IMO of an application by CJ CGV Co Limited
[2013] VSC 656
•29 November 2013
| Send for Reporting | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2011 06568
IN THE MATTER of an application by the CJ CGV Co Limited pursuant to s 6(1) of the Foreign Judgments Act 1991 (Cth)
| CJ CGV CO LIMITED | Plaintiff |
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JUDGE: | LANSDOWNE AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 15 October 2013, further written submissions 14 and 15 November 2013 | |
DATE OF JUDGMENT: | 29 November 2013 | |
CASE MAY BE CITED AS: | IMO of an application by CJ CGV Co Limited | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 656 | |
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FOREIGN JUDGMENT – registration – plaintiff paid tax in Korea for which judgment debtor liable – plaintiff then obtained judgment in Korea against judgment debtor in respect of this sum on the basis of unjust enrichment – judgment debtor opposes registration of the judgment on the basis that it is for an amount “payable in respect of taxes” and so not an “enforceable money judgment” – statutory exception to be interpreted in the light of the common law test - judgment in substance arises from private law of unjust enrichment – registration would not cause the direct or indirect enforcement of a foreign revenue law – judgment conceded to be otherwise registrable – judgment registered.
Foreign Judgments Act 1991 (Cth) s 3 “enforceable money judgment”; “an amount payable in respect of taxes or other charges of a similar nature”; ss 5(4), 6 and 7.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C.E. Shaw | Clayton Utz |
| For the Judgment Debtor | Mr P.D. Corbett SC | Herbert Geer |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 3
Foreign Judgments Act 1991 (Cth)..................................................................................................... 4
Facts....................................................................................................................................................... 6
Korean proceedings...................................................................................................................... 8
Analysis of judgments................................................................................................................ 10
Submissions...................................................................................................................................... 12
Discussion.......................................................................................................................................... 15
Statutory exception to be read in light of the common law.................................................. 15
Common law test........................................................................................................................ 16
Application of these principles to the facts of this case........................................................ 21
Conclusion......................................................................................................................................... 28
HER HONOUR:
Introduction
This is an application made by the plaintiff, CJ CGV Co Ltd, for the registration pursuant to Part 2 of the Foreign Judgments Act 1991 (Cth) (“Foreign Judgments Act” or “the Act”) of a judgment obtained by the plaintiff in South Korea against the judgment debtor. The judgment debtor is now known as VC Eye Pty Ltd (VC Eye) but was then known as Village Cinemas International Pty Ltd.
The plaintiff obtained judgment against VC Eye in the Seoul Central District Court on 16 November 2011 in the sum of KRW 1,143,909,032, with interest to run at 20% per annum from 30 March 2010 and costs.
VC Eye appealed the judgment to the Seoul High Court. That appeal was dismissed on 20 September 2012. VC Eye appealed that judgment to the Supreme Court of Korea. That appeal was dismissed without a hearing. VC Eye concedes that there are no further avenues of appeal available against the judgment in South Korea.[1]
[1]Transcript page 19, ll 3-9
The plaintiff made application ex parte for registration of the judgment obtained in the Seoul Central District Court by originating motion filed 5 December 2011. The usual course in relation to registration of a foreign judgment is that it proceeds on an ex parte basis. Once the judgment is registered, the Act provides for the judgment debtor to apply within a certain time frame, which must be specified in the order for registration, after notice has been given to it of the registration to have the registration set aside.
This application took a different course. The Court directed that the judgment debtor, VC Eye, be put on notice of the application from the outset, prior to consideration of the question of registration. The plaintiff’s application for registration was also adjourned on multiple occasions, in part to allow the appeals to be heard, and then to enable the parties to attend mediation, and file material.
VC Eye filed a summons on 20 April 2012, seeking by its first order that if the judgment had been registered the registration be set aside. By its second order that summons sought in the alternative that enforcement of the judgment, if registered, be stayed pending the final determination of the (first) appeal. Both orders as sought have now been overtaken by events, the judgment not having been registered and the appeals having been determined. VC Eye does not press the summons and proposes that it be dismissed at the conclusion of the proceedings.
VC Eye opposes registration of the judgment on the basis that it is excluded from judgments that may be registered under the Act. It asserts that the amount required to be paid pursuant to the judgment is in respect of taxes or other charges of a similar nature, which is a category of foreign money judgment that is excepted from registration.
For the reasons set out below, I do not accept that the judgment falls within the exception in the Act from registration for judgments in respect of taxes or other charges of a similar nature. VC Eye earlier also asserted that the plaintiff had not met the other necessary requirements for registration, but those objections were answered by the filing of a further affidavit by the plaintiff, the affidavit of Jiwon Kim affirmed 25 September 2013, and are no longer pressed. VC Eye concedes that, if the judgment does not fall within the tax exception, all other requirements of the Act and Rules of Court have been met.[2]
[2]Transcript page 57, ll 3-5.
Accordingly, I will order that the judgment be registered. Detailed reasons for this conclusion follow.
Foreign Judgments Act 1991 (Cth)
The Foreign Judgments Act provides for the registration of judgments that have been obtained in another country on a reciprocal basis with that other country. Once registered in the appropriate Australian court, the foreign judgment may be enforced here. It follows from the scheme of the Act that only judgments obtained in certain foreign countries, from certain courts in those countries, and of certain types, are registrable. Part 2 of the Act provides for the reciprocal enforcement of judgments. Section 6(1) within that Part provides that a judgment creditor “under a judgment to which this Part applies” may apply to the appropriate court in Australia to have the judgment registered within six years after the date of the judgment, or the date of the last judgment if the initial judgment was appealed.
The balance of s 6 makes provision as to the appropriate court in Australia, requires that that court register the judgment if the requirements of the Act and Rules of Court have been complied with, and requires specification in the order for registration of a period within which application may be made to set aside the registration. The section also provides for the consequences of registration and other procedural matters.
For current purposes the most relevant sub-sections of section 6 are as follows:
(3)Subject to this Act and to proof of the matters prescribed by the applicable Rules of Court, if an application is made under this section, the Supreme Court of a State or Territory or the Federal Court of Australia is to order the judgment to be registered.
(4)The court’s order must state the period within which an application may be made under s 7 to have the registration of the judgment set aside.
