Nantong Drayson Composite Material Co Ltd v Greyco Pty Ltd

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
NANTONG DRAYSON COMPOSITE MATERIAL CO LTD v GREYCO PTY LTD
[2023] SASC 52
Judgment of the Honourable Justice Stein
ARBITRATION - RECOGNITION AND ENFORCEMENT OF AWARDS - ENFORCING AWARDS - FOREIGN AWARDS
The applicant sought to register and enforce a foreign award. The respondent opposed registration and enforcement.
Held: The pre-requisites for registration and enforcement were proved and no exceptions were established. Application granted.
Uniform Civil Rules 2020 (SA) r 25.6(3); International Arbitration Act 1974 (Cth) ss 8, 9, 16, 39, referred to.
Tianjin Jishengtai Investment Consulting Partnership Enterprise v Huang [2020] FCA 767; Guoao Holding Group Co Ltd v Xue (No 2) [2022] FCA 1584; TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia (2013) 251 CLR 533; Beijing Jishi Venture Capital Fund (Ltd Partnership) v Liu [2021] FCA 477, applied.

NANTONG DRAYSON COMPOSITE MATERIAL CO LTD v GREYCO PTY LTD
[2023] SASC 52
Civil: Application

STEIN J: From about 2016, the respondent, now called Greyco Pty Ltd but previously known as Sustainable Infrastructure Systems (Aust) Pty Ltd, bought various products from the applicant, Nantong Drayson Composite Material Co Ltd (“Nantong Drayson”). The respondent paid some amounts for the delivered products, but a balance remained outstanding. On 18 March 2019, Nantong Drayson and the respondent executed a contract providing for payment of the outstanding amount by 30 September 2019 and for arbitration of any disputes. After the respondent failed to pay, Nantong Drayson commenced arbitration proceedings in the People’s Republic of China and an award was delivered. Nantong Drayson thereafter commenced proceedings in this Court to seek registration and enforcement of the award of the Chinese International Economic and Trade Arbitration Commission Jiangsu Arbitration Centre (“CIETAC”) dated 4 March 2022 (“Award”) in the matter of an arbitration between Nantong Drayson and the respondent.
Background
In early 2019, the parties entered into discussions to address the payment of amounts outstanding in relation to eight agreements for the supply of products. Emails from the respondent in late February 2019 indicated the respondent would instruct its lawyers to have an arrangement set out in a legally enforceable contract in any jurisdiction chosen by Nantong Drayson to demonstrate the respondent’s commitment to the arrangement. Emails included a proposal to resolve issues on a basis which involved Nantong Drayson shipping further goods to the respondent. Versions of a draft agreement were exchanged and a written contract was executed by both parties on 18 March 2019 (“Contract”). Correspondence from the respondent concerning the payment of outstanding amounts did not deny the obligation to pay or raise any issues said to justify non-payment, such as the goods being of poor quality. Email correspondence from the respondent referred to the respondent working on a payment plan for the amount owing and also to a guarantee that the payment problem could be solved.
Contract
The Contract states that the parties entered into the agreement after negotiation, intending to be bound. Clause 1 of the Contract states that the parties confirm they signed eight contracts for the purchase of goods, Nantong Drayson had fulfilled all the obligations of the Contract, the respondent must pay the amount of USD229,885.03 (“Payment Amount”) unconditionally and the respondent must not refuse to pay the Payment Amount on the ground of a defence including, but not limited to ‘quality problems for any reason’.
The Contract provides that the respondent would pay the Payment Amount before 30 September 2019 and contains a provision for payment of a penalty in the event of failure to pay on time. The Contract provides that the parties agree that all disputes under the Contract will be governed by the law of the People’s Republic of China. The Contract contains a clause providing for any dispute arising from, or in connection with the Contract, to be submitted to CIETAC for arbitration to occur in Nantong, with such arbitration to be conducted in accordance with the CIETAC arbitration rules. The Contract provides that any arbitral award made by CIETAC is final and binding upon both parties.
