The Victorian Supreme Court has ordered that a judgment obtained in South Korea concerning tax paid by the plaintiff, be registered in Australia against the judgment debtor (a Village Cinemas company), which was liable for that tax.
The plaintiff in this case, CJ CGV Co Ltd, paid tax in South Korea for which the judgment debtor was liable. The plaintiff then applied to the Supreme Court of Victoria for the registration pursuant to Pt 2 of the Foreign Judgments Act 1991 [for] the judgment it obtained in South Korea. The judgment debtor is now known as VC Eye Pty Ltd (VC Eye), an Australian corporation, but was then known as Village Cinemas International Pty Ltd.
The Seoul Central District Court found that VC Eye entered into joint venture agreements in 1996 and 1998 with South Korean companies regarding the establishment and operation of 2 entertainment complexes in and around Seoul. The South Korean companies (by their successors) entered into intellectual property licence agreements in 1998 and 1999 with Village Roadshow Hungary Rt (“VRH”). The judgment of the Seoul High Court described VRH as a wholly owned subsidiary of VC Eye. VRH was required by these intellectual property licence agreements to provide certain information to the South Korean companies and in return, those 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 DTA 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 stated that as a result of this finding, the Seoul Tax Office notified the plaintiff, who is the withholding agent, that it must pay KRW 1,143,090,032, plus surtax, which it did.
- The plaintiff sought recovery from VC Eye of the withholding tax it paid, which the Seoul District Court granted. 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, on the basis of unjust enrichment. VC Eye appeals to the Seoul High Court and the Supreme Court of Korea were dismissed.
The plaintiff made application ex parte for registration of the judgment. The Supreme Court said VC Eye opposed registration on the basis that it was for an amount “payable in respect of taxes” and so not an “enforceable money judgment” and was therefore excluded from judgments that may be registered under the Act. It asserted 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.
The Supreme Court did not accept that the judgment fell within the exception in the Act from registration for judgments in respect of taxes or other charges of a similar nature. VC Eye conceded that, if the judgment did not fall within the tax exception, all other requirements of the Act and Rules of Court had been met. The Court therefore ordered that the judgment be registered.
(IMO of an application by CJ CGV Co Limited [2013] VSC 656, Supreme Court of Victoria, Lansdowne AsJ, 29 November 2013.)
[LTN 233, 2/12/13]