Yang v Yue
[2021] VSC 740
•16 November 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2020 04101
| ZHILONG YANG and MEILING ZHANG | Plaintiffs |
| v | |
| JUN YUE and others (according to schedule) | Defendants |
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JUDGE: | Gorton J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 26 October 2021 |
DATE OF JUDGMENT: | 16 November 2021 |
CASE MAY BE CITED AS: | Yang v Yue |
MEDIUM NEUTRAL CITATION: | [2021] VSC 740 |
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PRACTICE AND PROCEDURE – Appeal from judicial registrar dismissing application for summary judgment – Hearing de novo – Whether defendants’ defence to stay proceeding has no real prospect of success – Where parties provided differing translations of agreement – Where defendants’ defence regards choice of law and jurisdiction – Whether choice of law is exclusive – Whether choice of law should be overruled for reasons of public policy – Whether location of property impacts choice of law or jurisdiction – Where plaintiffs submitted there is no rule of law in China – Whether defendants submitted to the jurisdiction – Appeal dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr L Magowan | Lin Legal & Associates |
| For the First to Fourth Defendants | Mr M Singh (solicitor) | Dhillon Legal |
| For the Fifth Defendant | No Appearance |
TABLE OF CONTENTS
A. Introduction.................................................................................................................................. 1
B. The terms of the agreement........................................................................................................ 2
B.1.The background to the dispute........................................................................................... 2
B.2.Choice of law and choice of jurisdiction........................................................................... 5
B.2.1.What did the parties agree?.................................................................................... 5
B.2.2.Is the proper law of the contract different from that chosen?........................... 8
B.2.3.Should the parties be held to the agreement to litigate in China?.................. 12
B.2.4.Have the defendants ‘submitted to the jurisdiction’?....................................... 14
B.3.Conclusion........................................................................................................................... 16
C. Final comments........................................................................................................................... 16
HIS HONOUR:
A. Introduction
The plaintiffs are a married couple with Australian permanent residency and a property in Southbank. They have been in China throughout the COVID-19 pandemic and remain there. The first and second defendants are the registered proprietors of three properties in Victoria, and the second defendant is the registered proprietor of a fourth property in Southbank where the first and second defendants reside. The third defendant is their son, and the fourth defendant (‘the company’) is an Australian company owned by them with a registered office in Victoria. The company owns the Magnolia Court Boutique Hotel in East Melbourne. When I refer to ‘the defendants’, I am referring to the first to fourth defendants.[1]
[1]By letter dated 16 November 2020, the registrar of titles, the fifth defendant, informed the Court that she did not intend to appear in this proceeding.
The plaintiffs allege that they are owed money by the first and second defendants, that the debt is guaranteed by the third defendant and the company, and that they have security interests in the properties. The plaintiffs rely on a signed agreement dated 31 May 2018 that is in Chinese. The plaintiffs have lodged caveats over the first and second defendants’ properties. A transfer for one of the properties has been lodged with the registrar of titles, the fifth defendant, for registration. The plaintiffs have obtained an interlocutory order preventing the registrar of titles from removing the caveat.
In this proceeding, the plaintiffs seek a declaration that the defendants are indebted to them in the amount of $900,884.93, a declaration that they have equitable charges over the first and second defendants’ properties, an order for possession of the properties, and an order for judicial sale of the properties. No pleadings have been filed despite an order for the proceeding to continue as if it had been commenced by writ.[2] However, it is apparent that the defendants dispute indebtedness to the plaintiffs, and contend that the agreements between them were governed by Chinese law and should be litigated in China.
[2]The effect of this order and the associated order requiring the defendants to file notices of appearance was to trigger the obligation on the plaintiffs under r 14.02 to file and serve a statement of claim within 30 days of the defendants’ appearances. A statement of claim ought to have been filed and served by 18 December 2020 at the latest.
The plaintiffs applied for summary judgment. That application was heard and dismissed by a judicial registrar. The plaintiffs have now appealed the dismissal of their application for summary judgment. The appeal proceeds as a hearing de novo.[3]
[3]Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 84.05(4).