Arbitration process
Following the respondent’s continued failure to pay, Nantong Drayson commenced an arbitration process in China. An Award was made. The Award states that the arbitration was conducted in accordance with the CIETAC Arbitration Rules. The Award states that all arbitration documents, notice of the arbitration and materials were effectively delivered to both parties in accordance with the Arbitration Rules. The Award sets out the procedure which was adopted by CIETAC to notify the respondent of the arbitration. That process included sending to the respondent, in both Chinese and English, the notice of arbitration, Arbitration Rules and Nantong Drayson’s arbitration documents. The documents were sent and served by China Express International Express (“TNT”). Thereafter, CIETAC sent to and served further documents on the respondent which included requests to the respondent to express opinions on the arbitration application. The respondent failed to respond. A notice of hearing of the arbitration was not formally served on the respondent before the hearing date and consequently the hearing was rescheduled. After a further notice of the hearing was returned by TNT, the hearing was further postponed and notice of the hearing was re-sent to the respondent’s registered address.TNT documents indicate that notice was served successfully. The respondent failed to appear at the hearing and failed to give a reason for non-appearance. The arbitrator determined to proceed in the absence of the respondent in accordance with the CIETAC Arbitration Rules. Materials provided by Nantong Drayson to the arbitrator were served on the respondent and the arbitrator informed the respondent of the hearing and gave the respondent further time to submit documents or request another hearing. The respondent failed to submit any materials for the arbitration or request a further hearing. The time limit for making an award was then extended.
The arbitrator thereafter determined to make the Award in the absence of the respondent based on the facts ascertained through hearing.
Award
The Award sets out the facts found by the arbitrator and the reasons for the Award. The arbitrator found that Nantong Drayson delivered goods to the respondent but there was a failure by the respondent to pay the full amount owing and the Contract was thereafter executed by both parties to address the arrears of payment. The arbitrator concluded the Contract was valid and the respondent was in breach of the Contract.
The arbitrator raised concerns about the quantum of the late payment penalty. Nantong Drayson then lowered the claim for liquidated damages from the Contract amount to an annual interest rate of 24 percent which was said to be far lower than the contractually agreed penalty rate, but higher than the judicial interest rate for private lending. The arbitrator accepted the rate of 24 percent.
The Award provides that the respondent shall pay Nantong Drayson the sum of USD229,885.03 and liquidated damages for overdue payment at an annual interest rate of 24 percent calculated from 1 October 2019 to the date of actual payment, together with an arbitration fee to be paid by the respondent, such amounts to be paid within 30 days of the date of the Award.
A copy of the Award was served on the respondent.
Proceedings for registration and enforcement
Nantong Drayson filed proceedings in this Court for registration and enforcement of the Award. Nantong Drayson supported its application by affidavits which, among other things, exhibited correspondence between the parties prior to entry into the Contract, the Contract and the translated Award.
After proceedings were issued in this Court to enforce the Award, the respondent appeared by its solicitor to oppose the application. After orders were made for filing affidavit material and submissions, the solicitor for the respondent informed Nantong Drayson’s solicitors that his firm had ceased to act. Nantong Drayson notified the respondent in writing of the Court orders and its obligations. The respondent failed to file any materials in accordance with the orders. Mr Wotton, director of the respondent, appeared on behalf of the respondent[1] at the hearing of argument to oppose the application. Mr Wotton asserted that goods delivered were faulty, resulting in significant orders for his firm being cancelled. He said he did not consider the arbitration fair for reasons including that he did not understand the significance of it, at the time of the arbitration he was trying to negotiate with Nantong Drayson, he was under the impression that he was having some success, that he did not understand some of the documents and he was trying to save his business.
[1] Mr Wotton’s appearance was by grant of leave pursuant to r 25.6(3) of the Uniform Civil Rules 2020 (SA) to which the applicant made no objection.
After hearing from Mr Wotton, I allowed Mr Wotton a further opportunity to file further material and to consider currency conversion and interest calculations produced by Nantong Drayson.
