Ocean Star Resort Pty Ltd v David Hokyoon Kwon & Anor

The First Issue for Determination 6The first issue for determination is whether or not the parties reached a compromise at the August 2005 Seoul meeting between Dr Jung Kwon and Mr David Kwon. If that compromise agreement were established then Ocean Star would have forgone any claim it might otherwise have had under the June 2004 Agreement and Soft Star and Mr David Kwon will be obliged to pay Ocean Star KRW 2.45 billion (being equivalent to AUD 2.722 million as at the commencement of proceedings). After giving a detailed account of the events that generated this dispute, the Court will first consider whether Ocean Star's allegation that a compromise was reached in August 2005 is made out. If Ocean Star were successful in that contention it would not be necessary to consider its other causes of action. 7These reasons first make observations about the credibility of some of the principal witnesses, then give a more detailed account of the development of the concept of a casino in Christmas Island as it evolved between the parties, then examine the legal issues. 8In the result the Court determines that a compromise was not reached between the parties in August 2005. It will therefore be necessary to consider the plaintiff's causes of action arising from the June 2004 Agreement.

The Principal Witnesses - Dr Kwon, Mr Sung and Mr Kwon 9The three main witnesses, Dr Kwon, Mr Sung and Mr Kwon were all Korean speakers. Dr Kwon and Mr Sung needed English interpreters. Mr Kwon struggled, in a stilted way at times, to deal with questioning in English. This limitation, together with a degree of reserve, which they all displayed, made it somewhat difficult to judge their credibility.

Dr Kwon 10Dr Kwon, is a former director of Ocean Star and a former Chairman and CEO of the Korean Chaebol, Korea Electric Power Industrial Development Co. He was a prominent figure in the Korean Freedom League (KFL), a large Korean political in business organisation founded in the 1950's. He was an impressive witness whose gravitas transcended all cultural barriers and was evident in the Courtroom. Dr Kwon let nothing that mattered to him happen by accident. His objective was to be a master of every situation. He was not always successful in this. 11He was accused of involvement in various criminal activities. He had spent time in prison. But he had received a kind of pardon under Korean law, in a Certificate of Amnesty and Reinstatement (Exhibit 1). I have noted the allegations against him and his response to them in my assessment of his credibility. But on the matters in issue in these proceedings he struck me as someone who could mostly be relied upon, although I have not always accepted his evidence. No great damage was done to his credibility in cross-examination. There were no obvious badges of fraud or dishonesty in his dealings in the subject of these proceedings.

Mr Sung 12Mr Sung is a director of Ocean Star but one with apparent day to day executive authority in its affairs. Mr Kwon derided Mr Sung as being something of a lackey of Dr Kwon. Whilst I have little doubt that Dr Kwon could direct Mr Sung in relation to the affairs of Ocean Star when required, Mr Sung was an impressive witness, although I have not always preferred his account of events and conversations. Mr Sung struck the Court as someone who told the truth and took his personal standards from more than the directions of Dr Kwon. He was in my view a man who did things his own way, had pride in his work and had his own sense of honour and integrity. He was not just an emanation of Dr Kwon. On important conversations and events I have mostly found him to be a reliable witness.

Mr Kwon 13Mr Kwon is the sole director of Soft Star. He is also a director of Asia Pacific Space Centre Pty Limited ("Space Centre"). 14Though they share the same surname, Mr Kwon is not a near relation to Dr Kwon. But they are distantly related as clansmen. Their true degree of mutual familial respect, was one of the issues in the proceedings. The surname Kwon is a common one in South Korea. 15Mr Kwon genuinely professed difficulty with English. But he did have a sophisticated use of English idiom. Mr Kwon presented as an astute businessman despite his language difficulties and problems in communication across cultures. He has a forceful personality and a persuasive self assurance. He was clearly active and energetic in business, where it is not difficult to see him getting his own way. 16Mr Kwon prides himself on being a strategic thinker: he spoke in terms of "driving" or "pushing" particular approaches or ideas. He has been a resident of Australia for over 20 years and had a sound understanding of the processes of Australian government, both in its political and administrative aspects. He understood the niceties of politics and was an astute judge of what lobbying methods were or were not likely to be effective. For example he talked in terms of "pushing" for a result with government and being "disappointed" when the Australian government was not going to change its mind. He spoke in terms that showed familiarity with legal concepts associated with land or conveyancing; for example he was familiar with the legal term "assignment". He knew the difference between a persuasive and an ineffective letter, to a minister of the Crown. He sought, without hesitation, to clarify questions from counsel that he did not understand and had a sophisticated use of idiom. He had palpable self assurance in the witness box. 17But Mr Kwon was also acutely aware of what was in his own self interest and was ready to promote this in his evidence. He tended to see his evidence as another occasion for pushing his line on the transactions under examination, rather than telling the truth as his first evidential priority. 18Mr Kwon was concerned with the detail of the business projects in which he was involved and about every part of his business empire. Despite the self interested nature of some of Mr Kwon's evidence he was mostly a reliable witness, whose evidence can be largely accepted, although I have preferred the evidence of other witnesses over him in places.

Mr Asims 19Mr Asims was employed by Soft Star to manage the resort at Christmas Island. He accompanied Mr Sung to visit government officials in Canberra on 19 July 2004. His evidence was only of relevance in one major area, whether Mr Sung had told government officials on the 19th of July that they would walk away from investing in the Christmas Island lease if a casino was not approved. On that his evidence can be largely be accepted because it is confirmed by other contemporaneous records. In my view that was the position that Mr Sung took with the government officials but I accept Mr Sung's evidence that he was far less emphatic about this with Mr Kwon. 20The contest of credibility among these witnesses really came down to preferring one or other of them in relation to particular conversations and events.

The Christmas Island Casino up to June 2004 21The Commonwealth government first granted a casino licence on Christmas Island in November 1993, to Christmas Island Resort Pty Limited ("CIR") for a term of 15 years, expiring in 2008 but with the potential for renewal for a further 10 years. The Casino Licence fee was $1 million per annum together with 8 per cent of the gross profit of the casino for the first two years of the licence, and then 10 per cent of the gross profit for subsequent years. 22CIR's licence required the casino to be operated by an independent third party experienced in operating casinos and with good financial standing. During the 1990's, an experienced casino operator, Casinos Australia International Limited ran the Christmas Island Casino. But in about July 1998 the Commonwealth government cancelled CIR's casino licence because of its failure to meet financial obligations. In early 1999 CIR's official liquidator offered several of its properties for sale. Soft Star became interested in these properties and in the concept of a casino on Christmas Island. The CIR properties for sale included the casino, with a 156 room hotel, 3 gaming areas, 2 restaurants and 2 night clubs, together with 2 separate staff accommodation, developments of some 72 flats each. CIR had already invested about $68 million in the infrastructure of the resort and casino complex. 23These Christmas Island properties were attractive to Soft Star for wider reasons. A related company, Asia Pacific Space Centre Pty Limited ("Space Centre"), had sought since the late 1990's to develop a commercial satellite launch facility on Christmas Island, an attractive site because of the island's close proximity to the earth's equator, predictable climate conditions, existing infrastructure and political stability. Space Centre began developing the Christmas Island site in 2001 but its progress had stalled for lack of funds by about mid 2003. 24Mr David Kwon had a substantial shareholding interest in both Soft Star and Space Centre. After inspecting the Christmas Island properties in 1999 he considered they would provide suitable facilities to accommodate Space Centre's staff and that the resort and casino complex could be marketed to tourists to watch future space launches. 25So in the period mid 1999 to early 2000 Mr Kwon negotiated with CIR's liquidator to acquire the Christmas Island properties. Soft Star was successful in its negotiations. On 31 March 2000 it contracted to purchase the Christmas Island Properties from the Commonwealth for $5.7 million. After March 2000 Soft Star invested a further $5 million into improving and renovating the Christmas Island properties. But Soft Star did not apply for a new casino licence after the purchase, as its funds were limited. Operating the casino and paying the licence fee to the Commonwealth appeared to be out of its immediate financial reach. 26Soft Star actually purchased a leasehold interest in the properties from the liquidator of CIR. There were three separate leasehold properties, one for the Christmas Island Casino/Resort (the subject of Crown lease (X85) and two others for the staff accommodation at separate but nearby locations, Poon San Road (the subject of Crown lease (X82) and San Chye Low (the subject of Crown lease (X81). The full title particulars of these leases have not been included in these reasons but they are obtainable, if required, from the Court's file. At the time of sale in March 2000 the leasehold for the casino and resort land and buildings, Crown lease (X85), had 79 years remaining. The leases for the staff accommodation, Crown leases (X81) and (X82), each had 81 years left to run. The Commonwealth of Australia provided its consent under the CIR - Soft Star Contract for Sale by 5 May 2000, on which date all CIR's leases were formally assigned to Soft Star. 27Once Soft Star became a lessee of the properties it commenced negotiations with the Commonwealth to acquire freehold title. But the Commonwealth placed three main stipulations on any conversion of these leases to freehold: (1) the Commonwealth would retain water rights over the properties; (2) the private road on the properties (Link Water Road) would be dedicated as a public road; and, (3) the resort had to be made operational again. 28Satisfying these conditions proved difficult. The resort and casino had not been operational since the collapse of CIR in 1998 and its casino licence was cancelled. Moreover, Soft Star claimed ownership of the water supply associated with the properties and was unwilling to cede the rights to this scarce resource to the Commonwealth. Soft Star's negotiations to acquire freehold from the Commonwealth proceeded from 2000 until early 2004 but without reaching finality. 29By mid 2003 Space Centre had reached a financial turning point. Mr David Kwon was seeking to re-capitalise it, as it was facing financial difficulties. He planned to raise funds through Soft Star by sub-leasing the Christmas Island properties. To pursue this objective, Mr Kwon met two officials of the KFL in Seoul in 2003, Mr Young Keon Ahn (Mr Ahn) and Mr Hyuk Lyun Sung (Mr Sung). In turn Mr Ahn and Mr Sung led him to Dr Jung Kwon, the President of KFL. 30KFL is a substantial organisation in Korea with both political and business faces. It was established in 1954 and now has in excess of 650,000 members. Many of its senior leaders are well known public figures in Korea. KFL has substantial economic influence in Korea, holding diverse investments in strategic parts of the Korean economy, including a majority share in the Korea and Electric Power Industrial Development Co, a subsidiary of the State run Korean Electric Power Corp. KFL is also a major investor in the real estate market, which is why Mr Kwon was seeking to meet Dr Kwon. He hoped to persuade Dr Kwon to authorise KFL to make an investment in Soft Star by taking a sub-lease of the Christmas Island properties. Dr Kwon says and it can be accepted that KFL would not invest internationally in real estate itself but would do so through associates that were not necessarily subsidiaries of KFL. 31Mr Ahn introduced Mr Kwon to Dr Kwon in late 2003 or early 2004 in Seoul. I accept that Dr Kwon expressed interest in acquiring the properties. Mr Kwon negotiated with Dr Kwon and an associate of Dr Kwon, Mr Hang Bok Cho, regarding the possible grant of a sub-lease. Mr Kwon says that the sub-lease was to be to an entity associated with KFL. Mr Kwon says, and I accept, he felt "comfortable" with Soft Star entering into an arrangement with an entity related to KFL. 32But Dr Kwon has a different perspective on the negotiations. He emphasized, and I accept, that KFL was unlikely to make an investment itself or through a subsidiary into something like the Christmas Island casino properties. He says that he was told of Mr Kwon's interest in finding an investor and initially put Mr Sung in touch with Mr Kwon, but only later became more closely involved in the negotiations. 33Mr Kwon says, and I accept, that at these various meetings in late 2003 and early 2004, he explained to Dr Kwon and Mr Cho: there was at that time no casino licence and the previous owner had lost the licence. Mr Kwon says that he made clear to Dr Kwon that he could not guarantee that the casino licence would be granted to a new owner and the Australian government would decide whether or not to grant a licence to operate a casino on Christmas Island. But I also accept Dr Kwon's evidence that Mr Kwon said to him that he (Mr Kwon) was confidant that a casino licence would be granted. 34Mr Kwon authorised his local manager of the Christmas Island properties, Mr Michael Asims, to give Dr Kwon access to documents to allow him to undertake due diligence, which was done. Mr Asims gave evidence in the proceedings. In early 2004, according to Mr Kwon, Dr Kwon advanced a counter proposal saying to Mr Kwon, "we do not require the casino licence as part of the deal. We will organise the Casino licence ourselves". 35Dr Kwon says he did not have the expertise to become involved in trying to get a casino licence. It is correct that he lacked the expertise. But he did, through Mr Sung, for example, have others who could do much of the executive and administrative work for him. 36Dr Kwon was willing to sub-lease the land and facilities without the licence. I accept Mr Kwon's evidence that Dr Kwon indicated to him in these discussions that Dr Kwon had "been in contact with the Australian Ambassador in Korea regarding the proposed sub-lease of the Resort and Casino and the prospect of negotiating and being granted a Casino Licence". Dr Kwon denies this conversation but in my view it did take place. Dr Kwon now says rather, "I relied on Mr Kwon to get the licence". I do not accept that Dr Kwon would have put this task beyond his control or in the hands of Mr Kwon. Dr Kwon was confident in his capacity to influence the processes of government, whether in Korea or in Australia. He would not have allowed his fortunes to depend upon a man such as Mr Kwon who's capacities for influence were quite untested in Dr Kwon's experience. 37By February 2004, Mr Kwon and Dr Kwon had struck a deal. Soft Star entered a sub-lease with KFL Star Pty Limited, a special purpose vehicle incorporated to take up the sub-lease of the properties and an entity distinct from Ocean Star, which was only deployed several months later. Although not ultimately contentious in these proceedings, the terms of the sub-lease remain something of a mystery. The sub-lease was written only in the Korean language and was signed by the parties in Korea. Mr Kwon does not have a copy of the sub-lease and none was in evidence. On 27 February 2004, pursuant to the sub-lease, Ocean Star paid Soft Star KRW 1 billion (approximately AUD908,427) in part payment of the deposit under the sub-lease. 38Mr Kwon claims that under the February 2004 sub-lease Ocean Star was obliged to pay an initial deposit of KRW 2.85 billion (equivalent to approximately AUD2,589,230). 39Mr Kwon says that prior to execution of the February 2004 sub-lease he was unaware that Dr Kwon was having any discussions with Commonwealth government officers about applying for a casino licence. But Mr Kwon does recall Dr Kwon indicating Ocean Star would take responsibility for attempting to organise the grant of a casino licence. I accept Dr Kwon did say something like this to Mr Kwon. It is consistent with the findings about Dr Kwon's easy familiarity with the ways of power. But Dr Kwon did not necessarily intend to hold those discussions himself. I also find that Mr Kwon thought that Ocean Star would probably have been holding some discussions with the Commonwealth government about this subject. I infer that from what Mr Kwon knew of Dr Kwon and what Dr Kwon said to him. 40No monies other than the KRW 1 billion paid on 27 February 2004 were paid to Soft Star for the sub-lease. Mr Kwon says he asked Dr Kwon for what he claimed was the balance owing from time to time (some KRW 1.85 billion) but was not given a response to his request.

