Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Joo v Yoo [2016] NSWCA 172 Hearing dates: 12 July 2016 Date of orders: 12 July 2016 Decision date: 25 July 2016 Before: Ward JA; Payne JA; Sackville AJA Decision: (1) Leave to appeal refused. (2) The applicants pay the respondent's costs. (3) Unless the applicants file written submissions with the Associate to Payne JA before 4 pm on 27 July 2016, the sum of $30,000 together with any interest thereon paid into Court as security for costs of the appeal by the applicants pursuant to order 2 made by Gleeson JA on 16 June 2016 be released forthwith to the respondent after 4 pm on 28 July 2016. Catchwords: APPEAL – application for leave to appeal – primary judge found no equitable transfer of equitable interest in shares valued at approximately USD 12,000 – whether leave to appeal should be granted in respect of property not having a value of $100,000 or more pursuant to Supreme Court Act 1970 (NSW) s 101(2)(r)(ii) Legislation Cited: Civil Procedure Act 2005 (NSW), s 60 Corporations Act 2001 (Cth), Part 7.11 Supreme Court Act 1970 (NSW), s 101 Cases Cited: Anning v Anning (1907) 4 CLR 1049 Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 Carolan v AMF Bowling Pty Ltd [1995] NSWCA 69 Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614 Category: Principal judgment Parties: Ok Ja Joo (First Applicant) Jae Joo Kim (Second Applicant) Wealth Wisdom Investments Limited (Third Applicant) Il Nam Yoo (Respondent) Representation: Counsel: M Neil QC & S O'Brien (Applicants) J R Young (Respondent) Solicitors: Alpha Lawyers (Applicants) Kim & Associates (Respondent) File Number(s): 2016/00178301 Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division – Corporations List Citation: [2016] NSWSC 670 Date of Decision: 26 May 2016 Before: Black J File Number(s): 2014/186025 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment 1. THE COURT: On 12 July 2016 this Court heard oral argument in this matter. At the conclusion of that argument the Court made orders that leave to appeal be refused with costs. The following are the reasons of the Court for making those orders. Brief facts 1. Although the hearing of the matter took place over several days, the relevant facts are in a relatively narrow compass. 2. In April 2012 (according to the applicants) or May 2012 (according to the respondent) a Mr Choi approached the respondent, Mr Yoo, with a business proposition. Mr Choi had been Mr Yoo's neighbour and was at that time associated with a Korean company, Topfield Co Ltd (Topfield). 3. At that time an Australian company, Toppro Pty Ltd (Toppro), was party to a distribution agreement with Topfield. Under that agreement Toppro was the distributor in Australia of electronic goods manufactured by Topfield. 4. Mr Choi said that he was aware of an opportunity for Mr Yoo to make a profit in the short term on the sale of shares. Mr Choi and Mr Yoo agreed that Mr Yoo would pay USD 10,000 for shares in Toppro, and on-sell those shares shortly thereafter for USD 12,000. 5. To give effect to this agreement Mr Yoo paid USD 10,000 to a Mr Yu for the shares in Toppro. It was eventually common ground before the primary judge that Mr Yoo did not obtain a legal interest in the shares by reason of non-compliance by Toppro with the provisions of Part 7.11 of the Corporations Act 2001 (Cth). At all times prior to the making of orders by the primary judge, Mr Yoo held only an equitable interest in the Toppro shares, arising from his ability to obtain specific performance of a contract for purchase of those shares from Mr Yu. 6. At Mr Choi's request, and pursuant to the agreement originally made, Mr Yoo also filled in, at least in part, a share transfer form in relation to the Toppro shares he had purchased. The transferee nominated in the share transfer form was a company incorporated in the British Virgin Islands, Wealth Wisdom Investments Limited (WWIL), the third applicant. The consideration identified on the form was USD 12,000. Mr Yoo signed the form as "sole director" of Toppro although he was not at that time a director. 7. Mr Yoo agreed with Mr Choi that the transfer form would lapse in three months and Mr Choi would not take any steps in relation to the transfer after three months. It was agreed that if the transfer was not completed in that time Mr Yoo would be free to deal with the shares as he saw fit. Subsequently there was a conversation between Mr Yoo and Mr Choi in which Mr Yoo granted Mr Choi a further three months (until November 2012) to complete the transfer, on the same terms. 8. In late 2012 Mr Yoo told Mr Choi that as he had not received payment he was keeping the Toppro shares. 9. Mr Choi gave the partly filled in form to Mrs Joo, the first applicant, shortly after it had been signed in May 2012. The evidence discloses that Mrs Joo was married to the managing director of Topfield and was also the sole shareholder of Waymon Group Limited (also incorporated in the British Virgin Islands), which was itself the sole director and shareholder of WWIL. 10. The primary judge found that although Mr Choi was wearing many hats in these transactions, for present purposes Mr Choi was the agent of WWIL: see judgment at [31]. 11. In 2014, Mr Yoo began to have a greater involvement in the day to day affairs of Toppro. Although the evidence is sparse and the details do not matter for present purposes, it appears that sometime in 2014 Mr Yoo took steps to terminate the distribution agreement between Toppro and Topfield. 