Further affidavits
The respondent filed an affidavit sworn by Mr Wotton on 22 March 2023. In that affidavit Mr Wotton deposed to the respondent winning a contract with NSW National Parks and Wildlife for the supply of a product which was supplied by Nantong Drayson. Mr Wotton deposed to the respondent receiving a written request from NSW government on 20 November 2018 stating that the faulty materials should be replaced. Mr Wotton asserted that he attempted to resolve the issue with Nantong Drayson over several months, but after Nantong Drayson was provided with the expert report, Nantong Drayson revoked credit terms and refused to deliver other existing orders. Mr Wotton asserted that this was to the severe detriment of his business. Mr Wotton asserted that the respondent then received no further contracts from the NSW government when it had been publicly announced that $50 million was to be spent on similar structures in NSW National Parks over 12 months.
Mr Wotton exhibited to his affidavit an email from NSW National Parks and Wildlife attaching a copy of a report commissioned by NSW National Parks and Wildlife. The report was provided to the respondent to enable the respondent to respond to the findings and outcome. The email summarised the main conclusions of the report including that the quality of fibre-reinforced polyester (“FRP”) goods was generally satisfactory but there were concerns regarding the quality of the painted finish on certain components and cracking in moulded grating. The email noted that while highlighting faults with the painted finish, the report also concluded that the painting did not contribute significantly to the product’s longevity. The email noted that the report concluded cracking was a pathway for moisture penetration and consequent weakness and cracked panels should be replaced. The email noted an intention to send out a revised specification for coastal walking track applications. The report was exhibited to Mr Wotton’s affidavit. The report referred to walking track upgrade projects using fibre-reinforced polyester composite products including deck grating panels and structural beams which were supplied by the respondent. The report states that in early 2018, isolated instances of cracking and fading and variations in the non-slip finish of some installed materials were noticed. The report states that the quality of the FRP members was considered satisfactory and did not significantly differ from that of a previous supplier. The report expresses concern about some other matters particularly consistency of grating quality based on observed cracking. The report suggests a potential cause of such cracking is weakness in panels resulting from variations in process or quality control. The report states, among other things, that paint was applied directly to the FRP members and the surface of the FRP was not prepared to promote paint adhesion. As a result, the painted finish was not of sufficient quality to enhance its durability.
Mr Wotton’s affidavit did not exhibit any other correspondence or documents in relation to the assertions made in his affidavit.
In an affidavit filed on 24 March 2023, the solicitor for Nantong Drayson deposed on information and belief to Nantong Drayson having no knowledge that the respondent won a contract with the NSW National Parks and Wildlife for the supply of FRP membrane and moulded grating and that Nantong Drayson had never received the email, or the report exhibited to Mr Wotton’s affidavit. The affidavit referred to the respondent continuing to purchase further products from Nantong Drayson in 2019 and exhibited sales contracts for two contracts entered into with the respondent in 2019 for FRP grating, FRP decking and other FRP products.
Submissions
Nantong Drayson submitted that The People’s Republic of China is a country to which the Convention on the Recognition and Enforcement of Foreign Arbitral Awards applies. China has been a convention country since 22 January 1987. Nantong Drayson’s submissions set out the relevant legal principles including the limited scope for judicial intervention in the enforcement of an award. Nantong Drayson submitted that the starting point is that the Award must be enforced and the Court may only refuse to enforce the Award if the respondent makes out a relevant statutory exception. Nantong Drayson contended that the respondent has failed to prove to the satisfaction of the Court that any of the conditions set out in ss 8(5) or 8(7) of the International Arbitration Act 1974 (Cth) (“IAA”) had been, or could be, met. Nantong Drayson’s submissions pointed to the basis in the filed material for the Court to conclude that the pre-requisites for enforcement of the Award had been met, that the existence of the arbitration agreement and Award had been proved, that the respondent had the opportunity to participate in the arbitration proceedings and that the respondent has failed to demonstrate an exception to the presumptive position that enforcement is made out.