The plaintiffs are only entitled to summary judgment if I am persuaded that the defence of their claims has no real prospects of success.[4] The issues for determination are whether there is a sufficient prospect that this proceeding is liable to be stayed on the basis that the parties should be required to litigate in China, and whether Chinese law rather than Victorian law should apply. The plaintiffs accepted, properly, that if Chinese law were to apply then the application for summary judgment could not succeed. Both issues first require an analysis of the terms of the agreement. If the terms of the agreement do require the parties to litigate in China or do provide that Chinese law applies, the question then becomes whether the parties’ agreement should be overcome for reasons of public policy.
B. The terms of the agreement
B.1. The background to the dispute
[4]Civil Procedure Act 2010 (Vic) s 63.
By a written agreement made in 2013, the first and second defendants agreed to transfer shares in the company to the plaintiffs in exchange for a ‘service fee’ of $100,000 so that the plaintiffs could apply for permanent residence. Presumably, their permanent residency application depended on their owning a business in Australia. The agreement was in writing and signed in Victoria but was in Chinese. The plaintiffs provided a translation. Under this agreement, the first and second defendants had the right to purchase the shares back within 60 days of the plaintiffs being granted permanent residence (and the agreement did not put any price on them). The agreement also provided that, notwithstanding this apparent sale of shares, the first and second defendants would throughout retain the ‘full rights of management and decision-making’ for the company, and that the plaintiffs would not be entitled to any ‘dividends or interests paid to shareholders’ of the company. Also, as part of this arrangement, the plaintiffs had to pay $375,000 into the company’s account ‘for the purpose of capital verification’. The agreement provided that the first and second defendants would pay this sum back to the plaintiffs ‘after capital verification is completed’.
The agreement also contained an acknowledgement that the first and second defendants were indebted to the plaintiffs in the sum of $600,000. As I understand it, from the terms of the agreement, this debt was to be used as security for the plaintiffs’ obligation to return the shares in the company, and the $100,000 ‘service fee’ was to be paid by a reduction in the amount owing from $600,000 to $500,000.
The agreement seems to have achieved its purpose, in that on 15 March 2016 the plaintiffs obtained permanent residence.
Then, on 31 May 2016, the plaintiffs and the first and second defendants and the company acknowledged a debt of $500,000 in another agreement. This agreement provided that the first and second defendants would repay that amount by 31 May 2018 and that the plaintiffs would transfer the shares in the company to the defendants as the debt was repaid. Again, the agreement was signed in Victoria but was written in Chinese, and a translation was provided.
On 31 May 2018, a third agreement was signed. This was the agreement relied upon by the plaintiffs. It, too, was in Chinese, and translations were provided by the plaintiffs and the defendants. This time the third defendant, who is the first and second defendant’s son, was a party. It appears from this agreement that the plaintiffs had transferred the shares in the company back to the first and second defendant without the debt having been repaid. In this agreement, the first and second defendants again acknowledged a debt of $500,000, and also acknowledged an obligation to pay interest of $50,000. They agreed to pay that sum by 31 May 2019 with interest accruing at 6%, making the repayment amount $583,000.
The plaintiffs have filed an affidavit sworn by the first plaintiff[5] in which he swore that he had lent the first and second defendants money so that they could purchase their properties and that the money had not been repaid. He also produced the agreements with official translations. The plaintiffs filed a further affidavit in which the first plaintiff deposed as to a current indebtedness of $900,884.93. The plaintiffs contended that they are entitled to sue in Victoria, that Victorian law applies, and that there is no defence to their claim. The first defendant has filed an affidavit[6] in response in which he accepts that $500,000 was transferred to him but says that it was a ‘guarantee fund’. It is not clear what that means. The implication, perhaps, is that it is not repayable. He did not explain how that fitted with the terms of the various agreements. He swore that the plaintiffs do not have a caveatable interest in the properties, but seems to have based this assertion on the fact that he did not borrow the money in dispute in order to buy the properties and that he had purchased the properties prior to the money being advanced. He did not engage with the assertion that the properties were later used as security for the debt said to be owed. He then swore that the plaintiffs have ‘breached some essential and express terms of the agreement’, and that he was ‘threatened and blackmailed’ by the first plaintiff to sign the 2016 and 2018 agreements. He gave no further details of those allegations.
