pty Limited secured more than ten franchisees for Sushi World outlets. Franchise fees varying from about $100,000 to $600,000 were paid to Sushi Nara Australia Pty Limited in respect of such franchises; (q) It was a matter of some embarrassment for Mr Ku, Kjun International Pty Limited and Sushi Nara Australia Pty Limited when, in about mid August 2006, letters were received by franchisees appointed by Sushi Nara Australia Pty Limited from the solicitors for LSU Pty Limited as trustee of the Nirvana Investment Trust asserting, inter alia, that it was the owner of trade mark number 785516 and that it had a substantial reputation in the name Sushi World, including the Sushi World logo; (r) All Sushi World outlets were supplied with made up sushi by Su-shi World Australia Pty Limited or, when the sushi was made up on site at various outlets, materials for the sushi were supplied by Su-shi World Australia Pty Limited, except in relation to some perishable items such as salmon, where supply was provided by third parties. The making of contracts 38 It is quite possible for parties to come to an agreement by accepting a proposal with the result that the agreement concluded does not give rise to legal relations. The reason for this is that the parties do not intend that their agreement should give rise to legal relations. This intention may be implied from the subject matter of the agreement, but it may also be expressed by the parties. In social and family relations such an intention is readily implied, while in business matters the opposite result would ordinarily follow. However, even in business matters, there can be no reason why the parties should not intend to simply rely on each other's good faith and honour. If they clearly express such an intention, there can be no reason in public policy why effect should not be given to it (per Scrutton LJ in Rose and Frank Company v J. R. Crompton and Brothers, Limited ('Rose and Frank')[1923] 2 KB 261 at 288). 39 In Rose and Frank the English Court of Appeal was considering a signed memorandum purporting to set out the understanding between two English firms supplying carbon paper of various kinds and the American firm which was importing such carbon paper. The document included the following: 'This arrangement is not entered into, nor is this memorandum written, as a formal or legal agreement, and shall not be subject to legal jurisdiction in the Law Courts either of the United States or England, but it is only a definite expression and record of the purpose and intention of the three parties concerned to which they each honourably pledge themselves with the fullest confidence, based on past business with each other, that it will be carried through by each of the three parties with mutual loyalty and friendly co-operation.' The American firm sued the English firms for breach of the contract said to have arisen from the relevant memorandum. It was held that the document did not constitute a binding agreement. 40 An executed document becomes an agreement when and in the manner the parties intend that it should do so (see per Lord Greene, MR in Eccles v Bryant (1947) 2 All ER 865 at 869.3). At 866.9 Lord Greene said: 'When parties are proposing to enter into a contract, the manner in which the contract is to be created so as to bind them must be gathered from the intentions of the parties, express or implied.' (See also Sindel v Georgiou (1984) 154 CLR 661 at 667-8). 41 The relevant principles in relation to the formation of a contract are conveniently summarised by Kaye J in his leading judgment in Australian (sic) and New Zealand Banking Group Ltd. v Frost Holdings Pty Ltd. (1989) VR 695 at 700-701 as follows: ' "It is a first principle of the law of contracts that there can be no binding and enforceable obligation unless the terms of the bargain, or at least its essential or critical terms, have been agreed upon. So, there is no concluded contract where an essential or critical term is expressly left to be settled by future agreement of the parties"; per Sugarman J. (sic) in the Full Court of the Supreme Court of New South Wales, quoted on appeal with approval by Menzies J. in Thorby v. Goldberg (1964) 112 C.L.R. 597, at p.607. See also May and Butcher Ltd v. R. (H.L.) [1934] 2 K.B. 17, at p.20, per Lord Buckmaster and, at p.22, per Lord Warrington. An agreement by a term of which a relevant or critical term will be the subject of future agreement between the parties is not enforceable. This general principle of the law of contract was stated by Viscount Dunedin in May and Butcher Ltd. v. R., at p.21 in the following passage: "To be a good contract there must be a concluded bargain, and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties. Of course it may leave something which still has to be determined, but then that determination must be a determination which does not depend upon the agreement between the parties. In the system of law in which I was brought up, that was expressed by one of those brocards of which perhaps we have been too fond, but which often express very neatly what is wanted: 'Certum est quod certum reddi potest.' Therefore, you may very well agree that a certain part of the contract of sale, such as price, may be settled by someone else. As a matter of the general law of contract all the essentials have to be settled. What are the essentials may vary according to the particular contract under consideration. We are here dealing with sale, and undoubtedly price is one of the essentials of sale, and if it is left still to be agreed between the parties, then there is no contract." Referring to the same principle of law, Lord Wright in Scammell and Nephew Ltd. v. Ouston [1941] A.C. 251, at pp. 268-9 stated: "There are many cases in the books of what are called illusory contracts, that is, where the parties may have thought they were making a contract but failed to arrive at a definite bargain. It is a necessary requirement that an agreement in order to be binding must be sufficiently definite to enable a court to give it a practical meaning. Its terms must be so definite, or capable of being made definite without further agreement of the parties, that the promises and performances to be rendered by each party are reasonably certain." No doubt the principle is founded on recognition that the parties might subsequently fail to agree upon the undecided term, and that in such event the agreement would fail for want of agreement concerning a relevant term. The situation is distinguished from a contract made by parties leaving an essential term to be agreed upon by them, and if they fail to agree the disputed term is to be determined by a third party or by arbitration. …' 42 It is also useful to have regard to the statement of principle contained in the judgment of Bray CJ in Powell and Berry v Jones and Jones (1968) SASR 394 at 397 as follows: 'It seems to me that there are four relevant categories of case where what at first sight looks like an enforceable contract subsequently turns out not to be one. No doubt these categories may and frequently do overlap and many cases fall within more than one of them. 1. The parties may have only agreed to agree. They may have left terms to be fixed by subsequent negotiation between them, their intention being that the provisions already agreed and those yet to be agreed shall operate together as one contract. Thorby v. Goldberg. 2. The parties may have made their agreement subject not only to the preparation but also to the execution of a formal document. In such a case, then, even though everything has in fact been agreed, either party may withdraw before the execution of such a document; e.g. Coope v. Ridout. Their intention must be taken to be that until such execution each of them has a locus poenitentiae. Many cases falling under this head also fall under the first. 3. The agreement may have left to the option of one party not only the mode of performance but whether there shall be any performance at all; e.g. Taylor v. Brewer. 4. There remains a residual class of case outside the first three categories where the agreement reached is so vague and uncertain that the court cannot give it any definite meaning at all. Cf. per Lord Wright in Scammell (G.) & Nephew Ltd. v. Ouston (H. C. & J. G.).' (footnotes omitted) 43 In Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 150-151, McHugh JA, as his Honour then was, said under the heading 'Was the consideration illusory?': 'A contract made for a consideration which is illusory is unenforceable: Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 356, 360-361 and Meehan v Jones (1982) 149 CLR 571 at 581. A consideration is illusory if its payment or fulfilment depends upon an unfettered discretion vested in the promisor.' To like effect Mr Justice Hope said at 143: 'All these decisions show how far courts are prepared to go in order to find that there is an enforceable contractual promise where that is what the parties have intended. There are of course limitations. I have already referred to the case where the promisor has a discretion, not only as to what he shall do, but also as to whether he shall do anything. Such a promise is illusory. Furthermore it appears that the promise will not be enforceable if the manner of performance, including the amount of money to be paid or, if relevant, the number of shares to be offered, is a matter entirely in the discretion of the promisor and no criteria by which the performance required of the promisor can be measured, or the minimum of that performance can be measured, is expressed or can be found to be implied.' When are contracts void for uncertainty? 44 The use of language which, as a matter of construction and not mere speculation, cannot be given any one meaning rather than another will defeat any intention of the parties to make a binding contract (per Menzies J in The Council of the Upper Hunter County District v Australian Chilling and Freezing Co. Limited (1968) 118 CLR 429 at 441). 45 Cases may arise where a vague, uncertain, or meaningless clause in a contract can simply be ignored. Other like clauses may be waived by a party if inserted solely for the benefit of that party. However, a clause which is definitive of the ultimate rights which it is contemplated that a party will get under his contract is incapable of being so treated. 46 However, not all ambiguous contracts are to be found void for uncertainty. In The Council of the Upper Hunter County District v Australian Chilling and Freezing Co. Limited, Barwick CJ saidat 436-7: '… a contract of which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of a meaning, it will ultimately bear that meaning which the courts, or in an appropriate case, an arbitrator, decides is its proper construction: and the court or arbitrator will decide its application. The question becomes one of construction, of ascertaining the intention of the parties, and of applying it. Lord Tomlin's words in this connexion in Hillas & Co. Ltd. v. Arcos Ltd. ought to be kept in mind. So long as the language employed by the parties, to use Lord Wright's words in Scammell (G.) & Nephew Ltd. v. Ouston is not "so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention", the contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention, be resolved.' (footnotes omitted) 47 In Whitlock v Brew (1968) 118 CLR 445 the High Court held that a clause concerning the grant of a lease was uncertain for it did not prescribe either the term of the lease or the rent; and further that the provision for arbitration "as to the interpretation and operation" of the clause did not authorise an arbitrator to fix either the rent or the term. It was further held that since the uncertain term was a material and inseverable part of the contract, there was no concluded agreement between the parties. Kitto J at 456 said: '… the document does not record a consensus ad idem as to the duration of the term, the rent, or anything else except the commencing date and the premises intended to be let.' Taylor, Menzies and Owen JJ said at 460-1: 'We are firmly of opinion that the expression "upon such reasonable terms as govern such a lease" is not, in the context in which it appears, apt to refer to either the period for which the contemplated lease is to subsist or to the rent to be payable thereunder. Nor do we think that the further expression "as to the interpretation or operation" of this clause covers a dispute as to either of those matters. We, therefore, are of opinion that the clause is uncertain in that it neither specifies nor provides a means for the determination as between the parties of the period for which the contemplated lease shall be granted or the rent which shall be payable thereunder.' Their Honours proceeded to deal with the question of severability referring to the judgment of Knox CJ in Life Insurance Co. of Australia Ltd. v. Phillips (1925) 36 CLR 60 at 72 where his Honour said: 'When a contract contains a number of stipulations one of which is void for uncertainty, the question whether the whole contract is void depends on the intention of the parties to be gathered from the instrument as a whole. If the contract be divisible, the part which is void may be separated from the rest and does not affect its validity.' 48 Another illustration of a contract which was held to be void for uncertainty is to be found in Bishop v. Taylor (1968) 118 CLR 518 where a contract for the sale of land included a condition which provided, inter alia, for 'one-third share of crops … until end of peanut crop in 1968 or end of harvesting period …' to be paid. The Court held that the condition was void for uncertainty because, upon construing it, one was unable to determine the term of the relevant sub-lease, the type of crop, or what 'one-third share of crops' meant. McTiernan and Taylor JJ said at 523: '… if it was intended that the lease should continue to subsist after the first year it is impossible to say with any degree of certainty for what period it was to subsist. The condition did not specify the nature of the crop or crops which the respondent might plant although, no doubt, it was contemplated that they would be peanuts. But the condition does not restrict him in his choice of crops and it may well be that it was for this reason that the condition provided, in effect, that the lease should subsist "until the end of peanut crop in 1968 or end of harvesting period or as otherwise agreed upon". The duration of the lease, therefore, it seems to us, was to depend upon what sort of crops had been sown for harvesting in 1968 and any agreement to grant a lease with the term so defined, or undefined, is void.' Menzies J said at 525: '… the condition of the contract for a sub-lease from the purchaser to the vendor of some part of the land, the subject of the contract, is one to which it is not possible by a process of construction to give any particular meaning. I agree entirely with what has been said about this condition being void for uncertainty.' Construction of contracts 49 It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction (per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ in Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 at 179 [40]). 50 Actual beliefs and intentions are, generally speaking, irrelevant in the determination of the legal rights and obligations flowing from a written agreement (see per Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ in Equuscorp Pty Ltd v HGT Investments Pty Ltd (2005) 218 CLR 471 at 483 [34]). 