Zhengzhou Lvdu Real Estate Group Co Ltd v Shu

[2024] NSWSC 58

Supreme Court

New South Wales

Medium Neutral Citation:

Zhengzhou Lvdu Real Estate Group Co Ltd v Shu [2024] NSWSC 58

Hearing dates:

1 February 2024

Date of orders:

1 February 2024

Decision date:

06 February 2024

Jurisdiction:

Equity

Before:

Nixon J

Decision:

The Court orders:

(1)   Judgment for the Plaintiff in the sum of ¥318,827,295.13, in respect of the judgment of the Zhengzhou Intermediate People’s Court of Henan Province, People’s Republic of China, dated 4 September 2020 in proceedings (2020) Yu 01 Min-Chu No 503.

(2)   The Defendant is to pay the Plaintiff’s costs of the proceeding.

(3) If the Defendant wishes to apply to set aside either or both of Orders 1 and 2 under Uniform Civil Procedure Rules 2005 (NSW) r 36.16(2)(b), the Defendant is to file and serve a notice of motion seeking that relief and any supporting evidence on or before 22 February 2024.

(4)   The Plaintiff is to serve by e-mail and post on the Defendant a copy of these orders and a transcript of today’s hearing on or before 8 February 2024.

The Court NOTES that interest on the sum in Order 1 will accrue in accordance with the Civil Procedure Act 2005 (NSW) s101.

Catchwords:

PRIVATE INTERNATIONAL LAW – Foreign judgments and orders – Recognition or enforcement at common law – People’s Republic of China – Zhengzhou Intermediate People’s Court of Henan Province – Judgment enforced

Legislation Cited:

Civil Procedure Act 2005 (NSW), s101

Foreign Judgments Act 1991 (Cth)

Foreign Judgment Regulations 1992 (Cth)

Cases Cited:

Bank of China Ltd v Chen [2022] NSWSC 749

Bank of China Ltd v Chen (No 2) [2022] NSWSC 1168

Bao v Qu; Tian (No 2) (2020) 102 NSWLR 435; [2020] NSWSC 588

Nouvion v Freeman (1889) 15 App Cas 1

Tianjin Yingtong Materials Co Ltd v Young [2022] NSWSC 943

Anna Zhou v Xiaoli Jing [2023] NSWSC 214

Texts Cited:

M Davies et al, Nygh’s Conflict of Laws in Australia (10th ed, 2020, LexisNexis Butterworths)

Category:

Principal judgment

Parties:

Zhengzhou Lvdu Real Estate Group Co Ltd (Plaintiff)
Pujuan Shu (Defendant)

Representation:

Counsel:
DJ Townsend (Plaintiff)
There was no appearance for the Defendant
Solicitors:
JurisBridge Legal (Plaintiff)

File Number(s):

2023/00299168

Publication restriction:

Nil

Judgment

1. By a summons filed on 20 September 2023, the Plaintiff sought recognition and enforcement in New South Wales of a judgment made against the Defendant by the Zhengzhou Intermediate People’s Court of Henan Province, People’s Republic of China in proceedings (2020) Yu 01 Min-Chu No 503 (the Zhengzhou Judgment), less such amounts of the judgment debt as have already been satisfied. The Plaintiff also sought interest and costs.

2. The matter was heard before me on 1 February 2024. At the end of the hearing, I made the following orders and directions and reserved my reasons.

“The Court orders:

(1)   Judgment for the Plaintiff in the sum of ¥318,827,295.13, in respect of the judgment of the Zhengzhou Intermediate People’s Court of Henan Province, People’s Republic of China, dated 4 September 2020 in proceedings (2020) Yu 01 Min-Chu No 503.

(2)   The Defendant is to pay the Plaintiff’s costs of the proceeding.

(3)   If the Defendant wishes to apply to set aside either or both of Orders 1 and 2 under Uniform Civil Procedure Rules 2005 (NSW) r 36.16(2)(b), the Defendant is to file and serve a notice of motion seeking that relief and any supporting evidence on or before 22 February 2024.

(4)   The Plaintiff is to serve by e-mail and post on the Defendant a copy of these orders and a transcript of today’s hearing on or before 8 February 2024.

The Court NOTES that interest on the sum in Order 1 will accrue in accordance with the Civil Procedure Act 2005 (NSW) s101.”

3. My reasons for making those orders are as set out below.

FACTUAL BACKGROUND

4. The Plaintiff is a company named Zhengzhou Lvdu Real Estate Group Co Ltd. On 6 June 2019, the Plaintiff entered into a commercial loan agreement (the Loan Agreement) with Henan Shengrun Real Estate Group (the Borrower Company). The amount of principal advanced was ¥170,000,000. The Defendant, Pujuan Shu, was the guarantor for the Borrower Company. The guarantor’s obligations under the Loan Agreement were joint and several.