12. In June 2014, Mrs Joo caused the identity of the transferee on the share transfer form, WWIL, to be crossed out by hand and her name included as transferee. 13. The transfer form contained the following express stipulation: Any alterations must be initialled by the seller/s and the buyer/s. 1. Also in June 2014, the share transfer form, as amended, was sent to Mr Yoo, together with a cheque for USD 12,000, made out in the name of Mrs Joo. Subsequently, a cheque for USD 12,000 made out in the name of Mr Yoo was forwarded to him. Those cheques were each returned to Mrs Joo's legal representatives. 2. On 23 June 2014, proceedings were commenced by Mr Yoo, and others, against the present applicants. 3. In September 2014, Mrs Joo caused the identity of the transferee on the share transfer form to be changed again. Her name was crossed out by hand and the name WWIL re-inserted as transferee. A further cheque for USD 12,000 was sent to Mr Yoo with the amended share transfer form. 4. Again, the cheque was immediately returned by Mr Yoo to Mrs Joo's legal representatives. Decision of the primary judge 1. Despite the factual background set out above, it was no part of the present applicants' case that in 2012 there was a contract between Mr Yoo on the one hand and Mr Choi (in any capacity) on the other to transfer the shares in Toppro to a third party, whether Mrs Joo, WWIL or anyone else. 2. Rather, the present applicants attempted to prove a case as one involving a gift of the Toppro shares by Mr Yoo to either Mrs Joo or WWIL. 3. Thus, in his Honour's careful and detailed judgment, the central question addressed was the one posed by the present applicants; whether they had established an equitable transfer of equitable property, being Mr Yoo's equitable interest in the Toppro shares. 4. The primary judge first set out the relevant test by reference to the leading texts and the decision of the High Court in Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614: see judgment at [40]-[45]. His Honour found that the evidence did not indicate an immediate intention on the part of Mr Yoo to convey the relevant equitable interest to WWIL, still less to Mrs Joo: see judgment at [49]-[50]. 5. The primary judge also rejected various ancillary claims including estoppel and contract claims. The only contract which was pleaded was one between Mr Yoo and Mrs Joo alleged to have come into existence in 2014 upon presentation of the cheque for USD 12,000 to Mr Yoo. 6. On 26 May 2016, the primary judge delivered detailed reasons and said that he proposed to make an order for the rectification of the share register of Toppro in favour of Mr Yoo and any appropriate ancillary orders. 7. On 3 June 2016, the primary judge made the following relevant orders: 1. The Court declares that the Plaintiff, IL NAM YOO, is the legal and equitable owner of the 100,000 shares in the First Defendant, Toppro Pty Ltd ACN 128 764 429 ("Toppro"). 2. The Court declares that each of the purported transfers of shares in Toppro from the Plaintiff did not take effect: a to the Second Defendant, OK JA JOO ("JOO"), dated 20 June 2014 b to the Fourth Defendant [WWIL] dated 3 September 2014. 3. The Court declares that the purported appointments as directors of Toppro on 20 June 2014 of each of the Second Defendant and the Third Defendant is each respectively void and of no effect. …. 6. Toppro shall within seven days of these orders correct the share register kept by it so as to show that on and from 30 April 2012, IL NAM YOO has held and owned 100,000 shares in Toppro and that he continues to do so ("the Correction"). The application for leave to appeal in this Court Stay of the primary judge's orders 1. On 10 June 2016, the present applicants made an application for leave to appeal to this Court. Although Toppro was a party to the proceedings before the primary judge, the applicants did not join it as a party to the application for leave to appeal. 2. On 16 June 2016, Gleeson JA made the following relevant orders: (1) On the undertaking as to damages given by the first applicant (Mrs Joo), by her counsel, stay the orders made by Black J in the proceedings below on 3 June 2016, being orders 1-11, until the determination of the application for leave to appeal or earlier further order. (2) The first applicant to provide security for costs in relation to the application for leave to appeal in the amount of $30,000 within 7 days, such amount to be paid into Court and to abide the further order of the Court. 1. As a result of the Court's orders made on 12 July 2016, the stay in order 1 of Gleeson JA's orders has come to an end. 2. The Court has addressed the disposition of the funds lodged as security for costs the subject of order 2 of Gleeson JA's orders at the conclusion of these reasons. Consideration of the application for leave to appeal 1. Section 101(2)(r)(ii) of the Supreme Court Act 1970 (NSW) provides that an appeal to the Court of Appeal shall not lie, except by leave of the Court of Appeal, unless the matter involves (directly or indirectly) any claim respecting property having a value of $100,000 or more. 2. At the commencement of the hearing, which had been fixed for concurrent hearing of the question of leave and the appeal itself, the Court invited submissions from the parties about whether the grant of leave was warranted in the present case. 3. The applicants for leave were represented by Mr M Neil QC and Mr S O'Brien. The respondent was represented by Mr J R Young. 