Supreme Court New South Wales Medium Neutral Citation: Ocean Star Resort Pty Ltd v David Hokyoon Kwon & Anor (No. 2) [2012] NSWSC 897 Hearing dates: 26 June 2012 Decision date: 31 July 2012 Jurisdiction: Equity Division Before: Slattery J Decision: The judgment will be expressed in Korean Won in respect of the Korean Won paid under the June 2004 Agreement. The judgment will be expressed in Australian Dollars in respect of the Australian Dollars paid under the June 2004 Agreement. Interest should be paid from 1 January 2009 up to the date of judgment. Interest should be paid at the Korean commercial interest rate in respect of the Korean Won component of the judgment and in accordance with Practice Note SC Gen 16 in respect of the Australian dollar component of the judgment. Parties are to undertake the necessary calculations. Catchwords: PROCEDURE - judgments and orders - currency of judgment - interest up to judgment finding in principal judgment Ocean Star Resort Pty Ltd v David Hokyoon Kwon & Anor [2012] NSWSC 318 that June 2004 contract abandoned - restitution of monies paid under abandoned contract - whether monies recovered should be paid in Korean Won or Australian Dollars - whether interest should be paid up to judgment - what interest rate is applicable. Legislation Cited: Civil Procedure Act 2005 (NSW) Cases Cited: Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 30 BP Exploration Co (Libya) Ltd v Hunt (No. 2) [1982] 1 All ER 925 Brown Boveri (Australia) Pty Ltd v Baltic Shipping Co (1989) 15 NSWLR 448 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1977) 138 CLR 423 Eleftherotria v Despina R [1979] 1 All ER 421 Helmsing Schiffahrts GmbH & Co v Malta Drydocks Corporation [1977] 2 Lloyd's Rep 444 Fitzgerald v Masters (1956) 95 CLR 420 Lombok Pty Ltd v Supetina Pty Ltd and Anor (1987) 14 FCR 226 Maschinenfabrik Augsburg-Nurenburg Aktiengesellschaft v Altikar Pty Ltd [1984] 3 NSWLR 152 Miliangos v George Frank (Textiles) Ltd [1976] AC 443 Mitsui OSK Lines Ltd v The Ship 'Mineral Transporter' [1983] 2 NSWLR 564 Norsemeter Holdings AS v Pieter Bolele (No. 3) [2002] NSWSC 390 Ocean Star Resort Pty Ltd v David Hokyoon Kwon & Anor [2012] NSWSC 318 Placer (PNG) Pty Ltd v Dyno Nobel Asia Pacific Ltd (Formerly Dyno Wesfarmers Ltd) [2000] NSWSC 142 State Bank of NSW v Swiss Bank Corporation (1995) 39 NSWLR 350 Summers v The Commonwealth (1918) 25 CLR 144 Swiss Bank Corporation v State of New South Wales (1993) 33 NSWLR 63 Category: Consequential orders Parties: Plaintiff-Ocean Star Resort Pty Ltd First Defendant-David Ho Kyoon Kwon Second Defendant- Soft Star Pty Ltd Representation: Counsel: Plaintiff-Mr J.R. Young First and Second Defendants-A.Ogborne Solicitors: Plaintiff-Sean Kim, Kim & Associates First and Second Defendants-Sylvia Fernandez, Holding Redlich File Number(s): 2009/290325 Publication restriction: No Judgment 1In this matter I gave my principal judgment on 11 April 2012: Ocean Star Resort Pty Ltd v David Hokyoon Kwon & Anor [2012] NSWSC 318. This second judgment concerns three issues arising out of the findings in my principal judgment: first, what currency, either Australian Dollars or Korean Won, should be the currency of the judgment; secondly, whether Ocean Star should receive interest up to judgment; and thirdly, if Ocean Star should receive interest up to judgment, which interest rates, Australian or Korean interest rates, are the appropriate interest rates for the calculation of that interest. 2In my principal judgment, I directed the parties to bring in short minutes of order to give effect to my reasons: at [181]-[182]. But, Ocean Star and Soft Star were unable to comply with the Court's direction and now seek competing orders, reflecting their different contentions on these three issues that continue to divide them. 3Persons, matters and things referred to in this judgment are described in the same way as they are in my principal judgment. This judgment should be read together with my principal judgment. Question 1 - The Currency of the Judgment 4In my principal judgment, I found that Ocean Star is able to claim all the monies paid under the June 2004 agreement back upon the abandonment and abrogation of that agreement: at [179]. 5In my principal judgment, I found that KRW 2.45 billon had been paid by Ocean Star to Soft Star over four payments: KRW 300 million on 24 June 2004, KRW 1 billion on 27 February 2004, KRW 150 million on 28 April 2004 and 1 billion on 15 July 2004: at [49]. The amount of KRW 1 billion on 15 July 2004 was the first assignment fee instalment, but was in fact paid in Australia dollars, in the precise amount of AUD 710,227.00, on 30 July 2004: at [145] (Exhibit D). 6Ocean Star seeks an order that judgment should be for AUD 2,736,323.66 (being the AUD amount of KWN 2.45 billion at the exchange rate as at 1 January 2009). Soft Star seeks an order that judgment should be for KRW 2.45 billion. 