[5]The affidavit was in English and was sworn in China without the aid of an interpreter.
[6]This affidavit was also in English and was sworn at Docklands without the aid of an interpreter.
As is apparent from the above, the defendants did not put forward much material on oath that could support an argument that they had a good defence if the plaintiffs were entitled to sue in Victoria and if Victorian law applied. The defendants instead opposed the application for summary judgment on the grounds that:
(a) the parties had agreed that any dispute would be litigated in China and not in Australia and they should be held to that agreement; and
(b) the parties had agreed that Chinese law would apply, and the plaintiffs had not led any evidence of Chinese law.
The plaintiffs criticised the defendants for not having applied for an order staying this proceeding and for the lack of material establishing any defence on the merits. I was told from the bar table that the defendants disputed that the money was owed on the basis that the moneys forwarded were not a loan but were some form of payment for the business interest or the procuration of the business visa, but that the defendants intended to flesh these matters out once it was determined whether or not the plaintiffs could bring this proceeding in Victoria and if so which law applied. I was also informed, during the hearing, that the defendants intended to deal first with the summary judgment application and that if summary judgment were not obtained then they would apply to have the proceeding stayed.
Despite the plaintiffs’ criticisms, it was not contended, and nor could it be, that the defendants’ failure to have filed a summons seeking to have the matter stayed meant that the defendants could not rely on the references to the Chinese law and jurisdiction in the agreements as reasons for which summary judgment should not be given. The plaintiffs contended that the defendants could not do so because they had ‘submitted’ to this Court’s jurisdiction.
B.2. Choice of law and choice of jurisdiction
B.2.1. What did the parties agree?
According to the translation provided by the plaintiffs, the 31 May 2018 agreement provided that:[7]
Six. [The first and second defendants] offers the assets or equities under their names (including but not limited to the company assets or share equities of [the company]) to be the guarantee of fulfilling the above loan repayment obligations.
Seven. [The company and the third defendant] undertake joint guarantee liability of [the first and second defendants’] loan repayment. The Guarantors are willing to provide guarantee with all their assets and equities for the borrower to pay off loan. The guarantee … coverage is all of [the first and second defendants’] repayment obligations and all costs incurred to [the plaintiffs] for loan claim (including but not limited to proceeding fees and legal costs). [The plaintiffs] can propose to [the first and second defendants], any of the two guarantors, both of them or all of the three parties to undertake full amount repayment liability.
Eight. Any dispute arising out of this agreement is subject to the jurisdiction of the Chinese courts where [the first and second defendants] is located, and is to be dealt with by Chinese laws and regulations.
Nine. All parties confirm that for the convenience to claim right or enforcement effect, [the plaintiffs] can issue proceedings or apply to the local court of where [the company] is located, when it is permitted by the proceeding laws of [the company], to acknowledge and enforce the judgement made by the Chinese court … to be dealt with by Chinese laws and regulation
[7]The emphasis in bold has been added.
According to the translation provided by the first and second defendants, these clauses are translated as:
Clause 6
[The first and second defendants] should use the assets and interests under their names (including but not limited to assets and shares in [the company]) as a security to honour the above repayment obligations.Clause 7
The guarantor [the company], and guarantor [the third defendant], shall have associated guarantor obligations for the above repayments. Guarantors voluntarily provide guarantee to the full repayment of the debt using their own personal assets and interests as warranty. The guarantee … is to cover the entire repayment obligations of [the first and second defendants] including all costs and expenses to recover the debt (including but not limited to litigation fees and lawyer fees). [The plaintiffs] may claim repayment from [the first and second defendants], or any one party or any two parties or three parties of the guarantors as these parties have associated repayment obligations.Clause 8
Any dispute arising from this agreement should be dealt with by a law court of China where [the first and second defendants] is located in accordance with Chinese laws.Clause 9
At the same time, all parties agree that, for convenience and better enforcement outcome, lawsuits may be submitted to a local court of the location of [the company] or permits may be applied for from a local court near the location of [the company] to enforce the decision or decisions made by a Chinese court …. Chinese laws should apply in these circumstances.
I am prepared for the moment to assume in the plaintiffs’ favour that the Victorian approach to interpretation of contracts should be applied.