51 The primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate', to use the words from earlier authority cited in Locke v. Dunlop ((1888) 39 Ch D 387 at 393), which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case ((1880) 16 Ch D 681 at 686). Further, it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. Finally, the statement of Lord Wright in Hillas and Co. Limited. v Arcos Limited. ((1932) 147 LT 503 at 514) that the court should construe commercial contracts 'fairly and broadly, without being too astute or subtle in finding defects', should not be understood as limited to documents drawn by businessmen for themselves and without legal assistance (cf. Upper Hunter County District Council v Australian Chilling and Freezing Co. Ltd. (1968) 118 CLR 429 at 437) (per Gibbs J, as his Honour then was, in Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99 at 109-110). 52 Where the language of a contract has a plain meaning evidence of surrounding circumstances is not admissible to assist in the interpretation of the contract (per Mason J in Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales ('Codelfa') (1982) 149 CLR 337 at 352). 53 Subsequent conduct is not admissible as an aid to construction of a contract. As Lord Reid said in Whitworth Street Estates Limited v Miller (1970) AC 583 at 603E (see also 615A): 'Otherwise one might have the result that a contract meant one thing the day it was signed, but by reason of subsequent events meant something different a month or a year later.' (See also Port Sudan Cotton Co v Govinda Swami Chettiar & Sons (1977) 2 Lloyd's LR 5 at 11). 54 In seeking to ascertain the intention of the parties to a written contract extrinsic evidence may not be resorted to except where such evidence may be called in aid in the interpretation of the written instrument. Clearly enough, it is not to the point to make an independent examination of extrinsic facts, even if they were within the knowledge of both parties, and upon such evidence to conclude that a particular provision was or was not of importance to the parties or to either of them. The question for determination is the intention of the parties as disclosed by the contract into which they have entered (per Taylor, Menzies and Owen JJ in Whitlock v Brew at 461). 55 The relevant principle in relation to resort being had on matters of construction to extrinsic evidence is to be found in the judgment of Mason J, as his Honour then was, in Codelfa at 352 as follows: 'The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed. It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification. Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.' Implication of terms 56 Terms may be implied in one of four ways (per Heydon JA, as his Honour then was, in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at 164 [28]). These were summarised by Hodgson J in Carlton & United Breweries Ltd v Tooth & Co Ltd (unreported, Supreme Court of New South Wales, 11 June 1985) as follows: '(i) Implications contained in the express words of the contract: see Marcus Clarke (Vic) Ltd v Brown (1928) 40 CLR 540 at 553-4. (ii) Implications from the "nature of the contract itself" as expressed in the words of the contract: see Liverpool City Council v Irwin [1977] AC 239. (iii) Implications from usage (for example, mercantile contracts). (iv) Implications from considerations of business efficacy: see BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at 26; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337.' 57 In relation to the fourth mentioned type of implied term the classic test is identified in the advice of Lord Simon of Glaisdale, Viscount Dilhorne and Lord Keith of Kinkel in B.P. Refinery (Westernport) Pty. Limited v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266 at 283 as follows: '… for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that "it goes without saying"; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.' The test promulgated by the Privy Council was approved by Mason J in Codelfa. Collateral contracts 58 A distinct collateral agreement, whether oral or in writing, and whether prior to or contemporaneous with the main agreement, will be valid and enforceable even though the main agreement be in writing, provided that the two may consistently stand together so that the provisions of the main agreement remain in full force and effect notwithstanding the collateral agreement. The collateral agreement cannot impinge on the main agreement. The consideration for a collateral agreement may be the making of the main agreement (per Knox CJ in Hoyt's Proprietary Limited v Spencer (1919) 27 CLR 133 at 139 and per Isaacs J at 147-8; see also Chapman v Chapman [1983] 2 NSWLR 420 at 432-5 and Gates v The City Mutual Life Assurance Society Limited (1986) 160 CLR 1 at 11). Trust principles 59 It is trite to say that every form of trust will have four essential elements: the trustee, the trust property, the beneficiary or charitable purpose, and the personal obligation annexed to the trust property (Jacobs' Law of Trusts in Australia, Seventh Edition 2006, J D Heydon and M J Leeming ('Jacobs') at [104]-[110]). 60 Trusts may be classified in a variety of ways. In Jacobs at [305] the learned authors said: 'It is therefore possible to classify trusts in the following ways: (1) From the point of view of intent to create a trust. Here, trusts are either – (a) express or declared; or (b) resulting or implied; or (c) constructive. (2) From the point of view of the objects of the trust. Here, trusts are either – (a) private; or (b) public or charitable. (3) From the point of view of the nature of the duties imposed upon the trustee. Here, trusts are either – (a) simple; or (b) special. (4) From the point of view of the form of the declaration of trust. Here, trusts are either – (a) executed; or (b) executory. …' See generally Jacobs at [301]-[308] 61 For the creation of an express trust, no technical expressions are necessary. It is sufficient if the settlor evinces with reasonable certainty: (a) an intent to create a trust; (b) the trust property; (c) the persons intended to be beneficiaries; and (d) the purpose of the trust so that the trust is administratively workable and not capricious. (Underhill and Hayton, Law Relating to Trusts and Trustees, 16th Edition, 2003, D J Hayton at 73.) 62 The presumption of a resulting trust that arises when property is transferred without consideration into the name of a person who is neither the child, adopted child or wife of the transferor, does no more than call for proof of an intention to confer beneficial ownership. Prima facie there is a resulting trust but where satisfactory proof is forthcoming that a purpose of the transaction was to confer beneficial ownership, the presumption is rebutted (see Russell v Scott ('Russell v Scott') (1936) 55 CLR 440 – the case of an aunt who put money into a joint bank account in her name and that of her nephew on the basis that it would be held in trust for the aunt during her lifetime but thereafter the beneficial interest would pass to the nephew). 63 There is no jurisdiction in an Australian court of equity to declare an owner of property to be a trustee of that property for another merely on the ground that, having regard to all the circumstances, it would be fair so to declare: Wirth v Wirth (1956) 98 CLR 228 at 232; Hepworth v Hepworth (1963) 110 CLR 309 at 318; Bloch v Bloch (1981) 180 CLR 390 at 400; Muschinski v Dodds ('Muschinski') (1985) 160 CLR 583 at 594-5, 608 and 615-6. 64 In rejecting the notion that a constructive trust will be imposed in accordance with idiosyncratic notions of what is just and fair Deane J in Muschinski acknowledged that general notions of fairness and justice are relevant to the traditional concept of unconscionable conduct, this being a concept which underlies fundamental equitable concepts and doctrines, including the constructive trust. His Honour pointed out that the constructive trust serves as a remedy which equity imposes regardless of actual or presumed agreement or intention to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle (see per Mason CJ, Wilson and Deane JJ in Baumgartner v Baumgartner ('Baumgartner') (1987) 164 CLR 137 at 148. 65 In relation to the general equitable principle, which restores to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy the benefit of them, to which Mason CJ, Wilson and Deane JJ referred in Baumgartner at 148, it was noted that Deane J had said in Muschinski: '… the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do: cf. Atwood v. Maude, and per Jessel M.R., Lyon v. Tweddell.' (footnotes omitted) 66 In Barclays Bank Ltd. v Quistclose Investments Ltd. ('Quistclose') [1970] AC 567 the House of Lords accepted that money which had been given to Rolls Razor Ltd and banked into a special bank account to enable Rolls Razor Ltd to pay a dividend to its shareholders was impressed with a primary trust to pay the money out to the shareholders and a secondary trust to repay it to Quistclose Investments Ltd if the primary trust failed. As it transpires, Rolls Razor Ltd went into voluntary liquidation prior to the payment out of the dividend. 67 In Carreras Rothmans Ltd. v. Freeman Mathews Treasure Ltd. [1985] 1 Ch 207 it was found that moneys paid by a company to an advertising agency, which were placed in a special account after the agency experienced financial difficulties, to be paid out to media interests with whom advertising had been placed for the company was held in trust by the agency for the payment over of the monies to the third party media interests. In that case Peter Gibson J explained the principle applied in Quistclose at 222 as follows: 'In my judgment the principle in all these cases is that equity fastens on the conscience of the person who receives from another property transferred for a specific purpose only and not therefore for the recipient's own purposes, so that such person will not be permitted to treat the property as his own or to use it for other than the stated purpose. Most of the cases in this line are cases where there has been an agreement for consideration so that in one sense each party has contributed to providing the property. But if the common intention is that property is transferred for a specific purpose and not so as to become the property of the transferee, the transferee cannot keep the property if for any reason that purpose cannot be fulfilled.' 68 In Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia ('Elizabethan Theatre Trust') (1991) 30 FCR 491 Gummow J held that moneys donated by third parties to the Australian Elizabethan Theatre Trust, with a view to securing tax deductibility for the donations so made, with a request that preference be given by the Australian Elizabethan Theatre Trust to the allocation of the moneys so donated to specific arts bodies associated with the Trust, did not result in the Australian Elizabethan Theatre Trust, which had entered into provisional liquidation, becoming the trustee of the monies so donated for the preferred arts bodies. At 502 Gummow J observed: 'The striking feature of the Quistclose litigation was that, whilst previously it might have been thought that debt and trust were distinct and disparate norms, it was thereafter clear that in a given case the transaction under analysis might bear a dual character.' 69 Commenting on the Quistclose litigation Gummow J said at 501: 'But the essential reason why the insolvency law did not strike at the transaction in question in Quistclose was that the moneys represented by the cheque drawn by Quistclose in favour of Rolls Razor and banked in the special account of Rolls Razor never any at (sic) stage became the beneficial property of Rolls Razor. It acquired no more than what Dixon J called a dry legal interest: see [Perpetual Trustee Company (Limited) v Commissioner of Stamp Duties of New South Wales (1941) 64 CLR 492] (at 510). On its part, Quistclose had both a contractual right to repayment out of the general assets of Rolls Razor, as a general creditor, and the beneficial interest in a fund, whether by way of resulting trust or as the second limb of an express trust.' 70 In relation to the constitution of an express trust Gummow J said at 502-503: 'The question as to the existence of any express trust will always have to be answered by reference to intention. … The relevant intention is to be inferred from the language employed by the parties in question and to that end the court may look also to the nature of the transaction and the relevant circumstances attending the relationship between them: see Walker v Corboy (1990) 19 NSWLR 382; Scott, The Law of Trusts (4th ed, 1987), §25.2. There is no need for particular caution in drawing the inference that a trust was intended: see Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 618-619. However, it also is important to appreciate both the flexibility of the institution of the express trust and the range of equitable institutions which fall short of but have some of the characteristics of a trust.' 71 In Elizabethan Theatre Trust Gummow J observed that the debate in Quistclose had been confined to whether the material disclosed a trust in the terms which his Honour had described or merely a loan. His Honour then continued by saying at 503: '… But the facts in such cases are susceptible of infinite variation and the trust is a supple instrument. Hence the suggestion by Professor Finn that if the facts disclosed no contractual obligation by the borrower to the lender to pay the creditors, there could hardly be present a concurrent intention to create a trust in their favour; rather, the borrower would hold the moneys borrowed as trustee of an express trust for the lender, subject to a mandate for the lender (sic) to use the fund to pay the creditors. On that footing, there would be but one trust, created to give the lender security for its rescue operation of the financially unhealthy borrower, but not to render the creditors beneficiaries under any trust. …' 72 Gummow J concluded his observations in respect of Quistclose by saying at 503: 'To speak of a Quistclose trust as if it were a new legal institution rather than an example of the particular operation of principle upon the facts as found is to set the listener or reader off on a false path. …' Summary 73 It is evident that each case turns on its own facts. However, the principles which are to be applied are clear, as indicated above. The witnesses 74 Two witnesses were called to give evidence in the applicant's case, namely Mr Ku and Mr Kim, a Queensland solicitor presently resident in South Korea. Three witnesses were called in the respondents' case, namely Luke Song, Sue Song and Ji Song. It seemed to me that the Songs had a sense that Mr Ku had, metaphorically speaking, pulled the wool over their eyes and in particular those of Mrs Song, securing for himself advantages in respect of Sushi World to which he was not entitled. Likewise, it seemed to me that Mr Ku had a sense that he had helped the Songs develop and expand the Sushi World business, especially when Luke Song was absent from the business and Sue Song was tired, overworked and ill, in such a way as to entitle him to some worthwhile fruits from his endeavours. 