7Reflecting existing legal principle, the parties agree that the Court has a power to express an order in a foreign currency: Miliangos v George Frank (Textiles) Ltd [1976] AC 443; Mitsui OSK Lines Ltd v The Ship 'Mineral Transporter' [1983] 2 NSWLR 564 at 569 per Yeldem J; Maschinenfabrik Augsburg-Nurenburg Aktiengesellschaft v Altikar Pty Ltd [1984] 3 NSWLR 152 at 153 per Rogers J; Brown Boveri (Australia) Pty Ltd v Baltic Shipping Co (1989) 15 NSWLR 448 at 463-464 per Kirby P, 471-472 per Hope JA, McHugh JA agreeing at 472; and State Bank of NSW v Swiss Bank Corporation (1995) 39 NSWLR 350 at 360-361 per Priestley, Handley and Sheller JJA. But the parties contest whether that power should be exercised in this case. 8Ocean Star, which seeks the entry of judgment in Australian dollars, says that the governing principle for present purposes, is that set out by Einstein J in Norsemeter Holdings AS v Pieter Bolele (No. 3) [2002] NSWSC 390. In Norsemeter Holdings AS v Pieter Bolele (No. 3), Einstein J held "the governing principle is that a judgment should be expressed in foreign currency, if such an order is sought by the claimant and that currency is the currency in which the claimant's loss was felt or which most truly expresses its loss": Norsemeter Holdings AS v Pieter Bolele (No. 3), [7]. Einstein J's governing principle expresses the dual requirements: (i) that the claimant seek judgment in the foreign currency, and (ii) that the foreign currency is the currency in which the claimant's loss was felt or which most truly expresses the claimant's loss. 9In Brown Boveri (Australia) Pty Ltd v Baltic Shipping Co Kirby P noted a requirement similar to the first requirement set out by Einstein J in Norsemeter Holdings AS v Pieter Bolele (No. 3), that: "Each country is entitled to expect that, special provision apart, a debt for civil wrong will be settled in the currency of that country, at least if a party entitled to sue there so claims. The currency of Australia is Australian dollars. The respondent has lawfully sued it in the Supreme Court of this State of Australia claiming a judgment expressed in that currency. There is nothing to require it to accept payment in pounds sterling in this country": at 464. 10Ocean Star submits that the currency of the judgment should be Australian dollars, because it sought payment in Australian Dollars in both the Statement of Claim and in the Amended Statement of Claim and that Soft Star has at no time taken issue with its claim for payment in Australian dollars. 11But Einstein J's first requirement of the governing principle set out above does not seem to have been applied in other cases. Mr Young of Counsel for Ocean Star directed the Court's attention to Placer (PNG) Pty Ltd v Dyno Nobel Asia Pacific Ltd (Formerly Dyno Wesfarmers Ltd) [2000] NSWSC 142. In Placer (PNG) Pty Ltd v Dyno Nobel Asia Pacific Ltd (Formerly Dyno Wesfarmers Ltd) Hunter J quoted the submissions of the claimant insurance company which appeared to restate the first requirement set out by Einstein J in the terms: "judgment calculated in a foreign currency will only be awarded where the plaintiff seeks it": [44]. Mr Young acknowledged that it was not clear that Hunter J was deciding the case on the basis that a foreign currency will only be awarded where the plaintiff seeks the award in the foreign currency or whether Hunter J simply thought that the foreign currency was inappropriate in the circumstances of the case. 12But Mr Ogborne, counsel for Soft Star, says that the first requirement of Einstein J's governing principle is not the law. Mr Ogborne directed the Court's attention to Brown Boveri (Australia) Pty Ltd v Baltic Shipping Co. In Brown Boveri (Australia) Pty Ltd v Baltic Shipping Co, the Court of Appeal of the Supreme Court of New South Wales found that "the court's duty is to express a judgment in the currency which best expresses the loss of the party which has sued": at 464 per Kirby P, Hope and McHugh JJA agreeing at 471 and 472; see also Rogers J's observation that "the Court's judgment ought to be in the currency that best expresses the plaintiffs loss" in Maschinenfabrik Augsburg-Nurenburg Aktiengesellschaft v Altikar Pty Ltd, at 153. Further, Mr Ogborne emphasised that in Brown Boveri (Australia) Pty Ltd v Baltic Shipping Co, although the plaintiff had not sought an award in Australian dollars, the Court nevertheless undertook consideration to determine the proper currency of the judgment. There was no suggestion that simply because the plaintiff had not sought an award in a foreign currency that the Court could dispose of the case on that basis. 