Goo v Kim (No 2)

Case [2023] FCA 1285

FEDERAL COURT OF AUSTRALIA

Goo v Kim (No 2) [2023] FCA 1285

Appeal from: Kim v Goo [2022] FedCFamC2G 602
File number(s): NSD 743 of 2022
Judgment of: HALLEY J
Date of judgment: 26 October 2023
Catchwords:

BANKRUPTCY AND INSOLVENCY – appeal – sequestration order made by primary judge – where primary judge relied on bankruptcy notice issued by respondent to appellant following failure to comply with specific performance order – whether appellant committed an act of bankruptcy under s 40(1)(g) of the Bankruptcy Act 1966 (Cth) – whether specific performance order was stayed at the time bankruptcy notice was issued – appeal dismissed

EQUITY – whether order for specific performance is not capable of immediate execution, without leave of the Court – where requirement to “apply to the Court to enforce an order” does not carry with it any implication that order is conditional

Legislation:

Bankruptcy Act1966 (Cth) ss 40, 41

Civil Procedure Act 2005 (NSW) ss 102, 103, 106, 138

Uniform Civil Procedure Rules2005 (NSW) rr 39.1, 39.34

Cases cited:

Australian Securities and Investments Commission v M101 Nominees Pty Ltd (in liq) (No 6) [2023] FCA 1276

Despot v Registrar General of New South Wales [2016] NSWCA 5

In the matter of Hoju Jobs Pty Ltd [2021] NSWSC 302

In the matter of Hoju Jobs Pty Ltd (No 2) [2021] NSWSC 407

Lim v Comcare [2019] FCAFC 104

Penning v Steel Tube Supplies Pty Ltd (1988) 18 FCR 568

Sunbird Plaza Proprietary Limited v Maloney (1988) 166 CLR 245; [1988] HCA 11
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Number of paragraphs: 84
Date of hearing: 15 June 2023
Counsel for the Appellant: Mr G McDonald
Solicitor for the Appellant: Rays Lawyers
Counsel for the Respondent: Mr R Marshall SC with Mr D Eardley
Solicitor for the Respondent: Praxis Lawyers

ORDERS

NSD 743 of 2022
BETWEEN:

MR SEOUNG JIN GOO

Appellant
AND:

MR JAY KOO KIM

Respondent

ORDER MADE BY:

HALLEY J

DATE OF ORDER:

26 OCTOBER 2023

THE COURT ORDERS THAT:

1.The notice of appeal filed on 9 September 2022 is to be dismissed.

2.The appellant is to pay the respondent’s costs.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

HALLEY J:

A.       INTRODUCTION

  1. This is an appeal from an order of a judge of the Federal Circuit and Family Court of Australia (Division 2) making a sequestration order against the estate of the appellant, Seoung Jin Goo (Sequestration Order): Kim v Goo [2022] FedCFamC2G 602 (primary judgment or J).

  2. The bankruptcy notice, relied on by the primary judge in making the Sequestration Order, was issued by reason of the failure of the appellant to comply with the specific performance order made by Williams J in the Supreme Court of New South Wales: see In the matter of Hoju Jobs Pty Ltd [2021] NSWSC 302 (

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AGLC
Goo v Kim (No 2) [2023] FCA 1285
Case
[2023] FCA 1285
Decision Date

CaseChat Overview and Summary

Goo v Kim (No 2) is an appeal against a sequestration order made by a judge of the Federal Circuit and Family Court of Australia. The appellant, Mr Goo, was declared bankrupt following his failure to comply with a specific performance order made by the Supreme Court. The primary judge relied on a bankruptcy notice issued by the respondent, Ms Kim, to support the sequestration order. The central issue in this appeal was whether the appellant committed an act of bankruptcy under section 40(1)(g) of the Bankruptcy Act 1966 (Cth) by failing to comply with the specific performance order, and if the order was stayed at the time the bankruptcy notice was issued.

The primary judge found that the order for specific performance was not stayed and that the respondent was not required to obtain the leave of the Court before enforcing the order and a consequential interest order. The primary judge also concluded that the specific performance order was a final order for the payment of money, which fell within section 40(1)(g) of the Bankruptcy Act. The primary judge rejected the appellant's argument that the order for specific performance was not a final judgment or order because it remained under the control of the Court.

