Australia: Encouraging signs for reciprocal recognition of foreign judgments involving Chinese courts

In a recent Australian court decision, a judgment made by a Chinese court has been recognised and enforced in Australia. This decision, combined with two other Australian court decisions recognising Chinese judgments, could open doors for those holding Australian judgments to seek to enforce their judgment against judgment debtors in mainland China.

We recently published an article on enforcing foreign judgments in Australia and Australian judgments in foreign jurisdictions. In that article we noted that China is not one of the countries listed in the Foreign Judgments Regulations 1992 (Cth) (Regulations) as a country from which a judgment can be enforced under the Foreign Judgments Act 1991 (Cth).

Countries listed in the Regulations are generally countries with which Australia has reciprocal arrangements in place for the recognition and enforcement of each other's court judgments. As Australian courts are recognising judgments and arbitral awards originating from China, it is possible that Chinese courts may reciprocate this by recognising Australian judgments and awards to enable their enforcement in mainland China.

Enforcement of Chinese Judgment

In the recent decision in Bao v Qu; Tian (No 2)¹ Justice Rothman of the Supreme Court of New South Wales had the opportunity to consider the recognition and enforcement of a judgment made by the Qingdao Intermediate People's Court of Shandong Province, China. His Honour's decision is the third recent Australian court judgment which has recognised a judgment originating from China under common law.²

The matter involved allegations that the plaintiff loaned the defendants around half a million dollars³ over four loans and the defendants had failed to repay those loans. The plaintiff successfully brought an action in the People's Court of Laoshan District Qingdao (Laoshan District Court) which ordered the defendants to pay the full amount of the unpaid loans (Primary Judgment).

The first defendant appealed the Primary Judgment.⁴ The Qingdao Intermediate People's Court of Shandong Province dismissed the appeal except for in respect of one loan, and ordered the defendants to pay approximately AU$420,000⁵ plus interest to the plaintiff (Final Chinese Judgment).⁶ The plaintiff took steps to enforce the Final Chinese Judgment in China and managed to recover around AU$4,000.⁷

After discovering that the defendants had emigrated to Australia, the plaintiff then sought to recover the balance of the amount in the Supreme Court of New South Wales. The facts before the Supreme Court were that the defendants were resident in New South Wales and had been personally served with the Summons and Amended Summons.⁸ The defendants filed of Notice of Appointment of Solicitor and filed a Points of Defence, although they did not file any submissions or evidence.⁹ By doing this, the defendants submitted to the jurisdiction of the Supreme Court of New South Wales.

Justice Rothman set out the general principles relevant to the enforcement of a foreign judgment under common law, after noting that judgments of Chinese courts are not enforceable under the statutory regime.¹⁰ These principles require that a foreign judgment meet the following conditions:¹¹

• the foreign court must have exercised jurisdiction which the Australian courts will recognise;
• it must be final and conclusive;
• the parties to the enforcement proceeding must be the same as those to the foreign proceeding; and
• it must be for a fixed debt.

Justice Rothman found that the evidence adduced by the plaintiff established that the four elements required for the New South Wales Supreme Court to enforce a foreign judgment at common law had been satisfied.¹²

There are some defences to an application for the enforcement of a foreign judgment including that the foreign judgment was obtained by fraud or that the judgment has been wholly satisfied. In this case, the defendants alleged that they had made repayments such that the debt upon which the Final Chinese Judgment was based was discharged.¹³ Justice Rothman found that these alleged repayments had, in the Chinese proceedings, either been raised and rejected by the Chinese court, or they were not raised when they should have been.¹⁴ Seeking to rely on the alleged repayments in the enforcement proceedings was an impermissible attempt to reopen the merits of the dispute.¹⁵ In any event, the defendants failed to adduce any evidence of such allegend repayments.

Accordingly, the defendants' challenge to the enforcement of the award failed and the plaintiff was entitled to enforce the judgment amount, less the AU$4,000 already recovered in China.¹⁶

Implications

This is the third time a judgment originating from a court in mainland China has been enforced in Australia.¹⁷ Similarly to Australia, recognition and enforcement of foreign judgments in China are only permissible if they follow an international or bilateral treaty or reciprocal relationships between China and the place from which the judgment originates.¹⁸ Interestingly, in recent years, China has enforced judgments originating from the United States of America on the basis that Chinese judgments have been recognised and enforced in the United States and therefore there is reciprocity between China and the United States. As with Australia, there is no international or bilateral treaty between China and the United States upon which such mutual recognition is based.

Because Australian courts have now enforced a number of Chinese Court decisions, and considering the approach that Chinese courts have taken in respect of judgments emanating from the United States, it is possible to infer that Chinese Courts may recognise Australian Court judgments pursuant to the principle of reciprocity in the future, in the absence of a relevant international or bilateral treaty. Of course, it is difficult to say with certainty whether this will be the approach of Chinese courts, particularly as very few court systems operate in complete ignorance of changing political landscapes.

Looking at it from the other side, this Australian court decision to recognise and enforce a foreign judgment under common law also provides encouragement to judgment debtors holding unsatisfied judgments from other jurisdictions to which the statutory regime does not apply (such as some of Australia's top trading partners including the United States and India) that an Australian court may recognise and enforce that judgment under common law principles.

Footnotes

¹ [2020] NSWSC 588. The author notes that the decision of Bao v Qu; Tian [2020] NSWSC 587 was an ex tempore decision of Justice Rothman in which he refused the defendants' application for an adjournment of the hearing.

² The other two judgments are Suzhou Haishun Investment Management Co Ltd v Zhao & Ors [2019] VSC 110; Liu v Ma & Anor (2017) 55 VR 104.

³ RMB 2,550,000 plus interest.

⁴ The second defendant was not an appellant but was represented by counsel at the hearing of the appeal: Bao v Qu; Tian (No 2) [2020] NSWSC 588 [7].

⁵ RMB 2,050,000

⁶ Bao v Qu; Tian (No 2) [2020] NSWSC 588 [8].

⁷ RMB 19,205; Bao v Qu; Tian (No 2) [2020] NSWSC 588 [9].

⁸ Bao v Qu; Tian (No 2) [2020] NSWSC 588 [11].

⁹ Ibid [14], [16].

¹⁰ Ibid [25]; As mentioned above, this is because China is not one of the countries listed in the Regulations as a country from which a judgment can be enforced under the Foreign Judgments Act 1991 (Cth).

¹¹ Ibid [26].

¹² Ibid [40].

¹³ Ibid [37].

¹⁴ Ibid [49].

¹⁵ Ibid [50].

¹⁶ Ibid [53].

¹⁷ See also Suzhou Haishun Investment Management Co Ltd v Zhao & Ors [2019] VSC 110; Liu v Ma & Anor (2017) 55 VR 104.

¹⁸ Civil Procedure Law of the People's Republic of China (People's Republic of China) National People's Congress, Order No. 44, 9 April 1991, arts 281-282.

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