5. On 12 May 2020, the Plaintiff initiated proceedings in the Zhengzhou Intermediate People’s Court of Henan Province (the Zhengzhou Court) against the Borrower Company and the Defendant for breach of the Loan Agreement.

6. The Zhengzhou Judgment was delivered on 4 September 2020. The Zhengzhou Court made orders that the Borrower Company repay to the Plaintiff the principal of the loan plus interest. The Zhengzhou Judgment found the Defendant collaterally liable for the repayment of the loan and interest.

7. Since the Zhengzhou Judgment was handed down, the Plaintiff has attempted to recover the judgment debt from the Borrower Company and the Defendant through negotiated payment agreements and through compulsory judgment execution procedures of the Zhengzhou Court. To date, the Plaintiff has recovered an amount of ¥22,964,226.54.

Procedural History

8. On 20 September 2023, the Plaintiff filed the Summons and the First Affidavit of Xiangqian Lu. Mr Lu was Vice-Chief Executive Officer of the Plaintiff from March 2006 to December 2022 and had day-to-day carriage of the aspects of the Plaintiff’s business which are relevant to these proceedings. His affidavit referred to the Loan Agreement, the commencement and conduct of the proceedings in the Zhengzhou Court, the delivery of the Zhengzhou Judgment, the calculation of interest, and the amounts recovered to date in respect of the judgment debt.

9. On 28 September 2023, the Summons and First Affidavit of Xiangqian Lu were served on the Defendant in China. These documents were personally handed to the Defendant by Mr Kai Li, who is head of the in-house legal department of the Plaintiff, at a meeting room in Shengrun International Plaza, Zhengzhou City, Henan Province. At the time of service, the Defendant and Mr Li had a conversation to the following effect:

“Ms Shu:   What are these documents?

[Mr Li]:   These are a Summons of the Supreme Court of NSW and an Affidavit of Xiangqian Lu. You should have a translator translate the details in the documents for you.

Ms Shu:   Okay. I will cooperate.

[Mr Li]:   You’ve been served. Could you please sign the proof of service form?

Ms Shu:   Okay.”

A copy of the proof of service, signed by the Defendant, was annexed to Mr Li’s affidavit.

10. On 29 September 2023, a first directions hearing in this matter took place. The Defendant did not appear. The matter was stood over for further directions on 17 November 2023 and the Plaintiff was directed to notify the Defendant of orders made.

11. On 1 October 2023, the Plaintiff sent a copy of the orders made at the first directions hearing by mail, addressed to the Defendant at Shengrun International Plaza. Mr Li also notified the Defendant of the Court’s orders by a WeChat message sent on the same date, which included the following text:

“Ms. Pujuan SHU, today I would like to convey to you the decision issued by the New South Wales Supreme Court on 29 September 2023. This case 2023/00299168 Zhengzhou Lyudu Real Estate Co., Ltd. v. Pujuan SHU will hold direction hearing at the New South Wales Supreme Court at 10 am on 17 November 2023.

Court Orders(1).docx

Please be informed!”

12. On 13 October 2023, the Commercial Statement was served on the Defendant. This was again effected by Mr Li personally handing the document to the Defendant in a meeting room at Shengrun International Plaza. On this occasion, Ms Shu confirmed that she had received a copy of the orders made at the first directions hearing and stated that these appeared to relate to a hearing on 17 November 2023, but added that she had not examined their specific contents in detail. Mr Li confirmed that the next hearing in this matter was scheduled for 17 November 2023. The Defendant briefly reviewed the Commercial List Statement in Mr Li’s presence and then signed a proof of receipt in respect of this document, which was annexed to Mr Li’s second affidavit.

13. On 17 November 2023, a second directions hearing in this matter took place before Ball ACJ in Eq. Once again, the Defendant did not appear. The Plaintiff referred on that occasion to Mr Li’s evidence establishing personal service on the Defendant. His Honour set the matter down for hearing on 1 February 2024 and ordered that the parties comply with the Usual Order for Hearing in Practice Note SC Eq 3 Annexure 3 in respect of the filing and service of documents in order to prepare the matter for hearing.

14. On 27 November 2023, Mr Li informed the Defendant via WeChat of the Court’s orders of 17 November 2023, including the order that the matter be set down for hearing on 1 February 2024. A copy of the orders was sent to the Defendant both by WeChat and by mail addressed to the Defendant at Shengrun International Plaza.

15. On 12 January 2024, Mr Li and his colleague, Zhenyu Wang, met the Defendant and discussed various matters relating to the judgment debt, including providing guarantees from associated companies, increasing repayment sources and the ongoing lawsuit in Australia. There was reference in these discussions to a property located at 31 Union Street, Pyrmont, New South Wales, of which the Defendant is the sole registered proprietor. The conversation included words to the following effect:

“Defendant:   My son in Australia has hired a lawyer, and the lawyer will appear in court on my behalf.

Mr Wang:   You should consider selling your property in Australia to repay the debt.