75 In this context, I have endeavoured to evaluate the oral evidence that has been given. All the witnesses impressed me as being intelligent, if not highly intelligent. It is regrettable that each of them appeared to me to give evidence that was tailored to fit in with the cases that they were seeking to advance or support, rather than simply provide direct and truthful answers to the questions that were asked of them. I felt that the Songs' evidence, in particular, smacked of being given to accord with a pre-set agenda. At times, I felt the answers provided by Luke Song were devious and/or evasive. Senior Counsel for the applicant submitted that, in assessing the credibility of the respondents' witnesses, I should rank them as Sue Song – most believable, then Ji Song, followed by Luke Song as least believable. I would incline to the view that Ji Song was more believable than his mother. Leading counsel for the respondents submitted that Mr Ku should not be found to be a witness of truth. Notwithstanding the concerns that I have with Mr Ku's evidence, I would, generally speaking, prefer his evidence to that of Luke Song. 17 October – 9 November 2006 76 In the period 17 – 25 October 2006 a series of meetings took place between Mr Ku and Luke Song directed at settling the trade mark proceedings. 77 Even before those proceedings were instituted, there had been discussions between the Ku and Song interests in relation to the resolution of differences concerning the ownership of various Sushi World outlets and shares in frachisees of businesses utilising the Sushi World name. These led to the preparation of documents which contemplated the 'private' transfer of Sushi World outlets or shares in various companies associated with Mr Ku to one or other of the Songs' three sons. Documents in the form of Letters of Agreement were prepared which were variously dated 1 January 2006 (a Sunday) and 1 June 2006. First meeting 78 On Tuesday 17 October 2006 a meeting took place at the Avillion Hotel in Sydney attended by a Mr Park, Luke Song and Mr Ku. The meeting had been convened at the instigation of Mr Park. Mr Ku's account of what transpired included conversation in the Korean language to the following effect: Luke Song: 'Jun [referring to Mr Ku] I am sick and tired of doing this legal fighting because there are two other legal fighting cases are on going now and I am almost exhausted and tired of spending all of my time with solicitors. The fighting between us is started because of lack of mutual trust and blocked communications, because many people say all kinds of created allegations against you and against us, that escalate the situation more worse and worse. Let's resolve this fighting and end this legal case without further going.' Ku: 'I agree, we don't have to wasted our valuable time on this kind of legal case. But this fighting started when you set up LSU Pty Ltd without my knowledge and sent letter to all Franchisees on 16 Aug 2006. As long as we tell the truth to the franchisees currently very upset and correct the wrong action, I don't have any reason to proceed with this legal action. We are not fighting to kill each other. Let's resolve this problem with mutual understanding and trust with the truth'. Luke Song: 'Sorry for that Director Ku, Let's stop fighting.' Ku: 'I am sorry too and let's stop all fighting.' Park: 'I am very happy to hear that and I am happy to see you guys start talking and have at least communication channel open. Let's talk and finalise all legal actions doing or preparing to do against each other.' 79 Luke Song did not acknowledge that conversation took place in the terms suggested by Mr Ku. He did however say that at a meeting with Mr Park and Mr Ku in October 2006 conversation took place in the Korean language to the following effect: Ku: 'All franchisees worry about the letter.' Luke Song: 'They don't have to worry anything if they don't damage the company image. We should make new regulations with them. It is regrettable that we are all in the legal dispute each other. Let's solve this problem through negotiations between us.' 80 I am generally satisfied that conversation to the effect of that set out above took place at a meeting between Mr Park, Mr Ku and Luke Song on 17 October 2006. Second meeting 81 A further meeting took place between Luke Song and Mr Ku on Wednesday 18 October 2006 at the Avillion Hotel in Sydney. On this occasion, Sue Song was also present. According to Mr Ku conversation took place which included: Sue Song: 'How can you start Federal Court legal action against me? You want to fight with me? OK you do whatever you want to do and I will show you what I can do against you.' Ku: 'What is LSU Pty Ltd company? When was that company incorporated? For what reason did you send letters to all of my franchisees who are all my friends and demand compensation or that they cease trading? That's the action you would regret later on and that's the action breaking our mutual trust and making me in the middle of this legal fighting. You know Sushi Nara Australia is the company developing franchising systems and that's the reason why you have paid all material costs to Sushi Nara Australia for the last three years. This totals around 2 million dollars. You were the person giving all of the background information when I made the franchise manual and disclosure statement with Richard Jang. You think the mistakenly not changed trade mark is still under Sushi World Australia's name and you tried to transfer it to LSU Pty Ltd a few months ago. You valued it at $100.00 and now you want to try to act as a franchisor? None of the franchisees believe that nonsense and they will not accept LSU Pty Ltd as Franchisor or IP holder, because when they started the sushi world business they knew which company is IP holder and which company is franchisor. Even you told them when they phoned you with issues that they should contact me at Sushi Nara Australia who is the Franchisor. You already knew Kjun International Pty Ltd is IP holding company and Sushi Nara Australia is Franchisor. Why are you doing this and breaking our mutual trust and betraying me and my friends? Why did you send that kind of stupid letter to all our franchisees and make me in the middle of start legal action against you? We worked as family member before? Aren't we?' Sue Song: 'I don't know that letter sent to Franchisees and I haven't seen it. I don't care which company holding IP and which company is franchisor. The thing makes me very upset is how can you start legal action against me and why you did not consult me when you or your franchisees got that kinds of letter and you should come and see me instead of starting this legal action.' Ku: 'When I got an urgent phone call from Keith Rhee saying what you are doing at that time with your solicitor, I called you and tried to ask what is going on and what is LSU Pty Ltd? You told me you were in Liverpool Westfield Shopping Centre having a meeting with the center manager. You told me that you will call back to me after finish that but no phone calls. I realized that you were staying with your solicitor. My Solicitor at the time, MNA Lawyers, called me and said your solicitor had told them to ask me not to contact you privately and that they would try to get the injunction for all our franchising plan and project. You know all the true story and what is current Sushi World Franchising system and structure. Why you did this to the person who worked as family member together?' Sue Song: 'I don't know nothing about that letter sent to all franchisees and I am very upset because even though that kind of wrong letter sent to you and your franchisees, you should come to see me and talk about it to fix the problems.' Ku: 'Are you really sure you don't know nothing about the letter sent to franchisees? That letter says LSU Pty Ltd which is incorporated only a few months ago is IP holding company and act like franchisor. You know Kjun International Pty Ltd is the IP holding company and Sushi Nara Australia Pty Ltd is Master Franchisor. From the year 2002 to up until now we and all franchisees know that our franchising structure and you and I worked in the same office for last 4 years, how you can plan like this without my knowledge and sent letters caused all this legal dispute between you and me?: I don't know why you are doing this to me.' Sue Song: 'I did not send letter and you are the person started this legal action against me and I want you to end this legal action by yourself. I know you are not the person doing things like this to me.' Ku: 'My intention of starting this legal action is telling the truth happened back in year 2002 and correct the mistakenly sent letter to all franchisees. If you really don't know nothing about the letter sent to franchisees on 16 Aug 2006, there is no reason to continue this legal action for me. Let's stop this and return back to the good relationship we had before.' 82 Sue Song deposed to conversation having taken place at this meeting in the following terms: Ku: 'Why did you set up LSU Pty Limited?' Sue Song: 'You don't have to know why I set up LSU Pty Limited. Do you think Sushi World is yours? Ku: 'No, Sushi World is not my company' Sue Song: 'Why did you put us in the Court?' Ku: 'I didn't want this one, but Keith Rhee pressured me to do this.' Sue Song: 'Do you think that I was no good for you when you worked for me?' Ku: 'Boss, you gave me enough and I don't complain about it.' Sue Song: 'I trusted you very much and I let you run the company because my health was not good after separation my husband.' Sue Song: 'I now have a lot of complaints from customers to the headoffice about the quality of sushi at Hurstville and Chatswood Westfield stores. I should fix the problem. You are no longer working for me so I ask my solicitor to send letter to the store managers. I don't know whether he sent it or not. Sushi World company is mine and you were just an employee.' Ku: 'What about the Deed of Agreement?' Sue Song: 'The Deed of Agreement is a fraud. There was no such agreement between us like the Deed of Agreement.' 83 Mr Ku acknowledged that when he spoke of working together as a 'family member' he was referring to a very close working relationship which he previously had with the Songs. 84 I am satisfied that conversation took place on 18 October 2006 generally to the effect of that set out above. Third meeting 85 A third meeting between Luke Song and Mr Ku took place at the Avillion Hotel in Sydney on Thursday 19 October 2006. Mr Park was in attendance for a brief period of time but he left the meeting early. According to Mr Ku, Luke Song said words to the effect: 'I know that the IP was transferred to Kjun International Pty Ltd in year 2002 and Sushi Nara Australia is the Master franchisor.' 86 Luke Song gave evidence that conversation took place in the Korean language in which words to the following effect were spoken: Ku: 'Chairman, I want you to recognise the work I done for the franchise during 2002 and onwards. So I can save face with my friends then I will transfer the shares in Kjun International to your son, then the legal fight will be over. I want to continue the franchise work after Court case.' Luke Song: 'It's OK, if you want to transfer then it will be over.' Ku: 'When I transfer the shares, the court case is over, then you can fight father and son.' Ku: 'It stupid to fight about in the Court, it better for us to agree and negotiate through conversation.' Luke Song: 'I think fighting in Court is a waste of money and time. I agree with you, conversation is the best solution.' Ku: 'I didn't claim any shops.' Luke Song: 'That's good.' Ku: 'I have problems with my friends who run Sushi World shops. They worry because your solicitor send letters to them. They are going to sue me if they are forced to change name. So please recognise my work for 2002 to 2005 for my franchise work. To show my loyalty, I will transfer my shares to your son, so everything will belong to Ji. IP will be yours. I will have nothing. You just recognise my work so I can save face with my friends. That's what I want so Court case can be over. But please don't tell my friend Keith Rhee or my solicitor or my friends. If they know, they give me hard time. They will think I am so stupid. I wish after this Court case you give me something like shares or whatever franchise work. It's up to you.' Luke Song: 'That's good idea to transfer shares to my son. I am sure we will be friends again and I can trust you and maybe we can work together again. I hope all Court case will be over from this agreement.' 87 Mr Ku responded to Luke Song's account of the 19 October 2006 conversation. Mr Ku denied that conversation took place as alleged by Luke Song in the first three passages quoted above. He also disputed that conversation took place in the terms of the passages that have been quoted from 'I didn't claim any shops' to the end of Luke Song's account of the alleged conversation. 88 Mr Ku says that prior to the meeting he had decided that there needed to be demonstrations of good faith. In his affidavit in reply he said that conversation took place to the following effect: Ku: 'I have built the franchise network since 2002 and I want to continue developing it but the letters that your solicitors sent to the franchisees are preventing me from doing that and if Sue does not stop I will be sued by franchisees, some of whom are my friends. I have a possible way we can settle our dispute instead of fighting about it in Court. These are the points: · the trust between us is broken. I can show my good intentions for the future if you can acknowledge the fact that the intellectual property was transferred to Kjun International in 2002 and that I have built the franchise network since then; · Ji can take his mother's role in the business because no franchisee will work with Sue or even accept her as a supplier; · I can transfer my shares in Kjun to Ji as a demonstration of my good faith for the future as long as you can acknowledge the IP was transferred.' 89 It may be observed that the first three passages (the 'first version') to which Luke Song has deposed (see [86]) cover much the same ground as the last two passages (the 'second version'), yet the concept of an agreement emerging is only to be found in the first version. This is the case, notwithstanding Luke Song's suggestion that the words 'this agreement' were used as part of the second version. If the first version amounted to an agreement, under which Mr Ku had promised to transfer his shares in Kjun International Pty Limited to Ji Song, one would hardly have expected Mr Ku to say thereafter, as I accept that he did: '... To show my loyalty, I will transfer my shares to your son, so everything will belong to Ji.' 90 As for Mr Ku's account, in his affidavit in reply, it bears some correspondence with Luke Song's second version. I consider the evidence as expressed in the last two passages to be nothing other than a regurgitation of the first version. It encapsulated the matters as discussed and should be preferred. 