Pushing for a Casino Licence - March and April 2004 41The February 2004 sub-lease was unsatisfactory to Soft Star. It did not require Soft Star to obtain a casino licence as a condition of the sub-lease. But Mr Kwon felt that Ocean Star would be more ready to pay the monies due under that sub-lease if a casino licence was in prospect. So on behalf of Soft Star he began promoting the grant of the casino licence to the Australian government. 42Soft Star actively lobbyed the grant of a casino licence in March, early April 2004. Mr Kwon met Senator the Honourable Ian Campbell, then the Minister for Local Government Territories and Roads in Canberra to discuss the possible licence grant. On 23 March 2004 Mr Kwon instructed solicitors to draft an agreement to grant a casino licence. In a way typical of Mr Kwon's active business style, he corresponded with Minister Campbell on 26 March 2004, enclosing his draft casino licence agreement between Soft Star and the Commonwealth. His interest on behalf of Soft Star in pursuing that result was unmistakeable. As he said to Senator Campbell in this correspondence:- "Without being presumptuous, I cannot overstate how important it is to Soft Star's ability to gain the necessary funds to re-open the Casino that Soft Star and the Commonwealth finalise and sign this agreement, and the Casino Licence is then issued, as quickly as possible." 43In reply on 5 April 2004, Minister Campbell invited Soft Star to apply through more formal channels for a casino licence, explaining the steps Soft Star would need to undertake, including the lodgement of a formal application, assessment of the application by the Casino Surveillance Authority and a recommendation by that Authority to the Minister. On 6 April 2004 Soft Star informed Dr Kwon of these communications with the Commonwealth, expressing the view that Minister Campbell supported the grant of a casino licence and the re-opening of a casino on Christmas Island. Objectively speaking, that view was well grounded. Minister Campbell had said in his letter of 5 April to Soft Star, "I support the re-opening of the Casino", although the Minister pointed out it was inappropriate for the Commonwealth to enter into the draft agreement Soft Star had advanced without a prior assessment by the Casino Surveillance Authority.

A New Investment Structure - May and June 2004 44On 28 April 2004, a further KRW 150 million (equivalent to approximately AUD136,257), was paid to Soft Star apparently as part payment of the deposit under the February 2004 sub-lease. At the same time, Messrs McDonald Pynt Commercial Lawyers of Perth, acting for Mr Sung and Dr Kwon proposed a different commercial structure for an investment in the Christmas Island properties, an assignment of the leases. 45Mr Kwon says, and I accept, Soft Star was then in financial difficulties. He negotiated for an assignment of the leases to Ocean Star, so that Soft Star could be paid more quickly. Another special purpose vehicle was incorporated on the KFL side to take the assignment, KFL Star Resort and Casino Pty Limited, now called "Ocean Star Resort Pty Limited". 46The assignment negotiations proceeded through lawyers: Mr David Walker, solicitor acting for Soft Star, and McDonald Pynt acting for Ocean Star. A draft of the assignment agreement that passed between the parties in May 2004 would have made the proposed assignment subject to the granting of a casino licence to the assignee. Between early May and late June when the assignment agreement was made, this condition precedent was removed from the draft. Mr Kwon says the removal was at the request of Dr Kwon. But Dr Kwon denies this, saying it is "absurd" to suggest that he sought removal of the condition precedent. It is not necessary to resolve this dispute to determine the matters in issue in these proceedings. But both sides had apparently competent lawyers acting for them. The final form of agreement was executed without the condition precedent that the casino licence be granted. I infer both parties clearly contemplated in their negotiations the possibility of such a term being included in the final assignment agreement. I also infer both parties were aware of its removal before execution of the June 2004 Agreement. Part of Dr Kwon's evidence suggest he was unaware of the term's deletion. I do not accept that part of his evidence. 47On 24 June 2004 the new entity, Ocean Star, executed the agreement to take an assignment from Soft Star of the leases the subject of the February 2004 sub-lease agreement. The June 2004 Agreement did not make the assignment subject to a condition precedent that a casino licence be granted to the assignee. 48The fee in consideration for the assignment was: a deposit of KRW 1.45 billion payable by 24 June 2004 and acknowledged to have been received; an assignment fee first instalment of KRW 1 billion payable by 15 July 2004; and, a further payment of assignment fee of KRW 2.55 billion within seven days of the assignment date, being the date of satisfaction or waiver of the conditions precedent under the agreement. A further KRW 9 billion was due to be paid after assignment, making a total consideration payable, including the deposit of KRW 14 billion. 49Ocean Star paid only KRW 300 million on about 24 June 2004 instead of KRW 1.45 billion, a formal shortfall of about KRW 1.15 billion. But this sum of KRW 1.15 billion had already been paid under the sub-lease, in two amounts KRW 1 billion on 27 February 2004 and KRW 150 million on 28 April 2004. The first assignment fee instalment of KRW 1 billion was paid on time on 15 July 2004.

The June 2004 Agreement 50The principal source of the legal obligations in issue in these proceedings is the Agreement for Assignment of Lease made on 24 June 2004 between Soft Star as Lessee, Ocean Star as assignee, Dr Kwon as guarantor and Mr Kwon as covenantor ("the June 2004 Agreement"). 51Many of the provisions of the June 2004 Agreement are of relevance to the matters in issues in the proceedings and are set out below: - "2.ASSIGNMENT OF LEASE AND CONDITIONS PRECEDENT 2.1Assignment Subject to the Conditions Precedent, the Lessee agrees to sign and the Assignee agrees to take an assignment of the Lease for the Assignment Fee and on the terms of this Deed free from encumbrances other than any set out in the Lease or contained in or implied by any relevant legislation. 2.2Conditions Precedent The assignment of the Lease pursuant to this Deed is subject to and conditional upon the Conditions Precedent being satisfied or waiver by the Assignee. 2.3Condition Precedents This Deed is subject and conditional upon: (a)obtaining of the Lessor's consent and the Lessee and the Assignee shall each use there best efforts to obtain the Lessor's Consent; (b)obtaining the consent of the Foreign Investment review Board to this Deed; (c)the Director of Liquor Licensing consenting to the transfer of the Liquor Licence, and these Condition Precedents may be waived by the Assignee if it is permitted to do so in accordance with all relevant legislation. 2.4Termination on failure of a Condition Precedent If any of the conditions in Clause 2.3 is not satisfied or has not been waived by the Assignee by written notice to the Lessee on or before the period specified in clause 2.2, this Deed may be terminated by the Assignee giving written notice to that effect to the Lessee. If this Deed is terminated under this clause then: (a)each party will be released from its obligations to further perform this Deed except for the obligations under this clause 2.4; (b)each party will retain its rights against the other in respect of any past breach of this Deed." 2.5Rectification of Default Under the Lease The Lessee agrees that if after the date of this Deed but before the Settlement Date the Lessor issues a default notice under any of the Leases then if it appears to the Assignee that the Lessee has, or may, fail to comply with the default notice within the time period stated in the default notice then the Assignee, may at the cost of the Lessee, subject to obtaining any necessary approvals from the Lessor, enter onto the Properties and carry out all such works as may be necessary to ensure that the default notice is complied with within the required time specified in the default notice. The Lessee must promptly give to the Assignee a copy of any default notice issued by the Lessor. .... "3.ASSIGNMENT FEE 3.1Payment of Assignment Fee (a)the Deposit has been paid direct to the Lessee by the Assignee and the Lessee by executing this Deed acknowledges receipt of the Deposit; (b)the balance of the Assignment Fee is to be paid by instalments of: (i)KRW 1,000,000,000 on or before 15 July 2004; (ii)KRW 2,550,000,000 within 7 days of the Assignment Date; (iii)as specified in clause 9 of this Deed. 4.DEPOSIT The Assignee acknowledges that the Lessee has use of the Deposit and the Lessee acknowledges it has received the Deposit in full. 5.SETTLEMENT 5.1Not later than seven (7) days before Assignment Date: (a)the Assignee is to deliver to the Lessee a transfer of Lease executed by the Assignee; (b)the Lessee is to deliver to the Assignee a copy of the documents without which the Transfer of Lease will not be registrable at the Titles Office. Settlement Settlement is to take place on the Assignment Date no later than 3pm on the day at the offices of the Assignee's Solicitors or any other place in Perth, Western Australia the Assignee reasonably nominates." ... "5.4Registration of Transfer and Mortgage The solicitors acting for the Lessee and the Assignee shall attend to the joint registration of the Transfer of the Lease and the Mortgage at the offices of the Department of Land Information Perth immediately following settlement. 5.5Liquor Licence It is acknowledged that the Lessee holds the Liquor Licence in respect of the Casino/Resort." "6.DEFAULT 6.1Time of the essence Time is of the essence in relating to all aspects of Settlement and all the provisions of this Deed relating to the payment of money. 6.2Rights on default If a party ('the defaulting party') is at any time in breach of any obligation imposed on it under this Deed, or if it repudiates this Contract, then the other party ('the non-defaulting party') may, in addition to any other rights or remedies it may have under this Deed or otherwise: (a)affirm this Deed and sue the defaulting party for breach of contract; or (b)affirm this Deed and sue the defaulting party for specific performance of this Deed and damages for breach of contract in addition to or in lieu of specific performance; or (c)subject to clause 6.3 and 6.4, if the non-defaulting party is the Lessee, the Lessee may terminate this Deed and do any one or more of the following: (i)forfeit and retain the Deposit and all moneys paid up to the date this Deed is terminated and all interest accrued on that money; (ii)sue the Assignee for damages for breach of contract; (iii)without further notice to the Assignee, re-sell the Properties in such manner as the Lessee thinks fit; or (iv)recover possession of the Properties; (d)subject to clauses 6.3 and 6.4, if the non-defaulting party is the Assignee, the Assignee may terminate this Deed and do either or both of the following: (i)recover all money paid by the Assignee under this Deed; or (ii)sue the Lessee for damages for breach of contract. 6.3Default Notice The non-defaulting party may not exercise its rights and remedies under clauses 6.2(c) and (d) unless: (a)it has given to the defaulting party a written notice which: (i)specified the breach complained of ('the breach'); (ii)requires that the breach (if capable of remedy) be remedied within the period stated in the notice, not being less than 14 days, or if a longer minimum period is required under the Sale of Land Act of Western Australia then that longer minimum period; and (iii)states that (if the breach is capable of remedy) unless the breach is remedied within the period stated in the notice, this Deed will or may be terminated; (b)the breach has not been remedied within the time stated in the notice. If a party gives a notice under this clause, that does not prejudice that party's right to give a further notice under this clause. 6.4Clause 6.3 does not apply where either party repudiates this Deed. 6.5Any right to damages, whether under this Deed or at common law, that a party may have arising from a breach by the other party of any obligation imposed on it under this Deed, is not to be in any way limited or prejudiced by the right to terminate or the termination of this Deed by that party under clause 6.2. 6.6If this Deed is terminated, each party will retain its rights against the other in respect of any then past breach of this Deed. 7.ASSIGNMENT OF LEASE 7.1Assignment In consideration of the covenants by the Assignee contained in this Deed, the Lessee as beneficial owner with effect on and from the Date of Assignment assigns to the Assignee absolutely the Lessee's right title and interest in the Lease, the Leased Premises and the Liquor Licence for the unexpired term of the Lease in accordance with this Deed. 7.2Execution of Registrable Transfer and Deed The Lessee and the Assignee will execute a Transfer of the Lease in a form registrable at the Department of Land Information and Deed of Assignment of lease if required by the Lessor." ... "LESSEE'S FINANCE The Lessee shall provide finance to the Assignee for the payment of the Assignment Fee by accepting delayed payment of part of the Assignment Fee. The sum of KRW 9,000,000,000 shall be paid by the Assignee to the Lessee after the Assignment Date in the following matter: (a)by equal annual instalments of KRW 1,800,000,000 with the first payment to be made on the Payment Commencement Date and with the subsequent four payments made on the 1st, 2nd, 3rd and 4th anniversaries of the Payment Commencement Date; (b)the Lessee's Finance shall not bear interest however, if the Assignee is in default of its obligation under the Mortgage then in addition to the balance outstanding under the Mortgage as at the time of the default the Lessee shall be entitled to an additional sum equal to 10% of the amount outstanding as at the time of default in addition to the balance outstanding by way of costs and interests forgone; and (c)the Assignee shall execute a Mortgage to be prepared by the Assignee's solicitors in a form acceptable to the Lessee incorporating the above terms and conditions and those terms and conditions normally found in mortgages registered in Western Australia but noting: (i)there is no interest payable under the Mortgage; (ii)costs and selling expenses are limited to a maximum of 10% of the balance outstanding as at the time of default; (iii)a thirty (30) day notice default notice period and (iv)the Assignee may payout the mortgage at any time without penalty within the due date." ... 10.Assignee's Access 10.1The Lessee grants to the Assignee a non-exclusive licence to have access at all reasonable times to the Leased Premises solely for the purpose of carrying out any repairs and maintenance work on the improvements thereon. As from the date of this Agreement the Assignee must effect the insurance required by Clause 18.1(a) and Clause 18.2 of the Sublease and the provisions of clauses 5.3, 5.4 and 10 of the Sublease will apply to the Assignee's use of the Premises under this clause 10. In carrying out any repair and maintenance work the Assignee must comply with the reasonable requirements of the Lessee. 10.2Within 30 days of the date of this Agreement the Lessee and the Assignee must carry out an inspection of the Leased Premises to verify the existence of the plant and equipment described in Annexure A to the Sublease. If necessary Annexure A must be amended to reflect the result of such an inspection. 10.3In this Clause 10 Sublease means the document described as sublease and annexed to the Agreement for Sublease. 11.TERMINATION OF AGREEMENT FOR SUBLEASE The Lessee and Assignee covenant and agree that with effect from the day this Deed is executed the Agreement for Sublease shall come to an end and each party is hereby released from its obligations under the Agreement for Sublease." ... "14.GUARANTEE 14.1By Guarantor The Guarantor hereby guarantees to the Lesse the due and punctual performance and observance by the Assignee of all and singular the covenants and agreements on the part of the Assignee herein contained and referred. 14.2By Covenantor The Covenantor hereby guarantees to the Assignee the due and punctual performance and observance by the Lessee of all and singular the covenants and agreements on the part of the Lessor herein contained and referred." 52The following definition is also relevant to an understanding of the Agreement:- "'Lessor's Consent' means the consent of the Lessor to the assignment of the Leases from the Lessee to the Assignee and to the Mortgage, such consent, to be unconditional or subject only to conditions which: (b)are acceptable to the Assignee, (if they apply to the Assignee or the Assignee is responsible to comply with them); or (b)if they apply to the Lessee the Lessee is able to comply with them by using its best endeavours;" 53The day after the Agreement was signed, Mr Simon Hong, Soft Star's "Manager - Team Support" emailed Mr Andrew Wilson, of the Department, enclosing a copy of the Agreement. He requested the Commonwealth's consent to the assignment. 54But on 16 July 2004, only a day after the second payment was due under the June 2004 Agreement, the parties experienced the realization of a political risk for which neither of them was well prepared, Minister Campbell's announcement.