Even on the plaintiffs’ translation, I do not accept that the defendants have no real prospects of success in establishing that the parties agreed that their dispute had to be litigated in China and resolved by the application of Chinese law. The agreement that the dispute would be ‘subject to the jurisdiction of the Chinese courts’ carries with it, at least arguably, the implication that such a dispute is subject only to the jurisdiction of the Chinese courts.[8] That implication is supported by the terms of clause nine, which confirm that ‘the judgement made by the Chinese court’ can be relied on, or enforced, in Victoria. The reference to issuing proceedings in clause nine could well be a reference in this context to a proceeding seeking the enforcement of the decision of the Chinese court under common law principles, rather than the issue of a proceeding to establish the underlying claim in Victoria.
[8]An express submission to a foreign jurisdiction may carry with it an implication that the submission is exclusively to that jurisdiction. See, eg, Akai Pty Ltd v The People’s Insurance Co Ltd (1996) 188 CLR 418, 425 (Dawson and McHugh JJ), 444 (Toohey, Gaudron and Gummow JJ).
The position is, in my view, even clearer with the choice of law. Although in theory an agreement to submit to a particular jurisdiction may be enabling rather than by implication exclusive, that is less likely with an agreement that a particular system of law apply. If parties choose a system of law to apply it is very unlikely that that choice would not be intended to be ‘exclusive’ as otherwise the parties would be left uncertain. The agreement is that any dispute ‘is to be dealt with by Chinese laws and regulations’. In my view, there is no reason to read that phrase other than as a contractual stipulation that the agreement is to be governed by Chinese law.
These conclusions are only strengthened on consideration of the defendants’ translation of the agreement. In that translation, it is stated that the agreement ‘should be dealt with by a law court of China’. This language strongly implies that the agreement is not to be ‘dealt with’ by a court situated elsewhere. The defendants’ translation also provides that any dispute should be dealt with ‘in accordance with Chinese laws’. This language is unambiguous.
Also, it should be borne in mind that the agreement is in Chinese and between people who have real connections with China. In those circumstances, there is nothing inherently unlikely in the parties’ intending to bind themselves to litigate any dispute between them in China and by the application of Chinese law. This would, at least, have the advantage of allowing a Court to determine the effect of the agreement without it having to rely on translations of the agreement into English, which, as this case has shown, can differ in potentially significant ways. It would also preclude the parties from having to go to the expense and inconvenience of proving Chinese law in a Victorian court.
B.2.2. Is the proper law of the contract different from that chosen?
The chosen law ought to apply unless the parties’ express choice ought to be avoided on the ground of public policy.[9] The matters of policy that could lead the Court to impose a system of law on parties other than that which they had chosen overlap with the matters of policy that could lead the Court to relieve parties from their agreement to litigate only in a particular jurisdiction. In the former case, they may be considered when determining what is the ‘proper law’ of the contract. Here, the plaintiffs contended that even if the parties had agreed that Chinese law would apply, I should conclude that Victorian law was the proper law of the contract, because:
[9]Vita Food Products Inc v Unus Shipping Co Ltd (in liq) [1939] AC 277, 290 (Lords Wright, Russell, MacMillan and Porter).
(a) the agreement was entered into in Victoria following negotiations in Victoria between parties with rights to reside in Victoria;
(b) an important aspect of the agreement was the provision of security over property situated in Victoria; and accordingly
(c) the law with the closest connection with the agreement was the law of Victoria.
The plaintiffs submitted that if Chinese law had been selected then the parties had ‘made a choice entirely unconnected with the realities of the contract’ and the issues before the Court.[10] The plaintiffs sought to rely particularly, as I understood it, on the fact that the agreement created a security interest in Victorian property, and that this proceeding concerned the validity of a caveat and sought judicial sale of a Victorian property. They relied particularly on Queensland Estates Pty Ltd v Collas[11] and BHP Petroleum Pty Ltd v Oil Basins Ltd.[12] Those cases establish that the parties’ choice as to the law to be applied may be avoided if the choice was not bona fide but was made to avoid the operation of a local law.
[10]These words are drawn, non-verbatim, from Queensland Estates Pty Ltd v Collas [1971] Qd R 75.