4. The applicant submitted that this was a case in which it is appropriate to grant leave because of: 1. the importance of the subject matter of the proceedings as to control of Toppro, a company which is the sole distributor of Topfield electronic consumer products in Australia; 2. the public importance of deciding the proper test for an equitable disposition of an equitable interest in shares, raising complex and subtle questions of equity and law, having significance going beyond litigants to others engaged in similar transactions; and 3. rectifying a clearly identifiable injustice in the Court below as to contrary findings, the taking into account of irrelevant evidence and the failure to give proper weight to relevant evidence. 1. The reasons of the Court for rejecting each of these submissions are as follows. The control of Toppro and the distributor arrangement with Topfield 1. Ordinarily, leave to appeal to the Court of Appeal in matters involving small claims is limited to matters which involve issues of principle, questions of general public importance or an injustice which is reasonably clear: see, for example, Carolan v AMF Bowling Pty Ltd [1995] NSWCA 69 per Kirby P. 2. It was common ground before this Court that the only evidence of the value of the shares the subject of this application for leave to appeal was that the shares had a value of USD 12,000. Even applying a very generous exchange rate, the matter involves a claim respecting property having a value of only a small fraction of the jurisdictional threshold of $100,000. 3. Further, the total value of the property here the subject of dispute is only about half of the amount ordered to be paid as security for costs of the appeal by Gleeson JA. It may comfortably be assumed that the total costs involved in a four day trial before the primary judge involved a sum being many multiples of the USD 12,000 value of the shares in dispute. 4. Section 60 of the Civil Procedure Act 2005 (NSW) provides: 60 Proportionality of costs In any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute. 1. As Basten JA pointed out in Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 at [39]: This direction has an important operation in respect of leave applications involving amounts below the statutory threshold. Where, as in the present case, the costs of the trial are disproportionate to the amount in dispute, the incurring of additional costs, for a potentially uncertain return, will be a factor weighing heavily against a grant of leave. 1. Absent demonstration of an issue of principle, a question of general public importance or an injustice which is reasonably clear, this is not a case where leave to appeal should be granted. 2. In the present case, the applicants sought to address this problem by pointing to evidence of the turnover of Toppro in the years FY2014/15 and most of FY2015/16, which was in the millions of dollars. As the primary judge noted, this evidence was of doubtful reliability as Toppro had "unusual accounting practices": see judgment at [90]. In any event, the fact of Toppro's apparently large turnover does not of itself demonstrate anything about the value of the shares in the company. 3. The applicants next sought to address this problem by submitting that the outcome of the proceedings would determine control of Toppro. If the importance of control of Toppro was a matter that the applicants seriously sought to advance there would have needed to be a great deal more evidence about Toppro and the potential results of orders made by the primary judge. For example, evidence would have been required about how many shares Toppro had, what the value of those shares might be, the total value of Toppro, the existing sources of Toppro's supply and whether there could be a reallocation of orders from other sources of supply, to name but a few matters. It was conceded by Mr Neil QC that these matters were not the subject of evidence. 4. Finally on this point, the applicants submitted that it was important that Toppro should remain a distributor of Topfield electronic consumer products in Australia and that this question somehow bore on the question of whether leave should be granted. That submission should be rejected. It was not explored in the evidence or explained in submissions how it was that the maintenance of any distribution arrangement between Toppro and Topfield was relevant to the grant of leave. It is not evident how a commercial decision by Toppro to prefer one source of potential supply of electronic products over another, if that was what was submitted to be at stake, could be a factor tending in favour of the grant of leave. 5. The applicants failed to demonstrate that the control of Toppro and/or the distributor arrangement between Topfield and Toppro were matters supporting the grant of leave to appeal. The proper test for an equitable disposition of an equitable interest in shares 1. Contrary to the submissions of the applicants, this case does not involve consideration of the proper test for an equitable disposition of an equitable interest in shares, nor does it raise "complex and subtle questions of equity and law". 