Section 7, also within Part 2, provides for application by the judgment debtor to have the registration of a judgment set aside. The Court is required to set aside the registration if satisfied of any of a number of matters, including that the judgment “is not, or has ceased to be, a judgment to which this Part applies” (s 7(2)(a)(i)) or that the judgment “was registered in contravention of this Act” (s 7(2)(a)(iii)).
VC Eye says that the judgment obtained in South Korea was not a judgment to which Part 2 applies and accordingly cannot be registered. VC Eye relies on s 5(4) of the Act, the first section within Part 2. That sub-section provides as follows:
(4)This Part applies to an enforceable money judgment that:
(a)is final and conclusive; and
(b)was given in:
(i)a superior court of a country in relation to which this Part extends; or
(ii)an inferior court of such a country, being an inferior court in relation to which this Part extends.
There is no dispute in this application that paragraphs (a) and (b) of s 5(4) are satisfied. VC Eye says that what is not satisfied is the initial requirement that the judgment be an “enforceable money judgment”. That phrase is defined in s 3 of the Act in these terms:
Enforceable money judgment means a money judgment under which is payable:
(a)an amount of money, other than (except as mentioned in paragraphs (b) and (c)) an amount payable in respect of:
(i)taxes or other charges of a similar nature; or
(ii)a fine or other penalty; or
(b)an amount of money payable in respect of New Zealand tax; or
(c)an amount of money payable in respect of recoverable Papua New Guinea income tax.
VC Eye says that this judgment falls within the exclusion of judgments for “an amount payable in respect of … taxes or other charges of a similar nature”.
Facts
I set out the facts as they emerge from the English translation of the judgment at first instance, being the judgment of the Seoul Central District Court dated 16 November 2011. Both the plaintiff and VC Eye made submissions on the basis of the English translation of that judgment undertaken by Andrea Young-Oak Lee which is exhibited to her affidavit sworn 2 December 2011. The plaintiff and VC Eye also both made their submissions on the basis of the English translation of the judgment of the High Court of Seoul which is exhibited to the affidavit of Minh A. Kim sworn 6 February 2013. In preparation of this judgment, I observed that p 11 of the 15 page translation of the High Court judgment was missing from the material filed with the Court. It was subsequently supplied by the plaintiff.
The facts are set out in the judgment before the Seoul Central District Court. The Court found that VC Eye entered into joint venture agreements in 1996 and 1998 with various South Korean companies regarding the establishment and operation of two entertainment complexes, one in Seoul and the other outside Seoul. There were various changes to the identity of the South Korean companies but their successors entered into intellectual property licence agreements in 1998 and 1999 with Village Roadshow Hungary Rt (“VRH”). The judgment of the High Court describes VRH as a wholly owned subsidiary of VC Eye. VRH was required by these intellectual property licence agreements to provide information to the South Korean companies in relation to the establishment, operation, administration and design of a multiplex cinema. In return, the South Korean companies would provide 4% of their gross revenues to VRH as royalties. The agreements provided that Korean tax law would be applicable to the royalties.
The plaintiff is the eventual successor of all of the South Korean companies who were parties to the joint venture and intellectual property licence agreements.
In 2001 and 2002, the plaintiff paid VRH 4% of its gross revenues by way of royalties, totalling KRW 7,262,060,214.
Under the tax treaty between Hungary and South Korea, South Korea does not impose withholding tax on royalties earned by a Hungarian resident. By contrast, under the tax treaty between Australia and South Korea, royalties accruing in South Korea may be taxed in South Korea up to 15% of the total of the royalties.
On 1 September 2006, after conducting a tax investigation of the plaintiff, Seoul Regional Tax Office deemed VC Eye to be liable for withholding tax on the basis that VRH had been put forward as merely a nominal party to avoid the tax rate of 15% applicable to royalties to be paid to an Australian company. The judgment states that as a result of this finding the Tax Office:
notified the Plaintiff who is the withholding agent that it must pay KRW 1,143,090,032 (=corporate tax KRW 1,039,917,302 + resident tax KRW 103,991,730) and a surtax of KRW 114,390,903 (=corporate tax part KRW 103,991,730 + resident tax part KRW 10,399,173). To this, without protesting this decision by way of a formal objection among others, the Plaintiff paid the entire amount of KRW 1,258,299,935 (=KRW 1,143,909,032 + KRW 114,390,903) to the Korean authorities.[3]
[3]Page 6 of 16 of the English translation, found at p 30 of the Court Book.
Korean proceedings
The plaintiff commenced proceedings against VC Eye in the Seoul Central District Court in 2007. The complaint is exhibited to the affidavit of Wung Ceop Chung, the Korean lawyer retained as an expert by the plaintiff. The complaint describes the claim as a claim for “repayment of improper profit” and seeks that VC Eye pay to the plaintiff the amount of KRW 1,143,909,032 together with interest and costs. The case description as it appears on the front page of the English translation of the judgment of the Seoul Central District Court is “unfair profits”.
I note at this point that there are small discrepancies within the trial judgment as translated as to the amount awarded to the plaintiff. The trial judgment in the portion quoted above states that the amount sought of the plaintiff by the Seoul Regional Tax Office, was comprised of KRW 1,143,090,032 (emphasis added) plus surtax, and the plaintiff paid the entire amount, comprising the surtax and KRW 1,143,909,032 (emphasis added). There is no explanation within the judgment of this difference. Similarly, the “Summary of the Decision”, which appears on the first page of the translation[4], orders VC Eye to pay the plaintiff KRW 1,143,090,032, but in the portion of the judgment headed “Findings” the amount is recorded as 1,143,909,032. This was the amount sought by the plaintiff’s complaint.
[4]Court Book page 26.
The plaintiff in further submissions says that the discrepancies are typographical errors, and that the correct figure, both sought by the plaintiff and for which judgment was given, is the higher figure of KRW 1, 143, 909, 032.[5] The plaintiff says this is shown by the fact that in the original Korean the judgment sum is given in the Summary of Decision as 1,143,909,032.[6] VC Eye does not disagree with this submission.[7] I accept the plaintiff’s submission. It is further supported by arithmetical checking of the figures given in the portion of the judgment quoted above. The amounts in the first set of brackets total this higher figure of KRW 1,143,909, 032, rather than the lower figure there stated.