[11][1971] Qd R 75.
[12][1985] VR 725.
It cannot be said in this case that the choice of law was not bona fide, or that it was made to avoid the operation of a local law.
I do not consider that the nature of the relief sought in this proceeding can be used to influence an assessment as to the proper law of the contract, save that it might illustrate the type of issues that might have been anticipated to arise under the agreement. That would be for the tail to wag the dog.
In my view, the cases relied on by the plaintiffs do not establish the principle that if parties make an agreement that includes a security interest in land then they ought not to be permitted to choose a legal system other than the legal system of the place where the land is located. In Queensland Estates Pty Ltd v Collas, the parties had entered into a complex arrangement relating to the sale of various parcels of land in Queensland. The agreement specifically provided for the lodgement of caveats. The agreement also provided that it should be ‘deemed to be entered into in the Colony of Hong Kong’. The Court determined that if this indicated an intention that the law of Hong Kong ought to apply, then the parties had ‘expressed a choice unconnected with the realities of the contract’, and that ‘whatever their intention, the matter of the lodgement of caveats … clearly has to be decided according to the lex situs’.[13] But in that case, the agreement itself extended to the lodging of caveats, and in that context, the application of the law of Hong Kong would clearly undermine that aspect of the agreement. There is nothing in the agreement in this case that assumes the applicability of a Victorian statutory regime. In my view it cannot be said in this case that the choice of Chinese law was ‘unconnected with the realities of the contract’.
[13]Queensland Estates Pty Ltd v Collas [1971] Qd R 75, 81 (Campbell J, Hanger ACJ and Wanstall J agreeing at 77).
Further, the only case cited on this point in Queensland Estates Pty Ltd v Collas was British South Africa Co v De Beers Consolidated Mines Ltd.[14] In that case, the plaintiff issued mortgage debentures that included security over land in Rhodesia (as Zimbabwe was then called) and also provided as additional security a licence to mine diamonds in Rhodesia.[15] The plaintiff contended that the licence came to an end when it discharged its liability under the mortgage debentures on the basis that otherwise there would be ‘a clog on the equity of redemption’. Whether that argument was good or not depended on whether the law that applied to the security was the law of England or the law of Rhodesia. The Court concluded that English law was the proper law of the contract, and that the security upon land in Rhodesia should be governed by English law, rather than the lex situs. Although the mortgage might not be enforceable in Rhodesia if it did not meet the legal requirements of that legal system, the English court could nonetheless make orders that acted in personam to bind the parties to perform in the way that the English law required. Cozens-Hardy MR said:
In my opinion an English contract to give a mortgage on foreign land, although the mortgage has to be perfected according to the lex situs, is a contract to give a mortgage which — inter partes — is to be treated as an English mortgage and subject to such rights of redemption and such equities as the law of England regards as necessarily incident to a mortgage.[16]
[14][1910] 2 Ch 502.
[15]Strictly, ‘diamondiferous ground’: ibid 503.
[16]Ibid 515.
Farwell LJ said:
[I]n considering a mortgage or charge, the nature of the property charged is of little (if any) importance: the transaction is primarily a personal transaction, and the fact that all or part of the security is real estate abroad is only material as necessitating the observance of the foreign law in the instruments creating the charge.[17]
[17]Ibid 516.
This approach allows for a situation where the law of one legal system is able to control the rights of parties, as against each other, in relation to their interests in land in another legal system. It does not establish that the rights of the parties must always be assessed by reference to the legal system where the land is situated.
Be that as it may, the essential point is that British South Africa Co v De Beers Consolidated Mines Ltd does not establish that the mere fact that the plaintiffs are claiming an interest in property in Victoria means that the agreement between the parties must be governed by Victorian law.
In BHP Petroleum Pty Ltd v Oil Basins Ltd,[18] the other case relied on by the plaintiffs, the Court referred to Queensland Estates Pty Ltd v Collas as an example where the Court had refused to allow a choice of law by the parties to operate, but went on to say that ‘these instances are all cases in which the parties have sought by their choice of law to avoid the operation of a fiscal or policy provision of the law which would otherwise apply to the contract’.[19] The Court went on to say that the ‘normal rule’ was that ‘the parties are free to choose the law which shall govern their agreement’.[20] This case does not take the matter any further.