2. Mr Neil QC, at the outset of his oral address, accepted that it was fundamental to the applicants' case on appeal that this Court should conclude that Mr Yoo intended to make a gift of the shares in Toppro to Mrs Joo or WWIL in May 2012. Mr Neil also accepted that the ground of appeal which addresses this question of characterisation of Mr Yoo's acts as a gift (Ground 5) was fundamental to all the preceding grounds. 3. In our view it is not reasonably arguable that in April/May 2012 Mr Yoo made a gift of shares to WWIL or Mrs Joo or that the present case can be characterised as an "equitable assignment without consideration". The primary judge found that "the evidence does not support a characterisation of Mr Yoo's intention as one of making a gift to WWIL at the relevant time": see judgment at [35]. Given the evidence we have described above, that conclusion was inevitable. 4. The references by the applicants to Anning v Anning (1907) 4 CLR 1049 and the comparison sought to be drawn by the applicants to the test described by the High Court in Howard Smith are all premised on there being a gift of shares by Mr Yoo to WWIL or Mrs Joo in April/May 2012. 5. The applicants have not demonstrated an arguable case that Mr Yoo intended to make a gift to WWIL or Mrs Joo at the relevant time. It cannot possibly have been intended by Mr Yoo that he make a gift of shares at the same time as he agreed with Mr Choi to be paid USD 12,000 for those shares and further asserted that if he was not paid within three months (later extended to six months) he would keep the Toppro shares. 6. It is, with respect, to miss the point to say that Mr Yoo accepted in cross-examination that he expected Mr Choi to be the person to pay him the USD 12,000 rather than Mrs Joo or WWIL. That tends to emphasise the importance of the underlying relationship between Mr Choi and Mr Yoo being contractual. 7. The fundamental problem for the applicants is that no case in contract concerning the events of 2012 was pleaded. 8. Accordingly, the premise for the applicants' argument is directly contradicted by a finding by the primary judge which was undoubtedly correct. As such there is no occasion for the grant of leave to appeal. Rectifying an alleged injustice 1. The applicants have not demonstrated that any important point of principle is at stake or that the decision of the primary judge gave rise to any identifiable injustice. 2. This was a case where the primary judge dealt in considerable detail and with great care the case advanced by the present applicants for leave. That case was predicated on the transfer of shares in Toppro which Mr Yoo agreed to for consideration of USD 12,000 being, in truth, an "equitable assignment without consideration", that is, a gift, and Mrs Joo and WWIL being "volunteers". 3. The primary judge identified at the earliest opportunity the fact that the applicant specifically disavowed any reliance on a contract case. The exchange between the primary judge and senior counsel for the applicants is recorded at transcript page 6, on the first day of the hearing: HIS HONOUR: To the extent you rely on a contract, it is a contract formed in 2014 when the consideration was paid? NEIL: Yes. 1. It may have been open to the applicants to plead a contract between Mr Yoo and Mr Choi for the transfer of shares to WWIL or Mrs Joo. No such case was pleaded and was expressly disclaimed by senior counsel for the applicants at the hearing before the primary judge. No such case was made on this application for leave. 2. In those circumstances, there is no arguable injustice in the primary judge's rejection of the case the applicants advanced. Conclusion re application for leave to appeal 1. The shares the subject of the present dispute had a value of only USD 12,000. The applicants failed to demonstrate any issue of principle, question of general public importance or an arguable injustice. This is clear case where leave to appeal should be refused. 2. On 12 July 2016, for the foregoing reasons, the Court made the following orders: 1. leave to appeal refused; 2. the applicants pay the respondent's costs. Additional Order of the Court 1. In addition to the orders announced by the Court on 12 July 2016, it is necessary to deal with the security for costs order made by Gleeson JA referred to at paragraph [27] above. 2. The applicants have been wholly unsuccessful in seeking leave to appeal and have been ordered to pay costs. Prima facie, it is appropriate in those circumstances that the amount ordered to be deposited as security for the respondent's costs be released to the respondent. 3. As no oral submissions were directed to this topic the order releasing that security will take effect only after 4 pm on 28 July 2016. If the applicants contend for a different or additional form of order written submissions about that topic should be filed with the Associate to Payne JA before 4 pm on 27 July 2016. 4. In addition to the orders announced on 12 July 2016, the Court orders that: 1. Unless the applicants file written submissions as provided for by [62] of the judgment, the sum of $30,000 together with any interest thereon paid into Court as security for costs of the appeal by the applicants pursuant to order 2 made by Gleeson JA on 16 June 2016 be released forthwith to the respondent after 4 pm on 28 July 2016. ********** 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: 25 July 2016