[5]Supplementary submissions of the plaintiff dated 14 November 2013, at [3].
[6]Court Book pages 9, 13 and 21.
[7]Supplementary submissions of VC Eye Pty Ltd dated 15 November 2013, at [2].
Comparison between the remedy sought in the complaint, and the recitation of the facts in the complaint and in the trial judgment, shows that the plaintiff did not seek to recoup from VC Eye the full amount of tax it paid, which included a “surtax”, but only the original withholding tax as assessed of 1,143,909,032. The full amount of tax that the plaintiff had in fact paid was 1,258,299,935 won.
The plaintiff relies in these proceedings on the way the plaintiff’s claim in Korea was articulated in the complaint to resist VC Eye’s contention that the judgment was essentially by way of the collection of tax. The plaintiff in the Korean proceedings articulated its case as follows in the complaint:
The plaintiff’s claim for return of improper profit from the defendant.
A.The relationship between the withholding agent and the taxpayer of the tax at source of income.
(1)In this case the plaintiff CJ CGV is the withholding agent and the defendant VCI (Village Cinemas International) is the taxpayer of the tax at source. Originally when the withholding agent pays the income amount to the taxpayer of the tax at source, the withholding agent must deduct the tax at source, in the capacity of the tax collecting authority. Furthermore, once the tax has been withheld, the tax payment obligation of the taxpayer of the tax at source will be extinguished regardless of whether the withheld tax is actually paid into the national treasury.
(2)However, if the withholding agent has lost the opportunity to withhold tax at source, the withholding agent may not enforce it against the taxpayer by itself like a tax office. This is because the withholding agent is only a private entity which is obliged to perform its duty of withholding tax at source to Korea.
(3)Therefore, if the withholding agent has paid to the national treasury the tax at source without withholding tax from the taxpayer of the tax at source, the withholding agent can claim return of improper profit by lodging a civil lawsuit against the taxpayer of the tax at source. Court precedents take the same position (Supreme Court judgment of 12 June 1979, case No. 79 Da 437).[8] (emphasis in (1) and (2) added)
[8]Page 6 of the English translation of the complaint, found at page 171 of the Court Book.
Analysis of judgments
It appears from the trial judgment that VC Eye opposed the plaintiff’s claim first on the basis that the Korean court did not have territorial jurisdiction, VC Eye being a foreign corporation with no place of business in Korea and not currently conducting any economic activities there. The Seoul Central District Court rejected this objection to jurisdiction, holding that there was a sufficient connection to South Korea for the Court to have jurisdiction. In reaching that conclusion the Court noted that the purpose of the case as claimed by the plaintiff was “compensation for unfair profits”.[9]
[9]Page 9 of the English translation at Court Book p 33.
The Court then determined the substance of the plaintiff’s claim. That section of the judgment is headed “The existence of the Defendant’s Duty to Provide Compensation for Unfair Profits”. The Court first determined that, on the evidence before it, VC Eye was liable for the withholding tax on the royalties because it was the actual entity that provided the intellectual property to the plaintiff and was the “actual owner” of the royalties. The Court held that VRH had been put forward as a nominal party only in order to evade tax, to take advantage of the fact that under the Korea-Australia Tax Treaty a taxed rate of 15% was applicable to VC Eye as an Australian corporation but the tax rate under the Korea-Hungary Tax Treaty was 0%.[10] In reaching this conclusion, the Court rejected the assertion by VC Eye that VRH was not a mere conduit established to avoid the payment of tax and that VRH was both a provider of the intellectual property and the owner of the royalties.
[10]Pages 11-12 of the English translation of the judgment; Court Book pages 35-36.
The second limb of the plaintiff’s argument in the proceedings was that, as VC Eye was liable to pay the withholding tax, VC Eye had a duty to reimburse the plaintiff. This was expressed to be “as compensation for unfair profits, because it was the Plaintiff, the withholding agent, who paid the withholding tax on the Royalty in Question to the Korean authorities without collecting at the source from the Defendant.”[11]
[11]Page 11 of the English translation of the trial judgment; Court Book page 35.
The trial judgment does not record any submission in opposition from VC Eye to this second limb of the plaintiff’s argument. Nor does the judgment set out detailed reasons for ordering the payment. The conclusion that the defendant was liable to pay the sum ordered to the plaintiff follows immediately after detailed discussion of the Court’s reasons for concluding that the defendant, VC Eye, was liable to pay the tax. Thus, it may have been that at trial most of the contest turned on whether or not the defendant VC Eye was liable to pay the tax, rather than on its obligation, if any, to reimburse the plaintiff. The focus of argument is not, however, necessarily the same as the proper characterisation of the nature of the proceedings.
The contentions of the parties as set out in the judgment of the Seoul High Court on appeal show that similar factual arguments were run on appeal as at trial. Again the plaintiff’s argument had two limbs – first, that VC Eye was liable to pay the tax and, secondly, that it was obliged to return to the plaintiff what is described in the English translation of the judgment as a “significant amount of the corporate tax and residence tax for the fees regarding this case, which are considered as unjust enrichment”.[12] As noted earlier, the amount sought by the plaintiff in the Korean proceedings was the original tax levied exclusive of the additional tax that it also paid to the tax authorities.
[12]Page 8 of the English translation of the appeal judgment at Court Book page 107.
As at trial, VC Eye submitted that VRH was not a mere conduit for the purpose of avoiding tax. VC Eye also submitted on appeal that because the plaintiff paid the withholding tax without raising any objection although VC Eye had refused the request, the case was properly characterised as “transfer of wrongly levied tax to the defendant”.[13]
[13]Page 8 of the English translation of the appeal judgment at Court Book page 107.
The High Court reviewed the facts and reached the same conclusion as the trial court that the “actual party of the licence agreement” was VC Eye, not VRH, and that accordingly the defendant VC Eye was under an obligation to pay to the plaintiff the total of the corporate tax and residence tax as levied, together with interest. The plaintiff submits that this finding was on the basis of indemnity, and there is certainly reference to indemnity on the final page of the translated judgment. It is not entirely clear to me that the High Court intended to depart in this regard from the judgment of the District Court, which appears to have been based on a principle analogous to unjust enrichment or restitution, rather than contract. I do not, however, consider that for registration of the District Court judgment it matters whether its basis was the private law basis of contract or that of unjust enrichment. The only relevant consideration is whether it falls within the exception.