91 In giving their evidence in the English language, Mr Ku's expression, and to a lesser extent, Luke Song's, was not particularly clear. In the passages which follow I have added in a normal typeface some explanations or amplification of what I understood them to have been saying: Mr Ku's evidence included: A. '… Because Sue Song and me, we work together. She was the founder and I respect that, but knowing the franchise[es], after getting that letter from the LSU Pty Limited, they are very upset and they don't want to work with Sue Song. They thought that the letter [was] sent from Sue Song. So … if Sue Song is not working, but I am happy to appoint another person [to take her place in dealings with Su-shi World Australia Pty Limited] and they learn the franchising from me. That is what I mentioned to Luke Song.' Q. 'And you said on 19 October that you would transfer the shares to Ji Song, the shares [in] Kjun International, didn't you?' A. 'Yes.' Q. 'And you were concerned then not about retaining [any] intellectual property rights, but simply getting on and working with the Songs to build Su-shi World up, weren't you?' A. 'No.' … Q. '… there is no mention there [in a conversation attributed to 29 October 2006] of the intellectual property, is there?' A. 'No. In 19 October 2006.' … Q. '… when talk about … being prepared to transfer the shares of Kjun International to Ji Young Song, there is no mention there … of the [intellectual] property being retained by you, is there?' A. 'Intellectual property is owned by Kjun International Pty Limited.' Q. 'But you are going to transfer the Kjun International to Mr Song, aren't you?' A. 'Yes, that is my intention.' … Q. 'You knew you had no right to the intellectual property of Su-Shi World when you swore this affidavit on 20 December last year, did you?' … A. 'When I make this affidavit I knew that Kjun International Australia (sic) is transferred to Ji Young Song but … I thought the agreement is a condition [i.e. a conditional one] and that one is assigned, so it is only as a franchise – Sushi Nara Australia Pty Ltd keep on doing the franchising and protect the franchise[e]s. It is okay, that is always my intention. That is all I knew at the time.' 92 Luke Song's evidence in relation to the 19 October meeting with Mr Ku was to the effect that it was quite a lengthy meeting, that he was endeavouring to reach an agreement to settle the trade mark proceedings with Mr Ku, but that he did not wish to proceed to a final agreement until he had discussed the matter with his wife and obtained her authority to do so. 93 In the course of his cross-examination by senior counsel for the applicant Mr Luke Song gave the following evidence in relation to the 19 October 2006 meeting: Q. '… you understood … that what Mr Ku was suggesting at that early first stage or early stage in the meeting was a way to re-establish trust between the parties?' A. 'Yes.' Q. 'So that with the trust established, you would afterwards be able to go on and try to agree a way in which you could settle the dispute itself?' A. 'Yes' 94 My understanding is that Mr Ku's intention was to transfer the shares to Ji Song both legally and beneficially. He may have believed that a transfer of the shares would be conditional upon a retention of rights by Sushi Nara Australia Pty Limited to continue to work as a head franchisor of the Sushi World name. Whether his belief, if indeed he held that belief, was communicated to the Songs at any relevant time, is another matter. One thing is clear and that is that Mr Ku's primary focus was upon re-establishing a relationship of trust with the Songs following his institution of the trade mark proceedings against them and their interests on 30 August 2006 to which they took offence. In my opinion Mr Ku's actions were strongly influenced by cultural overtones, where trust, loyalty and good faith, as such words are used in general parlance, were paramount. 95 Whilst re-establishment of a relationship of trust with the Songs was a primary concern of Mr Ku in October 2006, his evidence was that he was also focussing upon the trade mark ownership and the franchising arrangement. 96 Later, Luke Song gave the following further evidence in cross-examination: Q. '… he [Mr Ku] was saying that he would transfer the shares to (sic) Kjun International to establish a trust which would enable the dispute to settle?'' A. 'Yes' … Q. 'You knew, didn't you, that Mr Ku wanted to settle the dispute on a basis which left Sushi Nara's franchisees carrying on business as franchisees of Sushi Nara?' A. 'I don't know how he think, but in my idea, he wanted to continue work with me – or for me on the franchise area.' 97 Luke Song acknowledged that during the course of his conversation with Mr Ku, Mr Ku wanted his work for the Sushi World business to be 'recognised'. 98 Later in his cross-examination Luke Song gave the following evidence: Q. '… what were the possible terms of settlement that you discussed with Mr Ku, to the extent you can recall them now?' A. 'I think that he transfer share[s in Kjun International Pty Limited] to my son. The first court case trade mark [the trade mark case] will be over. Then he [Mr Ku] will work for me [Luke Song] on the franchise area.' 99 In discussing company structures and Mr Ku's future plans for steering the company in the right direction senior counsel for the applicant sought to elicit from Luke Song what, if any, discussion there was about a role for Kjun International Pty Limited. Luke Song gave the following evidence: Q. '… you recall, don't you, talk about Kjun's role as licensee?' A. 'No, he didn't tell me about it at this meeting. He didn't tell me about it at all over the Kjun.' Q. 'He didn't tell you anything about the role [of Kjun International]?' A. 'He didn't tell me what the Kjun was – Kjun's role was the licence – licence, he didn't tell me about that …' 100 When Luke Song was asked to recount the whole of the conversation he had with Mr Ku on 19 October 2006 he gave the following evidence: Ku: 'Chairman, I want to finish this court case through negotiations. This is only wasting time, a waste of money.' Luke Song: 'How can you sort out these problems?' Ku: 'I transfer shares to your son Ji Song, then the court case will be over. Maybe it looks like fighting between son and the father.' 101 Luke Song proceeded to explain that Mr Ku wanted his work recognised by Luke Song or by the Song family because he'd been working 'with the trading, 2002, 2005 for this franchise work for his friends' [My understanding is that Luke Song was referring to the time when Mr Ku had been working as 'Trading Director' of Su-shi World Australia Pty Limited which he attributed to 2002 - 2005]. Mr Ku advised that his friends were 'not happy' because they had received a letter from LSU Pty Limited's solicitor. Luke Song's evidence then continued: Luke Song: 'Yes, we can resolve with this problem through the negotiations.' 'Yes, which should … business for the future rather than fighting in the court. … I know it's very hard to reach agreement to make all side happy because my wife Sue, also my solicitor, doesn't want me [to] talk with you. So … they told me it's not that easy to end this case through the conversation or negotiations. Maybe they told me, "You may be misleading or cheating [i.e. you, Luke Song, may be mislead or cheated] by Mr Ku's tactics".' Luke Song says that he informed Mr Ku of what Sue Song and his solicitor had been saying about Mr Ku's tactics. Luke Song says that the conversation then continued: Ku: 'When I transfer my shares to your son, you will see my loyalty. I didn't … you at all. I still want to work for you. So to prove my loyalty also my hardworking trading the period of time when I [referring to Luke Song] was absent, I transfer these shares to your son.' Luke Song: 'That's good idea. If you transfer shares to my son, I trust you. We can work together in the future … you are good in the franchise area so you can work with me in the franchise area, so we can develop our company for the future.' 102 Later in his evidence under cross-examination Luke Song gave the following evidence: Q. 'You said to him, "If you can transfer the shares, the case will be over" didn't you?' A. 'Yes, the trademark case will be over.' Q. '… And he said to you that if anything went wrong in those proceedings, and they weren't settled, then the shares would come back to him, didn't he?' A. 'No.' Q. 'So you say that he was saying to you, "You can have these shares, and I trust you to bring the case to an end." Is that what you say?' A. 'Yes.' Q. 'It's the case, isn't it, that he said to you that he was not getting any money for the transfer of the shares that he proposed to you?' A. 'Yes, he told me, "It's up to you. You give me some shares or anything for this – for the transaction of shares."' Q. 'He said, didn't he, that, "You can transfer back to me Kjun shares as part of the settlement of the dispute," didn't he?' A. 'No.' Q. 'He said to you that, in the future, you could give him back shares in Kjun International, didn't he?' A. 'No, he told me, "It's up to you. You give me back something."' … Q. 'He said to you, didn't he, that you could give him some number of shares in Kjun International later?' A. 'Yes, he told me, it's up to me.' Q. 'And he said to you that that would be in the context of the settlement of the dispute, that the trademark proceedings were about, didn't he?' A. 'No, he didn't mention like this.' Q. 'It was quite clear to you, wasn't it, as a result of what was said, that Mr Ku wanted to get back shares as part of the dispute resolution?' A. 'No.' 103 At the conclusion of the meeting Luke Song and Mr Ku agreed to meet with one another again, Mr Ku indicating that in the meantime he would prepare some documents setting out the basis upon which the dispute could be settled. 104 In relation to that passage in his affidavit where Luke Song said 'I hope all Court case will be over from this agreement' Luke Song informed me that he was speaking of an agreement between himself and Mr Ku under which Mr Ku would transfer shares to Ji Song. He explained that then the court case will be over with Mr Ku working for Luke Song in the franchising of the Sushi World name. When asked by senior counsel for the applicant to explain what he meant by 'then the court case will be over', Luke Song's response was: 'When he [referring to Mr Ku] transfer shares to my son [meaning Ji Song],because the Kjun International [Pty Limited] is applicant on the trademark court case, then the applicant [Kjun International Pty Limited] will be my son.' 105 In the course of his cross-examination, Mr Ku conceded that he had reached an agreement with Luke Song on 19 October 2006. When asked whether he considered himself obliged to transfer the shares to Ji Song in accordance with an agreement said to have been reached with Luke Song on 19 October 2006 Mr Ku said: 'That is a verbal agreement we made on 19 October 2006 between Luke Song and me. Three things, the main issues, are agreed. That is the Kjun International transfer and trade mark and the other one is franchisee.' 106 When later asked whether he transferred the shares 'under sufferance' the nub of Mr Ku's response was: 'It is a trust to rebuild between Sue Song, Luke Song, Ji Song and me.' 107 Leading counsel for the respondents put it to Mr Ku, who agreed, that there had been 'two separate agreements'. In relation to these said agreements Mr Ku's evidence was: Q. 'The first was the agreement you reached on 19 October that you would transfer the shares to Ji Song in Kjun International?' A. 'No, from Kjun International (sic) to Ji Song.' … Q. 'But the transfer of the shares you had agreed to undertake on 19 October was not conditional upon the agreement whether it be by the short form or long form that was agreed on 25 October, was it?' A. 'No, this is the settlement, like a settlement agreement. I am giving everything and show my trust but if I am not getting any other agreement why I give share to Ji Song.' 108 Notwithstanding the suggestion by both sides that the conversation between Luke Song and Mr Ku on 19 October 2006 led to an 'agreement', I am not satisfied that the participants intended to enter into a legally binding contract on that day, even as between themselves (in this regard see Damberg v Damberg (2001) 52 NSWLR 492 at [148]-[157] per Heydon JA). Furthermore, I am not satisfied that there was any promise on the part of Mr Ku to transfer the shares to Ji Song or that any such promise formed part of an agreement reached between Mr Ku and Luke Song in accordance with the principles enunciated above, for which there was any consideration. Luke Song did not want to make a commitment that would bind his wife without her authority and Mr Ku was going away to prepare a settlement agreement in documentary form for the parties to consider. 109 In my opinion, Mr Ku's proposal that he transfer the shares to Ji Song was simply an exercise undertaken at his instigation, directed at rebuilding a relationship of trust with the Songs. It was not directed at constituting Ji Song a trustee of the shares for Mr Ku. Rather, it was an act of faith, uninfluenced by any representations made by Luke Song or Sue Song. He was prepared to put his interest in Kjun International Pty Limited at risk, relying on Ji Song's beneficence to allow him to enjoy or share in it again. Fourth meeting and intervening steps 110 The next meeting between Luke Song and Mr Ku took place on Wednesday 25 October, that is to say the day after Mr Ku prepared the shorter form of agreement, the longer form of agreement and the form of share transfer back from Ji Song to Mr Ku of shares in Kjun International Pty Limited. 111 In the meantime, Mr Ku says that he 'prepared a form of transfer' of the shares to Ji Song and that this occurred between 19 and 25 October 2006. He deposed to filling in 'a printed form'. The form which Mr Ku would appear to have prepared was not a share transfer form at all but rather a form of notification to ASIC to the effect that Ji Song had become the owner of the shares and that Mr Ku was no longer the owner of them. A copy of the six page 'Change to company details' form which Mr Ku filled in, dated 23 October 2006 and signed is attached to these reasons as 'Schedule 1'. No suggestion was put to Mr Ku that the document was not brought into existence and signed by him on the date that it bears. As mentioned at [26] no traditional form of transfer of the shares was ever executed by Mr Ku. This is now common ground. 112 In an affidavit sworn 2 May 2007 Mr Ku said: '20. … Before my meeting with Luke Song on 25 October 2006 (but after 19 October 2006) I had already prepared a form of transfer of my shares in Kjun International Pty Limited to Ji Young Song. … It was just a printed form that I filled in. Before 24 October 2006 I had given that to Mr Kim, a solicitor … and asked him to send it to ASIC. … In the end he did not lodge the document and so I worked out how to do it over the internet.' 21 … To this day, I have not received a single dollar or any other consideration for the transfer of my shares in Kjun International Pty Limited to Ji Song. … 23 As a result of transferring all my shares in Kjun International to Ji Song I have lost control of Kjun International, which has always been my company and I have previously been in full control of that company.' The assumption made by Mr Ku that he had transferred the shares to Ji Song and thus lost control of Kjun International Pty Limited does not bear analysis. 