Yeo v Australian Securities and Investments Commission, in the matter of Ji Woo International Education Centre Pty Ltd

Background facts 7 Ms Yeo, a Korean national, brought an application to reinstate Ji Woo International Education Centre Pty Ltd (company). That application was successful over the opposition of Mr Choi: Yeo v Australian Securities and Investment Commission, in the matter of Ji Woo International Education Centre Pty Ltd (deregistered) [2017] FCA 1480 (first judgment). 8 On 2 February 2018, pursuant to r 2.13(2) of the Federal Court (Corporations) Rules 2000 (Cth) I ordered that Mr Choi pay to Ms Yeo the additional costs resulting from his attendance to be heard in the proceeding including specified costs. 9 Mr Choi is a director of IBN Global Pty Ltd (IBN Global). As part of his opposition to the reinstatement, Mr Choi contended that Ms Yeo agreed to relinquish all of her rights as a shareholder of the company after she was found to have embezzled money from the company in August 2013: first judgment at [33]. Mr Choi also adduced evidence that Ms Yeo had engaged in a "second embezzlement" in November 2013: first judgment at [47]-[48] and [79]-[82]. 10 Ms Yeo has been found guilty in Korea of embezzlement and served an eight month jail term. Mr Choi's sworn evidence was that Ms Yeo served this jail term for embezzling funds from IBN Global (that is, not from the company). 11 On 14 March 2018, the Seoul Central District Court made an order requiring Ms Yeo to pay IBN Global ₩138,261,314 together with a service fee, stamp duty and interest accruing from 4 November 2015 (payment order). The certified translation of the payment order states relevantly: The debtor shall pay the creditor the amount stated in the attached document. Any costs incurred from demanding for [sic] the payment shall be paid by the debtor. Debtor can lodge an appeal within 2 weeks from the date this order is served. 12 On the following page, under the heading "Purport of Claim", the payment order sets out several paragraphs including a paragraph entitled "The fact of misappropriation" and a paragraph entitled "Conclusion", which states: In conclusion, the debtor's judgment is finalised, therefore the debtor should pay the creditor [₩]138,261,31 won, which is the amount of misappropriated fund[s]. Also, the debtor should pay the creditor the amount of damage by delay calculated at the rate of 6% annum, as defined in the commercial laws, from 4 November 2015 which was the last date of embezzlement to date of service of this order, then damage calculated at the rate of 15% per annum, as defined in the special act on the promotion of charges, from the next date of service until payment. Along with the stated amounts the debtor should pay the costs involved in demanding payment. 13 The parties agree that the payment order required payment on its terms unless an appeal was lodged. 14 Ms Yeo has lodged an appeal against the payment order. The appeal was listed before the Seoul Central District Court on 21 December 2018, but was not heard on that date. The appeal was listed for a further hearing on 19 April 2019 when, according to a lawyer representing Mr Choi in Korea, it was likely to be finalised with a judgment being handed down in June or July 2019. 15 On 15 November 2018, I further ordered that the costs payable by Mr Choi to Ms Yeo pursuant to the order of the Court made on 2 February 2018 be fixed in the sum of $125,151.32, together with the costs of the application fixed in the sum of $15,598.00, making in total $140,749.32 (costs order). 16 On about 28 November 2018, IBN Global and Mr Choi signed a document entitled "Deed of Assignment of Debt made the 28 Day of November 2018" (deed of assignment). The deed contains the following recitals: A. Myounghwa (Kelly) Yeo … Seoul, South Korea (the Debtor) is indebted to the Assignor on account of the payment order made against her on 14 March 2018 in proceedings 2018-Chajeon-1000992 (Financial Matter) in the Seoul Central District Court as follows: i. the sum of KRW ₩138,261,314 (being equivalent to AUD $164,942.40 based on the exchange rate of KRW838.24:AUD1 published by the Reserve Bank of Australia as at 14 March 2018); ii. service fees of KRW ₩108,700 (being equivalent to AUD $129.68 based on the abovementioned exchange rate); iii. interest accruing at 6% per annum from 4 November 2015 until the date on which the payment order is served upon the Debtor (Service Date); and iv. interest accruing at 15% per annum from Service Date until the debt is paid; (together, the Debt). B. The quantum of the sum set out in the payment order is currently the subject of an appeal by the Debtor. The appeal is scheduled to be heard on 21 December 2018, with the quantum anticipated to be conclusively determined in or around January or February 2019. C. The Assignor has agreed to assign the Debt to the Assignee absolutely both at law and in equity in accordance with the terms and conditions of this Deed. 17 Clause 1 of the deed provides: ASSIGNMENT OF DEBT 1.1. Subject to clause 1.2 below, the Assignor as the legal and beneficial owner of the Debt hereby absolutely passes, assigns and transfers the legal and equitable right and ownership to the whole of the Debt to the Assignee with the intent that the Assignee shall from express notice in writing signed by the Assignor being given to the Debtor such Debt shall be and be deemed to have been effectively assigned both at law and in equity. 