Defendant:   I asked my son about it, and he suggests that the tax for selling the house would be very high because I am a foreigner. If you must, proceed with enforcement through legal means.”

16. Despite indicating to Mr Wang that a lawyer would be appearing on her behalf, the Defendant did not appear at the hearing before me on 1 February 2024 and has not taken any step in the proceedings.

17. The Plaintiff did not seek default judgment against the Defendant, but instead sought final judgment on the basis that the evidence established that the requirements for recognition and enforcement of the Zhengzhou Judgment had been satisfied. Given the evidence, summarised above, that the Summons, Commercial List Statement and supporting affidavit had been personally served on the Defendant in China, that the orders made in these proceedings had been brought to her attention, and that she was aware of, and had the opportunity to participate in, the hearing on 1 February 2024, I formed the view that it was appropriate for the hearing to proceed against the Defendant, on a final basis, in her absence.

PRINCIPLES FOR ENFORCEMENT OF FOREIGN JUDGMENTS

18. In Australia, foreign judgments may be enforced either at common law or pursuant to the statutory regime under the Foreign Judgments Act 1991 (Cth). The statutory regime applies where the Foreign Judgment Regulations 1992 (Cth) designate a country as a jurisdiction of substantial reciprocity. This is not the case with judgments of the courts of the People’s Republic of China (other than the judgments of certain courts of Hong Kong).

19. Accordingly, it is necessary to apply common law principles in order to determine whether the Zhengzhou Judgment is to be recognised and enforced.

20. The principles for the enforcement of foreign judgments at common law are well settled. They were helpfully summarised by Rothman J in Bao v Qu; Tian (No 2) (2020) 102 NSWLR 435; [2020] NSWSC 588 at [26], as follows:

“At common law, a foreign judgment is prima facie capable of recognition and enforcement if the following requirements have been met:

(1)   the foreign court must have exercised jurisdiction of the requisite type over the defendant (also known as jurisdiction ‘in the international sense’);

(2)   the judgment must be final and conclusive;

(3)   there must be identity of parties between the judgment debtors and the defendants in any enforcement action; and

(4)   the judgment must be for a fixed, liquidated sum.

See Benefit Strategies Group Inc v Prider (2005) 91 SASR 544; [2005] SASC 194 per Bleby J at [28]; Schnabel v Young Lui [2022] NSWSC 15 (‘Schnabel’) per Bergin J at [75]; RDCW Diamonds Pty Ltd v Da Gloria [2006] NSWSC 450 per Rothman J at [28]-[32]; M Davies et al, Nygh’s Conflict of Laws in Australia (LexisNexis, 10^th ed, 2020) at [40.2].”

21. Further, as his Honour stated (at [29]):

“The onus rests on the party seeking to enforce the foreign judgment to establish these four requirements: Carl Zeiss Stiftung v Rayner & Keele Ltd [1967] 1 AC 853, Schnabel at [74]-[76]. Once they are established, however, the judgment is prima facie enforceable as a valid obligation: Stern v National Australia Bank; National Australia Bank Ltd v Pollack [1999] FCA 1421 at [133] (Tamberlin J); Suzhou Haishun Investment Management Co. Ltd v Yue’e Zhao & Ors [2019] VSC 110 at [92].”

22. This statement of principles has been adopted and applied in various subsequent decisions of this Court, including Bank of China Ltd v Chen [2022] NSWSC 749 at [8]; Tianjin Yingtong Materials Co Ltd v Young [2022] NSWSC 943 at [13]; Bank of China Ltd v Chen (No 2) [2022] NSWSC 1168 at [11]; and Anna Zhou v Xiaoli Jing [2023] NSWSC 214 at [15]-[16];

23. Where these four conditions have been established, the Defendant may only challenge the recognition and enforcement of the foreign judgment on limited grounds. In Tianjin Yingtong Materials Co Ltd v Young at [21], such grounds were said to include:

“(a)   where granting enforcement of the foreign judgment would be contrary to Australian public policy. This includes judgment obtained by improper means, such as duress or undue influence;

(b)   where the foreign judgment was obtained by fraud (including equitable fraud), by the plaintiff, or even on the part of the court;

(c)   where the foreign judgment is penal or a judgment for a revenue debt; and

(d)   where enforcement of the decision would amount to a denial of natural justice.”

CONSIDERATION

Foreign court exercised jurisdiction in the international sense

24. In Bao v Qu; Tian (No 2) at [27], Rothman J stated that:

“As to the first requirement that the foreign court have jurisdiction in the international sense, this is satisfied where the defendant is personally served with originating process within the jurisdiction of the foreign court: see Herman v Meallin (1891) 8 WN (NSW) 38; Nygh at [40.6]. Moreover, it is clear that a defendant who was served outside the jurisdiction of the foreign court, but has nonetheless appeared to argue the merits of the case, has submitted to the jurisdiction of that court: City of Swan v McGraw-Hill Companies Inc (2014) 223 FCR 295; [2014] FCA 442 at [113]; Nygh at [40.12-13].”

