KR & C Co Ltd v Soon Ok Hwang

HER HONOUR: This is an application for security for costs relating to the costs of an application to set aside a registered South Korean judgment.

By notice of motion filed 18 December 2020, the defendant relevantly seeks orders that:

The plaintiff is KR & C Co Ltd. Ms Cha solicitor appeared for the plaintiff. The defendant is Soon Ok Hwang. Mr Berg of counsel appeared for the defendant. The parties relied upon a joint court book.

At the outset, counsel for the defendant objected to the affidavit of Kyung-IL (Kenneth) Hong sworn 3 September 2020 on the basis that it was served on the solicitor for the defendant 10 days prior to this hearing. It was argued that this did not allow enough time to check the accuracy of the translation of the legal terms of the South Korean judgment. That affidavit was relied upon to support the registration of the South Korean judgment. I allowed this affidavit to be relied upon but take into account that there may be some inconsistency in the translation of the legal terms.

The defendant relied upon her affidavit dated 2 March 2021. She was not required for cross examination.

In 1997 she migrated from South Korea to Australia. In 2000, she settled in Australia on a permanent basis.

In early May 2019, she received a letter from the plaintiff’s solicitor claiming that on 21 November 2018 the plaintiff obtained a judgment against her in the Seoul Central District Court that ordered her to pay KRW114,767,049 to the plaintiff. The judgment sum comprised the principal sum of KRW20,000,000 Korean Won and Interest of KRW90,164,384 Korean Won, accrued from 14 May 1997.

The defendant says that she did not receive any notice of the proceedings which led to the Seoul Central District Court judgment dated 21 November 2018 (the 2018 judgment) that occurred during her Australian residence.

Later in May 2019, she found out that the plaintiff had obtained a judgment against her in the Seoul Central District Court on 11 November 2011 (the 2011 judgment) with same cause of action as the 2018 judgment.

The proceedings which led to the 2018 judgment were for the purpose of extending the plaintiff’s right to claim against the defendant under the 2011 judgment. She did not receive any notice of the proceedings which led to the 2011 judgment.

The defendant denies owing any money to the plaintiff, either from 14 May 1997 or any other date.

In May 2019, the defendant retained Mr Seung Jin Ahn, a South Korean lawyer. He appealed the 2011 judgment on her behalf to Seoul Central District Court. The appeal was based on the ground that she did not receive any notice of the proceedings which led to the 2011 judgment. The notice had been served by way of public notice while she was in Australia.

On 26 November 2019, the Seoul Central District Court dismissed her appeal (the 2019 judgment) on the basis that the appeal grounds should have been argued to the Seoul Central District Court in 2011 and not at a later time, including the time of her appeal. The 2019 judgment held that service by public notice confirmed that she had been served under a Korean law.

The 2019 South Korean judgment included the following paragraph:

On 12 December 2019, the defendant appealed the 2019 judgment to the Supreme Court of Korea. On 9 April 2020, the Supreme Court of Korea dismissed her appeal and reaffirmed the 2019 judgment.

The 2019 judgment ordered the defendant to pay interest on the principal sum owing. The Interest accrues from 14 May 1997. The interest is at the rate of 6% per annum for the period from 14 May 1997 to 21 April 2001 and 25% per annum for the period from 22 April 2001 to date. She submitted that the total interest accrued is more than the principal owing by a factor of 5.

The plaintiff has referred to and helpfully summarised the South Korean proceedings. I accept that the plaintiff’s summary is correct.

On 3 July 2001, the Daegu District Court of South Korea ordered that the defendant pay Hanareum Mutual Savings and Finance Company (Han Bank) a debt owing of KRW155,000,000 (approximately AU$177,777) plus statutory interest at the rate of 6% per annum and statutory interest at the rate of 25% per annum from 22 April 2001 until the date of full repayment (first instance judgment).

The first instance judgment was made in similar circumstances to that of a default judgment when the Daegu District Court was satisfied that personal service was made and effected on the defendant, and the defendant did not ask to be heard. On 7 August 2011, the first instance judgment became final and enforceable.