A Ministerial Announcement on 16 July 2004 55Senator Campbell's media release on 16 July 2004 came, so far as the evidence demonstrates, without any prior warning to either Soft Star or Ocean Star. It effected a profound change. Tourism on Christmas Island was supported. But Casino operations would be prohibited by legislation. The full text of the announcement is set out below:- "Proposed Refurbishment and Operation of the Christmas Island Resort The Australian Government strongly supports the proposed refurbishment and operation of the Christmas Island Resort without the need for casino operations, the Minister for Local Government, Territories and Roads, Senator Ian Campbell, announced today. In the interests of the Christmas Island community, the Australian Government has decided to make legislative changes to prohibit casino operations on Christmas Island. 'Gambling has become a major social concern in today's society and the challenge for the Australian Government is to find a response which considers not only the financial aspects of a casino in the Territory, but takes into consideration the social impacts as a consequence of gambling'. Senator Campbell said. 'To that extent, the Government is concerned about the impact a casino would pose to the social fabric of the Christmas Island community and the dislocation to families that problem gambling can cause'. 'I would like to take this opportunity to reiterate my strong belief that tourism has the potential to represent significant economic activity on Christmas Island and I foresee the reopening of the Christmas Island Resort as a substantial contribution to the Christmas Island economy' he said." 56Whilst it was suggested in these proceedings that Senator Campbell's decision and the subsequent legislative change would have the practical effect of advantaging casino operators in parts of Australia more distant from Indonesia and Singaporean casino tourists than Christmas Island, the process and reasons for the Ministers decision did not need to be examined in these proceedings. But the parties ultimately accepted that the Minister's decision was unchangeable, although they attempted at first to displace it. The parties dealt with the consequences of the Minister's decision in different ways. 57Minister Campbell's announcement produced two occasions of dispute between the parties. The first was a telephone conversation said to have taken place between Mr Kwon and Dr Kwon on the afternoon of the announcement, 16 July 2004. The second was a meeting that Mr Sung, accompanied by Mr Asims, had with Mr Wilson and other members of the Department on 19 July 2004. Findings about both of these disputed occasions are made later in these reasons under the issue of repudiation, to which they directly relate. 58Senator Campbell's announcement was newsworthy. Both sides in the proceedings acknowledged that they became aware of an article published in the Sydney Morning Herald on 21 July 2004, which reported that in the 1990's the casino had been one of the world's most profitable "with Asian gamblers spending billions of dollars on its tables", and then said:- "KFL Star Resort, a Perth - registered consortium of South Korean investors, told officials in Canberra this week that it would walk away from a plan to spend $30 million refurbishing the Island's decaying casino complex and resort hotel unless the decision was reversed." 59This newspaper article played a prominent part in Mr Kwon's later thinking. References to it appeared in the parties' subsequent communications. Mr Kwon says he understood the article to be accurate and to mean that Ocean Star was not intending to go ahead with the assignment of the lease. But curiously it did not lead to any other immediate communications between representatives of Ocean Star and Soft Star. 60July 2004 is the beginning of a strange void in the parties' dealings with one another. There is limited evidence of communications between them from July 2004 until May 2005. 61On the same day as the publication in the Sydney Morning Herald, 21 July 2004, Mr Kwon wrote to the new Minister for Local Government, Territories and Roads, Mr Lloyd MP, concerning Minister Campbell's 16 July 2004 announcement. Mr Kwon's letter described the announcement of the 16 July decision as "a complete surprise and a shock to me". He contrasted the decision with Minister Campbell's earlier communications with him on 1 March, in which Minister Campbell clearly voiced support for the re-opening of the casino, support that was re-iterated in the Minster's letter of 5th April 2004. Mr Kwon's 21 July 2004 letter recorded that Ocean Star had written to Mr Wilson on 19 July 2004 and continued:- "I understand that KFL Star Resort & Casino wrote to Mr Wilson on the 19th July summarising their plans for investment, redevelopment and operation of the Christmas Island resort and expressing their concern regarding the impact on these plans of the Australian Government's announcement to prohibit casino operations on Christmas Island. I also understand that KFL Star Resort & Casino stated in the letter that they are very keen to continue with their plans. However, they have requested that the decision be withdrawn as it will not be possible for them to proceed with the proposed investment if casino operations on Christmas Island are prohibited." 62Minister Lloyd replied quickly on 2 August (Exhibit F), reassuring Mr Kwon of the Minister's belief that tourism represents a "significant economic activity" on Christmas Island and that the re-opening of the resort would "provide a substantial contribution to the Christmas Island economy". Read objectively, Minster Lloyd's letter gave no comfort to anyone hoping that the Australian Government would reverse its 16 July 2004 decision.

Other Events in Late 2004 63Eventually, on 24 September 2004, the Commonwealth replied to Mr Hong's 25 June 2004 request for the Commonwealth's consent to the assignment. It did so through Mr Wilson, in a letter that deserves, because of its importance to the issues, to be reproduced in full. 64Set out below is the Commonwealth's letter of 24 September 2004 (Exhibit C):- "Soft Star Pty Ltd Level 21 24O'Connell St SYDNEY NSW 2000 WITHOUT PREJUDICE Attention - Mr Simon Hong Dear Sirs, Consent to Assign Leases G995882 and G995885 - Soft Star Pty Ltd to Ocean Star Resort Pty Ltd (formerly known as KFL Star Resort and Casino Pty Ltd) 1.I refer to the e-mail of Mr Simon Hong of 2 July 2004 and the subsequent telephone conversations with Andrew Wilson of the Department of Transport and Regional Services ('DOTARS'). 2.In Mr Hong's email, he advised that Soft Star had concluded an agreement with KFL Star Resort and Casino Pty Ltd ('KFL') (now known as Ocean Star Resort Pty Ltd) on 24 June 2004 to assign Leases G995882 and G995885 ('the Leases') held by Soft Star to KFL ('the Agreement'). I understand that the execution of the Agreement brings to an end the agreement to sublease between Soft Star and KFL. Mr Hong's email also seeks the Commonwealth's consent to the assignment of the Leases. 3.During Mr Hong's telephone conversation with Mr Wilson, Mr Hong confirmed that Soft Star and Ocean Star Pty Ltd (OSR) still wish to proceed with the Agreement even though the Commonwealth has announced that it intends to enact legislation prohibiting casino operations on Christmas Island. 4.DOTARS considers that the execution of the Agreement is invalid for the following reasons: -Soft Star failed to obtain the Commonwealth's prior written consent to the assignment as required by clause 5(e) of Lease G995882 and clause 5(f) of Lease G995885 and is therefore in breach of both Leases; and -the Minister's prior written approval is required for the assignment pursuant to sections 18(1) and 18(4) of the Land Administration Act 1997 (WA)(CI). The Agreement is therefore rendered void by section 18(6) of the Land Administration Act 1997 (WI)(CI). 5.Notwithstanding the invalidity of the Agreement, the Department is willing to treat Mr Hong's email as a fresh request for the Minister's consent to the assignment. 6.Accordingly, it may be possible to approve Soft Star's assignment of the Leases to OSR pursuant to s 18 of the Land Administration Act 1997 (WA)(CI), subject to Soft Star, within 30 days of the date of this letter: a.providing the Commonwealth with written acknowledgment from OSR and Soft Star stating that both of them: -are fully aware and accept that the Commonwealth has announced that it will make legislative amendments which will prohibit casino operations on Christmas Island, with the effect that casino operations cannot be conducted at the Resort or elsewhere on Christmas Island; and -wish to proceed with the Agreement even though following the making of the legislative amendments it will no longer be possible to operate a casino on Christmas Island; b.providing the Commonwealth copies of all information provided by OSR to the Foreign Investment Review Board to enable the Commonwealth to assess and determine OSR's suitability as an assignee of the Leases; c.amending the Agreement for Assignment of Lease in the manner set out in the copy of the Agreement attached to this letter; d.prior to the assignment of the Leases, carrying out the matters mentioned below to the satisfaction of the Commonwealth or, in the alternative, providing the Commonwealth with an undertaking from OSR by deed that it will carry out the matters below to the satisfaction of the Commonwealth: (i)agree in writing to surrender a suitable corridor of part of the Casino Resort Lease to be determined by the Commonwealth for the proposed re-alignment of Linkwater Road; (ii)to surrender (in accordance with correspondence between Soft Star and this Department and Soft Star's agreement with the Minister of 13 May 2004) those parts of the Casino Resort Lease land which contain natural springs and other sources of freshwater and infrastructure associated with Waterfall Spring, the water supply header tanks and Freshwater Spring. Pending completion of the surrender, Soft Star (or OSR) shall assure the Commonwealth free access (including vehicular access) at all times to the foregoing mentioned parts of the Casino Resort Lease land and the infrastructure; (iii)to finalise within 3 months (or such other longer period nominated by the Commonwealth) from the date of this letter all documentation with the Commonwealth to effect the above-mentions surrenders; (iv)to commence repairs to the access road constructed on the Casino Resort Lease land to the pump station and Waterfall Bay and to complete these repairs to the satisfaction of the Commonwealth within 3 months from the date of this letter or such other longer period nominated by the Commonwealth. (v)to maintain or arrange for the maintenance of the access road for the duration of the term of the Casino Resort Lease so as to ensure service access to the pump station and public access to Waterfall Bay; (vi)to commence repairs to Linkwater Road and to complete them to the satisfaction of the Commonwealth and the Christmas Island Shire within 3 months from the date of this letter or such other longer period nominated by the Commonwealth. Consistent with the provisions of the Casino Resort Lease, Soft Star (or OSR) acknowledges that if the repairs to Linkwater Road are not undertaken and completed within the period stipulated then the Commonwealth or any person so authorised may carry out the repairs. The costs and expenses incurred shall be paid by Soft Star (or OSR) to the Commonwealth on demand and pending payment shall be a debt due and payable to the Commonwealth; and (vii)to undertake all necessary repairs to and the maintenance of the electricity supply infrastructure (including power poles) constructed on the Casino Resort Lease land. e.providing an application to DOTARS for Ministerial approval pursuant to s 18 of the Land Administration Act 1997 (WA)(CI): -by Soft Star for the grant of the non-exclusive licence to OSR as set out in clause 10 of the Agreement; and -by PSR for the grant of a mortgage over the Leases to Soft Star pursuant to clause 9 of the Agreement. 7.Please signify your acceptance of the conditions in this letter by signing and returning the enclosed duplicate of this letter to this office within 7 days of the date of this letter. 8.If you have any issues in relation to the finalisation of legal documentation in respect of any of the matters mentioned in this letter, please contact Lee-Sai Choo, Australian Government Solicitor, Perth, GPO Box U1994 WA 6845, Telephone 089 268 1137, and Fax 089 268 1771. Yours sincerely, Andrew Wilson Assistant Secretary Territories Branch 24 September 2004" 65Mr Wilson's letter must be assessed as a refusal of consent to the transfer of the leases. It makes clear that the Commonwealth is not prepared to co-operate in the assignment under the June 2004 Agreement as the proposal then stood, in the first place because the Agreement was void by statute. But the letter is also important because it indicates that the Commonwealth was prepared to entertain a further application by Soft Star for an assignment of the leases. But the Commonwealth also stipulated for a series of further conditions upon the grant of such consent that would, among other things, have involved alterations to the area of land the subject of the leases and to the other facilities associated with the land the subject of the leases. Whether those conditions would have been acceptable to Ocean Star was not explored at the time because Soft Star did not send the letter to Ocean Star. 66But the letter is also important because it conveys a record of a communication between Mr Wilson and Mr Hong of Soft Star that both Soft Star and Ocean Star wished to proceed with the Agreement despite the government proposing to enact casino prohibition legislation in respect of Christmas Island. Much of the earlier evidence suggested that Ocean Star, at least, had made clear to the government that it was unlikely to proceed with the Agreement whilst casino operations were prohibited. This letter becomes an important basis for reconciling the parties conflicting versions of what happened between them during the period July and September 2004. 67Soft Star did not pass on the Commonwealth's 24 September 2004 letter to Ocean Star. It was clear from Mr Kwon's evidence that he had no knowledge of it being passed on. He did not seek to defend the proposition that some other person had given it to Ocean Star for him. Mr Kwon's motivation for not forwarding this document to Ocean Star is obscure. But his failure to do so meant that at all times prior to Soft Star issuing its Notice of Repudiation, Ocean Star did not know of the detail of the Commonwealth's response to the parties' request for its consent to the assignment. Soft Star's failure to send this document on is consistent with a mutual pattern of inaction in pursuit of the June 2004 Agreement from the end of 2004. 68But there was still some agreement related activity taking place on Ocean Star's side until late 2004 and possibly early 2005. Ocean Star produced business plans for a resort with KPMG's assistance in November 2004.