113 For a gift inter vivos to be effective, it must be established that the donor intended to make an immediate gift and that he has 'done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him', (referring to the principle applied in Milroy v Lord (1862) 4 DeGF & J 264 [45 ER 1185]) (per Taylor J in Cope v Keene (1968) 118 CLR 1 at 12; see also per Kitto J at 6 – 7). 114 An intended donee cannot obtain equitable remedies against the donor compelling him to give legal effect to his intention to give (per Dixon J, as his Honour then was, in Brunker v Perpetual Trustee Company (Limited) ('Brunker') (1937) 57 CLR 555 at 599). 115 In respect of the requirement that for a gift to be effective the donor must have done all that was 'necessary to be done', 'necessary' means 'necessary for the purpose of passing the property'. The word is not used in an obligatory sense. The donor is under no necessity, no obligation. What the Courts look at is what the donor might have done to perfect the gift (per Higgins J in Anning v Anning ('Anning') (1907) 4 CLR 1049 at 1082). 116 There is nothing unconscientious in a donor refusing at any stage to perfect a mere bounty (per Isaacs J in Anning at 1063). In Anning Griffith CJ opined at 1057: '… in the case of shares in a company which are only transferable by an instrument of transfer lodged with the company, I think that the donor has done all that is necessary on his part as soon as he has executed the transfer' 117 It seems to me that not only would execution of a transfer be necessary, but also delivery of that transfer to the donee and whatever else may be necessary to enable the donee to secure registration of the transfer. 118 In relation to a transfer of real estate Dixon J said in Brunker at 602-3: 'Further, I think that the donee must obtain property in the piece of paper itself and property in the paper could pass only by delivery (Cochrane v Moore). If property in the transfer remained in the transferor, his power of recalling it must also remain. For he would be entitled to possession of the paper, he could refuse to present it for registration and he could destroy it.' (footnote omitted) 119 As has already been observed no instrument of transfer of the shares was brought into existence, executed by Mr Ku or delivered to Ji Song or any agent for him. 120 In his affidavit sworn 28 June 2007 (sic) at paragraph 15 Mr Ku said: '15 Prior to going to the meeting with Luke Song [on 25 October 2006] I had been with a solicitor … Mr Y Kim. … I gave to Mr Kim the original transfer in the express post envelope and asked him to send it. … Later I became aware … that the share transfer had not gone through and I said I would check what had happened. … Later when I checked with Mr Kim and realised he had not sent the transfer I did phone Luke Song and say I would do the transfer on the internet. …' The so-called 'original transfer' was plainly the original of the 'Change to company details' form , a copy of which is reproduced in Schedule 1. 121 Mr Ku also gave oral evidence in respect of his giving the original of the completed 'Change to company details' form (a copy of which is reproduced in Schedule 1) to Mr Kim together with an envelope for use by him in transmitting the form to ASIC. In response to questions asked by me he said: Q. '… you have given evidence about providing Mr Kim with an envelope which contained documents that you asked to be sent to the Australian Securities & Investments Commission in Melbourne?' A. 'Yes.' Q. '… When you gave the documents to Mr Kim, or the relevant document that you wanted to go to the Australian Securities and Investments Commission … [w]as the document, or documents, already in the envelope when you gave it to Mr Kim or was it separate from the envelope?' A. 'It was separate.' Q. 'So you gave him the document and an envelope which he could use?' A. 'Yes.' Q. 'Two things?' A. 'Yellow, it's passport [I heard the witness saying express post] envelop (sic) … and then inside the original one … I put it inside and go there and I take it out and show him.' Q. 'So that when you spoke to Mr Kim you had the document in the envelope but it wasn't sealed?' A. 'Yes, it wasn't sealed.' Q. 'Did you, at any stage, seal the envelope yourself?' A. 'No, I didn't.' 122 In an affidavit sworn 29 May 2007 Mr Kim deposed as follows: '3 On 24 October 2006 I met Jun Ku at the Gloria Jeans coffee shop in North Sydney at about lunchtime. In that meeting Jun Ku gave me an ASIC form "Change to Company Details" … He gave me an express post envelope. … 6 I said to Jun Ku that I would check the transfer form and mail it to ASIC. However, although I said that, I did not post the transfer because I was worried that he might be cheated by Luke Song and Sue Song. … Additionally, I had not seen the agreement in Korean which Jun Ku was preparing. … 8 Some time after the meeting, on a couple of occasions, I asked Jun Ku to show me the agreement that he had prepared. … I still held back the ASIC document because of my concern.' 123 Mr Kim also gave the following oral evidence: 'It was about 8 November. I disclosed that I didn't follow his request, and then I was still holding the documents in my hand.' Just before that he had said: '… I think about 10 November, he [referring to Mr Ku] told me he transferred the shares. So … I chucked it [referring to the original completed "Change to company details" form signed by Mr Ku, a copy of which is reproduced in Schedule 1] out and throw it into the rubbish bin.' 124 It would appear that a 2 page document styled 'Change to company details' was lodged electronically by Mr Ku with ASIC at 4:44 pm on 9 November 2006 as document number 7E0905731. A copy of that document is attached to these reasons as 'Schedule 2'. It recorded that on 1 November 2006 Mr Ku's shareholding in the register of members of Kjun International Pty Limited had become nil and that Ji Song's shareholding had become 1,000 shares on that date. 125 When cross-examined by leading counsel for the respondents about the 'transfer' of the shares to Ji Song, Mr Ku gave the following evidence: Q. 'The fact is you didn't transfer the shares until 9 November; correct?' A. 'Yes.' Q. 'Even though you thought you had an agreement that you wanted on 25 October, isn't that correct?' A. 'But I already – before I go there, as I promised and we already came to an agreement on 19 October, I arrange to sending that copy of company change form to ASIC to other people [meaning as I understand it that before 25 October Mr Ku had provided Mr Kim with the "Change to company details" form in Schedule 1 for lodgement with ASIC]. And then I bring the copy of that paper and show them to Luke Song [meaning that Mr Ku brought with him to the meeting on 25 October 2006 a copy of the 'Change to company details' form which he had already provided to Mr Kim for lodgement with ASIC and showed the copy to Luke Song. It would appear that the copy reproduced in Schedule 1 was made from the copy so shown to Luke Song and apparently kept by him.] – I already kept my promise to reveal our trust.' 126 In his evidence in chief Luke Song acknowledged that at the meeting on 25 October 2006 Mr Ku showed him a copy of a 'Change to company details' form which had been completed in manuscript form and which recorded that Ji Song had become the owner of the shares and that Mr Ku had ceased to be the owner of them on 23 October 2006 i.e. the day before Mr Ku provided the original of the form to Mr Kim for lodgement with ASIC. The copy of the form provided to Luke Song reproduced an Australia Post adhesive sticker CN7685802 as a postal record. Luke Song deposed that he was shown 'the express post envelope with the number CN7685802' at the meeting on 25 October 2006 that Mr Ku said he had used to send the 'Change to company details' form to ASIC. I do not accept that the envelope was shown by Mr Ku to Luke Song. All that Mr Ku produced was the copy of the 'Change to company details' form as reproduced in Schedule 1. The copy reproduced the Australia Post adhesive sticker at the top of the first page of the form. The original envelope had been left with Mr Kim on the previous day. 127 The meeting on 25 October 2006 between Mr Ku and Luke Song again took place at the Avillion Hotel in Sydney. It would appear that the meeting commenced mid afternoon. 128 As contemplated by the concluding discussion at the meeting on 19 October 2006, Mr Ku attended with some draft documents which he had prepared. 129 In his affidavit sworn 20 December 2006 Mr Ku deposed to conversation with Luke Song on 25 October 2006 as follows: Ku: 'There is one change to the agreement. After the legal dispute I can't continue the working relationship with Sue. But for the future of Sushi World I am happy for your son, Ji Young Song, to take his mother's role in the business. To make things fair I can appoint another person to represent the franchisees to work with Ji Young Song instead of me to rebuild Sushi World.' Luke Song: 'I want you to be involved with my Son and to teach him. I want you to meet with him to discuss the future of Sushi World.' Ku: 'This is the legal binding settlement. As you admit and accept what happened in 2002 regarding IP transfer and admit my right of franchising system development for 4 years continuously and permanently, I will transfer all my shares of Kjun International Pty Ltd to your son first as good gesture if you sign this agreement. You tell Ji Young Song to return the shares back to me after talking with his mother about what was promised verbally with me when we worked together. That's the way we can rebuild our trust again. I will show what is my intention first because you signed and trusted me. Everyone will say I am the most stupid person doing this but I value more our trust than who is got what and who has the right. But I will not receive one single dollar for transferring these shares. Kjun has another asset not connected with Sushi World, and I am demonstrating my good faith. If anything goes wrong I didn't get [when called to give oral evidence Mr Ku said that this word should be "get' rather than "give" as he had originally sworn] a single dollar so I can get the shares back.' Luke Song: 'Yes ok. Thank you. Now I trust you forever.' 130 On 2 May 2007 Mr Ku swore a further affidavit in which he provided evidence as to his 25 October 2006 meeting with Luke Song. Amongst other things he expressed uncertainty as to whether he had said words to the effect 'There is one change to the agreement'. He said: 'I may have said something more like "There is one other thing".' 131 Given Mr Ku's evidence that he prepared the 'Change to company details' form, a copy of which is reproduced in Schedule 1, before his meeting with Luke Song on 25 October, that it bears the date 23 October and was handed by Mr Ku to Mr Kim on 24 October with the request that Mr Kim forward it to ASIC in the express post envelope which Mr Ku provided, I have great difficulty in accepting that, when he was speaking with Luke Song on 25 October 2006, he said: 'I will transfer all my shares of Kjun International Pty Ltd to your son first as good gesture if you sign this agreement.' It is unlikely that he would have used the words mentioned and in particular the word 'if' in circumstances where the 'Change to company details' form had already been prepared, signed and handed to his solicitor Mr Kim for transmission to ASIC in Melbourne. I would place greater emphasis upon the words 'Everyone will say I am the most stupid person doing this but I value more our trust than who is got what and who has the right'. Equally, I have difficulty in accepting that the conversation included the words 'If anything goes wrong I didn't get a single dollar so I can get the shares back'. This is not a case where a resulting trust should be implied if it be found that the shares were duly transferred by Mr Ku to Ji Song. As was said in Russell v Scott there will be no resulting trust where satisfactory proof is forthcoming that a purpose of the transaction was to confer beneficial ownership. In my opinion such a transfer was intended in respect of the shares but not perfected, there being no duly executed share transfer form which was delivered to Ji Song or another person on his behalf. 132 Mr Ku says that, at the meeting on 25 October, he and Luke Song addressed the longer form of agreement which he had prepared on 24 October 2006. He said in relation to the consideration of the longer form of agreement: 'We ran through all the clauses in the agreement one by one.' 133 Luke Song deposed to the production by Mr Ku of a document with clauses 'A' to 'G' on it. This is hardly illuminating. There was no form of agreement which included clauses A, B, C, D, E, F and G. There were, however, two different forms of agreement which began with 'A' and ended with 'G'. The longer form of agreement included clauses A, B, C, D, D (a second D), F and G. The shorter form of agreement contained clauses A, B, D, F and G. 134 In relation to the 25 October 2006 meeting Luke Song's evidence was that conversation took place to the following effect: Ku: 'Chairman, the share transfer will take 7 to 8 days because ASIC headquarters is in Melbourne.' Luke Song: 'Thank you, Mr Ku.' 135 Luke Song says that he was then shown the shorter form of agreement by Mr Ku who told him that he needed to sign the document to 'finish the dispute'. He says that Mr Ku said: 'Chairman, this is the agreement based on the previous agreement we talked about.' 136 Luke Song says that he proceeded to read the document [meaning the shorter form of agreement] and then signed it. 137 I do not accept Luke Song's evidence that the first form of agreement which he addressed on 25 October 2006 was the shorter form of agreement and prefer the evidence of Mr Ku who said that it was the longer form of agreement which was addressed first. 138 Mr Ku deposed to the signing of the longer form of agreement by Luke Song and himself. 139 In his affidavit of 2 May 2007 Mr Ku explained the execution by Luke Song and himself of two copies of the longer form of agreement and also of the shorter form of agreement: '17. … To the best of my recollection Luke Song picked up the bundle of documents which were in the plastic sleeve and which had the copy of the Korean Deed on top [the longer form of agreement] and he commenced signing each page. When he came to the first copy of the first version [the shorter form of agreement] he said words to the effect "Is this the same, it's not as long as the other copies. There are only 5 paragraphs. There are 7 in the other copies". I realised then that the first version was included in the bundle. In reply I said words to the effect "All of the contents of that agreement are in the one you have signed so that it doesn't matter. It's up to you whether you sign it or not." … 18. In the process of signing the documents, when he came to the share transfer from Ji Song back to me, I explained to him what it was. I recall that it had already been signed by me at that point. I cannot now recall signing it but it must have been when I printed the documents out the night before because I do not recall touching the documents in the plastic sleeve between then and the meeting [the copy attached to Mr Ku's affidavit was of a blank unsigned form]. 