The appeal was dismissed by the court, affirming the primary judge's decision. The court found that the order for specific performance was not stayed and that the respondent was not required to obtain the leave of the Court before enforcing the order. The court held that the Bankruptcy Notice complied with the requirements of section 41(2) of the Bankruptcy Act, as the specific performance order was a final order for the payment of money. The court rejected the appellant's argument that the order for specific performance was not a final judgment or order because it remained under the control of the Court.

The final orders of the court were that the notice of appeal filed on 9 September 2022 is to be dismissed and the appellant is to pay the respondent's costs.

Orders

Orders of the court

1. The notice of appeal filed on 9 September 2022 is to be dismissed.

2. The appellant is to pay the respondent’s costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For the reasons that follow, I am satisfied that the order for specific performance made by Williams J in the Supreme Court proceedings was not stayed at the time that the bankruptcy notice was issued at the request of the respondent and nor was the respondent required to obtain the leave of the Court before taking any steps to enforce the order and a consequential interest order. B. BACKGROUND The following background facts emerged from the judgment of the primary judge and were not disputed on the appeal. The respondent had agreed to invest money with the appellant’s companies, Hoju Jobs Pty Ltd (Hoju Jobs), a company incorporated in Australia and Hoju Jobs Limited (Hoju Korea), a company incorporated in Korea. A deposit of $300,000 made by the respondent to the appellant towards the investment, was secured by G class shares in Hoju Jobs. Ultimately, the balance of the investment did not proceed and the respondent then became contractually entitled to the return of the deposit and contractually required to return the shares in Hoju Jobs to the appellant. The appellant failed to return the deposit, so the respondent then sought specific performance against the appellant in the Supreme Court proceedings. It was common ground before the primary judge that the respondent had provided an executed transfer of the G class shares in Hoju Jobs (Hoju Shares) to the appellant. On 26 March 2021, Williams J delivered her reasons for judgment in the Supreme Court proceedings and directed the parties to prepare short minutes of order to reflect her reasons. On 21 April 2021, Williams J made an order for specific performance of an oral contract entered into between the appellant and the respondent (specific performance order), and orders for pre-judgment interest and costs (together, the Orders): see SC 2. The specific performance order included an order that the appellant pay the respondent the sum of $300,000 within 28 days of the making of the orders. The appellant failed to comply with that order. On 20 May 2021, the respondent caused a bankruptcy notice to be issued against the appellant for $359,798.64, comprising $300,000 for the judgment sum, pre-judgment interest of $58,294.53 for the period from 9 June 2017 to 26 March 2021 and $1,504.11 for post judgment interest (Bankruptcy Notice). On 2 June 2021, the Bankruptcy Notice was served on the appellant. On 12 July 2021, the Supreme Court ordered that a garnishee order be issued against the first defendant in the Supreme Court proceedings, Hoju Jobs, to enforce payment of the judgment debt of $358,294.53 (Garnishee Order). On 22 June 2021, the appellant filed an application to set aside the Bankruptcy Notice. The application was heard by Judge Manousaridis and dismissed. The time to comply with the Bankruptcy Notice was then extended up to 8 October 2021, at which time Mr Goo committed an act of bankruptcy. On 21 October 2021, the respondent filed a creditor’s petition.C. RELEVANT STATUTORY PROVISIONS AND PRINCIPLES