1.2. The Assignee accepts the assignment of the Debt from the Assignor. 1.3. The assignment of the Debt to the Assignee is free of all mortgages, charges and encumbrances of whatsoever kind or nature. 1.4. The Assignor represents to the Assignee that the Assignor has full power and is not in any way restricted or prevented from fully and absolutely passing, assigning and transferring the whole of the Assignor's legal and equitable right and ownership in the Debt to the Assignee so that the Assignee will upon express notice in writing being given to the debtor become the owner of the Debt both at law and in equity. 1.5. This assignment is not an assignment by the Assignor to the Assignee by way of charge. 1.6. The parties acknowledge that the quantum of the Debt is currently under appeal by the Debtor, and agree that the enforceable quantum of the Debt shall be subject to final determination by the Seoul Central District Court. 18 Clause 2 of the deed, entitled "Covenant for Further Assignment", provides: If for whatever reason the assignment to the Assignee of the Debt is not absolute and fully effective both at law and in equity then the Assignor covenants with the Assignee that the Assignor will, without any fee or charge, sign all further documents including deeds, consents, transfers, notices and other forms as may be reasonably required by the Assignee to more fully, perfectly and absolutely pass, assign and transfer the legal right to the Debt to the Assignee. 19 The deed makes no reference to the payment of any consideration for the assignment of the debt. 20 On 10 December 2018, Mr Choi filed an interlocutory application seeking a stay of the costs order. The basis of the application was a foreshadowed application for registration of a foreign judgment by Mr Choi. The application was supported by Mr Choi's 5 December 2018 affidavit. 21 On 31 December 2018, Mr Choi filed an originating application for registration of the payment order as a foreign judgment under the Foreign Judgments Act 1991 (Cth). 22 On 10 April 2019, that application was dismissed by consent with costs when it became apparent that the payment order was not capable of being registered. 23 Ms Yeo submitted that the present position is that, on the one hand, Ms Yeo has a final judgment in her favour for costs, from which no appeal has been filed, nor could now be filed. On the other hand: (1) there is doubt as to the effectiveness of the deed of assignment upon which Mr Choi relies, dependent as it is upon there being an indebtedness "on account of the Payment Order made against" Ms Yeo in the Seoul Central District Court; (2) Mr Choi has put no evidence before the Court to substantiate the asserted indebtedness of Ms Yeo to IBN Global, other than his application for a "Payment Order" which is presently hotly contested; and (3) Mr Choi does not presently have any judgment in his favour against Ms Yeo, whether final or otherwise.

Legal framework 24 The source of the Court's power to grant a stay of execution of judgment is two-fold: (1) the Court's inherent authority over its own process (see Southgate Investment Funds Limited v Deputy Commissioner of Taxation [2013] FCAFC 10; (2013) 211 FCR 274 at [11]; and (2) Rule 41.11 of the Federal Court Rules 2011, which provides: "A party may apply to the Court for a stay of execution of a judgment or order". 25 Counsel for Mr Choi, Mr Blank, referred to Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd & Anor [2007] NSWCA 57; 69 NSWLR 364 in which Beazley JA (as her Honour then was) (Hodgson JA and Santow JA agreeing) stated (at [143]) that there was an undoubted power in the exercise of the Court's discretion to grant a stay of the relevant costs order. Earlier, at [140], her Honour noted that a stay is available in a variety of circumstances, including where a defendant claims a right of set-off, citing In re A Debtor, No 21 of 1950 (No 2); Ex parte the Petitioning Creditors v The Debtor [1951] Ch 612. 