In South Korea, the plaintiff had 10 years to enforce the first instance judgment and after the 10 year period had expired the time could be extended. Between August 2001 and June 2011, Korean Deposit Insurance Corporation conducted investigations to ascertain the defendant’s assets and financial circumstances in South Korea through other Korean governmental departments and agency, but could not enforce the first instance judgment against the defendant as it could not establish any meaningful assets in South Korea belonging to the defendant.

On 8 June 2011, the plaintiff filed an application in the Seoul Central District Court seeking to extend the time to enforce the first instance judgment. As the plaintiff was not able to identify any assets of the defendant in South Korea, the plaintiff reduced its original debt claim from KRW155,000,000 (approximately AU$177,777) to KRW20,000,000 (equivalent to approx. $22,969), being only 12.9% of the original amount of the debt. This application for extension of the time for service was served on the defendant by way of public notice.

On 11 November 2011, the Seoul Central District Court, in Case No 2011 GaSo 1706241, granted the extension of the enforcement right and ordered that the defendant pay to the plaintiff the debt of KRW20,000,000 (approximately AU$22,969) plus statutory interest at the rate of 6% per annum and statutory interest at the rate of 25% per annum from 22 April 2001 until the date of full repayment (2011 judgment). This judgment was also served on the defendant by way of public notice.

Between November 2011 and 2018, Korean Deposit Insurance Corporation continued to investigate the defendant’s assets in South Korea. In about March 2018, Korean Deposit Insurance Corporation ascertained that the defendant owned three properties in Sydney, including a property in Lidcombe in which the defendant was the sole registered proprietor.

On 3 May 2019, H & H Lawyers, the plaintiff’s legal representatives in Australia, issued a letter of demand to the defendant seeking the amount owing under the 2011 judgment.

On 20 June 2019, the defendant filed an appeal in respect of the 2011 judgment in the Seoul Central District Court in case No 2019 Na 32407. At this appeal, the defendant admitted the underlying facts as to the debts arising under the first instance judgment. The defendant never contested as to the amount of debt owing nor the effectiveness of personal service.

On 26 November 2019, the Seoul Central District Court rejected all four grounds of appeal which were raised by the defendant, and affirmed the 2011 judgment (second Korean judgment).

On 12 December 2019, the defendant appealed the second Korean judgment to the Supreme Court of Korea, the highest court in Korea.

On 9 April 2020, the Supreme Court of Korea dismissed the appeal, ultimately affirming the 2011 judgment in favour of the plaintiff (third Korean judgment).

On 14 September 2020, the plaintiff filed a summons seeking an order for registration of a foreign judgment of the Republic of Korea South under Foreign Judgments Act 1991 (Cth).

On 8 December 2020, the judgment was registered in this Court pursuant to the Foreign Judgments Act. The defendant had 21 days after service upon her of notice of the registration to apply to set aside the registration and stay the enforcement of the judgment.

On 14 December 2020, the notice of the registration was served on the defendant. On 18 December 2020, the defendant filed this notice of motion seeking security for costs.

On 4 January 2021, the period of 21 days to apply to set aside the registered judgment expired.

On 25 February 2021, Campbell J in KR & C Co Ltd v Soon Ok Hwang [2021] NSWSC 164, granted leave to the defendant to file an application to set aside the registered judgment. On 26 February 2021, in compliance with this order, the defendant filed a notice of motion seeking to set aside the registration of the foreign judgment and to stay the enforcement of the judgment.

The defendant seeks security for costs in the sum of $33,000. She relies upon the prospects of success on the application to set aside the registration of the judgment and on public policy grounds.

The plaintiff opposes providing security for costs firstly on the basis that the the proper construction of Uniform Civil Procedure Rules 2005 (NSW)(“UCPR”) r 53.4, prevents the defendant from seeking security for costs; secondly, there is no reason to believe the plaintiff would not pay any costs order if a costs order was made against it; the plaintiff is, in substance, the respondent in the proceedings (and the defendant is the applicant); thirdly, the defendant’s prospects of success in the proceedings is minimal given the judgment was regularly obtained; and finally, the defendant exhausted all avenues of appeal in Korea and the respect given by Australian courts to foreign laws and court procedures.