[18][1985] VR 725.
[19]Ibid 747 (Murray J).
[20]Ibid 747–8 (Murray J).
I accept that there were and are many connections with Victoria. But the parties chose Chinese law. The fact that the defendants were seemingly offering Victorian properties as some form of security for their obligations, and the other connections to Victoria, are insufficient to overcome the clearly-expressed intention that Chinese law (rather than Victorian law) was to apply to the agreement.
The plaintiffs’ argument really begged the question. Their major premise was that they ought to be able to access the Victorian legal system[21] to enforce the contractual security, their minor premise was that if Chinese law applied they would not be able to access the Victorian legal system to enforce the contractual security, and their conclusion was that therefore Chinese law ought not to apply. But the major premise was not established. The parties agreed that any dispute would be determined by the application of Chinese law. No doubt that may make it more difficult for the plaintiffs, assuming that they can otherwise prove their case, to obtain access to the properties in order to satisfy the amounts owing to them. But there may well have been good reasons for them choosing Chinese law. It may have been very important for one side or the other at the time.
[21]By which loose phrase I mean the ability to lodge caveats and in due course to obtain an order for a judicial sale of the properties.
This conclusion of itself is probably fatal to the plaintiffs’ application for summary judgment. The effect of a foreign law has to be proved as a fact in this proceeding. The plaintiffs led no evidence as to how Chinese law treats agreements of this type. In the absence of such evidence, I cannot be confident to the extent necessary to grant summary relief that the agreement gives rise to a debt in the way contended, let alone that the form of words used gives rise to some form of proprietary interest in land.
B.2.3. Should the parties be held to the agreement to litigate in China?
The Court will hold the parties to their bargain to litigate in an agreed jurisdiction unless there is a strong cause for not doing so.[22] They may not be held to that bargain if the bargain were made in bad faith or were contrary to public policy.[23] The plaintiffs did not suggest that the choice of jurisdiction clause was made in bad faith. The plaintiffs instead contended that I ought to relieve them from any obligation that they have to litigate this dispute in China on public policy grounds. Their arguments, as I understood them, were:
[22]Huddart Parker Ltd v The Ship ‘Mill Hill’ (1950) 81 CLR 502, 508–9 (Dixon J); The Eleftheria [1970] P 94, 99H, 103G (Brandon J); Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197, 224 (Brennan J), 259 (Gaudron J); Akai Pty Ltd v The People’s Insurance Co Ltd (1996) 188 CLR 418, 427–9 (Dawson and McHugh JJ), 445 (Toohey, Gaudron and Gummow JJ); Australian Health & Nutrition Association Ltd v Hive Marketing Group Pty Ltd (2019) 99 NSWLR 419, 427 [22] (Bathurst CJ and Leeming JA), 438 [76]–[78] (Bell P).
[23]See, eg, Golden Acres Ltd v Queensland Estates Pty Ltd [1969] Qd R 378, 384–5 (Hoare J).
(a) there is no ‘rule of law’ in China;
(b) they ‘rely upon the Victorian property statutes’ to establish their interests in the properties; and
(c) a decision in China was not enforceable in Victoria ‘as of right’.
I am not able to accept the bald assertion that there is no rule of law in China if by that it is intended to convey that there is no mechanism by which the dispute between the parties can be litigated or formally resolved in China. No material was placed before the Court to suggest that any of the parties to this dispute were of sufficient interest to Chinese governmental officials to attract political interference with the process. To the extent that there are deficiencies in the Chinese legal system, or inconveniences now in litigating in Victoria, the requirement to litigate in China is a direct consequence of the bargain entered into.[24]
[24]Australian Health & Nutrition Association Ltd v Hive Marketing Group Pty Ltd (2019) 99 NSWLR 419, 445 [101]–[103] (Bell P).