The Notice of Repudiation - May 2005 69Ten months later Mr Kwon acted. On 3 May 2005, he caused Soft Star's solicitor, Mr David Walker, to issue a document entitled "Notice of Repudiaton" to Ocean Star (addressed care of McDonald Pynt) and to Dr Kwon (at an address in Seoul). The Notice of Repudiation referred to the June 2004 Agreement and then said:- "The Lessee hereby puts the Assignee and the Guarantor on notice that the Assignee and the Guarantor, by their words and conduct, have breached the Agreement and that the breach is of sufficient seriousness to demonstrate that the Assignee and the Guarantor are not ready or willing to perform the Agreement and have repudiated the Agreement. As a consequence of the repudiation; (a)the Agreement is immediately terminated; (b)the Lessee relies on clauses 6.4 of the Agreement; (c)the Lessee elects, under clause 6.2(c) of the Agreement, that the Assignee forfeits and the Lessee retains the Deposit and all moneys paid to date by the Assignee under the Agreement; and (d)the Lessee and the Covenantor reserve all of their other rights against the Assignee and the Guarantor under clause 6.2(c)" 70The Notice of Repudiation then set out certain facts, said to be "relied on by the Lessee and the Covenantor for the repudiation". Those facts were the following:- "1.Under the Agreement, the Assignee covenanted to take an assignment of the Lease for the Assignment Fee subject only to the satisfaction of three conditions precedent: (a)the Lessee and the Assignee using their best efforts to obtain the Commonwealth Government's consent as Lessor to the assignment to the Assignee; (b)the obtaining the consent of the Foreign Investment Review Board to the Agreement; and (c)the Director of Liquor Licensing consenting to the transfer of the Liquor Licence to the Assignee. 2.In addition, the Assignee agreed: (a)under clause 10.1 of the Agreement, from the date of the agreement to effect the insurance required by clause 18.1(a) and clause 18.2 of the Sublease; and (b)under clause 10.2 of the Agreement, within 30 days of the Agreement, to carry out with the Lessee an inspection of the Leased Premises to verify the existence of the plant and equipment described in Annexure A to the Sublease. 3.It was never the intention or agreement of the parties, and is not an express or implied term of the Agreement, that the Agreement was or is conditional on the granting of a casino licence to the Assignee or that the Leased Premises could or would be re-opened as a casino. 4.On 16 July 2004, the Minster for Local Government, Territories and Roads, Senator The Hon. Ian Campbell, issued a press release that the Australian Government had decided to make legislative changes to prohibit casino operations on Christmas Island (Ruling). 5.In response to the Ruling, representatives of the Assignee attended meetings with the Australian Government in Canberra and told officials that the Assignee 'would walk away from a plan to spend $30 million refurbishing the island's decaying casino complex and resort hotel unless the decision was reversed' (see Sydney Morning Herald, 21 July 20004, article 'Casino ruling will destroy our future, say islanders' by Lindsay Murdoch). 6.The Ruling has not been reversed. 7.On or about 16 July 2004, the assignee expressly verbally stated to the Lessee and the Covenantor that the Ruling had made it impossible for the Assignee to raise the investment funds necessary for the Assignee to complete the Agreement as the Assignee could only raise the funds it is was allowed to open a casino at the Leased Premises. Further, the Assignee requested that the Covenantor and or the Lessee identify alternative investors who could take over the Assignee's obligations under the Agreement. 8.Since 16 July 2004, the Assignee has not, and the Guarantor in the Assignee's stead has not, in breach of its obligations to use its best efforts, commenced or continued to do any action or thing required to satisfy any of the conditions precedent. Further, the Assignee has failed to comply with any of the other obligations under the Agreement, including but not limited to, obligations under clauses 10.1 or 10.2." 71Finally, on the basis of those facts the Notice of Repudiation claimed that the Assignee and the Guarantor "have repudiated the Agreement" for reasons then stated:- "1.the Assignee and the Guarantor have, by their words and conduct, expressly represented that they are not able or willing to perform their obligations under the Agreement, including being unable and unwilling to raise the finance necessary to complete the Agreement; 2.the Assignee and the Guarantor have, by their words and conduct, intimated that they intend to abandon and altogether refuse performance of the Agreement, as their comments to the Lessee and the Covenantor and to the Australian Government make it quite plain that the Assignee will not perform or will not perform in accordance with the Agreement; 3.the Assignee has not, and the Guarantor in the Assignee's stead has not, performed any of its obligations under the Agreement in breach of its obligations; 4.the absence of the Assignee and/or the Guarantor's readiness or willingness to perform is an anticipatory breach of the Agreement amounting to repudiation that gives the Lessee and the Covenantor a right to terminate the Agreement; and 5.the absence of readiness or willingness by the Assignee and/or the Guarantor to perform any of the other obligations under the Agreement is a breach of the Agreement that amounts to repudiation that gives the Lessee and the Covenantor a right to terminate the Agreement." 72Mr Sung responded the following day to this Notice of Repudiation. On 6 May 2005, he sent a letter on Ocean Star letterhead, as its "Managing Director". His letter did not bear internal evidence of being crafted on the basis of legal advice. It was a laymen's response to the Notice of Repudiation:- "Dear Sirs, We have received your letter. We inform you that we cannot endorse your assertion. Since the Agreement for Assignment of Lease Christmas Island Casino/Resort dated 24 June 2004, Ocean Star Resort Pty Ltd has progressed steadily for the Agreement and will continue to do so. Also, as stated in the Agreement, after acquiring the Liquor License, transfer the registration instantly and within 7 days after the registration instant and within 7 days after the registration transfer, give the partial payment. As the Agreement did not arrange such clause that the Liquor License has to be acquired in certain months and we understand the reason is to have enough time to prepare. Nevertheless the Agreement, one-sided the notice of repudiation from Soft Star Pty Ltd and partner David Walker thrown into confusion. We consider the act of Soft Star Pty Ltd is against the business ethics. Ocean Star Resort Pty Ltd officers will stride severely against the indiscreet act of Soft Star Pty Ltd and will mobilize every ways and means to copy with the situation. The Agreement for Assignment of Lease Christmas Island Casino/Resort dated 24 June 2004 has not been terminated one-sidedly and cannot be terminated. p.s. The Agreement can be terminated in following conditions. In connection with the Agreement, Soft Star Pty Ltd returns an amount invested to Ocean Star Resort Pty Ltd. With this condition, the Agreement can be terminated." 73The intriguing post script to Mr Sung's letter, which offered termination of the June 2004 Agreement on condition of the return of Ocean Star's investment, opened the door to the contested discussions about a compromise that are said to have taken place at a meeting in Seoul in August 2005. This "p.s." closely followed the arrangement Mr Sung allegedly made with Mr Kwon three months later in Seoul in August 2005, a contention that Mr Kwon disputed.

The August 2005 Meeting in Seoul 74The parties' recollections of what occurred from the second half of 2005 diverge. Mr Sung says there was a special negotiation in Seoul in August 2005. Mr Kwon says that no such negotiation occurred but that there was continuous, intermittent and unremarkable contact between himself on the one side and Dr Kwon and Mr Sung on the other from mid 2005 until about mid 2007. Both sides of this contest need to be briefly recorded, starting with Dr Kwon and Mr Sung's version of events up until the alleged August 2005 meeting in Seoul. 75Mr Sung's Version. Mr Sung says that after his 6 May 2005 letter, Mr Kwon telephoned him to arrange a meeting and said to Mr Sung words to the effect that he (Mr Kwon) stood by his promise to repay the money if a casino licence could not be granted. According to Mr Sung, Mr Kwon intimated to him that the Government's decision not to grant a casino licence on Christmas Island was very unpopular and that, "they would have to reverse it". In answer to this Mr Sung claims that he said, "Let us see. Even if it is not reversed we must have our money back". 76Mr Sung's account continues that in about July 2005 he arranged by telephone with Mr Kwon to meet in Korea, saying to him "we must have a meetng with you when you are here. It does not look like the government will [not] reverse its decision". An agreed date to meet with Mr Kwon in Korea was fixed. 77Mr Sung says he met with Mr Kwon in Seoul in August 2005. During that meeting he claims Mr Kwon said to him in Korean words to the effect, "I am sorry about what happened in Australia. I will give you all of your money back. Please give me some time to get the money". According to Mr Sung, the August 2005 meeting took place only between himself and Mr Kwon. Dr Kwon was not present. 78Dr Kwon's Version. Dr Kwon's evidence is consistent with this. He does not profess to have been in a meeting at which a compromise was reached. But he does not give any satisfactory account of Mr Sung reporting to him in about August 2005 that (1) a compromise had just been reached, that (2) Ocean Star could now no longer sue on the June 2004 Agreement, as it had been terminated by mutual agreement with Ocean Star releasing its causes of action, but that (3) at least Ocean Star would be getting its money back. 79Dr Kwon says that he only refrained from giving instructions to lawyers to sue Soft Star because of Mr Kwon's "promises" to return Ocean Star's investment. As these reasons explain below, Mr Kwon did hold out to Dr Kwon the possibility of the return of Ocean Star's Christmas Island investment. But it was not promised as part of a binding compromise. To that extent, in my view Dr Kwon is wrong. 80Mr Kwon's Version. Mr Kwon admits travelling frequently to Korea between mid 2005 and mid 2008. But he cannot recall having a meeting only with Mr Sung in Korea during that period. He specifically denies ever saying to Mr Sung words to the effect, "I am sorry about what happened in Australia. I will give all your money back. Please give me some time to get the money". 81Mr Sung's own account of the August 2005 Agreement hardly even gives it the status of an agreement. But first it is necessary to make findings about what happened at the alleged August 2005 meeting.