13But without needing to decide the correctness or otherwise of Einstein J's first requirement the Court of Appeal's general description of the task in Brown Boveri (Australia) Pty Ltd v Baltic Shipping Co seems to govern my decision. I can award a judgment in Korean Won, even though Ocean Star has not asked for judgment in that currency. 14Ocean Star submits that Einstein J's second requirement of the governing principle in Norsemeter Holdings AS v Pieter Bolele (No. 3) is also satisfied here and warrants the entry of judgment wholly in Australian dollars. Ocean Star says that Australian Dollars is the appropriate currency for judgment because: both Ocean Star and Soft Star are Australian companies with Australian addresses; both Ocean Star and Soft Star retained Australian lawyers to negotiate the lease agreement; the dispute has been litigated in Australian Courts; the dispute was brought about by the Australian Government's prohibition of casino operations on Christmas Island; the June 2004 agreement that gives rise to the dispute is in relation to property within Australian territory; and the potential, said to be disclosed by the evidence, that enforcement of a debt against Soft Star is necessary (and that enforcement of a debt in Australian Dollars is less complex than enforcement of a debt in Korean won). 15In reply Soft Star says that because the principal judgment finds that Ocean Star is entitled to recover monies paid under the June 2004 agreement, on the basis of abandonment and abrogation, that the monies paid under the June 2004 agreement are recoverable based on the principles of restitution and not as contractual damages, such that the question of the proper currency of the judgments must be considered within the framework of the principles of restitution. Soft Star says that such consideration leads to the conclusion that the proper currency for the judgment is Korean Won. 16In a claim for an award of restitution, the law is concerned with the defendant's benefit rather than on the plaintiff's expense: BP Exploration Co (Libya) Ltd v Hunt (No. 2) [1982] 1 All ER 925 at 969 per Goff J. 17In BP Exploration Co (Libya) Ltd v Hunt (No. 2) Goff J noted that ordinarily, judgment will be in the currency of the plaintiff's loss: BP Exploration Co (Libya) Ltd v Hunt (No. 2), 969. However, Goff J distinguishes between a claim for damages and an award of restitution: BP Exploration Co (Libya) Ltd v Hunt (No. 2), 969. Goff J there states: "In such cases the law is concerned with restitution in respect of the benefit obtained by the defendant. The award is therefore related to that benefit. The plaintiff's expense is a prerequisite of his claim; but it does not limit or control the award of restitution. In assessing an award of restitution, it is the defendant's benefit that has to be identified, in order that restitution may be ordered in respect of that benefit. Accordingly, in selecting (where necessary) the currency for the award, attention must be concentrated on the defendant's benefit rather than on the plaintiff's expense": BP Exploration Co (Libya) Ltd v Hunt (No. 2), at 969. 18Applying the approach of the House of Lords in Eleftherotria v Despina R [1979] 1 All ER 421, Goff J proceeds "the general principle is that the award of restitution should be made in the currency in which the defendant's benefit can be most fairly and appropriately valued. Such a principle is, of course, broad enough to embrace all claims in restitution, including the comparatively simple case I have already referred to where the benefit takes the form of a payment of money": BP Exploration Co (Libya) Ltd v Hunt (No. 2), at 970. These principles are applicable here. 19The return of moneys paid under the abandoned and abrogated June 2004 agreement is restitutionary. The benefit obtained by Soft Star was the payment of about KRW 2.45 billon, but more exactly being KRW 1.45 billion and AUD 710,277.00. Applying the principles stated by Goff J in BP Exploration Co (Libya) Ltd v Hunt (No. 2), the restitution of the monies paid by Ocean Star to Soft Star requires, in my view, the return of Soft Star's benefit to Ocean Star, being the two payments of KRW 1.45 billion and AUD 710,277.00 in those respective currencies. 