I will start with the plaintiff’s submissions in relation to UCPR 53.4.

UCPR 53.4 reads:

In the transcript dated 25 February 2021, counsel for the defendant drew Campbell J’s attention to UCPR 53.4. The following exchange took place:

I disagree with Richie’s commentary.

In Raffaele Viscardi SRL v Qualify Centre Food Services Pty Limited (No 2) [2013] NSWSC 2055 (“Vicardi”), Adams J expressed the view, which I accept it is obiter dicta at [11]:

Adams J did not determine this issue because the defendant was not able to demonstrate that the plaintiff, being a foreign company, was impecunious.

The plaintiff, in these current proceedings, submitted that, while security for costs under UCPR 42.21 is limited to applications made by a defendant in the proceeding, UCPR 53.4 is intended to preclude a judgment debtor from making an application for security as it used a distinct terminology to refer to a defendant as a “judgment debtor”.

As stated above, my preliminary view is that UCPR 53.4 precludes a defendant from seeking security for costs and I agree with Adams J in Vicardi. But for reasons that appear below, I am satisfied that the plaintiff is not impecunious, so it is not necessary for me to decide this issue.

The defendant relies upon UCPR 42.21 and 59.11 and the Court’s inherent power to order security for costs. UCPR 59.11 is not relevant here as it applies only to judicial review.

UCPR 42.21 relevantly reads:

It is common ground that the plaintiff is a corporation in South Korea, ordinarily resident outside Australia. Thus, the threshold issue in UCPR 42.2(1)(a) has been enlivened. The law is now settled that the discretion to order security for costs is unfettered and should be exercised having regard to all the circumstances of the case without any predisposition in favour of the award of security. The factors that the Court may order have regard to in determining an application for security for costs are set out in UCPR R 42.21(1).

UCPR 42.21(1A) relevantly reads:

In KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 196-98C, Beazley J identified the guidelines which the Court typically takes into account in determining the application. The relevant guidelines applicable in this application are:

The defendant bears the onus of establishing a basis for ordering security for costs. The defendant has not adduced any evidence establishing that the plaintiff is impecunious or will be unable to meet any adverse costs order.

It is common ground that this application for security for costs has been brought promptly and the plaintiff, a corporation in South Korea, has no assets in Australia. The plaintiff is a wholly owned subsidiary company of Korea Deposit Insurance Corporation which is a statutory authority in Korea established under the Korean Depositor Protection Act (Korea) which is similar to that of the Australian Prudential Regulation Authority (also known as APRA). The primary role of the plaintiff is to take over business or contracts of insolvent financial institutions and conduct a resolution process, including engaging court processes or debt recovery, to save such financial institutions from failing. The government of South Korea stands behind the plaintiff and there is no evidence to show the government of South Korea would be unable to pay the security for costs in the amount sought, or any adverse costs order ordered to do so.

The defendant accepted that the plaintiff’s claim is in good faith. She relies on public policy grounds to set aside the registration of the foreign judgment, under s 7(2)(a)(ix) Foreign Judgments Act. It relevantly reads:

They can be summarised as firstly, the interval of time between the South Korean Court and the registration of this judgment; secondly, the defendant did not receive notice of the hearing and the judgment of the South Korean Court; and finally, the quantum of the registered judgment is excessive. I will deal with each of them in turn.

While I am determining an application for security for costs, I must consider whether there are reasonable prospects of success of the defendant’s application to set aside the registered judgment.

The approach of the Court in determining whether or not to set aside the registration of foreign judgment was described by McCallum J in First Property Holdings Pte Ltd v Nyunt [2019] NSWSC 249. At [9] her Honour said:

When the ground of public policy is relied upon for the purpose of setting aside the registration of foreign judgment, the Court has regard to considerations of comity. In Kok v Resorts World at Sentosa Pte Ltd [2017] WASCA 150, Martin CJ stated at [17]:

I shall now address the defendant’s submissions on public policy.