26 At [143]-[145], her Honour concluded that the primary judge's discretion miscarried for the following reasons: [143] It is apparent that his Honour considered that the winding-up proceedings ought to abide the final ascertainment of the net credit position between the parties. It appears that this view was significantly shaped by his Honour's view that ABD's conduct in seeking to prosecute the winding-up proceedings in circumstances where it was possible that ABD might end up a net debtor was an abuse of process. This view was fortified by the fact that there had been a finding by the court in the statutory demand proceedings, that ABD had only established that about one third of its alleged claim in the District Court proceedings was arguable. His Honour observed that nothing more had been advanced to make it appear more plausible that the claim to the whole amount could be established. [144] It would thus appear that his Honour's order was made to keep matters in 'neutral' between the parties until the total indebtedness between the parties is determined. However, his Honour made the order in circumstances where he had found that if a stay was ordered, ABD's status as a creditor would be affected. I have concluded that that is not the case. In my opinion, that is sufficient to demonstrate that his Honour's discretion miscarried. [145] There are also additional reasons why I consider his Honour's discretion miscarried. The costs order created a debt that was separate from any other indebtedness and was not available as a set off against any indebtedness owed by ABD. Neither the costs order nor the proceedings in which it was made was subject to any appeal process. The mere fact that there were other claims between the parties, some of which were disputed and some of which were not, was not sufficient in my opinion in all the circumstances of this case, including those referred to in para [83] above, to stay the enforcement of an order that created another indebtedness. As I have indicated, this is even the more so when, even if a stay was granted, the debt subject of the stay remains due and payable. 27 The circumstances referred to at [83] of her Honour's reasons were that the basis on which the primary judge found an abuse of process was vitiated by error, and that her Honour was not satisfied that the Court of Appeal would find an abuse of process. 28 Mr Blank also referred to Ryan v South Sydney Junior Leagues Club [1975] 2 NSWLR 660 at 664, in which Bowen CJ in Eq granted a stay of execution of a costs order where the order could be set off against a second costs order that had not yet been taxed but which would exceed the first costs order. Mr Blank noted that his Honour rejected an argument that a stay should not be ordered because it would have the effect of defeating a solicitor's lien arising from the first costs order. 29 Counsel for Ms Yeo, Mr Baird, referred to Adamson v Ede [2008] NSWSC 1184, in which McCallum J considered an application for stay of execution of a judgment where there was evidence that the judgment creditor (Mr Adamson) owed the judgment debtor (Mr Ede) more than Mr Ede owed Mr Adamson, although the precise position was not clear. The amounts owed to Mr Ede comprised both liquidated claims and unliquidated claims in respect of costs orders. 30 At [42], her Honour noted that the jurisdiction to stay execution of a judgment on the grounds of set-off does not depend on satisfaction of the requirements for establishing an equitable set-off. Mr Blank argued that this proposition supports Mr Choi's application. 31 McCallum J declined to stay execution of the judgment for the following reasons: (1) Her Honour did not accept the premise of Mr Ede's application that the dealings between the parties may be summarised in the statement that Mr Adamson owes Mr Ede more than Mr Ede owes Mr Adamson. (2) It was relevant to consider the nature of the debts relied on by Mr Ede to sustain the application for a stay. Her Honour characterised them as, in the main, costs orders that had not yet been assessed. Her Honour had some doubt about the reliability of the evidence by which the quantum of the costs was estimated. 32 As to the liquidated claims, her Honour considered (at [50]) that: [T]he fact that Mr Ede was able to take an assignment of a debt in the order of $110,000 for consideration of $1, and did so after the judgment in these proceedings was entered, suggests a strategic imperative that has not been explained to this Court. I suspect that it may be as simple as the proposition that Mr Adamson and Mr Ede dislike each other intensely and will stop at nothing to make each other's lives miserable. I do not think the Court should permit its powers to be deployed as artillery in such a battle. 33 McCallum J concluded (at [51]): … If Mr Adamson and Mr Ede have a multiplicity of causes of action against each other, they are entitled to pursue them in multiple sets of proceedings but I do not think that it is in the interests of justice to permit one set of proceedings to become bogged down by the others. The judgment in these proceedings was entered after two contested hearings (one before a jury) and is not the subject of any appeal. I do not think that I should stay its enforcement.