25. The Zhengzhou Judgment records that the Defendant is a resident of Zhengzhou City. However, there is no evidence, one way or the other, as to whether she was personally served with the originating process for the Zhengzhou proceedings within the jurisdiction of the Zhengzhou Court. That is of little significance where it is established that the Defendant appeared at the hearing before the Zhengzhou Court and was represented by lawyers who argued the merits of the claim.

26. The Plaintiff tendered the Trial Hearing Record before the Zhengzhou Court on 8 July 2020. The Trial Hearing Record sets out the “Parties involved” as including two defendants:

“Defendant: Henan Shengrun Real Estate Group Co., LTD.

Address: …

The Legal Representative of the company: Pujuan Shu, Chairman

Agent ad litem: Zhen Gong, lawyer of Henan Shijitong Law Firm.

Agent ad litem: Guodong Ni, lawyer of Henan Shijitong Law Firm. (present)

Defendant: Pujuan Shu, Female, Han ethnicity, born on [date], resides in [address], Zhengzhou City.

Agent ad litem: Zhen Gong, lawyer of Henan Shijitong Law Firm.

Agent ad litem: Guodong Ni, lawyer of Henan Shijitong Law Firm. (present)”

27. That is, Ms Shu was not only the legal representative of the Borrower Company in respect of the Zhengzhou proceedings, but participated in those proceedings as a defendant in her own right. The same lawyers represented the Borrower Company and Ms Shu at those proceedings. Each page of the Trial Hearing Record is signed by one of those lawyers, Guodong Ni, who is recorded as having been present at the hearing.

28. At the commencement of the proceedings, the Presiding Judge asked the parties to confirm, and the “Defendant” did confirm, that there was no objection to the opposing parties’ legal representatives and no application for recusal in respect of any of the members of the panel hearing the case. Given that there was one set of lawyers representing Ms Shu and the Borrower Company, each of whom was a “Defendant”, and given that Ms Shu was named as the legal representative of the Borrower Company, it is apparent that statements in the Trial Hearing Record attributed to the “Defendant” are statements made on behalf of each of the Borrower Company and Ms Shu.

29. According to the Trial Hearing Record, the Presiding Judge then outlined the trial schedule:

“Presiding Judge: … Now, I will inform the schedule of this trial hearing as follows: 1. Each party presents the main points and reasons for their statement of claims and defences. 2. The Court will summarize the disputed points of the case and ask the opinions of the parties before determination; 3. The court will conduct investigations and interrogations based on the determined disputed points. 4. The parties will engage in court debates regarding the facts and applications of laws regarding the case. 5. Closing submissions in relation to comprehensive opinions on the whole case; 6. Judicial mediation. 7. The collegial panel deliberate and pronounce a judgement. Have the parties understood?

Plaintiff: Understood.

Defendant [Borrower Company and Ms Shu]: Understood.”

30. The hearing followed this schedule. The Borrower Company and Ms Shu were given an opportunity to state their defence, to lead evidence, to ask any questions, to make submissions and to respond to the Plaintiff’s contentions. According to the Trial Hearing Record, the Borrower Company and Ms Shu raised two substantive points in outlining their defence to the Plaintiff’s claim:

“Presiding Judge: The defendant is to make a defence.

Defendant [Borrower Company and Ms Shu]: Firstly, the loan involved in the case was used for both parties’ cooperative land development project. Because the cooperative land could not be auctioned as planned, the funds used could not obtain its return. We will arrange replacement funds as soon as possible in order to repay the loan in this case. The two sides are currently negotiating for an agreed resolution proposal; 2. [Secondly,] The interest rate agreed in the loan agreement is 12%, and the Plaintiff’s claim of interest of 18% per annum has no grounds.”

31. Having regard to those matters, the Plaintiff has established that the Defendant appeared before the Zhengzhou Court, without objecting to jurisdiction, and argued the merits of the case. It follows that the Plaintiff has established that the Zhengzhou Court exercised jurisdiction in the requisite “international” sense.

Foreign judgment final and conclusive

32. In Bao v Qu; Tian (No 2) at [28], Rothman J stated that:

“On the second requirement, the foreign court’s judgment must be final, in that it must put to an end the proceedings concerned and quell the controversy between the parties to the dispute: Nouvion v Freeman (1889) 15 App Cas 1 at 9; Doe v Howard [2015] VSC 75 at [67] per J Forrest J; Schnabel at [77] and [133]. A foreign judgment is final where it is treated as res judicata by the courts of the country in which it is made, in respect of the issues determined: Schnabel at [77], [133]; Bank Polska Kasa Opieki Spolka Akcyjna v Opara (2010) 238 FLR 309; [2010] QSC 93. In that regard, the fact that a judgment may be subject to appeal does not, in principle, affect the finality of the judgment: Colt Industries Inc v Sarlie (No 2) [1966] 1 WLR 1287; Lewis v Eliades [2003] EWCA Civ 1758.”