There is an interval of time between the initial judgment of the South Korean Court, which is the foundation of the registered foreign judgment, and the enforcement of that judgment in South Korea. That interval of time is more than an Australian Court will allow for the enforcement of a judgment and is contrary to public policy.

It would not be consistent with the above approach of the Court not to respect the comity, if the registered judgment is to be set aside on the basis of the public policy ground due to the fact that there are differences in the laws relating to limitation periods between Australia and Korea.

A judgment creditor has 10 years to enforce a judgment in Korea under the Korean Law and an extension of such time period is granted so long as an application for extension of time for enforcement is drafted properly and filed prior to the expiry of the subject judgment.

The Korean Court in the proceedings resulting in the 2011 judgment lawfully granted the extension of time for enforcement of the first instance judgment and thereby issued the 2011 judgment as a fresh judgment which is enforceable for 10 years.

During the period between 2001 and 2018, the plaintiff continued to investigate the defendant’s assets or financial resources in Korea for the purpose of enforcement of Korean judgment, but no meaningful assets were discovered.

After the plaintiff discovered that the defendant had interests in real properties in Australia in 2018 and had appealed twice in Korean Courts (including to the Supreme Court), she was given the opportunity to pay the debt before commencing these proceedings.

The plaintiff was personally served with the 2001 Korean originating process. Hence, I regard the prospects of success, of the argument that the extension of the validity of the judgment would be found to contrary to public policy, as modest at best. While it is perhaps unnecessary to compare the extension of time before a judgment goes stale in this Court, in the New South Wales Supreme Court, a judgment goes stale after 12 years (s 134 Civil Procedure Act 2005 (NSW)).

The 2011 notice of hearing was made by way of public notice.

The defendant did not receive notice of the 2011 hearing and subsequent judgment of the South Korean Court. By that lack of notice, the defendant says she was prejudiced in the 2018 and 2019 hearings of the South Korean Courts. Such prejudice to the defendant is contrary to public policy.

The fact that the statement of claim resulting in the 2011 judgment was served on the defendant by way of public notice did not cause prejudice to the defendant as she was served personally with the statement of claim in the first instance proceedings on 21 April 2001. She decided not to defend her case which resulted in making an admission under Article 150 of the Civil Procedure Act (Korea).

The 2011 judgment merely extended the first instance judgment but with a significantly reduced judgment sum from KRW155,000,000 (approximately AU$177,777) to KRW20,000,000 (approximately AU$22,969), being 12.9% of the original amount of the debt.

In the second Korean judgment, the Seoul Central District Court recognised prejudice the defendant may have suffered due to the service by way of public notice of the 2011 judgment and considered each claim the defendant made for the appeal proceeding. The efficacy of the service or the existence of debt was never argued by the defendant, and, instead, she admitted the debt. The Seoul Central District Court ultimately dismissed each of the four grounds of appeal the defendant raised and affirmed the 2011 judgment.

The defendant had the opportunity to argue her case in full before the Korean Courts, and the plaintiff has followed all legal procedures in accordance with the Korean legal system.

For the purposes of this application only, I accept that the defendant became aware of the 2001 judgment in the South Korean Central District Court in May 2019. She appealed the judgment on the basis that she did not receive any notice of the proceedings that led to the 2011 judgment.

On 26 November 2019, the Seoul Central District Court dismissed her appeal (the 2019 judgment) on the basis that the appeal grounds should have been argued to the Seoul Central District Court in 2011 and they could not be argued at a later time and this included at the time of the appeal. The 2019 judgment held that service by public notice confirmed that she had been served under a Korean law.

In these circumstances, and in the interest of comity in respect of institutions and other sovereign states which are considered to provide substantial reciprocity of treatment for Australia judgment, it is unlikely that the fact that the notice of the 2011 hearing was served by way of public notice in accordance with South Korean law would be found to be contrary to public policy. Once again, the chances of success are modest at best.

