Ku v Song - [2007] FCA 1189 - FCA 2007 case summary — Zoe

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Ku v Song

[2007] FCA 1189

Federal Court of Australia|2007-07-01|Before: Graham J

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Court

Federal Court of Australia

Decision date

2007-07-01

Before

Graham J

Source

Original judgment source is linked above.

Judgment (99 paragraphs)

[1]

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.'

[6]

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)

[13]

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'.

[14]

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

Bay Village Shop 22 Stockland Bay Village
Broadway Shop G06, 1-21 Bay Street, Broadway
Camperdown 15-17 Larkin Street CAMPERDOWN NSW 2050
Canberra Centre Shop A07 Canberra Centre CANBERRA
Canberra Food Shop CL 30 Ainslie Ave Civic Centre CANBERRA
Canberra Belconnen Kiosk FFK1 Westfield Shoppingtown Belconnen
Canberra Foodcourt BBQ Kiosk CL 28B Canberra Centre CANBERRA
Canberra Queanbeyan Kiosk K1 Riverside Plaza QUEANBEYAN
Double Bay Shop 8, 20-26 Cross Street, DOUBLE BAY NSW 2028
Erina Fair Sop T011 Erina Fair Shopping Centre ERINA
Erina Fair Restaurant Shop R9 Erina Fair Shopping Centre ERINA
Fox Studio No 215 - G07 Fox Studios RANDWICK
Hornsby Kiosk K102, Westfield Shoppingtown HORNSBY
Liverpool Shop 1-114 Westfield Shoppingtown LIVERPOOL
Macquarie Shopping Centre Kiosk K91B Macquarie Shopping Centre MACQUARIE
Marrickville Metro Centre Kiosk K25 Marrickville Metro Shopping Centre MARRICKVILLE
Miranda Westfield Kiosk 221 Westfield Miranda
Miranda (2) Shop 2078 Westfield MIRANDA
Miranda Food Shop 2006 Westfield Second Food Court MIRANDA
Mona Vale Shop 5, Pittwater Place MONA VALE
Pagewood Kiosk 115, Bunnerong Road, WESTFIELD PAGEWOOD
Pagewood (2)/East Gardens Kiosk K 302, Bunnerong Road WESTFIELD PAGEWOOD
Parramatta (2) Kiosk 504A, 159 Church Street St PARRAMATTA
Parramatta Food Kiosk 510C Westfield Shoppingtown PARRAMATTA
Penrith Plaza Kiosk K19 Penrith Plaza Shopping Centre PENRITH
Penrith Plaza Restaurant Shop R1 Penrith Plaza Shopping Centre PENRITH
Rhodes Homebush Shop 28 Rhodes Shopping Centre HOMEBUSH 29 Tuggerah Westfield Kiosk K201 Cnr Cobbs & Gavenlock Roads TUGGERAH

[15]

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.

[16]

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.

[18]

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. …'

[21]

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)

[25]

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.'

[29]

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)

[31]

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), s25.2. 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.'

[39]

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.'

[42]

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.'

[45]

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.'

[51]

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.'

[52]

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.'

[57]

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. …'

[63]

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".'

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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.'

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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.'

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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.'

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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.'

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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.'

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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)

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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.'

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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

Parties

Applicant/Plaintiff:

Respondent/Defendant:

Song

Legislation Cited (5)

Trade Practices Act 1974(Cth)s 51AA

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)

Corporations Regulations 2001(Cth)

Fair Trading Act 1987(NSW)s 42

Superannuation Industry (Supervision) Act 1993(Cth)

Cases Cited (34)

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

(1984) 154 CLR 661

(1988) 15 NSWLR 130

(1968) 118 CLR 429

(1968) 118 CLR 445

(1925) 36 CLR 60

(1968) 118 CLR 518

(2004) 219 CLR 165

(2005) 218 CLR 471

(1973) 129 CLR 99

(1982) 149 CLR 337

(2001) 53 NSWLR 153

(1977) 180 CLR 266

(1919) 27 CLR 133

(1986) 160 CLR 1

(1936) 55 CLR 440

(1956) 98 CLR 228

(1963) 110 CLR 309

(1981) 180 CLR 390

(1985) 160 CLR 583

(1987) 164 CLR 137

(1991) 30 FCR 491

(2001) 52 NSWLR 492

(1968) 118 CLR 1

(1937) 57 CLR 555

(1907) 4 CLR 1049

(1988) 79 ALR 83

(1969) 121 CLR 353

(1982) 149 CLR 571

(1928) 40 CLR 540

(1977) 52 ALJR 20

(1941) 64 CLR 492

(1990) 19 NSWLR 382

(1988) 164 CLR 604

Cited By (3)

- Anning v Anning

Donaldson v Natural Springs Australia Limited

Yoo v Toppro Pty Ltd & Ors