I am prepared to assume, for the present, that it may not be simple to enforce in Victoria a decision made by a Chinese court insofar as it relates to proprietary interests in properties situated in Victoria. Certainly, such a decision could not be registered under the Foreign Judgments Act 1991 (Cth). But it does not follow that requiring the parties to litigate in China would necessarily entirely deny to the plaintiffs the benefit of the security interests that they seem to have acquired under the agreements (assuming that Chinese law allows for such interests to be acquired in this way). A Chinese court may be able to make orders against the parties personally, such as an order that the defendants sell the properties and apply the monies in a certain way. In circumstances where all parties have retained an ongoing connection with China, and for all I know may have significant assets in China, it cannot be assumed that a Chinese court’s order to that effect could not be effective in practice. The decision of British South Africa Co v De Beers Consolidated Mines Ltd[25] referred to above is instructive in this regard. In that case, land used as security was in Rhodesia but the contract was governed by English law. The Court acknowledged that it could not directly affect the land outside of its jurisdiction by reference to rights established under English law, but it could enforce by injunction the associated obligations in relation to that land that the parties owed each other, and in this way enforce the security rights indirectly.[26] It may be that the Chinese legal system would operate in the same way.
[25][1910] 2 Ch 502.
[26]Ibid 513–14 (Cozens-Hardy MR), 517 (Farwell JL).
Also, it is not clear beyond argument that this Court would not make an order for judicial sale if the plaintiffs were to produce to the Court a valid order made by a Chinese court establishing the indebtedness, and either an order of the Chinese court or a legal opinion to the effect that under Chinese law the agreement created an interest in the plaintiffs in the properties that would be sufficient to require them to be sold and the proceeds applied towards repayment of the debt.[27]
[27]See, eg, Liu v Ma (2017) 55 VR 104, in which a Chinese judgment for the payment of money was enforced in Victoria.
In summary, I am not satisfied to the extent required for summary judgment that it would be contrary to public policy to require the parties to litigate their claims in China, in circumstances where:
(a) the agreement is written in Chinese and provides for the application of Chinese law;[28]
[28]The Eleftheria [1970] P 94, 105E (Brandon J). I consider whether this provision was ‘exclusive’ in Part B.2.1.
(b) the parties are Chinese citizens or at least seem to have the right to travel to and from China (indeed the first and second defendants are presently in China). It was not said that litigating in China was not logistically possible;
(c) the agreement arose out of prior agreements, and when the first agreement was entered into the plaintiffs had no right to permanent residency in Australia;
(d) the parties have, or may well have, assets in China, and the parties have, or may well have, a desire or need to continue to visit China due to family or friends or business interests in China. Accordingly, any orders made by a Chinese court to the effect that one party has an interest in a property may well be enforceable by orders directed personally at the parties or otherwise be able to be enforced in other ways within China. At any rate, I am not satisfied to the contrary;
(e) it may be that orders made by a Chinese court could be enforced in this Court under common law principles; and ultimately
(f) the parties promised to each other, which promises formed part of the consideration for the agreement, to resolve any disputes in China.
B.2.4. Have the defendants ‘submitted to the jurisdiction’?
The plaintiffs contended that, notwithstanding the above, the defendants cannot now apply to stay this proceeding because they have ‘submitted to the jurisdiction’ of this Court. They relied on the fact that the proceeding was filed on 28 October 2020, the defendants have filed notices of appearance, and the defendants have not, even now, made an application to stay the proceeding.
I do not consider that the defendants’ conduct is such that they have submitted to the jurisdiction of this Court if by that it is meant that they cannot now contend the proceeding ought to be stayed on the basis that the parties had agreed that the dispute would be litigated only in China. The matter first came before the Court on 29 October 2020 on the return of the plaintiffs’ summons for interlocutory relief. On that day, the first to third defendants appeared in person. The matter returned to Court on 30 October 2021, at which hearing the first and second defendants appeared with a solicitor, but there was no appearance for the third and fourth defendants. On 30 October 2020, the Court ordered that the first and second defendants ‘file and serve a notice of appearance forthwith’. They did so in November 2020, as did the third and fourth defendants. Then, in the first defendant’s affidavit sworn 18 December 2020, the first defendant swore that the intentions of the parties was that the proceeding would be determined ‘in Chinese Courts’. The summary judgment application was heard by the judicial registrar on 15 February 2021. The defendants defended the application on the basis that Chinese law applied, rather than on the basis that the Court had no jurisdiction. Nonetheless, the judicial registrar dismissed the application for summary judgment on the grounds:
I am satisfied that the defence of the First to Fourth Defendants, that the parties to the 2018 agreement have submitted to another jurisdiction, cannot be said to have no real chance of success.