Submissions
The plaintiff’s submissions have three components. First, that the exception contained within the definition of “enforceable money judgment” (notwithstanding the possible breadth of the words “in respect of”) must be read in light of the common law. It is clear, the plaintiff says, that the Commonwealth Parliament in formulation and passage of the Foreign Judgments Act adopted the United Kingdom legislation. Debate in the United Kingdom Parliament on the introduction of the United Kingdom legislation in turn shows that the United Kingdom Parliament did not intend to depart from the common law test. Secondly, the plaintiff says that at common law the exception was that courts would not enforce a foreign judgment if to do so would either directly or indirectly enforce a foreign revenue law. Thirdly, that on the facts the judgment here in question does not fall within that exception at common law, and, so, is not excluded from registration by the Foreign Judgments Act.
The plaintiff says the facts show that the plaintiff’s suit was a civil case brought by the plaintiff to recover money that it had paid on the defendant’s behalf, the defendant being liable to pay that tax and having unfairly benefited by the payment of the tax by the plaintiff. The suit was not either directly or indirectly the collection of tax by the tax authorities of South Korea. The tax authorities were not a party to the suit. The tax had already been paid by the plaintiff, and the plaintiff was not an agent of the tax authorities. At trial, the plaintiff’s cause of action was restitution or unjust enrichment. On appeal, the judgment was upheld on the basis of a contractual right of indemnity as between the plaintiff and the defendant.
VC Eye accepts the plaintiff’s first proposition (that the exception in the Foreign Judgments Act reflects the common law position) and the same statement of the common law position as is asserted by the plaintiff. VC Eye says, however, that this case falls within the exception on the facts. In particular, VC Eye submits that the case on which the plaintiff relies as analogous to this case in the application of the statutory and common law position is distinguishable on its facts. I will return to that shortly.
In relation to the facts, VC Eye first says there is no evidence that the plaintiff was contractually obliged (as between it and VC Eye) to pay tax on behalf of VC Eye, and no evidence of any right of indemnity as against VC Eye if it did so.[14] In that regard, it relies on the copy agreements exhibited to its only affidavit, that of Mr Lassen. As the second limb of this submission appeared to traverse the merits of the Korean judgments, I queried it in argument. VC Eye concedes that it is not relevant for the purposes of registration whether or not the foreign judgment is correct, and that the merits of the judgment are now beyond review.[15]
[14]Transcript page 54 ll 10-20.
[15]Transcript pages 55-56.
VC Eye says it is critical, however, in the determination as to whether or not the exception applies to prohibit registration, that there is no evidence that the plaintiff was obliged to pay, on behalf of VC Eye, the withholding tax that the court adjudged VC Eye liable to pay. As noted earlier, VC Eye says there is no such obligation to be found in the agreements. It submits that the expert evidence of Mr Chung, the Korean lawyer witness for the plaintiff, does not establish any such liability imposed by statute. Further, it submits that the judgments of the trial court and appeal court do not include any finding that the plaintiff was liable to pay the tax, or record any such liability, merely recording that demand was made of the plaintiff to pay, and the plaintiff did so. In the absence of evidence of an obligation on the plaintiff to pay, VC Eye submits that the plaintiff’s suit and the judgment is “a revenue collection device which the Act was specifically designed and intended to exclude”, the ultimate beneficiary being the revenue. [16]
[16]Transcript page 57 ll 8-30.
I gave the plaintiff and VC Eye an opportunity to make further written submissions on noting after the hearing that the plaintiff sought to recover from VC Eye only the original withholding tax, and not the full amount of the tax it paid to the Korean tax office. They have done so. Each submits that this fact supports its primary case. The plaintiff says that suit for the lower amount only is consistent with its submission that the judgment is not an attempt by the tax office to enforce, directly or indirectly, the Korean revenue laws, but simply a claim by the plaintiff for restitution. The plaintiff submits, without evidence, that the surtax is in the nature of a penalty for late payment of tax, and the plaintiff did not seek to recover it from VC Eye because VC Eye was not liable for it.[17]
[17]Supplementary submissions of the plaintiff dated 14 November 2013 at [4]-[5].
VC Eye says first that there is no evidence as to the nature of the “surtax”, and in particular whether or not it was a penalty, nor as to why the plaintiff only sought to recover the principal amount of tax it paid. As noted, the plaintiff concedes there is no evidence. VC Eye next submits that (if the Court accepts that the surtax is payable only by the plaintiff and not by VC Eye), the confinement of the plaintiff’s suit to only that tax which is payable by VC Eye reinforces its primary submission that the judgment is in respect of an amount payable in respect of taxes or other charges of a similar nature.[18]
[18]Supplementary submissions of VC Eye Pty Ltd dated 15 November 2013 at [7].
The difficulty with the further submissions is that they both depend on the Court accepting or finding one or more of the following: that the surtax is a penalty, is payable only by the plaintiff (the withholding agent) and not VC Eye, and was for that reason not sought to be recovered from VC Eye by the plaintiff. These matters are asserted by the plaintiff, but without evidence in support, and VC Eye rightly takes objection to the assertions on that basis. I do not consider it appropriate to reach these findings without evidence. Accordingly, the submission of VC Eye, which depends on acceptance of at least one of these propositions (identified in the bracketed portion above) is also without evidentiary foundation.
Discussion
Statutory exception to be read in light of the common law
I first consider the first submission of the plaintiff, that the phrase “an amount payable in respect of…taxes or other charges of a similar nature” must be read as importing the common law test. VC Eye does not demur from that assertion, but it is appropriate to shortly indicate that I agree with it.
The explanatory memorandum to the Foreign Judgments Bill 1991 (Cth), subsequently the Act, makes it clear that the Act is modelled on the legislation in the United Kingdom being the Foreign Judgments (Reciprocal Enforcement) Act 1933 (UK) (“the UK Act”).[19]
[19]Explanatory Memorandum to the Foreign Judgments Bill 1991, Parliament of Australia House of Representatives, paragraph 2.