33. As noted above, the Trial Hearing Record of 8 July 2020 included a statement by the Presiding Judge regarding the schedule for the proceedings before the Zhengzhou Court which, after evidence and argument, concluded with the following step: “The collegial panel deliberate and pronounce a judgment.”

34. At the end of the hearing on 8 July 2020, the parties agreed to mediation. The Presiding Judge then stated: “If mediation fails after court adjournment, a judgment will be pronounced on another day”.

35. The Zhengzhou Judgment was tendered by the Plaintiff. It is headed “Civil Judgment”, is dated 4 September 2020, and has been stamped by the Zhengzhou Court. The Zhengzhou Judgment states that (emphasis added):

“After the proceeding commenced on 15 May 2020, the Court applied ordinary procedures in accordance with the law and held a trial hearing. Jinlei Lu, the attorney of the Plaintiff Lvdu Company, and Guodong Ni, attorney of the Defendants Shengrun Company and Pujuan Shu, attended the hearing at the court. The case has now been heard and concluded.”

36. The Zhengzhou Judgment sets out the contentions advanced by each of the Plaintiff and the Defendant and the determinations of the Zhengzhou Court regarding the factual matters and legal matters at issue. For example, the Zhengzhou Judgment records that:

“The court holds that: the ‘Loan Agreement’ signed by the Plaintiff and the Defendant Shengrun Company and Pujuan Shu on 6 June 2019 reflects the true intention of the parties involved and it does not violate the mandatory provisions of laws and administrative regulations. Thus, the agreement is valid and has legally binding effect therefore all parties involved shall fully perform their obligations in accordance with the agreement. The Plaintiff has fulfilled its obligation by providing the loan according to the agreement, and the Defendant Shengrun Company failed to comply with the agreement, which has constituted a breach of agreement. The Plaintiff sued the Defendants to Court and requests Shengrun Company to repay the loan and the interests are based on clear facts and sufficient evidence with valid grounds. Therefore, the Court supports the Plaintiff’s claim.”

37. The Zhengzhou Judgment also records that the Zhengzhou Court found that:

“The Defendant Pujuan Shu shall repay the loan and interest for the Defendant Shengrun Company as agreed in the agreement due to her collateral liability and guarantee for the Defendant company’s liability provided to the Plaintiff.”

38. At the conclusion of the Zhengzhou Judgment, the Zhengzhou Court made orders disposing of all of the Plaintiff’s claims in the proceedings, as follows:

“In summary, in accordance with Article 60, Article 107 of the ‘Contract Law of the People’s Republic of China’, Article 26 of ‘Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Laws in the Trial of Lending Cases’, Article 18 of ‘Guaranty Law of the People’s Republic of China’, Article 64 of ‘Civil Procedure Law of the People’s Republic of China’, this Court orders the following:

1.   The Defendant company, Henan Shengrun Real Estate Group Co., Ltd., shall repay to the Plaintiff, Zhengzhou Lvdu Real Estate Group Co., Ltd. the principal of the loan in the amount of CNY 170 million and its interest (based on principal of CNY 170 million, calculated on an annual interest rate of 12% for the period between 12 June 2019 and 11 May 2020; and calculated on an annual interest of 18% for the period from 12 May 2020 until the date when the debt is fully repaid) within ten days after this judgment takes effect;

2.   Defendant Pujuan Shu bears collateral liability for all the payments obligation and debts of the Defendant Henan Shengrun Real Estate Group Co., LTD. After the Defendant Pujuan Shu fulfills the collateral liability, she has the right to recover from the Defendant Henan Shengrun Real Estate Group Co., LTD.;

3.   Reject and dismiss other claims filed by the Plaintiff, Zhengzhou Lvdu Real Estate Group Co., LTD.”

39. In addition, the Zhengzhou Judgment records that the Zhengzhou Court found that the Borrowing Company and Ms Shu were both liable for an amount of ¥969,855 in respect of the costs of the proceedings.

40. The Zhengzhou Judgment noted that there was a right of appeal, but it was time limited and had to be made to the Henan Provincial Higher People’s Court:

“If any party disagrees with this judgment, that party may lodge the appeal in 15 copies to the Henan Provincial Higher People’s Court within 15 days from the date of service of this judgment.”

41. No such appeal was lodged within time or at all. In any case, as noted above, the fact that a foreign judgment may be the subject of an appeal does not prevent it from being final and conclusive. In Nouvion v Freeman (1889) 15 App Cas 1 at 9-10, Lord Herschell stated as follows (emphasis added):

“… a judgment, to come within the terms of the law as properly laid down, must be a judgment which results from an adjudication of a Court of competent jurisdiction, such judgment being final and conclusive.