The plaintiffs appealed this decision, and no pleadings or other steps have been taken in the meantime.
In these circumstances, I do not consider that the defendants would be, at present, precluded from bringing an application to stay the proceeding on the basis of the clause in the agreement that required the parties to litigate in China. Probably, they ought to have filed conditional appearances under r 8.08, and any application may have to be accompanied by an application under r 25.01 to withdraw the unconditional appearances.[29] They are not disputing that the proceeding was validly served, and in that sense this Court has jurisdiction over them in order to determine whether or not it has jurisdiction over the dispute. Rather, they anticipate seeking a stay, in accordance with Victorian legal principles, on the basis that the agreement entered into provides for litigation exclusively in China. I do not consider that, objectively assessed, the defendants’ conduct amounts to a submission to this Court’s jurisdiction to resolve the issues of substance in dispute.[30]
[29]Cf Pico Holdings Inc v Dominion Capital Pty Ltd [2001] VSC 333 (Bongiorno J).
[30]Cf Brealey v Board of Management Royal Perth Hospital (1999) 21 WAR 79, 87 [38] (Ipp J).
Further, the defendants’ failure to have brought an application to stay the proceeding to date does not, to my mind, mean that it would now be an abuse of process for them to make such an application.
B.3. Conclusion
For the above reasons, it seems to me that the defendants do not have ‘no real prospect of success’ in establishing that:
(a) Chinese law applies to determine the rights under the agreement; and
(b) the proceeding is liable to be stayed on the basis that the proceeding ought to be brought in China.
Each is sufficient for the dismissal of the application for summary judgment.
C. Final comments
This is not to say that the caveats ought not to remain pending resolution of this dispute, as ordered by this Court on 30 October 2020. That is not a matter that I have to decide.
The plaintiffs’ affidavit in support does not state that in the belief of the deponent the defendants have no real prospects of success. That is a requirement of r 22.04(1)(b). That rule is there for good reason. The plaintiffs undertook to provide an affidavit deposing as to that belief if required. Accordingly, and for the avoidance of doubt, I have not relied on this deficiency as a reason for dismissing the application.
The plaintiffs seek directions that the properties ‘be sold by the Plaintiffs by way of judicial sale’. Ordinarily, such an order would not be made without evidence of the value of the various properties so that the Court can evaluate the appropriateness of requiring their sale.[31] Also, the purchaser of one of the properties (whose transfer has not been registered) and any mortgagee might have to be heard before the Court could order a judicial sale. Again, for the avoidance of doubt, I have not relied on these matters as a reason for dismissing the application; if I were inclined to make such an order these matters could have been addressed.
[31]See, eg, Hycenko v VHY Enterprises Pty Ltd [2020] VSC 834, [40], [56], [98] (Derham AsJ); Avco Financial Services Ltd v White [1977] VR 561, 567 (Gillard J).
I propose to dismiss the appeal against the judicial registrar’s order dismissing the application for summary judgment. I will hear the parties on the question of costs.
Finally, as I informed the parties, it seems to me that the arrangement between the parties might have been directed at presenting a false impression to Australia’s immigration officials for the purpose of securing permanent residency for the plaintiffs for a fee paid by the plaintiffs to the first and second defendants. I have not had regard to this possibility in determining to dismiss the appeal. However, I intend to refer these reasons, and the evidence that was placed before me in this proceeding, to the relevant authorities so that they can consider whether to take any further action.
SCHEDULE OF PARTIES
S ECI 2020 04101
| ZHILONG YANG | First Plaintiff |
| MEILING ZHANG | Second Plaintiff |
| -and- | |
| JUN YUE | First Defendant |
| YUN HU | Second Defendant |
| QIAOXI YUE | Third Defendant |
| JIN XIN AUSTRALIA PTY LTD (ACN 133 695 987) | Fourth Defendant |
| REGISTRAR OF TITLES | Fifth Defendant |
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