The parliamentary debate in relation to the United Kingdom legislation on its introduction as a Bill in turn makes it clear that the Foreign Judgments (Reciprocal Enforcement) Bill (UK) (“the UK Bill”), subsequently the UK Act, did not intend to depart from the common law principles that prior to the Bill governed when a foreign judgment would be enforced in a United Kingdom court. The procedure prior to the UK Bill required a new action to be commenced on the foreign judgment for it to be enforceable in the United Kingdom. The intention of the UK Bill was stated to be to obviate this necessity by introducing a procedure of registration, where a reciprocal procedure existed in the country of origin of the foreign judgment.[20] The UK Bill, subsequently the UK Act, contained a similar exclusion for judgments for “a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty”, as is now found in the Commonwealth Act.[21]
[20]Second Reading Speech in the House of Lords, HL Deb 14 February 1933, Vol 86, cc 671-5 and House of Commons HC Deb 21 March 1922, Vol 276, cc 248-50.
[21]HL Deb 21 February 1933, Vol 86, cc 762-8.
This analysis is supported by the judgment of the House of Lords In Government of India v Taylor[22]. In that case, Viscount Simonds held that the exclusion in the United Kingdom Act recognised the common law rule.[23]
[22][1955] AC 491
[23]Ibid, at 506.
I conclude that the exclusion in relation to judgments for taxes or the like was intended to be read, in the UK Act, and now in the Foreign Judgments Act, as adopting the common law test.
Common law test
At common law, the courts would not enforce a foreign judgment if to do so would be to enforce, directly or indirectly, the revenue laws of that other country. The parties rely on the same authorities to support this proposition, but seek different results from its application to the facts of this case.
The most relevant of the United Kingdom authorities is Peter Buchanan Ltd and anor v McVey[24] (“Peter Buchanan”). That case did not concern the registration of a foreign judgment. It concerned a suit in Northern Ireland, brought by a liquidator of a company incorporated in Scotland, against the former director of the company, now resident in Ireland, for moneys had and received by the director, but said to be due to the company. The company had been wound up at the instance of the Scottish revenue, in respect of a large sum of unpaid tax payable by the company. The trial judge, Kingsmill Moore J, found that the defendant had stripped the company of most of its assets, and transferred those assets to himself in Ireland, as part of a device to avoid Scottish tax. The defendant nevertheless opposed judgment against him on the basis that the courts would not enforce the collection of revenue for a foreign state, and that was the purpose of the suit.
[24][1954] IR 89
The judgment of Kingsmill Moore J contains a lengthy discussion of the common law principles, as demonstrated in previous cases, and discussion of the rationale for the rule. He began with the statement that “the law cannot be considered free from doubt”[25] and then considered previous cases where the foreign sovereign or government itself was the plaintiff seeking to recover a tax or charge. He concluded that those cases established that:
the Courts of our country will not enforce the revenue claims of a foreign country in a suit brought for the purpose by a foreign public authority or the representative of such an authority; and that, even if a judgment for a foreign penalty or debt be obtained in the country in which it is incurred, it is not possible successfully to sue in this country on such a judgment. They do not expressly go further, though some of the dicta suggest that there may be a principle that our Courts will not lend themselves indirectly to the collection of a foreign tax and will not entertain a suit which is brought for that object.[26] (emphasis added)
[25]At 100
[26]At 102-103
Kingsmill Moore J then considered a number of cases that stood for the principle that common law courts would not entertain an action for the enforcement of a penalty imposed by the laws of a foreign State, which he described as “a principle which seems to have been the parent of the rule as to not enforcing foreign revenue claims”.[27] He concluded that those cases established that :
it is not the form of the action or the nature of the plaint that must be considered, but the substance of the right sought to be enforced; and that if the enforcement of such a right would even indirectly involve the execution of the penal law of another State, then the claim must be refused.[28] (emphasis added)
[27]At 103
[28]At 104
Kingsmill Moore J next considered the rationale of the rule, and ultimately applied the same principle he had discerned in the penal cases, to the enforcement of foreign revenue claims, holding (in a statement on which VC Eye relies) that the application of the principle:
must not depend merely on the form in which the claim is made. It is not a question whether the plaintiff is a foreign State or the representative of a foreign State or its revenue authority. In every case the substance of the claim must be scrutinised and if it then appears that it is really a suit brought for the purpose of collecting the debts of a foreign revenue, it must be rejected…For the purpose of this case it is sufficient to say that when it appears to the Court that the sole object of the suit is to collect tax for a foreign revenue, and that this will be the sole result of a decision in favour of the plaintiff, then a Court is entitled to reject the claim by refusing jurisdiction.[29] (emphasis added)
[29]At 107
The judge found that the sole object of the liquidation proceedings in Scotland had been to collect the revenue debt owed by the company (there being sufficient assets left in Scotland to meet the claims of other creditors), and that the sole object of the proceedings before him instituted by the liquidator was to collect the Scottish Revenue debt. He found that the whole of the sum recovered, after payment of the liquidator’s remuneration and other costs, would be claimable by the Scottish Revenue. On the basis that the substance of the suit was to collect the revenue claim of a foreign State, he rejected the plaintiff’s claim.[30]
[30]At 108
The Supreme Court on appeal upheld his judgment, rejecting the proposition that the principle of non enforcement was limited to the direct enforcement of foreign tax claims or judgments for the payment of foreign taxes, or that the scope of enquiry was limited to the legal effect of proceedings, and not the indirect result of them.The Court held that the factual finding of the trial judge, that the purpose of the proceedings was to collect tax, was amply justified, and on that basis dismissed the appeal.[31]
[31]Ibid, per Maguire CJ at 117-118, with whom Murnaghan and O’Byrne JJ agreed.
Peter Buchanan was cited with approval in the first case to require the authoritative statement of the rule in the House of Lords, Government of India v Taylor.[32] In that case, Lord Keith of Avonholm stated the rule to be that “in no circumstances will the courts directly or indirectly enforce the revenue laws of another country”, and expressly approved the approach taken by Kingsmill Moore J in Peter Buchanan to examine the substance of the claim, and not just its form.[33]
[32][1955] AC 491.