Pre-requisites to recognition and enforcement
Section 9 of the IAA sets out the evidence requirements for the enforcement of a foreign award. The applicant must produce the duly authenticated original award or a duly certified copy and the original arbitration agreement or a duly certified copy. Section 9(2) of the IAA provides that an award shall be deemed to be duly authenticated and a copy of an award or agreement shall be deemed to be duly certified if it purports to have been authenticated or certified by the arbitrator or it has been otherwise authenticated or certified to the satisfaction of the Court. The section requires a translation into English, certified as a correct translation, of a document in a foreign language.[2] A translation shall be certified by a diplomatic or consular agent in Australia of the country in which the award was made.[3] A document produced to the court in accordance with the section is, upon mere production, receivable by the court as prima facie evidence of the matters to which it relates.[4]
[2] Section 9(3) of the IAA.
[3] Section 9(4) of the IAA.
[4] Section 9(5) of the IAA. See also Guoao Holding Group Co Ltd v Xue (No 2) [2022] FCA 1584 at [50]-[58], [62] per Stewart J.
Nantong Drayson relied upon Guoao Holding Group Co Ltd v Xue (No 2)[5] in support of its submission that the Court can either accept a translation that is certified in the manner referred to in s 9(4) of the IAA, or it can accept a translation which is “otherwise” to its satisfaction. It submitted the Court can conclude to its satisfaction that the Award has been translated in compliance with the IAA.
[5] [2022] FCA 1584 at [50]-[58], [62] per Stewart J.
Mr Wotton submitted that his lack of objection to the translation was due to not understanding the intricacies of the law, not because he accepted the translation. Mr Wotton said he did not receive documents from, or notarised by, an Australian diplomatic or consular agent and Mr Bingtao Hou is not a diplomatic or consular official of Australia. He contended he was completely lost as the documents he received were in Chinese or with a Chinese translation from a Chinese interpreter. Mr Wotton said that if there had been communications from an Australian diplomatic or consular agent, he would have had a point of contact that may have assisted. Nantong Drayson disputed Mr Wotton’s assertions including on the basis the solicitors previously acting for the respondent had been served with the affidavits filed in the proceedings.
To the extent Mr Wotton’s assertions related to documents concerning the arbitration itself, as opposed to these proceedings, s 9 does not address translations of documents used in the arbitration. The translations referred to in s 9 of the IAA are translations of the arbitration agreement and the award which are required for the purpose of proceedings commenced in Australia for the enforcement of a foreign award.
Documents exhibited to filed affidavits included English translations of the Award. The certified English translation of the Award was attached to the original Award. Each page was certified by Nanjing College Translation Co, a translation company in Jiangsu, China. Mr Bingtao Hou, a certified translator, cross checked the original English translation which had been certified by Nanjing College of Translation. The Award was notarised on 11 July 2022, authenticated by the Ministry of Foreign Affairs, People’s Republic of China on 18 July 2022 and authenticated by the Australian Embassy in Beijing on 20 July 2022. The Contract, drafted in both English and Chinese, was certified to be genuine by the China Council for the Promotion of International Trade, China Chamber of International Commerce (of which CIETAC is a subsidiary) on 11 November 2022, notarised and authenticated by the Ministry of Foreign Affairs, People’s Republic of China on 15 November 2022 and authenticated by the Australian Embassy in Beijing on 17 November 2022.
Copies of the Award and Contract were exhibited to affidavits and the original Award and Contract were provided to the Court for examination. I inspected them, including the various stamps and seals affixed to them. No objection was taken to their authenticity. I am satisfied that the Contract and the Award were duly authenticated and certified. I am satisfied with the translation. I consider the evidence sufficient to meet the requirement of s 9(4) of the IAA as being a translation otherwise to the satisfaction of the Court.
International Arbitration Act provisions
The IAA implements in Australia the international UNCITRAL Model Law on International Commercial Arbitration 1985, with amendments, by providing that it has the force of law in Australia.[6] The IAA gives effect to Australia’s obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 (“New York Convention”) and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States.
[6] Section 16(1) of the IAA.

The objects of the IAA include facilitating international trade and commerce by encouraging the use of arbitration as a method of resolving disputes, facilitating the use of arbitration agreements, recognition and enforcement of arbitral awards in relation to international trade and commerce and giving effect to Australia’s obligations under the Conventions and the UNCITRAL Model Law.
Under Article IV of the New York Convention, the only requirement to obtain recognition and enforcement is the supply of a duly authenticated original award or a duly certified copy with the original arbitration agreement or a duly certified copy. Article V sets out the grounds upon which recognition and enforcement can be refused.