Parties' contentions 34 Mr Choi's starting point was that, assuming that he obtains a judgment in the Seoul Central District Court following Ms Yeo's appeal, there will be two competing liquidated debts. Mr Choi contended that there are good prospects of success in the Korean court, because the civil proceedings arise out of the same factual matrix as Ms Yeo's criminal conviction for embezzlement. Mr Choi also noted that the Korean proceedings are likely to be finalised in June or July 2019. 35 Further, Mr Choi pointed to the following matters: (1) on the evidence, Ms Yeo has no assets in either jurisdiction (apart from the costs order); (2) there is no evidence as to whether the costs of the reinstatement proceeding have been paid by Ms Yeo or some other party; and (3) there is no evidence that the proposed stay could cause any hardship or other prejudice. 36 Mr Choi also suggested that Mr Choi may apply for a freezing order to protect proceeds paid pursuant to the costs order where there is an obvious risk that they would otherwise be dissipated. 37 Finally, Mr Choi argued that the Australian judgment should be stayed to enable Mr Choi to get the benefit that he hopes to obtain from the Korean proceeding. 38 Ms Yeo submitted that the application should be refused for the following reasons: (1) The evidence does not support the asserted link between the criminal conviction and IBN Global's civil claim. (2) The amount owing to IBN Global is uncertain, being the subject of contested proceedings in Korea. (3) The evidence does not support a conclusion that there is a relevant debt owed by Ms Yeo to Mr Choi. The deed of assignment identifies the payment order as the source of the debt purportedly assigned under the deed but that order is under appeal. (4) The deed of assignment, including its timing after the quantum of Ms Yeo's costs order was fixed and the absence of consideration, reflects a "strategic imperative". (5) The costs order is a final judgment separate from any indebtedness to IBN Global which might, in due course, be assigned to Mr Choi and is not the subject of any appeal process. There is no reason why Ms Yeo should not have the benefit of the judgment, and no prejudice to Mr Choi other than having to comply with the costs order. 39 Ms Yeo also contended that the application was an abuse of process because it was initially made on the basis of an order made in the Korean court, the payment order, which was never capable of registration as a foreign judgment. Ms Yeo submitted that it must have been known that the application was based upon a false premise. Finally, Ms Yeo noted that Mr Choi has opposed her at every stage of the litigation in this Court.

Consideration 40 The interests of justice do not warrant a stay of execution of the costs order, or the alternative relief sought by Mr Choi, for the following reasons: (1) Ms Yeo obtained the costs order in her favour in February 2018. It was quantified in November 2018, some eight months ago. The costs order is not the subject of any appeal. Ms Yeo is entitled to the benefit of that order. (2) The proceeding in the Seoul Central District Court is an action brought by IBN Global, not Mr Choi. The evidence does not permit me to make a confident assessment of their prospects. Although Mr Choi claims that the amount recoverable in that proceeding corresponds with the amount found to have been embezzled in the criminal proceeding, that is far from clear in the light of the facts set out in the payment order. (3) The evidence does not reveal the status or author of the facts stated in the payment order under the heading "Purport of Claim". They may be no more than the facts alleged by IBN Global. On their face, those facts suggest that the total funds of ₩138,251,314 were not embezzled in their entirety from IBN Global. For example, the facts include that funds were misappropriated from the "customers' fund as well as other customer's tuition fees and company fund". Further, the facts suggest that Ms Yeo may not have been the sole beneficiary of the embezzlement. The "personal purposes" for which the fund was misappropriated include "paying it for other student's fees". It is possible that IBN Global may have benefited from Ms Yeo's conduct in paying part of the embezzled funds for this purpose and this may affect any amount to which IBN Global will be entitled. (4) Thus, on the basis of the limited evidence available, there is a real prospect that Ms Yeo will be at least partly successful in her appeal. If so, then there is a significant question about the efficacy of the deed of assignment which purports to assign only the "payment order". In that event, Mr Choi's entitlement to set off any amount against the costs order will depend upon his procuring another deed of assignment. (5) Further, any amount found to be owing by Ms Yeo to IBN Global may be less, even significantly less, than the amount of the costs order. (6) Although I accept the theoretical possibility of a freezing order in aid of enforcement of a prospective foreign judgment: cf. PT Bayan Resources TBK v BCBC Singapore Pte Ltd [2015] HCA 36; (2015) 258 CLR 1 at [50], Mr Yeo's submissions did not address in any detail the prospect that such an order would be made in this case. 41 Contrary to Mr Baird's submission, I am not presently satisfied that the evident purpose of the deed of assignment, which is to enable a set off of Ms Yeo's costs order against the judgment that IBN Global hopes or expects to obtain in the Korean proceeding, is a negative factor in relation to the proposed stay of execution. 42 In relation to Ms Yeo's contention that the application was an abuse of process, the circumstances in which the application came to be made are unclear. Mr Choi appears to have recognised that the payment order was under appeal at the time of making the application on the basis of that order. However, without more evidence, I am not prepared to infer that the application involved any abuse of process or other improper conduct.

Conclusion 43 Mr Choi's interlocutory application should be dismissed. Costs should follow the event. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.