A Compromise in August 2005? 82Ocean Star has not made out its contention that there was a compromise made in Seoul in August 2005 in relation to its potential legal claims arising out of the June 2004 Agreement. Those potential legal claims were, in my view, legally capable of compromise at such a meeting. But my finding is that the parties did not negotiate such a compromise in Seoul in August 2005, or indeed at any other time. 83I do not accept the Ocean Star case that in August 2005 it negotiated a compromise of its disputed claims arising out of the June 2004 Agreement in exchange for Soft Star and Mr David Kwon agreeing to pay KRW 2.45 billion back to Ocean Star. I prefer Mr Kwon's account of what happened in Seoul in August 2005 to Mr Sung's account. Moreover, Mr Sung's version of what happened is objectively improbable. I draw these conclusions for the following reasons. 84First, Mr Sung's own version of the August 2005 meeting falls short of establishing a consensus in which Ocean Star gave up its rights of action for an agreement to pay a sum of money. According to his first affidavit, Mr Sung remembered that Mr Kwon's words on this occasion were to the effect, "I am sorry about what happened in Australia. I will give you all of your money back. Please give me some time to get the money". Whilst, if said, these words would be an admission against interest on the part of Soft Star that some money was then thought to be due to Ocean Star, they are not said to have been given in exchange for an Ocean Star promise of forbearance to sue. There is no promise not to sue matching the admission and the promise of payment. Nor can one be implied. Even on Mr Sung's version, the conversation is consistent with Mr Sung keeping open Ocean Star's right to sue Soft Star. Mr Sung's version of what was said was not improved after his first affidavit nor relevantly supplemented in oral evidence. 85Secondly, Mr Sung could not recall that he made a promise of forbearance to sue Soft Star in August 2005. He was cross-examined on his account of his alleged compromise conversation with Mr Kwon. His evidence on the subject was unpersuasive. I do not accept as a result that he had any real memory of this encounter as a special meeting at which he reached any clear binding compromise with Mr Kwon. 86Thirdly, I do not accept Mr Kwon would have negotiated such an important agreement with Mr Sung, even though Mr Sung had the authority to do so. Mr Sung was clearly subordinate to Dr Kwon when acting in the interests of Ocean Star. It is to be expected Mr Sung would have communicated with Dr Kwon to obtain approval to finalise or formally confirm such a special deal. There is no evidence that Dr Kwon had given such an important authority at this time. Moreover, the negotiation of a matter of this importance between Mr Sung and Dr Kwon is odd. Though Mr Sung was Dr Kwon's trusted advisor and confidant, Dr Kwon negotiated much of the June 2004 Agreement with Mr Kwon himself. Preceding that contract Mr Sung had been a point of contact through which Mr Kwon approached Dr Kwon. But the June 2004 Agreement was ultimately finalised at a higher level, between Dr Kwon and Mr Kwon and their respective lawyers. It would be surprising if a matter as important as the compromise of the June 2004 Agreement was left to Mr Sung to conclude. 87Fourthly, Mr Kwon says that he would not have dealt with anyone other than Dr Kwon on such a matter, in any event. By the time the proceedings came to hearing, Mr Kwon was to an extent exaggerating the lack of status of Mr Sung as a negotiating partner. But he was not entirely wrong. I accept Mr Kwon's evidence that he would wish to deal with his own clansman, Dr Kwon, on these commercial matters, rather than with Mr Sung. Mr Kwon had a sufficiently well developed sense of self importance that it is to be expected though, if he felt the possibility of compromise was being broached, he would seek to deal directly with Dr Kwon. After all, the parties were in the predicament they were because of mismatched expectations about the legal consequences of unpredictable events after the June 2004 Agreement. I find Mr Kwon was sufficiently careful to avoid the risk of further such misunderstandings. It is improbable, in my view, that he would have negotiated such a deal with Mr Sung alone. 88Fifthly, although Mr Sung's post script in his 6 May 2005 reply to the Notice of Repudiation, raised the possibility of a settlement along the same lines (a release for return of moneys paid) as he said was actually negotiated in Seoul in August 2005, it is remarkable that Ocean Star did not seek to confirm the settlement in writing, or instruct solicitors to formalise it in some way once the settlement was achieved. Ocean Star had previously retained a solicitor, Mr David Walker. Even the briefest of personal letters, such as the one that Mr Sung sent on 6 May, would have confirmed the compromise had it taken place. It seems unlikely that business people as astute as Mr Sung and Dr Kwon would not have taken the untroubling step of writing a brief note in order to secure Mr Kwon's and Soft Star's joint promise to pay KRW 2.45 billion to Ocean Star so as to put this matter behind them. If Mr Sung's version is to be accepted, the compromise gave Ocean Star the advantage of a clear joint promise to pay a definite sum and produce finality in what was otherwise shaping up as an complex and unruly contest. Neither Mr Sung nor Dr Kwon lacked the commercial insight to discern the advantages of such a course. In my view they did not take it because a compromise was not reached in August 2005. Nor did they attempt to communicate through lawyers; a surprising result for what was not an everyday transaction for either of them. 89Sixthly, there were continuing discussions between Mr Sung and Mr Kwon about aspects of the June 2004 Agreement that are inconsistent with their reaching a compromise in August 2005. Those later discussions take place against the backdrop of a mutual assumption that the parties are still in dispute about the legal consequences of the June 2004 Agreement and its claimed and disputed repudiation. It is unlikely that these discussions would have taken place in this form for so long until 2008 if a compromise had been reached in August 2005. 90Seventhly, one of the curious features of this litigation is that Ocean Star made no pre trial demand to Soft Star. The pleaded allegation of a compromise is really the primary basis of Soft Star's and Mr Kwon's liability, rather than the June 2004 Agreement. It is surprising if the compromise was made that it did not become the subject of a pre-litigation demand. 91Eighthly, I do not accept that Mr Kwon would have so readily agreed to return the funds part under the June 2004 Agreement. He seemed in oral evidence to have a strong sense of entitlement to the funds which would not have been any weaker in 2005.

Conversations between Mr Kwon and Dr Kwon: 2006 - 2008 92Dr Kwon says that Mr Kwon came to see him at his office in Korea in January 2006 and said to him, in Korean words to the effect, "I am trying to find foreign investors for my APSC [Space Centre] project that I am working on in Sydney at the moment. I expect to procure investment soon and I will repay monies to Mr Sung of Ocean Star". Mr Kwon does not deny this conversation. I find that it did occur. It is likely, in my view, that Mr Kwon said that he would try and do whatever he could to refund the Ocean Star investment, if that were possible. This is not a version that Mr Kwon admits to but it is in my view likely to be what was said. It is also consistent with the probabilities that the return of the money to Ocean Star must have been discussed. 93There is a greater contest about what passed between the parties from March 2006 onwards. Dr Kwon says that in March 2006 and then again in May 2007 he and Mr Kwon had contact. Dr Kwon says Mr Kwon came to see him at his office in Seoul (in March 2006) and indicated he was preparing to open "Soft Star Resort facilities in Australia" and would soon pay Mr Sung back. Dr Kwon says that (in May 2007) as the federal election of that year approached in Australia, Mr Kwon said to him by telephone that the Australian Labor Party had "expressed its firm support for re-opening a casino on Christmas Island" and that he would be able to pay back Ocean Star "the monies it had paid". Mr Kwon denies these conversations. But I accept Dr Kwon's evidence to the extent that he says Mr Kwon gave him encouragement to believe that his money would be refunded, if these business conditions permitted it. Some such conversations explain the lack of any demanding correspondence between Dr Kwon and Mr Sung in 2006 and 2007 and further explains the failure of any party to commence proceedings during this period. 94Then in a series of meetings in July, August, October and December 2007 Dr Kwon says Mr Kwon spoke about raising funds in various contexts which would lead to Mr Sung and Ocean Star being repaid: "as soon as I receive the investment [in a Chatswood building] I will be able to pay back Mr Sung and Ocean Star" (July 2007); "if this [sending Korean tourists to Christmas Island] works out then I should have no trouble paying Mr Sung and Ocean Star" (August 2007); "if that [re-opening the Christmas Island casino] happens then I will pay back all that I owed to Mr Sung and Ocean Star (October 2007); and, "I will try everything in my power [finishing a Sydney construction project] to finalise all payments to Mr Sung and Ocean Star as soon as possible" (December 2007). 95I accept something like these conversations did take place. They all have a common theme. Mr Kwon was saying that he would attempt to raise money or take steps in other business projects, which might generate funds from which it was possible Mr Sung, and Ocean Star would be repaid. But the self-evident contingencies in Mr Kwon's descriptions of his various business projects were such that no clear promise to repay Ocean Star could be inferred from any of his statements to Dr Kwon. 96Dr Kwon says that Mr Kwon also made similar statements in March, June and later in 2008. I accept that Mr Kwon did say things similar to what the Court has found he said in 2006 and 2007. Mr Kwon was seeking to keep the hope alive that Dr Kwon might get some money back, if one of various fund raising projects he mentioned were successful: re-opening the Christmas Island casino (March 2008), investment from a US based casino company (late 2008), and a funds injection into Soft Star (June 2008). My findings in respect of these conversations are the same as for the 2006 and 2007 conversations: Mr Kwon did not make any promise to repay Ocean Star; but he did raise the hope of repayment if all went well with one of these projects. 97Mr Kwon's account of this period from mid 2005 is very unsatisfactory. He paints a rather improbable picture of Dr Kwon approaching him about general investment matters, and Mr Kwon raising Ocean Star's non payment of the full KRW 14 billion assignment fee, to which Dr Kwon is said to have replied, "Yes I know. Ocean Star is still interested in Christmas Island and the Casino. Has the government's attitude to a casino changed?" To this Mr Kwon says he responded, "Not that I am aware of", and that Dr Kwon went on to say, "Ocean Star cannot repay you at the moment, but I can see if I can introduce you to other potential investors". 98Dr Kwon was not the kind of man to approach Mr Kwon in this apologetic way. He was a senior figure in KFL and Korean Society who would not have lowered himself in this way. The only part of Mr Kwon's version of these post mid 2005 conversations that I accept is when he says Dr Kwon asked for Ocean Star's deposit back. But I do not accept that Mr Kwon bluntly said back to his senior, Dr Kwon, as he claims he did on that occasion, "I cannot give you the deposit. The money has been spent and I can't get it back". Rather, I find that Mr Kwon kept alive the hope of future repayment.

A Meeting in May 2008 99Mr Sung says he met Mr Kwon in Korea again in May 2008 to discuss Ocean Star's failed investment in the Christmas Island casino. Mr Sung says that at that meeting he said to Mr Kwon in Korean words to the effect, "Please wait a few more months. I will give all of your money back". To this, Mr Sung says he replied, "I don't believe you have an actual capacity to repay. If you can't get me a casino licence you can at least get me a licence to operate a hotel on Christmas Island?" According to Mr Sung, Mr Kwon then replied, "I can raise KRW 100 billion from US and Korea very shortly. Once I have that money I will give you all the money back". On Mr Sung's version he then replied, "I have already waited long enough. I can't wait any further. If you don't pay back immediately, I will commence legal proceedings". To this Mr Kwon is said to have replied, "Please do not start any legal action. Give me a little more time. I will return all of your money back". 100Mr Kwon denies that this conversation took place. But Mr Sung's version is not without some basis in my view. There must have been some discussion between representatives of Ocean Star and Soft Star about the return of what was a very substantial sum of money that I find Dr Kwon and Mr Sung thought should be paid back to them. I accept that Mr Sung and Dr Kwon had expectations that the money invested would be returned. It is likely in my view that Mr Kwon made some vague diplomatic indications of returning monies if it ultimately turned out that the resort could not be developed, either as a casino or a tourist centre. But Mr Kwon was astute enough not to couch any such statements as a binding commitment. 101But one remarkable feature of Mr Sung's version of these conversations in May 2008 is that he does not hearken back to the compromise that he now alleges was made in August 2005. If the earlier compromise had been made, it was the logical starting point for Mr Sung to gain negotiating leverage over Mr Kwon in these discussions. After all, on Mr Sung's version of what happened in August 2005 in Seoul, Mr Kwon was not only failing to perform the June 2004 Agreement but he was reneging on the August 2005 compromise. Mr Sung's failure in his account to refer back to the August 2005 compromise in his account of these discussions undermines both: (1) the credibility of his account of these discussions, and (2) the persuasiveness of his account of the August 2005 meeting in Seoul. 102I find that in May 2008 Mr Kwon made at the most some vague, diplomatic statements about return of the money to Ocean Star and Mr Sung, if that were possible. But he gave no commitment to that effect. Ultimately, Ocean Star commenced these proceedings when it became clear to it that none of Mr Kwon's other projects were generating enough in funds to support repayment of the KRW 2.45 billion. Soft Star puts a more sinister connotation on the timing of the commencement of proceedings: that they are explained by Dr Kwon needing to try to recover the Ocean Star investment so as to mitigate his sentence in the criminal proceedings then being brought against him in Korea. But in my view, the better explanation is that for 3 years Mr Kwon was giving vague indications of future repayment to Mr Sung and Dr Kwon, which eventually they refused to accept. 103Another remarkable feature of the parties' evidence about the period from late 2005 to 2008 is that none of their conversations dwell upon the May 2005 correspondence and the parties' contested claims of repudiation of the June 2004 Agreement. This is of significance when the repudiation issue is dealt with later in these reasons.

The Issues 104The Court has found there was no compromise agreement made in August 2005; the plaintiff, Ocean Star, fails in its action for recovery of monies paid, based upon such an alleged compromise. 105There is another non-issue in the proceedings. Both parties conducted their cases on the basis that the leases were still able to be assigned but with the properties then being run only as a resort, not as a resort and casino, and neither contended that doctrines of contractual frustration were applicable in this case. For the doctrine of frustration to apply, the performance of the contract must be radically different from the performance in the circumstances, which it contemplated. In Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 360 Mason J (Stephen, Aickin and Wilson JJ agreeing) noted that the critical issue is whether the event alleged to constitute the frustration makes the performance the result of the frustration fundamentally different from the performance contemplated by the contract on its true construction in the light of surrounding circumstances. 106The parties were then left to contest the issues arising out of the June 2004 Agreement. As the respective cases were presented those issues were:- (a)Can Ocean Star recover its Deposit under the June 2004 Agreement? (b)Has Ocean Star repudiated the June 2004 Agreement and what are the consequences of any such repudiation? (c)Are monies paid under the June 2004 Agreement recoverable on restitutionary grounds? (d)Whether the June 2004 Agreement has been abandoned entitling Ocean Star to recovery of the Deposit and part Assignment Fee? 107The parties debated what issues in the proceedings arose out of the pleadings. In order to define the issues with clarity some amendments to the Statement of Claim were permitted and others disallowed. But the trial was conducted on the basis that the four issues defined here were in contest between the parties.