Section 8 of the IAA provides that a foreign award is binding by virtue of the IAA for all purposes on the parties to the award. The IAA provides for a foreign award to be enforced in a Court of the State as if the award were a judgment or order of that Court. Section 8(3A) of the IAA provides that a court may only refuse to enforce the foreign award in circumstances set out in ss 8(5) and 8(7). Section 8(5) of the IAA enables the Court to refuse to enforce an award if the party against whom it is invoked proves to the satisfaction of the court a number of specified matters. Those matters include that the party is under some incapacity, the arbitration agreement is not valid, the party was not given proper notice of the arbitration, the award deals with matters not falling within the terms of the submission to arbitration, the arbitral procedure was not in accordance with the agreement of the parties or the award has been set aside. Section 8(7) enables the Court to refuse to enforce the award if the subject matter is not capable of settlement by arbitration under the relevant laws in force or if the enforcement of the award would be contrary to public policy. Section 8(7A) provides that the enforcement of a foreign award would be contrary to public policy if the making of the award was induced or affected by fraud or corruption, or if a breach of the rules of natural justice occurred in connection with the making of the award.
Section 39 of the IAA provides that the Court must have regard to the objects of the IAA if a court is considering exercising a power under s 8 to enforce an award or to refuse to enforce an award.[7]
[7] Tianjin Jishengtai Investment Consulting Partnership Enterprise v Huang [2020] FCA 767 at [3] per Jagot J.
Relevant authorities
Arbitral awards are intended to provide certainty and finality. Arbitration is an efficient, impartial, enforceable and timely method to resolve commercial disputes.[8] The People’s Republic of China is a country to which the New York Convention applies.[9] The conception of public policy in the IAA, as adopted from the New York Convention, is limited to fundamental principles of justice and morality, conformable with the international nature of international commercial arbitration, which is a very different context from the review of public power in administrative law.[10] The scope and existence of the authority to make an award is founded on the parties’ agreement.[11] An arbitral award is recognised as binding and enforced to the extent the decision is made within the scope of authority conferred by the parties on the arbitral tribunal.[12] An arbitral award is binding on the parties to the arbitration agreement for all purposes which includes reliance on the award in legal proceedings in ways that do not involve enforcement, such as giving rise to res judicata or issue estoppel.[13] An error of law made by the arbitral tribunal in making the award is irrelevant to the rights or obligations to be determined in relation to recognition and enforcement of a foreign award, unless the error is relevant to proof of a ground for refusing enforcement.[14] Enforcement of an arbitral award is enforcement of the binding agreement by the parties to submit their dispute to arbitration, not enforcement of any disputed right which has been submitted to arbitration.[15] An award of CIETAC has been enforced in Australia.[16] In circumstances in which a judgment is sought from an Australian court and the award is to be enforced in Australia, the award can be converted to Australian dollars.[17]
[8] Tianjin Jishengtai Investment Consulting Partnership Enterprise v Huang [2020] FCA 767 at [19] per Jagot J.
[9] Tianjin Jishengtai Investment Consulting Partnership Enterprise v Huang [2020] FCA 767 at [9] per Jagot J.
[10] Guoao Holding Group Co Ltd v Xue (No 2) [2022] FCA 1584 at [32] per Stewart J.
[11] TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia (2013) 251 CLR 533 at [31] per French CJ and Gageler J.
[12] TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia (2013) 251 CLR 533 at [17] per French CJ and Gageler J.
[13] TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia (2013) 251 CLR 533 at [23] per French CJ and Gageler J.
[14] TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia (2013) 251 CLR 533 at [15]-[17]; [33] per French CJ and Gageler J.
[15] TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia (2013) 251 CLR 533 at [34] per French CJ and Gageler J.
[16] Beijing Jishi Venture Capital Fund (Ltd Partnership) v Liu [2021] FCA 477.
[17] Tianjin Jishengtai Investment Consulting Partnership Enterprise v Huang [2020] FCA 767 at [22]-[23] per Jagot J.