20But does the mix of Australian Dollars and Korean Won, which constitutes the precise benefit obtained by Soft Star, create a difficulty for the determination of the currency of judgment? Mr Ogborne submitted that, in the context of a mix of currencies, because the contract provided for payment in Korean Won and because Korean Won represented the majority currency in the dual currency-mix of Australian Dollars and Korean Won paid to Soft Star, the currency of the judgment should just be Korean Won. 21But mixed currency judgments are sometimes awarded. For example in Norsemeter Holdings AS v Pieter Bolele (No. 3) itself Einstein J ordered that the judgment be paid in a mix of Swedish Kroner and Norwegian Kroner: Norsemeter Holdings AS v Pieter Bolele (No. 3), at [23]. The award here is restitutionary and related to the benefit obtained by Soft Star. So it is appropriate that the currency of the judgment reflect that Soft Star obtained that benefit in a mix of Australian Dollars and Korean Won. Question 2 - Whether Ocean Star should receive interest up to the judgment 22Ocean Star says that because the Court found in the principal judgment at [179] that the June 2004 agreement was abandoned "by late 2008 or early 2009", that the midpoint in this range, 1 January 2009 should be taken as the date of the abandonment of the June 2004 agreement. Ocean Star seeks interest from that date of abandonment of the June 2004 agreement up to the date of judgment. Soft Star says that no interest should be awarded up to the date of judgment. 23Counsel for Soft Star cited cases of claims for restitution of monies paid under an abandoned contract in which interest up to judgment was not awarded: for example, Summers v The Commonwealth (1918) 25 CLR 144, DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1977) 138 CLR 423, Fitzgerald v Masters (1956) 95 CLR 420, Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 and Lombok Pty Ltd v Supetina Pty Ltd and Anor (1987) 14 FCR 226. However, those cases do not establish a rule that interest must not be awarded in cases of restitution of a deposit paid under an abandoned contract. Rather, they are examples of the Courts exercising their discretion not to award interest in cases of abandonment. 24DTR Nominees Pty Ltd v Mona Homes Pty Ltd was cited as an example of the restitution of monies paid under an abandoned contract in which interest up to judgment was not awarded. So it is. But the High Court (see the joint judgment of Stephen, Mason and Jacobs JJ at 434-435) did not award interest up to judgment, on the basis of the particular circumstances of that case. The Court was not applying any principle that interest should not be paid up to judgment for restitution of monies paid under an abandoned contract: DTR Nominees Pty Ltd v Mona Homes Pty Ltd, at 434-435. Instead, the award of interest remains in the discretion of the court. 25But there are cases that emphasise the Court's overriding discretion to award interest even in cases of the restitution of monies paid under abandoned contracts. In Lombok Pty Ltd v Supetina Pty Ltd and Anor (1987) 14 FCR 226, the Full Court of the Federal Court of Australia, did not award interest on monies paid under an abandoned contract. But it held that the award of interest on monies paid under an abandoned contract remains in the discretion of the court. 26In Lomback Lockhart J noted that the general rule is: "Ordinarily a purchaser is entitled to interest from the vendor on the deposit if its return is ordered by the court": Lombok Pty Ltd v Supetina Pty Ltd and Anor, 239. But noting that the entitlement to interest was not a rule of universal application his Honour pointed out that the "entitlement to interest on moneys repayable to a purchaser following the mutual abandonment of a contract is essentially for the court to determine in the exercise of its discretion when adjusting the rights and obligations of the parties. I am not persuaded that Supetina is entitled to interest on the moneys to be refunded by Lombok. No error by the trial judge has been demonstrated": Lombok Pty Ltd v Supetina Pty Ltd and Anor, at 239. And in the same case Pincus J said on this point: "the question of payment of interest in such circumstances appears to be one for the exercise of a judicial discretion": Lombok Pty Ltd v Supetina Pty Ltd and Anor, 246. 27Here it is appropriate that Soft Star pay interest up to the date of judgment on the monies paid by Ocean Star. Soft Star has enjoyed the benefit of holding the moneys paid by Ocean Star since mid 2004. Ocean Star does not claim interest during the period where it sought repayment of the monies pursuant to the alleged oral agreement and instead claims interest only from 1 January 2009, the midpoint of the range of dates that the June 2004 Agreement was abandoned. Although the evidence does not reveal what Soft Star has done with the monies since 1 January 2009, Soft Star had the opportunity to invest, and Ocean Star lost the opportunity to invest, the funds. In the exercise of the discretion under Civil Procedure Act 2005 (NSW), s100(1), Soft Star should pay interest from 1 January 2009 up to the date of judgment on the monies Ocean Star paid to Soft Star under the June 2004 agreement. Question 3 - The interest rate applicable up to the judgment 28The parties also disagree on the applicable interest rate up to judgment. Soft Star says that if interest up to judgment were to be awarded, interest should be calculated by reference to the interest rates which would compensate for the claimant's loss through being kept out of its money in the relevant foreign currency, such that it should be awarded by reference to the interest rates applicable in South Korea and not by reference to the interest rates applicable in Australia. Ocean Star accepts that, prima facie, if judgment is made in a foreign currency, the interest rates applicable to that foreign currency should be applied. But Ocean Star says that because it is an Australian company, operating in Australia; and because, it says, Soft Star has enjoyed the benefit of the deposit in Australia, Australian interest rates should apply. 