The quantum claimed by the plaintiff is in excess of 5 times the quantum of the judgment of the South Korean Court which is the foundation of the registered foreign judgment. That result is due in part to interest calculated at 25% annually, under South Korean legislation. The result is contrary to public policy.

The post-judgment interest rate applied to the subject Korean judgment is 25% per annum in accordance with Korean law applicable from 2 March 1981 to 31 June 2003. While there are differences between post-judgment interest rates between Australian Courts and Korean Courts, such rates were not arbitral but more of a reflection of the economic status of an individual state. For example, the post judgment interest rate in Australia as at the date of this submission is 6.10% per annum, however, it was 19.5% per annum for the period from 1 July 1986 to 31 October 1987. Such a difference should not be evaluated and compared from the point of view in the economically advanced society.

Further, while the principal sum and interest registered were KRW20,000,000 (approximately AU$22,969) and KRW102,821,844.42 (approximately AU$119,181) respectively, it ought not be considered excessive given that the original debt owing under the first instance judgment was KRW155,000,000 (approximately AU$177,777) which is higher than the total sum the defendant is presently required to pay under the registered judgment.

Interest rates under Korean law and Australian law fluctuate depending on economic conditions in that country. The prospects of success of setting aside the registered judgment is modest at best. It is unlikely that the fluctuating interest rates would be found to be contrary to public policy.

Overall, it is my view that the defendant’s public policy arguments to set aside the registered judgment are weak. Finally, I am satisfied that if the defendant were to be awarded costs against the plaintiff, the defendant can enforce the costs order in South Korea pursuant to the Foreign Judgments Act. The Supreme Court, Appellate Courts, District Courts, Family Court, Patent Court and Administrative Court in South Korean are the Courts specified in the Item 16A to the Schedule of the Foreign Judgments Regulation 1992 (Cth).

If I am wrong and security for costs ought to be ordered, I will address the amount of security that should be provided.

The defendant has given an estimate of the costs of the proceedings that includes costs of preparation for the hearing; costs of the hearing; and the additional costs of pursuing costs in South Korea. The plaintiff seeks the sum of KRW122,825,019.42, which is approximately AU$143,558.45. The security sought is $33,000. The security she sought is a proportionate amount of legal costs.

Min Woo Yun, the solicitor acting for the defendant, in his affidavit dated 22 March 2021, deposes that the defendant has incurred AU$28,293 of legal costs in this matter to date. The legal costs are recorded in a memorandum of costs prepared by him. The defendant’s legal representatives are preparing for the hearing of the motion to set aside the registration judgment. Mr Yun estimates a further 2.5 days preparation by the defendant’s legal representatives and 3 hours of court time. He estimates the defendant’s costs up to and including the hearing of this motion as AU$40,943 including GST.

The costs and disbursements incurred to date are set out in a letter by Cambridge Lawyers Campsie to H & H Lawyers dated 22 March 2021 (see Mr Yun’s Aff (CB24). As previously stated, the defendant seeks $33,000 for the legal costs incurred in the application to set aside the registered judgment.

The defendant has not sufficiently explained the basis for the calculation of the defendant’s estimated costs. It is unknown what work will be required for the February notice of motion, by whom, for how long, and what the applicable hourly rates are based on the extent of role and experience.

Further, the defendant’s itemised costs appear to be calculated on a solicitor/client rather than a party/party basis.

As things stand, substantial evidence for the notice of motion has already been filed by both parties. Excluding this notice of motion, the work remaining for the parties is relatively trivial.

The defendant’s estimate of $40,943 (including GST) does not reflect a proper assessment of cost on a security for costs application. The Court is not bound to accept the defendant’s proffered costs estimate. The plaintiff submitted that the Court would be justified in rejecting the defendant’s estimate of costs as unsupported and unreasonable.

Taking these considerations into account, it is my view that if security for costs were to be ordered and enforced in South Korea the appropriate amount is $33,000.

The defendant’s notice of motion filed 18 December 2020 is dismissed.

Costs are discretionary. Costs usually follow the event. The defendant is to pay the plaintiff’s costs on an ordinary basis.