(a)Recovery Under the June 2004 Agreement 108Ocean Star's principal contention is that the Deposit and other moneys it had paid under clause 3.1 of the June 2004 Agreement were repayable under clause 2 of that agreement, once the Conditions Precedent had not been satisfied and had not been waived. I do not agree with that contention. Rather, I find that upon the proper construction of the agreement (and absent proof of breach of contract) the return of those moneys was neither (1) provided for under the specific termination provision (clause 2.4) upon non-satisfaction of the Conditions Precedent, nor (2) provided for elsewhere in the agreement, and relevantly in clauses 2 or 3. 109(1) Clause 2.4. The June 2004 Agreement, clause 2.4, gave Ocean Star a right of termination if any of the three Conditions Precedent in clause 2.3 were not satisfied or waived. The scheme of the June 2004 Agreement appears to be that it provides for two kinds of termination: the first, is termination in the event of the failure of a Condition Precedent without other breach of the agreement (clause 2.4); and the second is termination in the event of breach or repudiation of the agreement (clause 6). The second of these clauses is discussed in more detail later in these reasons in relation to Soft Star's claim that Ocean Star has repudiated or breached the June 2004 Agreement. 110The agreement is unusual in that the same right to terminate in respect of the failure of the Conditions Precedent was not also conferred upon Soft Star. In contrast, the right of termination for breach or repudiation (clause 6) is conferred on both parties. In the events that have happened in this case, Ocean Star did not attempt to exercise any of its rights under clause 2.4. Just why this was so was not explored in the evidence. 111Another contrasting feature of clause 2.4 and clause 6 is that the latter specifically provides for the non-defaulting party to be able to recover or retain the monies it had paid or received under the June 2004 Agreement: clauses 6.2 (c) and (d). Clause 2.4 contains no such provision and does not cover what happens to such monies on termination. Of course, no "non-defaulting" party features in clause 2.4, as a party who might retain or recover such moneys. The subject matter of clause 2.4 does not require a breach or repudiation by a defaulting party. But the clause's failure, specifically, to cover such moneys indicates in my view that the parties intended to leave such matters to the parties' restitutionary remedies, outside the agreement. Such restitutionary remedies are not expressly excluded. Nor in my view, especially in light of the terms of clause 6, should it be inferred from the language of clause 2.4 that the parties intended such moneys should be left where they were at the time of failure of the Conditions Precedent. Clause 4 (Ocean Star's use of the Deposit) does not indicate otherwise. 112(2) No other provision for return of Deposit. I accept Soft Star's submissions generally as to the way that the clause 2 Conditions Precedent of the June 2004 Agreement work. The June 2004 Agreement assumes the Condition Precedent will be satisfied, if they are to be satisfied, prior to the assignment of the Leases. Despite some drafting deficiencies in the June 2004 Agreement, this is its effect. The agreement to assign (clause 2.1) is subject to the Conditions Precedent. The three conditions precedent (clause 2.3), Lessor's Consent, Foreign Investment Review Board ("FIRB") consent and liquor licence consent are capable of being waived by the assignee, Ocean Star (clause 2.3). But the June 2004 Agreement is clear that the agreed assignment is "subject to and conditional upon" the Conditions Precedent "being satisfied or waived" by the assignee (clause 2.2). Ordinarily that would mean the Conditions Precedent being performed before the assignment although waiver may involve an agreement to defer performance of some of the Conditions Precedent until after assignment. 113The June 2004 Agreement contains a drafting error in the manner it confers a right of termination on the assignee for failure of the Condition Precedent (clause 2.4). That clause is predicated upon the assumption that one of the Conditions Precedent is not satisfied or has not been waived by Ocean Star by written notice to Soft Star "on or before the period specified in clause 2.2". But no period is specified in clause 2.2. A period was no doubt originally so specified in an earlier draft of clause 2.2 and erroneously eliminated in the course of the iterative process of drafting. But clause 2.4 is still capable of meaning. Although no period of time is "specified" in clause 2.2, satisfaction or waiver of the Conditions Precedent should take place within a reasonable time: Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 543, 547, 554, 560 and 567. 114Soft Star's rights to terminate the June 2004 Agreement arose in an unusual way in this case. Soft Star did not have a clause 2.4 right of termination upon the non satisfaction of the Conditions Precedent, only Ocean Star did. Ocean Star did not waive the Conditions Precedent. This meant that Soft Star's only right of termination was in the event of Ocean Star's "default" within clause 6, noting that "repudiation" and "breach" are separately identified in clause 6 as "default" events that give specific rights to the "non defaulting party". But in my view, as the reasons below show, it has not been established that Ocean Star either repudiated the June 2004 Agreement or was in default in a way that resulted in Soft Star being able to use clause 6 to bring an end to the agreement. 115Ocean Star's Contractual Recovery Argument. Ocean Star argued that the very terms of clause 2.1, 2.2 and 2.3 meant that the deposit and other moneys paid under the June 2004 Agreement were to be repaid upon the non satisfaction of the Conditions Precedent because "the whole basis of the agreement is that there will be an assignment". But I do not think that argument is tenable. Merely because the Lessee's agreement to assign in clauses 2.1 and 2.2 is subject to the Conditions Precedent does not mean that their non-satisfaction requires that such moneys must be repaid. A contractual obligation for repayment in such circumstances would ordinarily be expressed in the agreement. Nor can such a term be implied. It is not necessary to give business efficacy to the June 2004 Agreement: B.P. Refinery (Westernport) Pty Limited v Shire of Hastings (1977) 180 CLR 266. 116Ocean Star's argument that the Deposit and other moneys paid under the June 2004 Agreement are recoverable under that agreement upon failure of the Conditions Precedent fails.

(b)Repudiation of the June 2004 Agreement and its Consequences 117Soft Star submits that Ocean Star has repudiated the June 2004 Agreement, which Soft Star accepted in its Notice of Repudiation on 3 May 2005. The relevance of this is that Soft Star contends in defence to Ocean Star's claim that the legal consequence of such an accepted repudiation is that Ocean Star cannot now recover the Deposit and other parts of the Assignment Fee, and Soft Star is entitled to retain any monies paid under the June 2004 Agreement before the Notice of Repudiation pursuant to Clause 6.2(c). 118Soft Star contended that Ocean Star had repudiated the June 2004 Agreement in four ways: (a)by Ocean Star's failure to take timely steps to satisfy the three Conditions Precedent of the June 2004 Agreement; (b)by Ocean Star's breaches of the June 2004 Agreement; (c)by declarations by the directors of Ocean Star that either the June 2004 Agreement would not be carried out or would be carried out only when it suited Ocean Star; and (d)by a complete financial inability on the part of Ocean Star to pay the settlement money. 119Only some of these grounds (parts of grounds (a), (b), and (c)) were included in Ocean Star's 3 May 2005 Notice of Repudiation. But at trial Soft Star justified its refusal further to perform the June 2004 Agreement, as Soft Star was entitled to do, relying upon other breaches of conditions allegedly committed before Soft Star's Notice of Repudiation: Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 at 378 per Dixon J. It is long established that a contracting party who becomes entitled to refuse performance of his contractual obligations, afterwards gives a wrong reason for his refusal, does not thereby deprive himself from the justification which in fact existed whether he was aware of it or not: British & Benningtons Ltd v North West Cachar Tea Co [1923] AC 48 at 71 per Lord Sumner and Henry Dean & Sons (Sydney) Ltd v P O'Day Pty Ltd (1927) 39 CLR 330, at 359. 120Soft Star contended that the issue of repudiation should be the initial path of analysis, which should proceed by examining each of the four factors said to establish Ocean Star's repudiation. That is the course that these reasons follow. The availability of the plaintiff's claimed remedies, in restitution and for recovery of moneys upon abandonment depend upon an assessment of whether the June 2004 Agreement is still on foot or not and whether the Deposit and part Assignment Fee have already been allocated to Soft Star under Clause 6.2(c). But first though a statement of the general law as to the circumstances in which a contract will be repudiated is useful in judging the conduct on behalf of Ocean Star that is said to constitute a repudiation of the June 2004 Agreement. 121The general law in relation to what may amount to a contractual repudiation may be concisely stated, although specific aspects of it will require elaboration later in these reasons. A contract is repudiated when a party evinces an intention no longer to be bound by it, or evinces an intention to fulfil it only in a matter substantially inconsistent with his or her contractual obligations; this test has been more colloquially expressed as a test that a contract is repudiated where a party makes clear by actions or representations "that he is prepared to carry out his part of the contract only if and when it suits him": Carr v JA Berriman Pty Ltd (1953) 89 CLR 327 (at 351) per Fullagar J. These authorities were recently considered by Bathurst CJ in Almond Investors Limited v Kualitree Nursery Pty Limited & Anor [2011] NSWCA 198. Whether a party's conduct is repudiatory or not is to be judged objectively by reference to the effect that the conduct would be reasonably calculated to have on a reasonable person as a party to the agreement: Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 230 ALR 56 at [102] and Highmist Pty Ltd v Tricare Ltd [2005] QCA 357, at [14]. 122The issue of repudiation was all important to Soft Star's case because its 3 May 2005 Notice of Repudiation did not comply with the June 2004 Agreement, Clause 6.3, which is a precondition for the exercise of rights and remedies under clause 6.2. Soft Star did not, as the claimed non-defaulting party, give a Clause 6.3 14 day period of notice to allow Ocean Star to remedy its alleged defaults. It claimed that the June 2004 Agreement "is immediately terminated". Clause 6.3 does not apply where either party repudiates the June 2004 Agreement: Clause 6.4. Otherwise it does apply. Thus, if Soft Star fails to establish Ocean Star's repudiation of the June 2004 Agreement then Soft Star cannot claim the benefit of Clause 6.2(c)(i), which is the contractual basis for Soft Star to retain the Deposit and part payment of the Assignment Fee. My findings in this section of these reasons are that Ocean Star had not repudiated the June 2004 Agreement by 3 May 2005 and that if it had committed any breaches of the June 2004 Agreement they were not a repudiation of that Agreement. As neither party has otherwise sought to rely upon Clause 6 and Clause 2.4 does not deal with the deposit or other moneys paid under the contract, the consequence of these findings is that Ocean Star is left to its restitutionary remedies.

(a)Failing to Satisfy the Three Conditions Precedent 123Soft Star's first claimed basis of repudiation was that Ocean Star had an obligation to take timely steps to satisfy each of the three Conditions Precedent; lessor's consent, FIRB consent and liquor licence consent. The failure to take these timely steps is said to amount to a repudiation of the June 2004 Agreement. Each of these three Conditions Precedent raises different considerations about Ocean Star's performance of its obligations and is considered separately below. 124Conditions Precedent 2.3(b) and (c) were themselves really dependent on Condition Precedent 2.3(a). Unless the Commonwealth was going to consent to the assignment then the need to act to get FIRB approval to transfer the liquor licence was negligible. Thus, in my view the practical approach to assessing the parties' conduct in relation to the Conditions Precedent is to look at the issue first of obtaining the Commonwealth's consent to the assignment. 125Lessor's Consent. The obligation in clause 2.3(a) to obtain the lessor's (the Commonwealth's) consent is structured with a composite obligation explaining the role of the lessee (Soft Star) and the assignee (Ocean Star) in obtaining that consent, "and the Lessee and the Assignee shall each use [their] best efforts to obtain the Lessor's Consent". 126Soft Star says that Ocean Star breached this "best efforts" provision because of the position Ocean Star had taken by September 2004, in refusing to proceed with the investment unless the Commonwealth reversed its decision to prohibit casino operations on Christmas Island. But for the reasons explained in section (c) below, I do not think Ocean Star took this position. 127The story of obtaining the lessor's consent starts shortly after the making of the June 2004 Agreement. Simon Hong of Soft Star emailed Commonwealth officers on 2 and 9 July 2004 to seek consent to the assignment of lease to Ocean Star. Similar consent had already been sought for the sub-lease earlier that year. But the Commonwealth did not reply until its letter of 24 September 2004, long after the Minister's decision of 16 July 2004. I agree with Soft Star's submission that the Commonwealth's reply of 24 September 2004 was crafted so as not to be an outright refusal to consent. The Commonwealth had an obligation under the three Crown leases "not to unreasonably withhold consent". By September 2004 the Commonwealth was undoubtedly alert to the possibility that Soft Star or Ocean Star might sue it for its prohibition upon casino operations on Christmas Island. 128Once the Commonwealth letter of 24 September 2004 had been received there is no evidence of any serious attempt by either party to obtain the lessor's consent. But did Ocean Star breach its obligation to use its best endeavours to obtain the Commonwealth's consent? 129In my view, Ocean Star did not breach its best endeavours obligation, principally because Soft Star did not forward to Ocean Star the Commonwealth's letter of 24 September 2004. Ocean Star can hardly be blamed for not taking up some of the possibilities being raised by the Commonwealth in that letter, if it was not given a copy of the letter. There is no evidence that Ocean Star received a copy of the letter from the Commonwealth by other means. There is no evidence that Soft Star informed Ocean Star about the contents of the letter. Once the letter had been sent, the only "best endeavours" that could be expected of Ocean Star were endeavours to treat with the Commonwealth along the lines that the Commonwealth had suggested in its letter. 130The need for communication of the Commonwealth's letter of 24 September 2004 from Soft Star to Ocean Star is all the more important when the June 2004 Agreement's definition of "Lessor's Consent" is seen to be the consent of the Lessor to the assignment, either unconditionally or subject to conditions which "are acceptable to the assignee [Ocean Star]". Soft Star had itself taken up the consent seeking process. It was the point of failure of communication of the conditions on which consent might be obtained to Ocean Star. This made it very difficult for Ocean Star to decide whether the Commonwealth's conditions were acceptable or not. 131FIRB Approval. There is no evidence that Ocean Star had made any FIRB application before Soft Star sent the Notice of Repudiation on 3 May 2005. Mr Sung was unaware that a FIRB application had been made. But there is no evidence from the Soft Star side that one had been made either. This tends to show lack of action by both sides on this issue. 132Liquor Licence Consent. The resort did have a liquor licence. Mr Asims was the approved manager under the licence. I accept his evidence that he received no communication on behalf of Ocean Star requesting a transfer of the licence. But it is not evident that he initiated any steps himself. 133Mr Sung did not identify any steps that Ocean Star had taken to obtain consent to the transfer of the liquor licence. In his oral evidence he said Ocean Star had never held a liquor licence and he would need to discuss the matter with the consulting firm that Ocean Star had engaged in 2004. But no further evidence emerged from Ocean Star about it seeking the transfer of the liquor licence.