19. When Luke Song had signed four of the documents in the bundle I had given him (two copies of each of the [longer form of agreement and the shorter form of agreement]) he handed them back to me and I signed all four copies. I then gave one of each back to Mr Song. The meeting concluded shortly after that.' 140 When cross-examined about the execution of the two forms of agreement Mr Ku gave evidence that Luke Song queried why the shorter form of agreement was shorter. According to Mr Ku he said to Luke Song words to the effect 'that one is included in the one we already talked about … for one hour'. Mr Ku gave the following evidence: Q. 'Well, why did you have him sign it?' A. 'He signed it and then gave it back to me, so I just signed it and gave that back to him.' Q. 'He signed it after he picked up the difference and after you had explained that it was only a draft. Isn't that correct?' A. 'I didn't say it is only a draft. I said that all the contents included in the one we already talked about it more than one hour.' 141 Luke Song said that after signing the shorter form of agreement he and Mr Ku 'had a few drinks'. He says that Mr Ku then produced 'another paper document' [referring to the longer form of agreement] whereupon conversation is said to have taken place in the Korean language to the following effect: Luke Song: 'We signed on the paper already. Why do you want more paper signed?' Ku: 'Chairman, this is no different from the first paper and there is only an added clause about franchise. You don't need to read it. We need this franchise clause because I want to continue the franchise work. Chairman, there is no difference.' 142 Luke Song says that by this time it was dark and he could not read the characters on the longer form of agreement properly. 143 I do not accept Luke Song's account of the sequence in which the two forms of agreement were signed. I do not accept that any documents were signed after Luke Song had 'had a few drinks'. I do not accept that Luke Song had any difficulty reading the characters on any document. I accept that at the meeting on 25 October 2006 the parties addressed the longer form of agreement considering each clause seriatim and at the conclusion of the consideration by the parties of the longer form of agreement, it was signed by Luke Song and Mr Ku, with an inadvertent execution of the shorter form of agreement as well, to which the parties gave no real attention. I do not accept that Mr Ku said 'you don't need to read it' with reference to any document. 144 Luke Song gave evidence to the effect that he was oblivious to the difference between the two documents which he signed on 25 October until 26 October. However, he did not contact Mr Ku on 26 October to suggest any concern about the differences between the two documents he had signed and in particular the additional clauses appearing in the longer form of agreement which it was said by him was not signed until after he had had a couple of drinks. 145 I am not satisfied that there was any trickery involved in the securing by Mr Ku of the execution of the longer form of agreement by Luke Song. Indeed, as I have previously observed, I am satisfied that the agreement which the parties considered in detail and intended to sign was the longer form of agreement. Luke Song and Mr Ku undoubtedly signed the two copies of the shorter form of agreement as well. I am satisfied that they did so knowing that the shorter form of agreement included no additional provisions. I am satisfied that they did not intend the shorter form of agreement to become the agreement by which they would be bound. 146 Mr Ku's evidence in chief was that at the conclusion of the meeting at the Avillion Hotel in Sydney: 'We then went to East Ocean Chinese restaurant to have dinner together.' At the dinner meeting Mr Ku said that conversation took place as follows: Luke Song: 'I will trust you forever until I die, let's build up our good relationship again, sorry for what happened.' Ku: 'I am sorry too, let's build up again. I hope Ji Young Song join us and start his role. Then I will do my best to help him to take his mother's role in Sushi World.' 147 In relation to the discussions which took place on 25 October 2006 concerning the settlement of the trade mark proceedings Luke Song gave the following evidence: Q. 'In the course of those conversations you recall, don't you, that Mr Ku said if anything went wrong he could get the shares back?' A. 'No.' Q. 'You don't recall that?' A. 'No, he didn't mention that.' 148 When asked in re-examination by leading counsel for the respondents whether he told his wife that he would be having the meeting with Mr Ku which took place on 25 October 2006, Luke Song responded 'I don't recall'. 149 I do not accept Luke Song's evidence in this regard. His previous meeting with Mr Ku had been on 19 October. He left that meeting in the belief that Mr Ku would bring with him to the next meeting a document embodying an agreement. Luke Song had been cautious to ensure that he did not commit himself to any agreement with Mr Ku unless and until he had his wife's authority to do so. Had he lacked his wife's authority to enter into the agreement on 25 October, I have no doubt that he would have refrained from signing it. I am of the opinion that when he signed the documents he believed he had his wife's authority. I would infer that Luke Song discussed the matter with Sue Song between 19 and 25 October and secured her agreement to a settlement of the trade mark proceedings. 150 When asked some questions by me at the conclusion of his re-examination Luke Song gave the following evidence: Q. 'The understanding you have given me is that you were very cautious not to commit to any agreement with Mr Ku when you had your discussions with him in mid October 2006; is that right?' A. 'Yes.' Q. 'My understanding is the reason you were cautious not to commit was because your wife had not indicated her willingness to agree?' A. 'Yes.' Q. 'Why did you sign any documents on 25 October?' A. 'Because she [presumably intended to be "he"] showed me the share transfer form and the express post envelope copy, then I was happy, then I thought I can sign certain.' … Q. 'Mr Song, all I want to know is whether or not, by applying your signature to a piece of paper on 25 October, you were intending to make an agreement with Mr Ku?' A. 'I want to make agreement but I thought I still needed my wife's consent.' … Q. 'Did you say anything to Mr Ku to the effect that by signing this I am not agreeing to be bound because I will have to obtain my wife's approval before it will be binding?' A. 'I didn't tell him at the moment.' Q. 'You didn't say that?' A. 'No.' 151 Sue Song was cross-examined about whether before and after meetings with Mr Ku there was discussion between Sue Song and Luke Song about them. Her evidence included the following: Q. 'After that meeting that you went to with Mr Ku did your husband tell you he was going to meet with Mr Ku again for a third time?' A. 'After … meeting after I have a meeting Mr Ku, yes.' Q. 'After you had a meeting with Mr Ku did you discuss that meeting with your husband?' A. 'No.' Q. 'Did your husband tell you after your meeting with Mr Ku that he was going to see Mr Ku and Mr Park again? A. 'No, he don't tell me.' Q. 'Did he tell you after your meeting with Mr Ku that he had had discussions with Mr Ku and meetings with Mr Ku?' A. 'My husband?' Q. 'Yes.' A. 'I think so he have the meeting.' Q. 'But did he tell you he had the meetings?' A. 'No.' 152 Sue Song was later asked a question in cross-examination about what happened after the meeting between Mr Ku and Sue Song on 18 October 2006 and before December 2006. Sue Song's answer was: 'My husband have the meeting Mr Ku and he – they discussed the share transfer.' 153 It may be observed that neither the longer form of agreement nor the shorter form of agreement made any mention of a share transfer. Presumably Sue Song had knowledge of discussions between her husband and Mr Ku about 'the share transfer' because her husband told her about such discussions. 154 Sue Song was asked further questions about pre and post meeting discussions between herself and her husband. The manner in which her answers were expressed in the English language needs to be carefully considered in the light of her difficulties in expressing herself in English. She gave the following evidence under cross-examination from senior counsel for the applicant: Q. '… After you met personally with Mr Ku did you and your husband talk about the trademark proceedings started by Mr Ku at any time before your husband told you that Mr Ku was going to transfer shares in Kjun International to your son Ji?' A. 'That did I have the conversation – have a meeting Mr Ku after my husband told me Ku want to transfer the share Kjun International share transfer I post to son. My husband told me he wanted this way.' 155 I am satisfied that Sue Song was speaking prospectively about a transfer of the shares to her son. Given that the possibility of such a transfer was first raised at the meeting between Luke Song and Mr Ku on 19 October 2006 and the copy of the 'Change to company details' form was shown by Mr Ku to Luke Song on 25 October 2006, I am satisfied that Sue Song knew of an intended transfer of the shares from Mr Ku to Ji Song at some stage in the period between the 19 October and the 25 October meeting. 156 In relation to her knowledge of the agreement signed by Luke Song and Mr Ku on 25 October 2006 and in particular the shorter form thereof, Sue Song gave the following evidence: Q. 'Do you recall your husband showing you a copy of that document signed by him in October 2006?' A. 'Yes.' Q. 'I want to ask you whether you remember whether before he showed you that document he had talked to you at all about the fact he was discussing making an agreement with Mr Ku?' A. 'No.' Q. 'Did you know at any time from the time you had the personal meeting with Mr Ku and the time your husband showed you this paper that he was discussing making an agreement with Mr Ku?' A. 'My husband decision or I don't …' Q. 'Did you know that he was having discussions with Mr Ku about making an agreement?' A. 'No.' 157 When asked about conversation passing between Luke Song and herself after the production by Luke Song of a copy of the shorter form of 25 October agreement which she read, Sue Song said: 'My husband is quite happy of them because any more is a Court case. [I understood her to be saying that Luke Song expressed his pleasure with the fact that by virtue of the agreement the trade mark proceedings had been settled.] Ku and Luke they finish the Court case and he [referring to Luke Song] told me that Ku is transfer the share for my Ji, that everything finish the Sue Song [whilst I cannot comprehend what was meant by the last phrase, the gist of what Sue Song was saying was that Mr Ku had or would be transferring the shares to Ji Song]. Any more it is going to the Court [meaning that the trade mark proceedings would not be going to the Court]. I remember that but still I am very upset. [My understanding of the last sentence is that Sue Song was seized of the fact that the matter was settled but she was still upset by its terms.] …' Q. 'What did you say to him?' A. 'He wanted the share transfer to my big son but this is my one. What is it Kjun, these ones. Su-Shi World they're mine. This is the reason I don't accept the share transfer. The reason this one is mine. [Sue Song seems to have been suggesting that any transfer of the shares should have been to herself rather than to Ji Song]' 158 It is clear that Sue Song's concern about the shares being transferred to her son rather than herself was not a concern which arose from her consideration of the agreement which Luke Song had signed. 159 When asked about the manner in which the agreement which she had read had been expressed, Sue Song gave the following evidence: Q. '… when you read the agreement, did you notice that the piece of paper said nothing about transferring shares in Kjun International?' A. 'Yes, this is some, sir, the …, the … section is costs, is the costs over them, all over them, he charges the pay, he charges, I'm so angry I'm fighting of them my husband. This is just stating Ku, why we pay them my legal costs and at that time my husband mention about Ku and the share transfer all Kjun International Ji.' … Q. '… you were particularly angry about the fact that it had something about the legal costs?' A. 'Legal costs and I don't know allow the Ku if you continue the franchise or our friend is something Su-Shi World that is your answer.' Q. 'Can you tell me which part of the agreement you saw dealt with Ku continuing in the franchise? … By reference to one of the letters?' A. 'Yes, G.' … Q. 'This is correct, isn't it, Mrs Song, one of the reasons you were upset about this agreement when you read it was the fact that it included clause G? A. 'Clause G and F, yes.' … Q. 'And is it correct to say that you said to your husband in that discussion when he first showed you the agreement that you did not accept it?' A. 'I'm not accept it, this one, yes, I don't accept it.' Q. 'And you said that to him, didn't you?' A. 'Yes.' 160 It may be observed that when Sue Song addressed paragraph F, which provided for each party to pay its own costs until as of 24 October 2006, she became quite animated in the witness box. 161 Sue Song says that she wanted the trade mark proceedings to go to Court up until the time she was told, in November 2006, that the shares had gone into Ji's name. 162 Mrs Song's evidence did not sit particularly comfortably with the evidence of her son, Ji Song. Ji Song gave evidence that from August 2006 through to October 2006 he was involved from time to time in discussions with his mother about the trade mark proceedings. He also had discussions with his father about those proceedings and participated in meetings with the solicitors for Su-Shi World Australia Pty Limited and the Songs from time to time. He was personally aware of two meetings in which his father participated with Mr Ku. He gave evidence that he found out about those meetings from his father shortly after they occurred. 163 Ji Song gave evidence that his father informed him of a desire on the part of Mr Ku to transfer the shares to Ji Song. When asked when he was first told about that his response was 'It wasn't the first time the idea had been thrown around'. 164 Ji Song cautioned his father not to trust Mr Ku and suggested that Mr Ku was 'trying to buy time'. 165 Ji Song gave evidence that his father informed him that Mr Ku was going to transfer the shares into Ji Song's name. Ji Song couldn't recall whether he discussed this conversation with his mother. However he responded to the question 'did your mother discuss with you before you became aware of it the possibility of the shares in Kjun [International Pty Limited] being transferred to you' in the affirmative. After he learnt that the shares had been 'transferred' into his name Ji Song discussed with Sue Song the consequences of that having occurred. 166 Ji Song rejected the suggestion that his mother was very unhappy with the settlement of the case. His response was to the effect, 'No, she said to me the case would be finished. If I own Kjun International she wouldn't keep fighting her own son.' 167 Ji Song's evidence was that Sue Song said words to the effect: 'If the shares are transferred into Ji's name I'll agree to stop the trademark proceedings.' 