…

The principle upon which I think our enforcement of foreign judgments must proceed is this: that in a court of competent jurisdiction, where according to its established procedure the whole merits of the case were open … to the parties, … a final adjudication has been given that a debt or obligation exists which cannot thereafter in that Court be disputed, and can only be questioned in an appeal to a higher tribunal.”

42. The Zhengzhou Court held in the Zhengzhou Judgment that additional interest would be payable on the outstanding principal of the loan if the judgment debt was not paid within the period specified in the court’s orders:

“If the payment obligation is not performed within the period specified in this judgment, the interest on judgment debt during the delayed performance period shall be doubled in accordance with the provisions of Article 253 of the Civil Procedure Law of the People’s Republic of China.”

43. The “period specified in this judgment” for payment of the judgment sum was “within ten days after this judgment takes effect” (see order 1 in paragraph 38 above). Mr Lu gave evidence that the Zhengzhou Judgment took effect after the expiration of the appeal period. The appeal period began, as set out above, on the date that the Zhengzhou Judgment was pronounced (4 September 2020) and expired 15 days thereafter (19 September 2020). Accordingly, the date which was ten days after the judgment took effect was 29 September 2020.

44. Article 253 is addressed further below. The Plaintiff tendered an “Interpretation by the Supreme People’s Court on Several Issues concerning the Applicable Law for Calculating the Interest of Debt on Delayed Performance in Execution Procedures” dated 7 July 2014 which deals, inter alia, with the interest payable under Article 253. This document states that the interpretation has been formulated in order “to standardise the calculation of interest of debt on delayed performance in enforcement procedures, in accordance with the provisions of the Civil Procedure Law of the People’s Republic of China and in combination with judicial practice”. The fact that, as stated in the Zhengzhou Judgment, Article 253 would be applicable following the date for payment of the judgment debt specified in the orders of the Zhengzhou Court indicates that, from that date, the judgment debt would be capable of being subject to enforcement procedures. This has in fact occurred. Mr Lu has deposed that the Plaintiff has in fact availed itself of “compulsory judgment execution procedures of the Court in China”.

45. Having regard to those matters, the Plaintiff has established that the Zhengzhou Judgment is final and conclusive, in that it put an end to the proceedings and quelled the controversy between the parties, subject only to a right to appeal to the Henan Provincial Higher People’s Court, which was not exercised.

Identity of parties

46. The third requirement is that there must be identity of parties between the judgment debtors and the defendants in any enforcement action.

47. There were two defendants before the Zhengzhou Court, namely, the Borrower Company and the guarantor, Ms Shu, who was the Chairman of the Borrower Company. Enforcement is sought against only the guarantor in the current proceeding.

48. If the foreign judgment is expressed to be against several defendants acting as separate legal entities, enforcement proceedings may be brought in Australia against any or all of them: see M Davies et al, Nygh’s Conflict of Laws in Australia (10^th ed, 2020) at [40.37], and the cases there cited. Accordingly, it is not necessary to seek enforcement and recognition against the Borrower Company, in order to seek enforcement and recognition against Ms Shu. Importantly, Ms Shu is a judgment debtor in her own right. She was personally sued in respect of the guarantee which she had given in respect of the Borrower Company’s liability under the Loan Agreement and the Zhengzhou Court ordered that she was “bears collateral liability for all the payments obligations and debts of the [Borrower Company]”.

49. The Plaintiff has led evidence that the Defendant in these proceedings, Pujuan Shu, is the same as the “Pujuan Shu” who is a judgment debtor in respect of the Zhengzhou Judgment. Mr Lu, who is the officer of the Plaintiff who had day-to-day carriage of the aspects of the Plaintiff’s business which are relevant to these proceedings, deposes that the Defendant in these proceedings is the person who entered into the Loan Agreement as guarantor, was sued in the Zhengzhou proceedings, and was represented at and participated in those proceedings. Mr Lu has also deposed that, subsequent to the pronouncement of the Zhengzhou Judgment, the Plaintiff has attempted to recover the judgment debt from both the Borrower Company and the Defendant in these proceedings, through negotiated payment agreements as well as through compulsory judgment execution procedures.

50. Similarly, Mr Li has given evidence, which has been summarised above, regarding his communications with the Defendant regarding the subject matter of the dispute in these proceedings. It is clear from this evidence, summarised at paragraphs 9-15 above, that the Defendant understands that the purpose of these proceedings is to enforce the Zhengzhou Judgment against her on the basis that she is the same person as the Pujuan Shu referred to in that judgment. The Defendant has not said anything to indicate that this is not the case, and has instead stated that the Plaintiff should “proceed with enforcement [in Australia] through legal means”.

51. Having regard to those matters, the Plaintiff has satisfied the third requirement for the recognition and enforcement of the Zhengzhou Judgment at common law.

