FEDERAL COURT OF AUSTRALIA Ku v Song (No. 2) [2007] FCA 1430 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 13 SEPTEMBER 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: 13 SEPTEMBER 2007 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. There be no order as to costs. 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: 13 SEPTEMBER 2007 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The original Application in this matter was filed on 21 December 2006. It was superseded by an Amended Application filed 15 March 2007, a Further Amended Application filed 14 June 2007 and a Second Further Amended Application filed 6 August 2007. 2 A Statement of Claim was filed on 15 March 2007, which was superseded by an Amended Statement of Claim filed 12 June 2007, a Further Amended Statement of Claim filed 13 June 2007 and a Second Further Amended Statement of Claim filed 6 August 2007. 3 The hearing occupied eight days commencing on 12 June 2007 and ultimately concluding on 6 August 2007. 4 The Court's decision was reserved on 19 June 2007 but the matter was re-listed for further submissions on 10 July 2007 whereupon the matter was stood over to 6 August 2007 for further hearing, the cases of both the applicant and the respondents being re-opened, with further evidence tendered, on that occasion. 5 On 6 August 2007 the Court reserved its judgment for the second time. Judgment was delivered 8 August 2007. Declarations were made as follows: '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.' 6 At [204] of my reasons for judgment of 8 August 2007 I said: '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.' 7 In the preceding paragraph [203] I had concluded that the applicant 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 but was, nevertheless, entitled to the declarations mentioned above. 8 On 8 August 2007 I formally directed the parties to file and serve any written submissions or supplementary written submissions on costs on or before 15 August 2007. 9 Given that the judgment spans some 90 pages, I do not intend to again recite the history of the matter or the several issues which were ventilated. 10 One cannot view the present proceedings in isolation. In a sense, they spring out of the trade mark proceedings instituted on 30 August 2006 by 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 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') (proceedings NSD 1661 of 2006). As I said in my earlier reasons for judgment at [18] – [19]: '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.' 11 Much of the factual material placed before the Court in the present proceedings was directed at whether the trade mark proceedings had been effectively settled between the Ku interests and the Song interests. 12 Amongst other things, the present proceedings concerned 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 to the third respondent Ji Young Song ('Ji Song'), which was said to have been made on 9 November 2006. Further evidence tendered by the respondents on 6 August 2007, following the reopening of the respective cases of the applicant and the respondents, revealed that there was a material inconsistency between what the public record showed the issued capital of Kjun International Pty Limited to be and what Kjun International Pty Limited's own Register of Members revealed. 13 The catalyst for the present proceedings would appear to have been a letter written by the solicitors for the Song interests to the solicitors for the Ku interests on 15 December 2006 in relation to the trade mark proceedings. In short compass, the solicitors for the Song interests claimed that they had become the solicitors for Kjun International Pty Limited. They advised that the solicitors for the Ku interests should 'immediately cease all work' on the trade mark proceedings in which Kjun International Pty Limited was the first applicant. 14 The basis for the change of solicitors was said to be that Ji Song had become the sole shareholder in Kjun International Pty Limited and, in exercise of his powers as such had removed Mr Ku as a director on 15 December 2006, replacing him with his mother, Sue Song. 15 However the applicant may have pleaded his case in the present proceedings the net result was that he secured declaratory relief to the effect that Ji Song had no right, title or interest in any shares in Kjun International Pty Limited and that the removal of Mr Ku as a director, secretary and public officer of Kjun International Pty Limited and the purported replacement of him as a director, secretary and public officer by Sue Song was of no force and effect. Accordingly, the solicitors for the Song interests had no right to advise the solicitors for the Ku interests that they should immediately cease all work on the trade mark proceedings. 16 In the respondents' 'SUPPLEMENTARY SUBMISSIONS' of 6 August 2007 they said at paragraph 14: '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. …' 17 However, in their original 'OUTLINE OF SUBMISSIONS' dated 19 June 2007 the respondents argued their case as follows: '112. The onus is on the Applicant to prove: (a) that the (sic) Luke Song, Sue Song, Ji Song and the Fifth Respondent engaged in misleading and/or deceptive conduct or conduct likely to mislead or deceive at the relevant time; (b) that Ji Song and the Fifth Respondent engaged in unconscionable conduct; (c) that Ji Song is holding shares on trust for the Applicant; and (d) that the Applicant suffered damage by reason of the conduct of the (sic) Luke Song, Sue Song, Ji Song or the Fifth Respondent. 113. It is submitted that the Applicant has not satisfied his onus – the evidence he has adduced is unsatisfactory in many respects and has not proved any cause of action against the Respondents. 114. It is submitted that the Application should be dismissed and that the Applicant should pay the First, Second, Third and Fifth Respondents' costs of the proceedings.' 