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

In Penning v Steel Tube Supplies Pty Ltd (1988) 18 FCR 568 at 575-576 (Woodward, Fisher and Spender JJ), the Court stated that: It appears to be settled law both in the United Kingdom and, at least at first instance, in this country, that the words in s 41(3) “execution of the judgment or order to which it relates has been stayed” are not restricted to an order expressly staying a judgment. They have been construed as having a much wider meaning. In certain circumstances execution is deemed to have been stayed if the execution creditor is for some reason not in a position to issue execution upon his judgment.D. DECISION OF THE PRIMARY JUDGE The primary judge addressed the appellant’s contention that there had not been an act of bankruptcy to provide a foundation for the making of a Sequestration Order at J [60]-[68]. The primary judge rejected the proposition that given an order for specific performance has been stated to remain in the control of the Court, the specific performance order was not a final judgment or final order that fell within s 40(1)(g) or an order that met the requirements of s 40(1) or s 40(3) of the Bankruptcy Act: at J [64]-[67]. The primary judge was satisfied that the order in paragraph 1(c) of the Orders (Order 1(c)) requiring the appellant to pay the respondent $300,000 within 28 days from the date of the order, was a final order, notwithstanding the “specific performance” preamble to the order. The primary judge stated that this conclusion was supported by the order in paragraph 5 of the Orders (Order 5) that provided for the payment of pre-judgment interest and which was not suggested to be anything other than a final order: at J [66]. The primary judge found that the Bankruptcy Notice complied with the requirements of s 41(2) of the Bankruptcy Act because Order 1(c) fell within s 40(1)(g) and both s 40(3)(b) and s 40(3)(g) of the Bankruptcy Act: at J [66]. The primary judge concluded:67The ability of a Court to supervise or revisit a specific performance order and the liberty order as to issues of non-compliance does not make the form of the order in the present case one that was not final. The Court does not accept that a specific performance order for the payment of a specified amount of money as expressed in the terms of the order in this case is not a final judgment or final order for the payment of money.68Whilst the Court accepts there is a contempt notice of motion on foot in the Supreme Court referrable to the failure to comply with order 1 (c) there is no stay on foot in respect of that order. The nature and form of the specific performance order as well as the liberty provision does not meant that order 1(c) is not an enforceable order or that order 1 (c) is the subject of any form of stay. The Court finds that there had been no stay of the final order within s40(3) (e) or s 41(3)(c). The Court rejects the respondent’s submissions that the petition is defective and rejects the submissions that there has been no act of bankruptcy, rejects the submissions as to there being a form of stay and rejects any submissions that there was no final order. Accordingly, the respondent has not succeeded on the issues (a) and (b) raised above.E. GROUNDS OF APPEAL

Ratio Decidendi

Legal Principle Established

This is an appeal from an order of a judge of the Federal Circuit and Family Court of Australia (Division 2) making a sequestration order against the estate of the appellant, Seoung Jin Goo (Sequestration Order): Kim v Goo [2022] FedCFamC2G 602 (primary judgment or J). The bankruptcy notice, relied on by the primary judge in making the Sequestration Order, was issued by reason of the failure of the appellant to comply with the specific performance order made by Williams J in the Supreme Court of New South Wales: see In the matter of Hoju Jobs Pty Ltd [2021] NSWSC 302 (SC); In the matter of Hoju Jobs Pty Ltd (No 2) [2021] NSWSC 407 (SC 2), (together, Supreme Court proceedings). The issue in this appeal is whether an order for specific performance has the necessary consequence that a judgment creditor is not able to immediately execute upon the order, without the leave of the Court, and thereby gives rise to a stay of the order for the purposes of the provisions of the Bankruptcy Act1966 (Cth) (Bankruptcy Act) governing the issue of a bankruptcy notice. For the reasons that follow, I am satisfied that the order for specific performance made by Williams J in the Supreme Court proceedings was not stayed at the time that the bankruptcy notice was issued at the request of the respondent and nor was the respondent required to obtain the leave of the Court before taking any steps to enforce the order and a consequential interest order. B. BACKGROUND The following background facts emerged from the judgment of the primary judge and were not disputed on the appeal. The respondent had agreed to invest money with the appellant’s companies, Hoju Jobs Pty Ltd (Hoju Jobs), a company incorporated in Australia and Hoju Jobs Limited (Hoju Korea), a company incorporated in Korea. A deposit of $300,000 made by the respondent to the appellant towards the investment, was secured by G class shares in Hoju Jobs. Ultimately, the balance of the investment did not proceed and the respondent then became contractually entitled to the return of the deposit and contractually required to return the shares in Hoju Jobs to the appellant. The appellant failed to return the deposit, so the respondent then sought specific performance against the appellant in the Supreme Court proceedings. It was common ground before the primary judge that the respondent had provided an executed transfer of the G class shares in Hoju Jobs (Hoju Shares) to the appellant. On 26 March 2021, Williams J delivered her reasons for judgment in the Supreme Court proceedings and directed the parties to prepare short minutes of order to reflect her reasons. On 21 April 2021, Williams J made an order for specific performance of an oral contract entered into between the appellant and the respondent (specific performance order), and orders for pre-judgment interest and costs (together, the Orders): see SC 2. The specific performance order included an order that the appellant pay the respondent the sum of $300,000 within 28 days of the making of the orders. The appellant failed to comply with that order.