Judgment for a liquidated sum

52. The final requirement for recognition and enforcement is that the judgment must be for a fixed, liquidated sum.

53. The Zhengzhou Judgment is for a specific sum (¥170,000,000), being the amount of principal advanced under the Loan Agreement, together with interest calculated according to specific percentages: (i) from 12 June 2019, when the principal was advanced, to 11 May 2020; (ii) from 12 May 2020 until the date when the debt is fully repaid; and (iii) pursuant to Article 253, from the date that the judgment debt was required to be paid (being 29 September 2020) until the debt is fully repaid. The Zhengzhou Judgment also holds that the Borrower Company and the Defendant are liable for the costs of the proceedings in the amount ordered by the Zhengzhou Court (¥969,855).

54. The fact that interest continues to accrue according to some formula which is specified in the foreign judgment does not prevent the foreign judgment being for a fixed, liquidated sum. In the ordinary course, it is appropriate to make an order for pre-judgment interest in accordance with the foreign judgment: Bao v Qu; Tian (No 2) at [59].

55. Accordingly, the fourth requirement for recognition and enforcement at common law is satisfied.

56. Mr Lu provided interest calculations, applying the rates determined by the Zhengzhou Court from the dates specified in the court’s orders, up until 1 February 2024, being the date of the orders made in these proceedings.

57. Mr Lu also provided evidence of the quantum recovered to date in respect of the Zhengzhou Judgment and the amount outstanding as at 1 February 2024.

58. Mr Lu’s calculations as at 1 February 2024 were as follows (with emphasis added and notes added):

“1. Sum advanced under the Loan Agreement: CN ¥170,000,000 [being the amount stated in order 1 of the Zhengzhou Judgment]

2.   Accrued Interest:

a. 12 June 2019 – 11 May 2020: CN ¥18,926,666.67 [being interest at 12% per annum, in accordance with order 1 of the Zhengzhou Judgment]

b. 12 May 2020 – 1 February 2024: CN ¥115,600,000 [being interest at 18% per annum, in accordance with order 1 of the Zhengzhou Judgment]

3.   Interest of debt on delayed performance in execution procedures (29 September 2020 – 1 February 2024): CN ¥36,295,000 [being interest at the Article 253 rate, in accordance with the Zhengzhou Judgment]

4.   Costs: CN ¥969,855 [as ordered on the final page of the Zhengzhou Judgment]

Sub Total: CN ¥341,791,521.67

5.   Sum paid in satisfaction of the judgment debt: CN ¥22,964,226.54

Total Outstanding: CN ¥318,827,295.13”

59. It should be noted that the same calculations were undertaken by Mr Lu as at an earlier date (23 August 2023) and were annexed to his first affidavit, which was personally served on the Defendant on 28 September 2023. The Defendant has not, in any of the communications since that time which are in evidence, raised any issue about any aspect of this calculation. That is despite the Defendant engaging, as recently as mid-January 2024, in discussions about increasing repayment sources, providing guarantees from associated companies and realising property to meet the judgment debt.

Any reason not to enforce?

60. Because the Plaintiff has established each of the four requirements for recognition and enforcement at common law, the Zhengzhou Judgment is prima facie enforceable. It then falls to the Defendant to establish any basis on which that judgment should not be recognised and enforced.

61. Since the Defendant has not participated in these proceedings, no contention has been advanced that any such basis has been established.

62. Further, and in any event, there does not appear to be, on the material before me, any material capable of making out any of the limited bases for declining to recognise and enforce a foreign judgment.

63. As regards whether there is fraud or a denial of natural justice or the obtaining of a judgment by improper means such as duress, the Trial Hearing Record indicates that the Defendant participated in the Zhengzhou proceedings through lawyers, advanced arguments, and had an opportunity to lead evidence, ask questions, make submissions and respond to the Plaintiff’s contentions. The Trial Hearing Record does not contain any complaint by the Defendant’s solicitors regarding the process adopted or regarding the Plaintiff’s conduct of the claim. The Defendant made clear at the hearing that there was no issue regarding the validity of the Loan Agreement or the advancing and non-repayment of the principal:

“Defendant [Borrower Company and Ms Shu]: We do not dispute the authenticity of the loan contract and transfer receipt. We will make efforts to raise funds and repay the loan involved in the case as soon as possible.”

64. I have considered whether the application of Article 253, which applies “double interest” in the event of the failure of a party to make a judgment debt by the date specified in the judgment, could be regarded as penal in nature.

65. The term “double interest” is something of a misnomer. Article 253 does not double the interest rate provided for under the Loan Agreement (which was 12% per annum from the date of the advance until the date of maturity, and then 18% per annum from the date of default until repayment). Instead, there is “double” interest in the sense that, from the date when the judgment debt was required to be paid until the date of actual payment, there is a second interest rate applicable, in addition to the contractual interest rate of 18% which was found to apply in the Zhengzhou Judgment. Article 1 of the “Interpretation by the Supreme People’s Court” states as follows:

“The calculation method for the doubled portion of the debt interest is as follows: Doubled portion of debt interest = the outstanding monetary debt of the debtor other than ordinary debt interest specified by effective legal document x 0.00175 per day x delayed performance period.”