[33]Ibid, at 510. Viscount Simonds also noted, at 508, that Peter Buchanan confirmed his view
The parties have referred me to only two Australian examinations of the common law rule, or the exclusion in the Act. The first is Ayres v Evans[34], a decision of the Full Federal Court. The appellant lived in New Zealand, and was declared bankrupt there. He had an interest in property in Australia, and his official assignee in bankruptcy in New Zealand sought an order from the Federal Court to assist him in getting in that interest for the benefit of the creditors in New Zealand. The order was granted at first instance. On appeal, the Full Federal Court considered Peter Buchanan, and the applicability of the common law rule there stated in the face of specific provisions in the Bankruptcy Act 1966 (Cth) designed to facilitate countries acting in aid of each other in bankruptcy. The Court did not take a uniform approach to resolution of these questions. Fox J distinguished Peter Buchanan on the basis that there the whole of the amount sought to be recovered by the liquidator would go to satisfaction of a revenue claim, whereas in the instant case debt to the revenue was not the whole of the bankrupt’s debt, although it was the majority of that debt. Northrop J, with whom McGregor J substantially agreed, also considered this a relevant distinction, but upheld the order below on the basis that the common law principle was abrogated by the specific provisions of the Bankruptcy Act.
[34](1981) 39 ALR 129
In my view, Ayres v Evans is of little assistance in this case, as the majority decision turns on the specific provisions of the Bankruptcy Act. The matter before me does not concern the relationship between the Act and any other statutory provision, nor insolvency. At its highest, Ayres v Evans may illustrate that Peter Buchanan is the high water mark of the extended common law principle by which the court must examine the substance, as well as the form, of the suit or judgment in question, as it applies to insolvency.
The other Australian authority is Re Reciprocal Enforcement of Judgments Act 1959 and the High Court of Borneo[35] (“the Borneo case”). That case directly concerns the registration of a foreign judgment pursuant to the then Commonwealth Act, the Reciprocal Enforcement of Judgments Act 1959 (Cth).The exception from registration of a judgment for a sum payable in respect of taxes or other charges of like nature was expressed in that Act in relevantly identical terms to the exception in the current Act. The application heard before Derrington J. in the Supreme Court of Queensland was served i.e. it was not determined ex parte, but it was not contested. Derrington J gave, however, a reasoned judgment. The foreign judgment there sought to be registered included a component for a municipal rate, which by the judgment the defendant tenant was ordered to pay the landlord plaintiff.
[35]Unreported decision of Derrington J in the Supreme Court of Queensland, in proceedings No 487/1984, delivered 7 January 1986.
Derrington J held that municipal rates were within the category of judgments for taxes or like charges which could not be the subject of enforcement proceedings at common law, but that the exception did not extend to recovery of such amount by a landlord against his tenant pursuant to the tenant’s contractual promise to pay.[36] The judgment does not make clear whether the landlord plaintiff (in the analogous position to the plaintiff in this proceeding) had in fact paid the rates in question, only noting that he was liable to do so-the rates being “exigible against the landlord by the revenue authorities, whether he recovers against the tenant or not”[37]. Nor does the judgment make it plain if the defendant tenant (in the analogous position to VE Eye in this case) was directly liable to the tax authorities, or only liable pursuant to contract to the landlord. Thus the case is distinguishable on the facts from the present case.I will return to this shortly.
[36]Ibid, at 7-8.
[37]Ibid, at 8.
Derrington J noted that the common law position was that the courts would not enforce the revenue laws of other countries either directly or indirectly, which exception may apply even if the foreign revenue authority is not a party to the action.[38] He next specifically considered whether the then Commonwealth Act coincided with the common law, given the use of the words “in respect of” in the exclusion, which words ordinarily are given a wide meaning. His reasoning in this aspect of the judgment is not entirely clear. He contrasted the case of “a claim by a private citizen which was not an indirect attempt at enforcement by a foreign revenue authority even though there may have been some remote connection with taxation or charges” (not excepted either at common law or under the statute) with that of “even an indirect attempt by a foreign revenue authority to enforce a taxation measure” (excepted under the statute) (emphasis added)[39]. If, by this contrast, he intended to limit the statutory exception to those judgments where the foreign revenue authority was a party, arguably his interpretation of the statute was actually narrower than the common law.
[38]Ibid.
[39]Ibid, at 9.
As noted earlier, this issue does not arise in this application because VC Eye concedes that the exception under the current Act (which also uses the phrase “in respect of”) adopts the common law test. For the reasons given earlier in relation to the statutory history, I consider that to be the correct interpretation.[40] It does not appear from the judgment of Derrington J that he had the benefit of argument on the basis of that statutory history.
[40]The plaintiff also referred me to discussion of the correct approach to statutory interpretation of a criminal code by the plurality (Gummow, Hayne, Crennan, Kiefel and Bell JJ) in The Queen v LK (2010) 241 CLR 177 at 220, in which they adopted the observations of Brennan J in Boughey v The Queen (1986) 161 CLR 10. I have some reservations as to whether this discussion is apposite for current purposes but it is not necessary, in view of the concession by VC Eye and the statutory history, to discuss this further.
It follows that the judgment here in question cannot be registered if that would occasion either the direct or indirect enforcement of a foreign revenue law. In other words, it cannot be registered if it is in form or substance enforcement as against VC Eye of a Korean tax liability.
Application of these principles to the facts of this case
The parties agree that the onus of obtaining registration of the judgment, including establishing that the exception does not apply, rests on the plaintiff. The plaintiff relies on the affidavits of its Australian solicitor, Vince Annetta, and the evidence of the Korean attorney Woon-Seop Chung to establish the facts, to the extent the facts are not established by the judgment and appeal judgment themselves.
The only evidence filed by VC Eye is the affidavit of Henrik Lassen, to which I referred earlier. I do not consider that that affidavit contains any relevant evidence. It exhibits various agreements and correspondence on the basis of which VC Eye contends, in the affidavit, that the plaintiff did not take the steps it was required to take as between it and VC Eye to dispute the taxation assessment. VC Eye also says that the agreements do not contain any right of indemnity in favour of the plaintiff as against VC Eye in respect of tax paid. It is not now suggested that these matters are relevant. The affidavit was filed in support of VC Eye’s summons to indicate that there were potential grounds to have registration set aside or stayed pending appeal, and all appeals are now exhausted. Counsel for VC Eye concedes that on this application the merits of the judgment are irrelevant.[41]
[41]Transcript page 55 at ll 22-24, and page 56 ll 20-26.