168 In relation to any anxiety expressed by Sue Song about legal costs, Ji Song gave the following evidence in response to questions asked by me: Q. 'What about legal costs; Did she say anything about them?' A. 'Ku's financial position isn't very good so I don't think we really put much hope – I mean, that's something we would like but …' Q. 'What did you[r] mother say about legal costs?' A. 'We want our legal costs to be paid by Ku but given the situation, it's not really necessary. It was more a … best scenario but not something we expected.' 169 The conflicts between Ji Song's evidence and Sue Song's evidence in relation to the events of October 2006 and thereafter make me very dubious about accepting Sue Song's account as to what transpired. I do not accept that Sue Song knew nothing about the intended settlement of the trade mark proceedings to which Luke Song subscribed his signature until after the event. I find that she, like Luke Song, wanted to secure a settlement, she was prepared to pay her own costs and was aware of the discussions which had taken place between Luke Song and Mr Ku on 19 October 2006. 170 In the days following 25 October 2006 the Songs became aware of the fact that the change to company details form which had been shown by Mr Ku to Luke Song on 25 October 2006 had not been registered with ASIC. They were not aware of the steps taken by Mr Ku to secure the registration of the document through Mr Kim. When queried about it Mr Ku is said to have responded with words to the effect, 'It's in the mail, I posted it'. When pressed further about the non-registration of the change to company details document in early November Mr Ku had further conversation in the Korean language with Luke Song to the following effect: Ku: 'Chairman, it's me Jun, I'm going to transfer the shares in the Company using the internet today. I'm going to call ASIC to see if it's OK for me to transfer the shares on the internet.' Luke Song: 'You better do it on the internet.' 171 No constitution for Kjun International Pty Limited was tendered prior to the conclusion of the hearing on 19 June 2007. However, following the re-listing of the matter on 10 July 2007 to allow submissions to be put on the legal requirements for a valid transfer of shares in Kjun International Pty Limited, it emerged that it did have a constitution. The respondents sought, and I readily agreed, as did the applicants, to a further adjournment to allow evidence, whether by the tender of documents or further cross-examination of Mr Ku, to be placed before the Court to ensure that the matter did not end up being decided on assumptions and understandings between the parties which may be in conflict with the true legal position. 172 Following the reopening of the applicant's case on 6 August 2007, the applicant tendered as Exhibit B a copy of the constitution of Kjun International Pty Limited. That constitution relevantly contained the following provisions: '3 Each of the provisions of the sections or sub-sections of the Law [a reference to the Corporations Law which applied prior to the commencement of the Corporations Act in 2001] which would but for this Clause apply to the Company as a replaceable rule within the meaning of the Law are displaced and do not apply to the Company. … 32(1) Subject to this Constitution, a Member may transfer all or any of his shares by instrument in writing in any usual or common form or in any other form that the Directors approve. (2) An instrument of transfer referred to in Clause 32.(1) shall be executed by or on behalf of both the transferor and the transferee. (3) A transferor of shares remains the holder of the shares transferred until the transfer is registered and the name of the transferee is entered in the register of Members in respect of the shares. …' (cf s 1072F of the Corporations Act) 173 As a company that was registered after 1 July 1998 replaceable rules under the Corporations Act applied to Kjun International Pty Limited by virtue of s 135(1) of the Corporations Act subject, of course, to s 135(2), which provided: '135(2) A provision of a section or subsection that applies to a company as a replaceable rule can be displaced or modified by the company's constitution.' In the instant case the replaceable rules applicable to Kjun International Pty Limited were displaced by its constitution (see ss 135(2) and 1404 of the Corporations Act). 174 Clause 34 of Kjun International Pty Limited's constitution provided, inter alia: '34(1) The Directors in their absolute and uncontrolled discretion may refuse to register any transfer of shares without assigning any reason therefor. …' (cf s 1072G of the Corporations Act) Legislative provisions concerning the transfer of shares 175 Whoever coined the expression 'as clear as mud' must have been slaving over the extraordinarily, and unnecessarily, complex provisions of the Corporations Act and the Corporations Regulations relating to share transfers at the time. Gaining an understanding of the relevant law on this subject back in 1961 involved a five minute exercise, reference being had to a couple of consecutive sections in the then Uniform Companies Act along with a couple of clauses in the relevant company's Articles of Association or in a set of 'Table A' Articles as recorded in the Fourth Schedule to that Act. Today, a like exercise requires hours of study, reference to numerous sections and regulations, which themselves make no sense without reference to numerous definitions, often shrouded in obfuscation, and, needless to say, strewn throughout the Corporations Act and the Corporations Regulations in various places such as ss 9 and 761A and regulations 1.0.02 and 7.11.01. 176 Why the law had to be expressed in such an obscure way beggars belief. Be that as it may, this case requires an understanding of the requirements for a valid transfer of shares in 2006. 177 The starting point seems to be s 1070A(1) of the Corporations Act, which provided as follows: '1070A(1) A share … in a company ... : (a) is personal property; and (b) is transferable … as provided by: (i) the company's … constitution; or (ii) the operating rules of a prescribed CS facility if they are applicable; and (c) is capable of devolution by will or by operation of law.' 178 Fortunately, the late emergence of evidence of a constitution for Kjun International Pty Limited spares one the necessity of exploring how a transfer of a share in an unlisted company may be effected as provided by the operating rules of a prescribed CS facility 'if they are applicable'. 179 The next step along the tortuous road towards discovering the requirements of the Corporations Act in relation to share transfers is to go to Subdivision A of Division 2 of Part 7.11 of the Corporations Act. That Subdivision commenced with s 1071A which relevantly provided: '1071A(1) This Subdivision applies to the following securities: (a) shares in a company; …' 180 One then turns to s 1071B of the Corporations Act, the next section that falls within Subdivision A of Division 2 of Part 7.11. It relevantly provided: '1071B(1) This section does not apply to a transfer of a security through a prescribed CS facility. (2) Subject to subsection (5), a company must only register a transfer of securities if a proper instrument of transfer (see subsections (3) and (4)) has been delivered to the company. This is so despite: (a) anything in its constitution; … … (3) An instrument of transfer is not a proper instrument of transfer for the purposes of subsection (2) if it does not show the details, specified in the regulations, in relation to the company concerned. (4) If the transfer of the securities is covered by Division 3 of this Part, then (in addition to subsection (3)), the instrument is not a proper instrument of transfer for the purposes of subsection (2) unless it is a sufficient transfer of the securities under regulations made for the purposes of that Division. (5) Subsection (2) does not prejudice the power of the company to register, as the holder of securities, a person to whom the right to the securities has devolved by will or by operation of law. …' 181 It may be observed that s 1071B(2) of the Corporations Act clearly proscribes the registration of a share transfer in the absence of a proper instrument of transfer. Such an instrument of transfer must meet the requirements of s 1071B(3) showing the details specified in the relevant regulations, and also s 1071B(4), if it applies, and the relevant regulations. 182 Division 3 of Part 7.11 of the Corporations Act deals with the 'Transfer of certain securities effected otherwise than through a prescribed CS facility'. It commences with s 1073A and concludes with s 1073F. 183 Section 1073A(1) relevantly provided: '1073A(1) This Division applies to the following securities: (a) shares in a company; …' 184 By virtue of s 1073F of the Corporations Act, Division 3 of Part 7.11 of the Act and the regulations made for the purposes of that Division are rendered paramount. Section 1073F relevantly provided: '1073F(1) This section deals with the effect of the provisions of: (a) this Division; and (b) the regulations made for the purposes of this Division. (2) The provisions apply in relation to a transfer of securities despite anything to the contrary in: (a) this Act (other than this Division); or (b) another law, or instrument, relating to the transfer of the securities. … (6) Nothing in the provisions prevents or affects the use of: (a) any other form of transfer of securities; or (b) any other mode of executing a document transferring securities; that is otherwise permitted by law. …' 185 A curious feature of Division 3 of Part 7.11 is that it empowers the making of regulations in relation to transfers of securities that are not effected through a prescribed CS facility but focuses almost exclusively on transfers of securities between persons represented by brokers and says virtually nothing about transfers of shares directly from a company member to a third party. 186 Section 1073D provided, inter alia: '1073D(2) The regulations may specify: (a) the way in which a security may be transferred, including: (i) the forms (if any) to be used; and (ii) what amounts to a proper or sufficient transfer of a security; and (b) the legal effect of a proper or sufficient transfer of a security; and (c) the rights, liabilities and obligations of a person in relation to the transfer of a security, including the rights, liabilities and obligations of: (i) the transferor and transferee; and (ii) any other person involved in the transfer; and (d) the circumstances in which a person will be taken to be involved in the transfer of a security for the purposes of the regulations; and (e) the circumstances in which a person is required not to register, or give effect to, a transfer. 1073D(3) Without limiting paragraph (2)(a), the regulations may: (a) specify the requirements for a document to be a sufficient transfer of a security; and (b) provide that a document meeting specified requirements may be used: (i) as a proper instrument of transfer for the purposes of section 1071B; and (ii) as an instrument of transfer for the purposes of any other law or instrument governing or relating to the security. …' 187 Before proceeding to consider the regulations which s 1071B(3) and (4) of the Act contemplate, it is appropriate, in the circumstances of the present case to also note the provisions of s 1071D(1) of the Act, which provided as follows: '1071D(1) A written application by the transferor of a security [an expression defined by s 761A which when taken with the definitions of "body" and "excluded security" in s 9 may be taken to include a share] of a company for the transferee's name to be entered in the appropriate register is as effective (for the company's purposes) as if it were an application by the transferee. The application is subject to the same conditions as it would be if it had been made by the transferee. …' 188 The obscurity of meaning of the relevant provisions of the Corporations Act dealing with the transfer of shares is compounded by the regulations that are relevantly to be found in Part 7.11 of the Corporations Regulations, which commence with regulation 7.11.01 and conclude with regulation 7.11.22. It is also necessary to have regard to Forms 1 – 4 inclusive which are to be found in Schedule 2A to the Corporations Regulations. 189 The first matter to address by reference to the Regulations is the identification of the 'the details, specified in the regulations' which an instrument of transfer of a share must show in order to be a proper instrument of transfer for the purposes of s 1071B(2) of the Corporations Act (see s 1071B(3)). 190 Given that the shares in Kjun International Pty Limited were 'unquoted securities' within the meaning of regulation 7.11.22(2) of the Corporations Regulations, the details required by s 1071B(3) may be found in regulation 7.11.22(1) which provided as follows: '7.11.22(1) For subsection 1071B(3) of the Act, for a transfer of unquoted securities, the State or Territory in this jurisdiction in which the company is taken to be registered is a prescribed detail.' 191 The effect of this regulation when taken with s 1071B(2) – (3) of the Corporations Act is such that, given that Kjun International Pty Limited was taken to be registered in the State of New South Wales, then a proper instrument of transfer of shares in it would need to show that fact (see also s 119A of the Corporations Act). So much for s 1071B(3) of the Corporations Act. 192 The next task is to ascertain what is necessary to render an instrument of transfer of a share, a proper instrument of transfer within the meaning of s 1071B(4) of the Corporations Act. When will an instrument of transfer answer the description of 'a sufficient transfer of the securities under regulations made for the purposes of [Division 3 of Part 7.11 of the Act]'? 193 Division 3 of regulation 7.11 of the Corporations Regulations commences with regulation 7.11.10 and concludes with regulation 7.11.22. Regulation 7.11.10 provided: '7.11.10 This Division is made under section 1073D of the Act, and applies to transfers of Division 3 securities [defined in regulation 1.0.02(1) to include "Division 3 assets", which in turn is defined in regulation 1.1.02(1) to include "(a) shares mentioned in paragraph 1073A(1)(a) of the Act"] effected otherwise than through a prescribed CS facility.' 194 Regulation 7.11.11(1) provides for a document to constitute 'a sufficient transfer of Division 3 assets' if, amongst other things, it is duly completed in accordance with documentation meeting the requirements of the relevant parts of Forms 1, 2, 3 or 4, none of which appear to have any application to a transfer otherwise than through a broker. 195 Regulation 7.11.14 provides an express link to s 1071B(4) of the Act. It relevantly provided: '7.11.14(1) A document that is a sufficient transfer of Division 3 assets may be used: (a) as a proper instrument of transfer for section 1071B of the Act; … …' 196 In the case of the transfer of shares in accordance with one or other of the Forms 1 – 4 inclusive, regulation 7.11.15 provides for transferees under 'sufficient transfers' to become bound by the relevant company's constitution. 