66. The “outstanding monetary debt of the debtor other than ordinary debt interest specified by effective legal document” is, in this case, the amount of the principal (¥170,000,000). Mr Lu’s calculations of Article 253 interest have been performed on this basis. The specified rate is 0.0175% per day, which equates to around 6.3875% per annum.

67. In Bao v Qu; Tian (No 2) at [59]-[63], Rothman J considered whether this additional interest under Article 253 was penal in nature:

“… on one view, the imposition of Article 253 Interest may be considered penal in nature and, therefore, unenforceable because of the exclusionary principle that Australian courts will not enforce a penal law either directly at the suit of a foreign government or indirectly in a suit between private citizens: see, for example, Suzhou Haishun Investment Management Co Ltd v Zhao and Ors [2019] VSC 110 at [114(8)].

In Schnabel v Lui [2002] NSWSC 15, Bergin J ordered enforcement of a judgment for compensatory damages made by a federal court in California, but refused to enforce that part of the judgment attributable to an award of punitive damages. The United States judge in that case had stated that the purpose of the punitive damages was to ‘“penalise” the first defendant and to deter others from failing to comply with the Court’s orders’: (at [176]).

Her Honour found that the award of punitive damages was not compensation for a detriment but, rather, to punish the defendant and they were in the form of a sanction. The damages were ‘the penal consequence for the first defendant’s failure to comply with the Court’s orders’: at [176]. Her Honour proceeded to sever the unenforceable award of punitive damages from the award of compensatory damages, which was enforceable: at [180].

The Full Court of the Supreme Court of South Australia considered the reasons of Bergin J in Benefit Strategies Group Inc v Prider (2005) 91 SASR 544 at 552. Speaking for a unanimous Court, Bleby J said, in obiter, that not all foreign judgments for punitive damages are unenforceable on public policy grounds. His Honour noted that the punitive damages in Schnabel were awarded as a sanction for failure to comply with the Court’s orders, giving them ‘an obvious “public” connotation’: at [72]. Bleby J explained at [68]-[73] that where the foreign court’s award of punitive damages is made to punish the defendant’s deliberate and callous disregard of the plaintiff’s rights, the award has ‘no public element’ and enforcement of it would not be contrary to the public policy of Australia, even if the amount awarded far exceeds what would have been awarded in an Australian court.

In the circumstances of this case, no evidence is before the court nor were submissions received as to whether the imposition of Article 253 Interest has a ‘public element’ of the kind described by the Court in Benefit Strategies. As such, and having regard to the interest rate imposed, which is not substantially dissimilar to the rate applicable for General Interest, I consider it appropriate to award pre-judgment interest to the plaintiff in accordance with the Final Chinese Judgment, including the element of Article 253 Interest.”

68. Given that it is the Defendant who bears the burden of showing that any element of the Zhengzhou Judgment is penal in nature, given that no evidence and no submissions have been advanced to this effect, and given the observations made by Rothman J in the passage quoted above, I do not consider there is a sufficient basis for me to determine, in the circumstances of this case, that any such reason for not enforcing the Zhengzhou Judgment is established on the evidence.

CONCLUSION

69. For the reasons set out above, I was satisfied, at the conclusion of the hearing before me, that the Zhengzhou Judgment was enforceable by this Court, that the outstanding amount of the Zhengzhou Judgment was as quantified by the Plaintiff, and that orders should be made accordingly.

70. Since the Plaintiff was entirely successful, it was in my view appropriate that costs should follow the event.

71. In order to take into account that the Defendant was not represented at the hearing before me and in order to ensure that she was given an opportunity to challenge any orders made disposing of the Summons, if she wished to do so, I included in the orders and directions:

1. a direction that the Plaintiff serve, by 8 February 2024, by email and post on the Defendant a copy of the orders and of the transcript of the hearing before me; and

2. an order that, if the Defendant wished to apply to set aside the orders enforcing the Zhengzhou Judgment and the costs order, because she was not present for the hearing or when the orders were made, she should file and serve, by 22 February 2024, a notice of motion seeking such relief and any supporting evidence.

72. I also considered it appropriate to include a note in the Court’s orders to the effect that interest on the amount of the judgment of this Court will accrue in accordance with the Civil Procedure Act 2005 (NSW) s 101. That is, the interest payable under s 101 shall be in substitution for and not in addition to any interest otherwise payable, either pursuant to the Loan Agreement or the Zhengzhou Judgment, for the period after 1 February 2024: see Bao v Qu; Tian (No 2) at [71].

73. For those reasons I made, on 1 February 2024, the orders set out in paragraph 2 above.

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Decision last updated: 06 February 2024