By letter dated 9 May 2012 from the solicitors for VC Eye to the solicitors for the plaintiff, which is exhibited to Mr Lassen’s affidavit, VC Eye disputes the assertion in Mr Annetta’s first affidavit that the “judgment did not in any way involve the participation of any taxation authority”. The letter does not, however, contain or refer to any evidence to the contrary, merely stating that “(t)he ‘participation’ of the taxation authority (NTS) is self evident.” Whether or not this was the case thus falls to be determined on the basis of other evidence.
Mr Lassen’s affidavit also exhibits a letter of demand from the plaintiff to VC Eye, in which the plaintiff asserts that the Korean Tax Service will “levy” taxes on it. This is an assertion by the plaintiff of demand made of it by the taxation authorities, and, possibly, liability to such demand. It is, however, assertion only. The letter attaches the notification from the National Tax Service in Korean, but there is no translation of that notification into English in evidence. Thus the affidavit does not cast any further light on the issue of whether or not the plaintiff was liable to pay the tax, which VC Eye asserts is critical.
Accordingly, the facts are to be found in the judgments themselves, the evidence of the plaintiff’s Australian and Korean solicitors, and that of Mr Chung. I find that the parties to the proceedings in which judgment was given were only the plaintiff and VC Eye, then known as Village Cinemas International Pty Ltd. The Korean tax authority was not a party. This is evident from the trial and appeal judgments themselves- the plaintiff and VC Eye are the only parties listed in the case details or referred to in the body of the judgments. Thus the Korean proceeding and the judgment thereby obtained are not direct enforcement by a foreign taxation authority of a tax liability.
At common law and under the Act a judgment may nevertheless fall within the exception even where the taxation authority is not a party. Peter Buchanan is the clearest example. There is, however, no evidence whatsoever here that the taxation authority was in any way propelling the proceeding indirectly or participating in it in any way. Indeed, there is unchallenged evidence to the contrary. Jiwon Kim, Korean solicitor for the plaintiff, in his affidavit affirmed 25 September 2013, positively deposes that the case did not in any way involve the participation of the taxation authority. Mr Kim’s evidence is given by way of confirmation of the earlier evidence to that effect given by the plaintiff’s Australian solicitor, Vince Annetta, in his first affidavit sworn 5 December 2011, in the first sentence of paragraph 2 (j). VC Eye did not seek to cross examine either Mr Annetta or Mr Kim.
In Peter Buchanan the tax authority funded both the appointment of the liquidator and the liquidator’s suit which was the subject of the objection. There is no evidence of any such role played by the tax authority here. The sole purpose of the liquidation and the litigation in Peter Buchanan was to obtain the tax said to be due, which had not otherwise been paid. Here, by contrast, the plaintiff had already paid the tax prior to institution of its suit against the defendant. Indeed, the plaintiff had paid more tax than it then sought to recover from VC Eye. In the absence of evidence, I cannot establish the nature of the surtax, nor why the plaintiff did not seek to recover it from VC Eye. But, whatever the characterisation of the surtax, or the reason why the plaintiff did not seek to recover it as well from VC Eye, in my view the mere fact that the plaintiff’s suit comprised less than the tax levied and paid supports the plaintiff’s contention that registration of the judgment would not amount to the indirect enforcement of a foreign tax liability. The tax paid by the plaintiff and the amount it then sought to recover from VC Eye are different. I do not accept VC Eye’s submission that suit for part only of the tax supports its case. In summary, there is no evidence that the taxation authority had any interest in the plaintiff’s suit against VC Eye, given that it had already been paid in full, and the suit was to recover part only of the tax paid, and there is evidence to the contrary.
I find that the Korean proceeding was a civil suit instituted by the plaintiff to recover from VC Eye, on the basis of principles analogous to unjust enrichment, some of the tax it had paid in satisfaction of VC Eye’s taxation liability. The evidence of Mr Kim and Mr Annetta is to this effect. Indeed, there is no dispute-counsel for VC Eye concedes as much.[42] VC Eye says, however, that in the absence of evidence that the plaintiff was obliged by Korean law to pay the tax on its behalf, the judgment is in substance one for the recovery of tax. VC Eye seeks to distinguish the case principally relied upon by the plaintiff as directly in point, the Borneo case, in both this regard and because in that case there was a clear contractual basis for recovery by the plaintiff landlord against the defendant tenant. As noted, in this case VC Eye says there was no such contractual right of indemnity.
[42]Transcript page 61-62, ll 12-2
Although the judgment to be registered ordered the tenant expressly to pay the landlord the municipal rate, Derrington J held that it was not a judgment “in respect of” tax because the judgment arose from the contractual liability, not from a taxation liability. The plaintiff says that analogously here the source of VC Eye’s liability is unjust enrichment, a different principle of private law, but, nevertheless, a private, and not a public, liability. I consider that submission to be correct. The fact that the judgment here was based on unjust enrichment rather than contract is not in my view a material distinction between this case and the Borneo case.
VC Eye also distinguishes the Borneo case on the basis that there the plaintiff landlord was obliged to pay the tax, although he could recover it from the tenant. Derrington J described the municipal rate as being “exigible against the landlord by the taxation authorities, whether he recovers against the tenant or not”.[43] Here, by contrast, VC Eye asserts that there is no evidence that the plaintiff was obliged to pay tax levied against VC Eye. The party who was liable to pay the tax was VC Eye. In my view, if this is a distinction on the facts, it is a distinction without a difference.
[43]Op cit, at 8.