(b)Breaches of the June 2004 Agreement 134Soft Star also contends that Ocean Star is in breach of clauses 10.1 and 10.2 of the June Agreement as at 3 May 2005, the date of the Notice of Repudiation. 135Under the June 2004 Agreement clause 10.1, Ocean Star was obliged, from the date of the Agreement, to effect the insurance required by clause 18.1(a) of the sub-lease, a provision which required Ocean Star to procure two insurance policies, a current public risk policy of not less than AUD 20 million and an insurance policy for the full replacement value of the leased premises against damage and destruction for not less than AUD 45 million. Both Mr Asims and Mr Sung gave oral evidence on this subject. Mr Asims, the general manager of the resort, said that Ocean Star did not take out any public risk policy. Mr Sung was uncertain as to whether such insurance was taken out. 136To overcome the apparent uncertainty about the evidence on this subject, the Court gave directions during the hearing on 8 September 2011 for each party to produce to the other by 10am the following day copies of any public risk policy in respect of the Christmas Island resort. The next day neither Ocean Star nor Soft Star produced any insurance documents. The direction was crafted to allow sufficient time to Ocean Star to consult with officers back in Seoul, which is 1 hour behind eastern Australian time, overnight to produce any such documents. I infer from Ocean Star's non-production of documents and its failure to confirm that it had taken out public liability insurance in a requisite amount that it had probably not done so, although the position was unclear on the evidence. But this was not repudiatory conduct. It appeared to be a mere oversight by a company distracted by apparently greater business problems of seeking to obtain investors in the resort project. It was an oversight which would probably have been cured by a quite diligent Mr Sung if a clause 6.3 Notice had been served on Ocean Star about this breach. 137Clause 10.2 of the June 2004 Agreement required a joint inspection by Soft Star and Ocean Star of the properties "to verify the existence of the plant and equipment described in Annexure A to the sub-lease". Mr Asims did not see any Ocean Star representative carry out an inspection. 138But this was a joint inspection obligation. There is no evidence that any attempt was made by Soft Star to arrange such an inspection and that Ocean Star refused to co-operate in conducting one. Nor was this alleged breach the subject of a clause 6.3 Notice from Soft Star. 139Soft Star seeks to make only a limited use of these alleged breaches of clauses 10.1 and 10.2. Soft Star rightly does not contend that the breaches were of a character that would enable Soft Star to terminate the June 2004 Agreement without Clause 6.3 notice. The breaches and the failures they demonstrate are a basis to infer Ocean Star's unwillingness to perform its contractual obligations. They would be useful in that respect if Ocean Star's unwillingness to perform was otherwise established. But in my view it was not.

(c)Declarations that the June 2004 Agreement would not be carried out 140Soft Star relies upon declarations that Dr Kwon and Mr Sung are alleged to have made on behalf of Ocean Star to Mr Kwon himself and to Commonwealth officers in the immediate aftermath of Minister Campbell's announcement of 16 July 2004. These alleged statements were to the effect that Ocean Star would not be proceeding with the June 2004 Agreement. Dr Kwon is alleged to have made the statements to Mr Kwon on the afternoon of 16 July 2004. Mr Sung is alleged to have made the statements to the Commonwealth officers at a meeting on 19 July 2004. Very little new conduct after these dates is relied upon to support Soft Star's repudiation case. Findings about Dr Kwon's statements on 16 July 2004 depend upon a contest of credibility between himself and Mr Kwon. There is ample objective evidence to support Mr Sung's making of statements to Commonwealth officers on 19 July 2004. After findings are made about what was said on each of thee occasions, the question in this section is what does the making of these statements imply about Ocean Star's intention to perform the contract. 14116 July 2004. Mr Kwon says that on 16 July 2004, he and Dr Kwon communicated by telephone. According to Mr Kwon, when Dr Kwon rang that day he had already heard the news and he confronted Mr Kwon with the statement, "we can only raise funds to pay Soft Star the rest of the money under the Agreement if we can operate a Casino on Christmas Island". Mr Kwon says he reminded Dr Kwon that "we have an agreement", which provided for the payment of the Assignment Fee to Soft Star "regardless of whether a casino licence is granted". According to Mr Kwon, Dr Kwon protested about the impossibility of raising funds without the casino licence. There was discussion between them about the possibility of other investors taking the assignment instead of Ocean Star but none was named. 142But I do not accept that the conversation took place on 16 July 2004 in the terms that Mr Kwon says. Mr Kwon was asked the following questions about what was said between himself and Dr Kwon from July 2004 and gave the following evidence:- "Q.I am just trying to understand if you thought that the casino licence was not part of the agreement, did you say to him at any time between July 2004 and May 2005, "Well, are you going to perform the contract without the casino licence?" A.Yes. Q.And what did he say? A.At the first and early stage he said "yes" I will do it, and the letter he changed the words. I like to honour the contract, I can not. Q.First he said he would and then? A.I can not honour because I cannot get the investor. Q.When did he first say that? A.About August 2004. " 143In my view, Dr Kwon did not say to Mr Kwon in substance that he was only prepared to raise funds and proceed if Ocean Star could operate a casino on Christmas Island. In my view, Dr Kwon communicated to Mr Kwon as Mr Kwon admitted, that "it would be difficult" to get investors, as indeed was self evident, if there was no casino licence. Although Dr Kwon said that he did not remember the conversation which Mr Kwon alleged took place on 16 July 2004, I am not persuaded that it happened in the terms that Mr Kwon says. 144Apart from my preference for Dr Kwon's evidence, Mr Kwon's account is contradicted by two important subsequent facts. Ocean Star did go to considerable lengths to prepare detailed business plans (Exhibits A and B) in about November 2004 to market the investment in a resort on Christmas Island. The brochures prepared in consultation with KPMG, although partly written in Korean, show the application of considerable effort in constructing a marketing and investment model for starting up a non casino resort. At the same time Ocean Star seems to have dropped the word "casino" from its name. 145Even if Dr Kwon said what Mr Kwon says he did on 16 July (which I do not accept), Ocean Star's production of the business plans after that date would indicate that Ocean Star had not entirely rejected the idea of proceeding with the contract. But there is another factor which supports the same inference. Although Ocean Star was supposed to pay the amount of KRW 1 billion on or before 15 July 2004, it actually did not pay that amount fully until 30 July 2004 (Exhibit D), after the Minister's announcement. The payment of such a substantial sum, which on then current exchange rate was in excess of AUD 700,000 is not consistent with the holding of a conversation two weeks earlier from which it should be inferred that Dr Kwon was saying he was not going to proceed with the contract. Both parties realised, in my view, there was still a long way to go in dealing with the Commonwealth. Indeed further steps were taken. 146In relation to oral conversations said to amount to repudiatory conduct, Ocean Star also relies on a telephone conversation between Dr Kwon and Mr Kwon about mid August 2004. Mr Kwon said to the Court in evidence that Dr Kwon had just "given up" on the project by about then. I accept that Dr Kwon did organise an investor to come out to Christmas Island about mid August 2004. But the business plans show in my view that Ocean Star had not given up on the project. On Mr Kwon's own evidence, in my view the better view is that he does not really remember Dr Kwon saying "I am not going to invest" but rather that "it would be difficult", which hit undoubtedly was. I do not accept that Dr Kwon said anything in mid August 2004 to Mr Kwon that he was certainly not going to proceed. 147The 19 July 2004 Communications with the Commonwealth. The evidence Soft Star has advanced is overwhelming in my view that Mr Sung on 19 July 2004 did say to Commonwealth officers at a meeting in Canberra on that date words to the effect, that Ocean Star "does not consider the resort to be financially viable without the casino operations, and thus, they would not be prepared to proceed with a plan and a $30 million investment". The making of such statements is supported by the evidence of Mr Asims, a departmental briefing note (Exhibit N), Dr Kwon's letter to Ambassador Heseltine of 2 August 2004 and a letter from Mr Sung to Minister Lloyd of 17 August 2004. But it seems to the Court that this was just position taking between Mr Sung, for these two parties, and the Commonwealth. As between Dr Kwon and Mr Kwon the situation was as I have explained previously. None of this was conduct by Ocean Star telling Soft Star it was not going to proceed with the contract. The effect of what Dr Kwon had said to Mr Kwon was that it would be "difficult". That is how Mr Kwon understood it.

(d)Ocean Star's Financial Incapacity 148Soft Star also contends that Ocean Star had by 3 May 2005 repudiated the June 2004 Agreement because it was not financially capable of settling that agreement. For a number of reasons this contention is not made out. It is open to a party to a contract to show that the other party has repudiated the contract, because the other party has become incapable of performing the contract; but the first party must establish that the other party is wholly and finally disabled from performing the contract and that this inability exists at the time of the termination: cf Sunbird Plaza Pty Limited v Maloney (1988) 166 CLR 245 at 262, 264 and 278. Soft Star has not established these matters to the court's satisfaction in this case. 149The evidence of Ocean Star's lack of financial capacity to settle the transaction in late 2004 and up to May 2005 is limited. Ocean Star's financial statements (Exhibit 7) do not assist an inference that it did not have the capacity to complete the transaction, which involved paying the balance of the KRW 11.55 billion (of the original contract price of KRW 14 billion) remaining payable under clause 3.1 (b) of the contract. All those financial statements show is that for the financial year ending 31 December 2007 (and including the year ending 31 December 2006) Ocean Star's balance sheet demonstrated it had net assets of the order of AUD 1.39 million. Although this was well short of the amount that would have been required to complete the June 2004 Agreement (KRW 11.55 million -with an approximate exchange rate of KRW 1100 to one AUD) it does not demonstrate, for several reasons, that Ocean Star was wholly and finally disabled from performing the contract in early May 2005. 150First, under clause 3.1 the balance of the consideration was not payable immediately: the next KRW 2.55 billion was not payable until within seven days of the Assignment Date, the date of satisfaction or waiver of the last of the Conditions Precedent. This date was not in near prospect, when Soft Star issued its Notice of Repudiation. The remaining KRW 9 billion to be financed by Soft Star was repayable under clause 9 in five annual instalments, the first of which was not payable until 18 months after 24 June 2004. Ocean Star had ample time to raise investment funds to meet this timetable. 151Secondly, Mr Sung and Dr Kwon were well connected through KFL in business and in politics in South Korea. Mr Sung had already raised KRW 350 million from one investor to make up part of the KRW 2.45 billion already paid to Soft Star. I accept Mr Sung's evidence that he had "a few more people" who were interested in investing through his KFL and other industry contacts. He had a venture capital company of his own, described as "JL Capital", that I accept was another possible source of funds for Ocean Star from capital markets. 152Thirdly, at the time of these events Dr Kwon was the President of the KFL and had substantial business contacts of his own to supplement Mr Sung's business contacts and financial resources. Dr Kwon's influence in South Korean business circles at this time was not in serious contest in the proceedings. 153Soft Star has not made out that at the time of its 3 May 2005 Notice of Repudiation that Ocean Star was wholly and finally disabled from completing the June 2004 Agreement.