29The principles governing the applicable interest rate may be shortly stated. Interest will ordinarily be calculated at the rates appropriate to the currency in which the judgment is given: Maschinenfabrik Augsburg-Nurenburg Aktiengesellschaft v Altikar Pty Ltd, 153 per Rogers J and Swiss Bank Corporation v State Bank of New South Wales (1993) 33 NSWLR 63, 64-65 per Giles J (upheld on appeal: State Bank of New South Wales v Swiss Bank Corporation, 360-362 per Priestley, Handley and Sheller JJA). But there may be circumstances justifying a different rate: Helmsing Schiffahrts GmbH & Co v Malta Drydocks Corporation [1977] 2 Lloyd's Rep 444, 448-449 per Kerr J. 30Courts assume that the plaintiff has had to borrow money in the foreign currency of the judgment to replace the money of which it has been deprived, or alternatively that the plaintiff has lost the opportunity of earning interest in that foreign currency on the money of which it has been deprived. Where the plaintiff claims judgment in a foreign currency, that is usually the currency in which it operates and in which it borrows or invests: Swiss Bank Corporation v State Bank of New South Wales, 64-65 per Giles J. 31 But that will not always be the case. For example, in Helmsing Schiffahrts GmbH & Co v Malta Drydocks Corporation Kerr J awarded interest calculated according to German interest rates, and not Maltese interest rates, even though Maltese pounds was the currency of the judgment, because the plaintiff was a German company and it was assumed that the plaintiff had to find the sum equivalent to the amount of the judgment from alternate sources in Germany. 32Giles J expressed the relevant discretionary considerations in Swiss Bank Corporation v State Bank of New South Wales Giles J, citing Helmsing Schiffahrts GmbH & Co v Malta Drydocks Corporation: "what are the appropriate rates depends on all the circumstances, of which the currency of judgment is only one. It must be remembered that there ought not be a fixed rule, and there is always an exercise of discretion in the court ordering that there be included in the judgment interest" (at 65). 33The proper course here is for Australian interest rates to be applied to the Australian dollar component and for Korean interest rates to be applied to the Korean Won component of the judgment. In relation to the Australian dollar component therefore interest rates will be calculated in accordance with Practice Note SC Gen 16. 34In relation to the Korean Won component, there is a further contest between the parties in relation to which Korean interest rates are applicable. Soft Star says that, assuming that the judgment amount is given in Korean won, if the Bank of Korea base rate is applied the higher interest accrued is KRW 195,194,520.55; but that if the commercial rate is applied the interest accrued is the higher amount of KRW 260,692,082.19. Ocean Star contends for interest rates according to the rates applicable to civil proceedings in Korea. 35The Korean commercial rate is the appropriate rate to apply to the Korean Won currency component of the judgment. That commercial interest rate best represents Soft Star's benefit if it had invested the Korean Won paid under the August 2004 contract. But it is also the amount which Ocean Star might expect to have received if it had the opportunity to invest those same monies. Conclusions 36In relation to the three questions posed in second judgment I have drawn the following conlusions. First, Australian Dollars should be the currency of judgment for the Australian dollar amount paid under the August 2004 contract and Korean Won, should be the currency of judgment for the Korean Won amount paid. Secondly, Ocean Star should receive interest from 1 January 2009 up to judgment. Thirdly, Ocean Star is entitled to Australian interest rates under Practice Note SC Gen 16 in respect of the Australian dollar amount of the judgment; and Korean commercial interest rates in repsect of the Korean Won amount. 37The parties should do the necessary calculations and bring in short minutes of order to give effect to these reasons. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 August 2012