197 Regulation 7.11.15 provides as follows: '7.11.15(1) If Division 3 assets are transferred by means of a sufficient transfer: (a) the transferee is taken to have agreed at the execution time to accept the Division 3 assets subject to the terms and conditions on which the transferor held them at that time; and (b) the terms and conditions are the terms and conditions applicable as between: (i) the issuer in relation to the Division 3 assets; and (ii) the holder for the time being of the Division 3 assets. (2) If the Division 3 assets are shares, the transferee is also taken to have agreed, at the execution time: (a) to become a member of the issuer; and (b) to be bound, on being registered as the holder of the shares, by the issuer's constitution.' 198 The absurdity of trying to apply these provisions of the Corporations Act, the Corporations Regulations and Forms 1 – 4 under the Corporations Regulations to transfers of shares otherwise than through a broker may well be overcome by s 1073F(6) of the Act. Notwithstanding the paramountcy conferred on Division 3 of Part 7.11 of the Act and the regulations made for the purposes of that Division, it may be that s 1073F(6) prevails even over the other provisions of Division 3 of Part 7.11 of the Act and the Regulations made for the purposes of that Division. As noted above it provided that nothing in the provisions of Division 3 of Part 7.11 and the regulations made for the purposes of that Division should prevent or affect the use of 'any other form of transfer of securities [which would include shares]' that is 'otherwise permitted by law'. 199 I would conclude that a traditional form of share transfer signed by a transferor and transferee in relation to shares in a company effected otherwise than through a broker could constitute a 'proper instrument of transfer' within the meaning of s 1071B(2) of the Corporations Act, notwithstanding the provisions of s 1071B(4) and the lack of a 'sufficient transfer' within the meaning of that subsection. What I have just said does not imply that an instrument of transfer which fails to comply with regulation 7.11.22(1) could be validly registered under s 1071B(2) of the Corporations Act. Post settlement conduct 200 In the belief, no doubt, that Mr Ku had validly transferred the shares to Ji Song, the solicitors for the Song interests wrote to the solicitors for the Ku interests on 15 December 2006 with reference to the trade mark proceedings. In their letter Edwin Davey Commercial & Litigation Lawyers wrote to Darryl Barlow & Company as follows: 'We now confirm that we act for Kjun International Pty Limited (the "Kjun International") and refer to the above matter together with your correspondence dated 13 November 2006. We note the contents of your correspondence and are instructed that our clients deny any assertions that the share transfer from Jun Bom Ku to Ji Young Song was on trust, with respect to the shares in Kjun International. We also remind you that Mr Ku transferred the shares on his own volition. In any event, we are of the position that your client's suggestion that the shares are held on trust by Mr Song are (sic) misguided on the basis that the ASIC Company Extract of Kjun International clearly sets out that the shares are in fact held wholly owned by Mr Song. In the interim, we confirm the following: 1. On 15 December 2006 Mr Song resolved to remove Jun Bom Ku as director of Kjun International; and 2. On 15 December 2006 Suk Joon Song (sic) executed Consent to Act as Director for Kjun International. We are instructed by Mrs Song that you are no longer instructed to act for Kjun International and are to immediately cease all work and have all our client's file available for collection by Monday, 18 December 2006.' 201 Thereupon, Darryl Barlow & Company wrote to Edwin Davey in relation to the trade mark proceedings as follows: 'We refer to the above matter and to the agreement in the Korean Language made on or about 25 October 2006 between Jun Bom Ku and Luke Song purporting to settle the above proceedings and other matters in dispute between the parties. We note that your client's conduct in proceeding to file a cross-claim in the proceedings and the content of you recent correspondence amounts to a repudiation of the said agreement. Our client accepts such repudiation and reserves his rights in relation to damages.' Conclusions 202 (a)Whilst the possibility of a transfer of shares from Mr Ku to Ji Song had been the subject of prior discussion, in the context of a possible settlement of the trade mark proceedings, it was raised by Mr Ku for the first time at the Avillion Hotel on 19 October 2006. (b) Mr Ku indicated his intention to transfer the shares to Ji Song with a view to effecting a gift inter vivos of those shares. (c) On 23 October 2006 Mr Ku executed a 'Change to company details' form (see Schedule 1) which he believed would, upon being recorded by ASIC, have the effect of validly transferring the shares to Ji Song. (d) On 24 October 2006 Mr Ku gave the original of the 'Change to company details' form signed by him and dated 23 October 2006 to Mr Kim so that Mr Kim might forward it to ASIC. (e) Mr Kim never forwarded the signed document to ASIC. On or about 9 November 2006 he threw it into his rubbish bin. (f) No proper instrument of transfer of the one share in Kjun International Pty Limited that was held by him as at 23 October 2006 or of any other shares, as required by s 1071B(2) of the Corporations Act, was ever executed by Mr Ku, delivered by him to Ji Song or delivered by him to Kjun International Pty Limited for registration. (g) In accordance with clause 32 of Kjun International Limited's constitution, Mr Ku remained the holder of whatever shares he may have held in Kjun International Pty Limited, notwithstanding his electronic lodgement on 9 November 2006 of the 'Change to company details' form with ASIC (see Schedule 2). The prima facie evidence of a transfer from Mr Ku to Ji Song (under s 1274B(2)) was negated by the evidence that no transfer was ever executed or delivered. This is now common ground. (h) Mr Ku never did everything that was necessary to be done in order to transfer any shares in Kjun International Pty Limited to Ji Song and render himself bound by his intended gift inter vivos. (i) No question of an implied resulting trust or any other form of trust or of a collateral contract to constitute a trust, arises. (j) No mention of Mr Ku's intended gift of the shares or any other shares was made in either form of agreement as signed by Luke Song and Mr Ku on 25 October 2006, even though the common understanding of the parties at that time was that the 'Change to company details' form (Schedule 1) had not been received or recorded by ASIC at that stage. (k) When at the Avillion Hotel on 25 October 2006, Luke Song and Mr Ku considered in detail the terms of the longer form of agreement with a view to effecting a settlement of the trade mark proceedings. (l) They then proceeded to execute the longer form of agreement and also inadvertently signed the shorter form of agreement. Neither party was under the influence of alcohol or unable to read and approve the terms of the agreements which were executed. (m) The parties intended that their execution of the longer form of agreement, but not the shorter form, should give rise to legal relations. (n) At the time of the execution of the longer form of agreement, the proper parties to the trade mark proceedings were: Song interests – LSU Pty Limited as trustee of the Nirvana Investment Trust Su-shi World Australia Pty Limited Sue Song Luke Song Ku interests – Kjun International Pty Limited Sushi Nara Australia Pty Limited (o) When Luke Song executed the longer form of agreement he intended to bind not only Su-shi World Australia Pty Limited, Sue Song and Luke Song, but also LSU Pty Limited as trustee of the Nirvana Investment Trust. (p) When Mr Ku executed the longer form of agreement he intended to bind not only Kjun International Pty Limited but also Sushi Nara Australia Pty Limited. (q) It is clear from paragraphs B, D, D [the second D], F and G in the longer form of agreement that Luke Song and Mr Ku intended the party described as 'A' to include all the respondents in the trade mark proceedings and by the party described as 'B' in that form of agreement to include all the applicants in those proceedings. (r) As at 25 October 2006 Luke Song was the sole director of Su-shi World Australia Pty Limited and he, together with Sue Song, were the directors of LSU Pty Limited. (s) In my opinion, it may be inferred that Sue Song authorised Luke Song to enter into a settlement agreement at some time between 19 and 25 October 2006 on her own behalf and also on behalf of LSU Pty Limited and that the longer form of agreement contained terms which were within the scope of Luke Song's authority. (t) As at 25 October 2006 Mr Ku was the sole director of Kjun International Pty Limited and also Sushi Nara Australia Pty Limited. As such, he had authority to bind both of those companies to a settlement agreement. (u) The longer form of agreement was not void for uncertainty. Its terms may be ascertained from the words used in the longer form of agreement and the relevant surrounding circumstances. (v) The reference in clause G of the settlement agreement to the parties' agreement to 'solve all problems harmoniously through a mutual talk and agreement, and help and cooperate with each other for mutual development without slandering each other' did not constitute an agreement to agree. Rather the words were indicative of a promise by the parties to use their respective best endeavours to resolve future disputes that may arise between them by negotiation, bringing to bear goodwill in so doing. (w) The settlement agreement provided for the applicants in the trade mark proceedings to refrain from continuing those proceedings and to refrain from bringing any further claims against the respondents arising out of the disputes between them in relation to the trade mark. It may be inferred that the applicants in the trade mark proceedings agreed to file a notice of discontinuance with the consent of the respondents. (x) The agreement also provided for no claims to be brought by the respondents against the applicants in the trade mark proceedings arising out of those disputes. Whilst the second clause D speaks of 'If "B" withdraws the lawsuit against "A" brought in the Federal Court of Australia New South Wales District Registry, "A" accepts it without reservation and agrees that there will not be any legal proceedings against "B" from "A"' (emphasis added), it is clear from the terms of the agreement and, in particular, the preamble to clause G that by the agreement the parties mutually agreed that they would 'not continue' with their respective claims so that no right was reserved to the respondents in the trade mark proceedings to institute their cross-claim as they did on 9 November 2006, in the absence of a formal notice of discontinuance to be filed by the applicants with the consent of the respondents in the trade mark proceedings. (y) The settlement agreement recognised the rights of Kjun International Pty Limited to the trade mark 'Su-shi World' and the continuation of the licensing arrangement, such as it was, whereby Sushi Nara Australia Pty Limited acted as a franchisor of the 'Sushi World' name. It provided for a recognition of the rights of the parties presently using the 'Sushi World' name in respect of shops, to continue to do so, and it conferred a right on the respondents in the trade mark proceedings to 'open new Sushi World' shops. (z) Notwithstanding the settlement agreement which had been concluded, the respondents, including JHJ Brothers Holdings Pty Limited, filed their cross-claim in the trade mark proceedings on 9 November 2006 and proceeded to serve same on 13 November 2006 (see [27]-[28] above). Furthermore, Ji Song purported to remove Mr Ku as a director, secretary and public officer of Kjun International Pty Limited, replacing him with Sue Song (see Edwin Davey's letter of 15 December 2006). Needless to say, the purported removal and replacement of Mr Ku by Sue Song was of no force and effect given that Ji Song never became the holder of any shares in Kjun International Pty Limited. (aa) By their conduct in filing and serving the cross-claim as they did, the respondents in the trade mark proceedings repudiated the settlement agreement reached on 25 October 2006. That repudiation was accepted by the applicants in the trade mark proceedings on 18 December 2006 thereby terminating the settlement agreement. (bb) In the circumstances, the restraints imposed upon the parties in relation to continuing the trade mark proceedings, whether as applicants or cross-claimants, came to an end with the consequence that the trade mark proceedings may now proceed to a hearing. (cc) None of the conduct engaged in by any of the Songs or Su-shi World Australia Pty Limited whether by action or omission constituted misleading and deceptive conduct or conduct likely to mislead or deceive. The circumstances which prevailed between 25 October and 9 November 2006 did not give rise to an obligation on the part of the Songs or any of them to disclose any intention that they may have had to file a cross-claim on 9 November 2006 nor did the circumstances give rise to an obligation upon them or any of them to disclose the fact that the cross-claim had been filed following its filing on 9 November 2006 and before its service on 13 November 2006 (see Henjo Investments Pty Limited v Collins Marrickville Pty Limited (1988) 79 ALR 83 at 94-5). (dd) Su-shi World Australia Pty Limited did not engage in any unconscionable conduct within the meaning of s 51AA of the Trade Practices Act. 203 In the foregoing circumstances, the applicant in the current proceedings has failed in respect of the claims as articulated in paragraphs 1 – 4 and 5 – 8 of the Second Further Amended Application filed on 6 August 2007. However, he is entitled to a declaration that the third respondent has no right, title or interest in any shares in the fourth respondent and also a declaration that the purported removal of the applicant as a director, secretary and public officer of the fourth respondent and the purported replacement of the applicant as a director, secretary and public officer of the fourth respondent by the first respondent, by the third respondent's resolution signed and dated 15 December 2006, was of no force and effect. 204 Given the basis upon which the case has been decided and the late emergence of evidence, which, if addressed prior to the commencement of the proceedings, may have obviated the need for the proceedings, the question of costs should be reserved for later decision. I propose to direct that the parties file and serve written submissions thereon within 7 days. Schedule 1 Schedule 2 I certify that the preceding two hundred and four (204) numbered paragraphs and two (2) Schedules are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham. Associate: Dated: 8 August 2007 Counsel for the Applicant: R J Webb SC and S Fendekian Solicitor for the Applicant: Darryl Barlow & Company Counsel for the First, Second, Third and Fifth Respondents: R K Weaver and S Chrysanthou Solicitor for the First, Second, Third and Fifth Respondents: Edwin Davey Commercial & Litigation Lawyers The Fourth Respondent submitted to such orders as the Court may seem fit. Dates of Hearing: 12, 13, 14, 15, 18, 19 June, 10 July and 6 August 2007 Date of Judgment: 8 August 2007