Consequences of Repudiation 154The Court has found that Ocean Star had not repudiated the June 2004 Agreement by 3 May 2005, either on the grounds stated in its Notice of Repudiation or on any other grounds Soft Star has advanced in these proceedings. Soft Star's purported but ineffective Notice of Repudiation was itself conduct a repudiation of the June 2004 agreement. The general rule is that a wrongful termination of the performance of a contract will constitute a repudiation of obligation: Ogle v Comboyuro Investments Pty Limited (1976) 136 CLR 444, at 453. Although this wrongful termination would have entitled Ocean Star to accept soft Star's repudiation and itself terminate the June 2004 Agreement, Ocean Star did not do this. 155Indeed, Mr Sung's somewhat clunky letter of 6 May 2005 in response to the Notice of Repudiation was an action quite to the contrary. After protesting about the lack of "any prior notice" and a situation, which was "against business ethics" Mr Sung's reply clearly asserts that the June 2004 Agreement "has not been terminated one-sidedly and cannot be terminated". This was an affirmation of the continuation of the agreement, which precluded Ocean Star from exercising either its clause 6 rights of termination or its rights at common law based upon the Notice of Repudiation. 156Though it comes much later than the acts of repudiation that Soft Star alleged against it, Ocean Star's instantaneous reaction to the Notice of Repudiation, affirming the agreement also supports the inference already drawn that Ocean Star did not earlier evince an intention to repudiate the Agreement. 157Between May 2005 and Ocean Star's commencement of these proceedings Mr Kwon, Dr Kwon and Mr Sung had numerous business conversations about how to resolve their differences arising out of this unsatisfactory situation and eventually the resort closed down. But during that period there was no further attempt on either side to accept an alleged repudiation of the June 2004 Agreement by the other side. In my view the contract remained on foot for a further period of time before it was finally abandoned and abrogated on the basis of the principles and facts described below. But first it is necessary to examine whether Ocean Star has a valid claim in restitution.

(c)Ocean Star's Claim in Restitution 158Despite various changes to the pleadings it was accepted by the end of the trial that the plaintiff, Ocean Star, had pleaded a claim in restitution. This was a matter of some importance. I have already found that the KRW 2.45 billion of moneys (Deposit and part Assignment Fee) Ocean Star paid under the June 2004 agreement before May 2005, were not recoverable by Ocean Star under the agreement itself. The agreement simply did not provide for what would happen to the Deposit and other instalments of the Assignment Fee in the event the clause 2 Conditions Precedent were not satisfied. The moneys could only be recovered on restitutionary grounds. 159The relevant principles may be concisely stated. A quasi contractual obligation to pay fair and just compensation for a benefit which has been accepted will only arise in a case where there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable; it is the very fact that there is no genuine agreement or that the agreement is frustrated, avoided or is unenforceable that provides the occasion for the imposition by law of the obligation to make restitution: Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, per Deane J at 256. A claim in restitution is available where in substance, rather than in form the consideration for which money is paid under a contract has wholly failed: Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344, at 376 and 377 per Deane J and Dawson J. A claim for restitution of moneys paid under a contract such as the June 2004 Agreement, which neither party contends has been frustrated, would not ordinarily be available, where it would overturn an existing allocation of risk or limitation of liability previously established by the parties' contract: Lumbers v W Cook Builders Pty Ltd (in liquidation) (2008) 232 CLR 635, [79] and [126] and Steele v Tardiani (1946) 72 CLR 386. 160Soft Star's case is that there is no room for the operation of Ocean Star's pleaded case in restitution. Soft Star says that merely because a Condition Precedent of the June 2004 Agreement was not satisfied (Amended Statement of Claim paragraphs 27(b) & (c)), does not give rise to a claim in restitution, because the parties did make provision for that eventuality in their Agreement, namely in clause 6. I do not agree with Soft Star's contentions here. 161The Court's findings above allow it to be concluded that on 3 May 2005 Soft Star had repudiated the June 2004 Agreement by issuing a wrongful Notice of Repudiation and Ocean Star was possibly in breach of the agreement in minor respects in relation to its obligation to insure provided for in clause 10.1. In these circumstances, had the parties chosen to use it, the contract provided a satisfactory termination mechanism through clause 6, which would have allocated risk in relation to the deposit. Were Ocean Star the non-defaulting party it would be entitled to terminate and recover the deposit and other moneys paid, under clause 6.2 (d). Were Soft Star the non-defaulting party, it would be entitled to forfeit and retain the deposit and all other moneys paid, under clause 6.2 (c). The fact that neither party chose to use that contractual mechanism and indeed for Ocean Star at least to affirm the contract does not mean that there was a gap in the contractual mechanism for dealing with the deposit and other moneys paid under the contract. Whilst the contract remained on foot, clause 6 provided a satisfactory mechanism for its termination in the event of breach or repudiation, but not otherwise. 162But clause 6 does not apply to mere non-satisfaction of the Conditions Precedent in the absence of a breach of contract: in clause 6 a "defaulting" party is a party "in breach" or one who "repudiates this Contract". What happens when neither party is a "defaulting" party within clause 6 but the Conditions Precedent have not been satisfied? Clause 2.4 applies. But as I have found above clause 2.4 does not deal with the deposit and other moneys paid under the contract. 163Were it necessary to decide this question, absent my conclusion that the contract had been abandoned, I would have granted Ocean Star restitutionary relief as claimed. I would have done so because no party has established a breach of contract in response to which the other side has established that the clause 6 mechanism is deployable. Ocean Star has affirmed the contract on 6 May 2004 and thereby disabled itself from relying upon Soft Star's repudiation in issuing a wrongful Notice of Repudiation. Ocean Star's failure to obtain insurance under clause 10 is not clearly established to be a breach of the June 2004 Agreement in any event. There is no contractual mechanism under the June 2004 Agreement to deal with the Deposit and other moneys paid even if the contract remained on foot when neither side is in breach. This is the kind of "gap" which allows for the operation of the law of restitution: cf John Nelson Developments Pty Ltd v Focus National Developments Pty Ltd [2010] NSWSC 150, per Ward J at [325] to [336]. 164Here there has been a total failure of consideration by reason of the non-satisfaction of the Conditions Precedent, and specifically obtaining the consent of the Commonwealth of Australia to the assignment, the Condition Precedent in Clause 2.3(a). The June 2004 Agreement contemplated in clause 3.1 the payment of the deposit and other money for "an assignment of the Lease". Clause 2.1 requires the same exchange of value. This has not occurred. Ocean Star has got nothing under the June 2004 Agreement for its Deposit and payment of part of the Assignment Fee absent the Commonwealth's consent to the assignment. 165But in my view the correct analysis here is that the June 2004 agreement was abandoned at some time before Ocean Star commenced these proceedings in 2009.

(d)Ocean Star's Claim in Abandonment 166Though infrequently applied, the principles that govern when a party has abandoned or abrogated a contract are well-established. Where one party fails in an action for damages for breach of contract, but the other party has not rescinded and time has passed during which neither party took steps to perform the contract, then the parties may be held to have conducted themselves so as to mutually abandon or abrogate the contract: Summers v The Commonwealth (1918) 25 CLR 144, per Isaacs J at 152. Whatever the terms of a contract may be, it is possible for the parties to so conduct themselves so as to mutually abandon or abrogate it; where neither party has repudiated or refused to perform a contract, or nothing in the nature of rescission has occurred, one party is not bound to give the other unlimited time to do that which the other has contracted to do: cf De Soysa v De Pless Pol [1912] AC 194 and Summers v The Commonwealth (1918) 25 CLR 144, per Isaacs J at 152. A consequence of such abandonment and abrogation is that a deposit payable under the contract is returnable: Summers v The Commonwealth (1918) 25 CLR 144 at 153 per Isaacs J. The High Court of Australia applied the same principles in DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1977) 138 CLR 423, at 434. These cases have also been applied more recently in this Court: cf Rona v Shimden Pty Ltd [2005] NSWSC 818 at [94]-[95] per White J; Gorgas v Soon Ok Hwang [2010] NSWSC 1121 at [45]-[54] per Palmer J and Gittany v Mcdowell [2009] NSWSC 591 at [56]-[61]. 167Orders for the return of a deposit may be made even though the claim on that basis is not specifically pleaded in the Statement of Claim, if the circumstances warrant the conclusion that the contract has been abandoned and abrogated: DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1977) 138 CLR 423 at 434. In this case, as a result of discussion between the Court and counsel for both parties about whether such a claim was available on the facts and was being articulated, Ocean Star took the course of formally amending its pleading to express such a claim were the Court to reach the view that the contract had been abandoned and abrogated. 168The Court's conclusions in relation to abandonment flow from findings of fact already made and the following findings and conclusions. 169First, in all the discussions that took place between the representatives of Soft Star and Ocean Star, mainly in Seoul, after May 2005 and until the commencement of proceedings, neither of them orally sought to initiate or press for the performance of the June 2004 Agreement. Neither side demanded further performance of the June 2004 Agreement from the other side in their face-to-face meetings during this period. Neither side pressed on its part to continue further performance of the agreement during this period 170Second, the contact that took place between the representatives of Soft Star and the representatives of Ocean Star was mainly focused on how Soft Star could raise funds through other projects to be able to return to Ocean Star the moneys which Ocean Star had paid under the June 2004 Agreement. In other words the parties were discussing an arrangement, which would replace the existing June 2004 Agreement with a regime which did not involve Ocean Star playing a role on Christmas Island and in which the parties would fully disengage from the June 2004 Agreement. 171Thirdly, with the exception of some limited communications in 2007, neither Ocean Star nor Soft Star actively sought to persuade the Commonwealth to change its mind about consenting to the assignment of the Lease. Any such brief communications were exhausted by late 2008 or early 2009. The Commonwealth did not provide any basis for the parties to expect it would change its mind. 172Fourthly, neither party sought by the Statement of Claim or any Cross Claim in these proceedings to complete the assignment of the Leases under the June 2004 Agreement. The relief sought related to the recovery of moneys paid under the June 2004 Agreement and to deal with the consequences of alleged repudiation of the agreement. The parties have long ago accepted that the Commonwealth would not consent to the assignment of the Leases. 173In my view, the June 2004 agreement was abandoned and abrogated by late 2008 or early 2009. In consequence, in my view the KRW 2.45 billion payable under it is recoverable as moneys paid under an abandoned and abrogated agreement. The Claim Against Mr Kwon 174Ocean Star has only succeeded against Soft Star as a result of the abandonment of the June 2004 Agreement. But Ocean Star has also made a claim against Mr Kwon as the Covenantor under clause 14.2. Under that clause the covenantor "guarantees to the Assignee [Ocean Star] the due and punctual performance and observance by the lessee [Soft Star] of all...the covenants and agreements on the part of the Lessor herein contained and referred". This Covenantor's obligation only relates to assuring the performance of the terms of the June 2004 Agreement. But Ocean Star has not now succeeded against Soft Star upon any of the terms of the June 2004 agreement. Rather, it has succeeded as a result of the abandonment of that agreement. That situation does not enliven the terms of clause 14.2 and Ocean Star may not recover under that clause against Mr Kwon.

Conclusions and Orders 175In the result, the Court has reached the following conclusions in relation to the matters in issue between the parties. 176The Court has found that no compromise was reached between Ocean Star and Soft Star's representatives in Seoul in August 2005, or any other time, for Ocean Star to forego its claims under the June 2004 Agreement in exchange for the recovery of the deposit and other money paid to Soft Star under that agreement. Thus, it is necessary for the Court to determine Ocean Star's other pleaded causes of action for recovery of money paid under the June 2004 Agreement. 177On those other causes of action the Court finds against Ocean Star on its claim in contract that the moneys it paid under the June 2004 Agreement are repayable as a term of that agreement, by reason of the non-satisfaction of the Conditions Precedent. There is no clause in the June 2004 agreement which provides for the return or other disposition of the Deposit and other parts of the Assignment Fee already paid, in the absence of an established breach of contract or repudiation, which would attract the operation of clause 6. 178On the other hand, Soft Star's contention that is it is entitled to retain the moneys it has paid under the June 2004 Agreement, because that is the contractual result, under clause 6 or otherwise, of being the non defaulting party upon Ocean Star's repudiation of the contract, also fails. It fails because Soft Star has not established that Ocean Star repudiated the June 2004 Agreement by the time Soft Star served its Notice of Repudiation on 3 May 2005. It also fails because Soft Star has not deployed clause 6 in respect of a non-repudiatory breach of the June 2004 Agreement by Ocean Star. 179But it is not necessary to decide Ocean Stars' claim in restitution for total failure of consideration in respect of payments made under the June 2004 Agreement. This is because the Court has found that by late 2008 or early 2009 the June 2004 agreement was abandoned and abrogated by the parties. Ocean Star is able to claim all the moneys paid under the June 2004 agreement back upon the abandonment and abrogation of that agreement. If the June 2004 Agreement were not abandoned and abrogated, then the Court finds that the same money could be recovered in restitution as there was a total failure of consideration for Ocean Star's payments, as a result of the non-satisfaction of the Conditions Precedent under the June 2004 Agreement, a matter not provided for under the Agreement. 180Finally, Ocean Star's claim against Mr Kwon personally under clause 14 fails, because Ocean Star has not succeeded upon the terms of the June 2004 Agreement which has been abandoned and abrogated. 181The parties should bring in short minutes of order to give effect to these reasons. Precise calculations will need to be undertaken of the amount including interest now to be repaid by Soft Star to Ocean Star. On Ocean Star's claim against Soft Star, Ocean Star has succeeded. On Ocean Star's claim against Mr David Kwon, Mr Kwon has succeeded. Costs would ordinarily follow the event in respect of both these respective claims. But there may also be claims for special orders as to costs, including claims that costs should not follow the event. 182Accordingly, I direct the parties to file and serve their agreed short minutes of order (or their competing versions) together with any submissions on costs or other relief by Friday, 20 April 2012. I further direct the parties to approach my associate to obtain a suitable date to determine any remaining issues in the proceedings.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 April 2012