First, is VC Eye’s contention that there is no evidence that the plaintiff was liable to pay VC Eye’s tax correct? There is assertion to this effect in the plaintiff’s complaint, and in its initial letter of demand to VC Eye, but there is no evidence to support it in the affidavits of Mr Annetta or Mr Kim. VC Eye says that there is no obligation imposed on the plaintiff to pay tax levied against VC Eye in the agreements exhibited to Mr Lassen’s affidavit. For the purposes of this application, and without making any finding, I accept that to be correct. There is no finding in either the trial judgment or the appeal judgment that the plaintiff was obliged to pay the tax levied on VC Eye- only that it did so on demand. The plaintiff relies on the evidence given by Mr Chung, admitted over objection as expert evidence, that the plaintiff as the withholding agent of VC Eye was liable to pay the tax. This evidence appears in Mr Chung’s affirmative answer to the question asked of him in paragraph 4 (e) of the list of questions. He also refers, at paragraph 4(g)(i) of his responses to the plaintiff as being “obligated” under “Korean tax law” to withhold tax levied on VC Eye at source, and to pay it if VC Eye did not.
VC Eye says no weight should be given to Mr Chung’s evidence, in this or any other regard, for the following reasons. First, Mr Chung conceded under cross examination that he had made no enquiries to support the conclusions he states in his answers beyond reading the material sent to him, being the complaint, judgments and some of the relevant agreements. This material is otherwise in evidence, with the exception of the complaint. VC Eye says that no special expertise is needed in its interpretation, or, if needed, it is not demonstrated by Mr Chung’s answers. This is because Mr Chung’s conclusions do not in most instances set out the process by which he arrived at them from this material, nor do they demonstrate any special expertise in interpretation of the material. In particular, in relation to his statements as to the tax liability of the plaintiff, Mr Chung conceded that he is not an expert in Korean tax law, although he said that the assertion he makes in his report is within the common knowledge of a Korean lawyer.
The plaintiff says that notwithstanding these matters, Mr Chung’s evidence that the plaintiff was liable pursuant to Korean tax law to pay the tax has weight, and should be accepted because it was never put to him in cross examination that his evidence was wrong.
In so far as it relates to the tax liability of the plaintiff, I accept VC Eye’s submission that Mr Chung’s evidence is of no weight. In addition to the matters set out above, I consider it significant that in his conclusions in his report as to the tax liabilities of the parties, as opposed to his discussion of the statute law applicable to unjust enrichment, Mr Chung refers to Korean tax law only in those general terms, not by reference to particular statutory provisions. Nor was he able in cross examination, when given the opportunity, to identify the particular source of the plaintiff’s claimed statutory liability to pay the tax. His evidence is simply too general, and he has admittedly too little special expertise in this area, to be of assistance in relation to this issue. This is so even though it was not squarely put to him in cross examination that his assertion was incorrect. The evidence sought to be adduced was expert evidence, and to have weight it must demonstrate that expertise.
I conclude that the only evidence that the plaintiff was liable pursuant to Korean tax law to pay the tax levied on VC Eye, is by way of inference from the fact that it did so on demand. While liability to pay is a fair inference from actual payment, if it was essential to the plaintiff’s case for registration to show that it had been required to pay the tax, then this inference alone may not have been sufficient.
I do not, however, accept the submission that this is an essential element of the plaintiff’s case. Counsel for VC Eye concedes that under Australian law it would not be necessary for a plaintiff who has discharged a liability of another and now seeks to recover the sum paid from that other by way of suit for unjust enrichment to show that it was personally obliged to make the payment.[44] In other words, a case may arise that is properly characterised as unjust enrichment notwithstanding no obligation on the payer to have made the payment. It follows that even if the payment was of tax, the case does not become one of enforcement of tax, rather than unjust enrichment, just because there was no obligation to pay.
[44]Transcript, page 60 ll 22-26.
Counsel for VC Eye contends that the relevant Korean law is not before the Court, but I do not accept this submission. In this respect I consider that Mr Chung’s evidence does have some weight, because it is more detailed and specific. He refers to, and quotes at paragraph 4(g)(iii) of his answers, a specific statutory provision of the Korean Civil Code by which the plaintiff could recover from VC Eye the tax it paid on its behalf. This provision is not specifically referred to in the trial or appeal judgments, and so in that regard Mr Chung’s evidence adds to what is otherwise before the Court. The principle as quoted by Mr Chung does not require proof that the plaintiff was obliged to make the payment. Further, Mr Chung states that the statutory provision is based on the “law of equity in English-American jurisprudence”, which, as conceded, would not require proof of obligation to pay. Finally, if it was an essential element of the plaintiff’s case in unjust enrichment to prove such obligation, and it had not done so, then it was open to VC Eye to defend the case on that basis. There is no reference in the trial or appeal judgment to VC Eye having done so.
In addition to these matters, I consider the characterisation of the plaintiff’s suit as revenue collection if it was not obliged to pay VC Eye’s tax to be quite artificial. Rather than getting to the substance of the suit, it imposes an artificial construct on it. I understand the submission of VC Eye to be that, in the absence of an obligation on the plaintiff to pay tax due by VC Eye, the plaintiff’s proceeding is revenue collection because the only obligation to pay the tax was on VC Eye, and the proceeding collected that tax. This characterisation of the suit ignores the significant intervening steps- actual payment of the tax by the plaintiff and so discharge of VC Eye’s liability, and subsequent suit by the plaintiff for reimbursement of some of the tax paid. Once the tax was paid by the plaintiff, revenue collection ceased.
I indicated earlier that if the facts of this case are distinguishable from those in the Borneo case, because here the plaintiff was not required to pay the tax whereas in that case he was, then it is a distinction without a difference. That is because whether or not the tax is imposed on the defendant to the suit or the plaintiff to the suit, once the tax is paid by the plaintiff, suit for its recovery against the defendant pursuant to a private right, whether that be contract or unjust enrichment, is not tax collection. Indeed, in the Borneo case it is not even clear whether the plaintiff had paid the tax prior to his suit and so arguably the case is even stronger authority for the plaintiff.
Conclusion
The case before the Korean courts was plainly expressed in form to be one of unjust enrichment. I conclude that it was also that in substance. The critical factors were that VC Eye was liable to make the payment in question, and that the plaintiff discharged that liability, VC Eye thereby gaining a benefit. That the payment was of tax does not change the nature of the recovery action by the plaintiff against VC Eye. The proper characterisation of the judgment is recovery pursuant to a private right, not direct or indirect enforcement of the revenue.
I will hear the parties if required in relation to the form of orders to give effect to these reasons and costs.
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