18 In their supplementary written submissions the respondents said under the headings 'Appropriate orders' and 'Costs': 'Appropriate orders … 28. The Respondents submit that the appropriate orders are: (a) the Application be dismissed; and (b) the Applicant pay the Respondents' costs on an indemnity basis. Costs 29. The corporate register of Kjun International Pty Limited (including the constitution of that company) was always in the custody and control of the Applicant. The Respondents were not served with a copy until very recently. This is despite a notice to produce (that would include such a document) being served on the Applicant on 5 June 2007 and informally called on at the Pre-Trial Hearing on 6 June 2007. 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. This was a matter peculiarly within the knowledge of the Applicant as director and secretary of Kjun International Pty Limited. 31. It should also be noted that the Applicant amended his pleading on the first, second and again on the third day of the hearing of this matter with the effect of changing his case significantly. 32. It is submitted that, by reason of the matters discussed above, this is a special case in which the Applicant has conducted himself inappropriately and he should pay the Respondents' costs of the proceedings on an indemnity basis. 33. The proceedings were utterly unnecessary and a waste of the Court's time. Accordingly, and (sic) the Applicant should pay the Respondents' costs of the proceedings on an indemnity basis.' 19 I have no record of any notice to produce having been called by the respondents when the matter was before me on 6 June 2007 and do not know what, if any documents, were the subject of any notice that may have been served on 5 June 2007, if at all. 20 True it is that Mr Ku claimed to have been the holder of the whole of the issued capital in Kjun International Pty Limited. However, it was the respondents' claim that the shares had been transferred to Ji Song which led to the purported removal of Mr Ku as a director and his replacement with Sue Song, who apparently instructed the solicitors for the Respondents to demand that the solicitors for the Ku interests cease all work in the trade mark proceedings. 21 The respondents' claim that Ji Song could frustrate the conduct of the trade mark proceedings by Kjun International Pty Limited was plainly the raison d'etre for the present proceedings. 22 The declarations which have been made are directly in conflict with the validity of the action taken by Ji Song on or about 15 December 2006 purportedly removing the applicant as a director of Kjun International Pty Limited and replacing him with Sue Song. 23 These proceedings have occupied a considerable amount of court time which, in the result, has been wasted. The respondents would seek to visit blame for the waste of time upon the applicant who they submit should have known what the constitution of Kjun International Pty Limited had to say about the allotment of shares and the transfer of shares and what in fact the true situation was in relation to share ownership before Change to company details forms were prepared by Mr Ku in respect of Kjun International Pty Limited on 23 October 2006 and 9 November 2006. 24 In my opinion responsibility for the unnecessary costs and expense incurred as a result of a failure to consider Kjun International Pty Limited's constitution, its register of members and the requirements for a valid transfer of shares in it from Mr Ku to Ji Song should be visited at the doors of both the applicant and the respondents. 25 In the circumstances, I do not see this case as special such that there should be an order for costs to be paid on an indemnity basis, if at all. 26 The relevant principles to be observed in respect of costs are conveniently summarised in the judgment of Sheppard J in Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 at 230-234. The ordinary rule is that where the Court orders that the costs of one party to litigation be paid by another party the order is for payment of those costs on the party and party basis. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court departing from the usual course. The existence of particular facts and circumstances capable of warranting the making of an order for payment of costs on the indemnity basis does not mean that judges are necessarily obliged to exercise their discretion to make such an order. 27 In Gersten v Minister for Immigration & Multicultural Affairs [2001] FCA 260 at [19] a Full Court consisting of Lee, Carr and Sackville JJ said: 'If an action is commenced when proper advice would indicate that the proceeding has no prospect of success, a discretion to award indemnity costs is ordinarily enlivened.' 28 Provided that the discretion is exercised having regard to the applicable principles, costs remain at the discretion of the primary judge. 29 In the outline of the applicant's submissions on costs dated 20 August 2007 the applicant has said: '2. The appropriate order is that the respondents pay the applicant's costs of the proceedings. That is so despite the fact that the orders made reflected the late emergence of the issue as to whether the transfer of shares in Kjun International from the applicant to Ji Young Song had been effective at law. …' 30 The applicant submitted that 'in a real sense' he had 'enjoyed complete success'. He may have enjoyed a successful outcome but the basis for it was certainly not as he had propounded. 31 There have been earlier costs orders made in these proceedings which should not be disturbed. 32 In relation to the costs that have not been the subject of any orders, it seems to me that the proper outcome in the unusual circumstances of this case is that there be no order as to costs. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham. Associate: Dated: 13 September 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: 13 September 2007