Analysis
As set out above, I accept that Nantong Drayson has established the Contract and the Award in accordance with the requirements in s 9 of the IAA.
The starting point under the IAA is that the Award must be enforced and I may only refuse to enforce the Award if the respondent establishes one or more of the matters provided for in ss 8(5) or 8(7) of the IAA.
The affidavit of Mr Wotton and the attached report gives rise to a suggestion of some issues with FRP products supplied by the respondent to NSW Parks and Wildlife, which Mr Wotton asserts the respondent obtained from Nantong Drayson. However, Nantong Drayson points to the fact that the respondent ordered further product after that report was received by the respondent. Further, the Contract is a contract for the payment of outstanding amounts and expressly provides that the respondent must not refuse to pay the Payment Amount on a ground of defence related to quality problems. The respondent voluntarily entered into the Contract containing this term and terms providing for arbitration, as set out above, some months after the report exhibited to Mr Wotton’s affidavit was provided by NSW National Parks and Wildlife to Mr Wotton on 20 November 2018. A number of assertions made by Mr Wotton, including the assertion that he sent the report to Nantong Drayson which then revoked credit and refused to deliver orders, were not substantiated by any documents. The Award is binding on the respondent and Nantong Drayson for all purposes which would include assertions concerning the quality of the goods the subject of the payment obligation in the Contract.[18]
[18] TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia (2013) 251 CLR 533 at [23] per French CJ and Gageler J.
In any event, any proof of defects in the quality of the goods or the other matters alleged by Mr Wotton, including that he lacked understanding of the significance of the arbitration, would not warrant a refusal to register and enforce the Award given the provisions of the IAA and the nature of the matters for consideration on an application for registration and enforcement. My task is not to determine whether there is any error in the Award or whether the respondent could have, or would have, achieved a different outcome if the respondent had actively defended the arbitration. The grounds on which recognition or enforcement of an award may be refused are limited. They are primarily, although not exclusively, concerned with impartiality, independence and fairness of the process. The respondent has not established any foundation for any of the exceptions in the IAA which allow the Court to refuse the enforcement of a foreign award. Mr Wotton did not suggest there was a failure to accord procedural fairness and I do not consider Mr Wotton’s submissions concerning his inability to understand the arbitration process would support a submission of any such failure given the procedure adopted by the arbitral tribunal. The procedure included serving notice of the hearing, serving documents, initially adjourning the hearing to ensure service of the notice before proceeding in the respondent’s absence, allowing the respondent time to file materials and so on. The respondent’s failure to take part in the arbitration process did not result from any failure on the part of the arbitral tribunal to accord procedural fairness.
In the circumstances, I consider Nantong Drayson has established it is entitled to orders registering the Award in accordance with the provisions of the IAA.
Quantum
Nantong Drayson has converted to Australian dollars the amounts ordered in the Award. Mr Wotton did not dispute the conversions.
Orders
I order that the award is registered in this Court as a judgment of this Court. I consider it appropriate to convert to Australian dollars the amounts ordered in the Award. The solicitors for Nantong Drayson are to produce minutes of order to give effect to these reasons which include the Australian dollar figure produced by the conversion referred to in each of orders 1 to 3 below.
I order that the respondent pay to Nantong Drayson:
1.The sum of USD229,885.03 to be converted to Australian dollars at the exchange rate published by the Reserve Bank of Australia one business day before the date of the order.
2.Pre-judgment interest as provided for by the Award from 1 October 2019 until the date of this order at the rate of 24 percent to be converted to Australian dollars at the exchange rate published by the Reserve Bank of Australia one business day before the date of the order.
3.Arbitration costs as adjudged in the award of RMB90,852 to be converted to Australian dollars at the exchange rate published by the Reserve Bank of Australia one business day before the date of the order.
4.Post judgment interest on the aggregate sum in accordance with the Uniform Civil Rules 2020 (SA) from the date of the order until full payment.
5.The respondent to pay Nantong Drayson’s cost of and incidental to the application.
6.That Nantong Drayson has liberty to apply for its costs to be assessed on a lump sum basis on the papers.

[2023] SASC 52

21 April 2023